:. First Legas Pi Realty Corporation vs. The Commissioner of Internal Revenue

DECISION -

- 2 - Bank Building, 149 Legaspi St., Legaspi Village, Makati, Metro Manila, while respond ent is the duly appointed Commissio~e~ of Internal Revenue of the Philippines with offices at the BIR Building, Diliman. Quezon City, where he may be served with summons.

Respondent may, likewise be served with summons through the Solicitor General at his official address. During the taxable year from January 1, 1976. to December 31, 1976, petitioner filed its quarterly and final corporate income tax returns and. paid the proper taxes thereon.

During th e taxable year fro m Jan uary 1, 1976 to · ..

December 31, 1976, petitioner fil ed i t s quarterly returns for income tax w1thh ~Jd at sou r ce and r emitted to the Bure au of Internal Rev en ue the proper withholding taxes .

Petitioner received an assessment notice and covering letter dated March 22, 1982 requesting payment of the amount of P24,953.16 as deficiency income tax for the year 1976.

The above captioned assessment was arrived at by respondent through the following computation: ') \...~ ' \

DE CI SION

CTA CASE NO. 37 48 - 3 - Net income per return . . •• •... •• . Adjustment s:

Rental i ncome {undec l ared ) P20, 100.00 Interes t expense (over clai med} . . . . . • . • 32 , 730.37 Professional fees (unsup- ported and prior year' s expense ) • . . • . . • . 8,840.00 Light and water (Prior year ' s expense) 4,080.90 Repairs and maintenance (- do-) 1, 021.67 Leasehold improvement s (-do-) 3,517 .67 Net i ncome per investi gation . • . .

Tax due thereon . . . . . . .

. • . .

Less: Tax already assessed . .... Deficiency ta . . . . . ~ . . . • . Add:

Interest at 42% . . . .

TOTAL AMOUNT DUE AND COLLECTIBLE

. Pl0,414 .79 70, 290.61 P80.7o5 .4o = == = ~ = z:::ra::r::t: P20,17fi.35 -· 2, 603 7Q 17,572.65 7, 380.51 ~~~~~~~=~~ From th e cover i ng ·l e t te r , it cou ld be gl eane d that the def ic iency 1 n co m~ ta x charged again st pet i ti oner is due t o the di ~n llo wa n ce of the fo llowing deducti ons: {a ) Ren t al inc ome ( b ) In t 0r est expe nse ( c ) Profe ss i ona l fe es ( d ) Li ght and wat e r (e) Repa i rs and ma i ntenance (f) Lea seho ld i mpro vements . . On April 1, 1982, peti tioner requested respondent to reco nsider th e ass essmen t and to withdraw an d cancel the demand f or payment.

DECISION -

CTA CASE NO. 37 48 - 4 - On Augus t 18, 198 3, a warr ant of di straint and - ..

levy was served on petitione r . On September 27, 1983, pe t itioner sought reconsiderati on and lifting of the Wa r rant of Distraint and Levy.

On Febru ary 20, 1984 , peti t ion e r received letter of respondent de nying t he re ques t and the protest stating that t hi s act i on cons ti tutes tr e fin al decision on the matter.

Henc e , t he pr ese nt appeal . The basi c questi on for determ i nat ion is wh ether or not petitione r i s lia bl e fo r th e def iciericy income tax -· for the year 1976 i n t he amou nt of P24 , 953 .1 6 . In as king t hat the petition f or rev iew be dismiss ed an d judgment be re ndered or·de r ing petitioner First Legaspi Realty Corpor ati on to pay the def iciency income tax i ques t io n, r es pond ent co ntends: (p. 71.

CTA records.)

Dur in g th e proc ee din g_ of t hi s case petition e r fai le d to sub mi t an d offer its document ary evidence in support of its claimed deductions for the year in question. Neither did petitioner file its memorandum 1n support of its case.

r~ore, it failed to presE!ht evidence dis puting the finding$ · of respondent • s Revenue Examine r that the amount of P59,1 00.00 received by petitioner as rent deposit is not considered income . No evidence VJ

DECISION -

CTA CASE NO . 3748 ... 5 - was l1k e\11ise shovm that. the interest expense it claime d as deduction was not exc~ss1ve. On the cla1m for professio nal fe es , expenses for li ght and water, repairs an d maintenanc e and l easeho ld expenset, petitioner fail ed to present recei~ts or . vouchers evidencin g expenses thus so incurre d. Moreover, petitioner, on several occasions h~d shown lack of interest in pur-suing 1ts p t~t it1on for rev1e"' filed \<lith this llonora le Court. Its faflure to present any evide nce show in g the fncorrectness of the ass.stment is fat~l consider1ng that the assl;lssment ma d~~ by the Commissioner of Internal Revenue 1$ correct unless controverted (So hol _and Transportation Co .

vs. Co mm i ss ionr.r of Inte rnn l Rev en ue, l-13099 and L-1 2462, pril 29, 1~50. 107 Ph il . 16R). We a.g re-e •.

The Court recognizes that the b 1rden of proof 1s on th e taxp~yer con t estinq the va li dit y or corrPctness of en asse~S f!l ~nt.

to nt·ove not 11n l_y that the Commissionf!r of Int~rnal Reventtf!' is wrong but that he (taxpayer) is ri gh t. (lino Gut ierrez vs. Collector of Intern a l Revenue, CTA Case No. 504 , January 28. 1952; see lllso Tan Guan vs. Cour·t of Tax 1\ppeals , L-23676.

A p r 11 2 7 , 1 91 ., ., 1 9 $ C R A 9 (l 3 • } And if the taxpayer fails to present . evidence or proof in suppo rt of h,s allegations tn ~1s peti fon ~or revi w. or to pros cute his action, cS in thiS c~se. tonform!bly to the doctr1 ne of the presu~pt1on 1n fevor of the correctn ss 6Eb

- 6 • of the tax assessment (Interprovincial Autobus Co., I nc .

vs.

Co ll ector of Internal Revenue, L-6741, January 31 , 1956, 98 Phil.

290;

Col l ector of Interna l Revenue vs. Bohol land Transportation Co., L-13099 and L-1346j, Apr 11 29, 1960, 107 Ph1 1.

965 ), the Cour t of Tax Appeals 'fill merel y sust ain the assessment agains-t --the taxp"y.:r. (Caresosa vs.

Bureau of Int ernal Revenue, CTA Ca se No.

3713, January 25 ,

1985 ,

ce rtiorari den ie d in G.R. No.

l- 7 0 7 5 8 , A u g • 3 0 , 1 9 8 !i . ) Since no Pvidence was pres ented by pet it1one r to substantiate the errors that are claimed to have been committ ed by the Commissio ner of Interna l Revenue 1n making the assess ment in qu~s ti on , this Court has no other al ternative than to resort to the 1 e g a 1 t r u i s m t h a t " a 1 1 p res u m P. t i on s are 1 n fa vor of t he correctn e ss of tax assess ments." The bu rd en of proof 1 s on the -\a xraye r to show the contr ary .

Petitioner utterly failed to do. This action f in ds support i n , the fol l owing autho r ities: (See Collec t or of I nterna l Revenue vs . Bohol la nd transporta t i on Co.; Boh ol Land Transportat i on Co. vs .

Coll ecto r of Inte rn al Revenue, l-1 3099 & l - 13462 , Apr il 29 , 1960 , 107 Ph11. 96 5.)

DEC I S I 0 tl - CTA CASE NO . 3 / 48 - 7 - " All presumptions are in favor of the correctne ss of tax assessments.

The good faith of tax assessors and the validity of their actions are presumed .

They wil l be presamed to have tak e n into conside ration a ll the fa cts to which their attention was called. No presumption can be indulged that all of the public officials of the state in the various cou ntie s who have to do w1tn the assessment of property for taxation wil 1 knowingly viol ate the duti es imposed upon them by law. "As a logical outgrowth of the pres umpti on in.

favor of the validity of assessmen ts, when such assessments are assailed, U1e burden of proof is upon the co mp l a ini ng party. It is incu mbe nt upon the property owner cl ea rl y to s hnw that the ~ss essmen t was er""roneou s . 1n order to relieve himself from it.

(51 Am.

Jur.

pages 620- 621}."

(interprovincial Autobus Co., Inc . vs. Coll ector of Inter nal Revenue, 98 Phil. , 290; 52 Off. Gaz. 127 791.} "Hh en an i mr>o rt er challenges by legal steps th e correctness o f the asse ss me nt of a duty by the Collector of Customs, the questio n to be decid ed i s not wh ether th e Co ll ector was wrong but whether the importer was righ t , the· burden be ing on the latter to establ ish the correctness of his own contention... (Behn, Mayer & Co.

vs.

Collecto r of Customs, 26 Phil., 647.)

"That the determination of the tax defic1enc y by the Government has prima facie validi ty ' and the burden re.sts upon th e taxpayer to overcome th1s presu mp tion and to show to the satisfaction of the Tax Court th at the determ1 nat ion was not correct.~~"· (Perez v s • Co u r t o f Tax A p p e ai s , e t a 1 • ,

G • R •

N o • L-10507, May 30~ 1958.}"

DE CISION -

- 8 - Even more , under sec t i on 3 of Rul e 17, Rules of Court, if plai nt iff ( pet iti one r her ei n ) fails t o appear at the t1 me of the t r i a 1 , or to pr ose cu te h i s a c t'i on for an unre asonab l e l eng th of t i me, whi c h ac tually happ ened in t hi s case, the actio n may be di sm iss ed upon motion of t he de f endant ( responden.t} or upon th e court's own moti on .

This dismissal shal l have th e effect of an adjudicat i on upon the merits, un l ess otherwi se pr ovided by court. ·· Pa renthe t i ca l ly , it may be s t ated that the general r ul es pr ovided i n the Rules of Co ur t go vern proc e.cd ings i n the Court of Tax Appeals .

The rul e s pro mul gated by the Cou r t of Ta x Ap pea l s ar e m£ re ly su pp l e ~ entary .

(P e rez vs. Araneta , 103 Phil. 11 G7 . )

Ac co r din gly , petitioner First Legaspi Rea l ty Corporation i s ordered t o pay to r espon dent Commissioner of I nt erna l Re ven ue the a 1oun t of P24,953.16 as def iciency in come tax for the year 197 6 , plus surch ar ges and in te r est in c id ent to de li nq uency pursuant to t he provisions of Secti on 51(e)(2)(3) of the applicable National In t ern al Re venue Code , as amended.

- 9 -

WHEREFORE, the decision appealed from is hereby affirmed at pPtit i oner's cos t s. SO ORDER ED.

Quezon City , Metro Manila, October 28, 1988.

WE CONCUR: ~

'---

CON S~

ROAQUI N

A~soci ate ~Judge ~~ Associate J11 dge Jets Ton CTA CASE SO. Cele So onareby certioy that fhis devisicn was reached after due connulfaticn amonda the mechears of the Court or Tax Apneais in acenrdance with Seetion 13, Article VITI of tie Caenstitution.

AMANT EL

Presiding dIndge cored