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524 SUPREME COURT REPORTS ANNOTATED

Sy Po vs. Court of Tax Appeals

*
No. L-81446. August 18, 1988.

BONIFACIA SY PO, petitioner, vs. HONORABLE COURT

OF TAX APPEALS AND HONORABLE COMMISSIONER
OF INTERNAL REVENUE, respondents.

Taxation; Court of Tax Appeals; Factual findings of the Court

of Tax Appeals are binding upon the Supreme Court, and can only
be disturbed on appeal if not supported by substantial evidence.—
Settled is the rule that the factual findings of the Court of Tax
Appeals are binding upon this Honorable Court and can only be
disturbed on appeal if not supported by substantial evidence.
Same; Same; Rule on the “best evidence obtainable,” when
applicable.—The law is specific and clear. The rule on the “best
evidence obtainable” applies when a tax report required by law for
the purpose of assessment is not available or when the tax report
is incomplete or fraudulent.
Same; Same; The failure of the taxpayers to present their
books of accounts for examination for taxable years compelled the
Commissioner of Internal Revenue to resort to the power conferred
on him under the Tax Code.—In the instant case, the persistent
failure of the late Po Bien Sing and the herein petitioner to
present their books of accounts for examination for the taxable
years involved left the Commissioner of Internal Revenue no
other legal option except to resort to the power conferred upon
him under Section 16 of the Tax Code.
Same; Same; Tax assessments; Presumption in favor of the
correctness of tax assessments.—Tax assessments by tax
examiners are presumed correct and made in good faith. The
taxpayer has the duty to prove otherwise. In the absence of proof
of any irregularities in the performance of duties, an assessment
duly made by a Bureau of Internal Revenue examiner and
approved by his superior officers will not be disturbed. All
presumptions are in favor of the correctness of tax assessments.

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Same; Same; Same; Fraudulent acts attributed to the

taxpayer had not been satisfactorily rebutted.—On the whole, we
find that the fraudulent acts detailed in the decision under review
had not been satisfactorily rebutted by the petitioner. There are
indeed clear indications on the part of the taxpayer to deprive the
Goverment of the taxes due.

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* SECOND DIVISION.

525

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Sy Po vs. Court of Tax Appeals

Same; Same; Same; Same; The existence of fraud cannot be set

aside absent substantial evidence to counteract the finding of
fraud.—The existence of fraud as found by the respondents can
not be lightly set aside absent substantial evidence presented by
the petitioner to counteract such finding. The findings of fact of
the respondent Court of Tax Appeals are entitled to the highest
respect. We do not find anything in the questioned decision that
should disturb this long-established doctrine.

APPEAL from the decision of the Court of Tax Appeals.

Reyes, J.

The facts are stated in the opinion of the Court.

     Basilio E. Duaban for petitioner.

SARMIENTO, J.:
1
This is an appeal from the decision of the respondent
Court of Tax Appeals, dated September 30, 1987, which
affirmed an earlier decision of the correspondent
Commissioner of Internal Revenue in assessment letters
dated August 16, 1972 and September 26, 1972, which
ordered the payment by the petitioner of deficiency income
tax for 1966 to 1970 in the amount of P7,154,685.16 and
deficiency specific tax for January 2, 1964 to January 19,
1972, in the amount of P5,595,003.68.
We adopt the respondent court’s finding of facts, to wit:

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Petitioner is the widow of the late Mr. Po Bien Sing who died on
September 7, 1980. In the taxable years 1964 to 1972, the
deceased Po Bien Sing was the sole proprietor of Silver Cup Wine
Factory (Silver Cup for brevity), Talisay, Cebu. He was engaged in
the business of manufacture and sale of compounded liquors,
using alcohol and other ingredients as raw materials.
On the basis of a denunciation against Silver Cup allegedly “for
tax evasion amounting to millions of pesos” the then Secretary of
Finance Cesar Virata directed the Finance-BIR-NBI team
constituted under Finance Department Order No. 13-70 dated
February 19, 1971 (Exh. 3, pp. 532-533, Folder II, BIR rec.) to
conduct the corresponding investigation in a memorandum dated
April 2, 1971

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1 Penned by Associate Judge Alex Z. Reyes and concurred in by Presiding Judge

Amante Filler; Associate Judge Constante C. Roaquin was on leave.

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526 SUPREME COURT REPORTS ANNOTATED

Sy Po vs. Court of Tax Appeals

(p. 528, Folder II, BIR rec.). Accordingly, a letter and a subpoena
duces tecum dated April 13, 1971 and May 3, 1971, respectively,
were issued against Silver Cup requesting production of the
accounting records and other related documents for the
examination of the team. (Exh. 11, pp. 525-526, Folder II, BIR
rec.). Mr. Po Bien Sing did not produce his books of accounts as
requested (Affidavit dated December 24, 1971 of Mr. Generoso
Quinain of the team, p. 525, Folder II, BIR rec.). This prompted
the team with the assistance of the PC Company, Cebu City, to
enter the factory bodega of Silver Cup and seized different brands,
consisting of 1,555 cases of alcohol products. (Exh. 22,
Memorandum Report of the Team dated June 5, 1971, pp. 491-
492, Folder II, BIR rec.). The inventory lists of the seized alcohol
products are contained in Volumes I, II, III, IV and V (Exhibits
14, 15, 16, 17, and 18, respectively, BIR rec.). On the basis of the
team’s report of investigation, the respondent Commissioner of
Internal Revenue assessed Mr. Po Bien Sing deficiency income tax
for 1966 to 1970 in the amount of P7,154,685.16 (Exh. 6 pp. 17-19,
Folder I, BIR rec.) and for deficiency specific tax for January 2,
1964 to January 19, 1972 in the amount of P5,595,003.68 (Exh. 8,
p. 107, Folder I, BIR rec.).
Petitioner protested the deficiency assessments through letters
dated October 9 and October 30, 1972 (Exhs. 7 and 9, pp. 27-28;

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pp. 152-159, respectively, BIR rec.), which protests were referred

for reinvestigation. The corresponding report dated August 13,
1981 (Exh. 10, pp. 355, Folder I, BIR rec.) recommended the
reiteration of the assessments in view of the taxpayer’s persistent
failure to present the books of accounts for examination (Exh. 8, p.
107, Folder I, BIR rec.), compelling respondent to issue warrants
of distraint and levy on September 10, 1981 (Exh. 11, p. 361,
Folder I, BIR rec.).
The warrants were admittedly received by petitioner on
October 14, 1981 (Par. IX, Petition; admitted par. 2, Answer),
which petitioner deemed respondent’s decision denying her
protest on the subject assessments. Hence, petitioner’s appeal on
2
October 29, 1981.

The petitioner assigns the following errors:

RESPONDENT INTENTIONALLY ERRED IN HOLDING THAT

PETITIONER HAS NOT PRESENTED ANY EVIDENCE OF
RELEVANCE AND COMPETENCE REQUIRED TO BASH THE
TROUBLING DISCREPANCIES AND SQUARE THE ISSUE OF
ILLEGALITY POSITED ON THE SUBJECT ASSESSMENTS.

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2 Rollo, Decision, 10-13.

527

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Sy Po vs. Court of Tax Appeals

II

RESPONDENT COURT OF TAX APPEALS PALPABLY

ERRED IN DECIDING THE CASE IN A WAY CONTRARY TO
THE DOCTRINES ALREADY LAID DOWN BY THIS COURT.

III

RESPONDENT COURT OF TAX APPEALS GRAVELY

ERRED IN FINDING PO BIEN SING TO HAVE INCURRED
3
THE ALLEGED DEFICIENCY TAXES IN QUESTION.

We affirm.
Settled is the rule that the factual findings of the Court
of Tax Appeals are binding upon this Honorable Court and

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can only be disturbed on appeal if not supported by

4
substantial evidence.
The assignments of errors boils down to a single issue
previously raised before the respondent Court, i.e., whether
or not the assessments have valid and legal bases.
The applicable legal provision is Section 16(b) of the
National Internal Revenue Code of 1977 as amended. It
reads:

Sec. 16. Power of the Commissioner of Internal Revenue to make

assessments.—
x x x     x x x     x x x
(b) Failure to submit required returns, statements, reports and
other documents.—When a report required by law as a basis for
the assessment of any national internal revenue tax shall not be
forthcoming within the time fixed by law or regulation or when
there is reason to believe that any such report is false, incomplete,
or erroneous, the Commissioner of Internal Revenue shall assess
the proper tax on the best evidence obtainable.
In case a person fails to file a required return or other
document at the time prescribed by law, or willfully or otherwise,
files a false or fraudulent return or other documents, the
Commissioner shall make or amend the return from his own
knowledge and from such informa-

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3 Id., Petition, 3; Rollo, 4.

4 Aznar vs. CTA, L-20569, August 23, 1974, 58 SCRA 519; Manila Wine
Merchants vs. Commissioner of Internal Revenue, L-26145, February 20, 1984,
127 SCRA 483; La Suerte Cigar and Cigarette Factory vs. Court of Tax Appeals, L-
36130 and Alhambra Industries vs. Court of Tax Appeals, L-36131, January 17,
1985, 134 SCRA 29.

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Sy Po vs. Court of Tax Appeals

tion as he can obtain through testimony or otherwise, which shall

be prima facie correct and sufficient for all legal purposes.

The law is specific and clear. The rule on the “best evidence
obtainable” applies when a tax report required by law for
the purpose of assessment is not available or when the tax
report is incomplete or fraudulent.

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In the instant case, the persistent failure of the late Po

Bien Sing and the herein petitioner to present their books
of accounts for examination for the taxable years involved
left the Commissioner of Internal Revenue no other legal
option except to resort to the power conferred upon him
under Section 16 of the Tax Code.
The tax figures arrived at by the Commissioner of
Internal Revenue are by no means arbitrary. We reproduce
the respondent court’s findings, to wit: As thus shown, on
the basis of the quantity of bottles of wines seized during
the raid and the sworn statements of former employees
Messrs. Nelson S. Po and Alfonso Po taken on May 26, and
27, 1971, respectively, by the investigating team in Cebu
City (Exhs. 4 and 5, pp. 514-517, pp. 511-513, Folder II,
BIR rec.), it was ascertained that the Silver Cup for the
years 1964 to 1970, inclusive, utilized and consumed in the
manufacture of compounded liquours and other products
20,105 drums of alcohol as raw materials 81,288,787 proof
liters of alcohol. As determined, the total specific tax
liability of the taxpayer for 1964 to 1971 amounted to
P5,593,003.68 (Exh. E, petition, p. 10, CTA rec.) Likewise,
the team found due from Silver Cup deficiency income
taxes for the years 1966 to 1970 inclusive in the aggregate
sum of P7,154,685.16, as follows:

1966 - P 207,636.24
1967 - 645,335.04
1968 - 1,683,588.48
1969 - 1,589,622.48
1970 - 3,028,502.92
Total amount due
and collectible P7,154,685.16

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Sy Po vs. Court of Tax Appeals

**
The 50% surcharge has been imposed, pursuant to Section 72 of
the Tax Code and tax 1/2% monthly interest has likewise been
***
imposed pursuant to the provisions of Section 51(d) of the Tax

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** Old rule, Section 72 of the National Internal Revenue Code otherwise

known as Commonwealth Act No. 466:
Surcharges for failure to render returns and for rendering false and
fraudulent returns.—The Commissioner of Internal Revenue shall assess
all income taxes. In case of willful neglect to file the return or list within
the time prescribed by law, or in case a false or fraudulent return or list is
willfully made, the Commissioner of Internal Revenue shall add to the tax
or to the deficiency tax, in case any payment has been made on the basis
of such return before the discovery of the falsity of fraud, a surcharge of
fifty per centum of the amount of such tax or deficiency. x x x
Now Section 248(b) of the National Internal Revenue Code of 1977 as
amended:
In case of willful neglect to file the return within the period prescribed
by this Code or regulations, or in case a false or fraudulent return is
willfully made, the penalty to be imposed shall be fifty percent (50%) of
the tax or of the deficiency tax, in case any payment has been made on the
basis of such return before the discovery of the falsity or fraud.
*** Old Rule, Section 51(d) of the National Internal Revenue Code
otherwise known as Commonwealth Act No. 466:
Interest on deficiency.—Interest upon the amount determined as a
deficiency shall be assessed at the same time as the deficiency and shall
be paid upon notice and demand from the Commissioner of Internal
Revenue; and shall be collected as a part of the tax, at the rate of six per
centum per annum from the date prescribed for the payment of the tax (or,
if the tax is paid in installments, from the date prescribed for the payment
of the first installment) to the date of the deficiency is assessed: Provided,
That the maximum amount that may be collected as interest on deficiency
shall in no case exceed the amount corresponding to a period of three
years, the present provisions regarding prescription to the contrary
notwithstanding.
Now Section 249(a) of the National Internal Revenue Code of 1977 as
amended:
In general—There shall be assessed and collected on any unpaid
amount of tax, interest at the rate of twenty percent (20%) per annum, or
such higher rate as may be prescribed for payment until the amount is
fully paid.

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530 SUPREME COURT REPORTS ANNOTATED

Sy Po vs. Court of Tax Appeals

5
Code (Exh. O, petition).
The petitioner assails these assessments as wrong.
6
In the case of Collector of Internal Revenue vs. Reyes,
we ruled:
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Where the taxpayer is appealing to the tax court on the ground

that the Collector’s assessment is erroneous, it is incumbent upon
him to prove there what is the correct and just liability by a full
and fair disclosure of all pertinent data in his possession.
Otherwise, if the taxpayer confines himself to proving that the tax
assessment is wrong, the tax court proceedings would settle
nothing, and the way would be left open for subsequent
assessments and appeals in interminable succession.

Tax assessments by tax examiners are presumed correct

and made 7in good faith. The taxpayer has the duty to prove
otherwise. In the absence of proof of any irregularities in
the performance of duties, an assessment duly made by a
Bureau of Internal Revenue examiner and approved by his
8
superior officers will not be disturbed. All presumptions
9
are in favor of the correctness of tax assessments.
On the whole, we find that the fraudulent acts detailed
in the decision under review had not been satisfactorily
rebutted by the petitioner. There are indeed clear
indications on the part of the taxpayer to deprive the
Government of the taxes due. The Assistant Factory
Superintendent of Silver Cup, Nelson Po gave the following
testimony:

Annexes “A”, “A-1” to “A-17” show that from January to December

1970, Silver Cup had used in production 189 drums of untaxed
distilled alcohol and 3,722 drums of untaxed distilled alcohol. Can

_______________

5 Rollo, 14-15.
6 104 Phil. 1061 (1958) Unrep., Nos. L-11534 and L-11558, November 25, 1958.
7 Commissioner of Internal Revenue vs. Construction Resources of Asia, Inc., L-
68230, November 25, 1986, 145 SCRA 671.
8 Gutierrez vs. Villegas, L-17117, July 31, 1963, 8 SCRA 527.
9 Collector of Internal Revenue vs. Bohol Land Transportation Co., L-13099 and
L-13462, April 29, 1960, 58 O.G. 2407.

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you tell us how could this be possible with the presence of a

revenue inspector in the premises of Silver Cup during working
hours?

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Actually, the revenue inspector or storekeeper comes around once a week

on the average. Sometimes, when the storekeeper is around in the
morning and Po Bein Sing wants to operate with untaxed alcohol as raw
materials, Po Bien Sing tells the storekeeper to go home because the
factory is not going to operate for the day. After the storekeeper leaves,
the illegal operation then begins. Untaxed alcohol is brought in from
Cebu Alcohol Plant into the compound of Silver Cup sometimes at about
6:00 A.M. or at 12:00 noon or in the evening or even at mid-night when
the storekeeper is not around. When the storekeeper comes, he sees
nothing because untaxed alcohol is brought directly to, and stored at, a
secret tunnel within the bodega itself inside the compound of Silver Cup.

In the same vein, the factory personnel manager testified that

false entries were entered in the official register book: thus,

A—As factory personnel manager and all-around handy man of Po Bien

Sing, owner of Silver Cup, these labels were entrusted to me to make the
false entries in the official register book of Silver Cup, which I did under
the direction of Po Bien Sing. (Sworn statement, p. 512, Folder II, BIR
10
rec.) (Italics ours)

The existence of fraud as found by the respondents can not

be lightly set aside absent substantial evidence presented
by the petitioner to counteract such finding. The findings of
fact of the respondent11 Court of Tax Appeals are entitled to
the highest respect. We do not find anything in the
questioned decision that should disturb this long-
established doctrine.
WHEREFORE, the Petition is DENIED. The Decision of
the respondent Court of Tax Appeals is hereby
AFFIRMED. Costs against the petitioner.
SO ORDERED.

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10 Rollo, Decision, 15-16.

11 Raymundo vs. Joya, L-27733, December 3, 1980, 101 SCRA 495;
Sanchez vs. Commissioner, 102 Phil. 37 (1957); Commissioner vs. Priscilla
Estate, 120 Phil. 125 (1964); Commissioner of Internal Revenue vs. Ayala
Securities Corporation, L-29485, March 31, 1976, 70 SCRA 204.

532

532 SUPREME COURT REPORTS ANNOTATED

Phil. Geothermal, Inc. vs. Noriel

     Melencio-Herrera, Paras and Padilla, JJ., concur.

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Petition denied. Decision affirmed.

Note.—Findings of Court of Tax Appeals investment in

bonds not related to reasonable corporate business needs
factual and binding on Supreme Court. (Manila Wine
Merchants, Inc. vs. Commissioner of Internal Revenue, 127
SCRA 483).

——o0o——

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