4/7/2021
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FIRST DIVISION
[ G.R. No. 210238, January 06, 2020 ]
IMELDA SZE, SZE KOU FOR, & TERESITA NG, PETITIONERS, VS.
BUREAU OF INTERNAL REVENUE, REPRESENTED BY THE
COMMISSIONER OF INTERNAL REVENUE, RESPONDENTS.
DECISION
REYES, J. JR., J.:
The Facts
The respondent Bureau of Internal Revenue (BIR) issued Revenue Regulation 8-2001 or
the Voluntary Assessment Program (VAP), granting tax payers the privilege of last
priority in the audit and investigation of all internal revenue taxes for the taxable year
December 31, 2000, and all prior years under certain conditions. Chiat Sing Cardboard
Corporation (Chiat Corp.) availed of the VAP and was issued a certificate of qualification
for 1999 and 2000. The BIR clarified that availment of the VAP should not be construed
to cover up any fraud or illegal acts that the taxpayer may commit as it is a mere
privilege.[1]
On March 25, 2003, the BIR issued a Letter of Authority (LOA) for the examination of
accounting books and records of Chiat Corp. for all internal revenue taxes for 1999 and
2000. Chiat Corp.'s Master Payroll, Beth Tugade (Tugade) received the LOA, but the
required documents were not presented. On May 5, 2003, Tugade received the BIR's
second notice and final notice, and still the records were not presented.[2]
Due to Chiat Corp's. refusal to present its accounting records, the BIR conducted an
investigation and discovered that Chiat Corp.: (1) underdeclared its sales amounting to
P160,588,321.63 and P113,578,182.69; (2) underdeclared its income amounting to
P10,663,130.96 and P5,678,909.13 for 1999 and 2000, respectively; (3) derived
income from undeclared importation of raw materials; (4) the underdeclared sales and
income should have been subjected to VAT and income tax; (5) deliberately and wilfully
misdeclared its taxable base to evade payment of correct internal revenue liabilities;
(6) failed to withhold taxes on labor cost it claimed amounting to P427,010,000.00; (7)
failed to rectify its income, value-added and withholding tax returns, which should
reflect the actual and correct taxable base; and (8) understated the payment of its
correct tax liabilities by more than 30%.[3]
Thereafter, the BIR issued a Notice of Informal Conference (NIC), Preliminary
Assessment Notice (PAN), Formal Letter of Demand (FLD), and Final Assessment Notice
(FAN). Despite these notices, Chiat Corp. failed to interpose any protest; thus, the
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