SECOND DIVISION

[C.T.A. CRIM. CASE NO. O-454. December 5, 2018.]

NPS Docket No. XVI-INV-12K-00520
For: Violation of Section 254 of the National Internal Revenue Code of 1997, as
amended (Attempt to Evade or Defeat Tax)

PEOPLE OF THE PHILIPPINES, plaintiff, vs. ARNEL CORTEZ

MANALOTO, 64B Sto. Entierro Street, Sto. Cristo, Angeles City,
Pampanga, accused.

[C.T.A. CRIM. CASE NO. O-455. December 5, 2018.]

NPS Docket No. XVI-INV-12K-00520
For: Violation of Section 254 of the National Internal Revenue Code of 1997, as
amended (Attempt to Evade or Defeat Tax)

PEOPLE OF THE PHILIPPINES, plaintiff, vs. ARNEL CORTEZ

MANALOTO, 64B Sto. Entierro Street, Sto. Cristo, Angeles City,
Pampanga, accused.

[C.T.A. CRIM. CASE NO. O-456. December 5, 2018.]

NPS Docket No. XVI-INV-12K-00520
For: Violation of Section 255 of the National Internal Revenue Code of 1997, as
amended

PEOPLE OF THE PHILIPPINES, plaintiff, vs. ARNEL CORTEZ

MANALOTO, 64B Sto. Entierro Street, Sto. Cristo, Angeles City,
Pampanga, accused.

[C.T.A. CRIM. CASE NO. O-457. December 5, 2018.]

NPS Docket No. XVI-INV-12K-00520
For: Violation of Section 255 of the National Internal Revenue Code of 1997, as
amended

PEOPLE OF THE PHILIPPINES, plaintiff, vs. ARNEL CORTEZ

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 MANALOTO, 64B Sto. Entierro Street, Sto. Cristo, Angeles City,
Pampanga, accused.

DECISION

CASTAÑEDA, JR., J : p

STATEMENT OF THE CASE

Accused Arnel Cortez Manaloto, a law practitioner, is charged before this

Court of the crimes of attempt to evade or defeat the payment of Value-Added
Taxes (VAT) under Section 254 of the National Internal Revenue Code (NIRC) of
1997, as amended, for taxable year 2011, 1(1) attempt to evade or defeat tax under
Section 254 of the NIRC, as amended, by substantial under-declaration of income
tax for taxable year 2011, 2(2) failure to file VAT Return under Section 255 of the
NIRC, as amended, for taxable year 2011, 3(3) and failure to supply correct and
accurate information in his Income Tax Return (ITR) under Section 255 of the
NIRC, as amended, for taxable year 2011. 4(4)

STATEMENT OF FACTS

On March 26, 2015, the prosecution filed before this Court four (4) separate
Informations against the accused. The accusatory portions of which provide:

CRIMINAL CASE NO. O-454

INFORMATION

xxx xxx xxx

"That in 2011 until April 25, 2012, in Angeles City, Pampanga and
within the jurisdiction of this Honorable Court, the above-named accused,
who is a law practitioner and a registered tax payer of Revenue District No.
21A, North Pampanga, being required by law to pay Value Added Taxes
(VAT) did, then and there, willfully, unlawfully, and feloniously attempt to
evade or defeat tax, as said accused did not pay his Value-Added Taxes
(VAT) for entire taxable year of 2011 thereby resulting in basic deficiency
Value-Added Tax in the total amount of Four Million Five Hundred Fifty
Six Thousand Seventy One Pesos and 95/100 (P4,556,071.95), more or
less, exclusive of surcharge and interest, to the damage and prejudice of the
Government of the Republic of the Philippines."

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 CONTRARY TO LAW.

CRIMINAL CASE NO. O-455

INFORMATION

xxx xxx xxx

"That on or about the 15th of April 2012, in Angeles City, Pampanga

and within the jurisdiction of this Honorable Court, the above-named
accused, a registered tax payer of Revenue District No. 21A, North
Pampanga, under TIN 240-090-529-000, required by law, rules and
regulations, to pay correct taxes did, then and there, willfully, unlawfully,
and feloniously attempt to evade or defeat tax, as said accused substantially
underdeclared his income for taxable years [sic] 2011 in his income Tax
Return thereby resulting in basic income tax deficiency of Twelve Million
One Hundred Fourteen Thousand Five Hundred Twenty Five Pesos and
20/100 (P12,114,525.20), more or less, exclusive of surcharge and interest,
to the damage and prejudice of the Government of the Republic of the
Philippines." CAIHTE

CONTRARY TO LAW.

CRIMINAL CASE NO. O-456

INFORMATION

xxx xxx xxx

"That in 2011 until April 25, 2012, in Angeles City, Pampanga,

Philippines, and within the jurisdiction of this Honorable Court, the
above-named accused, a law practitioner and a registered tax payer of
Revenue District No. 21A, North Pampanga, being required by law to file
Value-Added Tax (VAT) Return, did, then and there, willfully, unlawfully,
and feloniously fail to file his Value-Added Tax Return for taxable year
2011, thereby resulting in Value-Added Tax deficiency/liability in the
amount of Four Million Five Hundred Fifty Six Thousand Seventy One
Pesos and 95/100 (P4,556,071.95), more or less, exclusive of surcharge and
interest, to the damage and prejudice of the government."

CONTRARY TO LAW.

CRIMINAL CASE NO. O-457

INFORMATION

xxx xxx xxx

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 "That on or about the 15th day of April 2012, in Angeles City, Pampanga,
Philippines, and within the jurisdiction of this Honorable Court, the
above-named accused, a registered tax payer, required to pay internal
revenue taxes, did, then and there, willfully, unlawfully, and feloniously, fail
to supply correct and accurate information in his 2011 Income Tax Return,
by making it appear under oath that his income for taxable year 2011 was in
the amount of P1,495,200.00 only, when in truth and in fact, said accused's
income during the same taxable period was in the amount of P37,967,266.26
but failed to declare them in his Income Tax Return, to the damage and
prejudice of the government in the amount of Twelve Million One
Hundred Fourteen Thousand Five Hundred Twenty Five Pesos and
20/100 (P12,114,525.20), more or less, as basic income tax deficiency,
exclusive of surcharges and interest."

CONTRARY TO LAW.

The Court found the existence of probable cause for the issuance of warrant
of arrest against the accused for CTA Crim. Case Nos. O-454 5(5) and O-457 6(6)
on May 12, 2015, for CTA Crim. Case No. O-455 7(7) on May 25, 2015, and for
CTA Crim. Case No. O-456 8(8) on June 22, 2015.

On June 4, 2015, 9(9) the Court received the transmittal of the surety bond
posted for the provisional liberty of the accused for the subject criminal cases,
which was duly approved in an Order dated May 28, 2015 by Hon. Omar T. Viola,
Executive Judge of the Regional Trial Court, Branch 57 of Angeles City,
Pampanga.

On August 10, 2015, 10(10) the Court consolidated CTA Crim. Case Nos.
O-455, O-456, and O-457 with CTA Crim. Case No. O-454, the case bearing the
lower docket number, also pending before this Division.

Upon arraignment, 11(11) accused, assisted by his counsel, pleaded "Not

Guilty" to the charges in the respective Information contained in these
consolidated cases.

The Preliminary Conference was held on January 25, 2016 12(12) and
continued on February 15, 2016. 13(13)

On March 31, 2016, both parties manifested that they are adopting the
Minutes of the Preliminary Conference, thus, pre-trial conference was deemed
terminated. 14(14)

On May 3, 2016, the Court issued the Pre-Trial Order. 15(15) The parties
stipulated the following facts: 16(16) 1. That the accused Arnel Cortez Manaloto is
the same person being charged in the sets of Information. 2. That this Court has

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jurisdiction over the person of the accused Arnel Cortez Manaloto.

During trial, the prosecution presented the following witnesses: 1. Ms.

Mary Grace Alonzo, 17(17) 2. Ms. Gertrudes M. Eito, 18(18) 3. Mr. Gary V.
Atanacio, 19(19) 4. Ms. Evangeline S. Catotal, 20(20) 5. Ms. Rosalina F. Legaspi,
21(21) 6. Ms. Imelda D. Cebuano, 22(22) 7. Ms. Liza Jane G. Taojo, 23(23) and 8.
Mr. Benjamin B. Virtucio, Jr. 24(24) DETACa

Witness Ms. Mary Grace P. Alonzo testified by way of Judicial Affidavit.

25(25) Ms. Alonzo is a Revenue Officer of the BIR and presently assigned at the
National Investigation Division (NID). The Judicial Affidavit of Ms. Alonzo was
offered to prove the following: (a) Witness is one of the revenue officers of the
Bureau of Internal Revenue who was assigned to investigate Accused Arnel
Cortez Manaloto by virtue of a NID Memo Assignment; (b) From the BIR's
investigation of Accused Manaloto, it was verified that Accused Manaloto
acquired from Datu Andal Ampatuan, Jr. in 2011 a total of eight (8) real estate
properties in Davao City; (c) Accused Manaloto under-declared his income for
taxable year 2011; (d) Accused Manaloto has total deficiency taxes for taxable
year 2011 amounting to Twenty Seven Million Five Hundred Sixty Three
Thousand Five Hundred Ninety Five and 84/100 Pesos (P27,563,595.84), and (e)
Other matters related to the foregoing, which includes the identification of the
witness of documents in support of the foregoing. 26(26)

Witness Ms. Alonzo testified on the investigation she and her group
conducted regarding the tax liabilities of accused Manaloto for taxable years 2005
to 2011. 27(27) On November 16, 2012, Chief, NID Atty. Sixto C. Dy, Jr. issued a
Memorandum directing her group to conduct a preliminary investigation on Mr.
Manaloto's tax liabilities. 28(28) The group of examiners referred to composed of
witness Alonzo as one of the members together with Gertrudes M. Eito and Gary
Atanacio and headed by Group Supervisor Evangeline S. Catotal. 29(29) The
group started to conduct initial investigation by accessing the centralized database
of BIR — which is called the Integrated Tax System (ITS). 30(30) Upon accessing
the said database, her group gathered some personal information about the
accused, as follows: That Mr. Manaloto is a lawyer by profession; that he is
registered as a Professional in the Practice of law with the trade name THE
OFFICE, ATTY. ARNEL C. MANALOTO; that he is a registered taxpayer of
Revenue District Office No. 21-A, North Pampanga with TIN 240-090-529-000.
31(31) As part of the investigation, her group was instructed by Deputy
Commissioner Estela V. Sales of Legal Group to draft a Memorandum dated
November 23, 2012 directing Revenue District Office No. 21-A, North, Pampanga
to furnish her with certified true copies of all annual income tax return/s and value
added tax returns that were filed by Accused Manaloto with said district. 32(32)
Her group were furnished copies of a Certificate Authorizing Registration together
with the supporting documents such as the Deed of Absolute Sale made between
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Datu Andal Ampatuan, Jr. and Accused Manaloto and a Special Power of
Attorney. 33(33) Her group proceeded to evaluate the data gathered and came out
with the computation of the tax liabilities of the Accused Manaloto. 34(34) Ms.
Alonzo stated that her group was able to compute the total income received by
Accused for taxable year 2011, determine the corresponding deficiency income of
Mr. Manaloto and print computation sheets. 35(35) Based on her group's
computation, the total income of accused subject to tax for taxable year 2011 was
P37,967,266.26 36(36) and accused's total deficiency taxes for taxable year 2011
was P27,563,595.84. 37(37) Subsequently, her group received a Letter of
Authority (LOA) dated November 26, 2012 issued by the Commissioner of
Internal Revenue (CIR), 38(38) authorizing the members of the group to examine
the books of accounts of accused for period from January 1, 2005 to December 31,
2011. She also stated that her group sent a copy of LOA to the accused and
attached a checklist of requirements addressed to the accused Manaloto requesting
for the production of his accounting records to be examined by her group pursuant
to the LOA, 39(39) but there was no reply from the accused. 40(40) The CIR
issued a letter referral dated November 29, 2012 to the Secretary of Justice for the
filing of the criminal action against the accused. 41(41) The group executed a Joint
Complaint-Affidavit dated November 29, 2012 in connection with the
investigation conducted. 42(42)

During the cross-examination of Ms. Alonzo, 43(43) it was established that

the amount of the tax liabilities of the accused was computed before the issuance
of the LOA; 44(44) that Ms. Alonzo was not the one who personally served the
LOA, but she knew that the said LOA was received by the security guard of the
premises; 45(45) that the LOA was issued three (3) days prior to the filing of the
Joint Complaint-Affidavit with the Department of Justice; 46(46) and that
expenditure method was used by her group in computing the tax liabilities of the
accused for taxable year 2011. In that year, her group determined the total
purchases and expenditure of the taxpayer which is not proportionate to his taxable
income per his ITR. 47(47) The cash income for the year 2011 was also
determined in computing the tax liabilities of the accused. 48(48) When witness
was asked if it is important to determine the beginning cash balance for the year
2011 in order to compute the amount of the tax liabilities of the accused, she
answered, "NO." 49(49) The witness did not know if the BIR issued a subpoena
duces tecum to the accused. 50(50) When witness Ms. Alonzo was asked based on
the documents identified, "what among those documents will prove that the
deferred income is actually cash?" She answered that, "I don't know. The income
is just labelled as deferred." 51(51)

On re-direct examination, witness Ms. Alonzo explained that three (3) days
after the issuance of the LOA, the case was filed with the DOJ because they
followed the instruction of the CIR. 52(52) She also stated that the computation
was computed by the group. 53(53) Her other-co-members are Gertrudes Eito,
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Gary Atanacio, and the group is headed by Group Supervisor Evangeline S.
Catotal. 54(54) aDSIHc

Witness Ms. Gertrudes M. Eito testified by way of Judicial Affidavit to

prove the following: (a) Witness is one of the revenue officers of the BIR who was
assigned to investigate Accused Cortez Manaloto by virtue of a NID Memo
Assignment; (b) From the BIR's investigation of Accused Manaloto, it was
verified that Accused Manaloto is registered as a non-VAT taxpayer with Tax
Identification Number 240-090-529, with residential addresses at 64-B Sto.
Entierro St., Sto. Cristo, Angeles City; and at 20 Don Luis Panlilio St., Villa
Dolores Subd., Sto. Domino, Angeles City; (c) Witness was tasked to serve the
Letter of Authority issued against Accused Arnel Cortez Manaloto at his registered
residential address at 20 Don Luis Panlilio St., Villa Dolores Subd., Sto. Domino,
Angeles City, and (d) Other matters related to the foregoing, which includes the
identification of the witness of documents in support of the foregoing. 55(55)

Witness Ms. Eito is currently an Intelligence Officer III assigned at the

NID-BIR. She testified, among others, that on November 27, 2012, she went to
64-B Sto. Entierro St., Sto. Cristo, Angeles City, but despite her best efforts, she
could not find the said address. 56(56) She decided to go to the second address on
record of Mr. Manaloto at 20 Don Luis Panlilio St., Villa Dolores Subd., Sto.
Domino, Angeles City to serve the LOA. 57(57) She knocked on the gate and the
security guard came out. 58(58) She asked if the house was the house of Arnel
Manaloto 59(59) and the guard replied that it was indeed the house of Mr.
Manaloto but he was not at home that time. 60(60) The guard was the one who
received the LOA 61(61) on November 27, 2012. 62(62)

On cross-examination, Ms. Eito stated that she appeared before this Court
just to identify the LOA as well as how the LOA was served. 63(63)

Witness Mr. Gary V. Atanacio testified by way of Judicial Affidavit.

64(64) He is presently employed as Special Investigator of the NID-BIR. He said
that he is one of the members of the group assigned to investigate regarding the tax
liabilities of Mr. Arnel Manaloto for taxable years 2005 to 2011. 65(65) He
testified that he conducted a background investigation by looking at the records of
Mr. Manaloto in the BIR Returns Processing System or RPS. 66(66) He learned of
the income declared in the income tax returns of Mr. Manaloto for taxable years
2008, 2009, 2010, and 2011. 67(67) Accused's declared gross income were as
follows: for taxable year 2008 — P43,000.00; 68(68) for taxable year 2009 —
P112,594.18; 69(69) for taxable year 2010 — P234,188.00; 70(70) and for taxable
year 2011 — P1,495,200.00. 71(71)

On cross-examination, 72(72) Mr. Atanacio testified that prior to the filing

of the complaint affidavit, they were not able to examine the book of accounts of

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the accused, 73(73) and that the complaint was based on the Report on preliminary
investigation conducted by their team. 74(74) The LOA was issued on November
26, 2012 and the complaint was filed on November 29, 2012. 75(75) He stated that
they can even file a complaint even based on Preliminary Investigation and even
without examination of the book of accounts of the taxpayer. 76(76)

On re-direct examination, Mr. Atanacio said that as long as there is a fraud

case based on the cash liability of the taxpayer, they are allowed to file a
complaint even before an actual investigation. 77(77) He also said that the basis of
the complaint affidavit is the under declaration of his income by at least thirty
percent (30%). According to Mr. Atanacio, it was determined through the records
of the taxpayer based on the BIR Return Processing System or the RPS. They
compared it for that year, for the expenses and the purchases he made. In effect,
the complaint was based on Third Party information and also with the records
compared with the BIR. 78(78)

On re-cross examination, Mr. Atanacio admitted that the BIR was able to
determine the civil liability or the deficiency tax liability of the accused prior to
the issuance of the LOA. 79(79)

Witness Evangeline S. Catotal testified by way of Judicial Affidavit.

80(80) She was the supervisor of the group who conducted the preliminary
investigation on accused's tax liabilities. Her group conducted the investigation by
accessing the centralized database of BIR — which is called the Integrated Tax
System (ITS); looked into past tax-related filings of Mr. Manaloto; and sent access
letters to various agencies of government. 81(81) She said that her group received
documents from RDO Rosalina F. Legaspi of RDO 21-A of North Pampanga,
from Atty. Glen A. Geraldino, Regional Director of Revenue Region No. 19,
Davao City, and from the Public Attorney's Office (PAO). Ms. Catotal stated that
there was an under-declaration of more than 30% of the accused's income for the
year 2011. She said that "The income which he declared in his finances for the
year 2011, even if we consider prior years from 2005 to 2010, do not explain his
ability to purchase his current assets, which includes eight (8) parcels of land
worth Twenty Million Pesos (P20,000,000.00) purchased from Datu Andal
Ampatuan, Jr. in the year 2011." 82(82) ETHIDa

On cross-examination, Ms. Catotal admitted that in computing the supposed

tax liabilities of the accused in 2011, her group used the expenditure method. The
cash expenditures were compared with the cash receipts. 83(83) She also stated
that the coverage of the investigation based on the LOA is 2005 to 2011, however,
they are assessing only 2011 based on the acquired assets by the accused. 84(84)

Witness Ms. Rosalina F. Legaspi testified by way of Judicial Affidavit

85(85) that in November 2012, she was assigned as OIC-Revenue District Officer

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of Revenue District Office No. 21-A, North Pampanga; and that she issued a
certification on November 26, 2012 along with certified machine copies of the ITR
and Financial Statements for taxable year 2011 filed by the accused.

On cross-examination, 86(86) Ms. Legaspi testified, among others, that the

accused is a registered non-VAT taxpayer of Revenue District Office 21A, 87(87)
thus, subject to percentage tax. She admitted that based on accused's ITR and
financial statement, the accused is not liable to pay VAT. 88(88)

On July 26, 2017, the prosecution filed its Formal Offer of Evidence (FOE).
89(89) On August 14, 2017, accused filed his Comment on the Prosecution's
Formal Offer of Documentary Evidence. 90(90) On September 8, 2017, 91(91)
this Court acted on the prosecution's FOE and admitted the following exhibits,
subject to the Court's final evaluation and/or appreciation of their purposes,
materiality, relevancy and probative value to the issues involved in this case:

EXHIBITS DESCRIPTION
P-1 Bureau of Internal Revenue (BIR) Registration
Individual Details
P-2 Certification issued by Revenue District Office No.
21A evidencing his registration with their office
P-3 BIR Form No. 1701: Annual Income Tax Return
(ITR) for taxable year 2011 of Accused Manaloto
P-4 Deed of Absolute Sale dated 17 January 2011
P-4-1 Special Power of Attorney dated 26 January 2011
P-5 Independent Auditor's Report as of December 31,
2011 consisting of 3 pages
P-5-1 Deferred revenue entry in the Balance Sheet as of
December 31, 2011
P-6 Letter of Authority (LOA) 211-2012-00000319/SN
eLA201100045540 dated 26 November 2012
P-7 Certification issued by RDO No. 21A evidencing his
failure to file VAT returns
P-8 Detailed computations of Atty. Manaloto's
unreported income using the expenditure method for
taxable year 2011
P-9 Detailed computation of Atty. Manaloto's deficiency
income tax for taxable year 2011
P-10 Joint Complaint-Affidavit by Revenue Officers Mary
Grace P. Alonzo, Gertrudes M. Eito, Gary V.
Atanacio and Evangeline S. Catotal dated 29
November 2012, with annexes consisting of twenty

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 eight (28) pages
P-11 Referral Letter to the Secretary of Justice Hon. Leila
De Lima by Hon. Kim Jacinto-Henares,
Commissioner of Internal Revenue dated 29
November 2012, consisting of two (2) pages
P-12 Joint Reply-Affidavit by Revenue Officer[s] Mary
Grace P. Alonzo, Gertrudes M. Eito, Gary V.
Atanacio and Evangeline S. Catotal dated 7 February
2013, consisting of nine pages
P-13 Supplemental Joint Reply Affidavit by Revenue
Officer[s] Mary Grace P. Alonzo, Gertrudes M. Eito,
Gary V. Atanacio and Evangeline S. Catotal dated 19
February 2013 with annexes consisting of 8 pages
P-15 BIR Returns Processing System (RPS) for the year
2008 consisting of two (2) pages
P-16 BIR Returns Processing System (RPS) for the year
2009 consisting of two (2) pages
P-17 BIR Returns Processing System (RPS) for the year
2010 consisting of two (2) pages
P-18 BIR Returns Processing System (RPS) for the year
2011 consisting of one (1) page
P-19 National Investigation Division (NID) Memo
Assignment No. KJH/SCD 2012-11-16-0467 dated
16 November 2012
P-40 Access Letter to Chief Public Attorney, Public
Attorney's Office (PAO) (ARL-PI No. 2396-2012)
dated November 26, 2012
P-41 Certification issued by Epifanio C. Coles, Jr.,
Director II, Administrative Service, Public Attorney's
Office dated November 27, 2012
P-42 Certification issued by Ms. Marilyn S. Boongaling,
Chief Administrative Officer and concurrent Head,
Personnel Section, Administrative Section, Public
Attorney's Office, Department of Justice
(DOJ-Agencies Bldg., Quezon City)
P-46 Sworn Statement of Assets, Liabilities and Networth
(SALN) of Arnel C. Manaloto filed in 2005
P-47 Sworn Statement of Assets, Liabilities and Networth
(SALN) of Arnel C. Manaloto filed in 2007
P-48 Memorandum to Atty. Glen A. Geraldino, Regional
Director, Revenue Region No. 19, Davao City dated
November 23, 2012 consisting of two (2) pages
P-51 Certificate Authorizing Registration (CAR)
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 201000108453 dated November 26, 2012 consisting
of 2 pages, certified on November 26, 2012
P-52 BIR Form 1706: Capital Gains Tax Return certified
on November 26, 2012, certified on November 26,
2012
P-53 Revenue Official Receipt (ROR 201001557631),
certified on November 26, 2012
P-54 BIR Form 2000-OT: Documentary Stamp Tax
Return, certified on November 26, 2012
P-55 Revenue Official Receipt (ROR 201001557630)
certified on November 26, 2012
P-64 Memorandum to OIC-RDO Rosalina F. Legaspi,
Revenue District No. 21-A-North Pampanga dated
November 23, 2012 consisting of two (2) pages
P-65 Bureau of Internal Revenue Identification Card of
Revenue Officer Grace Alonzo (RO Alonzo)
P-66 Judicial Affidavit of Revenue Officer Grace Alonzo
dated May 11, 2016
P-66-A Signature of Revenue Officer Grace Alonzo in her
Judicial Affidavit dated May 11, 2016
P-67 Bureau of Internal Revenue Identification Card of
Revenue Officer Gertrudes Eito (RO Eito)
P-68 Judicial Affidavit of Revenue Officer Gertrudes Eito
dated June 21, 2016
P-68-A Signature of Revenue Officer Gertrudes Eito in her
Judicial Affidavit dated June 21, 2016
P-69 Bureau of Internal Revenue Identification Card of
Revenue Officer Gary V. Atanacio (RO Atanacio)
P-70 Judicial Affidavit of Revenue Officer Gary V.
Atanacio dated July 13, 2016
P-70-A Signature of Revenue Officer Gary V. Atanacio in his
Judicial Affidavit dated July 13, 2016
P-71 Bureau of Internal Revenue Identification Card of
Revenue Officer Evangeline Catotal (RO Catotal)
P-72 Judicial Affidavit of Revenue Officer Evangeline
Catotal dated August 10, 2016
P-72-A Signature of Revenue Officer Evangeline Catotal in
her Judicial Affidavit dated August 10, 2016
P-73 Judicial Affidavit of Rosalinda Legaspi dated August
26, 2016
P-73-A Signature of Rosalinda Legaspi in her Judicial
Affidavit dated August 26, 2016
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 However, the Court denied the admission of the following exhibits: (1)
Exhibits "P-4-2", "P-4-3", "P-4-4", "P-4-5", "P-4-6", "P-4-7", "P-4-8", "P-4-9",
"P-4-10", "P-4-11", "P-4-12", "P-4-13", "P-4-14", "P-4-15", "P-4-16", "P-4-17",
"P-4-18", "P-4-19", "P-4-20", "P-4-21", "P-4-22", "P-4-23", "P-4-24", "P-4-25",
"P-4-26", for failure to have the exhibits identified and for failure to present the
originals for comparison; (2) Exhibits "P-14", "P-21", "P-21-1", "P-43", "P-44",
"P-45", "P-49", "P-56", "P-57", "P-58", and "P-59", for failure to have the exhibits
identified; (3) Exhibit "P-20", for failure of the exhibit formally offered and
identified to correspond with the document actually marked; and (4) Exhibit
"P-50", for failure to present the original for comparison. 92(92)

On October 2, 2017, plaintiff filed a Motion for Extension of Time (to File
Motion for Reconsideration). 93(93) Thereafter, on October 11, 2017, the plaintiff
filed a Manifestation (Re: Plaintiff's Motion for Extension of Time to File Motion
for Reconsideration) stating that it will no longer file a motion for reconsideration.
94(94) The Court noted the said Manifestation on October 25, 2017. 95(95)

On October 2, 2017, the Court granted the Motion for Leave to File
Demurrer to Evidence filed by the accused on September 29, 2017. The Court
granted the prosecution a period of ten (10) days from receipt of the Demurrer to
Evidence within which to file a Comment or Opposition thereto. 96(96)

On October 12, 2017, plaintiff filed its Comment and Opposition (To
Accused's Demurrer to Evidence). 97(97) On October 30, 2017, accused filed a
Reply to the Comment and Opposition. 98(98)

On January 11, 2018, the Court denied accused's Demurrer to Evidence.

99(99)

On January 26, 2018, accused filed Motion for Reconsideration and Motion
for Deferment of Presentation of Evidence. 100(100) On January 31, 2018, the
Court granted the parties a period of ten (10) days from today within which to file
their respective Memoranda to accused's motion for reconsideration and motion
for deferment of presentation of evidence. 101(101)

Accused's Memorandum 102(102) and Memorandum for the Plaintiff (Re:

Denial of Accused's Demurrer to Evidence) 103(103) were filed by the parties on
February 12, 2018.

On April 3, 2018, the Court denied accused's Motion for Reconsideration.

104(104)

On April 4, 2018, accused filed a Motion to Admit Attached Supplemental

Memorandum. 105(105) On April 17, 2018, the Court ruled that the resolution of
Copyright 1994-2019 CD Technologies Asia, Inc. Taxation 2019 Second Release 12
the said motion was deemed moot. 106(106)

For his defense, accused presented three (3) witnesses, namely: 1. Mr.
Erwin Sicangco Carreon, 107(107) 2. Atty. Joselea Y. Floria-Balleta, 108(108)
and 3. Atty. Rogelio T. Reyes. 109(109)

Witness Erwin Sicangco Carreon testified by way of Judicial Affidavit

110(110) which was identified on April 30, 2018 Hearing. Mr. Carreon is a
licensed Certified Public Accountant and a PRC Accredited Auditor since 2005.
He testified, among others, that BIR erred when it concluded that the Deferred
Revenue Account in the total amount of P17,501,500.00 should have been
considered as part of the total income of the accused because there was no receipt
of income whether actually or constructively. He also stated that the "deferred
revenue" account is actually a provision for the liability the accused under his
existing obligation to perform legal services to his clients. 111(111) He said that
under the Deferred Revenue concept, accused did not receive income whether
actually or constructively. 112(112) He said that in the course of the audit, he did
not come across any document which could support any constructive receipt of the
items under "Deferred Revenue." 113(113) He also testified that taking into
consideration the materiality of the service contracts, the continuing obligation of
the accused to provide legal services to his clients, and the probability that his
clients will eventually pay, thus he prepared the following adjusting entry on the
books of the accused: AIDSTE

Dr. Other Assets xxx

Cr. Deferred Revenue x x x.
114(114
)

Witness Atty. Joselea Y. Floria-Balleta testified by way of Judicial

Affidavit in connection with the Certifications she issued when she was the Clerk
of Court VI in San Fernando, Pampanga. 115(115) She stated that she issued a
Certification concerning the existence and notarization of promissory notes, copies
of which were submitted by the Notary Public Atty. Rogelio T. Reyes to the Office
of the Clerk of Court of San Fernando, Pampanga. 116(116) She also stated that
her office issued a Negative Certification which says that a great portion of the
records and documents filed and/or committed to the charge of their office were
destroyed during monsoon rains on August 7 to 11, 2012 which inundated and
flooded the City of San Fernando, Pampanga including the Hall of Justice
Building housing the Office of the Clerk of Court and by reason of which, their
records do not include notarial reports of Atty. Rogelio Reyes for the month of
July 2010. 117(117)

Copyright 1994-2019 CD Technologies Asia, Inc. Taxation 2019 Second Release 13

 Witness Atty. Rogelio T. Reyes testified by way of Judicial Affidavit.
118(118) He testified that he is a Notary Public in the City of San Fernando,
Pampanga; and that the promissory notes of the accused exist and were notarized
by him, and that he has submitted said promissory notes to the Clerk of Court of
San Fernando, Pampanga.

On July 9, 2018, accused filed his Formal Offer of Evidence. 119(119)

On September 6, 2018, the Court granted Prosecution's Motion to Admit

Comment (Re: Accused's Formal Offer of Evidence) and admitted the comment
incorporated in its motion. The Court also noted and granted the accused's
Manifestation (with Motion for Resolution on Accused's Formal Offer of
Evidence). The Court admitted Exhibits "A-1", "A-1-1", "A-1-2", "A-2", "A-2-1",
"A-2-2", "A-3", "A-3-1," "A-3-2", "A-4", "A-4-1", "A-4-2", "A-5", "A-5-1",
"A-6", "A-6-1", "A-6-2", "A-7", "A-7-1", "A-7-2", "A-8", "A-8-1", "A-8-2",
"A-10", "A-11", "A-12", "A-13", "A-16", "A-17", "A-18", "A-19", "A-20",
"A-21", "A-22", "A-23", "A-24", "A-28", "A-28-1", "A-29", "A-29-1", "A-30",
"A-30-1", "A-31", "A-31-1", "A-32", and "A-32-1". SDAaTC

Exhibit Documentary Evidence

"A-1" Promissory Note issued by Arnel Manaloto in favor of
Takeshi Nioshioke dated December 27, 2010, in the
amount of P2,000,000.00
"A-1-1" Signature above the name Arnel Manaloto
"A-1-2" Signature above the name Rogelio Reyes
"A-2" Promissory Note issued by Arnel Manaloto in favor of
Jenilyn Dimalanta Dayrit dated December 22, 2010, in the
amount of P2,500,000.00
"A-2-1" Signature above the name Arnel Manaloto
"A-2-2" Signature above the name Rogelio Reyes
"A-3" Promissory Note issued by Arnel Manaloto in favor of
Alfredo Buan dated December 20, 2010, in the amount of
P2,500,000.00
"A-3-1" Signature above the name Arnel Manaloto
"A-3-2" Signature above the name Rogelio Reyes
"A-4" Promissory Note issued by Arnel Manaloto in favor of
Teresita Suva dated December 22, 2010, in the amount of
P5,000,000.00
"A-4-1" Signature above the name Arnel Manaloto
"A-4-2" Signature above the name Rogelio Reyes

Copyright 1994-2019 CD Technologies Asia, Inc. Taxation 2019 Second Release 14

 "A-5" Promissory Note issued by Arnel Manaloto in favor of
Takeshi Nioshioke dated December 3, 2010, in the amount
of P1,500,000.00
"A-5-1" Signature above the name Arnel Manaloto
Signature above the name Rogelio Reyes
"A-6" Promissory Note issued by Arnel Manaloto in favor of
Gerardo Cesar Garcia dated December 9, 2010, in the
amount of P2,500,000.00
"A-6-1" Signature above the name Arnel Manaloto
"A-6-2" Signature above the name Arnel Manaloto
"A-7" Promissory Note issued by Arnel Manaloto in favor of
Takeshi Nioshioke dated December 9, 2010 in the amount
of P1,500,000.00
"A-7-1" Signature above the name Arnel Manaloto
"A-7-2" Signature above the name Arnel Manaloto
"A-8" Promissory Note issued by Arnel Manaloto in favor of
Marciana Dimalanta dated July 14, 2010 in the amount of
P5,000,000.00
"A-8-1" Signature above the name Arnel Manaloto
"A-8-2" Signature above the name Arnel Manaloto
"A-10" Retainer Agreement between Arnel Manaloto and Datu
Andal Ampatuan, Jr. dated December 9, 2011
"A-11" Retainer Agreement between Arnel Manaloto and Datu
Andal Ampatuan, Sr. dated December 12, 2011
"A-12" Retainer Agreement between Arnel Manaloto and Datu
Sajid Ampatuan dated December 8, 2011
"A-13" Retainer Agreement between Arnel Manaloto and Datu
Akmad Ampatuan dated December 8, 2011
"A-16" Documentary Stamp Tax Form duly received in August
23, 2013 with payment amounting to P52,250.00
pertaining to the loan transaction with Marciana Dimalanta
"A-17" Documentary Stamp Tax Form duly received in August
23, 2013 with payment amounting to P50,167.50
pertaining to the loan transaction with Teresita Suva
"A-18" Documentary Stamp Tax Form duly received in August
23, 2013 with payment amounting to P14,750.25
pertaining to the loan transaction with Takeshi Nioshioke
"A-19" Documentary Stamp Tax Form duly received in August
23, 2013 with payment amounting to P25,083.75
pertaining to the loan transaction with Carmelo Lazatin.

Copyright 1994-2019 CD Technologies Asia, Inc. Taxation 2019 Second Release 15

 "A-20" Documentary Stamp Tax Form duly received in August
23, 2013 with payment amounting to P25,083.75
pertaining to the loan transaction with Jenilyn Dayrit
"A-21" Documentary Stamp Tax Form duly received in August
23, 2013 with payment amounting to P52,250.00
pertaining to the loan transaction with Gerardo Garcia
"A-22" Documentary Stamp Tax Form duly received in August
23, 2013 with payment amounting to P14,750.25
pertaining to transaction with Teresita Suva
"A-23" Documentary Stamp Tax Form duly received in August
23, 2013 with payment amounting to P19,667.00
pertaining to transaction with Takeshi Nioshioke
"A-24" Documentary Stamp Tax Form duly received in August
23, 2013 with payment amounting to P25,083.75
pertaining to transaction with Alfredo Buan
"A-28" Complaint-Affidavit filed by the Bureau of Internal
also marked as Revenue against Arnel Manaloto and Erwin Carreon
Exhibit P-10
for the
prosecution
"A-28-1" Paragraph 12 of the Complaint-Affidavit
"A-29" Certified True Copy of the Certification issued by Atty.
(part of Exhibit Joselea Y. Floria-Balleta to the BIR
A-27)
"A-29-1" Signature of Atty. Joselea Y. Floria-Balleta
"A-30" Negative Certification issued by Atty. Floria-Balleta to the
BIR
"A-30-1" Signature of Atty. Floria-Balleta
"A-31" Certification issued by Atty. Joselea Y. Floria-Balleta to
Atty. Arnel Manaloto
"A-31-1" Signature of Atty. Floria-Balleta
"A-32" Negative Certification issued by Atty. Floria-Balleta to
Atty. Arnel Manaloto
"A-32-1" Signature of Atty. Floria-Balleta

On September 24, 2018, plaintiff filed its Memorandum. 120(120) In its

Memorandum, plaintiff's STATEMENT OF FACTS:

"For taxable year 2011, Accused Manaloto filed his Income Tax
Return (ITR) declaring a total income of only One Million Four Hundred
Ninety Five Thousand Two Hundred Pesos (P1,495,200.00). Despite this
declaration in his ITR however, documents gathered during BIR's

Copyright 1994-2019 CD Technologies Asia, Inc. Taxation 2019 Second Release 16

 investigation disclosed that Accused Manaloto was able to acquire from
Datu Andal U. Ampatuan, Jr. in year 2011 a total of eight (8) real estate
properties in Davao City, as evidenced by a Deed of Absolute Sale and after
paying the amount of Twenty Million Pesos P20,000,000.00 therefor.
Documents to prove the above allegations were presented and testified
during trial in the instant case.

In addition, entries in the Financial Statement (Balance Sheet)

attached by Accused Manaloto in his ITR contained evidence of income
which he however did not subsequently declare in his ITR. In particular, his
Balance Sheet stated that he had deferred revenue in the total amount of
Seventeen Million Five Hundred One Thousand Five Hundred Pesos
(P17,501,500.00). Despite the receipt of said deferred revenue in 2011
however, he failed to pay the corresponding income taxes due thereon.

Consequently, Accused Manaloto committed substantial

under-declaration of income. Based on documents gathered and using the
expenditure method of computing undeclared income, the BIR was able to
ascertain Accused Manaloto's unreported income. The difference between
the declared total gross income of Accused Manaloto in his ITR versus his
actual amount of expenses, revealed a substantial under-declaration of more
than thirty percent (30%), and such is considered prima facie evidence of
fraudulent return under Section 248(B) of the NIRC of 1997, as amended, x
x x.

The computation of the substantial under-declaration as well as the

computation of the resulting tax deficiency were presented and testified
during trial in the instant case."

On September 27, 2018, accused filed his Memorandum. 121(121)

The case was submitted for decision on October 4, 2018.

STATEMENT OF ISSUES

The issues stipulated 122(122) by the parties for the Court's resolution are:

1. Whether or not there is proper and legal assessment of the

supposed tax liability of the accused.

2. Whether or not the computation of the Bureau of Internal

Revenue regarding the supposed tax liability of the accused is
sufficient basis to hold the latter criminally liable for the crimes
charged.

3. Whether or not accused is guilty of the crimes charged.

Copyright 1994-2019 CD Technologies Asia, Inc. Taxation 2019 Second Release 17

 Plaintiff argues that it was able to prove the guilt of the accused for the
crimes charged in the Information for violating Sections 254 and 255 of the NIRC
of 1997, as amended.

In his Memorandum, accused argues that the prosecution has not aptly
applied the Net Worth (Inventory) Method nor the Expenditures Method in
computing the tax liability of the accused; no formal investigation conducted by
the BIR as required by RMO 24-2008; the burden is not upon the accused to prove
that the money used in purchasing the subject eight (8) parcels of land were
sourced from promissory notes; the prosecution has not proven that the deferred
revenue is cash receipt that is taxable; and the "BIR detailed computation" is not
signed and approved by the Commissioner of Internal Revenue. In summary,
accused submits that the instant cases should be dismissed because the prosecution
failed to establish his guilt beyond reasonable doubt:

a. That it complied with RAMO 1-2000 and RMC No. 43-74,

concerning the valuation of the taxpayer's assets at the
beginning of the taxable period;

b. That there is actual cash received by the accused in connection

with the deferred revenue account; acEHCD

c. That it complied with Section 205 of the National Internal

Revenue Code, concerning finality of the BIR Computation;
and

d. That it complied with RAMO 24-2008 and RMC No. 43-74,

concerning the non-conduct of the formal investigation and
examination of the books of account of the accused.

THE RULING OF THE COURT

It is basic that in criminal case, the burden of proof is on the prosecution to

prove the guilt of the accused beyond reasonable doubt. "Proof beyond reasonable
doubt does not mean such a degree of proof as, excluding possibility of error,
produces absolute certainty. Moral certainty only is required, or that degree of
proof which produces conviction in an unprejudiced mind." 123(123) In a criminal
case, the accused is entitled to an acquittal, unless his guilt is shown beyond
reasonable doubt. 124(124)

Accused is charged before this Court of the crimes of:

1. attempt to evade or defeat the payment of Value-Added Taxes

(VAT) under Section 254 of the National Internal Revenue
Code (NIRC) of 1997, as amended, by failure to pay VAT for
Copyright 1994-2019 CD Technologies Asia, Inc. Taxation 2019 Second Release 18
 taxable year 2011 (CTA Crim. Case No. O-454);

2. attempt to evade or defeat tax under Section 254 of the NIRC,

as amended, by substantial under-declaration of income tax for
taxable year 2011 (CTA Crim. Case No. O-455);

3. failure to file VAT Return under Section 255 of the NIRC, as

amended, for taxable year 2011 (CTA Crim. Case No. O-456);
and

4. failure to supply correct and accurate information in his Income

Tax Return (ITR) under Section 255 of the NIRC, as amended,
for taxable year 2011 (CTA Crim. Case No. O-457).

Pertinent to this are Sections 254 and 255 of the National Internal Revenue
Code (NIRC), as amended, which provide:

"SEC. 254. Attempt to Evade or Defeat Tax. — Any person who

willfully attempts in any manner to evade or defeat any tax imposed
under this Code or the payment thereof shall, in addition to other
penalties provided by law, upon conviction thereof, be punished by a fine of
not less than Thirty thousand pesos (P30,000) but not more than One
hundred thousand pesos (P100,000) and suffer imprisonment of not less than
two (2) years but not more than four (4) years: Provided, That the conviction
or acquittal obtained under this Section shall not be a bar to the filing of a
civil suit for the collection of taxes." (Emphasis supplied)

"SEC. 255. Failure to File Return, Supply Correct and Accurate

Information, Pay Tax, Withhold and Remit Tax and Refund Excess Taxes
Withheld on Compensation. — Any person required under this Code or
by rules and regulations promulgated thereunder to pay any tax, make a
return, keep any record, or supply correct and accurate information, who
willfully fails to pay such tax, make such return, keep such record, or
supply such correct and accurate information, or withhold or remit taxes
withheld, or refund excess taxes withheld on compensation, at the time or
times required by law or rules and regulations shall, in addition to other
penalties provided by law, upon conviction thereof, be punished by a fine of
not less than Ten thousand pesos (P10,000) and suffer imprisonment of not
less than one (1) year but not more than ten (10) years. x x x" (Emphasis
supplied)

Also pertinent is the case of Commissioner of Internal Revenue vs. The

Estate of Benigno P. Toda, Jr., 125(125) the Supreme Court held that tax evasion
connotes the integration of three factors: SDHTEC

1. The end to be achieved, i.e., the payment of less than that

Copyright 1994-2019 CD Technologies Asia, Inc. Taxation 2019 Second Release 19

 known by the taxpayer to be legally due, or the non-payment of
tax when it is shown that a tax is due;

2. An accompanying state of mind which is described as being

evil, in bad faith, willful or deliberate and not merely
accidental; and

3. A course of action or failure of action which is unlawful.

The following pronouncement by the Supreme Court in the Bureau of

Internal Revenue vs. Court of Appeals, 126(126) is enlightening as follows:

In Ungab v. Judge Cusi, Jr., 127(127) we ruled that tax evasion is

deemed complete when the violator has knowingly and willfully filed a
fraudulent return with intent to evade and defeat a part or all of the tax.
128(128) Corollarily, an assessment of the tax deficiency is not required in a
criminal prosecution for tax evasion. 129(129) However, in Commissioner
of Internal Revenue v. Court of Appeals, 130(130) we clarified that although
a deficiency assessment is not necessary, the fact that a tax is due must first
be proved before one can be prosecuted for tax evasion. 131(131)

CTA CRIM. CASE Nos. O-454 and O-456

These cases pertain to the charges of non-filing of VAT return and

non-payment of VAT for taxable year 2011.

To sustain a conviction for attempt to evade or defeat tax under Section 254
of the NIRC of 1997, as amended, by failure to pay VAT for taxable year 2011
(CTA Crim. Case No. O-454), the following elements must be established:

1. An attempt in any manner to evade or defeat any tax imposed under

the NIRC or the payment thereof; and

2. Such attempt to evade or defeat tax or the payment thereof is willful.

To sustain a conviction for failure to make or file a return under Section

255 of the NIRC of 1997, as amended, (CTA Crim. Case No. O-456), the
following elements must be established:

1. Accused is a person required by the NIRC or rules and regulations to

make or file a return;

2. Accused failed to make or file the return at the time or times required
by law or rules and regulations; and

3. The failure to make or file the return was willful.

Copyright 1994-2019 CD Technologies Asia, Inc. Taxation 2019 Second Release 20

 In this case, the prosecution's witness Ms. Legaspi admitted on
cross-examination by prosecution's witness that the accused is a registered
non-VAT taxpayer of Revenue District Office 21A, 132(132) thus, subject to
percentage tax. She admitted that based on accused's ITR and financial statement,
the accused is not liable to pay VAT. 133(133)

Moreover, the prosecution failed to show definite proof that the accused
received cash for legal services rendered which could be subject to VAT. What is
apparent is that the accused paid percentage tax. 134(134) AScHCD

Considering that the first element was not complied with, we will no longer
proceed with the other elements in CTA Crim. Case No. O-456. It also follows
that there is no leg to stand on CTA Crim. Case No. O-454.

CTA CRIM. CASE Nos. O-455 and O-457

These cases pertain to the charges of substantial under-declaration of

income and failure to supply correct and accurate information in accused's ITR for
taxable year 2011.

To sustain a conviction for attempt to evade or defeat tax under (Section

254 of the NIRC of 1997,) as amended, (CTA Crim. Case No. O-455), the
following elements must be established:

1. An attempt in any manner to evade or defeat any tax imposed under

the NIRC or the payment thereof; and

2. Such attempt to evade or defeat tax or the payment thereof is willful.

To sustain a conviction for failure to supply correct and accurate

information in the return under Section 255 of the NIRC of 1997, as amended,
(CTA Crim. Case No. O-457), the following elements must be established:

1. The accused is a person required under the NIRC or rules and

regulations to supply correct and accurate information;

2. The accused failed to supply correct and accurate information at the

time or times required by law or rules and regulations; and

3. Such failure to supply correct and accurate information is willful.

In this case, the prosecution has proven that the accused is a Filipino citizen
residing in the Philippines and registered as taxpayer. He is registered as a
Professional in the practice of law with Trade name THE OFFICE, ATTY.
ARNEL C. MANALOTO. As such, he is required to supply correct and accurate

Copyright 1994-2019 CD Technologies Asia, Inc. Taxation 2019 Second Release 21

information in the ITR.

We will now determine if there is substantial under-declaration of income.

In the case of income, for it to be taxable, there must be a gain realized or

received by the taxpayer, which is not excluded by law or treaty from taxation.
135(135)

In this case, the accused's accountant (Carreon) stated that he made an

adjusting entry in relation to the accused's contracts with his clients, thus:

Dr. Other Assets xxx

Cr. Deferred Revenue xxx

There is deferred revenue when payment has been received but goods or
services have not been provided. At this point, for lack of other supporting
documents, the Court cannot definitely determine whether the Deferred Revenue is
really a deferred revenue or an accrued revenue. An accrued income is an income
for which goods or services has been provided but payment has not been made.
The prosecution has failed to show definite proof of income, e.g., receipt, on this
matter.

If Carreon merely made an error in the term or account used to record the
retainer's contract and indeed meant that the income is not deferred but actually
accrued, the same should be included in the computation for income tax purposes.
"Generally, all items of income are included in gross income when earned, even
though payment may be received in another tax year. All events that fix a
taxpayer's right to receive the income must have happened and it must be able to
figure the amount with reasonable accuracy." 136(136) In other words, when
income is earned, it is accrued — even though payment is not yet received — and
is subject to income tax.

On the other hand, if it is really a deferred income, it means it is not yet

earned, thus, not subject to income tax. Nevertheless, it is subject to VAT
137(137) if it is deferred income. However, this is not proven by the prosecution.

The term "willful" in tax crime statutes means a voluntary, intentional

violation of a known legal duty and bad faith or bad purpose need not be shown.
138(138)

In People v. Judy Anne Santos y Lumagui, 139(139) the accused was

charged with violation of Section 255 by allegedly under-declaring her income. On
the issue of willfulness, the CTA ruled as follows: AcICHD

Copyright 1994-2019 CD Technologies Asia, Inc. Taxation 2019 Second Release 22

 Citing Black's Law Dictionary, the term "willful" is defined as
voluntary and intentional. And in Merten's Law of Federal Income Taxation,
"willful" in tax crimes statutes is defined as voluntary, intentional violation
of a known legal duty.

Applying the foregoing in the case at bench, the element of willful

failure to supply correct and accurate information must be fully established
as a positive act or state of mind; it cannot be presumed nor attributed to
mere inadvertent or negligent acts. (Citations omitted, underscoring
supplied)

In this case, there was no willfulness on the part of the accused.

Based on the foregoing discussion, for failure to prove that there is

undeclared income, We cannot proceed with the elements charged in CTA Crim.
Case Nos. O-455 and O-457.

Anent the allegations that the prosecution has not aptly applied the Net
Worth (Inventory) Method nor the Expenditures Method in computing the tax
liability of the accused and that no formal investigation conducted by the BIR as
required by RMO 24-2008, 140(140) We agree.

Under paragraph XIII (D), of HANDBOOK ON AUDIT PROCEDURES

AND TECHNIQUES, 141(141) it was stated that "While it has been said that no
opening net worth is needed when the cash expenditure method is used, the more
impressive authority is to the contrary. The two steps involved in the cash
expenditure method are: a) valuation of the taxpayer's assets at the beginning of
the taxable period in order to determine the taxpayer's funds available for
expenditure during the ensuing taxable periods and b) determination of the amount
by which expenditures exceed reported income for the taxable period." caITAC

RMO 24-2008, letter F, provides:

F. PROCEDURE

A Preliminary Investigation must first be conducted to establish the

prima facie existence of fraud for RATE cases. This shall include the
verification and determination of the schemes and extent of fraud
perpetrated by the subject taxpayer.

The Formal Investigation which includes the examination of the

taxpayer's books of accounts and accounting records and third party
records, through the issuance of L/As and access letters, if necessary, shall
be conducted only after the prima facie existence of fraud has been
established. (Emphases Supplied).

Copyright 1994-2019 CD Technologies Asia, Inc. Taxation 2019 Second Release 23

 In this case, it was established that on November 16, 2012, Chief, NID
Atty. Sixto C. Dy, Jr. issued a Memorandum to conduct a preliminary
investigation on Mr. Manaloto's tax liabilities. 142(142) The LOA was issued on
November 26, 2012 and the complaint was filed on November 29, 2012; 143(143)
the security guard received the said LOA; that expenditure method was used by
the group in computing the tax liabilities of the accused for taxable year 2011; and
that prior to the filing of the complaint affidavit, they were not able to examine the
book of accounts of the accused, 144(144) and that the complaint was based on the
Report on preliminary investigation conducted by their team. 145(145) The said
investigation was conducted by the group by accessing the centralized database of
BIR — which is called the Integrated Tax System (ITS); looked into past
tax-related filings of Mr. Manaloto; and sent access letters to various agencies of
government. 146(146)

Clearly, the BIR failed to follow the guidelines in the proper audit. No
formal investigation was even conducted.

Anent the civil aspect, Section 7 (b) (1) of Republic Act (RA) No. 1125, as
amended by RA No. 9282, provides that "the filing of a criminal action being
deemed to necessarily carry with it the filing of the civil action, and no right to
reserve the filing of such civil action separately from the criminal action will be
recognized." Thus, the civil aspect of these consolidated cases, are deemed
simultaneously instituted and jointly determined with the instant criminal cases.

Moreover, it is well-settled that the acquittal of a taxpayer in the criminal

case cannot operate to discharge him or her from the duty to pay tax, because that
duty is imposed by statute prior to and independent of any attempt on the part of
the taxpayer to evade payment. The obligation to pay the tax is not a mere
consequence of the felonious acts charged in the information, nor is it a mere civil
liability derived from crime that would be wiped out by the judicial declaration
that the criminal acts charged did not exist. 147(147)

Section 205 of the NIRC of 1997, as amended, provides that "the judgment
in the criminal case shall not only impose the penalty but shall also order payment
of the taxes subject of the criminal case as finally decided by the
Commissioner." Thus, while "there is no requirement for the precise computation
and assessment of the tax before there can be a criminal prosecution," 148(148)
Section 205 of the NIRC of 1997, as amended, "requires that in order to be
included in the judgment of said civil liability, it must be the final decision of
petitioner [CIR]. Thus, it refers to a formal assessment." 149(149) In this case,
there is a computation of the deficiency income tax and deficiency VAT
determined by the group who investigated the accused's possible tax liabilities,
based on the COMPUTATION OF UNREPORTED INCOME USING
EXPENDITURES METHOD found during the preliminary investigation. Clearly,
Copyright 1994-2019 CD Technologies Asia, Inc. Taxation 2019 Second Release 24
 this computation is not a formal assessment. ICHDca

For easy reference, the BIR's computations 150(150) of accused's alleged

unreported income using Expenditure Method, deficiency income tax, and
deficiency VAT, signed by the group, provide:

ARNEL C. MANALOTO
FOR THE TAXABLE YEAR 2011

COMPUTATION OF UNREPORTED INCOME USING

EXPENDITURES METHOD
2011
A) Expenditures for a given taxable year
1 Expenses claimed per income tax return/financial statements
Rental Expenses 66,000.00
Gas & Oil 27,192.83
Transportation expense 3,130.00
Utilities and Communication expenses 56,063.93
Representation and entertainment 75,784.83
Licenses and taxes (net of percentage tax) 700.00
Repairs and maintenance-Office 70,426.25
Accounting and legal fees 4,900.00
Office supplies 13,692.44
Toll and parking fees 1,107.73
Dues and membership-Professional 13,600.00
Printing and reproduction of copies 2,547.25
Miscellaneous expenses 920.00 336,065.26
2 Personal expenses deductible or nondeductible -
Payment of debts, payables, accruals and other
3 liabilities/drawings -
4 Payment of taxes
Income tax 43,520.00
Percentage tax 44,856.00
Expanded WHT 3,025.00
Registration fee 500.00
Documentary stamps tax 300,000.00 391,901.00
5 Acquisition of assets
Other undeclared acquisition of real
Properties 20,000,000.00
Other assets per financial statements 18,734,500.00
Vehicles -

Copyright 1994-2019 CD Technologies Asia, Inc. Taxation 2019 Second Release 25

 Investments - 38,734,500.00
TOTAL EXPENDITURES 39,462,466.26
B) Sources of cash
1 Declared income per income tax return 1,495,200.00
2 Non-taxable receipts (Prizes, royalties) -
3 Non-taxable receipts (Dividends,
donations from broad) -
4 Receipts subjected to transfer such as
donations, inheritance -
5 Cash loans, if any -
6 Cash at the beginning of the period -
7 Deferred income per financial
statements 17,501,500.00 18,996,700.00
Excess cash as determined per investigation 20,465,766.26
Deferred income per financial statements 17,501,500.00
TOTAL INCOME SUBJECT TO TAX 37,967,266.26
Prepared by:
(signed) (signed)
GARY V. ATANACIO MARY GRACE B. PARADO

(signed) (signed)
GERTRUDES M. EITO EVANGELINE S. CATOTAL

COMPUTATION OF DEFICIENCY INCOME TAX

FOR THE TAXABLE YEAR 2011

Unreported income per investigation 37,967,266.26

Income tax due
Income tax due-First P500,000.00 125,000.00
-in excess of P500,000.00 — 32% 11,989,525.20 12,114,525.20
Surcharge Sec. 248 — 50% 6,057,262.60
Interest-Sec. 249 (4/16/12-12/31/12 —
14.11%) 1,709,359.51 7,766,622.11
TOTAL DEFICIENCY INCOME TAX 19,881,147.31
COMPUTATION OF DEFICIENCY INCOME TAX
FOR THE TAXABLE YEAR 2011
Unreported income per investigation 37,967,266.26
Output tax 4,556,071.95
Less: Allowable input tax -
4,556,071.95

Copyright 1994-2019 CD Technologies Asia, Inc. Taxation 2019 Second Release 26

Add: Surcharge Sec. 248 — 50% 2,278,035.98
Interest-Sec. 249 — (1/26/12-12/31/12
- 18.62%) 848,340.60 3,126,376.57
TOTAL DEFICIENCY VAT 7,682,448.52
TOTAL DEFICIENCY TAXES (INCOME & VAT) 27,563,595.84
Prepared by:
(signed) (signed)
GARY V. ATANACIO MARY GRACE B. PARADO

(signed) (signed)
GERTRUDES M. EITO EVANGELINE S. CATOTAL

"In all criminal cases, mere speculations cannot substitute for proof in
establishing the guilt of the accused. Indeed, suspicion no matter how strong must
never sway judgment. Where there is reasonable doubt, the accused must be
acquitted even though their innocence may not have been established. The
Constitution presumes a person innocent until proven guilty by proof beyond
reasonable doubt. When guilt is not proven with moral certainty, it has been our
policy of long standing that the presumption of innocence must be favored, and
exoneration granted as a matter of right." 151(151) cDHAES

WHEREFORE, premises considered, CTA Crim. Case Nos. O-454,

O-455, O-456, and O-457 are DISMISSED for failure of the prosecution to
establish the guilt of the accused beyond reasonable doubt. Accused Arnel Cortez
Manaloto is ACQUITTED of the crimes charged and without civil liability.

SO ORDERED.

(SGD.) JUANITO C. CASTAÑEDA,

JR.
Associate Justice
Cielito N. Mindaro-Grulla, J., concurs.

Footnotes
1. CTA Crim. Case No. O-454.
2. CTA Crim. Case No. O-455.
3. CTA Crim. Case No. O-456.
4. CTA Crim. Case No. O-457.
5. CTA Crim. Case No. O-454, Docket (Vol. I), pp. 252-257.
6. CTA Crim. Case No. O-457, Docket, pp. 250-255.
7. CTA Crim. Case No. O-455, Docket, pp. 248-252.

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 8. CTA Crim. Case No. O-456, Docket, pp. 211-215; The issuance of warrant of
arrest against the accused was deemed MOOT considering that the accused
already posted a surety bond.
9. CTA Crim. Case No. O-454, Docket (Vol. I), pp. 268-322, with supporting
documents.
10. CTA Crim. Case No. O-454, Docket (Vol. 1), pp. 363-354.
11. Minutes of the Hearing dated November 26, 2015, CTA Crim. Case No. O-454,
Docket (Vol. I), p. 381.
12. CTA Crim. Case No. O-454, Docket (Vol. I), pp. 389-393.
13. CTA Crim. Case No. O-454, Docket (Vol. I), pp. 413-423.
14. CTA Crim. Case No. O-454, Docket (Vol. II), p. 433.
15. CTA Crim. Case No. O-454, Docket (Vol. II), pp. 436-437.
16. CTA Crim. Case No. O-454, Docket (Vol. II), p. 436.
17. Transcript of Stenographic Notes (TSN), May 16, 2016 Hearing.
18. TSN, June 27, 2016 Hearing.
19. TSN, July 18, 2016 Hearing.
20. TSN, August 15, 2016 Hearing.
21. TSN, October 10, 2016 Hearing and TSN, February 6, 2017 Hearing.
22. TSN, November 14, 2016 Hearing.
23. TSN, November 14, 2016 Hearing.
24. TSN, January 23, 2017 Hearing.
25. Exhibit "P-66".
26. CTA Crim. Case No. O-454, Docket (Vol. II), p. 451.
27. A5, Exhibit "P-66".
28. A7, Exhibit "P-66".
29. A9, Exhibit "P-66".
30. A14, Exhibit "P-66".
31. A15, A16, and A17, Exhibit "P-66".
32. A18, Exhibit "P-66".
33. A28, Exhibit "P-66".
34. A33, Exhibit "P-66".
35. A34, Exhibit "P-66".
36. A40, Exhibit "P-66".
37. A41, Exhibit "P-66".
38. A42, Exhibit "P-66".
39. A43, Exhibit "P-66".
40. A47, Exhibit "P-66".
41. A48, Exhibit "P-66".
42. A51 and A52, Exhibit "P-66".
43. TSN, May 16, 2016 Hearing.
44. TSN, May 16, 2016 Hearing, p. 13.
45. TSN, May 16, 2016 Hearing, p. 14.
46. TSN, May 16, 2016 Hearing, pp. 15-16.
47. TSN, May 16, 2016 Hearing, p. 17.
48. TSN, May 16, 2016 Hearing, p. 16.
49. TSN, May 16, 2016 Hearing, p. 16.

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50. TSN, May 16, 2016 Hearing, pp. 17-18.
51. TSN, May 16, 2016 Hearing, p. 20.
52. TSN, May 16, 2016 Hearing, p. 22.
53. TSN, May 16, 2016 Hearing, p. 23.
54. TSN, May 16, 2016 Hearing, p. 23.
55. CTA Crim. Case No. O-454, Docket (Vol. II), p. 451.
56. A16, Exhibit "P-68".
57. A17, Exhibit "P-68".
58. A19, Exhibit "P-68".
59. A20, Exhibit "P-68".
60. A21, Exhibit "P-68".
61. A24, Exhibit "P-68".
62. A26, Exhibit "P-68".
63. TSN, June 27, 2016 Hearing, p. 9.
64. Exhibit "P-70".
65. A5 and A14, Exhibit "P-70".
66. A15, Exhibit "P-70".
67. A18, Exhibit "P-70".
68. A19, Exhibit "P-70".
69. A20, Exhibit "P-70".
70. A21, Exhibit "P-70".
71. A22, Exhibit "P-70".
72. Hearing July 18, 2016.
73. TSN, July 18, 2016 Hearing, p. 8.
74. TSN, July 18, 2016 Hearing, p. 9.
75. TSN, July 18, 2016 Hearing, p. 13.
76. TSN, July 18, 2016 Hearing, p. 13.
77. TSN, July 18, 2016 Hearing, p. 14.
78. TSN, July 18, 2016 Hearing, p. 14.
79. TSN, July 18, 2016 Hearing, p. 15.
80. Exhibit "P-72".
81. A11, Exhibit "P-72".
82. A36, Exhibit "P-72".
83. TSN, August 15, 2016 Hearing, pp. 9-10.
84. TSN, August 15, 2016 Hearing, p. 13.
85. Exhibit "P-73".
86. TSN, February 6, 2017.
87. TSN, February 6, 2017, p. 8.
88. TSN, February 6, 2017, p. 14.
89. CTA Crim. Case No. O-454, Docket (Vol. II), pp. 790-837.
90. CTA Crim. Case No. O-454, Docket (Vol. II), pp. 961-972.
91. CTA Crim. Case No. O-454, Docket (Vol. III), pp. 975-976.
92. CTA Crim. Case No. O-454, Docket (Vol. III), pp. 975-976.
93. CTA Crim. Case No. O-454, Docket (Vol. III), pp. 1044-1046.
94. CTA Crim. Case No. O-454, Docket (Vol. III), pp. 1084-1085.
95. CTA Crim. Case No. O-454, Docket (Vol. III), pp. 1097-1098.

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96. CTA Crim. Case No. O-454, Docket (Vol. III), p. 1082.
97. CTA Crim. Case No. O-454, Docket (Vol. III), pp. 1087-1094.
98. CTA Crim. Case No. O-454, Docket (Vol. III), pp. 1121-1125.
99. CTA Crim. Case No. O-454, Docket (Vol. III), pp. 1100-1120.
100. CTA Crim. Case No. O-454, Docket (Vol. III), pp. 1127-1142.
101. CTA Crim. Case No. O-454, Docket (Vol. III), p. 1145.
102. CTA Crim. Case No. O-454, Docket (Vol. III), pp. 1146-1165.
103. CTA Crim. Case No. O-454, Docket (Vol. III), pp. 1166-1173.
104. CTA Crim. Case No. O-454, Docket (Vol. III), pp. 1178-1180.
105. CTA Crim. Case No. O-454, Docket (Vol. III), pp. 1181-1183.
106. CTA Crim. Case No. O-454, Docket (Vol. III), pp. 1192-1193.
107. TSN, April 30, 2018 Hearing.
108. TSN, July 2, 2018 Hearing.
109. Id.
110. Judicial Affidavit of Erwin Sicangco Carreon, CTA Crim. Case No. O-454,
Docket (Vol. III), pp. 1196-1207.
111. Judicial Affidavit of Erwin Sicangco Carreon, 6A, CTA Crim. Case No. O-454,
Docket (Vol. III), p. 1198.
112. Judicial Affidavit of Erwin Sicangco Carreon, 7A, CTA Crim. Case No. O-454,
Docket (Vol. III), p. 1198.
113. Judicial Affidavit of Erwin Sicangco Carreon, 7A, CTA Crim. Case No. O-454,
Docket (Vol. III), p. 1198.
114. Judicial Affidavit of Erwin Sicangco Carreon, 14A, CTA Crim. Case No. O-454,
Docket (Vol. III), p. 1202.
115. Judicial Affidavit of Atty. Joselea Y. Flora-Balleta, CTA Crim. Case No. O-454,
Docket (Vol. III), pp. 1307-1311.
116. Judicial Affidavit of Atty. Joselea Y. Flora-Balleta, 3A, CTA Crim. Case No.
O-454, Docket (Vol. III), p. 1308.
117. Judicial Affidavit of Atty. Joselea Y. Flora-Balleta, 10A, CTA Crim. Case No.
O-454, Docket (Vol. III), p. 1309.
118. Judicial Affidavit of Atty. Rogelio T. Reyes, CTA Crim. Case No. O-454, Docket
(Vol. III), pp. 1317-1321.
119. CTA Crim. Case No. O-454, Docket (Vol. III), pp. 1359-1368.
120. CTA Crim. Case No. O-454, Docket (Vol. III), pp. 1397-1444.
121. CTA Crim. Case No. O-454, Docket (Vol. III), pp. 1446-1464.
122. CTA Crim. Case No. O-454, Docket (Vol. II), pp. 436-437.
123. Section 2, Rule 133 of the Rules of Court.
124. Id.
125. G.R. No. 147188, September 14, 2004.
126. G.R. No. 197590, Nov. 24, 2014.
127. 186 Phil. 604 (1980).
128. Id. at 610-611.
129. Id. at 610.
130. 327 Phil. 1 (1996).
131. Id. at 35.
132. TSN, February 6, 2017, p. 8.

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133. TSN, February 6, 2017, p. 14.
134. Exhibit "P-8".
135. Bureau of Internal Revenue vs. Court of Appeals, G.R. No. 197590, November
24, 2014, citing Chamber of Real Estate and Builders' Associations, Inc. vs.
Romulo, G.R. No. 160756, March 9, 2010, 614 SCRA 605, 627.
136. Mertens, Law of Federal Income Taxation, Vol. 2, Chapter 12A, p. 100.
137. Section 108 of the NIRC of 1997, as amended,
"SEC. 108. Value-Added Tax on Sale of Services and Use or Lease of Properties.
—
(A) Rate and Base of Tax. — There shall be levied, assessed and collected, a
value-added tax equivalent to twelve percent (12%) of gross receipts derived from
the sale or exchange of services, including the use or lease of properties.
xxx xxx xxx
The term 'gross receipts' means the total amount of money or its equivalent
representing the contract price, compensation, service fee, rental or royalty,
including the amount charged for materials supplied with the services and
deposits and advanced payments actually or constructively received during
the taxable quarter for the services performed for another person, excluding
value-added tax." (Emphasis supplied)
138. Ongsiako, Jr., et al. vs. People of the Philippines, CTA EB Crim. Case No. 031,
May 26, 2015, citing Mertens (Law of Federal Income Taxation) Chapter 47.05,
p. 28, Vol. 13 cited in People of the Philippines vs. Estelita Delos Angeles, CTA
Crim. Case No. O-027, November 25, 2009.
139. CTA Crim. Case No. O-012, January 16, 2013.
140. Revenue Memorandum Order No. 024-08, Subject: Policies and Guidelines for
RATE Cases, May 9, 2008.
141. (Revision — Year 2000), subject and attachment in Revenue Audit Memorandum
Order No. 1-00, March 17, 2000.
142. A7, Exhibit "P-66".
143. TSN, July 18, 2016 Hearing, p. 13.
144. TSN, July 18, 2016 Hearing, p. 8.
145. TSN, July 18, 2016 Hearing, p. 9.
146. A11, Exhibit "P-72".
147. Castro vs. The Collector of Internal Revenue, G.R. No. L-12174, April 26, 1962.
148. Ungab vs. Cusi, Jr., et al., G.R. Nos. L-41919-24, May 30, 1980.
149. People of the Philippines vs. Mendez, CTA EB Crim. Nos. 038 & 039, September
8, 2017.
150. Exhibits "P-8" and "P-9".
151. Monteverde vs. People of the Philippines, G.R. No. 139610, August 12, 2002.

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 Endnotes

1 (Popup - Popup)
1. CTA Crim. Case No. O-454.

2 (Popup - Popup)
2. CTA Crim. Case No. O-455.

3 (Popup - Popup)
3. CTA Crim. Case No. O-456.

4 (Popup - Popup)
4. CTA Crim. Case No. O-457.

5 (Popup - Popup)
5. CTA Crim. Case No. O-454, Docket (Vol. I), pp. 252-257.

6 (Popup - Popup)
6. CTA Crim. Case No. O-457, Docket, pp. 250-255.

7 (Popup - Popup)
7. CTA Crim. Case No. O-455, Docket, pp. 248-252.

8 (Popup - Popup)
8. CTA Crim. Case No. O-456, Docket, pp. 211-215; The issuance of warrant of
arrest against the accused was deemed MOOT considering that the accused
already posted a surety bond.

9 (Popup - Popup)
9. CTA Crim. Case No. O-454, Docket (Vol. I), pp. 268-322, with supporting
documents.

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 10 (Popup - Popup)
10. CTA Crim. Case No. O-454, Docket (Vol. 1), pp. 363-354.

11 (Popup - Popup)
11. Minutes of the Hearing dated November 26, 2015, CTA Crim. Case No. O-454,
Docket (Vol. I), p. 381.

12 (Popup - Popup)
12. CTA Crim. Case No. O-454, Docket (Vol. I), pp. 389-393.

13 (Popup - Popup)
13. CTA Crim. Case No. O-454, Docket (Vol. I), pp. 413-423.

14 (Popup - Popup)
14. CTA Crim. Case No. O-454, Docket (Vol. II), p. 433.

15 (Popup - Popup)
15. CTA Crim. Case No. O-454, Docket (Vol. II), pp. 436-437.

16 (Popup - Popup)
16. CTA Crim. Case No. O-454, Docket (Vol. II), p. 436.

17 (Popup - Popup)
17. Transcript of Stenographic Notes (TSN), May 16, 2016 Hearing.

18 (Popup - Popup)
18. TSN, June 27, 2016 Hearing.

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 19 (Popup - Popup)
19. TSN, July 18, 2016 Hearing.

20 (Popup - Popup)
20. TSN, August 15, 2016 Hearing.

21 (Popup - Popup)
21. TSN, October 10, 2016 Hearing and TSN, February 6, 2017 Hearing.

22 (Popup - Popup)
22. TSN, November 14, 2016 Hearing.

23 (Popup - Popup)
23. TSN, November 14, 2016 Hearing.

24 (Popup - Popup)
24. TSN, January 23, 2017 Hearing.

25 (Popup - Popup)
25. Exhibit "P-66".

26 (Popup - Popup)
26. CTA Crim. Case No. O-454, Docket (Vol. II), p. 451.

27 (Popup - Popup)
27. A5, Exhibit "P-66".

28 (Popup - Popup)
28. A7, Exhibit "P-66".

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 29 (Popup - Popup)
29. A9, Exhibit "P-66".

30 (Popup - Popup)
30. A14, Exhibit "P-66".

31 (Popup - Popup)
31. A15, A16, and A17, Exhibit "P-66".

32 (Popup - Popup)
32. A18, Exhibit "P-66".

33 (Popup - Popup)
33. A28, Exhibit "P-66".

34 (Popup - Popup)
34. A33, Exhibit "P-66".

35 (Popup - Popup)
35. A34, Exhibit "P-66".

36 (Popup - Popup)
36. A40, Exhibit "P-66".

37 (Popup - Popup)
37. A41, Exhibit "P-66".

38 (Popup - Popup)

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38. A42, Exhibit "P-66".

39 (Popup - Popup)
39. A43, Exhibit "P-66".

40 (Popup - Popup)
40. A47, Exhibit "P-66".

41 (Popup - Popup)
41. A48, Exhibit "P-66".

42 (Popup - Popup)
42. A51 and A52, Exhibit "P-66".

43 (Popup - Popup)
43. TSN, May 16, 2016 Hearing.

44 (Popup - Popup)
44. TSN, May 16, 2016 Hearing, p. 13.

45 (Popup - Popup)
45. TSN, May 16, 2016 Hearing, p. 14.

46 (Popup - Popup)
46. TSN, May 16, 2016 Hearing, pp. 15-16.

47 (Popup - Popup)
47. TSN, May 16, 2016 Hearing, p. 17.

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 48 (Popup - Popup)
48. TSN, May 16, 2016 Hearing, p. 16.

49 (Popup - Popup)
49. TSN, May 16, 2016 Hearing, p. 16.

50 (Popup - Popup)
50. TSN, May 16, 2016 Hearing, pp. 17-18.

51 (Popup - Popup)
51. TSN, May 16, 2016 Hearing, p. 20.

52 (Popup - Popup)
52. TSN, May 16, 2016 Hearing, p. 22.

53 (Popup - Popup)
53. TSN, May 16, 2016 Hearing, p. 23.

54 (Popup - Popup)
54. TSN, May 16, 2016 Hearing, p. 23.

55 (Popup - Popup)
55. CTA Crim. Case No. O-454, Docket (Vol. II), p. 451.

56 (Popup - Popup)
56. A16, Exhibit "P-68".

57 (Popup - Popup)
57. A17, Exhibit "P-68".

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 58 (Popup - Popup)
58. A19, Exhibit "P-68".

59 (Popup - Popup)
59. A20, Exhibit "P-68".

60 (Popup - Popup)
60. A21, Exhibit "P-68".

61 (Popup - Popup)
61. A24, Exhibit "P-68".

62 (Popup - Popup)
62. A26, Exhibit "P-68".

63 (Popup - Popup)
63. TSN, June 27, 2016 Hearing, p. 9.

64 (Popup - Popup)
64. Exhibit "P-70".

65 (Popup - Popup)
65. A5 and A14, Exhibit "P-70".

66 (Popup - Popup)
66. A15, Exhibit "P-70".

67 (Popup - Popup)

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67. A18, Exhibit "P-70".

68 (Popup - Popup)
68. A19, Exhibit "P-70".

69 (Popup - Popup)
69. A20, Exhibit "P-70".

70 (Popup - Popup)
70. A21, Exhibit "P-70".

71 (Popup - Popup)
71. A22, Exhibit "P-70".

72 (Popup - Popup)
72. Hearing July 18, 2016.

73 (Popup - Popup)
73. TSN, July 18, 2016 Hearing, p. 8.

74 (Popup - Popup)
74. TSN, July 18, 2016 Hearing, p. 9.

75 (Popup - Popup)
75. TSN, July 18, 2016 Hearing, p. 13.

76 (Popup - Popup)
76. TSN, July 18, 2016 Hearing, p. 13.

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 77 (Popup - Popup)
77. TSN, July 18, 2016 Hearing, p. 14.

78 (Popup - Popup)
78. TSN, July 18, 2016 Hearing, p. 14.

79 (Popup - Popup)
79. TSN, July 18, 2016 Hearing, p. 15.

80 (Popup - Popup)
80. Exhibit "P-72".

81 (Popup - Popup)
81. A11, Exhibit "P-72".

82 (Popup - Popup)
82. A36, Exhibit "P-72".

83 (Popup - Popup)
83. TSN, August 15, 2016 Hearing, pp. 9-10.

84 (Popup - Popup)
84. TSN, August 15, 2016 Hearing, p. 13.

85 (Popup - Popup)
85. Exhibit "P-73".

86 (Popup - Popup)
86. TSN, February 6, 2017.

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 87 (Popup - Popup)
87. TSN, February 6, 2017, p. 8.

88 (Popup - Popup)
88. TSN, February 6, 2017, p. 14.

89 (Popup - Popup)
89. CTA Crim. Case No. O-454, Docket (Vol. II), pp. 790-837.

90 (Popup - Popup)
90. CTA Crim. Case No. O-454, Docket (Vol. II), pp. 961-972.

91 (Popup - Popup)
91. CTA Crim. Case No. O-454, Docket (Vol. III), pp. 975-976.

92 (Popup - Popup)
92. CTA Crim. Case No. O-454, Docket (Vol. III), pp. 975-976.

93 (Popup - Popup)
93. CTA Crim. Case No. O-454, Docket (Vol. III), pp. 1044-1046.

94 (Popup - Popup)
94. CTA Crim. Case No. O-454, Docket (Vol. III), pp. 1084-1085.

95 (Popup - Popup)
95. CTA Crim. Case No. O-454, Docket (Vol. III), pp. 1097-1098.

96 (Popup - Popup)

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96. CTA Crim. Case No. O-454, Docket (Vol. III), p. 1082.

97 (Popup - Popup)
97. CTA Crim. Case No. O-454, Docket (Vol. III), pp. 1087-1094.

98 (Popup - Popup)
98. CTA Crim. Case No. O-454, Docket (Vol. III), pp. 1121-1125.

99 (Popup - Popup)
99. CTA Crim. Case No. O-454, Docket (Vol. III), pp. 1100-1120.

100 (Popup - Popup)

100. CTA Crim. Case No. O-454, Docket (Vol. III), pp. 1127-1142.

101 (Popup - Popup)

101. CTA Crim. Case No. O-454, Docket (Vol. III), p. 1145.

102 (Popup - Popup)

102. CTA Crim. Case No. O-454, Docket (Vol. III), pp. 1146-1165.

103 (Popup - Popup)

103. CTA Crim. Case No. O-454, Docket (Vol. III), pp. 1166-1173.

104 (Popup - Popup)

104. CTA Crim. Case No. O-454, Docket (Vol. III), pp. 1178-1180.

105 (Popup - Popup)

105. CTA Crim. Case No. O-454, Docket (Vol. III), pp. 1181-1183.

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 106 (Popup - Popup)
106. CTA Crim. Case No. O-454, Docket (Vol. III), pp. 1192-1193.

107 (Popup - Popup)

107. TSN, April 30, 2018 Hearing.

108 (Popup - Popup)

108. TSN, July 2, 2018 Hearing.

109 (Popup - Popup)

109. Id.

110 (Popup - Popup)

110. Judicial Affidavit of Erwin Sicangco Carreon, CTA Crim. Case No. O-454,
Docket (Vol. III), pp. 1196-1207.

111 (Popup - Popup)

111. Judicial Affidavit of Erwin Sicangco Carreon, 6A, CTA Crim. Case No. O-454,
Docket (Vol. III), p. 1198.

112 (Popup - Popup)

112. Judicial Affidavit of Erwin Sicangco Carreon, 7A, CTA Crim. Case No. O-454,
Docket (Vol. III), p. 1198.

113 (Popup - Popup)

113. Judicial Affidavit of Erwin Sicangco Carreon, 7A, CTA Crim. Case No. O-454,
Docket (Vol. III), p. 1198.

114 (Popup - Popup)

114. Judicial Affidavit of Erwin Sicangco Carreon, 14A, CTA Crim. Case No. O-454,
Docket (Vol. III), p. 1202.

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 115 (Popup - Popup)
115. Judicial Affidavit of Atty. Joselea Y. Flora-Balleta, CTA Crim. Case No. O-454,
Docket (Vol. III), pp. 1307-1311.

116 (Popup - Popup)

116. Judicial Affidavit of Atty. Joselea Y. Flora-Balleta, 3A, CTA Crim. Case No.
O-454, Docket (Vol. III), p. 1308.

117 (Popup - Popup)

117. Judicial Affidavit of Atty. Joselea Y. Flora-Balleta, 10A, CTA Crim. Case No.
O-454, Docket (Vol. III), p. 1309.

118 (Popup - Popup)

118. Judicial Affidavit of Atty. Rogelio T. Reyes, CTA Crim. Case No. O-454, Docket
(Vol. III), pp. 1317-1321.

119 (Popup - Popup)

119. CTA Crim. Case No. O-454, Docket (Vol. III), pp. 1359-1368.

120 (Popup - Popup)

120. CTA Crim. Case No. O-454, Docket (Vol. III), pp. 1397-1444.

121 (Popup - Popup)

121. CTA Crim. Case No. O-454, Docket (Vol. III), pp. 1446-1464.

122 (Popup - Popup)

122. CTA Crim. Case No. O-454, Docket (Vol. II), pp. 436-437.

123 (Popup - Popup)

123. Section 2, Rule 133 of the Rules of Court.
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 124 (Popup - Popup)
124. Id.

125 (Popup - Popup)

125. G.R. No. 147188, September 14, 2004.

126 (Popup - Popup)

126. G.R. No. 197590, Nov. 24, 2014.

127 (Popup - Popup)

127. 186 Phil. 604 (1980).

128 (Popup - Popup)

128. Id. at 610-611.

129 (Popup - Popup)

129. Id. at 610.

130 (Popup - Popup)

130. 327 Phil. 1 (1996).

131 (Popup - Popup)

131. Id. at 35.

132 (Popup - Popup)

132. TSN, February 6, 2017, p. 8.

133 (Popup - Popup)

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133. TSN, February 6, 2017, p. 14.

134 (Popup - Popup)

134. Exhibit "P-8".

135 (Popup - Popup)

135. Bureau of Internal Revenue vs. Court of Appeals, G.R. No. 197590, November
24, 2014, citing Chamber of Real Estate and Builders' Associations, Inc. vs.
Romulo, G.R. No. 160756, March 9, 2010, 614 SCRA 605, 627.

136 (Popup - Popup)

136. Mertens, Law of Federal Income Taxation, Vol. 2, Chapter 12A, p. 100.

137 (Popup - Popup)

137. Section 108 of the NIRC of 1997, as amended,
"SEC. 108. Value-Added Tax on Sale of Services and Use or Lease of Properties.
—
(A) Rate and Base of Tax. — There shall be levied, assessed and collected, a
value-added tax equivalent to twelve percent (12%) of gross receipts derived from
the sale or exchange of services, including the use or lease of properties.
xxx xxx xxx
The term 'gross receipts' means the total amount of money or its equivalent
representing the contract price, compensation, service fee, rental or royalty,
including the amount charged for materials supplied with the services and
deposits and advanced payments actually or constructively received during the
taxable quarter for the services performed for another person, excluding
value-added tax." (Emphasis supplied)

138 (Popup - Popup)

138. Ongsiako, Jr., et al. vs. People of the Philippines, CTA EB Crim. Case No. 031,
May 26, 2015, citing Mertens (Law of Federal Income Taxation) Chapter 47.05,
p. 28, Vol. 13 cited in People of the Philippines vs. Estelita Delos Angeles, CTA
Crim. Case No. O-027, November 25, 2009.

139 (Popup - Popup)

139. CTA Crim. Case No. O-012, January 16, 2013.
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 140 (Popup - Popup)
140. Revenue Memorandum Order No. 024-08, Subject: Policies and Guidelines for
RATE Cases, May 9, 2008.

141 (Popup - Popup)

141. (Revision — Year 2000), subject and attachment in Revenue Audit Memorandum
Order No. 1-00, March 17, 2000.

142 (Popup - Popup)

142. A7, Exhibit "P-66".

143 (Popup - Popup)

143. TSN, July 18, 2016 Hearing, p. 13.

144 (Popup - Popup)

144. TSN, July 18, 2016 Hearing, p. 8.

145 (Popup - Popup)

145. TSN, July 18, 2016 Hearing, p. 9.

146 (Popup - Popup)

146. A11, Exhibit "P-72".

147 (Popup - Popup)

147. Castro vs. The Collector of Internal Revenue, G.R. No. L-12174, April 26, 1962.

148 (Popup - Popup)

148. Ungab vs. Cusi, Jr., et al., G.R. Nos. L-41919-24, May 30, 1980.

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 149 (Popup - Popup)
149. People of the Philippines vs. Mendez, CTA EB Crim. Nos. 038 & 039, September
8, 2017.

150 (Popup - Popup)

150. Exhibits "P-8" and "P-9".

151 (Popup - Popup)

151. Monteverde vs. People of the Philippines, G.R. No. 139610, August 12, 2002.

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