Republic of Philippines Court of Tax Appeals Quezon City

REPUBLIC OF THE PHILIPPINES
COURT OF TAX APPEALS

QUEZON CITY
SECOND DIVISION
WELLFORM TRADING CTA CASE NO. 9086

CORPORATION,
Petitioner,
Members:
Castaneda, Jr., Chairperson,

-versus- Casanova, and
Manahan, JJ.
COMMISSIONER OF Promulgated:
INTERNAL REVENUE, NOV Z7 Z017
Respondent.
~/ 'f: Jo / ·IIJ ,
x----------------------------------------------------------------------------------x
DECISION
CASTANEDA, JR., l,.:
THE CASE
This resolves the Petition for Review filed on July 10, 2015 by
Wellform Trading Corporation, praying for this Court to declare as
null and void, for lack of factual and legal bases, the assessment
notice that assessed petitioner for alleged deficiency value-added tax
(VAT) in the amount of P96,527,897.39, inclusive of interest, for the
period covering January 1 to June 30, 2012. r
DECISION
CfA CASE NO. 9086
Page 2 of 42
THE FACTS
Petitioner Wellform Trading Corporation is registered with the

Securities and Exchange Commission (SEC) on August 2, 1991, with
SEC Company Registration No. AS091-194034 and with the Bureau
of Internal Revenue (BIR) on May 21, 1996, with Tax Identification
Number 000-080-369-000. Petitioner holds office at 355 Cavite
corner Gapan Streets, Barangay 148, Zone 13, Tendo, Manila. It is
primarily engaged in the business of buying, selling, distributing, and
marketing at wholesale and retail of fermented liquor, bottled water
and other beverages. 1
On the other hand, respondent is the duly appointed

Commissioner of the Bureau of Internal Revenue (BIR) who has the
power to decide disputed assessments, refunds of internal revenue
taxes, fees or other charges, penalties imposed in relation thereto or
other matters arising under the National Internal Revenue Code
(NIRC) or other laws or portions thereof administered by the BIR.
He holds office at the BIR National Office Building, Agham Road,
Diliman, Quezon City.
On March 18, 2013, petitioner received Letter of Authority

(LOA) No. LOA-VOS-2013-00000120/SN: eLA201100016722 dated
March 14, 2013 authorizing the representatives of BIR Revenue
District No. V08-Assessment Division to conduct an examination for
VAT for the period covering January 1, 2012 to June 30, 2012
pursuant to Revenue Memorandum Order No. 20-2012. 2
On April 3, 2013, petitioner received from respondent its First

Request for Presentation of Records dated April 1, 2013. 3
This was followed by the Second and Final Notice for

Presentation of Records dated April 16, 2013, received by petitioner
on April 18, 2013. 4 rt-
1
Par. 1, Admitted Facts, Joint Stipulation of Facts and Issues (JSFI), Docket, Vol. II, pp. 789-790.
2
Par. 3, Admitted Facts, JSFI, Docket, Vol. II, p. 790.
3
4
DECISION
CfA CASE NO. 9086
Page 3 of 42
On April 26, 2013 5, May 8, 2013 6 and May 22, 2013 7, petitioner
submitted supporting documents in response to the above requests.
On May 22, 2013, petitioner received from respondent a

Reminder Letter for the submission of its Books of Accounts, Official
Receipts, Summary List of Sales and Purchases and Expense
Receipts. 8
Petitioner again submitted supporting documents on June 11,

2013 and July 5, 2013 10 •
9
Subsequently, petitioner received a Subpoena Duces Tecum on

July 26, 2013. 11
Thus, another set of documents were submitted by petitioner

on August 14, 2013 in compliance with respondent's subpoena. 12
However, respondent issued a Preliminary Assessment Notice

(PAN) together with the Details of Discrepancies dated October 2,
2014, which was received by petitioner on October 3, 2014. 13
On November 13, 2014, petitioner received from respondent

Formal Assessment Notice (FAN) dated November 11, 2014, Details
of Discrepancies, Assessment Notice No. Vf-ELA16722-12-14-1046,
Analysis of Sales per TPI from AITEID, and Schedule of Supported
Input Taxes; wherein the latter assessed the former for deficiency
VAT in the amount of P96,527,897.39 inclusive of interest for
taxable period January 1 to June 30, 2012. 14
As a response to respondent's FAN, petitioner filed on

December 12, 2014 an Administrative Protest by way of a Request
for Reconsideration of the assessment contained in the respondent's j<-
5
Exhibit "P-18", Docket, Vol. II, p. 1193.
6 Exhibit "P-19", Docket, Vol. II, p. 1194.
7
Exhibit "P-21", Docket, Vol. II, p. 1195.
8
10 Exhibit "P-25", Docket, Vol. II, pp. 1197-1199.
11
13
14
DECISION
CTA CASE NO. 9086
Page 4 of 42
FAN with the Office of the Regional Director Jonas DP Amara of

Revenue Region No. 8- Makati. 15
Petitioner alleges that despite the filing of the administrative

protest, respondent did not issue any decision thereon. Thus,
feeling aggrieved by the VAT assessment, and mindful of the
reglementary period relative to respondent's inaction on the protest,
petitioner filed the instant Petition for Review on July 10, 2015.
On September 10, 2015, respondent filed an Answer by

registered mail, 16 interposing the following defenses:
"4. Petitioner was assessed of deficiency value-

added tax for taxable period January 1, 2012 to June 30,
2012 for the reason that during the administrative
investigation of its tax case by the Bureau of Internal
Revenue (BIR), petitioner failed to substantiate or submit
supporting evidence against the BIR findings, more
specifically shown under the Details of Discrepancies
attached to the Preliminary Assessment Notice (PAN)
dated October 2, 2014 and Formal Assessment Notice
(FAN) dated November 11, 2014, which are briefly
discussed hereunder, viz:
XXX XXX XXX
5. Petitioner was assessed by the respondent for

deficiency value-added tax for taxable period of January
1, 2012 to June 30, 2012 within the prescriptive period
under Section 203 of the 1997 Tax Code;
6. The assessments issued against petitioner for

deficiency value-added tax for were made in accordance
with law and regulations.
7. Assessment are prima facie presumed correct

and made in good faith. The taxpayer has the duty of
proving otherwise. In the absence of proof of any fo;-
15
16
Docket, Vol. II, pp. 759-762.
DECISION
CTA CASE NO. 9086
Page 5 of 42
irregularities in the performance of official duties, an

assessment will not be disturbed (Aban, Law of Basic
Taxation in the Philippine, Jst Edition, p. 109)."
The case was subsequently set for Pre-Trial Conference on

November 12, 2015. 17 Respondent's Pre-Trial Brief18 was later filed
on November 6, 2015, while the Pre-Trial Brief for the petitioner was
filed on November 9, 2015. 19
On November 27, 2015, the parties filed their Joint Stipulation

of Facts and Issues. 20 Thereafter, a Pre-Trial Order was issued by
the Court on January 19, 2016. 21
Trial ensued, giving both parties the opportunity to present

their respective documentary and testimonial evidence.
After presentation, marking, identification and offer, the Court

admitted, as part of petitioner's documentary evidence, Exhibits "P-
1" to "P-33-A", except for Exhibits "P-9-a", "P-10-a", "P-12-a" and "P-
13-a". 22
On the other hand, the Court admitted, as part of respondent's

evidence, Exhibits "R-1" to "R-9-a". 23
Thereafter, the Memorandum for Respondent was filed by

registered mail on October 21, 2016 24, while the Memorandum for
the Petitioner 25 was filed on November 25, 2016. Accordingly, the
instant case was considered submitted for decision on December 2,
2o16. 26 r
17
Docket, Vol. II, p. 764.
18
19
20
21
22
Resolution dated July 26, 2016, Docket, Vol. III, pp. 1245-1246.
23
Resolution dated September 20, 2016, Docket, Vol. III, pp. 1259-1260.
24 Docket, Vol. III, pp. 1272-1275.
25
Docket, Vol. III, p. 1277-1308.
26 Docket, Vol. III, p. 1309.
DECISION
CTA CASE NO. 9086
Page 6 of 42
THE ISSUES
The parties submitted the following issues 27 for this Court's

disposition:
1. Whether respondent's allegation that petitioner has

undeclared sales amounting to P99,660,220.47 based
on benchmark rate has factual and legal bases;
2. Whether respondent's allegation that petitioner has

undeclared sales amounting to P41,760,025.41 based
on computerized matching has factual and legal
bases;
3. Whether respondent disallowance of petitioner's

input tax representing 97°/o of the total input tax
credits claimed for taxable period January to June
2012 has factual and legal bases; and
4. Whether petitioner is liable for the alleged deficiency

value-added tax and increments for taxable period
January to June 2012 in the amount of
P96,527,897.39.
THE COURT'S RULING
Respondent assessed petitioner of deficiency VAT amounting to

P96,527,897.39, inclusive of interest, for the period covering January
1 to June 30, 2012, computed as follows: 28
VATable sales per VAT returns p 422,462,011.11

Add: Sales not subjected to VAT p 99,660,220.47
Undeclared sales 41,760,025.41 141,420,245.88
Gross receipts subject to VAT p 563,882,256.99
Output tax due p 67,665,870.84

Less: Input tax claimed per return p 49,131,702.18
27
Issues, JSFI, Docket, Vol. II, p. 792.
DECISION
CTA CASE NO. 9086
Page 7 of 42
Less: Unsupported input tax p 47,727,546.63

Excess input tax carried over
259,034.46 47,986,581.09 1,145,121.09
to succeeding quarter
VAT payable p 66,520,749.75
Less: Tax payments p 1,563,739.16
Add: Creditable VAT withheld per return p 2,996.57
Less: Unsupported creditable VAT
withheld
2,996.57 - 1,563,739.16
Basic tax due p 64,957,010.59

Add: Interest (07.26.12 to 12.29.14) 31,570,886.80
Total amount due p 96,527,897.39
Sales not subjected to VAT

amounting to P99,660,222.47
Respondent computed the alleged sales not subjected to VAT

as follows: 29
Computed VATable Sales based on Benchmark Rate p 522,122,233.58

Less: Total VATable Sales per VAT Return 422,462,011.11
Sales Not Subjected to VAT p 99,660,222.47
Benchmark Sales/Receipts= Current Input Tax Credit Claimed

VAT Rate-Benchmark Rate
Current Input Tax Claimed for the pt and 2nd quarters P49,131,702.18
Benchmark Rate for Other Wholesaling 2.59%
Benchmark Sales/Receipts= P49,13L702.18

12%-2.59%
Benchmark Sales/Receipts= P49,13L702.18

9.4100%
Benchmark Sales/Receipts= P522,122,233.58
Petitioner opposes the computation and alleges that the

industry benchmark cannot be used as the best evidence to support
an assessment of a deficiency tax. According to petitioner, this was
even admitted by respondent's own witness. Petitioner further
alleges that there was no mention from the objectives of the
benchmarking program on the imposition of taxes on the mere basis
of a benchmark which could bring about a deficiency assessment
against a taxpayer.~
29
Exhibit "P-2", Docket, Vol. II, p.1113.
DECISION
CTA CASE NO. 9086
Page 8 of 42
On the other hand, respondent claims that the assessment was

based on best evidence obtainable because of petitioner's failure and
refusal to make certain records available despite issuance of
Subpoena Duces Tecum dated July 23, 2013.
Respondent avers that since there is no means by which the

correctness and accuracy of petitioner's receipts can be ascertained,
assessment based on estimate was used pursuant to Section 2.4(a)
of Revenue Memorandum Circular (RMC) No. 23-2000.
An examination of the assessment shows that respondent

arrived at the sales allegedly not subjected to VAT amounting to
P99,660,222.47 by comparing petitioner's gross sales based on
industry benchmark rate pursuant to Revenue Memorandum Order
(RMO) No. 05-2012 with the sales reported per VAT Returns.
Specifically, RMO No. 05-2012 defined benchmarking of

taxpayers as the process of setting a standard to determine the
performance level of taxpayers in a given line of industry or sector.
According to respondent, the computed VATable sales based on

benchmark rate less total VATable sales per VAT return is the best
evidence obtainable so as to determine the amount of petitioner's
deficiency VAT liability.
It is significant to note that the objectives of profiling and

benchmarking activities under RMO No. 05-2012 are limited to the
following:
"I. Objectives:
This Order aims to prescribe the revised/updated

policies, guidelines and/or procedures in the conduct of
taxpayer profiling and benchmarking activities to all
Regional and Revenue District Offices (RDOs). It also
provides an effective tool in addressing collection
problems, plugging tax leakages and implementing a risk-
to-revenue based audit and enforcement activities. ~
DECISION
CTA CASE NO. 9086
Page 9 of 42
Specifically, this Order is issued to:
1. Address the downward trend in revenue

collections by providing an environment that
levels the playing field among all taxpayers
belonging to the same industry;
2. Empower revenue officials and employees

concerned to deal with the numerous
incidence of registered taxpayers who are
neither filing their tax returns nor paying the
correct taxes; and
3. Adopt a set of principles and methods that

provide the basic formula in computing the
benchmark and guide the district offices
concerned towards a more systematic or
well-balanced implementation of the
Benchmarking Program."
Also, the same RMO No. 5-2012 provides for the guidelines in
the conduct of benchmarking, including the benchmarking cycles:
"III. General Policies
XXX XXX XXX
5. Guided by the procedures herein provided, LTS

Audit Division Chiefs; [sic] to the extent applicable to it,
and Revenue District Officers shall ensure that the
benchmarking cycle is completed within the required
timeframe. The following shall likewise be observed:
a. In cases where Letters of Authority have

been issued to taxpayers, the LT Audit
Division Chiefs, and RDOs concerned shall
take into consideration the established
benchmark in the industry where the
subject taxpayer belongs before considering
the case closed and terminated;
b. Any downtrend deviation from the

benchmark shall be fully explained and such Jz--
DECISION
CTA CASE NO. 9086
Page 10 of 42
data shall form part of the inputs in the

revision of final benchmark rates;
c. All issues and concerns raised by taxpayers

in the implementation of this program that
call for immediate action shall be the
responsibility of the implementing office.
Reports of action taken thereon must be
furnished the Benchmarking Committee.
6. Taxpayers whose tax compliance is below

the duly established and approved benchmark
shall be classified as follows:
Classifications Risk to Revenue/Gap to Benchmark
High Risk Taxpayers Over 30°/o below benchmark

Middle Risk Taxpayers 16°/o to 30°/o below benchmark
Low Risk Taxpayers 15°/o or less below benchmark
7. Taxpayers classified as high risk shall be

the top priority target for enforcement actions,
such as Surveillance, CRM/POS Post Evaluation,
Oplan Kandado, Inventory Stocktaking and Audit;
8. The Benchmarking Committee shall be

responsible for reporting and recommending the
appropriate actions that may be taken and/or sanctions
that may be imposed against taxpayers or any other
person found to be supplying/submitting false or
fabricated data purportedly to meet the benchmark
requirements;
XXX XXX XXX
IV. Guidelines and Procedures for the Conduct of

Benchmarking
Benchmarking Cycles:
1. Gather taxpayer data.
XXX XXX XXX~

DECISION
CTA CASE NO. 9086
Page 11 of 42
2. Prepare the taxpayers profile.
XXX XXX XXX
3. Evaluate the result and Establish Benchmark.
XXX XXX XXX
4. Notice to Taxpayer.
In view of the established standard rate of tax

compliance or the benchmark, the RDOs may now
proceed to notify taxpayers who fall below the
benchmark that they should rectify their tax
returns and improve their tax compliance. xxx
XXX XXX XXX
The RDOs shall ensure that all information are

correct and the benchmark data were thoroughly
reviewed and validated as against the
return/information obtained per taxpayer before
sending out the notification letters. The Notice to be
sent to the taxpayers is not a notice of investigation
that will bar the taxpayer from amending his return.
However, within fifteen (15) days from receipt
of said Notice, the taxpayer must explain fully in
writing its failure to measure up in compliance
with set industry benchmark. Failure to
satisfactorily establish its reasons, the taxpayer
may be issued a Letter of Authority or be
subject to other enforcement activities.
5. Evaluate Taxpayers' Response/Reactions.
The RDO must evaluate the reasons put forward by

the taxpayers in its response. Based on this
evaluation, the RDO should make a recommendation
whether taxpayer should be subjected to enforcement
activities, issued an electronic Letter of Authority
( eLA) or not.
6. Analyze and Prepare Reports and Recommendation. J<-

DECISION
CTA CASE NO. 9086
Page 12 of 42
Evaluation involves a risk to revenue analysis. Thus, a

proper report by the Revenue District Officer to the
Regional Director or by the xxx has to be made with
conclusions, whether taxpayer fall under the high risk,
middle- or low-risk category bracket. Reports should
likewise include recommendations for proper
enforcement actions such as immediate
issuance of Letter of Authority, if none has been
issued yet, conduct of Post Evaluation on
CRM/POS Machines, placing establishment
under surveillance, or conduct of inventory
stock taking.
7. Enforcement Actions - Assess and Collect

Deficiency Taxes.
The conduct of Oplan Kandado or Inventory

Stock Taking, as the case maybe, will almost
always trigger the issuance of Letters of
Authority. Audit activities and processes
embodied under Revenue Regulations No. 12-
99 are to be complied with in coming up with
assessment notices.
8. Evaluate, Compare & Adjust the Final Benchmark.
Under this stage, comparison of the initially

benchmarked data under Cycle 3 must be compared
for purposes of computing the revised benchmark
under Cycle 9. The results of evaluation may either be
a downtrend benchmark or an uptrend benchmark
revision.
9. Revise Benchmark.
The Committee shall come up with the 'schedule

benchmark' by line of industry in every audit division
(LTS), regional and district offices. Areas with low
compliant taxpayers must be identified and monitored.
The Audit Division Chiefs/Revenue District Officers
and Regional Directors shall use the scheduled
benchmark as a tool in classifying taxpayers as high
risk, middle risk or low risk taxpayers. These revised /k-
DECISION
CTA CASE NO. 9086
Page 13 of 42
benchmarks should serve as a guide to improve

voluntary compliance.
10. Monitor the activities and accomplishments on

benchmarking. Prepare and submit the reports in soft
copies (MsExcel format) as provided under paragraph
V hereof.
11. Periodically review the statistical method utilized to

arrive at the benchmarks. Recommend the revision of
benchmark and/or method or strategies, if necessary.
12. Considering the unique characteristics of taxpayers

covered by the Large Taxpayers Service, the following
additional steps should be undertaken, when
applicable, to wit:
12.1. From the groupings by industry,

classify taxpayers as 'old existing' and
'newly enlisted' taxpayers;
12.2. For the old taxpayers, proceed with

the process of tax profiling; for those
under the newly enlisted taxpayers,
compare their VAT & IT compliance
with the initial benchmark;
12.3. Newly enlisted taxpayers whose VAT &

Income Tax (IT) compliance are
below benchmark shall be issued with
benchmark notices requiring them to
upgrade/enhance their tax payments.
Those who will not improve given
enough time to do so shall be
subjected to tax enforcement
activities." (Emphases supplied)
A perusal of the foregoing shows that the purpose of the

benchmarking program and of deriving the benchmarking rate is
mainly to establish measurement or a set of standards to be used to
measure and monitor the performance/compliance of taxpayers in a
particular industry and improve voluntary tax compliance. There is cr.-
DECISION
CTA CASE NO. 9086
Page 14 of 42
nothing in the foregoing which would show that the benchmark rate
should be used in computing the tax liability of the taxpayer.
At best, the benchmarking program may be used in

recommending enforcement actions such as immediate issuance of
Letter of Authority, if none has been issued yet, conduct of Post
Evaluation on CRM/POS Machines, placing establishment under
surveillance, or conduct of inventory stock taking. Moreover, it is
important to stress that while the enforcement actions, such as the
conduct of Oplan Kandado or Inventory Stock Taking, as the case
may be, will almost always trigger the issuance of Letters of
Authority, the same RMO requires that the audit activities and the
processes embodied under Revenue Regulations No. 12-99 should
still be complied with in coming up with assessment notice.
Clearly, in this case, respondent should have assessed

petitioner based on its own investigation pursuant to the electronic
Letter of Authority ( eLA) issued and in compliance with Revenue
Regulations No. 12-99, and not by merely using the benchmark rate
in arriving at the alleged computed VATable sales of petitioner.
Thus, the use of the benchmark rate in computing petitioner's

tax liability has no legal basis.
As to respondent's claim that the assessment was arrived at on

the basis of the Best Evidence Obtainable, the Court finds relevant
Section 6(B) of the NIRC of 1997, as amended, which requires that
the assessment of the tax be determined based on the Best Evidence
Obtainable in the absence of accounting records or other records.
Section 6(B) of the Tax Code, reads:
"SEC. 6. Power of the Commissioner to Make

Assessments and Prescribe Additional Requirements for
Tax Administration and Enforcement -
XXX XXX XXX
(B) Failure to Submit Required Returns, Statements,

Reports and other Documents. - When a report required
by law as a basis for the assessment of any national
internal revenue tax shall not be forthcoming within the r--
DECISION
CTA CASE NO. 9086
Page 15 of 42
time fixed by laws or rules and regulations or when there

is reason to believe that any such report is false,
incomplete or erroneous, the Commissioner shall assess
the proper tax on the best evidence obtainable.
In case a person fails to file a required return or

other document at the time prescribed by law, or willfully
or otherwise files a false or fraudulent return or other
document, the Commissioner shall make or amend the
return from his own knowledge and from such
information as he can obtain through testimony or
otherwise, which shall be prima facie correct and
sufficient for all legal purposes." (Emphasis supplied)
Relevantly, Section 5 of the NIRC gives respondent vast powers

which he could exercise in obtaining the best evidence, as follows:
"SEC. 5. Power of the Commissioner to Obtain

Information and to Summon, Examine, and Take
Testimony of Persons. - In ascertaining the correctness
of any return, or in making a return when none has been
made, or in determining the liability of any person for any
internal revenue tax, or in collecting any such liability, or
in evaluating tax compliance, the Commissioner is
authorized:
(A) To examine any book, paper, record, or other

data which may be relevant or material to such inquiry;
(B) To obtain on a regular basis from any person

other than the person whose internal revenue tax
liability is subject to audit or investigation, or from any
office or officer of the national and local governments,
government agencies and instrumentalities, including the
Bangko Sentral ng Pilipinas and government-owned or -
controlled corporations, any information such as, but not
limited to, costs and volume of production, receipts or
sales and gross incomes of taxpayers, and the names,
addresses, and financial statements of corporations,
mutual fund companies, insurance companies, regional
operating headquarters of multinational companies, joint
accounts, associations, joint ventures or consortia and
registered partnerships, and their members; J2-
DECISION
CTA CASE NO. 9086
Page 16 of 42
(C) To summon the person liable for tax or

required to file a return, or any officer or employee of
such person, or any person having possession, custody,
or care of the books of accounts and other accounting
records containing entries relating to the business of the
person liable for tax, or any other person, to appear
before the Commissioner or his duly authorized
representative at a time and place specified in the
summons and to produce such books, papers, records,
or other data, and to give testimony;
(D) To take such testimony of the person

concerned, under oath, as may be relevant of material
to such inquiry; and
(E) To cause revenue officers and employees to

make a canvass from time to time of any revenue district
or region and inquire after and concerning all persons
therein who may be liable to pay any internal revenue
tax, and all persons owning or having the care,
management or possession of any object with respect to
which a tax is imposed.
The provisions of the foregoing paragraphs

notwithstanding, nothing in this Section shall be
construed as granting the Commissioner the authority to
inquire into bank deposits other than as provided for in
Section 6(F) of this Code."
The power of the Commissioner to assess on the best evidence

obtainable was likewise elaborated in the case of Commissioner of
Internal Revenue vs. Hantex Trading Co. Inc. 30 , wherein the High
Court ruled as follows:
"The law allows the BIR access to all relevant or

material records and data in the person of the taxpayer.
It places no limit or condition on the type or form of the
medium by which the record subject to the order of the
BIR is kept. The purpose of the law is to enable the SIR
to get at the taxpayer's records in whatever form they Jc-
3o G.R. No. 136975, March 31, 2005.
DECISION
CTA CASE NO. 9086
Page 17 of 42
may be kept. Such records include computer tapes of the

said records prepared by the taxpayer in the course of
business. In this era of developing information-storage
technology, there is no valid reason to immunize
companies with computer-based, record-keeping
capabilities from BIR scrutiny. The standard is not the
form of the record but where it might shed light on the
accuracy of the taxpayer's return.
In Campbell, Jr. v. Guetersloh, the United States

(U.S.) Court of Appeals (5th Circuit) declared that it is the
duty of the Commissioner of Internal Revenue to
investigate any circumstance which led him to believe
that the taxpayer had taxable income larger than
reported. Necessarily, this inquiry would have to be
outside of the books because they supported the return
as filed. He may take the sworn testimony of the
taxpayer; he may take the testimony of third
parties; he may examine and subpoena, if
necessary, traders' and brokers' accounts and
books and the taxpayer's book accounts. The
Commissioner is not bound to follow any set of patterns.
The existence of unreported income may be shown by
any practicable proof that is available in the
circumstances of the particular situation. Citing its ruling
in Kenney v. Commissioner, the U.S. appellate court
declared that where the records of the taxpayer are
manifestly inaccurate and incomplete, the Commissioner
may look to other sources of information to establish
income made by the taxpayer during the years in
question.
XXX XXX XXX
The rule is that in the absence of the accounting

records of a taxpayer, his tax liability may be determined
by estimation. The petitioner (Commissioner of Internal
Revenue) is not required to compute such tax liabilities
with mathematical exactness. Approximation in the
calculation of the taxes due is justified. To hold
otherwise would be tantamount to holding that skillful
concealment is an invincible barrier to proof. However,
the rule does not apply where the estimation is fv-
DECISION
CTA CASE NO. 9086
Page 18 of 42
arrived at arbitrarily and capriciously." (Emphasis

supplied and citations omitted)
In other words, while respondent has the power to assess

petitioner on the best evidence obtainable and may resort to the
exercise of its powers under Section 5 of the NIRC and to
approximation in the calculation of the taxes due, the same should
not be arrived at arbitrarily and capriciously.
In this case, respondent based the assessment against

petitioner for sales allegedly not subject to VAT on the computed
VATable sales based on benchmark rate less total VATable sales per
VAT return. Noticeably, respondent made no determination of the
actual VATable sales of petitioner, considering that the benchmark
rate used by respondent pertains to the sales of other wholesaling
companies as reflected in the computation. There was also no
showing as to how the benchmark rate was derived by respondent,
or that it can at least be used to approximate the actual VATable
sales of petitioner. What can only be deduced from the computation
is that respondent merely assumed that the amount of VATable sales
of other wholesaling companies is the same with the VATable sales of
petitioner.
At this juncture, it must be pointed out that in order to stand

the test of judicial scrutiny, the assessment must be based on actual
facts. The presumption of correctness of assessment being a mere
presumption cannot be made to rest on another presumption.
Hence, assessment should not be based on mere presumptions no
matter how reasonable or logical said presumptions may be. 31
Consequently, while there is a presumption of correctness of

assessment issued by respondent, being a mere presumption, the
same cannot be made to rest on another presumption, which is
respondent's presumption that the amount of VATable sales of other
wholesaling companies is the same with the VATable sales of
petitioner.
The Court further observes that while the computation of

petitioner's VATable sales was based on presumptions and ?c-
31 Commissioner
of Internal Revenue vs. Alberto D. Benipayo, G.R. No. L-13656, January 31,
1962; Commissioner of Internal Revenue vs. Island Garment Manufacturing Corporation and the
CourtofTaxAppeals, G.R. No. L-46644, September 11, 1987.
DECISION
CTA CASE NO. 9086
Page 19 of 42
estimations, respondent, however, was able to further assess

petitioner for undeclared sales based on sales per particular
customer. Although in the succeeding discussion, the Court shall still
determine whether these data were verified, it does not change the
fact that the computed benchmark sales/receipt is not the best
evidence obtainable in computing petitioner's liability since
respondent could derive and verify evidence and data from third
parties.
Also, contrary to respondent's allegation, it appears from the

records that petitioner was able to submit documents to address
respondent's request for documents pursuant to the eLA. 32
Clearly, the use of benchmark rate in determining petitioner's

total VATable sales is not the best evidence that can be obtained by
respondent and that the use of the same in making an assessment
has no support in law. Thus, for being without factual or legal basis,
the deficiency VAT arising from the alleged sales not subjected to
VAT should be cancelled.
Undeclared Sales amounting

to P41,760,025.41
As to the alleged undeclared sales, respondent assessed

petitioner of deficiency VAT on the alleged undeclared sales in this
wise: 33
Undeclared Sales amounting to P41,760,025.41:
Comparison of sales per Third Party Information (TPI)

and sales per Summary List of Sales (SLS) disclosed that there
were undeclared sales from customers in the amount of
P3,053,348.68, hence petitioner was assessed of VAT pursuant
to Section 106 of the tax code.
Sales per particular Customers (TPI) p 41 816,269.15

Sales declared per SLS 56,243.74
Undeclared Sales (Annex B) P41,760,025.41
32 Exhibits "P-18" to "P-27", Docket, Vol. II, pp. 1193 to 1200.

DECISION
CTA CASE NO. 9086
Page 20 of 42
Petitioner alleges that there was failure to verify the allegations

stemming from third party information through externally sourced
data as required by RMO No. 04-2003. Moreover, considering that
the data gathered from third party sources came from BIR's RELIEF
system, it is necessary that the guidelines and policies set under
RMO Nos. 42-2003 and 46-2004 must be met, that includes the
requirement for the BIR to secure sworn statements or certifications
from TPI sources. Without verification or certification from the third-
party sources as to the veracity of the information used by
respondent, such information cannot be considered as a "third party
information".
As mentioned in the Details of Discrepancies, respondent

derived the alleged undeclared sales by comparing third party
information and purchases from the alleged third-party sources and
sales by the petitioner which were reflected in the summary list of
sales. However, as testified by respondent's witness Mr. Renan A.
Plata during cross-examination, he was not able to secure the
required certifications from these third-party sources. 34 Also, there
was no showing from the records that these pieces of information
were verified.
These findings cast doubts as to the reliability and correctness

of the assessment for deficiency VAT on the alleged sales not
subjected to VAT and the alleged undeclared sales.
Moreover, it must be emphasized that while respondent has the

power to assess petitioner on the best evidence obtainable and may
resort to the exercise of its powers under Section 5 of the NIRC and
to approximation in the calculation of the taxes due, the same should
not be arrived at arbitrarily and capriciously.
In this case, instead of exerting his best effort in gathering

information from other sources to verify the alleged undeclared sales
and instead of taking into consideration the documents submitted by
petitioner, respondent chose to resort to presumptions and heavily
relied on the results of the unverified third party matching and on the
benchmark rate in estimating petitioner's sales and tax liability.~
34 Transcript of Stenographic Notes taken during the hearing held on July 27, 2016, pp. 15-16.
DECISION
CTA CASE NO. 9086
Page 21 of 42
Therefore, respondent's finding that petitioner has sales not

subject to VAT and undeclared sales lacks factual and legal bases.
Nevertheless, as to the alleged unsupported input tax, the

Court shall determine the propriety of the assessment based on the
evidence presented by the parties considering that respondent
computed the same based on his examination of petitioner's
supporting documents.
Unsupported Input Tax

amounting to P47,727,546.63
Respondent's verification disclosed that petitioner failed to

submit the required VAT Invoices or Official Receipts (OR) to support
the claimed input taxes, thus, respondent disallowed the same
pursuant to the provision imposed under Section 110(A)(1) of the
NIRC which provides that any input tax claimed evidenced by a VAT
Invoice or official receipt issued in accordance with Section 113 of
the NIRC shall be creditable against output tax, to wit:
Input tax claimed per VAT returns p 49,131 702.18

Supported input tax 1,404 155.55
Unsupported input tax P47,727,546.63
Based on the documents submitted, the Court-commissioned

ICPA, Mr. Ericson D. Tadeja, found that the total input VAT declared
in the 1st and 2nd Quarterly VAT Returns of taxable year 2012
amounting to P49,131,702.8735 was composed of the following major
and minor purchases: 36
Major Purchases
Asia Brewery Incorporated (ABI) p 18,722,361.32
Interbev Philippines, Inc. (IPI) 24,471,344.86
Sub-total p 43,193,706.18
Minor Purchases
35
Exhibits "P-11" and "P-14", Docket, Vol. II, pp. 1178 and 1189.
Quarter Input VAT Claimed

1st P24 658,734.40
2nd 24 472,968.47
P49,131,702.87
36 Exhibits "P-32-A", ICPA Report, p. 8.

DECISION
CTA CASE NO. 9086
Page 22 of 42
Various suppliers 5 937,996.69

Total input tax claimed per return p 49,131,702.87
Upon examination of the submitted documents, the findings of

the !CPA may be summarized as follows:
Findings Reference Exhibit VAT Amount

A. Purchases from ABI and IPI (major purchases)
1. Purchases of Goods supported by original VAT-registered sales invoices 13A.1 to

(A6I and IPI) IC 13A 13A.2594
A6I p 19 016 947.20
IPI 21 849 285.42
sub-total p 40,866. 232.62
2. Purchases of Goods supported by Debit Memos (A6I and IPI)

A6I p 204 592.30
IPI 324 141.46
sub-total p 528733.76
3. Purchases of Goods supported by Credit Memos (A6I and IPI)
A6I p (1 006,584.06)
IPI (822 639.04)
sub-total 1'(1829.223.10)
4. Purchases of Goods Supported by photocopied/scanned VAT-registered

sales invoices (A6I and IPI) IC-136 136.1 to 136.215
A6I p 323 460.86
IPI 3 304 502.04
sub-total ,. 3,627. 962.90
Total Purchases from ABI and IPI (major purchases) p 43 193 706.18
B. Purchases from suppliers other than ABI and IPI (minor purchases)
1. Purchases of goods and capital goods supported by VAT-registered

sales invoices IC-14A 14A.1 to 14A.89 p 158 586.17
2. Purchases of services supported by VAT-registered official receipts IC-146 146.1 to 146.298 4 012 579.22
sub-total p 4171,165.39
3. Purchases of goods, capital goods and services supported by VAT-

registered official receipts but are outside the taxable period IC-14C 14C.1 to 14C.756 p 583 591.48
4. Purchases of goods, capital goods and services which are not properly
supported by VAT-reqistered invoices or official receipts IC-140 140.1 to 140.209 583 749.82
5. Purchases of goods, capital goods and services which are

substantiated by tape receipts but are unreadable IC-14E 14E.1 to 14E.52 5 842.92
6. Purchases of goods, capital goods and services which are unaccounted

due to lack of documents IC-14F 593,647.08
sub-total p 1 766. 831.30
Total Purchases from suppliers other than ABI and IPI (minor
purchases) 5 937,996.69
GRAND TOTAL p 49 131,702.87
Based on the foregoing, the Court finds that the amount of

P1,766,831.30 (items 8.3 to 8.6) must be disallowed for petitioner's ~
DECISION
CTA CASE NO. 9086
Page 23 of 42
failure to meet the substantiation requirements under Sections

110(A) and 113(A) and (B) of the NIRC of 1997, as amended by
Republic Act No. 9337, and as implemented by Sections 4.110-2,
4.110-8 and 4.113-1 of Revenue Regulations No. 16-05.
In addition to said exceptions, the examination of the

documents submitted by petitioner leads to the findings as discussed
below.
A. Input VAT from Domestic Purchases of Goods from Asia

Brewery Incorporated {ABI) and Interbev Philippines
Incorporated (IPI)
Records reveal that petitioner's input VAT on domestic

purchases from ABI and IPI from January to June 2012 amounted to
P18,722,361.33 and P24,471,344.86, respectively, net of monthly
debit and credit memos, to wit:
VAT claimed
Upon further verification, the Court finds that the total input
VAT of P10,602,806.07 must be disallowed due to the following
grounds: Jv-
37
Annex IC-8A, ICPA Report p. 583, Exhibit "P-32-C".
38
Annex IC-9, ICPA Report p. 652, "Exhibit P-32-C"; Exhibits "P-13A.2565" to "P-13A.2568", and
"P-13A.2584" to "P-13A.2594".
39 Annex IC-8A, ICPA Report p. 599, Exhibit "P-32-C".
40
Annex IC-9, ICPA Report p. 653, Exhibit "P-32-C"; Exhibits "P-13A.2563" to "P-13A.2564" and
"P-13A.2578" to "P-13A.2583".
41
Annex IC-86, ICPA Report p. 623, Exhibit "P-32-C".
42
Annex IC-9, ICPA Report p. 654, Exhibit "P-32-C"; Exhibits "P-13A.2569" to "P-13A.2577".
DECISION
CTA CASE NO. 9086
Page 24 of 42
Exhibit No.
DECISION
CTA CASE NO. 9086
Page 25 of 42
Asia Brewery Inc. 13A.79 139709 1/18/2012 3,060.00

Asia Brewery Inc. 13A.128 139530 1/16/2012 930.00
Asia Brewery Inc. 13A.132 139546 1/16/2012 960.00
DECISION
CfA CASE NO. 9086
Page 26 of 42
DECISION
CTA CASE NO. 9086
Page 27 of 42
Sub-total (February 2012)

, 2,126,280.00
Interbev Philippines Incorporated 136.201 75803 3/23/2012 p 47,614.29
Interbev Philippines Incorporated 136.202 75523 3/19/2012 20,880.00
Interbev Philippines Incorporated
Sub-total (March 2012)
136.203 75326 3/15/2012
, 303.75
68,798.04
Interbev Philippines Incorporated 13A.2220 01411 5/5/2012 p 17,400.00
Interbev Philippines Incorporated 13A.2316 01458 5/18/2012 24,360.00
Sub-total (May 2012)
136.208 00048 5/2/2012
, 17,400.00
142,680.00
Interbev Philippines Incorporated 136.210 00804 6/4/2012 p 17,400.00
Sub-total (June 2012)
136.214 00815 6/5/2012
, 17,400.00
100,920.00
2. Supported by VAT invoices with incorrect TIN ofpetitioner.
Interbev Philippines Incorporated 13A.1518 71276 1/2/2012 p 20,880.00
DECISION
CTA CASE NO. 9086
Page 28 of 42

Interbev Philippines Incorporated 13A.1592 71713 1/12/2010 490.18
DECISION
CTA CASE NO. 9086
Page 29 of 42

DECISION
CTA CASE NO. 9086
Page 30 of 42

Sub-total (January 2012)
13A.1686 73019 1/12/2031
, 24,985.71
3,519,792.85
DECISION
CTA CASE NO. 9086
Page 31 of 42

Sub-total (February 2012) p 1,496,018.59
Sub-total (March 2012) p 623,371.07
TOTAL DISALLOWANCES- INTERBEV PHILIPPINES INC. p 8944380.55
TOTAL DISALLOWANCES- ABI & IPI p 10,602,806.07
DECISION
CTA CASE NO. 9086
Page 32 of 42
It was noted that the above amounts were based on the

original invoice amounts, without adjustments for the debit/credit
memos (DM/CM) issued by ABI and IPI, thus, the Court deemed it
necessary to further adjust the above input VAT amounts applying
the pertinent DM/CM issued by ABI and IPI.
However, since the DM/CM were issued on a monthly basis

without specifying the invoices unto which those specifically pertain
to, the Court finds it reasonable to pro-rate the net DM/CM per
month among the allowed and disallowed input VAT claims.
Consequently, the Court finds that the input VAT amounts of
P1,584,789.36 and P8,513,233.37 must be disallowed from the input
VAT claimed on domestic purchases of goods from ABI and IPI,
respectively, or in the aggregate amount of P10,098,022.73 from
January to June 2012, to wit:
Pro-rated
DM/CM
Amount Total Influt Total
Ratio DM/CM Attributable to
Disallowed VAT Claim Disallowances
[C={A/8)] {Q) Disallowed
(A} l!!l F=(A-E)
Input VAT
[E=(CxD)]
Asia Brewery p p p
9,900.00 p 1,671,165.11 0.59% (96,298.83) (570.48) 9,329.52
(Beer) - January
Asia Brewery
(Bottled Water) - 1,325,064.68 1,637,274.86 80.93% (81,863.74) (66,253.23) 1,258,811.45
January
Asia Brewery
323,460.84 2,496,589.93 12.96% (52,581.03) (6,812.45) 316,648.39
(_Bottled Water) - May_
Sub-total - ABI p 1,658,425.52 p (73,636.16) p 1,584,789.36
Interbev - January p 4,386,312.85 43 p 4,386,312.86 100.00% (219,315.64) p (219,315.64) p 4,166,997.21
Interbev- February 3,622,298.5944 3,622,298.57 100.00% (181,114.93) (181,114.93) 3,441,183.66
45
Interbev - March 692,169.11 5,200,393.40 13.31% (260,019.67) (34,608.46) 657,560.65
Interbev - May 142 680.00 4 315 254.16 3.31% 81 092.74 2 681.26 145 361.26
Interbev - June 100,920.00 3,596,920.39 2.81% 43,147.09 1,210.59 102,130.59
Sub-total- IPI p 8,944,380.55 1'(431,147.18) p 8,513,233.37
TOTAL p 10,602 806.07 P(504 783.34) PlO 098 022.73
B. Input VAT from Other Domestic Purchases of Goods and

Services
After examination of the documents submitted to support the

input VAT claimed on domestic purchases of goods and services
other than ABI and IPI, the Court finds that the amount of Jc-
43
p 866,520.00 + p 3,519,792.85 = p 4,386,312.85
44
p 2,126,280.00 + p 1,496,018.59 = p 3,622,298.59
45 p 68,798.04 + p 623,371.07 = p 692,169.11
DECISION
CTA CASE NO. 9086
Page 33 of 42
P4,163,498.10 must likewise be disallowed due to the following

grounds:
Invoice/OR Disallowed
Exhibit No. Supplier Date
No. Input Tax
1. Input VAT amount were not separately indicated in the supporting invoices/DRs and without petitioner's
address and/or TIN
14A.3 D.U. Machine Shop 19223 1/4/2012 p 105.00
14A.4 New Filipino Trading 68435 2/1/2012 3.21
14A.5 Valete's Brake, Clutch Parts and Gen. Merchandise 20554 1/4/2012 56.78
14A.6 Lian Auto Supply various various 150.00
14A.11 WDM Truckparts Center 2349 1/9/2012 40.71
14A.12 Joint Trading 11366 1/18/2012 21.43
14A.13 Lian Auto Supply 125283 1/18/2012 16.07
14A.15 Lian Auto Supply 125690 1/29/2012 46.61
14A. 21 D.U. Machine Shop 19381 1/23/2012 5.36
14A. 22 Jojin Trading 11390 1/23/2012 4.29
14A.31 Valete's Brake, Clutch Parts and Gen. Merchandise various 1/23/2012 46.61
14A.45 Toni's Petron Service Station 10973 2/4/2012 34.29
14A.49 EMC Hardware 39377 2/16/2012 314.89
14A.59 Ageo Auto Parts 9918 2/28/2012 32.14
14A.63 New JOM Auto Parts & Gen. Mdse. 7248 2/10/2012 211.07
14A.65 Toni's Petron Service Station 204176 2/10/2012 62.68
14A.71 Valete's Brake, Clutch Parts and Gen. Merchandise various various 30.54
14A.76 Lian Auto Supply various 3/11/2012 120.53
14A.80 JBCC Auto Supply and General Merchandise 32519 3/20/2012 10.71
14A.83 ME Shopping Center 446 3/21/2012 18.21
14A.88 Valete's Brake, Clutch Parts and Gen. Merchandise 22407 3/19/2012 85.71
14B.1 North-West Enterprises 0103 2/4/2012 12,174.11
14B.4 CMT Hauling Services 0619 1/16/2012 2,272.71
14B.5 E.M. Mendoza Trucking 292 1/20/2012 19,587.24
14B.7 J.P. Opef\a Trucking, Inc. 4956 1/21/2012 6,154.71
14B.8 J.P. Opefia Trucking, Inc. 4955 1/21/2012 4,245.57
14B.10 E.C. Creencia Trading 1468 1/18/2012 2,031.32
14B.12 Renz Trucking 516 1/24/2012 54,097.22
14B.14 G. Malijan trucking 2179 1/24/2012 5,665.71
14B.16 Hizon Transport Services and Trading Inc. 4644 2/6/2012 83,038.88
14B.17 3 Kids Enterprises 289 1/31/2012 21,739.50
14B.21 C. Gubatan Enterprises 782 2/2/2012 11,292.39
14B.23 D' Bar Logistics 157 2/6/2012 2,166.11
14B.24 E. P. Bautista Trucking Services 172 2/6/2012 7,244.07
14B.30 Good Deal Hauling Services 1932 2/6/2012 2,430.43
14B.31 AGN Trucking & Trading 3682 3/1/2012 3,813.43
14B.32 Robien Trucking 99 2/11/2012 9,425.14
14B.33 MRTC Trucking Services Corp. 650 2/6/2012 2,973.32
14B.34 Jelly's Trucking Services 440 2/6/2012 2,272.71
14B.35 New Jamaica Security Agency various 7/15/2011 5,041.07
14B.37 D' Bar Logistics 164 2/20/2012 2,548.39
DECISION
CTA CASE NO. 9086
Page 34 of 42
14B.38 E. M. Mendoza Trucking 307 2/20/2012 28,927.61

14B.40 JZ Valencia Enterprises 607 3/3/2012 13,474.18
14B.41 Leavil Trucking Services 135 2/20/2012 6,962.46
14B.46 Renz Trucking 546 3/5/2012 36,523.29
14B.50 Lee & Sons Printing Corp. 8551 3/5/2012 921.03
14B.51 Verson Trucking Services 944 2/27/2012 3,356.25
14B.53 Joanne & Janine Enterprises 2861 3/13/2012 19,240.37
14B.55 Our Beverly Village Trucking Corp. 1664 2/20/2012 5,191.18
14B.56 Degits Trucking Services 66 2/25/2016 7,459.29
14B.58 ContGeo Cargo Solutions 393 2/27/2012 3,356.25
14B.60 D' Bar Logistics 168 3/3/2012 2,548.39
14B.61 D' Bar Logistics 172 10,807.50
148.68 JZ Valencia Enterprises 608 3/3/2012 14,508.16
14B.71 Rapid Movers & Forwarders Co., Inc. 5752 3/3/2012 11,552.79
14B.80 LFH Venture Merchandising Corp. 66 2/3/2012 43,428.75
14B.84 Renz Trucking 552 12/3/2012 39,398.84
14B.87 E. C. Creencia Trading 1487 5/3/2012 2,272.71
14B.90 San Joseph Sea Oil Gasoline Station 490 3/2/2012 3,099.11
14B.91 Golden Eye Trucking 579 3/26/2012 2,973.32
14B.97 Mary Rose Cargo Movers, Inc. 364 3/12/2012 9,897.82
14B.98 Wide Area Network Transport Services 924 3/19/2012 4,821.11
DECISION
CTA CASE NO. 9086
Page 35 of 42

14B.116 Lee & Sons Printing Corp. 8567 3/21/2012 6,160.71
14B.117 Renz Trucking 565 4/2/2012 93,082.82
14B.125 D' Bar Logistics 259 3/26/2012 2,272.71
14B.138 Renz Trucking 566 4/2/2012 59,980.78
14B.145 Riddle Trucking Service 282 4/11/2012 4,891.86
14B.151 D' Bar Logistics 266 5/12/2015 3,567.75
14B.154 MRTC Trucking Services Corp. 695 9,120.47
14B.162 Renz Trucking 596 4/30/2012 53,704.60
14B.164 Golden Eye Trucking 595 4/23/2012 5,139.43
14B.167 VJ TEC Trucking Services 385 5/2/2012 1,906.09
DECISION
CTA CASE NO. 9086
Page 36 of 42

14B.182 Renz Trucking 594 4/30/2012 81,121.14
14B.191 Joanne & Janine Enterprises 937 S/7/2012 22,527.73
14B.196 JRS Express various 5-01-12 21.43
14B.198 JRS Express various various 45.01
14B.209 Renz Trucking 606 5/21/2012 52,810.32
14B.210 Z. S. M. Trucking Services 461 5/21/2012 4,468.36
14B.218 Mary Rose Cargo Movers, Inc. 297 5,521.71
14B.223 Z. S. M. Trucking Services 408 5/28/2012 2,973.32
14B.229 Dennis Trucking Services 6350 5/19/2012 2,012.70
14B.230 Renz Trucking 621 6/11/2012 61,392.77
14B.232 Renz Trucking 623 6/11/2012 45,118.69
14B.244 z. S. M. Trucking Services 415 6/11/2012 2,138.49
14B.250 Rapid Movers & Forwarders Co., Inc. 5922 5,497.18
14B.251 Rapid Movers & Forwarders Co., Inc. 5921 13,261.46
DECISION
CTA CASE NO. 9086
Page 37 of 42
14B.264 J.P. Opeiia Trucking, Inc. 0029 6/30/2012 2,166.11
14B.276 Manna & Genesis Food house 5246 2/9/2012 96.05
14B.277 North-West Enterprises various 2/15/2012 1,660.72
14B.278 Rosvilla Trading 276322 2/6/2012 96.96
14B.284 JRS Express various 2/20/2012 21.43
14B.285 Northern Star Investigation and Security Agency various 2/29/2012 1,660.72
14B.288 Green R Hotel 25427 2/24/2012 80.36
14B.290 JRS Express 43343 2/28/2012 11.79
14B.294 Magic Mart Co. 865 3/10/2012 71.79
14B.295 JRS Express 45197 3/30/2012 11.79
14B.296 Green R Hotel 25721 3/9/2012 64.29
14B.297 Northern Star Investigation and Security Agency various 3/15/2012 1,660.72
sub-total P3,032,339.28
2. Input VAT amount were not separately indicated in the supporting invoices/DRs; without petitioner's address
and/or TIN and dated outside the period of claim
14B.13 Wide Area Network Transport Services 1030 1/21/2011 p 5,094.21
14B.200 New Jamaica Security Agency 7811 10/16/2011 5,041.07
14B.242 Vigan Printing Press 5192 12/27/2012 112.50
14B.269 D' Bar Logistics 276 7/6/2012 2,166.11
14B.272 Renz Trucking 639 7/2/2012 8,547.32
14B.273 Renz Trucking 636 7/2/2012 10,468.29
14B.119 Begits Trucking Services 67 4/13/2013 4,946.57
14B.259 Marissa's Trucking & Hauling Services 363 7/3/2012 102,014.77
14B.260 Allroad Trucking 0009 7/7/2012 2,430.43
sub-total p 313,757.12
3. Supporting VAT invoices/DRs do not indicate petitioner's TIN and/or address
14A.2 Choy's Householdwares 1081 1/7/2012 p 81.00
14A.7 New Pacific Auto Supply 194180 1/10/2012 66.96
14A.8 Nina Marc General Merchandising 110438 1/12/2012 19.29
14A.9 Sky I Auto Parts Center 70424 1/14/2012 26.79
14A.10 The New Laoag Auto Supply 100103 1/11/2012 12.86
14A.14 New Jom Auto Parts 110129 1/21/2012 19.29
14A.20 A.B. Casiano Gravel & Sand various 1/31/2012 139.28
Lernel Auto Supply, Furniture & General
14A.23 11210 1/30/2012 15.00
Merchandising
14A.25 New Jom Auto Parts & General Merchandise 35432 1/24/2012 37.50
14A.26 New Lorna's Trading 54509 1/26/2012 10.71
14A.28 R. Fragante Hardware 57321 1/20/2012 4.29
14A.29 Sky-1 Auto Parts Center 70483 1/23/2012 26.79
14A.32 A.B. Casiano Gravel & Sand various 2/3/2012 127.50
14A.33 Farmland Hardware & Gen. Merchandise various various 32.14
14A.34 Jojin Trading 11476 2/8/2012 38.04
DECISION
CTA CASE NO. 9086
Page 38 of 42
14A.35 Laoag Centerpoint General Merchandise 6258 2/7/2012 10.71

14A.36 Laoag Kambal Corporation 47750 2/6/2012 21.43
14A.37 Laoag Pacific Hardware various various 126.42
14A.39 New JOM Auto Parts & Gen. Mdse. various various 352.39
14A.40 New Pacific Auto Supply various various 46.08
14A.41 Petron Bantay Service Station 169087 2/8/2012 24.66
14A.42 Silicon Valley 21527 2/6/2012 160.71
14A.43 Solid North Marketing Corp. 8754 2/5/2012 7.50
14A.47 A.B. Casiano Gravel & Sand 6497 2/17/2012 9.11
14A.48 D. U. Machine Shop 19528 2/8/2012 482.14
14A.50 Farmland Hardware & Gen. Merchandise 14981 2/16/2012 2.14
14A.51 Jojin Trading 11503 2/13/2012 16.61
14A.52 Nina Marc Gen. Mdse 112862 2/8/2012 107.14
14A.53 Stargate Caltex Service Station 358072 2/12/2012 5.36
14A.55 New Jom Auto Parts & General Merchandise various various 50.90
14A.60 New Jom Auto Parts & General Merchandise 111905 2/26/2012 26.79
14A.66 Ettah Lihl Enterprises 44228 3/1/2012 33.21
14A.67 1297 Motor Parts & General Services 345 3/9/2012 6.43
14A.68 Jojin Trading 11701 3/25/2012 10.18
14A.74 Laoag Far Eastern Lumber & Hardware 515 3/17/2012 75.54
14A.75 Laoag Kambal Corporation 75717 3/16/2012 174.43
14A.77 New Jom Auto Parts & General Merchandise various various 83.57
14A.81 Jojin Trading various various 72.42
14A.84.1 New Jom Auto Parts & General Merchandise 37262 3/22/2012 3.21
14A.84.2 The New Laoag Auto Supply 393707 3/20/2012 10.71
14A.89 Vigan Goldlabel Gen. Merchandise 96936 3/24/2012 16.07
148.2 Marissa's Trucking & Hauling Services 0291 1/24/2012 22,725.19
148.6 Good Deal Hauling Services - Branch I 1309 1/16/2012 3,615.70
148.11 Rapid Movers & Forwarders Co., Inc. 5680 2/10/2012 7,356.35
148.19 LFH Venture Merchandising Corp. 192 2/13/2012 49,937.25
148.20 LFH Venture Merchandising Corp. 192 2/13/2012 36,772.93
148.195 Farmside Hotel various various 163.93
148.241 Laoag Renzo Hotel various various 648.21
148.275 Laoag Renzo Hotel various various 346.08
148.281 Universal Storefront Services Corp. various 2/16/2012 8.76
148.282 Vigan Printing Press 5273 2/14/2012 85.71
148.287 CF Real Estate Lessor 1789 2/3/2012 8,400.00
148.289 Ilocos Sur Electric Cooperative, Inc. various 1,219.21
148.291 Laoag Renzo Hotel various various 1,039.02
148.292 Kingscourt Hotel 9990 2/12/2015 75.00
148.293 Tracy-Macy's Diner 34922 2/20/2012 22.29
DECISION
CfA CASE NO. 9086
Page 39 of 42
146.298 I Universal Storefront Services Corp. I various I various I 5.40

4. Purchases of Se!Vices supported by documents other than VAT OR, dated outside the period of claim and the
amount of input VAT was not separately indicated therein
146.9 Robien Trucking 115 12/18/2011 p 7,537.61
146.18 Allroad Trucking 0006 12/30/2011 4,303.93
146.89 San Joseph Seaoil Gasoline Station 17284 15-02-12 2,876.14
S. Purchases of Se!Vices supported by documents other than VAT OR and the amount of input VAT was not
separately indicated therein
146.112 Grandios Enterprise 259 1/31/2012 p 24,379.53
146.139 Leavil Trucking Services 2157 4/2/2012 5,143.82
146.146 Grandios Enterprise 280 2/23/2012 17,507.46
146.163 CMT Hauling Services 659 2/29/2012 2,166.11
146.216 Grandios Enterprise 307 3/30/2012 17,087.77
146.262 Grandios Enterprise
sub-total
326 4/30/2012
, 13,506.48
79.791.17
6. Supported by documents issued not in the name ofpetitioner
146.245 3 Kids Enterprises 358 6/18/2012 p 20,450.91
146.279 D. U. Machine Shop 19528 2/8/2012 2,065.71
146.283 !locos Norte Electric Cooperative Inc. 78067 2/28/2012 680.22
sub-total p 23L196.84
7. Purchase ofgoods supported by invoices dated outside the period of claim
10/5/2011 p
14A.1 Nina Marc General Merchandising 103569 103671 514.29
10L§j2011
sub-total p 514.29
8. Purchases of goods supported by VAT invoices which indicate wrong address ofpetitioner
14A.17 Pilipinas Shell Corp various 2/29/2012 p 13,424.11
14A.18 Pilipinas Shell Corp various 3/31/2012 60,074.20
14A.19 Pilipinas Shell Corp various 3/31/2012 12,251.08
14A.56 Petron Fleet Card various 1/28/2012 54,477.48
sub-total p 140.226.87
9. Purchase of goods supported by tape receipts
14A.30 St. Joseph Drugstore 1/27/2012 p 156.64
sub-total p 156.64
10. Purchases ofgoods supported by VAT ORs imprinted with the phrase "Not valid as source of input tax"
14A.46 Western Commercial Corp various various p 3,995.36

14A.54 Western Commercial Corp 23246 1/31/2012 5,014.29
14A.62 Western Commercial Corp 23239 1/20/2012 948.21
14A.72 Western Commercial Corp 23299 2/28/2012 2,089.29
11. VAT invoice unreadable
14A.64 The New Laoag Auto Supply
sub-total
387093
,
p 12.86
12.86
GRAND TOTAL P4,163,498.10
In sum, the Court partially upholds respondent's assessment on

unsupported input tax to the extent of P16,028,352.13, as
determined below:
Exceptions per ICPA Report p 1,766,831.30

Additional Disallowances by the Court:
Domestic purchases of goods from ABI and IPI p 10,098,022.73
Other domestic purchases of goods and services 4,163,498.10 14,261,520.83
Total unsupported input tax p 16,028,352.13
DECISION
CTA CASE NO. 9086
Page 40 of 42
Likewise, the creditable VAT withheld claimed by petitioner

amounting to P2,996.57 was found to be unsupported, thus, it must
be disallowed.
Excess Input Tax Carried Over to

Succeeding Quarter- P259,034.46
As stated in the Details of Discrepancies, the excess input tax

amounting to P259,034.46 was not applied against the allowable
input tax in computing deficiency VAT since this shall be carried over
to the next succeeding quarter(s) as provided under Section 110(8)
of the NIRC of 1997, as amended.
However, the Court finds it improper for respondent to disallow

the said excess input tax because any tax benefit derived by
petitioner from the carry-over of the said amount redounds to the
succeeding quarter(s). Since the tax benefit will be in the succeeding
quarter(s), at most, petitioner may only be assessed in the said
succeeding quarter(s).
Considering all the foregoing, petitioner is liable to pay the

basic deficiency VAT in the amount of P16,028,352.12, computed as
follows:
Gross receipts subject to VAT p 422,462,011.11
Output tax due p 50,695,441.33

Less: Input tax claimed per return p 49,131,702.18
Less: Unsupported input tax 16,028 352.13 33 103 350.05
VAT payable p 17,592,091.28
Less: Tax payments 1,563,739.16
Creditable VAT withheld per return p 2,996.57
Less: Unsupported creditable VAT withheld 2,996.57 - 1,563,739.16
Basic deficiency VAT p 16,028,352.12
WHEREFORE, premises considered, the instant Petition for

Review is DENIED. Accordingly, the Court finds petitioner liable to
pay the basic deficiency VAT but in the reduced amount of
P20,035,440.15, inclusive of twenty-five percent (25°/o) surcharge
imposed under Section 248(A)(3) of the NIRC of 1997, as amended,
as computed below: ?-
DECISION
CTA CASE NO. 9086
Page 41 of 42
Basic deficiency VAT P16,028,352.12

Add: 25% Surcharge 4,007,088.03
Total VAT due P20,035,440.15
In addition, petitioner is liable to pay:
a) Deficiency interest at the rate of twenty percent

(20°/o) per annum on the basic deficiency VAT of
P16,028,352.12 computed from July 25, 2012, until full
payment thereof pursuant to Section 249(8) of the NIRC
of 1997, as amended; and
b) Delinquency interest at the rate of 20°/o per

annum on the total amount of P20,035,440.15 and on the
20°/o deficiency interest which have accrued as
aforestated in (a), computed from December 11, 2014, 46
until full payment thereof pursuant to Section 249(C) of
the 1997 NIRC, as amended.
SO ORDERED.
~~~c.~/St
.fUANITO C. CASTANEf>A~ JR.
Associate Justice
WE CONCUR:
~(lv#~
CAESAR A. CASANOVA CATHERINET.MANAHAN
Associate Justice Associate Justice
46
Exhibit "P-3", Docket, Vol. II, p.1115.
DECISION
CTA CASE NO. 9086
Page 42 of 42
ATTESTATION
I attest that the conclusions in the above Decision were

reached in consultation before the case was assigned to the writer of
the opinion of the Court's Division.
~~~ c .aY-~;~-
1UANITO C. CASTANEDA, JR.
Associate Justice
Chairperson
CERTIFICATION
Pursuant to Article VIII, Section 13 of the Constitution, and the

Division Chairperson's Attestation, it is hereby certified that the
conclusions in the above Decision were reached in consultation
before the case was assigned to the writer of the opinion of the
Court.
Presiding Justice

Republic of Philippines Court of Tax Appeals Quezon City

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REPUBLIC OF THE PHILIPPINES

COURT OF TAX APPEALS

WELLFORM TRADING CTA CASE NO. 9086

Castaneda, Jr., Chairperson,

CASTANEDA, JR., l,.:

Petitioner Wellform Trading Corporation is registered with the

On the other hand, respondent is the duly appointed

On March 18, 2013, petitioner received Letter of Authority

On April 3, 2013, petitioner received from respondent its First

This was followed by the Second and Final Notice for

On May 22, 2013, petitioner received from respondent a

Petitioner again submitted supporting documents on June 11,

Subsequently, petitioner received a Subpoena Duces Tecum on

Thus, another set of documents were submitted by petitioner

However, respondent issued a Preliminary Assessment Notice

On November 13, 2014, petitioner received from respondent

As a response to respondent's FAN, petitioner filed on

FAN with the Office of the Regional Director Jonas DP Amara of

Petitioner alleges that despite the filing of the administrative

On September 10, 2015, respondent filed an Answer by

"4. Petitioner was assessed of deficiency value-

XXX XXX XXX

5. Petitioner was assessed by the respondent for

6. The assessments issued against petitioner for

7. Assessment are prima facie presumed correct

irregularities in the performance of official duties, an

The case was subsequently set for Pre-Trial Conference on

On November 27, 2015, the parties filed their Joint Stipulation

Trial ensued, giving both parties the opportunity to present

After presentation, marking, identification and offer, the Court

On the other hand, the Court admitted, as part of respondent's

Thereafter, the Memorandum for Respondent was filed by

The parties submitted the following issues 27 for this Court's

1. Whether respondent's allegation that petitioner has

2. Whether respondent's allegation that petitioner has

3. Whether respondent disallowance of petitioner's

4. Whether petitioner is liable for the alleged deficiency

THE COURT'S RULING

Respondent assessed petitioner of deficiency VAT amounting to

VATable sales per VAT returns p 422,462,011.11

Output tax due p 67,665,870.84

Less: Unsupported input tax p 47,727,546.63

Basic tax due p 64,957,010.59

Sales not subjected to VAT

Respondent computed the alleged sales not subjected to VAT

Computed VATable Sales based on Benchmark Rate p 522,122,233.58

Benchmark Sales/Receipts= Current Input Tax Credit Claimed

Benchmark Sales/Receipts= P49,13L702.18

Benchmark Sales/Receipts= P49,13L702.18

Benchmark Sales/Receipts= P522,122,233.58

Petitioner opposes the computation and alleges that the

On the other hand, respondent claims that the assessment was

Respondent avers that since there is no means by which the

An examination of the assessment shows that respondent

Specifically, RMO No. 05-2012 defined benchmarking of

According to respondent, the computed VATable sales based on

It is significant to note that the objectives of profiling and

This Order aims to prescribe the revised/updated