\ Ruperto Hosillg, et al. vs. = Case No, et al.

\ REPUBLIC OF THE PHILIPPINES

COURT OF TAX APPEALS

MANILA

\ RUPERTO HOSILLG, C.I.A.

- versus = CASE NO, 249

COLLECTOR OF INTERNAL A

REVENUE, itl Hespondcernt, DECISION.

This {is an @*ppeel from a deciston of the rese pondent Collector of Internal Revenue assessing against, and demanding from, the petftioner Ruperts Hosillos the sum of P380,50 as deffetency income tax, Surcharge and coapromise penalty for the year 1950.

In 1950, the petitioner herein, who was then resident of Tlotlo City and farmer by occupation with eight (3) minor children to support, dertved his ine come solely from his riceland and a fishnond which he leased from the yovernment, ‘On February &, 1951, he ftied hts tncome tax return, Exhtott 4 (p. 2, BIR rec.), for the year 1950 showings= (a) # gross income of #6,199.15, (b) gress expenses of #2,331.10 itemized as follows:

Fish Pond and repairs ecsccvese #193564.03 Purchase of seedling (Tanum).. 126.95 Simiiia (Fist: Fry) eeeecscnsees 766.50

Ireigat

eeonvrrterreseoeeeeneeoes 40,72 Faxes Paid seccoccsescscsseces ane Sg FO Total Expenses .ececcees #29331, 10

AG

DECI TON «

CeolsAe CASE NO, 249 - 2 a

(c) & net income of 3,868.05, and (d) total exanp- tions of 6,500.00 as head of family with eight (8) minor children, Sometine in 1954, a large group ef fishpond owners of Ilcllo were investigated py the local brench of the Bureau of Internal Hievenue for possible tax evasion upon iastruction of the Provincial Revenue Officer of that locality who was of the opinion that the government was not getting in full its due share of the taxes from the fishpend owners in said area, On November 21, 1955, the petitioner recefved @ letter, Exhibit 5 (p. 15, BIA rec.) dated Novenber ld, 1955 purportedly sent by Antonio IT, Mercado, Acting Provincial Kevenue Cfiicer of Lloile, but signed by _ BIA Examiner Enrique P, isidero wherein he was advised that, after an investigation, there was found te be due from hiz the sggregete smount of § 26,775.64 as defi Giency income taxes, surcharges and compromise penal- ties for the tax years 1950 to 1954, inclusive, However, in 4 meworandum, Exhibit I (pp. 16, 17, SIG rec.) dated December 2, 1955 submitted oy SIA Agent E, Tumbagahan and 3IA Examiner E. Isidore to the Acting Provincial Aevenue Officer of Iloilo City, the income tax deficiency of petitioner for the same years 1950 to 1954, together with the surcharges and penal- ties was reduced to «18,144,429, On February 16, 1956, the petitioner received Assessment Notice No. BAR=1955-50, Exhibit 5 (p. 19, BIR rec.) issued on February 5, 1956 for the sua of 24 2?

DECI. IU « Coleie Chk We, 249 «3 #380,50 as deficiency income tex, surcharge and com= promise penalty for the tax year 1950, broken down a6 follows:

Veiiciency tax due per return esses 2187.00 SOs Surcharge cscecaccesvesssecsess 93.0 COMEVOMISE sessececevesseessesenss Amount cue eeeeseeses #380, 50 This assessment, as admitted by respondent (p. 2, Res- pondent*s Memorandum) was arrived at after adding to the net income shown in petitioner's income tax return the following !tems:

Net Income as per return secceee 13,968,085 Undetlared sales secccccescecese 99 405~35 Expenses Gisallowed sesesceceves 52}),53 Total eeeseetunaeete 29,592.93 From this amount of #9,592,.93 respondent deducted the amount of #6,500,00 claimed by petitioner 15 exempt tons, thus leaving @ net taxable amount of #3,092,93. On the Stated amount, respondent determined as income tax due from petfifioner the sum of #187.50 which taken together with the surcherge and compromise penalty, would awount te €380, 50, At this juncture, it should be mentioned that res- pondent concedes that petitioner, who 1s married and had eight (&) minor children in 1950, was then entitled to @ total personal exemption of 77,300.00 instead of 86,500.00, in accordance with Republic: Act No. 590, It is equéelly conceded that, pursuant to Section 21 of the Tax Coce, es amended by Aepublic Act No, 590, the applicable tax was 5 of the tetal net tncome because

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ea ee ee ee ee a ae ey a ae

DEC Is ION «

C.T.A. CASE NO, 249 -~4-e said tetel net income did not exceed P2,000,00 (p,. 2, Respondent's Memorandum), Respondent now admits on page 3 of his memoran- dum thet the amount due from pet{ttoner is just the sum of #134,47, computed in detail as follows: Net income per investie gation. ‘eteerseecesesnsesese 9,592, 93 Less: Total personal @XOMPtLONS sevecessveves Amount subject to tex sesesese EAL Income tax due thereon Bt SH cosescceceosesessaeece 89.65 Adds SOG Surcharge esecesecers Total income tax and SUTCHEPYE secccsecsvececcese | 134,47 There is no dispute that petitfoner correctly de- clared his gross income derfved from pelay farming, Likewise, there is no dispute that petitioner failed to produce any S00k of accounts or record to support the correctness of the figures entered in his 1950 ine Come tax return, The f{ssues raised fn this appeal are -

l. Whether or not petitioner {s liable for income tax deficiency for the year 1950;

2. Whether or net petitioner {s lfable for fraud penelty; and

3. Whether or not petitioner should be compelled to pay the compromise penalty sought to he collected by respondent.

The first issue presents solely 4 question of fact. Respondent claims that petitioner underdeclared hts gross sales of “bafigos*® produced in his fishpend and overde- Glared his expenses, and, sccordingly, he assessed the deficiency tax in question. On the other hand, peti- tioner claims that he made no underdeclaration of his gross sales of “bafigos" and no overdeclaration of exe penses. 7 :

DECTISICN «

C.T.A. CASE NO, 249 = 5 « r To prove the incorrectness of the claim that he underdeclared his gross sales of “bafigos", petie- tioner testified thet he bought only 71,000 “bafigos" fry in April, 1950, et the rate of #10,00 per thou- eand, or 3 total of * 710.0; that the expenses for the transportation of the fry from Molo, the plece where the fry was bought, to Anileo, where his fishe pond is located, amounted to P56,50, so that the total cost to him of the safd fry wes ?766,50; that of the 71,000 “bajfigos" fry, only about 70% to 25h survived; that the “bafigos" fish and other kinds of uneulttvated fish produced in his fishpond {fn 1950 were sold only for 4,159.15, at the rete of *1.00 per kilo of "bafigos"; and that he bought the fry {n April to enoble him to sell his "bafigos* {in December, es ft took about efcht

(8) months for the fry to develop Into a regular size fish for the market considering that his fishpond was not well developed, Respondent mede no effort to present concrete Ps. evidence to rebut the evidence adduced by petitioner. , BIR Examiner Enrfiove tsidoro testified on the result of his inquiry ae to the prices of “batgos" fry. “e stated thet the price of fry from September to Cctober of 1950 was from P6,00 to #7.00 per thousand, but tn the month of April the price ranged from ?9,00 to F11.00 per thousend. No effort having been made to disprove the testimony of pet{tioner that he bought the fry ‘fn April of 1950, such fact must have to be accepted as sufficiently established. This being so, the fact *" 24

DECTS ION =

GeTeA. CASE WO, 249 = 6< that the said fry was bought at the price of #10,00 per thousand must also be accepted, it being aduitted by BIR Examiner isidero that the price of izxy in April ranged from #9.00 to #11.00 per thousand, It may be argued that it is unnatural for peti- tioner to buy his fry when the price is high, Sut if it were to be admitted that the fry was sought in September or Cetober of 1950, when the price was low, then the “bajfigos" produced by petitioner out of said fry could not have been sold in December of thet year but in the following years hence, the assessment aust have to be diswissed for lack of legal basis, Ayain, the fact that the price of iry in April wes high fs no reason why a fishpond owner shouid not buy fry in that month, The price of “bafiges" fry, as in the case of other commodities, is governed wy the law of supply and demand, The fact that the price of fry in April is high may indicate that the supply is low and that there are many buyers. And the fact that there are many ouyers is an indication tnet condie tions are favorable for the production of *oafigos* sufficient to offset the high cost of fry. .

There {s also a dispute as to whether or not the sum of #766,50 represents the purchase price of “bafigos" fry bought by petitioner. [ft is the contention of > petitioner that only the sum of #710,00 was used to purchase the fry and the sum of #56.5O was spent for the transportation of the fry from Molo to his fishpond

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IS IGN eo CTA. CASE NO, 249 - To in Anilao, However, respondent claims that the said amount was used to purchase “pajigos" fry and it does net include transportation expenses. Nothing appears in the record of this case to show that petitioner made any Separate claim for expenses in connection with the purchase of said fry and no evidence has been presented to disprove the allegation of peti- tioner that the sum of #56,50 represents transporta= tion expenses of the fry bought by him, #e are, theree fore, inclined to believe the allegation of petitioner that only the sum of © 710,00 was actually used te pure chase “baifigos* fry and that the sum of #56.50 represents With respect to the percentage of survival of “pafigos", we agree with respondent thet the winilaun percentage of survival is 30% and aot 206 or Jie as clained by petitioner, [his finaing of respondent is supported by the testimony of Pedro Padlan, officer=in- charge of the Visayan Uemonstration Fish Fara at Molo, Iloilo, who was presented by petitioner hiuseli as his own witness.

With respect to the disallowance by respondent of a portion of the expenses claimed by petitioner in the sum of #521.53, the latter has made merely « lighthearted attempt to justify the deduetibility of his alleged ex- penses. We find no justification to modify the decision of respondent on this point.

, In resume, we find that petitioner bought in April, 1950, 71,000 “bafigos" fry for #710.00 at the rete of ” oY:

2 <x Te ll

DEC TS ION

CeTeAse CASE NO, 249 #10,00 per thousands that of the 71,000 “bafigos" fry, 304 sucvived, or 17,750; that the 17,500 “bafigos", or 4,437.50 kiles at the rate of 4 “bafigos* per kilo, were sold in December of 1950 for 94,437.50 at the rate of #1.00 per kilo; and that petitioner overde- clared his expenses by *521.53. Petitioner, in view - ef these findings, made an underdeclaration of his income from his sales of “bafigos" in the sum of #277.35, representing the difference between his gross sales of '4,437,50 less his declared gross sales of #4,159,15, and an overdeclaration of his expenses in the sum of #521.53. However, even with the addi- tion of said underdecleration of income and overdetla- ration of expenses, petitioner is stili not subject to income tax for the year 1950, as shown below:

Net income pex POLUEM ceceseee 25,868.05 Plus: Undeclared sales cesceose 277.35 Expenses disallowed ....

vet © seccccsesccessscces US, Tt appearing that petitioner is not liable to the income tax for the year 1950, we find it unnecessary to consider the other {ssues raised tn this appeal, FOR THE FOREGOING CONSIDERATIONS, the dec {ston appealed from is hereby reversed, without prenouncement as to costs, .

30 QWENED, Manila, Philippines, January 22, 1956,

DECTS ION =

C.T.A. CASE NO, 249

Presiding Judge

ROMAN M, UMALT

Associate Judye

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