CTA Decisions CTA Case No. 1109411094 2026-08-11

EURO AUTOCARS, INC. DOING BUSINESS UNDER THE NAME AND STYLE OF LAMBORGHINI MANILA AND BENTLEY MANILA v. THE COMMISSIONER OF INTERNAL REVENUE

111111111111 1111 111111 11111 11111 111111111111111111111111111111 111111111111111111 CTA Form No. 8 23-000072-005 1 REPUBLIC OF THE PIDLIPPINES COURT OF TAX APPEALS QUEZON CITY SPECIAL FIRST DIVISION CTA CASE N0.11094 EURO AUTOCARS, INC. DOING BUSINESS UNDER THE NAME AND STYLE OF LAMBORGHINI MANILA AND BENTLEY MANILA, Petitioner, NOTICE OF DECISION - versus- THE COMMISSIONER OF INTERNAL REVENUE, Respondent. To: OFFICE OF THE SOLICITOR GENERAL 134 Amorsolo Street, Legazpi Village Makati City ATTY. FRANCIS GIDEON G. NAPUTO Bureau oflnternal Revenue Legal Division, Revenue Region 8B 2nd Floor, BIR Revenue Regional Office Building No. 3 13 Gil Puyat Ave., Makati City EMMANUEL C. ALCANTARA AND ASSOCIATES LAW OFFICES 5th f loor, SOY I Building 6760 Ayala Avenue 1226 Makati City GREETINGS: You are hereby notified by these presents that on August 11, 2026, a Decision was rendered in the above-entitled case, copy of which is attached hereto. Quezon City, Philippines, August 24, 2026. Atty. M~M'~is Execut~;rg:ro~ Court II

REPUBLIC OF THE PHILIPPINES COURT OF TAX AePEALS QUEZON CITY SPECIAL FIRST DIVISION EURO AUTOCARS, INC. CTA CASE NO. 11094 DOING BUSINESS UNDER THE NAME AND STILE OF LAMBORGHINI MANILA AND BENTLEY MANILA, Petitioner, Members: BACORRO-VILLENA, Acting Chairperson, and CUI-DAVID,ll. -versus- THE COMMISSIONER OF INTERNAL REVENUE, Promulgated: Respondent. AUG 11 2~0PM X - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - _.,....~ - - - - - - - - - - - - - - X DECISION BACORRO-VILLENA, L.: At bar is a Petition for Review1 filed by petitioner Euro Autocars, Inc. Doing Business Under the Name and Style of Lamborghini Manila and Bentley Manila (petitioner) pursuant to Section 3(a)(1),' Rule 43 t Fi!ed on 02 March 2023, Division Docket, pp. 6-213, with attached exhibits. SEC. 3. Cases within the jurisdiction of the Court in Division. - ... (a) Exclusive original over or appellate jurisdiction to review by appeal the following: {I) Decisions of the Commissioner oflnternal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue[.] JURISDICTION OF THE COURT.

CTA Case No. 11094 Euro Autocars, Inc. Doing Business Under the Name and Style of Lamborghini Manila and Bentley Manila v . The Commissioner of Internal Revenue DECISION x------ --- - -- - --- -- -- --- -- ----- - -- - -- - - - ----- - -- --- --- ------- - -- - -- - ----x and Section 4(a), 4 Rule 85 of the Revised Rules of the Court of Tax Appeals (RRCTA). It seeks the reversal and cancellation of respondent Commissioner of Internal Revenue's (respondent's/CIR's) Final Decision dated 20 January 2023 6 (Final Decision), denying petitioner's protest against the assessment demanding payment for alleged deficiency value-added tax (VAT) and compromise penalty for the taxable period from 01 January 2014 to 30 June 2014 in the aggregate amount of f78,J2o,162.12, inclusive of increments. PARTIES OF THE CASE Petitioner is a domestic corporation duly organized and existing under the laws of the Republic of the Philippines, with principal office address at 28th Street corner n th Avenue, Bonifacio Global City (BGC), Taguig City, Philippines.? It is registered with the Securities and Exchange Commission (SEC) under Company Registration No. CS201117672.8 It is also registered with the Bureau of Internal Revenue (BIR) under Taxpayer Identification No. (TIN) oo8-139-3o8-ooo.9 As its Amended Articles of Incorporation10 (AOI) show, petitioner's primary purpose is to engage in the business of acquiring, leasing, selling, transferring, generally dealing in, renovating, and servicing all types of new and used motor vehicles, and any parts or accessories used in connection therewith, and to engage in the business of purchasing, acquiring, owning, selling, and generally dealing in all types of supplies used by all types of European motor vehicles. t S EC. 4. Where to appeal; mode ofappeal. - (a) An appeal from a decision or ruling or the inaction of the Commissioner ofl nternal Revenue on disputed assessments or claim for refund of internal revenue taxes erroneously or illegally collected, the decision or ruling of the Commi ssioner of Customs, the Secretary of Finance, the Secretary of Trade & Industry, the Secretary of Agricu lture, and the Regional Trial Court in the exercise of their original jurisdiction, shall be taken to the Court by filing before it a petition for review as provided in Ru le 42 of the Rules of Court. The Court in Division shall act on the appeal. PROCEDURE IN CIVIL CASES. Exhibit " P-22"/Exhibi t " R-6", BIR Records, pp. 1314-1 335. See Petitioner' s Amended Articles oflncorporation (AOI), Exhibit " P-2", Division Docket, pp. 453- 458. See Petitioner's Securities and Exchange Commission (SEC) Certificate of Fil ing of Amended Articles of Incorporation (AOI) with Company Registration No. CS20 111 7672 dated 05 March 202020, Exhibit " P-1 ", id., p. 452. See Bureau o f Internal Revenue (BIR) Certi ficate of Registration (COR) dated 06 October 201 1, Exhibit " P-3", id., p. 464. 10 Supra at note 7, p. 453 .

CTA Case No. 11094 Euro Autocars, Inc. Doing Business Under the Name and Style of Lamborghini Manila and Bentley Manila v. The Commissioner of Internal Revenue DECISION x-----------------------------------------------------------------------x Respondent, on the other hand, is the CIR, who is vested by law with the authority to enforce and implement the provisions of the National Internal Revenue Code (NIRC) of1997, as amended, and other related statutes and implementing rules and regulations. Respondent holds office at the Office of the CIR, BIR National Building, Quezon City, and is represented in this case by counsel, Atty. Francis Gideon G. Naputo (Atty. Naputo), whose office address is at the BIR Legal Division, Region 8B, 2nd Floor, BIR Revenue Regional Office Building No. 313, Gil Puyat Ave., Makati City.u FACTS OF THE CASE On 05 March 2015, petitioner received a Letter of Authority (LOA) dated 02 March 201512 with Reference No. LOA-V08-2015-ooooo015, issued by Revenue Region (RevReg) No. 8-Makati City, through then Regional Director (RD) Jonas DP. Amora (Amora). The LOA authorized Revenue Officer Pauline Lydia Reyes (RO Reyes) and Group Supervisor Renan Plata (GS Plata) to examine petitioner's books of accounts and other accounting records pertaining to VAT liabilities for the period from 01 January 2014 to 30 June 2014. The LOA likewise required petitioner make available all relevant books, records, and supporting documents necessary for the conduct of the audit and examination.13 On 31 May 2016, petitioner received the Preliminary Assessment Notice (PAN) dated 30 May 2016 with Details of Discrepancies and Annexes/4 assessing petitioner for deficiency VAT in the aggregate amount of-Pu7 ,105,875·33, inclusive of interest!5 Subsequently, on 01 July 2016, petitioner received the Assessment Notices16 (ANs) and the Formal Assessment Notice17 (FAN) with Details of Discrepancies, all dated 27 June 2016, signed by RD Amora. Through these issuances, respondent demanded payment of the aggregate amount of 1'119.327,674· 32, inclusive ofincrements, representing alleged t II Paragraph 3, Joint Stipulation of Facts and Issues (JSFI), Division Docket, p. 358. 12 Exhibit "P- 15"/Exhibit "R- 1", BIR Records, Folder No. I , p. 3. 13 Par. 3.2, III. Statement of the Facts and of the Case, JSFI , Division Docket, p. 359. 14 Exhibit "P- 16"/Exhibit "R-3", BIR Records, Folder No.2, pp. 370-380. IS Basic Tax Due of P84,775, 177.50 and Interest of P32,330,697.83; Par. 3.3, II I. Statement of the Facts and of the Case, JSFI, Division Docket, p. 359. 16 Exh ibit "R-4", BIR Records, Folder No.2, pp. 386-387. 17 Exhi bit "P- I 7'', id., pp. 38 I -385.

CTA Case No. 11094 Euro Autocars , Inc. Doing Business Under the Name and Style of Lamborghini Manila and Bentley Manila v. The Commissioner of Internal Revenue DECISION x------------------- ------ ---------------- ------------- -----------------x deficiency VAT and compromise penalty for the taxable period from 01 January 2014 to 30 June 2014.18 On 29 July 2016, petitioner filed a Protest (Request for Reinvestigation) 19 against the FAN with the Office of the RD of RevReg No. 8-Makati City. 2 0 Thereafter, through a Letter dated 22 August 2016 21 signed by RD Amara, the BIR informed petitioner that it had granted the Protest (Request for Reinvestigation). The BIR likewise directed petitioner to submit all relevant supporting documents within sixty (6o) days from the filing of the said Protest to facilitate the reinvestigation of the assessment. 22 On 21 June 2017, petitioner received the Amended ANs 2 3 and the Final Decision on Disputed Assessment24 (FDDA) with Details of Discrepancies and Annexes, all dated 19 June 2017 and signed by RD Glen A. Geraldina (Geraldino) . Through these issuances, respondent demanded payment of the aggregate amount of P78.320,I62.12, inclusive of surcharge and interest, representing alleged deficiency VAT and compromise penalty, detailed as follows: 2 5 Tax Type Basic Surcharge Interest Total VAT P47,741,117.91 P- P28, 566,1 92.2o P76.307.}10.n Increments on - 1,482,928.81 444.923.20 1,927,852.01 Late Remittance Compromise 8s,ooo.oo - - 8s,ooo.oo Penalty Total P47,826,n7.91 PI,482,928.8I P29,on,ns.4o P,8,320 1162.12 18 Total Deficiency VAT of P ll 9,242,674.32 (inclusive of interest) and Compromise Penalty of P85,000.00; Par. 3.4, Ill. Statement of the Facts and of the Case, JSFI, Division Docket, p. 359. 19 Exhibit " P- 18", BIR Records, Folder No. 2, pp. 388-416. 20 Par. 3.5, Ill. Statement of the Facts and of the Case, JSFI, Division Docket, p. 359. 21 BIR Records, Folder No. 2, p. 464. 22 Par. 3.6, Ill. Statement of the Facts and of the Case, JSFI , Division Docket, p. 359. 23 Exhibit "R-5", BIR Records, Folder No. 5, pp. 1277- 1278. 24 Exhibit "P-20", id., pp. 1267-1 276. 25 Par. 3.7, Ill. Statement of the Facts and ofthe Case, JSFI, Division Docket, p. 359.

CTA Case No. 11094 Euro Autocars, Inc. Doing Business Under the Name and Style of Lamborghini Manila and Bentley Man ila v. The Commissioner of Internal Revenue DECISION x------ ----- ---------------------- ----- ------ -------- --- ------ -- -------- x On 20 July 2017, petitioner filed a Protest (Request for Reconsideration) against the FDDA26 with the Office of the CIR (OCIR), addressed to then CIR Caesar R. Dulay (Commissioner Dulay), assailing the FDDA. 2 7 Thereafter, on 01 February 2023, petitioner received respondent's Final Decision 28 promulgated on 20 January 2023, denying the Protest against the FDDA and demanding payment in the aggregate amount of P78,320,162.12, inclusive of surcharge and interest, representing alleged deficiency VAT and compromise penalty for the taxable period from 01 January 2014 to 30 June 2014. 2 9 PROCEEDINGS BEFORE THE COURT On 02 March 2023, within thirty (30) days from receipt of the Final Decision, petitioner filed the instant Petition for Review3o before the Second Division? docketed as CTA Case No. 11094. On 14 March 2023, the Court issued Summons32 to respondent directing him or her to submit an Answer within 30 days from service. Respondent received the said Summons on 16 March 2023.33 After the Second Division granted respondent an extension of time to file an Answer,34 respondent filed the same via registered mail on 15 May 2023.JS In the Answer, respondent raised the following special and affirmative defenses: (1) petitioner is liable for deficiency VAT based on gross receipts that were not subjected to VAT, namely- (a) participation fees from marketing events, (b) initial customer deposits; (c) payments for second-hand trade-in units; (d) insurance claims; and (e) special plate processing fees; (2) petitioner is liable for deficiency VAT arising from undeclared sales of second-hand units . deemed sold; (3) petitioner is liable for deficiency VAT arising from the t 26 Exhibit "P-21 ", BIR Records, Folder No. 2, pp. 505-509. 27 Par. 3.8, Ill. Statement of the Facts and of the Case, JSFI, Division Docket, p. 359. 28 Exhibit "P-22"/Exhibit "R-6", supra at note 6. 29 Par. 3.9, Il l. Statement o f the Facts and of the Case, JSFI , Division Docket, p. 360. 30 Supra at note I. 31 The Second Division is composed o f Associate Erlinda P. Uy (Ret.), as Chairperson, and Associate Justice Jean Marie A. Bacorro-Villena and Associate Justice Lanee S. Cui-David, as Members. 32 Division Docket, p. 2 14. 33 See Notification dated 20 March 2023 , id., p. 2 15. 34 See Resolution dated I 0 May 2023, id., p. 22 1. 3S See Answer dated 15 May 2023, id., pp. 222-235.

CTA Case No. 11094 Euro Autocars, Inc. Doing Business Under the Name and Style of Lamborghini Manila and Bentley Manila v. The Commissioner of Internal Revenue DECISION x------------------- - ----------------- - --- -- - -- - -- - ---------- - -- - -------x undeclared sale of a Lamborghini Aventador; (4) petitioner is liable for deficiency VAT arising from undeclared sales of unaccounted inventory deemed sold; (s) petitioner is liable for deficiency VAT arising from undeclared sales corresponding to undeclared output VAT; (6) petitioner is liable for deficiency VAT arising from the disallowance of input taxes on current purchases; (7) petitioner is liable for deficiency VAT arising from input tax carried over to the succeeding period; and (8) respondent did not violate petitioner's right to due process by assessing increments for the late remittance of VAT in the FD DA dated 19 June 2017 . On 26 May 2023, the Second Division set the case for a Pre-Trial Conference on 03 October 2023.J6 Petitioner filed its Pre-Trial Brief>7 on 8 12 September 2023, while respondent filed his or her Pre-Trial Brief> on 28 September 2023. Subsequently, in view of the reorganization of the three (3) Divisions of the Court effective 29 May 2023,39 the present case was transferred to the First Division.4° In the Resolution dated 14 July 2023,'P the First Division ordered respondent's counsel, Atty. Naputo, to show cause why he should not be cited for indirect contempt for failing to comply with the Court's directive in the Resolution dated 10 May 2023, 42 which required respondent to elevate the entire BIR Records of the case within ten (10) days from the filing of the Answer. The First Division likewise ordered Atty. Naputo to comply with the said directive within 10 days from notice. In compliance therewith, on 25 July 2023, Atty. Naputo filed a "Compliance with Manifestation (Transmittal of BIR Records with . Profuse Apologies),"43 thereby transmitting the entire BlR Records oft 36 See Notice of Pre-Trial Conference dated 26 May 2023, id., pp. 237-238. 37 !d., pp. 252-26 1. 38 !d., pp. 264-268. 39 See Notice dated 29 May 2023, id., p. 239. 40 The First Division is composed of Presiding Justice Roman G. Del Rosario (Ret.), as Chairperson, and Associate Justice Jean Marie A. Bacorro-Yill ena and Associate Justice Lanee S. Cui-David, as Members. 41 Division Docket, p. 242. 42 Supra at note 34. 43 Division Docket, pp. 244-247, with attached Table of Contents.

CTA Case No. 11094 Euro Autocars, Inc. Doing Business Under the Name and Style of Lamborghini Manila and Bentley Manila v. The Commissioner of Internal Revenue DECISION x--- - ---- - - ---- -- - --- - ------- - ------- - --- - ----------- - --------- - -- - ----- x Manalastas) and the parties' respective counsels. Consequently, the First Division allowed the parties a non-extendible period of 30 days, reckoned from 29 December 2023, or until 28 January 2024, within which to continue mediation proceedings and attempt to reach an amicable settlement.54 On 23 January 2024, the First Division issued the Pre-Trial Order,55 directing that the trial proceed on o6 February 2024 for the presentation of petitioner's evidence and on 13 August 2024 for the presentation of respondent's evidence. In a Minute Resolution dated o6 February 2024,56 the First Division noted and granted the parties' "Joint Manifestation and Motion,"57 which prayed for the suspension of the proceedings for at least 30 days. Accordingly, the First Division reset the initial presentation of petitioner's evidence to 14 May 2024.58 In the trial that ensued, petitioner presented its testimonial and documentary evidence. It offered the testimony of its sole witness, Aquino. During the 14 May 2024 hearing, 59 Aquino test ified that: (1) as petitioner's Accounting Officer, she supervises compliance with pertinent laws, government rules and regulations, payment of taxes, licenses, and fees, and the preparation and documentation of petitioner's business transactions for audit and accounting purposes; (2) petitioner is a domestic corporation primarily engaged in acquiring, leasing, selling, transferring, renovating, servicing, and otherwise dealing in new and used motor vehicles, including their parts, accessories, and supplies, particularly those for European motor vehicles; (3) petitioner is duly registered with the BIR for income tax (IT), VAT, expanded withholding tax (EWT)/other withholding taxes, and withholding tax on compensation (WTC) ; (4) she coordinated the . BIR examination of petitioner's books of accounts and accountingt 54 See Minute Resolution dated 12 January 2024, supra at note 52. 55 Division Docket, pp. 398-414. 56 ld., p. 420. 57 ld., pp. 416-419. 58 See Minute Resolution dated 13 May 2024, id., p. 423. 59 See Minutes of the Hearing and Order, both dated 14 May 2024, id. , pp. 427-429 and 431-432, respectively.

CTA Case No. 11094 Euro Autocars, Inc. Doing Business Under the Name and Style of Lamborghini Manila and Bentley Manila v. The Commissioner of Internal Revenue DECISION x-----------------------------------------------------------------------x records for the period from 01 January 2014 to 30 June 2014, as well as the filing of petitioner's protest against the resulting deficiency tax assessments; (s) petitioner's company records show that it timely filed its Monthly and Quarterly VAT returns and paid the taxes due thereon for the period in question; (6) based on petitioner's 2014 Audited Financial Statements (AFS), petitioner did not treat some of the disputed items which the BIR assessed as income and, therefore, did not report them as such in its financial statements; (7) on os March 2015, petitioner received the BIR's LOA authorizing RO Reyes and GS Plata to examine petitioner's books of accounts and accounting records for VAT for the period in question; (8) on 31 May 2016, petitioner received the PAN assessing deficiency VAT and compromise penalty in the total amount of P117,105,87S·33; (g) on 01 July 2016, petitioner received the FAN demanding payment of Pn9,327,674·32, inclusive of increments, representing deficiency VAT and compromise penalty for the period in question; (1o) on 29 July 2016, petitioner, through its external advisor, Reyes Tacandong & Co. (RT&Co.), filed a Protest requesting reinvestigation of the FAN with the Office of the RD of RevReg No. 8-Makati City; (n) the BIR granted petitioner's request for reinvestigation and required petitioner to submit supporting documents within 6o days from the filing of the Protest; (12) on 27 September 2016, petitioner filed a Supplemental Protest Letter and submitted documents in support of its Protest; (13) on 21 June 2017, petitioner received the FDDA dated 19 June 2017, demanding payment of deficiency VAT in the aggregate amount of P78,320,I62.12, inclusive of increments, for the period in question; (14) on 20 July 2017, petitioner assailed the FDDA by filing a Protest/Request for Reconsideration with the OCIR; and (15) on 01 February 2023, petitioner received respondent's Final Decision demanding payment of the total amount stated in the FDDA. 60 On cross-examination, Aquino confirmed that petitioner submitted supporting documents in connection with its request for reinvestigation. However, when asked whether petitioner submitted contracts, agreements, and other evidence to support its claim that participation fees from marketing events, payments for second-hand trade-in units, insurance claims, and other similar items did nott 60 See Judicial Affidavit of Ma. Racquel S. Aquino dated 02 March 2023, Exh ibit " P-23", id., pp. 38-2 13, with attached exhibits.

CTA Case No. 11094 Euro Autocars, Inc. Doing Business Under the Name and Style of Lamborghini Manila and Bentley Manila v. The Commissioner of Internal Revenue DECISION x---------------- - ------------------------------------------------------x On 04 February 2025, following two (2) Court-initiated continuances, 69 the hearing for respondent's initial presentation of evidence proceeded. At the said hearing before the First Division,7o respondent presented his or her lone witness, RO Reyes, who testified that: (t) at the time of the execution of her Judicial Affidavit, she was the Chief of the Large Taxpayers VAT Audit Unit (LT VAU); (2) she was assigned as RO of the VAU of RevReg No. 8-Makati on 12 August 2012; (3) her primary duties and responsibilities include, among others, the tax verification and examination of a taxpayer's books of accounts and other accounting records to determine VAT liabilities for a particular taxable period in order to collect the correct amount of VAT and to recommend the assessment of any deficiency VAT due; (4) she received an LOA dated 02 March 2015, signed byRD Amora, authoring her to conduct the examination of petitioner's books of accounts and other accounting records for the period from 01 January 2014 to 30 June 2014; (s) the said LOA with attached Notice for the Presentation/ Submission of Documents/ Records was served on petitioner on 05 March 2015; (6) she prepared a Memorandum Report recommending the issuance of the PAN; (7) on 31 May 2016, the PAN with attached Details of Discrepancies, signed by RD Amora, was served on petitioner; (8) for failure to file a protest to the PAN, the BIR served on petitioner the FAN with ANs, also signed by RD Amora, demanding the payment of deficiency VAT in the total amount of Pn9,242,674.32 (inclusive of interest) and compromise penalty of f>85,ooo.oo; (9) petitioner filed a Protest against the FAN with ANs; (to) after reinvestigation, respondent, through RD Geraldina, issued an FDDA with amended ANs, demanding payment of the aggregate amount of P78a2o,162.12, inclusive of surcharge and interest, representing alleged deficiency VAT and compromise penalty for the period in question; (n) petitioner filed a Request for Reconsideration of the FDDA with amended ANs before the OCIR; and (12) on 20 January 2023, respondent, through then Commissioner Romeo D. Lumagui, Jr. (Commissioner Lumagui), issued the herein assailed Final Decision (on the Request for the FDDA with amended ANs ..,. t Reconsideration), demanding payment of the total amount indicated in 69 See Notices of Resetting dated 09 September 2024 and 29 October 2024, id., pp. 53 8 and 54 1, respectively. 70 See Minutes of the Hearing and Order, both dated 04 February 2025, id., pp. 545-547 and 549-550, respectively. 71 See Judicial Affidavit of Revenue Officer Pauline Lydia M. Reyes dated 22 September 2023, Exhibit "R-7", id., pp. 269-273.

CTA Case No. 11094 Euro Autocars, Inc. Doing Business Under the Name and Style of Lamborghini Manila and Bentley Manila v. The Commissioner of Internal Revenue DECISION x------------------------------------------ --- ---------------- ----------x In compliance with the Court's directive, petitiOner filed its Memorandum78 on 19 June 2025. Respondent, on the other hand, failed to file a memorandum despite due noticeJ9 Accordingly, on o8 August 2025, the First Division considered the case submitted for decision.80 ISSUE As the parties so stipulated, 81 the main issue for this Court's determination is - WHETHER PETITIONER EURO AUTOCARS, INC. DOING BUSINESS UNDER THE NAME AND STYLE OF LAMBORGHINI MANILA AND BENTLEY MANILA IS LIABLE TO PAY FOR DEFICIENCY VALUE-ADDED TAX (VAT) IN THE AGGREGATE AMOUNT OF P78,)20,162.12, INCLUDING INCREMENTS, INTERESTS AND COMPROMISE PENALTY FOR THE PERIOD FROM 01 JANUARY 2014 TO 30 JUNE 2014. ARGUMENTS PETITIONER'S ARGUMENTS In support of its claim that respondent erred in ruling that it is liable for deficiency VAT in the aggregate amount of P78,320,I62.12, including increments, interests and compromise penalty for the period from 01 January 2014 to 30 June 2014, petitioner argues that its transactions supported by non-VAT ARs do not constitute income and, therefore, should not be subjected to VAT. First, as to the assessment for deficiency VAT on gross receipts not subjected to VAT, petitioner contends that respondent erroneously classified the following items as "gross receipts" not subjected to VAT: (a) participation fees from marketing events; (b) initial customer deposits; (c) payments for second-hand tra9e-in units; (d) insurance claims; and (e) special plate processing fees.t 78 ld., pp. 579-597. 79 See Records Verification dated 23 June 2025, id., p. 601. 80 See Minute Resolution dated 08 August 2025, id., p. 602. 81 See Part B, JSFI, supra at note 46, p. 361.

CTA Case No. 11094 Euro Autocars, Inc. Doing Business Under the Name and Style of Lamborghini Manila and Bentley Manila v. The Commissioner of Internal Revenue DECISION X-----------------------------------------------------------------------X As regards the participation fees from marketing events, petitioner asserts that the Final Decision misappreciated the nature of the amounts collected. It explains that it merely collected the fees from participants and remitted them to the Lamborghini Club to cover actual event costs. Thus, petitioner insists that these amounts did not inure to its benefit and should not be treated as gross receipts. With respect to initial customer deposits, payments for second- hand trade-in units, and insurance claims, petitioner maintains that these items do not represent actual sales or income. It merely applied the initial customer deposits against the cost of the vehicles and recorded the corresponding sales only upon consummation of the transactions. Petitioner further claims that it held the trade-in units on consignment and applied their proceeds to the cost of new units, which it reported for tax purposes upon actual sale. Lastly, petitioner asserts that it received the insurance claims on behalf of its clients and applied the same directly to repair costs. Accordingly, petitioner argues that these amounts should not be subjected to VAT. As to the special plate processing fees, petitioner argues that the Final Decision speculatively and without sufficient basis subjected these fees to VAT merely because it did not maintain a separate account for them in its financial records. Petitioner contends that it held these amounts in trust and remitted them to the Land Transportation Office (LTO) for the issuance of special plates. As trust funds, petitioner insists that these amounts do not form part of its gross receipts. Second, as regards the assessment for deficiency VAT arising from undeclared sales of second-hand or trade-in units amounting to P25,70o,ooo.oo, petitioner asserts that it took these units on consignment and applied the proceeds against the purchase of brand- new vehicles, which petitioner duly reported. Thus, petitioner claims that it did not realize actual gross receipts from the trade-in transactions. Petitioner therefore argues that the corresponding VAT assessment lacks basis and must be cancelled. Third, as to the assessment for deficiency VAT arising from the undeclared sale of a Lamborghini Aventador amounting to Pt6,071,428.57. petitioner argues that it merely acted as an indentor or . conduit in the sale between Khamfeuang Phanthaxay {Phanthaxay) t

CTA Case No. 11094 Euro Autocars, Inc. Doing Business Under the Name and Style of Lamborghini Manila and Bentley Manila v. The Commissioner of Internal Revenue DECISION x--------------------------------------------------------------- - -------x and Wilfreda Revillame (Revillame) and did not earn income from the transaction. Petitioner adds that it charged no service fees or commissions. According to petitioner, the Indent Order clearly shows that the buyer, not petitioner, initiated the purchase. Since petitioner received no compensation, petitioner maintains that it earned no taxable gross receipts from the transaction. Thus, petitioner argues that the VAT assessment is erroneous and must be withdrawn. Fourth, with respect to the assessment for deficiency VAT arising from undeclared sales of unaccounted inventory deemed sold amounting to P43,754,796.3o, petitioner explains that the discrepancy resulted from accounting errors, such as the failure to reclassify entries and reverse work-in-progress items. Petitioner insists that these errors did not intend to understate income and that petitioner adequately explained the same. Citing the Court of Tax Appeals (CTA) En Bane's ruling in Commissioner of Internal Revenue v. Agrinurture, Inc. ,82 (Agrinurture) petitioner asserts that the underdeclaration of purchases alone does not justify the imposition of IT or VAT. Respondent must still prove the elements of taxable income, i.e. , actual or constructive receipt of gain, which petitioner clai!Ds are absent in this case. Thus, petitioner argues that no VAT should be imposed on the alleged unaccounted inventory. Fifth, as to the assessment for deficiency VAT ansmg from undeclared output VAT amounting to PI7,s6o,2oo.7s, petitioner argues that the alleged deficiency resulted from bookkeeping errors committed by its previous accountant. Petitioner claims that the detailed reconciliation submitted to the BIR during the administrative proceedings shows that there was no undeclared sale. Upon correction of the error, the alleged undeclared sales should be reduced to zero. Hence, petitioner argues that the VAT assessment should be cancelled and withdrawn. Sixth, relative to the assessment for deficiency VAT arising from the disallowed input tax on current purchases of P2o,652,441.81 due to alleged noncompliance with the invoicing requirements under Sections _ no8 ' and 11384 of the Nl RC of 1997, as amended, petitioner maintains that t 82 CTA EB No. I 05 4 (CTA Case No. 8345), 13 January 20 15. 83 SEC. 110. Tax Credits. 84 SEC. 113. Invoicing and Accounting Requirements for VAT-Registered Persons.

CTA Case No. 11094 Euro Autocars, Inc. Doing Business Under the Name and Style of Lamborghini Manila and Bentley Manila v. The Commissioner of Internal Revenue DECISION x-----------------------------------------------------------------------x compliant invoices and receipts fully support its input tax claims. Petitioner also relies on its Summary List of Sales (SLS) and the Summary List of Purchases (SLP) submitted by its suppliers. Petitioner further asserts that it reported the purchases and paid the corresponding VAT. Thus, petitioner argues that the disallowance lacks basis and should be reversed. Seventh and last, as regards the assessment for deficiency VAT arising from the disallowed input tax carried over to the succeeding period amounting to P478,65L75, petitioner assails the disallowance for lack of legal and factual basis. Petitioner notes that the law allows the carry-over of excess input VAT, even if the excess input VAT arose from a previous year. Since petitioner did not claim the input tax as a credit against output tax during the period in question, petitioner argues that the amount remained valid for carry-over to the next quarter. RESPONDENT'S ARGUMENTS On the other hand, respondent did not address the foregoing arguments in a memorandum, having opted not to file one. However, in the Answer, respondent raised arguments in response to petitioner's claims. First, as to the imposition of VAT on items deemed "gross receipts" subject to VAT, respondent maintains that these items are subject to VAT because they arose from transactions incidental to petitioner's commercial or economic activity and were made in furtherance of its business. Respondent argues that petitioner failed to present documents disproving the assessment that the sales relating to initial customer deposits and payments for second-hand trade-in units were consummated within the assessed period. According to respondent, petitioner likewise failed to present documents disproving the assessment that the repairs on the insured vehicles were performed within the assessed period; hence, respondent treated the same as sales subject to VAT. With regard to the special plate processing fees, respondent insists that petitioner failed to submit documents supporting its claim that the amounts received were in the nature of a tax exclusion. Thus, respondent treated the amounts as gross receipts special plates. t' for services ren.dered in assisting customers with the processing of their

CTA Case No. 11094 Euro Autocars, Inc. Doing Business Under the Name and Style of Lamborghini Manila and Bentley Manila v. The Commissioner of Internal Revenue DECISION x------------- - ------------ ------------------- -------------- - -- --------- x Second, regarding the undeclared sales of second-hand or trade- in units amounting to P25, 70o,ooo.oo, respondent counters that petitioner's consignment transactions are deemed sales because the actual sales between petitioner and its clients occurred more than 6o days from the dates of consignment. Respondent asserts that, since the actual sales occurred beyond the 6o-day period and since reinvestigation showed that petitioner had no remaining vehicles in its inventory, the consigned goods were deemed sold under Section w6(B) (3)8S of the NIRC of 1997, as amended. Third, as to the undeclared sale of a Lamborghini Aventador amounting to P16,o71,428.57, respondent asserts that petitioner failed to present evidence showing the vendor's claim for consideration. Respondent further notes that petitioner failed to refute the finding that the sale of the Lamborghini Aventador constituted a "deemed sale" transaction under a consignment arrangement pursuant to Section 4.106-7(a)(3) 86 of Revenue Regulations (RR) No. 16-2005.87 Respondent based this finding on the fact that petitioner sells consigned goods and that its ARs books show that petitioner received the buyer's down payment. Moreover, respondent argues that, even assuming petitioner merely acted as a commercial broker in the transaction, the gross receipts from such service remain subject to VAT under Section 10888 of the NIRC of 1997, as amended. Fourth, as to the unaccounted inventory deemed sold, respondent explains that the discrepancy between the beginning inventory balance per trial balance and the amount per duly submitted inventory list amounted to P43,754,796.3o, and that respondent treated this discrepancy as undeclared sales. Respondent notes that the discrepancy _ arose from petitioner's accountant's failure to update the General t 85 SEC. 106. Value-added Tax on Sale of Goods or Properties.- (B) Transactions Deemed Sale. - The foll owing transactions shall be deemed sale: (3) Consignment of goods if actual sale is not made with in sixty (60) days following the date such goods were consigned[.] 86 SECTION 4.106-7. Transactions Deemed Sale. - (a) The following transactions shall be "deemed sale" pursuant to Sec. I 06 (B) of the Tax Code: (3) Consignment of goods if actual sale is not made within 60 days fo llowing the date such goods were consigned. Consigned goods returned by the consignee within the 60-day period are not deemed sold[.] 87 Consolidated Value-Added Tax Regulations of2005. 88 S EC. I 08. Value-added Tax on Sale ofServices and Use or Lease of Properties.

CTA Case No. 11094 Euro Autocars, Inc. Doing Business Under the Name and Style of Lamborghini Manila and Bentley Manila v . The Commissioner of Internal Revenue DECISION x--------------- ------ --- ---- -- --- - -------- --- -- ----- --- --------- ------- x Ledger (GL) by reclassifying the entry for ((Bentley Inventory-Lifestyle" to ((Cost of Sales-Unit Sales, Swapping of Tire of Unit Sold," and by reversing the ((work-in-progress" entry. According to respondent, these circumstances confirm the inaccuracy of petitioner's records and indicate the possibility of undeclared sales. Fifth, with respect to the undeclared output VAT amounting to P17,s6o,2oo.7s, respondent notes that the assessment resulted from a comparison between the total output tax accounts per trial balance and the output tax declared for June 2014, which disclosed a discrepancy of P2,107,224.09. According to respondent, petitioner admitted that the discrepancy arose from its previous bookkeeper's failure to record various accounting entries, which petitioner sought to correct through its reconciliation. However, respondent argues that petitioner had already filed its books of accounts, GL, and tax returns with the BIR, and that these had become final because petitioner did not amend them within the period provided under the NIRC of 1997, as amended. Respondent therefore maintains that petitioner may no longer correct its previously filed VAT returns at this stage; otherwise, the law on the timely filing and payment of taxes would be rendered ineffective. Sixth, as to the disallowed input tax on current purchases, respondent contends that the examination of petitioner's books of accounts showed that the input taxes claimed on local purchases, amounting to P2o,652,441.81, failed to comply with the invoicing and substantiation requirements under Sections no(A) 89 and 113(A) and (B)9° of the NIRC of 1997, as amended, and under Section 4.no-891 of RR No. 16-2oos.9 Respondent thus maintains that the amount of 2 P2o,652,441.81 claimed as credit against petitioner's output taxes should be disallowed. Seventh and finally , regarding the disallowed input tax carried over to the succeeding period amounting to P478,651.75, respondent stresses that a taxpayer may carry over input tax as creditable input tax _ for the next quarter only when the input tax exceeds the output tax.t 89 SEC. 110. Tax Credits. (A) Creditable Input Tax. - ... 90 SEC. 113. Invoicing and Accounting Requirements for VAT-Registered Persons. (A) Invoicing Requirements. - .. . (8 ) Accounting Requirements. - .. . 91 SECTION 4. 1 I 0-8. Substantiation of Input Tax Credits. 92 Supra at note 87.

CTA Case No. 11094 Euro Autocars, Inc. Doing Business Under the Name and Style of Lamborghini Manila and Bentley Manila v. The Commissioner of Internal Revenue DECISION x------------------------------------------------------------------- -- --x The afore-quoted Section 228 of the NIRC of 1997, as amended, is implemented by RR No. 12-99,99 as amended by RR No. 18-2013100 and RR No. 22-2o20.101 Relevant portions of Section 3.1.4 of RR No. 12-99, as amended by RR No. 18-2013 and RR No. 22-2020, provides the taxpayer's options on disputed assessments, to wit: Sec. 3· Due Process Requirement in the Issuance of a Deficiency Tax Assessment.- Sec. 3·1.5. Disputed Assessment. - The taxpayer or its authorized representative or tax agent may protest administratively against the aforesaid FLO/ FAN within thirty (3o) days from date of receipt thereof. The taxpayer protesting an assessment may file a written request for reconsideration or reinvestigation as follows: (i) Request for reconsideration - refers to a plea of re- evaluation of an assessment on the basis of existing records without need of additional evidence. It may involve both a question of fact or of law or both. (ii)Request for reinvestigation - refers to a plea of re- evaluation of an assessment on the basis of newly discovered or additional evidence that a taxpayer intends to present in the reinvestigation. It may also involve a question of fact or of law or both. For requests for reinvestigation, the taxpayer shall submit all relevant supporting documents in support of his protest within sixty (6o) days from date of filing of his letter of protest, otherwise, the assessment shall become final. The term "relevant supporting documents" refer to those documents necessary to support the legal and factual bases in disputing a tax assessment as determined by the taxpayer. The sixty (6o)-day period for the submission of all relevant supporting documents shall not apply to requests for reconsideration. Furthermore, the term "the assessment shall become final" shall mean the taxpayer is barred from disputing the correctness of the issuedt 99 Implementi ng the Provisions o f the National Inte rnal Revenue Code of 1997 Govern ing the Ru les on Assessment of National Internal Revenue Taxes , Civil Penalties and Interest and the Extra- Judicial Settlement o f a Taxpayer's Criminal Violation of the Code Through Pay ment of a Suggested Compromise Penalty. 100 A mending Certain Sections of Revenue Regulations No. 12-99 Relative to the Due Process Requirement in the Issuance of a Defi ciency Tax Assessment. 101 Amending Certain Sections of Revenue Regulations No. 12-1 999, as Amended by Revenue Regulations No. 18-20 13 and Revenue Regulations No. 7-2018, Relative to the Due Process Requirement in the Issuance of a Deficiency Tax Assessment.

CTA Case No. 11094 Euro Autocars, Inc. Doing Business Under the Name and Style of Lamborghini Manila and Bentley Manila v. The Commissioner of Internal Revenue DECISION x-----------------------------------------------------------------------x assessment by introduction of newly discovered or additional evidence, and the FDDA shall consequently be denied. If the protest is denied, in whole or in part, by the Commissioner's duly authorized representative, the taxpayer may either: (i) appeal to the Court of Tax Appeals (CTA) within thirty (30) days from date of receipt of the said decision; or (ii) elevate his protest through request for reconsideration to the Commissioner within thirty (3o) days from date of receipt of the said decision. No request for reinvestigation shall be allowed in administrative appeal and only issues raised in the decision of the Commissioner's duly authorized representative shall be entertained by the Commissioner. If the protest or administrative appeal, as the case may be, is denied, in whole or in part, by the Commissioner, the taxpayer may appeal to the CTA within thirty (3o) days from date of receipt of the said decision. Otherwise, the assessment shall become final, executory and demandable. A motion for reconsideration of the Commissioner's denial of the protest or administrative appeal, as the case may be, shall not toll the thirty (30)- day period to appeal to the CTA. 102 In applying the foregoing rules, the Supreme Court, in the case of Philippine Amusement and Gaming Corporation v. Bureau of Internal Revenue, et al.•o3 (PAGCOR) and later on in Commissioner of Internal Revenue v. V. Y. Domingo jewellers, Inc., 104 explained that there are three (3) options by which a taxpayer may appeal the denial of its administrative protest, to wit: Following the verba legis doctrine, the law must be applied exactly as worded since it is clear, plain, and unequivocal. A textual reading of Section 3.1.5 gives a protesting taxpayer like PAGCOR only three options: If the protest is wholly or partially denied by the t 1. CIR or his authorized representative, then the . _ _ _ __ __t_ax_p_a_y_e_r_may appeal to the CTA within 30 days 102 Italics in the original text, emphasis and underscoring supplied. 103 G.R. No. 20873 1, 27 January 20 16; Citation om itted, emphasis, italics and underscoring in the orig inal text and supplied. 104 Supra at note 93 .

CTA Case No. 11094 Euro Autocars, Inc. Doing Business Under the Name and Style of Lamborghini Manila and Bentley Manila v. The Commissioner of Internal Revenue DECISION x---- - -------------------------- -- -- ------------------ -- ----------------x Date Event 31 May 2016 Petitioner received the PAN dated 30 May 2016, 106 signed by RDAmora. 01 July 2016 Petitioner received the FAN dated 27 June 2016,10 7 signed by RDAmora. 29 July 2016 Petitioner filed its Request for Reinvestigation (Protest against the FAN) dated 29 July 2016 10 8 within the 30-day reglementary period. - Petitioner received the BIR's Letter dated 22 August 2016, 10 9 granting the Request for Reinvestigation and directing petitioner to submit all relevant supporting documents within 6o days from the filing of the Protest. 27 September 2016 Petitioner filed a Supplemental Protest Letter dated 27 September 2016, 110 submitting additional supporting documents in connection with the Request for Reinvestigation within the 6o-day reglementary period. 21 June 2017 Petitioner received the FDDA dated 19 June 2017,u 1 signed by RD Geraldine. 20 July 2017 Petitioner filed a Request for Reconsideration (Protest against the FDDA) dated 20 July 2017111 within the 30-day reglementary period. 01 February 2023 Petitioner received respondent's Final Decision dated 20 January 2023. 11 3 02 March 2023 Petitioner filed its Petition for Review114 within the 30-day reglementary period. Since the instant Petition for Review was timely filed on 02 March 2023, a day before the last day of the 3o-day appeal period (reckoned from petitioner's receipt of respondent's Final Decision on 01 February 2023), this Court acquired jurisdiction over the case. We now proceed to the merits of the case. For an orderly discussion, We shall address, in seriatim, the parties' contrasting arguments on each of the following components of the deficiency VAT assessment:t 106 Exhibit "P-1 6"/Exhibit "R-3 ", supra at note 14. 107 Exhibit "P-17", supra at note 17. 108 Exhibit "P-18", supra at note 19. 109 Supra at note 21. 110 Exhibit "P-1 9", BIR Records , Folder No. 2, pp. 467-483. Ill Exhibit "P-20", supra at note 24. 112 Exhibit " P-21 ",supra at note 26. 113 Exhibit " P-22"/Exhibit " R-6", supra at note 6. 114 Supra at note I.

CTA Case No. 11094 Euro Autocars, Inc. Doing Business Under the Name and Style of Lamborghini Manila and Bentley Manila v. The Commissioner of Internal Revenue DECISIO N x------------------------- - --------------------------- ----- ---- -- -- --- --x Component Computation per FDDA Amount (a) VATable Sales/Receipts per VAT Returns P196,707,767·41"s First Gross Receipts Not Subjected to VAT P122,652,541.91 Second Undeclared Sales from Trade-In Units Deemed Sold 25,700,000.00 Third Undeclared Sales ofLamborghini Aventador 16,o71,4 2s. 57 Fourth Undeclared Sales from Unaccounted Inventory 43.754.796·30 Fifth Undeclared Sales from Undeclared Output Tax 17,560,200.75 (b) Total Additional Gross Receipts Subjected to VAT P225,738,967.53 (c) = (a)+ (b) Gross Receipts Subjected to VAT p 422,446·734·94 (d)= (c) x 12% Output VAT Pso,693,6o8.19 (d) Input VAT on Current Purchases P21,153,159·43"6 Sixth Disallowed Input Taxes on Local Purchases 20,652,441.81 Seventh Disallowed Input Tax Carried Over to Succeeding Period 478 ,651·75 (e) Total Disallowed Input VAT P21,131,o93·56 (f)= (d)- (e) Net Allowed Input VAT P22,o65.87 (g)= (d)- (f) Output VAT Due Pso,671,542·32 (h) VAT Payments 2,930,424•41 U7 (i) = (g)- (h) Basic Deficiency Output VAT Due p 47·741,117·91 (j) Deficiency Interest (from 26 July 2014 to 21 July 2017) 28,566,19 2.20 115 Month VA Table Sales/Receii>ts Exhibit No. Division Docket January 20 14 P l6 604 924.3 1 " P-5" (BIR Fonn No. 2550M) D. 475 February 20 14 83 084 95 1.60 " P-6" (BIR Fonn No. 2550M) D. 477 March 20 14 95 807 962.08 "P-7''J.I!IR Fonn No. 2550Ql o. 479 April 2014 401 955. 17 "P-8"_ffi_JR Fonn No. 2550M_} 0. 48 1 May 2014 572 197.08 " P-9"_ffi_IR Fonn No. 255QMl o. 483 June 2014 235 777 .17 " P-10" (B IR Fonn No. 2550Q) D. 485 Total P l 96 707 767.41 116 Input VAT on Month Ex hibit No. Division Docket C urrent Purchases January 20 14 PI 779 602. 16 "P-5" :illR Fonn No. 2550M) o.475 February 20 14 8 674 527.93 " P-6" B IR Fonn No. 2550M) D. 477 March 2014 10093 599. 16 "P-7" BIR Fonn No. 255()Q}_ o. 479 Aoril 2014 49 264.64 " P-8" BIR Fonn No. 2550M) D. 48 1 May 2014 49 220.53 " P-9" ~IR Fonn No. 2550M~ o. 483 June 20 14 506 945.0 1 " P- 10" (BIR Fonn No. 25500) D.485 Total P21 153 159.43 11 7 Month VAT Pavments Exhibit No. Division Docket January 20 14 P2 12 988.76 " P-5- 1" (BTR-BIR D(!QOsit/Pf!Y_ment Sli]Jl o. 476 February 20 14 I 295 666.26 " P-6-1 " (BTR-BIR Deposit/Payment Slip) D. 478 March 20 14 I 403 356.29 "P-7-1" (BTR-BIR Deposit/Payment Slip) D. 480 April 2014 - " P-8- 1" (Acknowle<1g_ment Receipt) D. 482 May 20 14 18 4 13.10 " P-9-1 " (BTR-BIR Deposit/Payment Sli]Jl o. 484 June 20 14 Total P2 930 424.41 - " P-1 0- 1" (Acknowledgment Receipt) D. 486

CTA Case No. 11094 Euro Autocars, Inc. Doing Business Under the Name and Style of Lamborghini Manila and Bentley Manila v. The Commissioner of Internal Revenue DECISION x-----------------------------------------------------------------------x Component Computation per FDDA Amount (k) = (i) + (j) A. Total Deficiency Output VAT Due P76,J07 ,)10.11 (I) Basic Tax Due (Late Remittance) Ps,931,715·3ous (m) = (I) x :z.s% :z.s% Surcharge 1,482.,92.8.81119 (n) Interest up to Date of Remittance 444·92J.20110 (o) = (m) + (n ) B. Total Increment on Late Remittance Pl,927,852.01 (p) c. Compromise Penalty PSs,ooo.oo (q) =(k) + (o) + (p) TOTAL P78>J20,l62.12 FIRST COMPONENT: ASSESSMENT FOR DEFICIENCY VALUE-ADDED TAX (VAT) ON ITEMS DEEMED GROSS RECEIPTS SUBJECT TO VAT TOTALLING P122,652,541.91 The first component concerns respondent's imposition ofVAT on certain items supported by non-VAT ARs, which respondent treated as gross receipts subject to VAT. Petitioner argues that the subject items supported by non-VAT ARs do not constitute income or gross receipts because they either did not inure to its benefit, did not represent completed sales~ or were merely held in trust for third parties or government agencies.t 118 VA Table Output VAT BIR Records Invoice No. 25% Surcharge Folder No.4 Sa le/Receipt Belatedlv Remitted 00039 P7 759.73 P931.17 P232.79 p. 975 00036 10 141 ,071.43 I 216 928.5 7 304 232. 14 D. 974 00029 5 343.97 641.28 160.32 p. 973 022 13 142857. 14 I 577 142.86 394 285.71 D. 946 020 13 142857. 14 I 577 142.86 394 285.7 1 p. 948 02 1 1299 1 071.43 I 558 928.57 389 732. 14 D. 947 Total P49 430 960.85 P5 931 715.31 PI 482 928.81 119 Id. 120 Output VAT Invoice VA Table Date of Should be Interest Belatedly Interest No. Sale/Receipt Remittance Reported Rate Remitted 00039 P7 759.73 P93 1.1 7 26/0 1/2015 25/07/201 4 10.14% P94.39 00036 10141 071.43 I 216 928.57 26/0 1/201 5 25/07/20 14 10.14% 123 359.88 00029 5 343.97 641.28 26/01 /2015 25/07/20 14 10. 14% 65.0 1 022 13 142 857. 14 I 577 142.86 26/0 1/2015 25/07120 14 10. 14% 159 874.76 020 13 142 857.14 I 577 142.86 27/10/20 14 25/0712014 5. 15% 8 1 233.66 021 1299 1 07 1.43 I 558 928.57 27/1012014 25/07/2014 5.15% 80 295.50 Total 1"49 430 960.85 1"5931 715.3 1 !"444 923.20

CTA Case No. 11094 Euro Autocars , Inc. Doing Business Under the Name and Style of Lamborghini Manila and Bentley Manila v. The Commissioner of Internal Revenue DECISION x---- - --------------- -- ---------------- - ----- - -------- --- --------------- x Respondent counters that the subject items supported by non- VAT ARs arose from transactions incidental to petitioner's commercial or economic activity and were made in furtherance of its business. Respondent further maintains that petitioner failed to present sufficient documents to prove that these amounts should be excluded from gross receipts or should not be subjected to VAT. At the outset, the Court reiterates that tax assessments enjoy the presumption of regularity and correctness, and are presumed to have been made in good faith. 12 1 Thus, petitioner bears the burden of presenting competent and sufficient evidence to refute respondent's findings and to prove that the assessed items do not form part of its taxable gross receipts. As held in Commissioner of Internal Revenue v. Hantex Trading Co., Inc. ,122 upon the introduction of the assessment in evidence, a prima facie case of liability on the part of the taxpayer arises, and petitioner- taxpayer bears the burden of disputing the correctness of the assessment. Similarly, in McDonald's Philippines Realty Corporation v. Commissioner of Internal Revenue, 123 the Supreme Court reiterated that tax assessments are presumed correct and issued in the regular performance of tax authorities' duties; hence, the taxpayer must dispute such correctness and regularity. Notably, Schedule 1124 attached to the FDDA contains only a list of receipts not subjected to VAT. Although the listed transactions refer to the related Sls/ORs and include the ir corresp o nding descriptions o r particulars, Schedule 1 does not group the amounts according to the category or nature of the items treated as gross receipts subject to VAT, which amounted in the aggregate to P122,6S2,541.91. Nonetheless, the Court will address the parties' respective claims according to the nature . of the items purportedly comprising the total amount subjected to VAT.t 12 1 Bonifacio Sy Po v. Honorable Court of Tax Appeals and Honorable Commissioner of Internal Revenue, G.R. No. L-81446, 18 August 1988. 122 G.R. No. 136975, 3 1 March 2005. 123 G.R. No. 247737, 08 August 2023. 124 "Revised Summary of Gross Receipts not subjected to VAT" attached to the Final Decision on Disputed Assessment (FDDA), Exhibit " P-20", supra at note 24, p. 1269.

CTA Case No. 11094 Euro Autocars, Inc. Doing Business Under the Name and Style of Lamborghini Manila and Bentley Manila v. The Commissioner of Internal Revenue DECISION x- ----- ---------------------------------------------------------------- - x Section 10512s of the NIRC of 1997, as amended, is clear and categorical in stating that a person shall be liable to VAT when the sale of goods and services is done in the ordinary course of trade or business. The phrase "in the course of trade or business" connotes regular conduct or pursuit of a commercial or an economic activity, including transactions incidental thereto. Under Section 106(A) of the NIRC of 1997, as amended, VAT is imposed on the "gross selling price or gross value in money of the goods or properties sold, bartered or exchanged" and shall be paid by the seller or transferor. Meanwhile, under Section 108(A) of the NIRC of 1997, as amended, VAT is imposed on the "gross receipts derived from sale or exchange of services." Significantly, these provisions define the terms "goods or properties," "gross selling price," and "gross receipts," as well as the phrase "sale or exchange of services," as follows: SEC. 106. Value-added Tax on Sale ofGoods and Properties. - (A) Rate and Base ofTax. -These shall be levied, assessed and collected on every sale, barter or exchange of goods or properties, a value-added tax equivalent to twelve percent (12%) of the gross selling price or gross value in money of the goods or properties sold, bartered or exchanged, such tax to be paid by the seller or transferor. (1) The term 'goods or properties' shall mean all tangible and intangible objects which are capable of pecuniary estimation[.] The term 'gross selling price' means the total amount of money or its equivalent which the purchaser pays or is obligated to pay to the seller in consideration of the sale, barter or exchange of the goods or properties, excluding the value-added tax. The excise tax, if any, on such goods or properties shall form part of the gross selling price. Properties. - t SEC. 108. Value-added Tax on Sale of Services and Use or Lease of 12S SEC. lOS. Persons Liable . -Any person who, in the course of trade or business, sells, barters, exchanges, leases goods or properti es, renders services, and any person who imports goods shall be subject to the value-added tax (VAT) imposed in Sections I 06 to I 08 of this Code.

CTA Case No. 11094 Euro Autocars, Inc. Doing Business Under the Name and Style of Lamborghini Manila and Bentley Manila v. The Commissioner of Internal Revenue DECISION x-------------------- ---- ---- ------------------------ ----------------- --x (A) Rate and Base ofTax. -There shall be levied, assessed and collected, a value-added tax equivalent to twelve percent (12%) of gross receipts derived from the sale or exchange of services, including the use or lease of properties. The phrase 'sale or exchange of services' means the performance of all kinds of services in the Philippines for others for a fee, remuneration or consideration, including those performed or rendered by construction and service contractors; stock, real estate, commercial, customs and immigration brokers; lessors of property, whether personal or real; warehousing services; lessors or distributors of cinematographic films; persons engaged in milling, processing, manufacturing or repacking goods for others; proprietors, operators or keepers of hotels, motels, rest houses, pension houses, inns, resorts; proprietors or operators of restaurants, refreshment parlors, cafes and other eating places, including clubs and caterers; dealers in securities; lending investors; transportation contractors on their transport of goods or cargoes, including persons who transport goods or cargoes for hire and other domestic common carriers by land, air and water relative to their transport of goods or cargoes; services of franchise grantees of telephone and telegraph, radio and television broadcasting and all other franchise grantees except those under Section 119 of this Code; services of banks, non- bank financial intermediaries and finance companies; and non-life insurance companies (except their crop insurances), including surety, fidelity, indemnity and bonding companies; and similar services regardless of whether or not the performance thereof calls for the exercise or use of the physical or mental faculties .... The term 'gross receipts' means the total amount of money or its equivalent representing the contract price, compensation, service fee , rental or royalty, including the amount charged for materials supplied with the services and deposits and advanced payments actually or constructively received during the taxable quarter for the services performed or to be performed for another person, excluding value-added tax.11•6 Relatedly, Section 4·105-1127 of RR No. 16-2oosu8 defines a "taxable sale" as the sale, barter, exchange, or lease of goods or properties, including transactions deemed sale, and the performance of service for . a consideration, whether in cash or in kind, all of which are subject tot 126 Emphasis supplied and italics in the original text. 127 SECTION 4. 105-1 . Persons Liable. 128 Supra at note 87.

CTA Case No. 11094 Euro Autocars , Inc. Doing Business Under the Name and Style of Lamborghini Manila and Bentley Manila v. The Commissioner of Internal Revenue DECISION x--------- - - ------------------------------------------------------------x VAT under Section 106129 and 10813° of the NIRC of 1997, as amended. Section 4.105-3131 of the same Regulations further provides that the phrase "in the course of trade or business" refers to the regular conduct or pursuit of a commercial or economic activity, including transactions incidental thereto. Thus, amounts actually or constructively received by a taxpayer as contract price, compensation, service fee, or consideration for transactions undertaken in the course of trade or business fall within the scope of taxable gross receipts, unless the taxpayer proves that such amounts were merely received in trust, merely passed on to third parties, or otherwise legally excluded from taxable gross receipts. In Commissioner ofInternal Revenue v. Tours Specialists, Inc. and the Court of Tax Appeals132 (Tours Specialists), the Supreme Court recognized that amounts merely entrusted to a taxpayer, which do not belong to it and do not redound to its benefit, do not form part of its gross receipts. However, the taxpayer must first establish by competent evidence that the amounts were in fact merely held in trust or passed on to third parties. After a careful consideration of the parties' respective arguments, the Court is constrained to sustain respondent's finding that petitioner failed to prove that the subject items supported by non-VAT ARs do not fall within the scope of taxable gross receipts, as defined under Sections 106 and 108 of the NIRC of 1997, as amended. a. Participation Fees from Marke ting Events Petitioner argues that respondent erroneously subjected the participation fees from marketing events to VAT because petitioner merely collected the fees from the participants and remitted the same to the Lamborghini Club to cover actual event costs. Respondent, however, maintains that petitioner failed to substantiate this claim and, accordingly, treated the participation fees as receipts arising from transactions incidental to petitioner's business and subject to VAT.t 129 SEC. 106. Value-added Tax on Sale of Goods or Properties. 130 Supra at note 88. 131 SECTION 4. 105-3. Meaning of "In the Course of Trade or Business". 132 G.R. No. 664 16, 2 1 March 1990.

CTA Case No. 11094 Euro Autocars, Inc. Doing Business Under the Name and Style of Lamborghini Manila and Bentley Manila v. The Commissioner of Internal Revenue DECISION x------------------------------------- - ---------------------------------x Petitioner again relies on the assertion that the payments for second-hand or trade-in units were merely applied against the selling price of the brand-new units purchased. However, petitioner did not present specific documents identifying the brand-new units or vehicles involved, the customers concerned, the corresponding trade-in agreements, the application of the proceeds to the selling price of the brand-new units purchased, the VAT invoices, and the relevant portions of the SLS (reconciled with the corresponding VAT returns) showing that the resulting sales were already reported for tax purposes. Absent these supporting documents, the Court cannot verify whether the amounts were merely offsets against duly reported sales or whether petitioner actually received consideration from transactions consummated within the assessed period. Petitioner's bare allegation cannot overcome the presumption of correctness accorded to respondent's assessment. Accordingly, respondent properly treated the payments for second-hand or trade-in units as taxable gross receipts. d. Insurance Claims Petitioner asserts that the insurance claims should not be subjected to VAT because petitioner merely received the amounts on behalf of its clients and applied them directly to repair costs; hence, the amounts did not represent actual sales, income, or gross receipts. Respondent, however, counters that petitioner failed to present documents disproving the assessment that the repairs on the insured vehicles were performed within the assessed period and, accordingly, treated the amounts as sales or receipts subject to VAT. Unfortunately, petitioner failed to present competent evidence showing that the amounts classified as payments from insurance claims belonged to the owners of the insured vehicles and were merely received by petitioner on their behalf. Petitioner likewise failed to establish, through repair orders, invoices, ORs, insurance documents, accounting records, or similar evidence, that the amounts were fully applied to the cost of repairs and that the correspopding repair services, if any, were properly reported for VAT purposes.t

CTA Case No. 11094 Euro Autocars, Inc. Doing Business Under the Name and Style of Lamborghini Manila and Bentley Manila v. The Commissioner of Internal Revenue DECISION x-----------------------------------------------------------------------x If petitioner received insurance proceeds and applied them to the repair of vehicles, such amounts may constitute consideration for repair services performed in the course of petitioner's business, unless petitioner proves that it merely held the amounts in trust or acted only as a conduit without receiving compensation or economic benefit. Petitioner did not present such proof. Accordingly, respondent validly treated the amounts classified as payments from insurance claims as taxable receipts subject to VAT. e. Special Plate Processing Fees Petitioner argues that the special plate processing fees should not form part of its gross receipts because petitioner merely held the amounts in trust and remitted them to the LTO for the issuance of special plates, and that respondent's reliance on the absence of a separate account in its financial records is speculative and unsupported. Respondent, however, maintains that petitioner failed to substantiate its claim that the amounts were held in trust and, accordingly, treated the fees as gross receipts for services rendered in assisting customers with the processing of their special plates. As with the foregoing categories of items supported by non-VAT ARs, petitioner failed to present specific evidence showing that the special plate processing fees were merely held in trust and fully remitted to the LTO. Particularly, petitioner did not submit proof of remittance to the LTO, official LTO receipts corresponding to the assessed amounts, schedules matching customer collections with LTO payments, or accounting records showing that petitioner did not retain any portion of the amounts as a service fee or processing charge. As held in Tours Specialists, the Court recognizes that funds merely received in trust or passed on to third parties do not constitute taxable gross receipts when they do not belong to the taxpayer and do not redound to its benefit. However, the taxpayer invoking this rule must first prove that the amounts were indeed received in trust or . merely passed on to third parties. Petitioner failed to make this showing.t

CTA Case No. 11094 Euro Autocars, Inc. Doing Business Under the Name and Style of Lamborghini Manila and Bentley Manila v. The Commissioner of Internal Revenue DECISION X- -- - --- -------- ------- ---- ------- ---- --- ---- ------ ------- ---- ---------- X Moreover, petitioner's failure to maintain a separate account for the alleged trust funds further weakens its claim. Although the absence of a separate account, by itself, may not conclusively establish taxability, it supports respondent's finding when taken together with petitioner's failure to present proof of remittance and non-retention of any portion of the special plate processing fees. Accordingly, respondent properly treated the special plate processing fees as taxable gross receipts for services rendered in assisting customers with the processing of special plates. In sum, petitioner failed to carry its burden of presenting competent and sufficient evidence showing that the items supported by non-VAT ARs were not gross receipts subject to VAT. Specifically, petitioner failed to establish that the amounts were merely held in trust, merely passed on to third parties, already reported as part of taxable sales, or otherwise excluded from VAT. Considering that petitioner bears the burden of clearly showing that the assessment is erroneous, its failure to present sufficient proof of error justifies the judicial affirmance of the assessment. 13s Accordingly, the first component of respondent's assessment for deficiency VAT, which treated gross receipts in the aggregate amount of P122,6S2,54L91 as subject to VAT, is sustained. SECOND COMPONENT: ASSESSMENT FOR D EFICIENCY VALUE-ADDED TAX (VAT) ON UNDECLARED SALES OF SECOND- HAND OR TRADE-IN UNITS AMOUNTING TO P2s,7oo,ooo.oo The second component involves respondent's assessment of in units amounting to f'25,70o,ooo.oo.''6 t deficiency VAT on the alleged undeclared sales of second-hand or trade- 135 Ferdinand R. Marcos II v. Court of Appeals, et a/., G.R. No. 120880, 05 June 1997, citing Adela Santos Gutierre: v. Jose D. Villegas and Riza/ina Santos Rivera, G.R. No. L- 1711 7, 3 1 July 1963. 136 Clie nt's Date Price 1/ 11 /20 14 P6 000 000.00

CTA Case No. 11094 Euro Autocars, Inc. Doing Business Under the Name and Style of Lamborghini Manila and Bentley Manila v. The Commissioner of Internal Revenue DECISION x------------------ ----- ------------------------------- -----------------x Petitioner argues that these trade-in units were actually consignment deals between petitioner and its clients and the proceeds thereof upon sale were applied against the selling price of the brand- new units purchased by the owners and already reported for tax purposes upon consummation of the sale. Petitioner maintains that it did not realize actual gross receipts from the trade-in transactions. Thus, petitioner contends that the corresponding VAT assessment lacks factual and legal basis. Respondent counters that the consignment deals constituted transactions deemed sales under Section 106(B) (3) 137 of the NIRC of 1997, as amended. Respondent asserts that the actual sales between petitioner and its clients occurred more than 6o days from the dates of consignment. Respondent further points out that, upon reinvestigation, petitioner had no remaining vehicles in its inventory. On this basis, respondent maintains that the consigned goods were deemed sold and properly subjected to VAT. We uphold the assessment. At the outset, the Court finds it necessary to clarify the nature of the underlying transactions. In its Protest against the FAN,tJ8 petitioner itself explained that the trade-in transactions were actually consignment deals between petitioner and its clients. A consignment is an arrangement where the owner leaves goods in the possession of another party for sale. Petitioner likewise stated that, in the assessed transactions, it merely acted as a conduit of its clie nts with respect to the trade-in units. Petitioner further explained that the amounts received from the sale of these units were applied as discounts to the price of the new vehicles purchased by the clients and, for this reason, . petitioner allegedly did not receive actual gross receipts subject to VAT. t Benedicta Pe Lim 2/ 12/20 14 Porsche Cayenne S/996 T urbo 4 000,000.00 Bryan Ang 2/ 18/20 14 Porsche 20 13 9 11 6 500 000.00 Audi 2013 RS5 4 000,000.00 Arch. Antonio Turalba Sr. 2/20/20 14 Porsche Turbo 20 II 5 200 000.00 Total Selling Price of Trade-in Units Deemed Sold P25,700,000.00 137 Supra at no te 85. 138 Exhib it "P- 18", su pra at note 19 , pp. 407-408.

CTA Case No. 11094 Euro Autocars, Inc. Doing Business Under the Name and Style of Lamborghini Manila and Bentley Manila v. The Commissioner of Internal Revenue DECISION x------ ---------- -------------------------------------------------------x Based on petitioner's own explanation, it appears that the trade- in value of the second-hand units did not form part of the selling price reflected in the sales invoices for the brand-new vehicles. Since petitioner allegedly applied the proceeds from the sale of the trade-in units as discounts, petitioner would have issued Sis only for the net purchase price of the brand-new vehicles, after deducting the value or proceeds of the trade-in units. However, the Court can confirm this factual premise only through the VAT invoices or Sis corresponding to the sale of the brand-new vehicles. These documents would show whether petitioner indeed excluded the trade-in value from the selling price of the brand-new vehicles, or whether petitioner had already included the trade-in value in the invoiced amount and subjected the same to VAT. Unfortunately, petitioner failed to present these relevant pieces of evidence. This distinction is material. If the transaction involved the sale of brand-new vehicles with the value of the trade-in units applied as discounts, petitioner would be liable for VAT only on the net selling price of the brand-new vehicles actually invoiced and reported. However, once petitioner subsequently sold the second-hand or trade- in units, petitioner became liable for VAT on the selling price of those units. At the very least, petitioner had to show that it had already reported and remitted the VAT on such subsequent sales to the BIR. Conversely, if petitioner returned the trade-in units to the clients and, for that reason, no discount was ultimately applied to the purchase price of the brand-new vehicles, petitioner should have received from the clients the amount corresponding to the value of the returned trade- in units. In that scenario, petitioner would still have received consideration connected with the sale of the brand-new vehicles, whether in cash or its equivalent, and such receipt would likewise be subject to VAT unless petitioner proves that it had already reported and remitted the corresponding VAT thereon. Thus, an assertion that the sale of the brand-new vehicles had already been reported for VAT purposes does not necessarily prove that petitioner likewise reported and paid VAT on the subsequent sale of the second-hand or trade-in units. Petitioner had to present the VAT invoices or Sis for the sale of the brand-new vehicles, as well as thet'

CTA Case No. 11094 Euro Autocars, Inc. Doing Business Under the Name and Style of Lamborghini Manila and Bentley Manila v. The Commissioner of Internal Revenue DECISION x-------------------------------- ---------------------------------------x relevant documents relating to the subsequent sale of the trade-in units, such as Sis, ORs, deeds of sale, consignment records, inventory records, accounting entries, and VAT returns. Considering petitioner's own characterization of the transactions as consignment deals, as well as the representation of petitioner's representative, a certain Carol Delos Santos (Delos Santos), that petitioner had no remaining inventory of vehicles, petitioner bore the burden to prove that the second-hand or trade-in units were sold at selling prices equivalent to, or higher than, their trade-in values and that petitioner reported and remitted the corresponding VAT to the BIR. Alternatively, petitioner could have shown that the units were sold outside the assessment period or that any particular unit remained unsold during the period involved. Having failed to present the relevant evidence relating to both the sale of the brand-new vehicles and the subsequent sale of the trade-in units, petitioner failed to discharge its burden. Specifically, petitioner did not present the supposed consignment agreements, Sis, ORs, VAT returns, accounting entries, inventory movement schedules, or other competent documents showing the actual sale of the trade-in units, the selling prices thereof, and the payment of the corresponding VAT. Petitioner likewise failed to establish that any of the trade-in units were sold outside the assessment period. While petitioner asserted that some units remained unsold or still on hand, this assertion cannot prevail over the audit finding that petitioner's representative, Delos Santos, disclosed that petitioner had no remaining vehicle inventory, especially in the absence of documentary support. Moreover, petitioner's explanation that the proceeds from the sale of the trade-in units were merely applied as discounts to the purchase price of the brand-new vehicles does not negate VAT liability on the subsequent sale of the trade-in units. On the contrary, it confirms that the trade-in units had economic value and that their disposition generated proceeds used to reduce the purchase price of the clients' new vehicles. If petitioner sold the units and used the proceeds to grant discounts to its clients, petitioner had to establish that the t

CTA Case No. 11094 Euro Autocars, Inc. Doing Business Under the Name and Style of Lamborghini Manila and Bentley Manila v. The Commissioner of Internal Revenue DECISION x------------------------------------------------------- -------- ----- ---x corresponding output VAT on those sales had been paid. Petitioner failed to do so. The Court is mindful of the settled rule that an assessment must rest on actual facts and that the presumption of correctness of an assessment cannot rest on another presumption.139 However, this rule does not aid petitioner. Respondent's assessment did not rest solely on speculation. Respondent based the assessment on petitioner's own explanation during the administrative proceedings that the trade-in units were placed with petitioner for sale and that the proceeds were applied as discounts to the price of new vehicles, as well as on the disclosure during audit that petitioner had no remaining vehicle inventory. These circumstances reasonably support respondent's finding that the trade-in units had been sold and that petitioner failed to show that the corresponding VAT had been paid. As earlier emphasized, in assessment cases, petitioner bears the burden of proving that the assessment is erroneous. Here, petitioner had control over the documents necessary to refute respondent's findings, including the consignment agreements, records of sale, Sis, ORs, VAT returns, inventory records, and proof of remittance of output VAT. Petitioner's failure to present these documents gives rise to the presumption that suppressed evidence would be adverse if produced/40 and justifies the conclusion that petitioner failed to overcome the assessment. Accordingly, the Court finds that respondent properly treated the second-hand or trade-in units as undeclared sales subject to VAT. Since petitioner failed to prove that the VAT on the sale of these units had already been reported and remitted, or that the units were sold outside the assessment period or remained unsold, the second component of respondent's assessment for deficiency VAT on undeclared sales o f t 139 See Ortiz Memorial Chapel Inc., represented by Ronald Ortiz v. Commissioner of Internal Revenue, G.R. No. 278483, 03 December 2025, citing Commissioner of Internal Revenue v. Spouses Remigio P. Magaan and Leticia L. Magaan, G.R. No. 232663, 03 May 202 1. 140 Rule 13 1 BURDEN OF PROOF, BURDEN OF EVIDENCE AND PRESUMPTIONS Section 3. Disputable presumptions. - The following presumptions are satisfactory if uncontradicted, but may be contradicted and overcome by other evidence: (e) That evidence wi ll fully suppressed wou ld be adverse if produced[.]

CTA Case No. 11094 Euro Autocars, Inc. Doing Business Under the Name and Style of Lamborgh ini Manila and Bentley Manila v. The Commissioner of Internal Revenue DECISION x----------- ------------------------------------------------------------x second-hand or trade-in units amounting to P2s,7oo,ooo.oo IS sustained. THIRD COMPONENT: ASSESSMENT FOR DEFICIENCY VALUE-ADDED TAX (VAT) ON THE UNDECLARED SALE OF A LAMBORGHINI AVENTADOR AMOUNTING TO P16,o71..428.57 The third component relates to respondent's assessment of deficiency VAT on the alleged undeclared sale of a Lamborghini Aventador amounting to P16,071,428.57· Petitioner argues that it merely acted as an indentor or conduit in the sale between Phanthaxay and Revillame. Petitioner maintains that it did not earn income from the transaction and did not charge any service fee or commission. According to petitioner, the Indent Order shows that the buyer, not petitioner, initiated the purchase. Since petitioner received no compensation, petitioner insists that it earned no taxable gross receipts from the transaction. Respondent counters that petitioner failed to present evidence showing the vendor's claim for consideration. Respondent further argues that petitioner failed to refute the finding that the sale of the Lamborghini Aventador constituted a deemed sale transaction under a consignment arrangement pursuant to Section 4.106-7(a)(3) 141 ofRR No. 16-2005.142 Respondent bases this finding on petitioner's business of selling consigned goods and on petitioner's ARs books showing that petitioner received the buyer's down payment. Moreover, respondent argues that, even assuming petitioner merely acted as a commercial broker, the gross receipts from such service remain subject to VAT under Section 108143 of the NIRC of 1997, as amended. We are inclined to cancel the assessment for lack of factual basis.t 14 1 Supra at note 86. 142 Supra at note 87. 143 Supra at note 88.

CTA Case No. 11094 Euro Autocars, Inc. Doing Business Under the Name and Style of Lamborghini Manila and Bentley Manila v. The Commissioner of Internal Revenue DECISION x-----------------------------------------------------------------------x Section w6(A) 144 of the NIRC of 1997, as amended, quoted above, imposes VAT on every sale, barter, or exchange of goods or properties in the course of trade or business, based on the gross selling price or gross value in money of the goods or properties sold, bartered, or exchanged. The tax shall be paid by the seller or transferor. Section w8(A) 145 of the NIRC of 1997, as amended, imposes VAT on gross receipts derived from the sale or exchange of services. The same provision defines "sale or exchange of services" as the performance of all kinds of services in the Philippines for others for a fee, remuneration, or consideration, including those performed or rendered by commercial brokers and similar services, regardless of whether the performance thereof calls for the exercise or use of physical or mental faculties. Here, respondent arrived at the assessment after vouching petitioner's ARs Book. This procedure revealed that, under AR No. 00012 dated 07 February 2014/46 petitioner received P26,ooo,ooo.oo from "Wire Int'l Holdings, Inc. FAO: [Revillame] " in full payment for one (1) unit ofLamborghini Aventador. Respondent also examined the Deed of Absolute Sale (DOAS) dated 16 September 2014147 covering the sale of the same vehicle from Phanthaxay to Revillame for a total consideration of P44,ooo,ooo.oo. In its Protest against the FDDA/48 petitioner explained that Phanthaxay originally imported the subject Lamborghini Aventador through petitioner pursuant to an indent arrangement. However, upon the arrival of the vehicle, Phanthaxay allegedly decided not to take the car and instead sold it to Revillame. For this reason, petitioner insisted that it merely acted as an indentor and conduit in the sale between Phanthaxay and Revillame. Petitioner's explanation that it merely acted as an indentor or conduit does not fully persuade the Court. Petitioner did not offer in evidence the Indent Order that allegedly showed the terms of the indent . arrangement, the identity of the real buyer or principal, the scope oft 144 Supra at p. 28. 145 Supra at pp. 28-29. 146 BIR Records, Folder No.3 , p. 927. 147 Id., Folder No. I, p. 239. 148 Exhibit " P-2 1",supra at note 26, p. 507.

CTA Case No. 11094 Euro Autocars, Inc. Doing Business Under the Name and Style of Lamborghini Manila and Bentley Manila v. The Commissioner of Internal Revenue DECISION x-----------------------------------------------------------------------x petitioner's role, and the absence of any compensation, commission, service fee, or other economic benefit in its favor. Petitioner likewise failed to present any agreement, correspondence, billing, accounting record, remittance document, or other competent evidence showing the precise nature of its participation in the transaction. Nevertheless, petitioner's failure to substantiate its indentor or conduit theory does not automatically sustain respondent's assessment. Respondent still had the burden to establish, by adequate factual and evidentiary basis, that petitioner received taxable gross receipts or gross selling price corresponding to the amount assessed. Again, an assessment must rest on actual facts .149 Although assessments enjoy the presumption of correctness, such presumption cannot rest on another presumption. An assessment cannot be based on mere inference, conjecture, or assumption, no matter how reasonable or logical the inference may appear.1so The documentary trail shows that the assessed transaction involved the same Lamborghini Aventador. The DOAS151 identifies the vehicle as a Lamborghini Aventador with Chassis No. ZHW EC1 471C LA 01259, Motor No. L539-01572, and color yellow. These details match those reflected in the cancelled Vehicle Sales Invoice (VSI) No. 255152 issued by PGA Automobile, Inc. to petitioner, which identifies the same unit by Vehicle Identification No. (VIN) ZHW EC1471C LA 01259, Model Lamborghini Aventador, Engine No. L539-01572, and exterior color yellow. The DOAS153 shows that the total consideration for the sale of the Lamborghini Aventador amounted toP44,ooo,ooo.oo. Since respondent had already included the P26,ooo,ooo.oo portion evidenced by AR No. oo012 154 under the first component of the deficiency VAT assessment, respondent assessed only the remaining P18,ooo,ooo.oo t 149 See Ortiz Memorial Chapel Inc., represented by Ronald Orti= v. Commissioner ofInternal Revenue, supra at note 139, citing Commissioner of Internal Revenue v. Spouses Remigio P. Magaan and Leticia L. Magaan, supra at note 139. ISO See Collector of Internal Revenue (now Commissioner) v. Alberto D. Benipayo, G.R. No. L- 13656, 3 1 January 1962; Commissioner of Internal Revenue v. Island Garment Manufacturing Corporation and the Court of Tax Appeals, G. R. No. L-46644, II September 1987. 151 Supra at note 14 7. 152 BIR Records, Folder No. I, p. 243. 153 Supra at note 147. 154 Supra at note 146.

CTA Case No. 11094 Euro Autocars, Inc. Doing Business Under the Name and Style of Lamborghini Manila and Bentley Manila v. The Commissioner of Internal Revenue DECISION x---------------------------------- -------------------------------------x difference. To arrive at the tax base or the gross selling price not subjected to VAT, respondent divided this VAT -inclusive amount by 1.12, resulting in the undeclared sale of P16,o71,428.s7, computed as follows: Total Consideration for the Sale ofLamborghini Aventador p 44, 000,000.00 per DOAS between Phanthaxay and Revillame Less: Amount Received by Petitioner from Revillame (already 26,ooo,ooo.oo assessed under the First Component) Difference (Amount Not Subjected to VAT) 18,ooo,ooo.oo Divided by: 1 + 12% VAT rate 1.12 Undeclared Sale ofLamborghini Aventador Pt6,07I,428·57 However, the Court cannot uphold the assessment merely on the basis of the P18,ooo,ooo.oo difference between the consideration stated in the DOAS and the P26,ooo,ooo.oo covered by petitioner's AR No. 00012. There is no evidence on record showing that petitioner received the remaining P18,ooo,ooo.oo, actually or constructively, during the assessed period. There is likewise no competent evidence showing that this amount represented payment for services performed or to be performed by petitioner, or that the amount ultimately redounded to petitioner's benefit. The BIR Records also contain an LTO Certification dated 03 June 2014 55 showing that Phanthaxay was an Importer, or an individual 1 authorized to import a motor vehicle for personal use. This LTO Certification further states that Phanthaxay's status as an Importer "shall be covered by a written undertaking not to sell the vehicle for a period of three (3) years from the time of importation." This document is material because it tends to show that Phanthaxay, and not petitioner, appeared as the person authorized to import the subject vehicle for personal use, subject to the undertaking stated in the LTO Certification. To be sure, if Phanthaxay sold the imported motor vehicle within the restricted period or in a manner inconsistent with his status as an importer for personal use, such circumstance may have tax consequences against him. Depending on the surrounding facts, the sale . may fall within the course of trade or business, in which case the BIR t ISS BIR Records, Folder No. 1, p. 238.

CTA Case No. 11094 Euro Autocars , Inc. Doing Business Under the Name and Style of Lamborghini Manila and Bentley Manila v. The Commissioner of Internal Revenue DECISION x-----------------------------------------------------------------------x may pursue the proper tax consequences against Phanthaxay. That matter, however, is for the BIR to determine and pursue against the proper taxpayer. What is material in this case is whether respondent sufficiently established that petitioner received the P18,ooo,ooo.oo difference as taxable consideration, gross receipts, or remuneration during the assessed period. Respondent failed to do so. The Court cannot infer petitioner's receipt of the P18,ooo,ooo.oo difference solely from the fact that petitioner received P26,ooo,ooo.oo under AR No. oo0121S6 and that the DOAS157 between Phanthaxay and Revillame stated a total consideration of P44,ooo,ooo.oo. These documents may show petitioner's participation in the transaction to some extent, but they do not prove that petitioner received the remaining balance, that petitioner retained any portion thereof, or that the amount was paid to petitioner for services rendered as broker, indentor, facilitator, or conduit. Respondent's theory therefore rests on an evidentiary gap. Section w6(A)158 of the NIRC of 1997, as amended, requires proof of a sale, barter, or exchange of goods or properties by the taxpayer in the course of trade or business. Section w8(A)/59 on the other hand, requires proof of gross receipts derived from the sale or exchange of services for a fee, remuneration, or consideration. In either case, respondent had to establish that petitioner received or became entitled to receive the taxable amount assessed. The records do not show this with respect to the PI8,ooo,ooo.oo difference. Accordingly, despite that petitioner failed to fully substantiate its claim that it merely acted as an indentor or conduit, respondent likewise failed to establish that petitioner actually or constructively received the PIB,ooo,ooo.oo difference, or that such amount redounded to petitioner's benefit as consideration for the unit sold or services rendered, if any, during the assessed period. The Court is therefore constrained to cancel the third component of respondent's assessmentt 156 Supra at note 146. 157 Supra at note 147. 158 Supra at p. 28. 159 Supra at pp. 28-29.

CTA Case No. 11 094 Euro Autocars, Inc. Doing Business Under the Name and Style of Lamborghini Manila and Bentley Manila v. The Commissioner of Internal Revenue DECISION x----------------------------------------------------- ------- -----------x It bears reiterating the settled rule that an assessment must be based on actual facts .160 While tax assessments enjoy the presumption of correctness, such presumption cannot rest on another presumption. As earlier underscored, an assessment cannot rest on mere inference, conjecture, or assumption, no matter how reasonable or logical such inference may appear. 161 To withstand judicial scrutiny, an assessment must have sufficient factual and evidentiary basis. The Court recognizes that, in audit investigations, the government is not confined to the taxpayer's declarations alone and may resort to all available evidence and reasonable methods to determine taxable income, including the reconstruction of income. 162 Thus, respondent may resort to indirect approaches, particularly when the taxpayer's records are inadequate, incomplete, or unreliable. However, respondent must still establish that the indirect approach used is consistent with the best evidence obtainable rule sanctioned under Section 2.3163 of Revenue Memorandum Circular (RMC) No. 23-2000. 164 Respondent must also show that the method reasonably leads to the conclusion that the amount assessed represents undeclared sales or taxable receipts. The use of an indirect method does not relieve respondent of the burden to demonstrate the factual connection between the discrepancy found and the tax assessed. Here, respondent arrived at the alleged inventory deemed sold by merely obtaining the difference between petitioner's ((Total Inventory Accounts per Trial Balance" as of 30 June 2014,'65 beginning balancet' 160 See Ortiz Memorial Chapel Inc., represented by Ronald Orti: v. Commissioner ofInternal Revenue, supra at note 139, citing Commissioner of Internal Revenue v. Spouses Remigio P. Magaan and Leticia L. Magaan, s upra at note 139. 161 See Collector of Internal Revenue (now Commissioner) v. Alberto D. Benipayo, supra at note 150; Commissioner of Internal Revenue v. Island Garment Manufacturing Corporation and the Court of Tax Appeals, supra at note 150. 162 See William Li Yao v. Collector of Internal Revenue, G. R. No. L-1 1875, 28 December 1963. 163 2.3 Assessment Based on Best Evidence Obtainable. - An assessment based on best evidence obtainable is justified when any of the grounds provided by law is clearly established viz: I. The report or records requested from the taxpayer are not forthcoming i.e. the records are lost; refusal of the taxpayer to submit such records ; 2. The reports submitted are fa lse, incomplete or erroneous. 164 Existing Revenue Procedures on the Assessment of Deficiency Internal Revenue Taxes Based on the "Best Evidence Obtainable." 165 See Petitioner's " Inventory Accounts Per Trial Balance" (Beginning Balance Column) and "Trial Balance" (Beginning Balance Column), both as of 30 June 20 14, BIR Records, Folder No. 2, pp. 317 and 297-300, respectively.

CTA Case No. 11094 Euro Autocars, Inc. Doing Business Under the Name and Style of Lamborghini Manila and Bentley Manila v. The Commissioner of Internal Revenue DECISION x----------------- -- -- --------- - ----------------------------------------x amounting to P4s,o61,432.83/ 66 and petitioner's "Inventory List" as of 31 December 2013, 167 amounting to P1,3o6,636·53· Respondent then treated the resulting difference of P43,754,796.3o as undeclared sales subject to VAT, as shown below: Total Inventory Accounts per Trial Balance as of 30 June p 45,061,432.83 2014, Beginning Balance Column Less: Inventory List as of 31 December 2013 1,)06,636·53 Inventory Deemed Sold p 43,754,796·30 The Court cannot sustain this approach. First, both figures used by respondent are balances per books and the higher figure does not appear to be an audited amount. Second, respondent compared the two (2) figures that do not pertain to the same inventory classification. The "Total Inventory Accounts per Trial Balance" amounting to P 45,061,432.83 corresponds largely to Lamborghini and Bentley units, and even includes work-in-progress. In contrast, the total amount per "Inventory List" of P1,3o6,636.s3 corresponds only to "Parts and Accessories and Lifestyle." Notably, the Inventory List does not include Lamborghini and Bentley units. Thus, respondent's comparison was not made using comparable categories. Respondent compared a broader inventory balance, which included motor vehicle inventory and work-in-progress, with an inventory list limited to parts, accessories, and lifestyle items. This mismatch substantially weakens respondent's conclusion that the entire t 166 Amounts were lifted from petitioner's " Inventory Accounts Per Trial Balance" (Beginning Balance Colum n) and "Trial Balance" (Beginning Balance Column), both as o f 30 June 20 14. Account Title Befinninf Balance Inventory-Units Lam borghini P364 8 12.07 Inventory-Parts & Accessories Lamborghini 9 740 930.77 Inventory-Lifesty le Lamborghini 5,08 1' 160.90 Work-in-Progress Lamborghin i 904 747.33 Inventory-Units Bentley 28 200,754.23 Inventory-Parts & Accessories Bentley 623 899.40 Inventory-Lifestyle Bentley 139,0 12.5 1 Work-in-Progress Bentley 6 11 5.62 Total P45,061 ,432.83 167 See Petitioner's " Inventory List" as o f3 1 December 20 13, BIR Records, Folder No.2, pp. 2 10-2 12.

CTA Case No. 11094 Euro Autocars, Inc. Doing Business Under the Name and Style of Lamborghini Manila and Bentley Manila v. The Commissioner of Internal Revenue DECISION x-----------------------------------------------------------------------x difference of P43,754,796.30 represented unaccounted inventory deemed sold. Third, petitioner's audited balance sheet as of 31 December 2013168 further shows an inventory balance of PI,67s,654·oo, consisting of materials and parts amounting to P1,3o6,637·oo (which matches the "Total Inventory Accounts per Inventory List" used by respondent) and work-in-progress amounting to P369,on.oo.169 While this circumstance may suggest that petitioner's books reflected inventory accounts exceeding the audited inventory balance by P43,754,796.3o, the Court cannot automatically treat the difference as inventory deemed sold. Respondent had to establish, through competent evidence, that the difference more likely than not corresponded to unreported or undeclared sales during the assessment period. Respondent failed to make this showing. The Court notes that petitioner declared VATable sales aggregating PI96,707,767-41170 from 01 January 2014 to 30 June 2014, the assessed period. Before respondent could properly assess deficiency VAT on the alleged inventory deemed sold, respondent should have verified whether the units covered by the P43.754,796.3o difference had already formed part of the units sold and reported in petitioner's VAT returns, with the corresponding output VAT already remitted to the BIR. Otherwise, petitioner would be exposed to the risk of being assessed deficiency VAT on the same units despite having already declared the corresponding sales and paid the related VAT. Stated differently, respondent jumped to the conclusion that the P43,754,796.3o difference represented inventory deemed sold without first completing the necessary audit steps to establish that the supposed inventory items were not already included in petitioner's reported VATable sales. Respondent's finding therefore lacks the required factual had undeclared sales subject to VAT.t link between the alleged discrepancy and the conclusion that petitioner 168 Id., Folder I, p. 229. 169 See Note 5 (Inventories) under Notes to Financial Statements, id., p. 22 1. 170 Supra at note I 15.

CTA Case No. 11094 Euro Autocars, Inc. Doing Business Under the Name and Style of Lamborghini Manila and Bentley Manila v. The Commissioner of Internal Revenue DECISION x---- -------------- ---- --- -- ---- --------------------------- -- -------- - -- x The Court does not disregard respondent's observation that petitioner's records appeared inaccurate or incomplete, particularly in relation to the reclassification of "Bentley Inventory-Lifestyle" to "Cost of Sales-Unit Sales, Swapping of Tire of Unit Sold," and the reversal of the "work-in-progress" entry. These circumstances may justify further audit inquiry or the use of indirect methods. However, they do not, by themselves, prove that petitioner realized undeclared sales amounting to P43,754,796.3o. Respondent still had to trace the alleged inventory difference, identify the units or items involved, verify whether they had been sold, and determine whether petitioner failed to report the corresponding sales and output VAT. In fact, the assessment may be disputed through a reasonableness test showing that, more likely than not, the P43,754,796.3o difference had already formed part of the units sold and reported in petitioner's VAT returns. Applying the standard formula for cost of sales, petitioner's beginning inventory per trial balance as of 30 June 2014 of P45,061.432.83, plus domestic purchases of goods other than capital goods per VAT returns of P174.40o,8o5.09/71 less ending inventory per trial balance as of 30 June 2014 of P48,031.455·47, 172 yields a derived cost of sales of P171.430,782-45· This amount is lower than, but closely . approximates, the total cost of sales accounts per trial balance o f t 171 Domestic Purchases of Goods Month Ex hibit No. Division Docket Other tha n Ca pital Goods January 20 14 P l4 830.018 .00 " P-5" (BIR Fonn No. 2550M p. 475 February 20 14 72 287 732.75 " P-6" (BIR Form No. 2550M P. 477 March 2014 83 579 539.17 " P-7" (BIR Form No. 2550Q p. 479 April 2014 5 027.75 " P-8" (BIR Form No. 2550M p. 48 1 May 20 14 4605 .16 " P-9" (BIR Form No. 2550M p. 483 June 20 14 3 693 882.26 " P-10" (BIR Form No. 25500) P. 485 T otal Pl 74 400 805.09 Amounts were lifted from petitioner's "Inventory Accounts Per Trial Balance" (Ending Balance Column) and "Trial Balance" (Ending Balance Column), both as of30 June 20 14. Account T itle Ending Balance Inventory-Units Lamborghini P364 8 12.07 Inventory-Parts & Accessories Lamborghini 8 366 322.47 Inventory-Lifestyle Lamborghini 5 0 19 722.85 Work-in-Progress Lamborghini I 344 198.80 Inventory-Units Bentley 28 200 754.23 Inventory-Units OPOrrrade-in 4 000 000.00 lnventorv-Parts & Accessories Bentley 40 238.98 Inventory-Lifestyle Bentley 237 050.56 Work-in-Progress Bentley 458 355.51 T ota l P48,031 ,455.47

CTA Case No. 11094 Euro Autocars, Inc. Doing Business Under the Name and Style of Lamborghini Manila and Bentley Manila v. The Commissioner of Internal Revenue DECISION x------- ------------- --------- -------------------- -------- ---- -- ------ --x PI71,995,522.03.'73 Moreover, applying the 2014 cost ratio of 91.49%'74 to the declared VATable sales of PI96,707,767.41 for the assessed period results in an estimated declared cost of sales of P179,967,936.4o. The table below illustrates this reasonableness test. Total Inventory Accounts per Trial Balance as of 30 June 2014, p 45,061,432.83 Beginning Balance Column Add: Domestic Purchases of Goods Other than Capital Goods 174>4oo,8o5.o9 per VAT Returns for the Assessed Period Less: Total Inventory Accounts per Trial Balance as of 30 June 48 ,031>455·47 2014, Ending Balance Column Derived Cost of Sales as of 30 June 2014 PI71A30,782.45 Total Cost of Sales Accounts per Trial Balance as of PI7J,995J522.03 30 June 2014, Ending Balance Column Estimated Declared Cost of Sales as of 30 June 2014 Pt79,967,936·40 From the foregoing, since the derived cost of sales for the assessed period ofPI71,430,782.45 is fully covered by the estimated cost of sales based on the VAT returns, the Court may reasonably conclude that the P43,754,796.3o difference had already formed part of the units sold. Accordingly, while respondent may resort to the best evidence obtainable and indirect approaches in appropriate cases, respondent failed to justifY that the method used in this component reasonablyt 173 Amounts were li fted from petitioner's "Trial Balance" (Endi ng Balance Column) as of 30 June 20 14. Account T itle Ending Balance Cost of Sales-Units-Lambo P41 727 678.57 Cost of Sales-Li festyle-Lambo 22 749.21 Cost of Sales- Li festyle-ION-Lambo 43,257.50 Cost of Sales-Parts-Lambo 5 657,847.58 Cost of Sales-Parts-IDN-Lambo I 258 079. 13 Cost of Sales-Parts-Workshoo-Lambo 438 007.39 Cost of Sales-Units-Bentley 85 523 21 4.28 Cost of Sales-Li festyle-Bentley 2 845.43 Cost of Sales- Li festvle-ION-Bentlev 30 545.63 Cost of Sales-Parts-Bentley 36 759 755.27 Cost ofSalcs-Parts-IDN-Bentley 171 139.56 Cost of Sales-Parts-Workshop-Bentley 360 402.48 Total P1 71,99S,S22.03 174 Amounts were lifted from petitioner's 20 14 Audited Financial Statements (AFS). Cost of Sales P256,5 16,884.00 = 91.49% Sales 280,376,964.00

CTA Case No. 11094 Euro Autocars, Inc. Doing Business Under the Name and Style of Lamborghini Manila and Bentley Manila v. The Commissioner of Internal Revenue DECISION x----- - ------- --- ------ ------------ -- ---- -- - ------------------- - --------x established undeclared sales. The assessment rested on an inappropriate comparison of non-equivalent inventory figures and an unsupported assumption that the resulting difference represented inventory deemed sold. Simply put, respondent's finding lacks adequate factual and evidentiary support. Consequently, the fourth component of respondent's assessment for deficiency VAT on the alleged undeclared sales corresponding to unaccounted inventory deemed sold amounting to P43,754,796.3o must be cancelled. FIFTH COMPONENT: ASSESSMENT FOR DEFICIENCY VALUE-ADDED TAX (VAT) ON UNDECLARED OUTPUT VAT AMOUNTING TO Pn,s6o,2oo.75 The fifth component involves respondent's assessment of deficiency VAT on alleged undeclared output VAT amounting to P17,s6o,2o0.75· Petitioner argues that the alleged deficiency resulted from bookkeeping errors committed by its previous accountant. Petitioner claims that the detailed reconciliation it submitted to the BIR during the administrative proceedings shows that there was no undeclared sale. Upon correction of the error, petitioner maintains that the alleged undeclared sales should be reduced to zero. Hence, petitioner argues that the VAT assessment should be cancelled and withdrawn. Respondent counters that the assessment resulted from a comparison between the total output tax accounts per trial balance and the output tax declared for June 2014, which disclosed a discrepancy of P2,107,224.09. According to respondent, petitioner admitted that the discrepancy arose from its previous bookkeeper's failure to record various accounting entries, which petitioner sought to correct through its reconciliation. Respondent argues, however, that petitioner had already filed its books of accounts, GL, and tax returns with the BIR, and that these records had become final because petitioner did not amend them within the period provided under the NIRC of 1997, as amended. _ Respondent therefore maintains that petitioner may no longer correct t

CTA Case No. 11094 Euro Autocars, Inc. Doing Business Under the Name and Style of Lamborghini Manila and Bentley Manila v. The Commissioner of Internal Revenue DECISION x-----------------------------------------------------------------------x In its Protest against the FAN/76 petitioner sought to refute the assessment by submitting a purported reconciliation. According to petitioner, once the adjustments for the alleged inadvertent errors are made and the correct entries are recorded, the computation should zero out. However, such reconciliation can hardly be considered a true reconciliation sufficient to cancel or withdraw the assessment. Instead of explaining the discrepancy between the total output tax accounts per trial balance and the output tax declared in petitioner's VAT return, the reconciliation merely showed the alleged corrected or "should be" amounts of the output tax accounts per trial balance and resulted in negative output tax figures, detailed as follows: OUTPUT TAX- SALES LAMBO Po.o3 OUTPUTTAX - PARTS LAMBO (89,856.82) OUTPUT TAX - SERV LAMBO (97.554·76) OUTPUT TAX - SALES BENTLEY 4.851,428.56 OUTPUT TAX - PARTS BENTLEY (4,862,330.84) OUTPUT TAX - SERV BENTLEY (15.459·57) Total Output Tax Accounts as of 30 June 2014 (P213,773·4o) Less: Declared Output Tax for the Month of June 2014 28,293·26 Undeclared Output VAT (P242,o66.66) Divided by VAT Rate 12% Undeclared Sales from Undeclared Output VAT (P2,017,222.17) These results do not simply explain or eliminate the discrepancy found by respondent. Rather, they effectively suggest that petitioner's declared output tax for June 2014 was itself overstated or incorrect. If petitioner's own reconciliation were to be accepted, the necessary consequence would be to alter the output tax figure declared in petitioner's Second Quarterly VAT Return for 2014. This would, in effect, require an amendment of petitioner's VAT return. Petitioner may not do so at this stage. Under Section 6(A) 177 of the NIRC of 1997, as amended, petitioner could no longer modify, change, or amend its VAT return after the actual service of the notice of audit or investigation. As correctly pointed out by respondent, the law would _ lose force if a taxpayer, after the commencement of audit and after t 176 Exhibit "P-1 8", supra at note 19, pp. 407-408. 177 Supra at note 175.

CTA Case No. 11094 Euro Autocars, Inc. Doing Business Under the Name and Style of Lamborghini Manila and Bentley Manila v. The Commissioner of Internal Revenue DECISION x----------- ------- ---------------------- -------------------------- -- ---x SIXTH COMPONENT: DISALLOWED INPUT TAX ON CURRENT PURCHASES AMOUNTING TO P2o,6s2,441.81 The sixth component concerns respondent's disallowance of input tax on current purchases amounting to P2o,652,441.81 due to alleged noncompliance with invoicing and substantiation requirements. Petitioner maintains that compliant invoices and receipts fully support its input tax claims. Petitioner also relies on its SLS and the SLP submitted by its suppliers. Petitioner further asserts that it reported the purchases and paid the corresponding VAT. Thus, petitioner argues that the disallowance lacks basis and should be reversed. Respondent counters that the examination of petitioner's books of accounts showed that the input taxes claimed on local purchases failed to comply with the invoicing and substantiation requirements under Sections no(A) 178 and 113(A) and (B) 179 of the NIRC of 1997, as amended, and Section 4.no-81So of RR No. 16-2005.181 Respondent thus maintains that the amount of P2o,652,441.81 claimed as credit against petitioner's output taxes should be disallowed. We rule in favor of petitioner. Section 228182 of the NIRC of 1997, as amended, requires that a taxpayer be informed in writing of the law and the facts on which an assessment is made; otherwise, the assessment shall be void. This requirement is not a mere procedural formality. It embodies the taxpayer's right to due process by enabling the taxpayer to intelligentlyt 178 Supra at note 89. 179 Supra at note 90. 180 Supra at note 91. 181 Supra at note 87. 182 SEC. 228. Protesting of Assessment. - When the Commissioner or his duly authorized representative finds that proper taxes should be assessed, he shall first notify the taxpayer of hi s findi ngs[.] ... 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. (Emphasis and underscoring suppli ed)

CTA Case No. 11094 Euro Autocars, Inc. Doing Business Under the Name and Style of Lamborghini Manila and Bentley Manila v. The Commissioner of Internal Revenue DECISION x-------------------- ------------ ---------------------------------- -----x Pertinently, under Revenue Memorandum Order (RMO) No. 46-2004/ 90 when an assessment is based on TPI, the investigating RO must prepare and send a confirmation request to the taxpayer that served as the source of the TPI. Alternatively, the investigating RO must coordinate with the RDO having jurisdiction over the TPI source for the preparation and issuance of the confirmation request. If the TPI source confirms, in its reply, the amounts reflected in the TPI, the investigating RO must obtain the TPI source's sworn statement attesting to the veracity of the data provided. Verily, the aforesaid two (2) grounds for disallowance call for different defenses and different evidence. Respondent's communicated basis was therefore inaccurate. By repeatedly describing the disallowance as one ansmg from noncompliance with invoicing requirements, respondent failed to fairly inform petitioner that the actual basis of the disallowance was the alleged discrepancy between petitioner's purchases and TPI. Worse, the records do not provide ample information on the source, nature, and particulars of the TPI used. Without such information, petitioner could not meaningfully verify the supposed discrepancy or refute the assessment with specificity. I The Court cannot uphold an assessment where the ground communicated to the taxpayer differs from the basis actually reflected in the supporting schedule. Due process requires more than a statement of a conclusion. Respondent must state the facts and the law relied upon with sufficient clarity to allow the taxpayer to understand and contest the assessment. An assessment that mischaracterizes the basis of the disallowance deprives the taxpayer of a fair opportunity to be heard on the actual issue. The Supreme Court has consistently held that assessments issued in violation of the taxpayer's right to due process are void. In . Commissioner of Internal Revenue v. Avon Products Manufacturing,t 190 Additional Supplement and Guidelines in Handling Letter Notices with Discrepancies Arising from Data Matching Processes as defined in Revenue Memorandum Order (RMO) Nos. 34-2004 and 30- 2003 , as amended by RMO Nos. 42-2003 and 24-2004, which remai n Unserved, have been Served but are Without Response, or are Under Protest by Taxpayers.

CTA Case No. 11094 Euro Autocars , Inc. Doing Business Under the Name and Style of Lamborghini Manila and Bentley Manila v. The Commissioner of Internal Revenue DECISION x----------------------------------- - --- --- ----------------------------- x Inc., 9 the Supreme Court emphasized that the BIR must strictly comply 1 1 with the due process requirements under Section 228 of the NIRC of 1997, as amended, and RR No. 12-99/92 as amended by RR No. 18-2013193 and RR No. 22-2o2o. 94 The taxpayer must be informed of the factual and 1 legal bases of the assessment; otherwise, the assessment cannot stand. The same principle applies here. The Court does not rule that respondent may never rely on TPI in verifying a taxpayer's purchases and input tax claims. Respondent may use TPI in appropriate cases. However, if respondent relies on such information as basis for disallowance, respondent must adequately disclose the factual basis of the discrepancy and provide sufficient particulars to allow the taxpayer to respond. Respondent cannot state one ground in the assessment notices and rely on another ground in the supporting schedule. Accordingly, the disallowance of input tax on current purchases amounting to P2o,652.441.8I cannot be sustained. The PAN/95 FAN,t9 6 FDDA, 197 and Final Decision198 inaccurately characterized the basis of the disallowance as noncompliance with invoicing requirements, while Schedule 5199 shows that the disallowance actually stemmed from discrepancies based on TPI. This inconsistency, coupled with the absence of ample information on the source and particulars of the TPI, violated petitioner's right to due process. Consequently, the disallowance of input tax on current purchases amounting to P2o,652,441.81 is cancelled. SEVENTH COMPONENT: DISALLOWED INPUT TAX CARRIED OVER TO THE SUCCEEDING PERIOD AMOUNTING TO P478,651.75t 191 G.R. Nos. 20 1398-99, 03 October 20 18. 192 Supra at note 99. 193 Supra at note I 00. 194 Supra at note I 0 I. 195 Exhibit "P-1 6"/Exhibit "R-3", supra at note 14. 196 Exhibit "P-1 7", supra at note 17. 197 Exhibit "P-20", supra at note 24. 198 Exhibit "P-22"/Exhibit "R-6", supra at note 6. 199 Supra at note 189.

CTA Case No. 11094 Euro Autocars, Inc. Doing Business Under the Name and Style of Lamborghini Manila and Bentley Manila v. The Commissioner of Internal Revenue DECISION x--- - ---------------------- - --- ------------------------------------ -- ---x Under the Philippine VAT system, a taxpayer's output VAT may be reduced by allowable input VAT attributable to the taxable period. If the allowable input VAT exceeds the output VAT, the excess may be carried over to the succeeding quarter or quarters as creditable input tax.2 0 1 Conversely, if the output VAT exceeds the allowable input VAT, the difference results in VAT payable or deficiency VAT, as the case may be. 202 Here, the deficiency VAT assessment necessarily changes the VAT position of petitioner for the period in question. Since respondent determined that petitioner had deficiency VAT for the assessed period, the amount previously treated as excess input tax carried over to the succeeding period can no longer remain undisturbed in the computation. If respondent did not reduce the total allowable input tax by the excess input tax carried over to subsequent periods, a portion of the input tax that petitioner had already carried forward and could have utilized in the succeeding period would be applied or offset against the basic deficiency VAT for the assessed period. This would contradict the premise that the tax benefit from the excess input tax carried over redounds to the subsequent period, not to the period under assessment. The adjustment therefore prevents a distortion in the deficiency VAT computation. It ensures that the input tax carried over to the succeeding period is not simultaneously treated as available to reduce the basic deficiency VAT for the assessed period. Otherwise, petitioner would obtain the benefit of the same input tax twice: .first, as creditable input VAT carried over and utilized in the succeeding period; and second, as a reduction of the deficiency VAT assessed for the earlier period. The Court also recognizes the practical consequences of a contrary ruling. If the Court were to refuse the adjustment and allow thet 201 SEC. 110. Tax Credits. - (B) Excess Output or Input Tax. - If at the end of any taxable quarter the output tax exceeds the input tax, the excess shall be paid by the VAT-reg istered person. If the input tax exceeds the output tax, the excess s hall be carried over to the succeeding quarter or quarters. Any input tax attributable to the purchase o f capital goods or to zero-rated sales by a VAT-registered person may at his option be refunded or credited against other internal revenue taxes, subject to the provisions o f Section 11 2. (Emphasis and underscoring suppli ed) 202 See Commissioner of Internal Revenue v. Seagate Technology (Philippines), G.R. No. 153866, 11 February 2005.

CTA Case No. 11094 Euro Autocars, Inc. Doing Business Under the Name and Style of Lamborghini Manila and Bentley Manila v. The Commissioner of Internal Revenue DECISION x------ -- ----- ----------- ---- ------------------- -- -- -- ------------ ---- -- x excess input tax carried over to remain part of the allowable input tax for the assessed period, petitioner would have to amend its subsequent VAT returns to remove the excess input tax already utilized or carried forward in those later periods. This would impose an additional burden on petitioner and could expose petitioner to further BIR action if the subsequent returns are not correspondingly corrected. A contrary ruling would likewise impose an unnecessary administrative burden on respondent. The BIR would have to monitor this Court's decisions and the taxpayer's succeeding VAT returns to ensure that excess input tax credits already applied against a deficiency assessment are not again utilized in subsequent periods. Such a result would complicate the administration of the VAT system and create avoidable risks of double benefit. More importantly, if the Court were to allow the carry-over without first ascertaining that the excess input tax remained available and unused in the succeeding periods, petitioner could benefit twice from the same amount. Petitioner could enjoy the tax credit against output VAT in subsequent periods while also using the same amount to reduce or offset the deficiency VAT for the assessed period. This would prejudice the government and defeat the purpose of the carry-over mechanism. Accordingly, respondent correctly reduced the total allowable input tax by the excess input tax carried over to the succeeding period amounting to P478,651.75 · The adjustment is the refore sustained. Having already addressed the seven components of respondent's assessment for deficiency VAT, We will now address the propriety of respondent's imposition of increments due to late remittance of output VAT on sales transactions within the assessed period, but belatedly declared in the second half of 2014, during the FDDA stage. RESPONDENT'S IMPOSITION OF INCREMENTS DUE TO LATE REMITTANCE IS PROPER.t

CTA Case No. 11094 Euro Autocars, Inc. Doing Business Under the Name and Style of Lamborghini Manila and Bentley Manila v. The Commissioner of Internal Revenue DECISION x-----------------------------------------------------------------------x To recall, respondent initially assessed gross receipts not subjected to VAT in the total amount of P412,682,864.17 (see PAN203 and FAN204). After reinvestigation, respondent reduced the total amount of gross receipts not subjected to VAT from P4I2,682,864.17 to PI22,652,541.91. Respondent found that some of the items, amounting to P240,599,361.41, pertained to undated VSis that petitioner had already declared in 2013, with the corresponding VAT properly remitted. Respondent also found that other items, amounting to P 49,430,96o.8s, 205 were declared in the third and fourth quarters of 2014, although the vehicles had already been delivered and the corresponding VSis had been issued during the first semester of 2014. Accordingly, respondent no longer treated these items as undeclared sales, but imposed the corresponding statutory increments for the late remittance ofVAT. Section 248(A) 206 of the NIRC of 1997, as amended, imposes a twenty-five percent (25%) surcharge in case of failure to file any return and pay the tax due thereon on the date prescribed. Section 249(B) 207 of the NIRC of 1997, as amended, likewise imposes interest on any unpaid amount of tax from the date prescribed for payment until full payment thereof. These additions are imposed by operation of law once the taxpayer fails to timely pay the tax due. It is well-settled that the liability for VAT arises in the taxable period when the sale is made and the output VAT becomes due. A . taxpayer's subsequent declaration and payment of the VAT in a later t 203 Exhibit "P- 16"/Exhibit " R-3 ", supra at note 14. 204 Exhibit "P-17", supra at note 17. 205 Supra at note 120. 206 SEC. 248. Civil Penalties. - (A) There shall be imposed, in addition to the tax required to be paid, a penalty equivalent to twenty-five percent (25%) of the amount due, in the following cases: {I) Failure to tile any return and pay the tax due thereon as required under the provisi ons of this Code or rules and regulations on the date prescribed; or (2) Unless otherwise authori zed by the Commissioner, tiling a return with an internal revenue officer other than those with whom the return is required to be tiled; or (3) Failure to pay the deficiency tax within the time prescribed for its payment in the noti ce of assessment; or (4) Fai lure to pay the full or part of the amount of tax shown on any return required to be tiled under the provisions of this Code or rules and regulations, or the full amount of tax due for which no return is required to be til ed, on or before the date prescribed for its payment. 207 SEC. 249. Interest. - (B) Deficiency Interest. - Any deficiency in the tax due, as the term is defined in this Code, shall be subject to the interest prescribed in Subsection (A) hereof, which interest shall be assessed and coll ected from the date prescribed for its payment until the full payment thereof.

CTA Case No. 11094 Euro Autocars, Inc. Doing Business Under the Name and Style of Lamborghini Manila and Bentley Manila v. The Commissioner of Internal Revenue DECISION x----------------------------------------------------- ------------------x taxable period do not extinguish the surcharge and interest that accrued by reason of the failure to timely report and remit the tax. The statutory additions attach upon late payment and remain collectible notwithstanding eventual remittance of the basic VAT. Here, petitioner does not dispute that the amount of P49,43o,g6o.85208 was declared only in the third and fourth quarters of 2014. The records further show that the underlying transactions pertained to items delivered, and covered by VSis issued, during the first half of 2014, which is the period under assessment. Thus, even if respondent properly cancelled the basic deficiency VAT on these items after verifying that petitioner eventually declared them and remitted the corresponding VAT, respondent correctly imposed the statutory interest arising from petitioner's late remittance. The Court also finds no violation of petitioner's right to due process. Petitioner cannot claim lack of notice or surprise as to the late remittance of VAT on these transactions. Respondent confirmed only during reinvestigation, after petitioner submitted additional supporting documents, that the P49,43o,g6o.85 had already been declared in the third and fourth quarters of 2014. This necessarily showed that petitioner had already remitted the VAT thereon, albeit in later taxable periods. In the FDDA, 2 0 9 respondent accepted this explanation after examining petitioner's supporting documents, and consequently cancelled the corresponding portion of the basic deficiency VAT assessment. Given these circumstances, respondent could not have been reasonably expected to inform petitioner of the late remittance finding at the PAN or FAN stage. Respondent arrived at this finding only during reinvestigation, after petitioner submitted documents showing that the transactions were declared in the third and fourth quarters of 2014. Since petitioner had the opportunity to explain the transactions, submit supporting documents, and secure the cancellation of the basic deficiency VAT on the P49,43o,g6o.85/ 10 petitioner was accorded due process. t 208 Supra at note 120. 209 Exhibit " P-20", supra at note 24. 21 0 Supra at note 120.

CTA Case No. 11094 Euro Autocars, Inc. Doing Business Under the Name and Style of Lamborghini Manila and Bentley Manila v. The Commissioner of Internal Revenue DECISION x-------------------------------------- - --------------------------------x In other words, respondent did not change the nature of the assessment in a manner that deprived petitioner of the opportunity to respond. Instead, respondent reduced the assessment after considering petitioner's own evidence and imposed only the statutory increments that necessarily flowed from petitioner's belated declaration and remittance of VAT. It is also worth noting that petitioner did not refute respondent's finding that the items sold in connection with the transactions involved had already been delivered and the corresponding VSis had been issued during the first half of 2014. Thus, respondent's determination of the taxable event that triggered the imposition ofVAT and the prescribed time for remittance of VAT will prevail. However, this Court cannot uphold the twenty-five percent (25%) surcharge imposed on the late remittance ofVAT on sales transactions aggregating P49,430,960.85, considering that petitioner had already filed the VAT returns and paid the VAT due for the first and second quarters of 2014. Under Section 248(A) 2 11 of the NIRC of 1997, as amended, the 25% surcharge shall be imposed only in the following cases: (1) failure to file any return and pay the tax due thereon as required under the provisions of this Code or rules and regulations on the date prescribed; or (2) unless otherwise authorized by the Commissioner, filing a return with an internal revenue officer other than those with whom the return is required to filed; or (3) failure to pay the deficiency tax within the time prescribed for its payment in the notice of assessments; or (4) failure to pay the full or part of the amount of tax shown on any return required to be filed under the provisions of this Code or rules and regulations, or the full amount of the tax due for which no return is required to be filed, on or before the date prescribed for its payment. Relevantly, RMC No. 43-20222 12 clarified that the 25% surcharge shall not be imposed on an amendment of a tax return if the taxpayer filed the initial tax return on or before the prescribed due date. On the other hand, the 25% surcharge shall be imposed on a tax deficiency found during audit if the particular tax return under audit was filed beyond the prescribed period or due date.t 21 1 Supra at note 206. 212 Non-Imposition of Surcharge on Amended Tax Returns.

CTA Case No. 11094 Euro Autocars, Inc. Doing Business Under the Name and Style of Lamborghini Manila and Bentley Manila v. The Commissioner of Internal Revenue DECISION x---------------------- ----------------------------- -------------------- x Clearly, the imposition of the 25% surcharge under the present circumstances could only fall under the first instance, i.e., failure to file any return and pay the tax due thereon on the date prescribed. However, petitioner timely filed its VAT returns for the first and second quarters of 2014 and paid the VAT due thereon. The belated declaration of certain sales transactions in the third and fourth quarters of 2014 may warrant the imposition of interest on the late remittance ofVAT, but it does not justify the imposition of the 25% surcharge where petitioner did not fail to file the relevant returns within the prescribed period. Accordingly, respondent's imposition of the 25% surcharge is improper and must be cancelled. Only the imposition of interest on the late remittance of output VAT on sales transactions within the assessed period but belatedly declared in the third and fourth quarters of 2014 is sustained. PETITIONER IS NOT LIABLE FOR COMPROMISE PENALTY. Respondent imposed on petitioner a compromise penalty in the amount of P85,ooo.oo. The Court finds no legal basis for such imposition. Under RMO No. 01-90, 213 as amended by RMO No. 07-2015,214 compromise penalties are merely amounts suggested in settlement of criminal liability. They may not be imposed or exacted from a taxpayer who refuses to pay them. It is well-settled that the Court has no jurisdiction to compel a taxpayer to pay a compromise penalty. By its very nature, a compromise penalty implies a mutual agreement between the parties as to the matter compromised. Thus, the choice of whether to pay the compromise penalty distinctly belongs to the taxpayer.2 1s Absent any showing that _ petitioner consented to the compromise penalty, its imposition must b e t 213 Amendments to the Provisions of a "Revised Schedule of Compromise Penalties" for Internal Revenue Violations as Prescribed in RMO 26-86. 214 The Revised Consol idated Schedule ofCompromise Penalties fo r Violations of the National Internal Revenue Code. 215 The Philippines International Fair, Inc. v. The Coffector of Internal Revenue, et at., G.R. Nos. L-12928 & L-1 2932, 3 1 March 1962.

CTA Case No. 11094 Euro Autocars, Inc. Doing Business Under the Name and Style of Lamborghini Manila and Bentley Manila v. The Commissioner of Internal Revenue DECISION x------------------------ - -------- - --- ---------------- - -----------------x Component Adjusted Computation Amount (h) VAT Payments 2,930,424.41 119 (i) = (g) - (h) Adjusted Basic Deficiency Output VAT Due P19,909J52.9.12. (m) Interest up to Date of Remittance p 444·92.3.2.0110 Notwithstanding the foregoing determination that petitioner is liable for deficiency VAT, the Court must proceed to determine whether the prescriptive period for respondent to collect the assessed deficiency has already expired. Although petitioner did not raise prescription as an issue, the Court must resolve it because prescription directly affects the enforceability of the tax liability. The Court cannot properly order petitioner to pay the amount computed above if respondent has already lost the right to collect it by prescription. In the case of Commissioner of Internal Revenue v. Pilipinas Shell Petroleum Corporation, 221 the Supreme Court held that one of the ways by which the CIR may initiate a judicial action for collection of a tax is through the filing of an answer to the taxpayer's petition for review wherein payment of the tax is prayed for so as to stop the running of the prescriptive period in cases where the CIR issued an assessment and the taxpayer appealed the same to the CTA, viz: Unlike summary administrative remedies, the government's power to enforce the collection through judicial action is not conditioned upon a previous valid assessment. Sections 318 and 319(a) of the 1977 NIRC expressly allowed the institution of court proceedings for collection of taxes without assessment within five years from the filing of the tax return and 10 years from the discovery of falsity, fraud , or omission, respectively. A judicial action for the collection of a tax is begun: (a) by the filing of a complaint with the court of competent jurisdiction, or (b) where the assessment is appealed to the Court of Tax Appeals, by filing an answer to the taxpayer's petition for review wherein payment of the tax is prayed for. 219 From respondents' filing of their excise tax returns in the years . 1992 to 1997 until the lapse of the five-year prescriptive period under t Supra at note 117. 220 Supra at note 120. 221 G.R. Nos. 197945 & 204 11 9-20, 09 July 20 18; Citations om itted, emphas is in the original text and supplied, underscoring supplied .

CTA Case No. 11094 Euro Autocars, Inc. Doing Business Under the Name and Style of Lamborghini Manila and Bentley Manila v. The Commissioner of Internal Revenue DECISION x----------------------------------------------------------- - -----------x Section 318 of the 1977 NIRC in the years 1997 to 2002, petitioner did not institute any judicial action for collection of tax as aforedescribed. Instead, petitioner relied solely on summary administrative remedies by issuing the collection letters and warrants of garnishment and distraint and/or levy without prior assessment against respondents. Sifting through records, it can be said that petitioner's earliest attempts to judicially enforce collection of respondents' alleged deficiency excise taxes were his Answers to respondents' Petitions for Review filed before the CTA in Case Nos. 5657, 5728, and 6547 on August 6, 1998, March 2, 1999, and November 29, 2002, respectively. Verily, in a long line of jurisprudence, the Court deemed the filing of such pleadings as effective tax collection suits so as to stop the running ofthe prescriptive period in cases where: (a) the CIR issued an assessment and the taxpayer appealed the same to the CTA; (b) the CIR filed the answer praying for the payment of tax within five years after the issuance of the assessment; and (c) at the time of its filing, jurisdiction over judicial actions for collection of internal revenue taxes was vested in the CTA, not in the regular courts. Considering that herein respondent's Answer2 22 is what crucially suspended the running of the prescriptive period for collection, and in that pleading, respondent expressly prayed that the Court order petitioner to pay the deficiency VAT for the taxable period from 01 January 2014 to 30 June 2014, the Court must first determine whether respondent may still lawfully exercise the right to collect the assessed deficiency VAT. THE PRESCRIPTIVE PERIODS UNDER SECTIONS 203, 222 AND 223 OF THE NATIONAL INTERNAL REVENUE CODE (NIRC) OF 1997, AS AMENDED. Section 203 of the NIRC of 1997, as amended, provides for the prescriptive period in the assessment and collection of internal revenue taxes:t 222 Supra at note 35.

CTA Case No. 11094 Euro Autocars, Inc. Doing Business Under the Name and Style of Lamborghini Manila and Bentley Manila v. The Commissioner of Internal Revenue DECISION x-----------------------------------------------------------------------x SEC. 203. Period of Limitation Upon Assessment and Collection. - Except as provided in Section 222, internal revenue taxes shall be assessed within three (3) years after the last day prescribed by law for the filing of the return, and no proceeding in court without assessment for the collection of such taxes shall be begun after the expiration of such period: Provided, That in a case where a return is filed beyond the period prescribed by law, the three (3)-year period shall be counted from the day the return was filed. For 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. In Commissioner of Internal Revenue v. Court of Tax Appeals Second Division and QL Development, Inc.223 (QL Development), the Supreme Court, citing the case of Commissioner of Internal Revenue v. United Salvage and Towage (Phils.), Inc.224 (United Salvage), ruled that in cases of valid assessment issued within the three (3)-year period, the BIR has another three (3) years to collect the taxes reckoning from the date the assessment notice had been released, mailed or sent to the taxpayer: The statute of limitations on assessment and collection of national internal revenue taxes was shortened from five (5) years to three (3) years by virtue of Batas Pambansa Big. 700. Thus, petitioner has three (3) years from the date of actual filing of the tax return to assess a national internal revenue tax or to commence court proceedings for the collection thereof without an assessment. However, when it validly issues an assessment within the three (3)-year period, it has another three (3) years within which to collect the tax due by distraint, levy, or court proceeding. The assessment of the tax is deemed made and the three (3)-year period for collection of the assessed tax begins to run on the date the assessment notice had been released, mailed or sent to the taxpayer. 225 However, where the assessment itself alleges a false or fraudulent return with intent to evade tax, Section 222 extends the prescriptive period, as follows:t 223 G. R. No. 258947, 29 March 2022; Emphasis and ital ics in the original text. 224 G. R. No. 197515, 02 July 20 14. 225 Citation omitted, italics in the origina l text and emphasis suppli ed.

CTA Case No. 11094 Euro Autocars, Inc. Doing Business Under the Name and Style of Lamborghini Manila and Bentley Manila v. The Commissioner of Internal Revenue DECISION x-------- ---- ---- --- ------------- ----- -------------- ------ ---------- ---- x The five-year period for collection of taxes only applies to assessments issued within the extraordinary period of 10 years in cases of false or fraudulent return or failure to file a return. Indeed, Section 222 of the NIRC, as amended, provides: SEC. 222. Exceptions as to Period of Limitation ofAssessment and Collection ofTaxes. - (a) In the case of a false or fraudulent return with intent to evade tax or of failure to file a return, the tax may be assessed, or a proceeding in court for the collection of such tax may be filed without assessment, at any time within ten (10) years after the discovery of the falsity, fraud or omission: Provided, That in a fraud assessment which has become final and executory, the fact of fraud shall be judicially taken cognizance of in the civil or criminal action for the collection thereof. (c) Any internal revenue tax which has been assessed within the period of limitation as prescribed in paragraph (a) hereof may be collected by distraint or levy or by a proceeding in court within five (5) years following the assessment of the tax. 126 Meanwhile, Section 223 of the NIRC of 1997, as amended, provides for instances when the running of the statute of limitation may be suspended, to wit: SEC. 223. Suspension of Running of Statute of Limitations. - The running of the Statute of Limitations provided in Sections 203 and 222 on the making of assessment and the beginning of distraint or levy or a proceeding in court for collection, in respect of any deficiency, shall be suspended for the period during which the Commissioner is prohibited from making the assessment or beginning distraint or levy or a proceeding in court and for sixty (6o) days thereafter; when the taxpayer requests for a reinvestigation which is granted by the Commissioner; when the taxpayer cannot be located in the address given by him in the return filed upon which a tax is being assessed or collected: Provided, that, if the taxpayer informs the Commissioner of any change in address, the running of the Statute of Limitations will not be suspended; when the warrant of distraint or levy is duly served _ upon the taxpayer, his authorized representative, or a member of his t 226 See Commissioner of Internal Revenue v. Court of Tax Appeals Second Division and QL Development, Inc., supra at note 223 ; Empasis and italics in the original text.

CTA Case No. 11094 Euro Autocars, Inc. Doing Business Under the Name and Style of Lamborghini Manila and Bentley Manila v. The Commissioner of Internal Revenue DECISION x-----------------------------------------------------------------------x household with sufficient discretion, and no property could be located; and when the taxpayer is out of the Philippines.227 These grounds are limitative and must be strictly construed, being exceptions to a statute designed to protect taxpayers from stale claims.228 Pertinently, the mere characterization of a protest as one for "reinvestigation" does not, by itself, suspend the running of the prescriptive period; the request must have been granted by the CIR or the latter's duly authorized representative, and the burden of proving that the request was granted rests on the CIR. 22 9 THE ORDINARY THREE (3)-YEAR PRESCRIPTIVE PERIOD TO COLLECT APPLIES TO THE SUBJECT VALOE- ADDED TAX (VAT) ASSESSMENT. Nothing in the PAN 2 3° FAN 2 31 FDDA 2 32 or Final Decision 2 33 under I I I review shows that respondent invoked the presumption of prima facie fraud in assessing petitioner for deficiency VAT. Accordingly, the extraordinary 10-year assessment period and five (s)-year collection period under Section 222(a) 234 of the NIRC of 1997, as amended, do not apply to the subject deficiency VAT assessment. Instead, the ordinary three (3)-year prescriptive periods under Section 2032 35 of the NIRC of the deficiency VAT at issue in this case. t 1997, as amended, govern respondent's ~mthority to assess and collect 221 Emphasis supplied and italics in the original text. 228 Commissioner of Internal Revenue v. Standard Insurance Co., Inc., G.R. No. 259729, 17 November 2025. 229 China Banking Corporation v. Commissioner of Internal Revenue, G.R. No. 172509, 04 February 20 15; Bank of the Philippine Islands v. Commissioner of Internal Revenue, G.R. No. 139736, 17 October 2005. 230 Ex hibit "P-1 6"/Exhibit "R-3", supra at note 14. 231 Exhibit "P-17", supra at note 17. 232 Exhibit "P-20", supra at note 24. 233 Exhibit "P-22"/Exhibit "R-6", supra at note 6. 234 SEC. 222. Exceptions as to Period of Limitation ofAssessment and Collection of Taxes. - (a) In the case of a false or fraudulent return with intent to evade tax or of failure to file a return, the tax may be assessed, or a proceeding in court for the collection of such tax may be filed without assessment, at any time within ten ( I 0) years after the discovery of the falsity, fraud or omission: Provided, That in a fraud assessment which has become final and executory, the fact of fraud shall be judicially taken cognizance of in the civil or criminal action for the collection thereof. 235 Supra at p. 69.

CTA Case No. 11094 Euro Autocars, Inc. Doing Business Under the Name and Style of Lamborghini Manila and Bentley Manila v. The Commissioner of Internal Revenue DECISION x----------- --- -- --- - -- ------------- -- --------------------- --- - - -- ---- --x THE RELEVANT DATES ARE ESTABLISHED THROUGH THE PARTIES JOINT STIPULATION OF FACTS AND THE EVIDENCE ON RECORD. The following dates are material to the computation of the prescriptive period: Respondent issued the FAN 2 36 (with ANs2 37) on 27 June 2016. Petitioner received the same on 01 July 2019 and timely filed a Request for Reinvestigation (Protest against the FAN) 2 38 on 29 July 2016. Respondent received such protest on the same date.2 39 Thereafter, respondent, through RD Geraldine, issued the FDDA240 on 19 June 2017 . Petitioner received the same on 21 June 201i41 and timely elevated it to respondent, himself or herself, via a Request for Reconsideration (Protest against the FDDA)242 on 20 July 2017. Finally, on 20 January 2023, respondent issued the Final Decision243 under review, which affirmed the FDDA in its entirety. PETITIONER'S REQUEST FOR REINVESTIGATION (PROTEST AGAINST THE FORMAL ASSESSMENT NOTICE [FAN]) TEMPORARILY TOLLED THE PRESCRIPTIVE PERIOD TO COLLECT. Section 223244 of the NIRC of 1997, as amended, quoted above, provides that a taxpayer's request for reinvestigation suspends the running of ~rescriptive period for collection when the CIR grants the request. Q 236 Exhibit "P-1 7", supra at note 17. 237 Exhibit "R-4", supra at note 16. 238 Exhibit "P- 18", supra at note 19. 239 Id. 240 Exhibit "P-20", supra at note 24. 241 Par. 3.7, Ill. Statement of the Facts and of the Case, JSFI, supra at note 46, p. 359. 242 Exhibit "P-21 ",supra at note 26. 243 Exhibit " P-22"/Exhibit " R-6", supra at note 6. 244 Supra at pp. 70-7 1.

CTA Case No. 11094 Euro Autocars, Inc. Doing Business Under the Name and Style of Lamborghini Manila and Bentley Manila v. The Commissioner of Internal Revenue DECISION X- ----------------------------------------------------------------------X The records establish that petitioner filed a Request for Reinvestigation (Protest against the FAN) on 29 July 2016. 245 The parties likewise stipulated that the BIR, through the Letter dated 22 August 2016 246 signed by RD Amora, informed petitioner that such request had been granted and petitioner was required to submit all relevant supporting documents within 6o days from the filing thereof. Besides, the said Letter expressly states "the entire tax docket, together with [petitioner's] protest, will be forwarded to the VAT Audit Section, Assessment Division, ... for re-evaluation and re-investigation." This affirmative act effectively granted petitioner's Request for Reinvestigation (Protest against the FAN). Petitioner, thereafter, timely filed its Supplemental Protest2 47 on 27 September 2016 and submitted additional supporting documents for the BIR's consideration. Respondent, acting through RD Geraldina, subsequently issued the FDDA2 48 (with Amended ANs2 49) on 19 June 2017. In the FDDA, respondent expressly considered petitioner's Request for Reinvestigation (Protest against the FAN) 2 so and Supplemental Protest and substantially reduced the assessed deficiency VAT. These circumstances confirm that respondent granted the request and conducted an actual reinvestigation of the assessment. In Bank of the Philippine Islands v. Commissioner of Internal Revenue, 2 s1 the Supreme Court explained that the CIR need not expressly grant a request for reinvestigation. The Court may infer the grant from the acts of the CIR or authorized BIR officials in response to the taxpayer's request. The actual conduct of a reinvestigation and the resulting issuance of a reduced or amended assessment constitute circumstances showing that the BIR granted the request. Accordingly, the substantial reduction of the original assessment in the FDDA further demonstrates that respondent acted favorably on petitioner's Request for Reinvestigation (Protest against the FAN). 245 Indeed, the law prescribing a limitation of actions for the collection of taxes is beneficial both to the State and to its citizens; Exhibit " P-1 8", supra at note 19. tot 246 Supra at note 21. 247 Exhibit "P-1 9", supra at note II 0. 248 Exhibit "P-20", supra at note 24. 249 Exhibit "R-5", supra at note 23. 250 Exhibit "P-2 1",supra at note 26. 251 Supra at note 229.

CTA Case No. 11094 Euro Autocars, Inc. Doing Business Under the Name and Style of Lamborghini Manila and Bentley Manila v. The Commissioner of Internal Revenue DECISION x---------------------- -------------------------------------------------x thereafter. In this regard, Section 4(z) 259 of RA 11469,260 which declared a national emergency due to the Coronavirus Disease 2019 (COVID-19) pandemic, and the subsequent issuance of RR Nos. n-202o261 and 12-202o, 262 must be taken into account. These regulations excluded from the computation of prescriptive periods the days when affected areas were under Enhanced Community Quarantine (ECQ) or Modified Enhanced Community Quarantine (MECQ), recognizing that the BIR (specifically, RevReg No. 8-Makati City, which conducted the audit, and respondent's National Office,263 where the request for reconsideration was pending) could not perform its audit, assessment, or collection functions during such periods. Accordingly, in computing the prescriptive period to collect from 2020 to 2022, the following restrictive quarantine periods imposed in the National Capital Region (NCR) must be considered: Imposed Quarantine Number Dates Restriction of days COVID-19-related Issuances oi June 2020 to GCQ IS Inter-Agency Task Force (IATF) Resolution No. IS June 2020 40, 27 May 2020 I6 June 2020 to GCQ IS IATF Resolution No. 46-A, IS June 2020 30 June 2020 01 July 2020 to GCQ IS IATF Resolution No. so-A, 29 June 2020 IS July 2020 I6 July 2020 t o GCQ I6 IATF Resolution No. ss-A, 14 July 2020 31 ]uly 2 0 2 0 01 August 2020 to GCQ 3 IATF Resolution No. 6o-A, 30 July 2020 03 August 2020 259 Section 4. Authorized Powers. - Pursuant to Article VI. action 23 (2) of the Constitution, the President is hereby authorized to exerci se powers that are necessary and proper to carry out the declared national pol icy. The President shall have the power to adopt the following temporary emergency measures to respond to crisis brought by the pandemic: (z) Move statutory deadlines and timelines for the filing and submission of any document, the payment of taxes, fees, and other charges required by law, and the grant of any benefit, in order to ease the burden on individuals under Community Quarantine[.] 260 AN ACT DECLARING THE EXISTENCE OF A NATIONAL EMERGENCY ARISING FROM THE CORONAVIRUS DISEASE 20 19 (COVID-19) SITUATION AND A NATIONAL POLICY IN CONNECTION THEREWITH, AND AUTHORIZING THE PRESIDENT OF TH E REPUBLIC OF THE PHILIPPINES FOR A LIMITED PERIOD AND SUBJECT TO RESTRICTIONS, TO EXERCISE POWERS NECESSARY AND PROPER TO CARRY OUT THE DECIDED NATIONAL POLICY AND FOR OTHER PURPOSES. 261 Amends Section 2 of Revenue Regu lations No. I 0-2020 relative to the extension of statutory deadlines and timeliness for the fi ling and submissi on of any document and the payment of taxes pursuant to Section 4(z) of Republic Act No. I 1469, otherw ise known as "Bayanihan to Heal as One Act". 262 Amends Revenue Regulations No. I 0-2020, as amended by Revenue Regulations No. I 1-2020, relative to the extension of statutory dead li nes and timeliness for the filing and submission of any docum ent and the payment of taxes pursuant to Section 4(z) of Republic Act No. I I469, otherwise known as "Bayanihan to Heal as One Act". 263 Situated at BIR National Office Building, Senator Mi riam Defensor-Santiago Avenue, Diliman, Quezon City.

CTA Case No. 11094 Euro Autocars, Inc. Doing Business Under the Name and Style of Lamborghini Manila and Bentley Manila v. The Commissioner of Internal Revenue DECISION x- ------ -------- ------ --- --- --- --- --- ---- --- --------- --- -- ----- - ---- ----x Imposed Quarantine Number Dates Restriction of days COVID-19-related Issuances 04 August 2020 to MECQ 15 Memorandum from the Executive Secretary 18 August 2020 dated 03 August 2020 19 August 2020 to GCQ 13 IATF Resolution No. 64, 17 August 2020 31 August 2020 01 September 2020 to GCQ 30 IATF Resolution No. 66, 27 August 2020 30 September 2020 01 October 2020 to GCQ 31 IATF Resolution No. 75-A, 28 September 2020 31 October 2020 01 November 2020 to GCQ 30 IATF Resolution No. 81, 26 October 2020 30 November 2020 01 December 2020 to GCQ 31 Memorandum from the Executive Secretary 31 December 2020 from 01 December 2020 01 January 2021 to GCQ 31 Memorandum from the Executive Secretary 31 January 2021 from 01 January 2021 01 February 2021 to GCQ 28 Memorandum from the Executive Secretary 28 February 2021 from 29 January 2021 01 March 2021 to GCQ 28 Memorandum from the Executive Secretary 28 March 2021 from 27 February 2021 29 March 2021 to ECQ/ MECQ 33 Memorandum from the Executive Secretary 30 April 2021 from 27 March 2021; IATF-EID Resolution No. 108-A, o4April2o21; IATF-EID Resolutio n No. 109-A, 10 Ap ril 2021 01 May 2021 to MECQ 14 IATF-EID Resolu tion No. 113-A, 29 April2021 14 May2o21 15 May 2021 to GCQ 17 IATF-EID Resolution No. us-A, 13 May 2021 31 May 2021 01 June 2021 to GCQ 30 IATF-EID Resolution No. u8-A, 31 May 2021; 30 June 2021 IATF-EID Resolution No. 121, 14 June 2021 01July 2021 to GCQ 31 IATF-EID Resolution No. 124, s. 2021, 30 June 31 July 2021 2021; lATF-EID Resolution No. 127-E, 15 July 2021 01 August 2021 to GCQ 5 os August 2021 IATF-EID Resolution No. 130-A, 29 July 2021 o6 August 2021 to ECQ 15 20 August 2021 21 August 2021 to 11 IATF-EID Resolution No. 134, 19 August 2021 31 August 202.1 01 September 20 21 to 7 IATF-EID Resolution No. 135-A, :z.6 August MECQ 07 September 2021 2021 o8 September 2021 to 8 IATF-EID Resolution No. 1371 07 September 15 Sep tember 2021 2021 16 September 2021 to GCQ 15 IATF-EID Resolution No. 136-F, o6 September 30 September 2021 2021 16 September 2021 to Alert Levels 4, t8t Guidelines on the Pilot Implementation of Alert 15 March 2022 3, 2 and 1264 Levels System for COVID-19 Response in the National Capital Region, 13 September 2021; IATF-EID Resolution No. 141-A, 30 September 2021; IATF-EID Resolution No. 143-A, 14 October 2021 264 The highest Alert Level imposed in Metro Mani la was Al ert Level 4, during w hich government agencies, such as the BIR, were a lready required to be fully operational.

CTA Case No. 11094 Euro Autocars, Inc. Doing Business Under the Name and Style of Lamborghini Manila and Bentley Manila v . The Commissioner of Internal Revenue DECISION x------------------------ ------- ---- --------- -------------- --- ----- ---- -x From the foregoing tabulation, aside from 16 March 2020 to 31 May 2020 per RMC No. 136-2o2o/6s NCR was also under: (1) MECQ from 04 August 2020 to 18 August 2020 for fifteen (15) days ; (2) ECQ/MECQ from 29 March 2021 to 14 May 2021 for forty-seven (47) days; and (3) ECQ/MECQ from o6 August 2021 to 15 September 2021 for forty-one (41) days. Pursuant toRR Nos. n-2o2o266 and 12-2020/67 the Court must add 6o days to each of these quarantine periods. Accordingly, these periods suspended the running of the prescriptive period for collection for an aggregate of 283 days. 268 When combined with the 137-day suspension recognized under RMC No. 136-2020/69 a total of 420 days (i.e., 137 days per RMC No. 136-2020 and 283 days per RR Nos. u-2020 and 12-2020) must be excluded in computing the prescriptive period for collection. In sum, applying the ordinary three (3)-year period, as adjusted for the 301-day suspension resulting from petitioner's granted Request for Reinvestigation (Protest against the FAN) 270 and the 420-day suspension arising from the COVID-19 emergency issuances, the computation of the prescriptive period to collect the deficiency VAT at issue is as follows : Date Event 27 June 2016 Issue date of the FAN 22 August 2016 Approval of the Request for Reinvestigation (Protest against the FAN) 19 June 2017 Issue date of the FDDA 27 June 2019 End of the three (3)-year prescriptive period to collect after the issuance of the FAN 265 Clarification on the Suspension of the Statute of Limitation Provided Under Revenue Regulations {RR) No. 11-2020. 266 Supra at note 261 . 267 Supra at note 262. 268 04 August 2020 to 18 August 2020 15 + 60 75 29 March 202 1 to 14 May 202 1 47 + 60 107 06 August 202 1 to 15 September 2021 41 + 60 101 Total 283 269 Supra at note 265. 270 Exhibit " P-18", supra at note 19.

CTA Case No. 11094 Euro Autocars, Inc. Doing Business Under the Name and Style of Lamborghini Manila and Bentley Manila v. The Commissioner of Internal Revenue DECISION x------------------------------------------------------ - ----------------x Date Event 23 April 2020211 End of the three (3)-year prescriptive period to collect after considering the 301-day suspension resulting from petitioner's granted Request for Reinvestigation (Protest against the FAN) 17 June 20212 72 End of the three (3)-year prescriptive period to collect after considering the .po-day suspension due to COVID-19 emergency issuances 15 May 2023 Respondent's filing of his or her Answe~73 demanding the payment ofthe deficiency VAT. QL Development instructs that the BIR validly commences collection only through distraint, levy, or a judicial proceeding. The judicial remedy may take the form of either an independent action for collection or, when the taxpayer has appealed the assessment to this Court, the filing of an answer that expressly prays for payment of the assessed tax. In this case, nothing in the case records, including the BIR Records, shows that respondent issued and served upon petitioner a Warrant of Distraint and/or Levy (WDL) or availed of any other summary remedy to collect the deficiency VAT at issue. Thus, respondent undertook only one act of collection: the filing of the Answer before this Court on 15 May 2023, in which respondent prayed that the Court order petitioner to pay the assessed deficiency VAT. Moreover, respondent issued the Final Decision274 under review only on 20 January 2023. This date marked the earliest point at which . respondent could validly pursue collection because, as the Supreme 271 t Last day of period to collect 27 June 20 19 Add: COVID-1 9 related suspension 301 days Last day of period to collect after suspension 23 April 2020 due to grant of reinvestigation 272 Last day of period to collect after suspension due 23 April 2020 to grant of reinvestigation Add: COVID-19 related suspension 420 days Last day of period to collect after COVID-19 17June2021 related suspension 273 Supra at note 35. 274 Exhibit "P-22"/Exhibit " R-6", supra at note 6.

CTA Case No. 11094 Euro Autocars , Inc. Doing Business Under the Name and Style of Lamborgh ini Manila and Bentley Manila v. The Commissioner of Internal Revenue DECISION x------ --------------- ------ - - --- ---- - ------ -------- --- ------ ---------- - x Court categorically held in Light Rail Transit Authority v. Bureau of Internal Revenue, represented by the Commissioner of Internal Revenue,275 a WDL issued during the pendency of an administrative appeal is void. Unfortunately, by 20 January 2023, respondent's right to collect had already prescribed. As earlier illustrated, after accounting for the 301-day suspension resulting from petitioner's granted Request for Reinvestigation (Protest against the FAN) 2 76 and the additional 420-day suspension arising from the COVID-19 emergency issuances, the three (3)-year prescriptive period for collection ended on 17 June 2021. Respondent's delay in resolving the administrative appeal and issuing the Final Decision therefore allowed the prescriptive period to lapse. Indeed, by the time respondent filed the Answer on 15 May 2023, the right to collect had already been barred by prescription for approximately one (1) year, eleven (n) months and seven (7) days. In the recent case of Commissioner ofInternal Revenue v. Standard Insurance Co., Inc. 2 77 (Standard Insurance), the Supreme Court emphasized that the statute of limitations on tax collection does not constitute a mere technical defense. Rather, it confers a substantial right upon the taxpayer. Once the government allows the prescriptive period to lapse through its inaction, it loses the remedy of collection, while the taxpayer acquires the right to finality, thus: c. Effect ofprescription: the tax obligation is extinguished The statute of limitations on the collection of taxes is not a mere technical defense but a substantial right, legislatively designed to afford protection to the taxpayer against unreasonable and stale claims. When the government sleeps on its right and lets the prescribed period elapse, it loses the remedy and the taxpayer gains a right to finality. In Bank of the . Philippine Islands v. CIR, the Court stressed that the law on t 275 G.R. No. 23 1238, 20 June 2022. 276 Exhi bit " P-1 8", supra at note 19. 277 Supra at note 228; Citations omitted, italics in the original text, emphasis and underscoring supplied.

CTA Case No. 11094 Euro Autocars, Inc. Doing Business Under the Name and Style of Lamborghini Manila and Bentley Manila v. The Commissioner of Internal Revenue DECISION x-----------------------------------------------------------------------x prescription should be liberally construed in favor of the taxpayer, and that the exceptions or grounds for suspension should be strictly construed. The inaction of the BIR for an inordinate length of time, to the prejudice of the taxpayer who is entitled to certainty and repose, cannot be simply brushed aside. The present case exemplifies why the statutes of limitation are in place. The deficiency DST assessment was issued in 2004, and Standard Insurance promptly challenged it. The BIR then let more than a decade pass without taking action to enforce collection or to finally resolve the protest. It was only in 2017, by which time key officers may have changed and documents could have been lost or faded, that the CIR decided to issue a final demand. By then, the taxpayer had been lulled into a false sense of security that perhaps the BIR had dropped its claim. To permit the BIR to revive the assessment after such a long silence would be fundamentally unfair. The right of the BIR to collect is never endless. inexhaustible. nor absolute. It does not have an indefinite period of time within which to collect taxes, considering that from the date of receipt of the FAN issued. the prescriptive period within which it could exercise its right to collect began to set in. The BIR had its chance and it blew it. The law then steps in to declare the tax obligation extinguished due to the government's inaction. It is worth noting that in BPI, which involved a DST assessment as well, the Court found the government's right to collect prescribed when the BIR's warrant of distraint was served four days beyond the three-year period then applicable .... In the present case, the delay is not a matter of days but years; the final demand came almost 10 years past the three-year deadline. If prescription could operate to bar collection in BPI, despite the taxpayer's protest and even waivers executed, all the more should it bar the CIR here. The government's neglect materially and substantially violated rights vested by our taxation laws on a taxpayer by virtue of extinctive prescription. To rule otherwise would undermine the very purpose of having prescriptive periods, and would countenance bureaucratic sloth to the detriment of citizens. Finally, the CIR's citation of Collector v. Suyoc Consolidated Mining, an old case on estoppel due to the taxpayer's requests, is misplaced. Standard Insurance's conduct cannot be seen as inducing the BIR to delay collection. On the contrary, Standard consistently pressed for resolution, albeit asking that actual collection ~ be deferred until the protest was decided. The CTA found no evidence U

CTA Case No. 11094 Euro Autocars, Inc. Doing Business Under the Name and Style of Lamborghini Manila and Bentley Manila v. The Commissioner of Internal Revenue DECISION x---------------------- - ------------------------------------------------x that Standard Insurance did anything to mislead the BIR or cause it to refrain from collecting, aside from legitimately pursuing its administrative remedies. Indeed, after the protest in 2004, the CIR was free to act, either to deny it promptly, or to partially grant it, or even to garnish assets subject to the protest. The prolonged delay was solely of the BIR's choosing or neglect. Under these circumstances, there is no equitable reason to prevent Standard Insurance from invoking prescription. Estoppel against a taxpayer's assertion of prescription can arise only in clear cases of the taxpayer's bad faith, which are not present here. Applying the foregoing pronouncements in Standard Insurance, the Court finds it fundamentally unfair to allow respondent to enforce the subject assessment and collect the deficiency VAT after the expiration of the prescriptive period. Respondent's failure to timely resolve the administrative appeal and initiate a valid collection proceeding resulted solely from respondent's own inaction. Nothing in the records, moreover, shows that petitioner acted in bad faith, misled respondent, or otherwise induced the delay in collection. Thus, although the Court finds the deficiency VAT assessment partially correct, respondent may no longer enforce or collect the assessed amount because the right to collect has already prescribed. The Court must therefore cancel the corresponding deficiency VAT liability on the ground of prescription. In closing, the Court finds it fitting to echo the Supreme Court's observation in Standard Insurance regarding administrative delay - justice delayed is justice denied, even in taxation, viz: Revenue officers and the Commissioner would do well to heed that justice delayed is justice denied, even in taxation. The CIR sat on Standard Insurance's case for over a decade, leaving the taxpayer in limbo. Such inaction is not only detrimental to the public treasury, as the government's chance to timely collect was lost, but also inconsiderate of the taxpayer's right to a prompt disposition of its protest. The Regulations implementing the NIRC, specifically, Revenue Regulations No. 12-99, prescribe periods for the Commissioner to act on protests (180 days from submission of documents, under Section 228 of the NIRC). These were . ignored . The Court echoes the CTA En Bane's sentiment that the BIR's t

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EURO AUTOCARS, INC. DOING BUSINESS UNDER THE NAME AND STYLE OF LAMBORGHINI MANILA AND BENTLEY MANILA v. THE COMMISSIONER OF INTERNAL REVENUE

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