G.R. No. 159694 January 27, 2006COMMISSIONER OF INTERNAL REVENUE,Petitioner,vs. AZUCENA T. REYES,Respondent.G.R. No. 163581 January 27, 2006AZUCENA T. REYES,Petitioner,vs. COMMISSIONER OF INTERNAL REVENUE,Respondent.PANGANIBAN,CJ.:Under the present provisions of the Tax Code and pursuant to elementary due process, taxpayers must be informed in writing of the law and the facts upon which a tax assessment is based; otherwise, the assessment is void. Being invalid, the assessment cannot in turn be used as a basis for the perfection of a tax compromise.The CaseBefore us are two consolidated1Petitions for Review2filed under Rule 45 of the Rules of Court, assailing the August 8, 2003 Decision3of the Court of Appeals (CA) in CA-GR SP No. 71392. The dispositive portion of the assailed Decision reads as follows:"WHEREFORE, the petition is GRANTED. The assailed decision of the Court of Tax Appeals is ANNULLED and SET ASIDE without prejudice to the action of the National Evaluation Board on the proposed compromise settlement of the Maria C. Tancinco estates tax liability."4The FactsThe CA narrated the facts as follows:"On July 8, 1993, Maria C. Tancinco (or decedent) died, leaving a 1,292 square-meter residential lot and an old house thereon (or subject property) located at 4931 Pasay Road, Dasmarias Village, Makati City."On the basis of a sworn information-for-reward filed on February 17, 1997 by a certain Raymond Abad (or Abad), Revenue District Office No. 50 (South Makati) conducted an investigation on the decedents estate (or estate). Subsequently, it issued a Return Verification Order. But without the required preliminary findings being submitted, it issued Letter of Authority No. 132963 for the regular investigation of the estate tax case. Azucena T. Reyes (or [Reyes]), one of the decedents heirs, received the Letter of Authority on March 14, 1997."On February 12, 1998, the Chief, Assessment Division, Bureau of Internal Revenue (or BIR), issued a preliminary assessment notice against the estate in the amount ofP14,580,618.67. On May 10, 1998, the heirs of the decedent (or heirs) received a final estate tax assessment notice and a demand letter, both dated April 22, 1998, for the amount ofP14,912,205.47, inclusive of surcharge and interest."On June 1, 1998, a certain Felix M. Sumbillo (or Sumbillo) protested the assessment [o]n behalf of the heirs on the ground that the subject property had already been sold by the decedent sometime in 1990."On November 12, 1998, the Commissioner of Internal Revenue (or [CIR]) issued a preliminary collection letter to [Reyes], followed by a Final Notice Before Seizure dated December 4, 1998."On January 5, 1999, a Warrant of Distraint and/or Levy was served upon the estate, followed on February 11, 1999 by Notices of Levy on Real Property and Tax Lien against it."On March 2, 1999, [Reyes] protested the notice of levy. However, on March 11, 1999, the heirs proposed a compromise settlement ofP1,000,000.00."In a letter to [the CIR] dated January 27, 2000, [Reyes] proposed to pay 50% of the basic tax due, citing the heirs inability to pay the tax assessment. On March 20, 2000, [the CIR] rejected [Reyess] offer, pointing out that since the estate tax is a charge on the estate and not on the heirs, the latters financial incapacity is immaterial as, in fact, the gross value of the estate amounting toP32,420,360.00 is more than sufficient to settle the tax liability. Thus, [the CIR] demanded payment of the amount ofP18,034,382.13 on or before April 15, 2000[;] otherwise, the notice of sale of the subject property would be published."On April 11, 2000, [Reyes] again wrote to [the CIR], this time proposing to pay 100% of the basic tax due in the amount ofP5,313,891.00. She reiterated the proposal in a letter dated May 18, 2000."As the estate failed to pay its tax liability within the April 15, 2000 deadline, the Chief, Collection Enforcement Division, BIR, notified [Reyes] on June 6, 2000 that the subject property would be sold at public auction on August 8, 2000."On June 13, 2000, [Reyes] filed a protest with the BIR Appellate Division. Assailing the scheduled auction sale, she asserted that x x x the assessment, letter of demand[,] and the whole tax proceedings against the estate are void ab initio. She offered to file the corresponding estate tax return and pay the correct amount of tax without surcharge [or] interest."Without acting on [Reyess] protest and offer, [the CIR] instructed the Collection Enforcement Division to proceed with the August 8, 2000 auction sale. Consequently, on June 28, 2000, [Reyes] filed a [P]etition for [R]eview with the Court of Tax Appeals (or CTA), docketed as CTA Case No. 6124."On July 17, 2000, [Reyes] filed a Motion for the Issuance of a Writ of Preliminary Injunction or Status Quo Order, which was granted by the CTA on July 26, 2000. Upon [Reyess] filing of a surety bond in the amount ofP27,000,000.00, the CTA issued a [R]esolution dated August 16, 2000 ordering [the CIR] to desist and refrain from proceeding with the auction sale of the subject property or from issuing a [W]arrant of [D]istraint or [G]arnishment of [B]ank [A]ccount[,] pending determination of the case and/or unless a contrary order is issued."[The CIR] filed a [M]otion to [D]ismiss the petition on the grounds (i) that the CTA no longer has jurisdiction over the case[,] because the assessment against the estate is already final and executory; and (ii) that the petition was filed out of time. In a [R]esolution dated November 23, 2000, the CTA denied [the CIRs] motion."During the pendency of the [P]etition for [R]eview with the CTA, however, the BIR issued Revenue Regulation (or RR) No. 6-2000 and Revenue Memorandum Order (or RMO) No. 42-2000 offering certain taxpayers with delinquent accounts and disputed assessments an opportunity to compromise their tax liability."On November 25, 2000, [Reyes] filed an application with the BIR for the compromise settlement (or compromise) of the assessment against the estate pursuant to Sec. 204(A) of the Tax Code, as implemented by RR No. 6-2000 and RMO No. 42-2000."On December 26, 2000, [Reyes] filed an Ex-Parte Motion for Postponement of the hearing before the CTA scheduled on January 9, 2001, citing her pending application for compromise with the BIR. The motion was granted and the hearing was reset to February 6, 2001."On January 29, 2001, [Reyes] moved for postponement of the hearing set on February 6, 2001, this time on the ground that she had already paid the compromise amount ofP1,062,778.20 but was still awaiting approval of the National Evaluation Board (or NEB). The CTA granted the motion and reset the hearing to February 27, 2001."On February 19, 2001, [Reyes] filed a Motion to Declare Application for the Settlement of Disputed Assessment as a Perfected Compromise. In said motion, she alleged that [the CIR] had not yet signed the compromise[,] because of procedural red tape requiring the initials of four Deputy Commissioners on relevant documents before the compromise is signed by the [CIR]. [Reyes] posited that the absence of the requisite initials and signature[s] on said documents does not vitiate the perfected compromise."Commenting on the motion, [the CIR] countered that[,] without the approval of the NEB, [Reyess] application for compromise with the BIR cannot be considered a perfected or consummated compromise."On March 9, 2001, the CTA denied [Reyess] motion, prompting her to file a Motion for Reconsideration Ad Cautelam. In a [R]esolution dated April 10, 2001, the CTA denied the [M]otion for [R]econsideration with the suggestion that[,] for an orderly presentation of her case and to prevent piecemeal resolutions of different issues, [Reyes] should file a [S]upplemental [P]etition for [R]eview[,] setting forth the new issue of whether there was already a perfected compromise."On May 2, 2001, [Reyes] filed a Supplemental Petition for Review with the CTA, followed on June 4, 2001 by its Amplificatory Arguments (for the Supplemental Petition for Review), raising the following issues:1. Whether or not an offer to compromise by the [CIR], with the acquiescence by the Secretary of Finance, of a tax liability pending in court, that was accepted and paid by the taxpayer, is a perfected and consummated compromise.2. Whether this compromise is covered by the provisions of Section 204 of the Tax Code (CTRP) that requires approval by the BIR [NEB]."Answering the Supplemental Petition, [the CIR] averred that an application for compromise of a tax liability under RR No. 6-2000 and RMO No. 42-2000 requires the evaluation and approval of either the NEB or the Regional Evaluation Board (or REB), as the case may be."On June 14, 2001, [Reyes] filed a Motion for Judgment on the Pleadings; the motion was granted on July 11, 2001. After submission of memoranda, the case was submitted for [D]ecision."On June 19, 2002, the CTA rendered a [D]ecision, the decretal portion of which pertinently reads:WHEREFORE, in view of all the foregoing, the instant [P]etition for [R]eview is hereby DENIED. Accordingly, [Reyes] is hereby ORDERED to PAY deficiency estate tax in the amount of Nineteen Million Five Hundred Twenty Four Thousand Nine Hundred Nine and 78/100 (P19,524,909.78), computed as follows:x x x x x x x x x[Reyes] is likewise ORDERED to PAY 20% delinquency interest on deficiency estate tax due ofP17,934,382.13 from January 11, 2001 until full payment thereof pursuant to Section 249(c) of the Tax Code, as amended."In arriving at its decision, the CTA ratiocinated that there can only be a perfected and consummated compromise of the estates tax liability[,] if the NEB has approved [Reyess] application for compromise in accordance with RR No. 6-2000, as implemented by RMO No. 42-2000."Anent the validity of the assessment notice and letter of demand against the estate, the CTA stated that at the time the questioned assessment notice and letter of demand were issued, the heirs knew very well the law and the facts on which the same were based. It also observed that the petition was not filed within the 30-day reglementary period provided under Sec. 11 of Rep. Act No. 1125 and Sec. 228 of the Tax Code."5Ruling of the Court of AppealsIn partly granting the Petition, the CA said that Section 228 of the Tax Code and RR 12-99 were mandatory and unequivocal in their requirement. The assessment notice and the demand letter should have stated the facts and the law on which they were based; otherwise, they were deemed void.6The appellate court held that while administrative agencies, like the BIR, were not bound by procedural requirements, they were still required by law and equity to observe substantive due process. The reason behind this requirement, said the CA, was to ensure that taxpayers would be duly apprised of -- and could effectively protest -- the basis of tax assessments against them.7Since the assessment and the demand were void, the proceedings emanating from them were likewise void, and any order emanating from them could never attain finality.The appellate court added, however, that it was premature to declare as perfected and consummated the compromise of the estates tax liability. It explained that, where the basic tax assessed exceededP1 million, or where the settlement offer was less than the prescribed minimum rates, the National Evaluation Boards (NEB) prior evaluation and approval were the conditio sine qua non to the perfection and consummation of any compromise.8Besides, the CA pointed out, Section 204(A) of the Tax Code applied to all compromises, whether government-initiated or not.9Where the law did not distinguish, courts too should not distinguish.Hence, this Petition.10The IssuesIn GR No. 159694, petitioner raises the following issues for the Courts consideration:"I.Whether petitioners assessment against the estate is valid."II.Whether respondent can validly argue that she, as well as the other heirs, was not aware of the facts and the law on which the assessment in question is based, after she had opted to propose several compromises on the estate tax due, and even prematurely acting on such proposal by paying 20% of the basic estate tax due."11The foregoing issues can be simplified as follows: first, whether the assessment against the estate is valid; and, second, whether the compromise entered into is also valid.The Courts RulingThe Petition is unmeritorious.First Issue:Validity of the Assessment Against the EstateThe second paragraph of Section 228 of the Tax Code12is clear and mandatory. It provides as follows:"Sec. 228. Protesting of Assessment. --x x x x x x x x x"The taxpayers shall be informed in writing of the law and the facts on which the assessment is made: otherwise, the assessment shall be void."In the present case, Reyes was not informed in writing of the law and the facts on which the assessment of estate taxes had been made. She was merely notified of the findings by the CIR, who had simply relied upon the provisions of former Section 22913prior to its amendment by Republic Act (RA) No. 8424, otherwise known as the Tax Reform Act of 1997.First, RA 8424 has already amended the provision of Section 229 on protesting an assessment. The old requirement of merelynotifyingthe taxpayer of the CIRs findings was changed in 1998 toinformingthe taxpayer of not only the law, but also of the facts on which an assessment would be made; otherwise, the assessment itself would be invalid.It was on February 12, 1998, that a preliminary assessment notice was issued against the estate. On April 22, 1998, the final estate tax assessment notice, as well as demand letter, was also issued. During those dates, RA 8424 was already in effect. The notice required under theoldlaw was no longer sufficient under thenewlaw.To be simply informed in writing of the investigation being conducted and of the recommendation for the assessment of the estate taxes due is nothing but a perfunctory discharge of the tax function of correctly assessing a taxpayer. The act cannot be taken to mean that Reyes already knew the law and the facts on which the assessment was based. It does not at all conform to the compulsory requirement under Section 228. Moreover, the Letter of Authority received by respondent on March 14, 1997 was for the sheer purpose of investigation and was not even the requisite notice under the law.The procedure for protesting an assessment under the Tax Code is found in Chapter III of Title VIII, which deals with remedies. Being procedural in nature, can its provision then be applied retroactively? The answer is yes.The general rule is that statutes are prospective. However, statutes that are remedial, or that do not create new or take away vested rights, do not fall under the general rule against the retroactive operation of statutes.14Clearly, Section 228 provides for the procedure in case an assessment is protested. The provision does not create new or take away vested rights. In both instances, it can surely be applied retroactively. Moreover, RA 8424 does not state, either expressly or by necessary implication, that pending actions are excepted from the operation of Section 228, or that applying it to pending proceedings would impair vested rights.Second, the non-retroactive application of Revenue Regulation (RR) No. 12-99 is of no moment, considering that it merely implements the law.A tax regulation is promulgated by the finance secretary to implement the provisions of the Tax Code.15While it is desirable for the government authority or administrative agency to have one immediately issued after a law is passed, the absence of the regulation does not automatically mean that the law itself would become inoperative.At the time the pre-assessment notice was issued to Reyes, RA 8424 already stated that the taxpayer must be informed of both the law and facts on which the assessment was based. Thus, the CIR should have required the assessment officers of the Bureau of Internal Revenue (BIR) to follow the clear mandate of the new law. The old regulation governing the issuance of estate tax assessment notices ran afoul of the rule that tax regulations -- old as they were -- should be in harmony with, and not supplant or modify, the law.16It may be argued that the Tax Code provisions are not self-executory. It would be too wide a stretch of the imagination, though, to still issue a regulation that would simply require tax officials to inform the taxpayer, in any manner, of the law and the facts on which an assessment was based. That requirement is neither difficult to make nor its desired results hard to achieve.Moreover, an administrative rule interpretive of a statute, and not declarative of certain rights and corresponding obligations, is given retroactive effect as of the date of the effectivity of the statute.17RR 12-99 is one such rule. Being interpretive of the provisions of the Tax Code, even if it was issued only on September 6, 1999, this regulation was to retroact to January 1, 1998 -- a date prior to the issuance of the preliminary assessment notice and demand letter.Third, neither Section 229 nor RR 12-85 can prevail over Section 228 of the Tax Code.No doubt, Section 228 has replaced Section 229. The provision on protesting an assessment has been amended. Furthermore, in case of discrepancy between the law as amended and its implementing but old regulation, the former necessarily prevails.18Thus, between Section 228 of the Tax Code and the pertinent provisions of RR 12-85, the latter cannot stand because it cannot go beyond the provision of the law. The law must still be followed, even though the existing tax regulation at that time provided for a different procedure. The regulation then simply provided that notice be sent to the respondent in the form prescribed, and that no consequence would ensue for failure to comply with that form.Fourth, petitioner violated the cardinal rule in administrative law that the taxpayer be accorded due process. Not only was the law here disregarded, but no valid notice was sent, either. A void assessment bears no valid fruit.The law imposes a substantive, not merely a formal, requirement. To proceed heedlessly with tax collection without first establishing a valid assessment is evidently violative of the cardinal principle in administrative investigations: that taxpayers should be able to present their case and adduce supporting evidence.19In the instant case, respondent has not been informed of the basis of the estate tax liability. Without complying with the unequivocal mandate of first informing the taxpayer of the governments claim, there can be no deprivation of property, because no effective protest can be made.20The haphazard shot at slapping an assessment, supposedly based on estate taxations general provisions that are expected to be known by the taxpayer, is utter chicanery.Even a cursory review of the preliminary assessment notice, as well as the demand letter sent, reveals the lack of basis for -- not to mention the insufficiency of -- the gross figures and details of the itemized deductions indicated in the notice and the letter. This Court cannot countenance an assessment based on estimates that appear to have been arbitrarily or capriciously arrived at. Although taxes are the lifeblood of the government, their assessment and collection "should be made in accordance with law as any arbitrariness will negate the very reason for government itself."21Fifth, the rule against estoppel does not apply. Although the government cannot be estopped by the negligence or omission of its agents, the obligatory provision on protesting a tax assessment cannot be rendered nugatory by a mere act of the CIR .Tax laws are civil in nature.22Under our Civil Code, acts executed against the mandatory provisions of law are void, except when the law itself authorizes the validity of those acts.23Failure to comply with Section 228 does not only render the assessment void, but also finds no validation in any provision in the Tax Code. We cannot condone errant or enterprising tax officials, as they are expected to be vigilant and law-abiding.Second Issue:Validity of CompromiseIt would be premature for this Court to declare that the compromise on the estate tax liability has been perfected and consummated, considering the earlier determination that the assessment against the estate was void. Nothing has been settled or finalized. Under Section 204(A) of the Tax Code, where the basic tax involved exceeds one million pesos or the settlement offered is less than the prescribed minimum rates, the compromise shall be subject to the approval of the NEB composed of the petitioner and four deputy commissioners.Finally, as correctly held by the appellate court, this provision applies to all compromises, whether government-initiated or not.Ubi lex non distinguit, nec nos distinguere debemos. Where the law does not distinguish, we should not distinguish.WHEREFORE, the Petition is hereby DENIED and the assailed Decision AFFIRMED. No pronouncement as to costs.SO ORDERED.G.R. No. L-19727 May 20, 1965THE COMMISSIONER OF INTERNAL REVENUE,petitioner,vs. PHOENIX ASSURANCE CO., LTD.,respondent.G.R. No. L-19903 May 20, 1965PHOENIX ASSURANCE, CO., LTD.,petitioner,vs. COMMISSIONER OF INTERNAL REVENUE,respondent.BENGZON, J.P.,J.:From a judgment of the Court of Tax Appeals in C.T.A. Cases Nos. 305 and 543, consolidated and jointly heard therein, these two appeals were taken. Since they involve the same facts and interrelated issues, the appeals are herein decided together.Phoenix Assurance Co., Ltd., a foreign insurance corporation organized under the laws of Great Britain, is licensed to do business in the Philippines with head office in London. Through its head office, it entered in London into worldwide reinsurance treaties with various foreign insurance companies. It agree to cede a portion of premiums received on original insurances underwritten by its head office, subsidiaries, and branch offices throughout the world, in consideration for assumption by the foreign insurance companies of an equivalent portion of the liability from such original insurances.1wph1.tPursuant to such reinsurance treaties, Phoenix Assurance Co., Ltd., ceded portions of the premiums it earned from its underwriting business in the Philippines, as follows:YearAmount Ceded

1952P316,526.75

1953P246,082.04

1954P203,384.69

upon which the Commissioner of Internal Revenue, by letter of May 6, 1958, assessed the following withholding tax:YearWithholding Tax

1952P 75,966.42

195359,059.68

195448,812.32

TotalP183,838.42=============

On April 1, 1951, Phoenix Assurance Co., Ltd. filed its Philippine income tax return for 1950, claiming therein, among others, a deduction of P37,147.04 as net addition to marine insurance reserve equivalent to 40% of the gross marine insurance premiums received during the year. The Commissioner of Internal Revenue disallowed P11,772.57 of such claim for deduction and subsequently assessed against Phoenix Assurance Co., Ltd. the sum of P1,884.00 as deficiency income tax. The disallowance resulted from the fixing by the Commissioner of the net addition to the marine insurance reserve at 100% of the marine insurance premiums received during the last three months of the year. The Commissioner assumed that "ninety and third, days are approximately the length of time required before shipments reach their destination or before claims are received by the insurance companies."On April 1, 1953, Phoenix Assurance Co., Ltd. filed its Philippine income tax return for 1952, declaring therein a deduction from gross income of P35,912.25 as part of the head office expenses incurred for its Philippine business, computed at 5% on its gross Philippine income.On August 30, 1955 it amended its income tax return for 1952 by excluding from its gross income the amount of P316,526.75 representing reinsurance premiums ceded to foreign reinsurers and further eliminating deductions corresponding to the coded premiums. The amended return showed an income tax due in the amount of P2,502.00. The Commissioner of Internal Revenue disallowed P15,826.35 of the claimed deduction for head office expenses and assessed a deficiency tax of P5,667.00 on July 24, 1958.On April 30, 1954, Phoenix Assurance Co., Ltd. filed its Philippine income tax return for 1953 and claimed therein a deduction from gross income of P33,070.88 as head office expenses allocable to its Philippine business, equivalent to 5%, of its gross Philippine income. On August 30, 1955 it amended its 1953 income tax return to exclude from its gross income the amount of P246,082.04 representing reinsurance premiums ceded to foreign reinsurers. At the same time, it requested the refund of P23,409.00 as overpaid income tax for 1953. To avoid the prescriptive period provided for in Section 306 of the Tax Code, it filed a petition for review on April 11, 1956 in the Court of Tax Appeals praying for such refund. After verification of the amended income tax return the Commissioner of Internal Revenue disallowed P12,304.10 of the deduction representing head office expenses allocable to Philippine business thereby reducing the refundable amount to P20,180.00.On April 29, 1955, Phoenix Assurance Co., Ltd. filed its Philippine income tax return for 1954 claiming therein, among others, a deduction from gross income of P99,624.75 as head office expenses allocable to its Philippine business, computed at 5% of its gross Philippine income. It also excluded from its gross income the amount of P203,384.69 representing reinsurance premiums ceded to foreign reinsurers not doing business in the Philippines.On August 1, 1958 the Bureau of Internal Revenue released the following assessment for deficiency income tax for the years 1952 and 1954 against Phoenix Assurance Co., Ltd.:1952

Net income per audited returnP 12,511.61

Unallowable deduction & additional income:

Overclaimed Head Office expenses:

Amount claimed . . . . . . . . . . . .P 35,912.25

Amount allowed . . . . . . . . . . . .20,085.90P 15,826.35

Net income per investigationP 28,337.96

Tax due thereonP 5,667.00===========

1954

Net income per auditedP160,320.21

Unallowable deduction & additional income:

Overclaimed Head Office expenses:

Amount claimed . . . . . . . . . . . .P29,624.73

Amount allowed . . . . . . . . . . . .19,455.5010,16.23

Net income per investigationP170,489.41

Tax due thereonP 39,737.00

Less: amount already assessed36,890.00

DEFICIENCY TAX DUEP 2,847.00===========

The above assessment resulted from the disallowance of a portion of the deduction claimed by Phoenix Assurance Co., Ltd. as head office expenses allocable to its business in the Philippines fixed by the Commissioner at 5% of the net Philippine income instead of 5% of the gross Philippine income as claimed in the returns.Phoenix Assurance Co., Ltd. protested against the aforesaid assessments for withholding tax and deficiency income tax. However, the Commissioner of Internal Revenue denied such protest. Subsequently, Phoenix Assurance Co., Ltd. appealed to the Court of Tax Appeals. In a decision dated February 14, 1962, the Court of Tax Appeals allowed in full the decision claimed by Phoenix Assurance Co., Ltd. for 1950 as net addition to marine insurance reserve; determined the allowable head office expenses allocable to Philippine business to be 5% of the net income in the Philippines; declared the right of the Commissioner of Internal Revenue to assess deficiency income tax for 1952 to have prescribed; absolved Phoenix Assurance Co., Ltd. from payment of the statutory penalties for non-filing of withholding tax return; and, rendered the following judgment:WHEREFORE, petitioner Phoenix Assurance Company, Ltd. is hereby ordered to pay the Commissioner of Internal Revenue the respective amounts of P75,966.42, P59,059.68 and P48,812.32, as withholding tax for the years 1952, 1953 and 1954, and P2,847.00 as income tax for 1954, or the total sum of P186,685.42 within thirty (30) days from the date this decision becomes final. Upon the other hand, the respondent Commissioner is ordered to refund to petitioner the sum of P20,180.00 as overpaid income tax for 1953, which sum is to be deducted from the total sum of P186,685.42 due as taxes.If any amount of the tax is not paid within the time prescribed above, there shall be collected a surcharge of 5% of the tax unpaid, plus interest at the rate of 1% a month from the date of delinquency to the date of payment, provided that the maximum amount that may be collected as interest shall not exceed the amount corresponding to a period of three (3) years. Without pronouncement as to costs.Phoenix Assurance Co., Ltd. and the Commissioner of Internal Revenue have appealed to this Court raising the following issues: (1) Whether or not reinsurance premiums ceded to foreign reinsurers not doing business in the Philippines pursuant to reinsurance contracts executed abroad are subject to withholding tax; (2) Whether or not the right of the Commissioner of Internal Revenue to assess deficiency income tax for the year 1952 against Phoenix Assurance Co., Ltd., has prescribed; (3) Whether or not the deduction of claimed by the Phoenix Assurance Co., Ltd.as net addition to reserve for the year 1950 is excessive; (4) Whether or not the deductions claimed by Phoenix Assurance Co., Ltd. for head office expenses allocable to Philippine business for the years 1952, 1953 and 1954 are excessive.The question of whether or not reinsurance premiums ceded to foreign reinsurers not doing business in the Philippines pursuant to contracts executed abroad are income from sources within the Philippines subject to withholding tax under Sections 53 and 54 of the Tax Code has already been resolved in the affirmative inBritish Traders' Insurance Co., Ltd.v. Commisioner of Internal Revenue, L-20501, April 30, 1965.1We come to the issue of prescription. Phoenix Assurance Co., Ltd. filed its income tax return for 1952 on April 1, 1953 showing a loss of P199,583.93. It amended said return on August 30, 1955 reporting a tax liability of P2,502.00. On July 24, 1958, after examination of the amended return, the Commissioner of Internal Revenue assessed deficiency income tax in the sum of P5,667.00. The Court of Tax Appeals found the right of the Commissioner of Internal Revenue barred by prescription, the same having been exercised more than five years from the date the original return was filed. On the other hand, the Commissioner of Internal Revenue insists that his right to issue the assessment has not prescribed inasmuch as the same was availed of before the 5-year period provided for in Section 331 of the Tax Code expired, counting the running of the period from August 30, 1955, the date when the amended return was filed.Section 331 of the Tax Code, which limits the right of the Commissioner of Internal Revenue to assess income tax within five years from the Filipino of the income tax return, states:SEC. 331.Period of limitation upon assessment and collection. Except as provided in the succeeding section internal revenue taxes shall be assessed within five years after the return was filed, and no proceeding in court without assessment for the collection of such taxes shall be begun after the expiration of such period. For the purposes of this section, a return filed before the last day prescribed by law for the filing thereof shall be considered as filed on such last day:Provided, That this limitation shall not apply to cases already investigated prior to the approval of this Code.The question is: Should the running of the prescriptive period commence from the filing of the original or amended return?The Court of Tax Appears that the original return was a complete return containing "information on various items of income and deduction from which respondent may intelligently compute and determine the tax liability of petitioner, hence, the prescriptive period should be counted from the filing of said original return. On the other hand, the Commissioner of Internal Revenue maintains that:"... the deficiency income tax in question could not possibly be determined, or assessed, on the basis of the original return filed on April 1, 1953, for considering that the declared loss amounted to P199,583.93, the mere disallowance of part of the head office expenses could not probably result in said loss being completely wiped out and Phoenix being liable to deficiency tax. Not until the amended return was filed on August 30, 1955 could the Commissioner assess the deficiency income tax in question."Accordingly, he would wish to press for the counting of the prescriptive period from the filing of the amended return.To our mind, the Commissioner's view should be sustained. The changes and alterations embodied in the amended income tax return consisted of the exclusion of reinsurance premiums received from domestic insurance companies by Phoenix Assurance Co., Ltd.'s London head office, reinsurance premiums ceded to foreign reinsurers not doing business in the Philippines and various items of deduction attributable to such excluded reinsurance premiums thereby substantially modifying the original return. Furthermore, although the deduction for head office expenses allocable to Philippine business, whose disallowance gave rise to the deficiency tax, was claimed also in the original return, the Commissioner could not have possibly determined a deficiency tax thereunder because Phoenix Assurance Co., Ltd. declared a loss of P199,583.93 therein which would have more than offset such disallowance of P15,826.35. Considering that the deficiency assessment was based on the amended return which, as aforestated, is substantially different from the original return, the period of limitation of the right to issue the same should be counted from the filing of the amended income tax return. From August 30, 1955, when the amended return was filed, to July 24, 1958, when the deficiency assessment was issued, less than five years elapsed. The right of the Commissioner to assess the deficiency tax on such amended return has not prescribed.To strengthen our opinion, we believe that to hold otherwise, we would be paving the way for taxpayers to evade the payment of taxes by simply reporting in their original return heavy losses and amending the same more than five years later when the Commissioner of Internal Revenue has lost his authority to assess the proper tax thereunder. The object of the Tax Code is to impose taxes for the needs of the Government, not to enhance tax avoidance to its prejudice.We next consider Phoenix Assurance Co., Ltd.'s claim for deduction of P37,147.04 for 1950 representing net addition to reserve computed at 40% of the marine insurance premiums received during the year. Treating said said deduction to be excessive, the Commissioner of Internal Revenue reduced the same to P25,374.47 which is equivalent to 100% of all marine insurance premiums received during the last months of the year.Paragraph (a) of Section 32 of the Tax Code states:SEC. 32.Special provisions regarding income and deductions of insurance companies, whether domestic or foreign. (a) Special deductions allowed to insurance companies. In the case of insurance companies, except domestic life insurance companies and foreign life insurance companies doing business in the Philippines, the net additions, if any, required by law to be made within the year to reserve funds and the sums other than dividends paid within the year on policy and annuity contracts may be deducted from their gross income: Provided, however, That the released reserve be treated as income for the year of release.Section 186 of the Insurance Law requires the setting up of reserves for liability on marine insurance:SEC. 186. ...Provided, That for marine risks the insuring company shall be required to charge as the liability for reinsurancefifty per centum of the premiums written in the policies upon yearly risks, and thefull premiumswritten in the policiesupon all other marine risks not terminated(Emphasis supplied.)The reserve required for marine insurance is determined on two bases: 50% of premiums under policies on yearly risks and 100% of premiums under policies of marine risks not terminated during the year. Section 32 (a) of the Tax Code quoted above allows the full amount of such reserve to be deducted from gross income.It may be noteworthy to observe that the formulas for determining the marine reserve employed by Phoenix Assurance Co., Ltd. and the Commissioner of Internal Revenue 40% of premiums received during the year and 100% of premiums received during the last three months of the year, respectively do not comply with Section 186. Said determination runs short of the requirement. For purposes of the Insurance Law, this Court therefore cannot countenance the same. The reserve called for in Section 186 is a safeguard to the general public and should be strictly followed not only because it is an express provision but also as a matter of public policy. However, for income tax purposes a taxpayer is free to deduct from its gross income a lesser amount, or not to claim any deduction at all. What is prohibited by the income tax law is to claim a deduction beyond the amount authorized therein.Phoenix Assurance Co., Ltd.'s claim for deduction of P37,147.04 being less than the amount required in Section 186 of the Insurance Law, the same cannot be and is not excessive, and should therefore be fully allowed.*We come now to the controversy on the taxpayer's claim for deduction on head office expenses incurred during 1952, 1953, and 1954 allocable to its Philippine business computed at 5% of itsgross incomein the Philippines The Commissioner of Internal Revenue redetermined such deduction at 5% on Phoenix Assurance Co., Ltd'snet incomethereby partially disallowing the latter's claim. The parties are agreed as to the percentage 5% but differ as to the basis of computation. Phoenix Assurance Co. Lt. insists that the 5% head office expenses be determined from thegross income, while the Commissioner wants the computation to be made on thenet income. What, therefore, needs to be resolved is: Should the 5% be computed on the gross or net income?The record shows that the gross income of Phoenix Assurance Co., Ltd. consists of income from its Philippine business as well as reinsurance premiums received for its head office in London and reinsurance premiums ceded to foreign reinsurance. Since the items of income not belonging to its Philippine business are not taxable to its Philippine branch, they should be excluded in determining the head office expenses allowable to said Philippine branch. This conclusion finds support in paragraph 2, subsection (a), Section 30 of the Tax Code, quoted hereunder:(2)Expenses allowable to non-resident alien individuals and foreign corporations. In the case of a non-resident alien individual or a foreign corporation, the expenses deductible are the, necessary expenses paid or incurred in carrying on any business or trade conductedwithin the Philippinesexclusively. (Emphasis supplied.)Consequently, the deficiency assessments for 1952, 1953 and 1954, resulting from partial disallowance of deduction representing head office expenses, are sustained.Finally, the Commissioner of Internal Revenue assails the dispositive portion of the Tax Court's decision limiting the maximum amount of interest collectible for deliquency of an amount corresponding to a period of three years. He contends that since such limitation was incorporated into Section 51 of the Tax Code by Republic Act 2343 which took effect only on June 20, 1959, it must not be applied retroactively on withholding tax for the years 1952, 1953 and 1954.The imposition of interest on unpaid taxes is one of the statutory penalties for tax delinquency, from the payments of which the Court of Tax Appeals absolved the Phoenix Assurance Co., Ltd. on the equitable ground that the latter's failure to pay the withholding tax was due to the Commissioner's opinion that no withholding tax was due. Consequently, the taxpayer could be held liable for the payment of statutory penalties only upon its failure to comply with the Tax Court's judgment rendered on February 14. 1962, after Republic Act 2343 took effect. This part of the ruling of the lower court ought not to be disturbed.WHEREFORE, the decision appealed from is modified, Phoenix Assurance Co., Ltd. is hereby ordered to pay the Commissioner, of Internal Revenue the amount of P75,966.42, P59,059.68 and P48,812.32 as withholding tax for the years 1952, 1953 and 1954, respectively, and the sums of P5,667.00 and P2,847.00 as income tax for 1952 and 1954 or a total of P192,352.42. The Commissioner of Internal Revenue is ordered to refund to Phoenix Assurance Co., Ltd. the amount of P20,180.00 as overpaid income tax for 1953, which should be deducted from the amount of P192,352.42.If the amount of P192,352.42 or a portion thereof is not paid within thirty (30) days from the date this judgment becomes final, there should be collected a surcharge and interest as provided for in Section 51(c) (2) of the Tax Code. No costs. It is so ordered.[G.R. No. 128315.June 29, 1999]COMMISSIONER OF INTERNAL REVENUE,petitioner, vs.PASCOR REALTY AND DEVELOPMENT CORPORATION, ROGELIO A. DIO and VIRGINIA S. DIO,respondents.D E C I S I O NPANGANIBAN,J.:An assessment contains not only a computation of tax liabilities, but also a demand for payment within a prescribed period.It also signals the time when penalties and interests begin to accrue against the taxpayer.To enable the taxpayer to determine his remedies thereon, due process requires that it must be served on and received by the taxpayer.Accordingly, an affidavit, which was executed by revenue officers stating the tax liabilities of a taxpayer and attached to a criminal complaint for tax evasion, cannot be deemed an assessment that can be questioned before the Court of Tax Appeals.Statement of the CaseBefore this Court is a Petition for Review onCertiorariunder Rule 45 of the Rules of Court praying for the nullification of the October 30, 1996 Decision[1]of the Court of Appeals[2]in CA-GR SP No. 40853, which effectively affirmed the January 25, 1996 Resolution[3]of the Court of Tax Appeals[4]in CTA Case No. 5271.The CTA disposed as follows:WHEREFORE, finding [the herein petitioners] Motion to Dismiss as UNMERITORIOUS, the same is hereby DENIED. [The CIR] is hereby given a period of thirty (30) days from receipt hereof to file her answer.Petitioner also seeks to nullify the February 13, 1997 Resolution[5]of the Court of Appeals denying reconsideration.The FactsAs found by the Court of Appeals, the undisputed facts of the case are as follows:It appears that by virtue of Letter of Authority No. 001198, then BIR Commissioner Jose U. Ong authorized Revenue Officers Thomas T. Que, Sonia T. Estorco and Emmanuel M. Savellano to examine the books of accounts and other accounting records of Pascor Realty and Development Corporation. (PRDC) for the years ending 1986, 1987 and 1988. The said examination resulted in a recommendation for the issuance of an assessment in the amounts of P7,498,434.65 and P3,015,236.35 for the years 1986 and 1987, respectively.On March 1, 1995, the Commissioner of Internal Revenue filed a criminal complaint before the Department of Justice against the PRDC, its President Rogelio A. Dio, and its Treasurer Virginia S. Dio, alleging evasion of taxes in the total amount of P10,513,671.00.Private respondents PRDC, et. al. filed an Urgent Request for Reconsideration/Reinvestigation disputing the tax assessment and tax liability.On March 23, 1995, private respondents received a subpoena from the DOJ in connection with the criminal complaint filed by the Commissioner of Internal Revenue (BIR) against them.In a letter dated May 17, 1995, the CIR denied the urgent request for reconsideration/reinvestigation of the private respondents on the ground that no formal assessment has as yet been issued by the Commissioner.Private respondents then elevated the Decision of the CIR dated May 17, 1995 to the Court of Tax Appeals on a petition for review docketed as CTA Case No. 5271 on July 21, 1995.On September 6, 1995, the CIR filed a Motion to Dismiss the petition on the ground that the CTA has no jurisdiction over the subject matter of the petition, as there was no formal assessment issued against the petitioners.The CTA denied the said motion to dismiss in a Resolution dated January 25, 1996 and ordered the CIR to file an answer within thirty (30) days from receipt of said resolution.The CIR received the resolution on January 31, 1996 but did not file an answer nor did she move to reconsider the resolution.Instead, the CIR filed this petition on June 7, 1996, alleging as grounds that:Respondent Court of Tax Appeals acted with grave abuse of discretion and without jurisdiction in considering the affidavit/report of the revenue officer and the indorsement of said report to the secretary of justice as assessment which may be appealed to the Court of Tax Appeals;Respondent Court of Tax Appeals acted with grave abuse of discretion in considering the denial by petitioner of private respondents Motion for Reconsideration as [a] final decision which may be appealed to the Court of Tax Appeals.In denying the motion to dismiss filed by the CIR, the Court of Tax Appeals stated:We agree with petitioners contentions, that the criminal complaint for tax evasion is the assessment issued, and that the letter denial of May 17, 1995 is the decision properly appealable to [u]s.Respondents ground of denial, therefore, that there was no formal assessment issued, is untenable.It is the Courts honest belief, that the criminal case for tax evasion is already an assessment.The complaint, more particularly, the Joint Affidavit of Revenue Examiners Lagmay and Savellano attached thereto, contains the details of the assessment like the kind and amount of tax due, and the period covered.Petitioners are right, in claiming that the provisions of Republic Act No. 1125, relating to exclusive appellate jurisdiction of this Court, do not, make any mention of formal assessment. The law merely states, that this Court has exclusive appellate jurisdiction over decisions of the Commissioner of Internal Revenue ondisputed assessments, andother mattersarising under the National Internal Revenue Code, other law or part administered by the Bureau of Internal Revenue Code.As far as this Court is concerned, the amount and kind of tax due, and the period covered, are sufficient details needed for an assessment. These details are more than complete, compared to the following definitions of the term as quoted hereunder. Thus:Assessmentis laying a tax. Johnson City v. Clinchfield R. Co., 43 S.W. (2d) 386, 387, 163 Tenn. 332. (Words and Phrases, Permanent Edition, Vol. 4, p. 446)The wordassessmentwhen used in connection with taxation, may have more than one meaning.The ultimate purpose of an assessment to such a connection is to ascertain the amount that each taxpayer is to pay.More commonly, the word assessment means the official valuation of a taxpayers property for purpose of taxation.State v. New York, N.H. and H.R. Co. 22 A. 765, 768, 60 Conn. 326, 325. (Ibid. p. 445)From the above, it can be gleaned that an assessment simply states how much tax is due from a taxpayer.Thus, based on these definitions, the details of the tax as given in the Joint Affidavit of respondents examiners, which was attached to the tax evasion complaint, more than suffice to qualify as an assessment.Therefore, this assessment having been disputed by petitioners, and there being a denial of their letter disputing such assessment, this Court unquestionably acquired jurisdiction over the instant petition for review.[6]As earlier observed, the Court of Appeals sustained the CTA and dismissed the petition.Hence, this recourse to this Court.[7]Ruling of the Court of AppealsThe Court of Appeals held that the tax court committed no grave abuse of discretion in ruling that the Criminal Complaint for tax evasion filed by the Commissioner of Internal Revenue with the Department of Justice constituted an assessment of the tax due, and that the said assessment could be the subject of a protest.By definition, an assessment is simply the statement of the details and the amount of tax due from a taxpayer.Based on this definition, the details of the tax contained in the BIR examiners Joint Affidavit,[8]which was attached to the criminal Complaint, constituted an assessment.Since the assailed Order of the CTA was merely interlocutory and devoid of grave abuse of discretion, a petition forcertioraridid not lie.IssuesPetitioners submit for the consideration of this Court the following issues:(1)Whether or not the criminal complaint for tax evasion can be construed as an assessment.(2)Whether or not an assessment is necessary before criminal charges for tax evasion may be instituted.(3)Whether or not the CTA can take cognizance of the case in the absence of an assessment.[9]In the main, the Court will resolve whether the revenue officers Affidavit-Report, which was attached to the criminal Complaint filed with the Department of Justice, constituted an assessment that could be questioned before the Court of Tax Appeals.The Courts RulingThe petition is meritorious.Main Issue:AssessmentPetitioner argues that the filing of the criminal complaint with the Department of Justice cannot in any way be construed as a formal assessment of private respondents tax liabilities.This position is based on Section 205 of the National Internal Revenue Code[10](NIRC), which provides that remedies for the collection of deficient taxes may be by either civil or criminal action.Likewise, petitioner cites Section 223(a) of the same Code, which states that in case of failure to file a return, the tax may be assessed or a proceeding in court may be begunwithout assessment.Respondents, on the other hand, maintain that an assessment is not an action or proceeding for the collection of taxes, but merely a notice that the amount stated therein is due as tax and that the taxpayer is required to pay the same.Thus, qualifying as an assessment was the BIR examiners Joint Affidavit, which contained the details of the supposed taxes due from respondent for taxable years ending 1987 and 1988, and which was attached to the tax evasion Complaint filed with the DOJ.Consequently, the denial by the BIR of private respondents request for reinvestigation of the disputed assessment is properly appealable to the CTA.We agree with petitioner.Neither the NIRC nor the revenue regulations governing the protest of assessments[11]provide a specific definition or form of an assessment.However, the NIRC defines the specific functions and effects of an assessment.To consider the affidavit attached to the Complaint as a proper assessment is to subvert the nature of an assessment and to set a bad precedent that will prejudice innocent taxpayers.True, as pointed out by the private respondents, an assessment informs the taxpayer that he or she has tax liabilities.But not all documents coming from the BIR containing a computation of the tax liability can be deemed assessments.To start with, an assessment must be sent to and received by a taxpayer, and must demand payment of the taxes described therein within a specific period.Thus, the NIRC imposes a 25 percent penalty, in addition to the tax due, in case the taxpayer fails to pay the deficiency tax within the time prescribed for its payment in the notice of assessment.Likewise, an interest of 20 percent per annum, or such higher rate as may be prescribed by rules and regulations, is to be collected from the date prescribed for its payment until the full payment.[12]The issuance of an assessment is vital in determining the period of limitation regarding its proper issuance and the period within which to protest it.Section 203[13]of the NIRC provides that internal revenue taxes must be assessed within three years from the last day within which to file the return.Section 222,[14]on the other hand, specifies a period of ten years in case a fraudulent return with intent to evade was submitted or in case of failure to file a return.Also, Section 228[15]of the same law states that said assessment may be protested only within thirty days from receipt thereof.Necessarily, the taxpayer must be certain that a specific document constitutes an assessment.Otherwise, confusion would arise regarding the period within which to make an assessment or to protest the same, or whether interest and penalty may accrue thereon.It should also be stressed that the said document is a notice duly sent to the taxpayer.Indeed, an assessment is deemed made only when the collector of internal revenue releases, mails or sends such notice to the taxpayer.[16]In the present case, the revenue officers Affidavit merely contained a computation of respondents tax liability.It did not state a demand or a period for payment.Worse, it was addressed to the justice secretary, not to the taxpayers.Respondents maintain that an assessment, in relation to taxation, is simply understood to mean:A notice to the effect that the amount therein stated is due as tax and a demand for payment thereof.[17]Fixes the liability of the taxpayer and ascertains the facts and furnishes the data for the proper presentation of tax rolls.[18]Even these definitions fail to advance private respondents case. That the BIR examiners Joint Affidavit attached to the Criminal Complaint contained some details of the tax liabilities of private respondents does notipso factomake it an assessment.The purpose of the Joint Affidavit was merely to support and substantiate the Criminal Complaint for tax evasion.Clearly, it was not meant to be a notice of the tax due and a demand to the private respondents for payment thereof.The fact that the Complaint itself was specifically directed and sent to the Department of Justice and not to private respondents shows that the intent of the commissioner was to file a criminal complaint for tax evasion, not to issue an assessment.Although the revenue officers recommended the issuance of an assessment, the commissioner opted instead to file a criminal case for tax evasion.What private respondents received was a notice from the DOJ that a criminal case for tax evasion had been filed against them, not a notice that the Bureau of Internal Revenue had made an assessment.In addition, what private respondents sent to the commissioner was a motion for a reconsideration of the tax evasion charges filed, not of an assessment, as shown thus:This is to request for reconsideration of the tax evasion charges against my client, PASCOR Realty and Development Corporation and for the same to be referred to the Appellate Division in order to give my client the opportunity of a fair and objective hearing[19]Additional Issues:Assessment Not Necessary Before Filing of Criminal ComplaintPrivate respondents maintain that the filing of a criminal complaint must be preceded by an assessment.This is incorrect, because Section 222 of the NIRC specifically states that in cases where a false or fraudulent return is submitted or in cases of failure to file a return such as this case, proceedings in court may be commencedwithout an assessment.Furthermore, Section 205 of the same Code clearly mandates that the civil and criminal aspects of the case may be pursued simultaneously.InUngab v. Cusi,[20]petitioner therein sought the dismissal of the criminal Complaints for being premature, since his protest to the CTA had not yet been resolved.The Court held that such protests could not stop or suspend the criminal action which was independent of the resolution of the protest in the CTA.This was because the commissioner of internal revenue had, in such tax evasion cases, discretion on whether to issue an assessment or to file a criminal case against the taxpayer or to do both.Private respondents insist that Section 222 should be read in relation to Section 255 of the NIRC,[21]which penalizes failure to file a return.They add that a tax assessment should precede a criminal indictment.We disagree.To reiterate, said Section 222 states that an assessment is not necessary before a criminal charge can be filed.This is the general rule.Private respondents failed to show that they are entitled to an exception.Moreover, the criminal charge need only be supported by aprima facieshowing of failure to file a required return.This fact need not be proven by an assessment.The issuance of an assessment must be distinguished from the filing of a complaint.Before an assessment is issued, there is, by practice, a pre-assessment notice sent to the taxpayer.The taxpayer is then given a chance to submit position papers and documents to prove that the assessment is unwarranted.If the commissioner is unsatisfied, an assessment signed by him or her is then sent to the taxpayer informing the latter specifically and clearly that an assessment has been made against him or her.In contrast, the criminal charge need not go through all these.The criminal charge is filed directly with the DOJ.Thereafter, the taxpayer is notified that a criminal case had been filed against him, not that the commissioner has issued an assessment.It must be stressed that a criminal complaint is instituted not to demand payment, but to penalize the taxpayer for violation of the Tax Code.WHEREFORE, the petition is herebyGRANTED. The assailed Decision isREVERSEDandSET ASIDE.CTA Case No. 5271 is likewiseDISMISSED.No costs.SO ORDERED.[G.R. No. 136975. March 31, 2005]COMMISSION OF INTERNAL REVENUE,petitioner, vs.HANTEX TRADING CO., INC.,respondent.D E C I S I O NCALLEJO, SR.,J.:Before us is a petition for review of the Decision[1]of the Court of Appeals (CA) which reversed the Decision[2]of the Court of Tax Appeals (CTA) in CTA Case No. 5126, upholding the deficiency income and sales tax assessments against respondent Hantex Trading Co., Inc.The AntecedentsThe respondent is a corporation duly organized and existing under the laws of the Philippines. Being engaged in the sale of plastic products, it imports synthetic resin and other chemicals for the manufacture of its products. For this purpose, it is required to file an Import Entry and Internal Revenue Declaration (Consumption Entry) with the Bureau of Customs under Section 1301 of the Tariff and Customs Code.Sometime in October 1989, Lt. Vicente Amoto, Acting Chief of Counter-Intelligence Division of the Economic Intelligence and Investigation Bureau (EIIB), received confidential information that the respondent had imported synthetic resin amounting toP115,599,018.00 but only declaredP45,538,694.57.[3]According to the informer, based on photocopies of 77 Consumption Entries furnished by another informer, the 1987 importations of the respondent were understated in its accounting records.[4] Amoto submitted a report to the EIIB Commissioner recommending that an inventory audit of the respondent be conducted by the Internal Inquiry and Prosecution Office (IIPO) of the EIIB.[5]Acting on the said report, Jose T. Almonte, then Commissioner of the EIIB, issued Mission Order No. 398-89[6]dated November 14, 1989 for the audit and investigation of the importations of Hantex for 1987. The IIPO issuedsubpoena duces tecumandad testificandumfor the president and general manager of the respondent to appear in a hearing and bring the following:1. Books of Accounts for the year 1987;2. Record of Importations of Synthetic Resin and Calcium Carbonate for the year 1987;3. Income tax returns & attachments for 1987; and4. Record of tax payments.[7]However, the respondents president and general manager refused to comply with the subpoena, contending that its books of accounts and records of importation of synthetic resin and calcium bicarbonate had been investigated repeatedly by the Bureau of Internal Revenue (BIR) on prior occasions.[8]The IIPO explained that despite such previous investigations, the EIIB was still authorized to conduct an investigation pursuant to Section 26-A of Executive Order No. 127. Still, the respondent refused to comply with the subpoena issued by the IIPO. The latter forthwith secured certified copies of the Profit and Loss Statements for 1987 filed by the respondent with the Securities and Exchange Commission (SEC).[9] However, the IIPO failed to secure certified copies of the respondents 1987 Consumption Entries from the Bureau of Customs since, according to the custodian thereof, the original copies had been eaten by termites.[10]In a Letter dated June 28, 1990, the IIPO requested the Chief of the Collection Division, Manila International Container Port, and the Acting Chief of the Collection Division, Port of Manila, to authenticate the machine copies of the import entries supplied by the informer. However, Chief of the Collection Division Merlita D. Tomas could not do so because the Collection Division did not have the original copies of the entries. Instead, she wrote the IIPO that, as gleaned from the records, the following entries had been duly processed and released after the payment of duties and taxes:IMPORTERHANTEX TRADING CO., INC. SERIES OF 1987ENTRY NO. DATE RELEASED ENTRY NO. DATE RELEASED03058-87 1-30-87 50265-87 12-09-8709120-87 3-20-87 46427-87 11-27-8718089-87 5-21-87 30764-87 8-21-8719439-87 6-2-87 30833-87 8-20-8719441-87 6-3-87 34690-87 9-16-8711667-87 4-15-87 34722-87 9-11-8723294-87 7-7-87 43234-87 11-2-8745478-87 11-16-87 44850-87 11-16-8745691-87 12-2-87 44851-87 11-16-8725464-87 7-16-87 46461-87 11-19-8726483-87 7-23-87 46467-87 11-18-8729950-87 8-11-87 48091-87 11-27-87[11]Acting Chief of the Collection Division of the Bureau of Customs Augusto S. Danganan could not authenticate the machine copies of the import entries as well, since the original copies of the said entries filed with the Bureau of Customs had apparently been eaten by termites. However, he issued a certification that the following enumerated entries were filed by the respondent which were processed and released from the Port of Manila after payment of duties and taxes, to wit:Hantex Trading Co., Inc.Entry No.Date ReleasedEntry No.Date Released 03903 1-29-87 22869 4-8-87 04414 1-20-87 19441 3-31-87 10683 2-17-87 24189 4-21-87 12611 2-24-87 26431 4-20-87 12989 2-26-87 45478 7-3-87 17050 3-13-87 26796 4-23-87 17169 3-13-87 28827 4-30-87 18089 3-16-87 31617 5-14-87 19439 4-1-87 39068 6-5-87 21189 4-3-87 42581 6-21-87 43451 6-29-87 42793 6-23-87 42795 6-23-87 45477 7-3-87 35582 not received 85830 11-13-87 45691 7-3-87 86650 not received 46187 7-8-87 87647 11-18-87 46427 7-3-87 88829 11-23-87 57669 8-12-87 92293 12-3-87 62471 8-28-87 93292 12-7-87 63187 9-2-87 96357 12-16-87 66859 9-15-87 96822 12-15-87 67890 9-17-87 98823 not received 68115 9-15-87 99428 12-28-87 69974 9-24-87 99429 12-28-87 72213 10-2-87 99441 12-28-87 77688 10-16-87 101406 1-5-87 84253 11-10-87 101407 1-8-87 85534 11-11-87 03118 1-19-87[12]Bienvenido G. Flores, Chief of the Investigation Division, and Lt. Leo Dionela, Lt. Vicente Amoto and Lt. Rolando Gatmaitan conducted an investigation. They relied on the certified copies of the respondents Profit and Loss Statement for 1987 and 1988 on file with the SEC, the machine copies of the Consumption Entries, Series of 1987, submitted by the informer, as well as excerpts from the entries certified by Tomas and Danganan.Based on the documents/records on hand, inclusive of the machine copies of the Consumption Entries, the EIIB found that for 1987, the respondent had importations totalingP105,716,527.00 (inclusive of advance sales tax). Compared with the declared sales based on the Profit and Loss Statements filed with the SEC, the respondent had unreported sales in the amount ofP63,032,989.17, and its corresponding income tax liability wasP41,916,937.78, inclusive of penalty charge and interests.EIIB Commissioner Almonte transmitted the entire docket of the case to the BIR and recommended the collection of the total tax assessment from the respondent.[13]On February 12, 1991, Deputy Commissioner Deoferio, Jr. issued a Memorandum to the BIR Assistant Commissioner for Special Operations Service, directing the latter to prepare a conference letter advising the respondent of its deficiency taxes.[14]Meanwhile, as ordered by the Regional Director, Revenue Enforcement Officers Saturnino D. Torres and Wilson Filamor conducted an investigation on the 1987 importations of the respondent, in the light of the records elevated by the EIIB to the BIR, inclusive of the photocopies of the Consumption Entries. They were to ascertain the respondents liability for deficiency sales and income taxes for 1987, if any. Per Torres and Filamors Report dated March 6, 1991 which was based on the report of the EIIB and the documents/records appended thereto, there was aprima faciecase of fraud against the respondent in filing its 1987 Consumption Entry reports with the Bureau of Customs. They found that the respondent had unrecorded importation in the total amount ofP70,661,694.00, and that the amount was not declared in its income tax return for 1987. The District Revenue Officer and the Regional Director of the BIR concurred with the report.[15]Based on the said report, the Acting Chief of the Special Investigation Branch wrote the respondent and invited its representative to a conference at 10:00 a.m. of March 14, 1991 to discuss its deficiency internal revenue taxes and to present whatever documentary and other evidence to refute the same.[16] Appended to the letter was a computation of the deficiency income and sales tax due from the respondent, inclusive of increments:B. Computations:1. Cost of Sales Ratio A2/A1 85.492923%2. Undeclared Sales Imported A3/B1 110,079,491.613. Undeclared Gross Profit B2-A3 15,969,316.61C. Deficiency Taxes Due:1. Deficiency Income Tax B3 x 35% 5,589,261.00 50% Surcharge C1 x 50% 2,794,630.50 Interest to 2/28/91 C1 x 57.5% 3,213,825.08 Total 11,597,825.582. Deficiency Sales Tax at 10% 7,290,082.72 at 20% 10,493,312.31 Total Due 17,783,395.03 Less: Advanced Sales Taxes Paid 11,636,352.00 Deficiency Sales Tax 6,147,043.03 50% Surcharge C2 x 50% 3,073,521.52 Interest to 2/28/91 5,532,338.73 Total 14,752,903.28[17] ===========The invitation was reiterated in a Letter dated March 15, 1991. In his Reply dated March 15, 1991, Mariano O. Chua, the President and General Manager of the respondent, requested that the report of Torres and Filamor be set aside on the following claim: [W]e had already been investigated by RDO No. 23 under Letters of Authority Nos. 0322988 RR dated Oct. 1, 1987, 0393561 RR dated Aug. 17, 1988 and 0347838 RR dated March 2, 1988, and re-investigated by the Special Investigation Team on Aug. 17, 1988 under Letter of Authority No. 0357464 RR, and the Intelligence and Investigation Office on Sept. 27, 1988 under Letter of Authority No. 0020188 NA, all for income and business tax liabilities for 1987. The Economic Intelligence and Investigation Bureau on Nov. 20, 1989, likewise, confronted us on the same information for the same year.In all of these investigations, save your request for an informal conference, we welcomed them and proved the contrary of the allegation. Now, with your new inquiry, we think that there will be no end to the problem.Madam, we had been subjected to so many investigations and re-investigations for 1987 and nothing came out except the payment of deficiency taxes as a result of oversight. Tax evasion through underdeclaration of income had never been proven.[18]Invoking Section 235[19]of the 1977 National Internal Revenue Code (NIRC), as amended, Chua requested that the inquiry be set aside.The petitioner, the Commissioner of Internal Revenue, through Assistant Commissioner for Collection Jaime M. Maza, sent a Letter dated April 15, 1991 to the respondent demanding payment of its deficiency income tax ofP13,414,226.40 and deficiency sales tax ofP14,752,903.25, inclusive of surcharge and interest.[20]Appended thereto were the Assessment Notices of Tax Deficiency Nos. FAS-1-87-91-001654 and FAS-4-87-91-001655.[21]On February 12, 1992, the Chief of the Accounts Receivables/Billing Division of the BIR sent a letter to the respondent demanding payment of its tax liability due for 1987 within ten (10) days from notice, on pain of the collection tax due via a warrant of distraint and levy and/or judicial action.[22]The Warrant of Distraint and/or Levy[23]was actually served on the respondent on January 21, 1992. On September 7, 1992, it wrote the Commissioner of Internal Revenue protesting the assessment on the following grounds:I. THAT THE ASSESSMENT HAS NO FACTUAL AS WELL AS LEGAL BASIS, THE FACT THAT NO INVESTIGATION OF OUR RECORDS WAS EVER MADE BY THE EIIB WHICH RECOMMENDED ITS ISSUANCE.[24]II. THAT GRANTING BUT WITHOUT ADMITTING THAT OUR PURCHASES FOR 1987 AMOUNTED TOP105,716,527.00 AS CLAIMED BY THE EIIB, THE ASSESSMENT OF A DEFICIENCY INCOME TAX IS STILL DEFECTIVE FOR IT FAILED TO CONSIDER OUR REAL PURCHASES OFP45,538,694.57.[25]III. THAT THE ASSESSMENT OF A DEFICIENCY SALES TAX IS ALSO BASELESS AND UNFOUNDED CONSIDERING THAT WE HAVE DUTIFULLY PAID THE SALES TAX DUE FROM OUR BUSINESS.[26]In view of the impasse, administrative hearings were conducted on the respondents protest to the assessment. During the hearing of August 20, 1993, the IIPO representative presented the photocopies of the Consumption and Import Entries and the Certifications issued by Tomas and Danganan of the Bureau of Customs. The IIPO representative testified that the Bureau of Customs failed to furnish the EIIB with certified copies of the Consumption and Import Entries; hence, the EIIB relied on the machine copies from their informer.[27]The respondent wrote the BIR Commissioner on July 12, 1993 questioning the assessment on the ground that the EIIB representative failed to present the original, or authenticated, or duly certified copies of the Consumption and Import Entry Accounts, or excerpts thereof if the original copies were not readily available; or, if the originals were in the official custody of a public officer, certified copies thereof as provided for in Section 12, Chapter 3, Book VII, Administrative Procedure, Administrative Order of 1987. It stated that the only copies of the Consumption Entries submitted to the Hearing Officer were mere machine copies furnished by an informer of the EIIB. It asserted that the letters of Tomas and Danganan were unreliable because of the following:In the said letters, the two collection officers merely submitted a listing of alleged import entry numbers and dates released of alleged importations by Hantex Trading Co., Inc. of merchandise in 1987, for which they certified that the corresponding duties and taxes were paid after being processed in their offices. In said letters, no amounts of the landed costs and advance sales tax and duties were stated, and no particulars of the duties and taxes paid per import entry document was presented.The contents of the two letters failed to indicate the particulars of the importations per entry number, and the said letters do not constitute as evidence of the amounts of importations of Hantex Trading Co., Inc. in 1987.[28]The respondent cited the following findings of the Hearing Officer: [T]hat the import entry documents do not constitute evidence only indicate that the tax assessments in question have no factual basis, and must, at this point in time, be withdrawn and cancelled. Any new findings by the IIPO representative who attended the hearing could not be used as evidence in this hearing, because all the issues on the tax assessments in question have already been raised by the herein taxpayer.[29]The respondent requested anew that the income tax deficiency assessment and the sales tax deficiency assessment be set aside for lack of factual and legal basis.The BIR Commissioner[30]wrote the respondent on December 10, 1993, denying its letter-request for the dismissal of the assessments.[31]The BIR Commissioner admitted, in the said letter, the possibility that the figures appearing in the photocopies of the Consumption Entries had been tampered with. She averred, however, that she was not proscribed from relying on other admissible evidence, namely, the Letters of Torres and Filamor dated August 7 and 22, 1990 on their investigation of the respondents tax liability. The Commissioner emphasized that her decision was final.[32]The respondent forthwith filed a petition for review in the CTA of the Commissioners Final Assessment Letter dated December 10, 1993 on the following grounds:First. The alleged 1987 deficiency income tax assessment (including increments) and the alleged 1987 deficiency sales tax assessment (including increments) arevoid ab initio, since under Sections 16(a) and 49(b) of the Tax Code, the Commissioner shall examine a return after it is filed and, thereafter, assess the correct amount of tax. The following facts obtaining in this case, however, are indicative of the incorrectness of the tax assessments in question: the deficiency interests imposed in the income and percentage tax deficiency assessment notices were computed in violation of the provisions of Section 249(b) of the NIRC of 1977, as amended; the percentage tax deficiency was computed on an annual basis for the year 1987 in accordance with the provision of Section 193, which should have been computed in accordance with Section 162 of the 1977 NIRC, as amended by Pres. Decree No. 1994 on a quarterly basis; and the BIR official who signed the deficiency tax assessments was the Assistant Commissioner for Collection, who had no authority to sign the same under the NIRC.Second. Even grantingarguendothat the deficiency taxes and increments for 1987 against the respondent were correctly computed in accordance with the provisions of the Tax Code, the facts indicate that the above-stated assessments were based on alleged documents which are inadmissible in either administrative or judicial proceedings. Moreover, the alleged bases of the tax computations were anchored on mere presumptions and not on actual facts. The alleged undeclared purchases for 1987 were based on mere photocopies of alleged import entry documents, not the original ones, and which had never been duly certified by the public officer charged with the custody of such records in the Bureau of Customs. According to the respondent, the alleged undeclared sales were computed based on mere presumptions as to the alleged gross profit contained in its 1987 financial statement. Moreover, even the alleged financial statement of the respondent was a mere machine copy and not an official copy of the 1987 income and business tax returns. Finally, the respondent was following the accrual method of accounting in 1987, yet, the BIR investigator who computed the 1987 income tax deficiency failed to allow as a deductible item the alleged sales tax deficiency for 1987 as provided for under Section 30(c) of the NIRC of 1986.[33]The Commissioner did not adduce in evidence the original or certified true copies of the 1987 Consumption Entries on file with the Commission on Audit. Instead, she offered in evidence as proof of the contents thereof, the photocopies of the Consumption Entries which the respondent objected to for being inadmissible in evidence.[34] She also failed to present any witness to prove the correct amount of tax due from it. Nevertheless, the CTA provisionally admitted the said documents in evidence, subject to its final evaluation of their relevancy and probative weight to the issues involved.[35]On December 11, 1997, the CTA rendered a decision, the dispositive portion of which reads:IN THE LIGHT OF ALL THE FOREGOING, judgment is hereby rendered DENYING the herein petition. Petitioner is hereby ORDERED TO PAY the respondent Commissioner of Internal Revenue its deficiency income and sales taxes for the year 1987 in the amounts ofP11,182,350.26 andP12,660,382.46, respectively, plus 20% delinquency interest per annum on both deficiency taxes from April 15, 1991 until fully paid pursuant to Section 283(c)(3) of the 1987 Tax Code, with costs against the petitioner.SO ORDERED.[36]The CTA ruled that the respondent was burdened to prove not only that the assessment was erroneous, but also to adduce the correct taxes to be paid by it. The CTA declared that the respondent failed to prove the correct amount of taxes due to the BIR. It also ruled that the respondent was burdened to adduce in evidence a certification from the Bureau of Customs that the Consumption Entries in question did not belong to it.On appeal, the CA granted the petition and reversed the decision of the CTA. The dispositive portion of the decision reads:FOREGOING PREMISES CONSIDERED, the Petition for Review is GRANTED and the December 11, 1997 decision of the CTA in CTA Case No. 5162 affirming the 1987 deficiency income and sales tax assessments and the increments thereof, issued by the BIR is hereby REVERSED. No costs.[37]The Ruling of the Court of AppealsThe CA held that the income and sales tax deficiency assessments issued by the petitioner were unlawful and baseless since the copies of the import entries relied upon in computing the deficiency tax of the respondent were not duly authenticated by the public officer charged with their custody, nor verified under oath by the EIIB and the BIR investigators.[38]The CA also noted that the public officer charged with the custody of the import entries was never presented in court to lend credence to the alleged loss of the originals.[39]The CA pointed out that an import entry is a public document which falls within the provisions of Section 19, Rule 132 of the Rules of Court, and to be admissible for any legal purpose, Section 24, Rule 132 of the Rules of Court should apply.[40]Citing the ruling of this Court inCollector of Internal Revenue v. Benipayo,[41]the CA ruled that the assessments were unlawful because they were based on hearsay evidence. The CA also ruled that the respondent was deprived of its right to due process of law.The CA added that the CTA should not have just brushed aside the legal requisites provided for under the pertinent provisions of the Rules of Court in the matter of the admissibility of public documents, considering that substantive rules of evidence should not be disregarded. It also ruled that the certifications made by the two Customs Collection Chiefs under the guise of supporting the respondents alleged tax deficiency assessments invoking the best evidence obtainable rule under the Tax Code should not be permitted to supplant the best evidence rule under Section 7, Rule 130 of the Rules of Court.Finally, the CA noted that the tax deficiency assessments were computed without the tax returns. The CA opined that the use of the tax returns is indispensable in the computation of a tax deficiency; hence, this essential requirement must be complied with in the preparation and issuance of valid tax deficiency assessments.[42]The Present PetitionThe Commissioner of Internal Revenue, the petitioner herein, filed the present petition for review under Rule 45 of the Rules of Court for the reversal of the decision of the CA and for the reinstatement of the ruling of the CTA.As gleaned from the pleadings of the parties, the threshold issues for resolution are the following: (a) whether the petition at bench is proper and complies with Sections 4 and 5, Rule 7 of the Rules of Court; (b) whether the December 10, 1991 final assessment of the petitioner against the respondent for deficiency income tax and sales tax for the latters 1987 importation of resins and calcium bicarbonate is based on competent evidence and the law; and (c) the total amount of deficiency taxes due from the respondent for 1987, if any.On the first issue, the respondent points out that the petition raises both questions of facts and law which cannot be the subject of an appeal by certiorari under Rule 45 of the Rules of Court. The respondent notes that the petition is defective because the verification and the certification against forum shopping were not signed by the petitioner herself, but only by the Regional Director of the BIR. The respondent submits that the petitioner should have filed a motion for reconsideration with the CA before filing the instant petition for review.[43]We find and so rule that the petition is sufficient in form. A verification and certification against forum shopping signed by the Regional Director constitutes sufficient compliance with the requirements of Sections 4 and 5, Rule 7 of the Rules of Court. Under Section 10 of the NIRC of 1997,[44]the Regional Director has the power to administer and enforce internal revenue laws, rules and regulations, including the assessment and collection of all internal revenue taxes, charges and fees. Such power is broad enough to vest the Revenue Regional Director with the authority to sign the verification and certification against forum shopping in behalf of the Commissioner of Internal Revenue. There is no other person in a better position to know the collection cases filed under his jurisdiction than the Revenue Regional Director.Moreover, under Revenue Administrative Order No. 5-83,[45]the Regional Director is authorized to sign all pleadings filed in connection with cases referred to the Revenue Regions by the National Office which, otherwise, require the signature of the petitioner.We do not agree with the contention of the respondent that a motion for reconsideration ought to have been filed before the filing of the instant petition. A motion for reconsideration of the decision of the CA is not a condition sine qua non for the filing of a petition for review under Rule 45. As we held inAlmora v. Court of Appeals:[46]Rule 45, Sec. 1 of the Rules of Court, however, distinctly provides that:A party may appeal by certiorari from a judgment of the Court of Appeals, by filing with the Supreme Court a petition for certiorari within fifteen (15) days from notice of judgment, or of the denial of his motion for reconsideration filed in due time. (Emphasis supplied)The conjunctive or clearly indicates that the 15-day reglementary period for the filing of a petition for certiorari under Rule 45 commences either from notice of the questioned judgment or from notice of denial of the appellants motion for reconsideration. A prior motion for reconsideration is not indispensable for a petition for review on certiorari under Rule 45 to prosper. [47]While Rule 45 of the Rules of Court provides that only questions of law may be raised by the petitioner and resolved by the Court, under exceptional circumstances, the Court may take cognizance thereof and resolve questions of fact. In this case, the findings and conclusion of the CA are inconsistent with those of the CTA, not to mention those of the Commissioner of Internal Revenue. The issues raised in this case relate to the propriety and the correctness of the tax assessments made by the petitioner against the respondent, as well as the propriety of the application of Section 16, paragraph (b) of the 1977 NIRC, as amended by Pres. Decree Nos. 1705, 1773, 1994 and Executive Order No. 273, in relation to Section 3, Rule 132 of the Rules of Evidence. There is also an imperative need for the Court to resolve the threshold factual issues to give justice to the parties, and to determine whether the CA capriciously ignored, misunderstood or misinterpreted cogent facts and circumstances which, if considered, would change the outcome of the case.On the second issue, the petitioner asserts that since the respondent refused to cooperate and show its 1987 books of account and other accounting records, it was proper for her to resort to the best evidence obtainable the photocopies of the import entries in the Bureau of Customs and the respondents financial statement filed with the SEC.[48] The petitioner maintains that these import entries were admissible as secondary evidence under the best evidence obtainable rule, since they were duly authenticated by the Bureau of Customs officials who processed the documents and released the cargoes after payment of the duties and taxes due.[49] Further, the petitioner points out that under the best evidence obtainable rule, the tax return is not important in computing the tax deficiency.[50]The petitioner avers that the best evidence obtainable rule under Section 16 of the 1977 NIRC, as amended, legally cannot be equated to the best evidence rule under the Rules of Court; nor can the best evidence rule, being procedural law, be made strictly operative in the interpretation of the best evidence obtainable rule which is substantive in character.[51]The petitioner posits that the CTA is not strictly bound by technical rules of evidence, the reason being that the quantum of evidence required in the said court is merely substantial evidence.[52]Finally, the petitioner avers that the respondent has the burden of proof to show the correct assessments; otherwise, the presumption in favor of the correctness of the assessments made by it stands.[53]Since the respondent was allowed to explain its side, there was no violation of due process.[54]The respondent, for its part, maintains that the resort to the best evidence obtainable method was illegal. In the first place, the respondent argues, the EIIB agents are not duly authorized to undertake examination of the taxpayers accounting records for internal revenue tax purposes. Hence, the respondents failure to accede to their demands to show its books of accounts and other accounting records cannot justify resort to the use of the best evidence obtainable method.[55]Secondly, when a taxpayer fails to submit its tax records upon demand by the BIR officer, the remedy is not to assess him and resort to the best evidence obtainable rule, but to punish the taxpayer according to the provisions of the Tax Code.[56]In any case, the respondent argues that the photocopies of import entries cannot be used in making the assessment because they were not properly authenticated, pursuant to the provisions of Sections 24[57]and 25[58]of Rule 132 of the Rules of Court. It avers that while the CTA is not bound by the technical rules of evidence, it is bound by substantial rules.[59]The respondent points out that the petitioner did not even secure a certification of the fact of loss of the original documents from the custodian of the import entries. It simply relied on the report of the EIIB agents that the import entry documents were no longer available because they were eaten by termites. The respondent posits that the two collectors of the Bureau of Customs never authenticated the xerox copies of the import entries; instead, they only issued certifications stating therein the import entry numbers which were processed by their office and the date the same were released.[60]The respondent argues that it was not necessary for it to show the correct assessment, considering that it is questioning the assessments not only because they are erroneous, but because they were issued without factual basis and in patent violation of the assessment procedures laid down in the NIRC of 1977, as amended.[61] It is also pointed out that the petitioner failed to use the tax returns filed by the respondent in computing the deficiency taxes which is contrary to law;[62]as such, the deficiency assessments constituted deprivation of property without due process of law.[63]Central to the second issue is Section 16 of the NIRC of 1977, as amended,[64]which provides that the Commissioner of Internal Revenue has the power to make assessments and prescribe additional requirements for tax administration and enforcement. Among such powers are those provided in paragraph (b) thereof, which we quote:(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 orwhen there is reason to believe that any such report is false, incomplete or erroneous, the Commissioner 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, orwillfully or otherwise files a false or fraudulent return or other document, the Commissioner shall make or amend the return from his own knowledge and from such information as he can obtain through testimony or otherwise, which shall be prima facie correct and sufficient for all legal purposes.[65]This provision applies when the Commissioner of Internal Revenue undertakes to perform her administrative duty of assessing the proper tax against a taxpayer, to make a return in case of a taxpayers failure to file one, or to amend a return already filed in the BIR.The petitioner may avail herself of the best evidence or other information or testimony by exercising her power or authority under paragraphs (1) to (4) of Section 7 of the NIRC:(1) To examine any book, paper, record or other data which may be relevant or material to such inquiry;(2) To obtain information from any office or officer of the na