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09-06-1999 Revenue Regulations No.

12-99
September 6, 1999
REVENUE REGU!"#$NS N$. 12-99
SU%&E'" ( #mplementing t)e *rovisions o+ t)e National #nternal
Revenue 'o,e o+ 199- Governing t)e Rules on !ssessment o+ National
#nternal Revenue "a.es, 'ivil *enalties an, #nterest an, t)e E.tra-/u,i0ial
Settlement o+ a "a.pa1er2s 'riminal Violation o+ t)e 'o,e Through
Payment of a Suggested Compromise Penalty
"$ ( !ll #nternal Revenue $30ers an, $t)ers 'on0erne,
SE'"#$N 1. S0ope. 4 *ursuant to t)e provisions o+ Se0tion 255, in
relation to Se0tion 256 o+ t)e National #nternal Revenue 'o,e o+ 199-,
t)ese Regulations are )ereb1 promulgate, to implement t)e provisions
o+ Se0tions 6, -, 205, 227, 25-, 257 an, 259 on assessment o+ national
internal revenue ta.es, +ees an, 0)arges an, to provi,e t)e rules
governing t)e e.tra-/u,i0ial settlement o+ a ta.pa1er2s 0riminal violation
o+ t)e sai, 'o,e or an1 o+ its implementing Regulations t)roug)
pa1ment o+ a suggeste, 0ompromise penalt1.
SE'"#$N 2. General *rin0iples. 4
2.1 ")e sur0)arge an,8or interest )erein pres0ribe, shall apply to
all taxes, fees and charges imposed un,er t)e 'o,e 9)i0) s)all be
0olle0te, at t)e same time, in t)e same manner, and as part o+ t)e
ta..
2.2 #n 0ase t)e ta. ,ue +rom t)e ta.pa1er is pai, on a partial or
installment basis, t)e interest on t)e ,e:0ien01 ta. or on t)e
,elin;uen01 ta. liabilit1 o+ t)e ta.pa1er s)all be impose, +rom ,ue ,ate
o+ t)e ta. until +ull pa1ment t)ereo+. ")e interest s)all be 0ompute,
base, on t)e ,iminis)ing balan0e o+ t)e ta., in0lusive o+ interests.
SE'"#$N <. =ue *ro0ess Re;uirement in t)e #ssuan0e o+ a =e:0ien01
"a. !ssessment. 4
<.1 >o,e o+ pro0e,ures in t)e issuan0e o+ a ,e:0ien01 ta.
assessment(
<.1.1 Noti0e +or in+ormal 0on+eren0e. 4 ")e Revenue $30er 9)o
au,ite, t)e ta.pa1er2s re0or,s s)all, among ot)ers, state in )is report
whether or not the taxpayer agrees with his fndings t)at t)e
ta.pa1er is liable +or ,e:0ien01 ta. or ta.es. If the taxpayer is not
amenable, base, on t)e sai, $30er2s submitte, report o+ investigation,
the taxpayer shall be informed, in writing, b1 t)e Revenue =istri0t
$30e or b1 t)e Spe0ial #nvestigation =ivision, as t)e 0ase ma1 be ?in t)e
0ase Revenue Regional $30es@ or b1 t)e ')ie+ o+ =ivision 0on0erne, ?in
t)e 0ase o+ t)e %#R National $30e@ of the discrepancy or
discrepancies in the taxpayer's payment of his internal revenue
taxes, +or t)e purpose o+ A#n+ormal 'on+eren0e,A in or,er to aBor, t)e
ta.pa1er 9it) an opportunit1 to present )is si,e o+ t)e 0ase. #+ t)e
ta.pa1er fails to respond within ffteen !"# ,a1s +rom ,ate o+
re0eipt o+ t)e noti0e +or in+ormal 0on+eren0e, )e s)all be 0onsi,ere, in
,e+ault, in 9)i0) 0ase, t)e Revenue =istri0t $30er or t)e ')ie+ o+ t)e
Spe0ial #nvestigation =ivision o+ t)e Revenue Regional $30e, or t)e
')ie+ o+ =ivision in t)e National $30e, as t)e 0ase ma1 be, s)all en,orse
t)e 0ase 9it) t)e least possible ,ela1 to t)e !ssessment =ivision o+ t)e
Revenue Regional $30e or to t)e 'ommissioner or )is ,ul1 aut)oriCe,
representative, as t)e 0ase ma1 be, for appropriate review and
issuance of a defciency tax assessment, if warranted$
<.1.2 Preliminary %ssessment &otice P%&#$ 4 #+ a+ter revie9 an,
evaluation b1 t)e !ssessment =ivision or b1 t)e 'ommissioner or )is
,ul1 aut)oriCe, representative, as t)e 0ase ma1 be, it is ,etermine, t)at
t)ere e.ists su30ient basis to assess t)e ta.pa1er +or an1 ,e:0ien01 ta.
or ta.es, t)e sai, $30e s)all issue to t)e ta.pa1er, at least b1
registere, mail, a *reliminar1 !ssessment Noti0e ?*!N@ +or t)e propose,
assessment, s)o9ing in ,etail, t)e +a0ts an, t)e la9, rules an,
regulations, or /urispru,en0e on 9)i0) t)e propose, assessment is
base, ?see illustration in !NNED ! )ereo+#$ If the taxpayer fails to
respond within ffteen !"# days from date of receipt of the P%&,
he shall be considered in default, in 9)i0) 0ase, a formal letter of
demand and assessment notice shall be caused to be issued by
the said '(ce, calling for payment of the taxpayer's defciency
tax liability, inclusive of the applicable penalties$
<.1.< E.0eptions to *rior Noti0e o+ t)e !ssessment. 4 ")e noti0e +or
in+ormal 0on+eren0e an, t)e preliminar1 assessment noti0e s)all not be
re;uire, in an1 o+ t)e +ollo9ing 0ases, in 9)i0) 0ase, issuan0e o+ t)e
+ormal assessment noti0e?E!N@ +or t)e pa1ment o+ t)e ta.pa1er2s
,e:0ien01 ta. liabilit1 s)all be su30ient(
?i@ F)en t)e fnding for any defciency tax is the result of
mathematical error in t)e 0omputation o+ t)e ta. appearing on t)e
+a0e o+ t)e ta. return :le, b1 t)e ta.pa1erG or
?ii@ F)en a ,is0repan01 )as been ,etermine, bet9een t)e ta.
9it))el, an, t)e amount a0tuall1 remitte, by the withholding agentG
or
?iii@ F)en a taxpayer who opted to claim a refund or tax credit
of excess creditable withholding tax for a taxable period 9as
,etermine, to )ave 0arrie, over an, automati0all1 applie, t)e same
amount 0laime, against t)e estimate, ta. liabilities +or t)e ta.able
;uarter or ;uarters o+ t)e su00ee,ing ta.able 1earG or
?iv@ F)en t)e excise tax due on excisable articles has not been
paidG or
?v@ F)en an article locally purchased or imported by an
exempt person, su0) as, but not limite, to, ve)i0les, 0apital
e;uipment, ma0)ineries an, spare parts, )as been sol,, tra,e, or
trans+erre, to non)exempt persons.
<.1.5 *ormal +etter of ,emand and %ssessment &otice?*+,%&@.
4 ")e +ormal letter o+ ,eman, an, assessment noti0e s)all be issue, b1
t)e 'ommissioner or )is ,ul1 aut)oriCe, representative. ")e letter o+
,eman, 0alling +or pa1ment o+ t)e ta.pa1er2s ,e:0ien01 ta. or ta.es
s)all state t)e +a0ts, t)e la9, rules an, regulations, or /urispru,en0e on
9)i0) t)e assessment is base,, otherwise, t)e formal letter of
demand and assessment notice shall be voi, ?see illustration in
!NNED % )ereo+@. ")e same s)all be sent to t)e ta.pa1er onl1 b1
registere, mail or b1 personal ,eliver1. #+ sent b1 personal ,eliver1, t)e
ta.pa1er or )is ,ul1 aut)oriCe, representative s)all a0Hno9le,ge re0eipt
t)ereo+ in t)e ,upli0ate 0op1 o+ t)e letter o+ ,eman,, s)o9ing t)e
+ollo9ing( ?a@ Iis nameG ?b@ signatureG ?0@ ,esignation an, aut)orit1 to
a0t +or an, in be)al+ o+ t)e ta.pa1er, i+ a0Hno9le,ge, re0eive, b1 a
person ot)er t)an t)e ta.pa1er )imsel+G an, ?,@ ,ate o+ re0eipt t)ereo+.
-$!$" ,isputed %ssessment. 4 ")e ta.pa1er or )is ,ul1 aut)oriCe,
representative may protest administratively against the aforesaid
formal letter of demand and assessment notice within thirty
-.# days from date of receipt thereof. #+ t)ere are several issues
involve, in t)e +ormal letter o+ ,eman, an, assessment noti0e but t)e
ta.pa1er onl1 ,isputes or protests against t)e vali,it1 o+ some o+ t)e
issues raise,, t)e ta.pa1er s)all be re;uire, to pa1 t)e ,e:0ien01 ta. or
ta.es attributable to t)e un,ispute, issues, in which case, a
collection letter shall be issued to the taxpayer calling for
payment of the said defciency tax, inclusive of the applicable
surcharge and/or interest. No a0tion s)all be taHen on t)e ta.pa1er2s
,ispute, issues until t)e ta.pa1er )as pai, t)e ,e:0ien01 ta. or ta.es
attributable to t)e sai, un,ispute, issues. ")e pres0riptive perio, +or
assessment or 0olle0tion o+ t)e ta. or ta.es attributable to t)e ,ispute,
issues s)all be suspen,e,.
")e ta.pa1er s)all state t)e +a0ts, t)e appli0able la9, rules an,
regulations, or /urispru,en0e on 9)i0) )is protest is base,, otherwise,
his protest shall be considered void and without force and
e0ect. #+ t)ere are several issues involve, in t)e ,ispute, assessment
an, t)e ta.pa1er +ails to state t)e +a0ts, t)e appli0able la9, rules an,
regulations, or /urispru,en0e in support o+ )is protest against some o+
t)e several issues on 9)i0) t)e assessment is base,, t)e same s)all be
0onsi,ere, un,ispute, issue or issues, in 9)i0) 0ase, t)e ta.pa1er s)all
be re;uire, to pa1 t)e 0orrespon,ing ,e:0ien01 ta. or ta.es attributable
t)ereto.
The taxpayer shall submit the re1uired documents in support of
his protest within sixty 2.# days from date of fling of his letter
of protest, otherwise, the assessment shall become fnal,
executory and demandable. ")e p)rase Asubmit t)e re;uire,
,o0umentsA in0lu,es submission or presentation o+ t)e pertinent
,o0uments +or s0rutin1 an, evaluation b1 t)e Revenue $30er
0on,u0ting t)e au,it. ")e sai, Revenue $30er s)all state t)is +a0t in )is
report o+ investigation.
#+ t)e ta.pa1er +ails to :le a vali, protest against t)e +ormal letter o+
,eman, an, assessment noti0e 9it)in t)irt1 ?<0@ ,a1s +rom ,ate o+
re0eipt t)ereo+, t)e assessment s)all be0ome :nal, e.e0utor1 an,
,eman,able.
If the protest is denied, in 9)ole or in part, b1 t)e 'ommissioner, t)e
ta.pa1er may appeal to the Court of Tax %ppeals 9it)in t)irt1 ?<0@
,a1s +rom ,ate o+ re0eipt o+ t)e sai, ,e0ision, ot)er9ise, t)e assessment
s)all be0ome :nal, e.e0utor1 an, ,eman,able.
In general, 3i+ t)e protest is ,enie,, in 9)ole or in part, b1 t)e
'ommissioner or )is ,ul1 aut)oriCe, representative, t)e ta.pa1er ma1
appeal to t)e 'ourt o+ "a. !ppeals 9it)in t)irt1 ?<0@ ,a1s +rom ,ate o+
re0eipt o+ t)e sai, ,e0ision, ot)er9ise, t)e assessment s)all be0ome
:nal, e.e0utor1 an, ,eman,able45 Provided, however, that if the
taxpayer elevates his protest to the Commissioner 9it)in thirty
-.# days from date of receipt of the fnal decision o+ t)e
'ommissioner2s ,ul1 aut)oriCe, representative, t)e latter2s ,e0ision
s)all not be 0onsi,ere, :nal, e.e0utor1 an, ,eman,able, in 9)i0) 0ase,
t)e protest s)all be ,e0i,e, b1 t)e 'ommissioner.
#+ t)e 'ommissioner or )is ,ul1 aut)oriCe, representative +ails to a0t on
t)e ta.pa1er2s protest 9it)in one )un,re, eig)t1 ?170@ ,a1s +rom ,ate o+
submission, b1 t)e ta.pa1er, o+ t)e re;uire, ,o0uments in support o+ )is
protest, t)e ta.pa1er ma1 appeal to t)e 'ourt o+ "a. !ppeals 9it)in
t)irt1 ?<0@ ,a1s +rom t)e lapse o+ t)e sai, 170-,a1 perio,, ot)er9ise, t)e
assessment s)all be0ome :nal, e.e0utor1 an, ,eman,able.
<.1.6 %dministrative ,ecision on a ,isputed %ssessment. 4 ")e
,e0ision o+ t)e 'ommissioner or )is ,ul1 aut)oriCe, representative s)all
?a@ state t)e +a0ts, t)e appli0able la9, rules an, regulations, or
/urispru,en0e on 9)i0) su0) ,e0ision is base,, otherwise, the
decision shall be void ?see illustration in !NNED ' )ereo+@, in 9)i0)
0ase, t)e same s)all not be 0onsi,ere, a ,e0ision on a ,ispute,
assessmentG an, ?b@ t)at t)e same is )is :nal ,e0ision.
<.1.- 'onstru0tive Servi0e. 4 #+ t)e noti0e to t)e ta.pa1er )erein
re;uire, is serve, b1 registere, mail, and no response is received
+rom t)e ta.pa1er 9it)in t)e pres0ribe, perio, +rom ,ate o+ t)e posting
t)ereo+ in t)e mail, the same shall be considered actually or
constructively received by the taxpayer$ #+ t)e same is personall1
serve, on t)e ta.pa1er or )is ,ul1 aut)oriCe, representative who,
however, refused to ac6nowledge receipt thereof, the same shall
be constructively served on the taxpayer. 'onstru0tive servi0e
t)ereo+ s)all be 0onsi,ere, eBe0te, b1 leaving t)e same in t)e premises
o+ t)e ta.pa1er an, t)is +a0t o+ 0onstru0tive servi0e is atteste, to,
9itnesse, an, signe, b1 at least t9o ?2@ revenue o30ers ot)er t)an t)e
revenue o30er 9)o 0onstru0tivel1 serve, t)e same. ")e revenue o30er
9)o 0onstru0tivel1 serve, t)e same s)all maHe a 9ritten report o+ t)is
matter 9)i0) s)all +orm part o+ t)e ,o0Het o+ t)is 0ase ?see illustration in
!NNED = )ereo+@.
S7CTI'& 8$ Civil Penalties$ 9
8$! Twenty)*ive Percent :";# Surcharge$ 4 ")ere s)all be
impose,, in a,,ition to t)e basi0 ta. re;uire, to be pai,, a penalt1
e;uivalent to t9ent1-:ve per0ent ?26J@ t)ereo+, in an1 t)e +ollo9ing
0ases(
5.1.1 *ailure to fle any return and pay t)e ta. ,ue t)ereon as
re;uire, un,er t)e provisions o+ t)is 'o,e or rules an, regulations on
t)e ,ate pres0ribe,G or
5.1.2 Unless ot)er9ise aut)oriCe, b1 t)e 'ommissioner, fling a
return with an internal revenue o(cer other than those with
whom the return is re1uired to be fledG or
5.1.< *ailure to pay the defciency tax within the time prescribed
+or its pa1ment in t)e noti0e o+ assessmentG or
5.1.5 *ailure to pay the full or part of the amount of tax shown
on any return re1uired to be fled un,er t)e provisions o+ t)is 'o,e
or rules an, regulations, or t)e +ull amount o+ ta. ,ue +or 9)i0) no
return is re;uire, to be :le,, on or be+ore t)e ,ate pres0ribe, +or its
pa1ment.
8$: *ifty Percent ".;# Surcharge5
5.2.1 In case of willful neglect to fle the return 9it)in t)e perio,
pres0ribe, b1 t)e 'o,e, or in case a false or fraudulent return is
willfully made, t)e penalt1 to be impose, s)all be :+t1 per0ent ?60J@
o+ t)e ta. or o+ t)e ,e:0ien01 ta., in 0ase an1 pa1ment )as been ma,e
on t)e basis o+ su0) return be+ore t)e ,is0over1 o+ t)e +alsit1 or +rau,(
*rovi,e,, That a substantial underdeclaration o+ ta.able sales,
re0eipts or in0ome, or a substantial overstatement o+ ,e,u0tions, as
,etermine, b1 t)e 'ommissioner or )is ,ul1 aut)oriCe, representative,
shall constitute prima facie evidence of a false or fraudulent
return( *rovi,e,, +urt)er, ")at +ailure to report sales, re0eipts or in0ome
in an amount e.0ee,ing t)irt1 per0ent ?<0J@ o+ t)at ,e0lare, per return,
an, a 0laim o+ ,e,u0tions in an amount e.0ee,ing t)irt1 per0ent ?<0J@
o+ a0tual ,e,u0tions, s)all ren,er t)e ta.pa1er liable +or substantial
un,er,e0laration o+ sales, re0eipts or in0ome or +or overstatement o+
,e,u0tions, as mentione, )erein( *rovi,e,, +urt)er, t)at t)e term A9ill+ul
negle0t to :le t)e return 9it)in t)e perio, pres0ribe, b1 t)e 'o,eA shall
not apply in case the taxpayer, without notice from the
Commissioner or his authori<ed representative, voluntarily fles
the said return, in which case, only :"; surcharge shall be
imposed for late fling and late payment of the tax in lieu of the
above ".; surcharge. 'onversel1, t)e 60J sur0)arge s)all be
impose, in 0ase t)e ta.pa1er :les t)e return onl1 a+ter prior noti0e in
9riting +rom t)e 'ommissioner or )is ,ul1 aut)oriCe, representative.
5.2.2 Se0tion 6 ?!@ o+ t)e 'o,e provi,es t)at an1 ta. return :le, b1 a
ta.pa1er Ama1 be mo,i:e,, 0)ange, or amen,e,A b1 t)e ta.pa1er
A9it)in t)ree ?<@ 1ears +rom ,ate o+ su0) :lingA provi,e,, )o9ever, t)at
Ano noti0e +or au,it or investigation o+ su0) return, statement or
,e0laration )as, in t)e meantime, been a0tuall1 serve, upon t)e
ta.pa1er.A ")us, i+ upon investigation, it is ,etermine, t)at t)e
ta.pa1er2s originall1 :le, ta. return is +alse or +rau,ulent, su0) ta.pa1er
s)all remain liable to t)e 60J 0ivil penalt1 regar,less t)at t)e ta.pa1er
)as :le, )is amen,e, ta. return, i+ t)e sai, amen,e, ta. return,
)o9ever, )as been :le, onl1 a+ter issuan0e o+ t)e etter o+ !ut)orit1 +or
t)e investigation o+ t)e ta.pa1er2s ta. return or su0) amen,ment )as
been ma,e in t)e 0ourse o+ t)e sai, investigation.
SE'"#$N 6. >o,e o+ *ro0e,ures in 'omputing +or t)e "a. an,8or
!ppli0able Sur0)arge. 4 S)o9n )ereun,er are illustrative 0ases +or t)e
0omputation an, assessment o+ t)e ta., in0lusive o+ sur0)arge ?i+
appli0able@ an, interest(
"$! ate :ling an, late pa1ment o+ t)e ta.. 4 #llustration( #n0ome ta.
return +or t)e 0alen,ar 1ear 1997 9as ,ue +or :ling on !pril 16, 1999 but
t)e ta.pa1er voluntaril1 :le, )is ta. return, 9it)out noti0e +rom t)e %#R,
onl1 on &une <0, 1999. ")e ta. ,ue per return amounts to *100,000. #n
t)is 0ase, t)e ta.pa1er s)all be liable +or ,elin;uen01 penalties
0onsisting o+ 26J sur0)arge, plus 20J interest per annum, 0ompute,
+rom ,ue ,ate o+ t)e ta. until ,ate o+ pa1ment, 0ompute, as +ollo9s(
'alen,ar Kear 1997
#n0ome ta. ,ue per return *100,000.00
!,,( 26J sur0)arge +or late :ling an, late
pa1ment ?*100,000.00 times 26J@ *26,000.00
20J int. p.a. +rom 5-16-99 to 6-<0-99
?*100,000.00 times .0516625@ *5,166.25 *29,166.25
4444 44444
"otal amount ,ue ?e.0lu,ing suggeste, 0ompromise +or
late :ling an, late pa1ment o+ t)e ta.@ *129,166.25
LLLLLLLLL
$nl1 one 26J sur0)arge s)all be impose, +or late :ling o+ t)e return an,
late pa1ment o+ t)e ta..
"$: ")e ta. return is :le, on time but :le, t)roug) an internal
revenue o30er ot)er t)an 9it) 9)om t)e return is re;uire, to be :le,.
4 #llustration( ")e ta.pa1er2s 1997 in0ome ta. return is re;uire, to be
:le, t)roug) t)e aut)oriCe, agent banH un,er t)e /uris,i0tion o+ R=$
East >aHati. %ut, 9it)out prior aut)oriCation +rom t)e %#R, t)e ta.pa1er
:le, )is ta. return an, pai, t)e ta. t)roug) t)e aut)oriCe, agent banH
un,er t)e /uris,i0tion o+ R=$ =avao 'it1. "a. ,ue an, pai, per return is
*100,000.00.
'alen,ar Kear 1997
#n0ome ta. ,ue per return *100,000.00
!,,( 26J sur0)arge *26,000.00
44444
"otal amount ,ue *126,000.00
ess( !mount pai, *100,000.00
44444
!mount still ,ue *26,000.00
LLLLLLLLL
"$- ate :ling an, late pa1ment ,ue to ta.pa1er2s 9ill+ul negle0t. 4
#llustration( ")e ta.pa1er ,i, not :le )is in0ome ta. return +or t)e
0alen,ar 1ear 199- 9)i0) 9as ,ue +or :ling on !pril 16, 1997. Ie 9as
noti:e, b1 t)e %#R o+ )is +ailure to :le t)e ta. return, +or 9)i0) reason,
)e :le, )is ta. return an, pai, t)e ta., onl1 a+ter t)e sai, noti0e, on
&une <0, 1999. ")e ta. ,ue per return is *100,000.00.
'alen,ar Kear 199-
#n0ome ta. ,ue per return *100,000.00
!,,( 60J sur0)arge +or 9ill+ul negle0t to
:le t)e return an, late pa1ment o+ t)e ta.
?*100,000 times 60J@ *60,000.00
20J int. p.a. +r. 5-16-97 to 6-<0-99
?*100,000.00 times .2516625@ *25,166.25 *-5,166.25
44444 44444
"otal amount ,ue ?e.0lu,ing suggeste, 0ompromise
+or late :ling an, late pa1ment o+ t)e ta.@ *1-5,166.25
LLLLLLLLL
"$8 *enalt1 or penalties +or ,e:0ien01 ta.. 4 !s a rule, no sur0)arge
is impose, on ,e:0ien01 ta. an, on t)e basi0 ta.. Io9ever, i+ t)e
amount ,ue in0lusive o+ penalties is not pai, on or be+ore t)e ,ue ,ate
state, on t)e ,eman, letter, t)e 0orrespon,ing sur0)arge s)all be
impose,.
#llustration No. 1( "a.pa1er :le, on time )is in0ome ta. return +or
0alen,ar 1ear 199- an, pai, *100,000.00 on !pril 16, 1997. Upon pre-
au,it o+ )is return, it 9as ,is0lose, t)at )e erroneousl1 0ompute, t)e
ta. ,ue. ")e 0orre0t amount o+ ta. ,ue is *120,000.00. ")e ta.pa1er is
assesse, +or ,e:0ien01 in0ome ta. in a letter o+ ,eman, an,
assessment noti0e issue, on &une <0, 1999.
'alen,ar Kear 199-
"a. ,ue per pre-au,it *120,000.00
ess( !mount assesse, an, pai, per ta. return :le, *100,000.00
44444
=e:0ien01 in0ome ta. *20,000.00
!,,( 20J int. p.a. +rom 5-16-97 to 6-<0-99
?*20,000.00 times .2516625@ *5,7<1.06
44444
!mount still ,ue *25,7<1.06
LLLLLLLLL
#llustration No. 2( !%' '$R*$R!"#$N :le, its in0ome ta. return +or
0alen,ar 1ear 199- an, pai, on time its in0ome ta. s)o9n t)ereun,er,
amounting to *100,000. Sai, ta.pa1er 9as investigate,. Upon
veri:0ation o+ its a00ounting re0or,s, it 9as ,is0lose, t)at its ,e,u0tion,
+rom gross in0ome, o+ representation e.penses in t)e amount o+
*200,000.00 ,i, not meet all t)e statutor1 re;uisites +or ,e,u0tibilit1.
")e 0orporation 9as ,ul1 noti:e, o+ t)e sai, ,is0repan01 t)roug) a
*reliminar1 !ssessment Noti0e. %ase, on t)e <6J in0ome ta. rate on
0orporations appli0able in t)e 1ear 199-, t)e in0ome ta. ,ue a+ter
investigation amounts to *1-0,000.00. !+ter ,e,u0tion o+ in0ome ta.
pai, per return :le,, t)e basi0 ,e:0ien01 in0ome ta. amounts to
*-0,000, e.0lu,ing penalties. Eailing to protest on time against t)e
preliminar1 assessment noti0e, a +ormal letter o+ ,eman, an,
assessment noti0e 9as issue, on >a1 <1, 1999, re;uiring pa1ment o+
t)e assessment not later t)an &une <0, 1999.
'alen,ar Kear 199-
#n0ome ta. ,ue per investigation*1-0,000.00
ess( #n0ome ta. pai, per return *100,000.00
44444
=e:0ien01 in0ome ta. *-0,000.00
!,,( 20J int. p.a. +r. 5-16-97 to 6-<0-99 ?*-0,000 times .2516625@
*16,907.6-
44444
"otal amount still ,ue *76,907.6-
LLLLLLLLL
#llustration No. <( DKM '$R*$R!"#$N :le, its in0ome ta. return +or
0alen,ar 1ear 199- 9it) a net ta.able in0ome o+ *600,000.00. !t t)e
appli0able in0ome ta. rate o+ <6J +or t)e 1ear 199-, its in0ome ta.
amounte, to *1-6,000.00. Io9ever, upon investigation, it 9as ,is0lose,
t)at its in0ome ta. return 9as +alse or +rau,ulent be0ause it ,i, not
report a ta.able in0ome amounting to anot)er *600,000.00. $n its net
in0ome o+ *1,000,000.00, per investigation, t)e in0ome ta. ,ue is
*<60,000.00. =e,u0ting its pa1ment per return :le,, t)e ,e:0ien01,
e.0lu,ing penalties, amounte, to *1-6,000.00. #t 9as ,ul1 in+orme, o+
t)is :n,ing t)roug) a *reliminar1 !ssessment Noti0e. Eailing to protest
on time against t)e preliminar1 assessment noti0e, a +ormal letter o+
,eman, an, assessment noti0e 9as issue, on >a1 <1, 1999 0alling +or
pa1ment o+ t)e ,e:0ien01 in0ome ta. on or be+ore &une <0, 1999.
#n t)is 0ase, sai, 0orporation is liable +or t)e 0ivil penalties o+ 60J
sur0)arge +or )aving :le, a +alse or +rau,ulent return, plus 20J interest
per annum on t)e ,e:0ien01, 0ompute, as +ollo9s(
'alen,ar Kear 199-
#n0ome ta. ,ue per investigation*<60,000.00
ess( #n0ome ta. pai, per return *1-6,000.00
44444
=e:0ien01 in0ome ta. *1-6,000.00
!,,( 60J sur0)arge +or :ling a +rau,ulent or +alse
return ?*1-6,000.00 times 60J@ *7-,600.00
20J int. p.a. +r. 5-16-97 to 6-<0-99
?*1-6,000.00 times .2516625@ *52,2-1.6- *129,--1.6-
44444 44444
"otal amount ,ue *<05,--1.6-
LLLLLLLLL
"$" ate pa1ment o+ a ,e:0ien01 ta. assesse,. 4 #n general, t)e
,e:0ien01 ta. assesse, s)all be pai, b1 t)e ta.pa1er 9it)in t)e time
pres0ribe, in t)e noti0e an, ,eman,, ot)er9ise, su0) ta.pa1er s)all be
liable +or t)e 0ivil penalties in0i,ent to late pa1ment.
#llustration( %ase, on t)e above #llustration No. <, S0enario 5, assuming
t)at t)e 0alen,ar 1ear 199- ,e:0ien01 in0ome ta. assessment against
DKM '$R*$R!"#$N, in t)e amount o+ *<05,--1.6-, is not pai, b1 &une
<0, 1999, t)e ,ea,line +or pa1ment o+ t)e assessment, an, assuming
+urt)er t)at t)is assessment )as alrea,1 be0ome :nal an, 0olle0tible. #n
t)is 0ase, su0) 0orporation s)all be 0onsi,ere, late in pa1ment o+ t)e
sai, assessment. !ssuming, +urt)er, t)at t)e 0orporation pa1s its ta.
assessment onl1 b1 &ul1 <1, 1999, t)e 0ivil penalties +or late pa1ment
s)all be 0ompute, as +ollo9s(
'alen,ar Kear 199-
"otal ,e:0ien01 in0ome ta. assesse, on >a1 <1, 1999 *<05,--1.6-
!,,( 26J sur0)arge +or late pa1ment
?*<05,--1.6- times 26J@ *-6,192.92
20J interest p.a. +rom --1-99 to
--<1-99 ?*<05,--1.6-
times .016666-@ *6,0-9.65 *71,2-2.56
44444 44444
"otal amount ,ue ?e.0lu,ing suggeste, 0ompromise
penalt1 +or late pa1ment@ *<76,055.1<
LLLLLLLLL
"$2 'omputation o+ 20J interest per annum in 0ase o+ partial or
installment pa1ment o+ a ta. liabilit1. 4 #llustration No. 1( #n 0ase
e.ten,e, pa1ment o+ t)e ta. is ,ul1 aut)oriCe,. 4 =EE '$R*$R!"#$N,
,ue to :nan0ial in0apa0it1, re;ueste, t)at it be allo9e, to pa1 its
in0ome ta. liabilit1 per return +or 0alen,ar 1ear 1997, in t)e amount o+
*1,000,000.00, in +our ?5@ mont)l1 installments, starting !pril 16, 1999.
#ts re;uest )as been ,ul1 approve, pursuant to Se0. 6< o+ t)e "a. 'o,e.
#n t)is 0ase, no 26J sur0)arge s)all be impose, +or late pa1ment o+ t)e
ta. sin0e its ,ea,line +or pa1ment )as been ,ul1 e.ten,e,. Io9ever,
20J interest per annum +or t)e e.ten,e, pa1ment s)all be impose,,
0ompute, base, on t)e ,iminis)ing balan0e o+ t)e Aunpai, amountA,
pursuant to t)e provisions o+ Se0tion 259 ?=@ o+ t)e 'o,e.
No 26J sur0)arge on e.ten,e, pa1ment s)all be impose, provi,e,,
)o9ever, t)at t)e ta.pa1er2s re;uest +or e.tension o+ t)e perio, 9it)in
9)i0) to pa1 is ma,e on or be+ore t)e ,ea,line pres0ribe, +or pa1ment
o+ t)e ta. ,ue. 'onversel1, i+ su0) re;uest is ma,e a+ter t)e ,ea,line
pres0ribe, +or pa1ment, t)e ta.pa1er s)all alrea,1 be treate, late in
pa1ment, in 9)i0) 0ase, t)e 26J sur0)arge s)all be impose,, even i+
pa1ment o+ t)e ,elin;uen01 be allo9e, in partial amortiCation.
E.ample(
'alen,ar Kear 1997
#n0ome ta. ,ue per return *1,000,000.00
ess( 1st installment o+ t)e ta. on or be+ore 5-16-99 *260,000.00
444444
%alan0e as o+ 5-16-99 *-60,000.00
!,,( 20J int. p.a. +rom 5-16-99 to 6-16-99
?*-60,000.00 times .016666-@ *12,600.0<
444444
!mount ,ue on 6-16-99 *-62,600.0<
ess( 2n, installment on 6-16-99 ?*260,000.00 plus
*12,600.0< interest@ *262,600.0<
444444
%alan0e as o+ 6-16-99 *600,000.00
!,,( 20J int. p.a. +rom 6-16-99 to 6-16-99
?*600,000.00 times .016666-@ *7,<<<.<6
444444
!mount ,ue on 6-16-99 *607,<<<.<6
ess( <r, installment on 6-16-99 ?*260,000.00 plus
*7,<<<.<6 interest@ *267,<<<.<6
444444
%alan0e as o+ 6-16-99 *260,000.00
!,,( 20J int. p.a. +rom 6-16-99 to --16-99
?*260,000.00 times .016666-@ *5,166.67
444444
5t) an, :nal installment on --16-99 *265,166.67
LLLLLLLLLLL
#llustration No. 2( 'omputation o+ ta. ,elin;uen01 in 0ase o+ partial
pa1ment o+ t)e ta. ,ue 9it)out prior %#R aut)oriCation +or e.ten,e,
pa1ment. 4
E.ample( GI# '$R*$R!"#$N ,i, not :le its :nal a,/ustment in0ome ta.
return +or t)e 0alen,ar 1ear 1997 9)i0) 9as ,ue on !pril 16, 1999. ")e
%#R in+orme, t)e 0orporation o+ its +ailure to :le its sai, ta. return an,
re;uire, t)at it :le t)e same, in0lusive o+ t)e 26J sur0)arge an, 20J
interest per annum penalties in0i,ent to t)e sai, omission. $n >a1 16,
1999 it a,vise, t)at its in0ome ta. ,ue +or t)e sai, 1ear amounts to
*1,000,000.00 but, )o9ever, ,ue to its a,verse :nan0ial 0on,ition at t)e
moment, it 9ill be unable to pa1 t)e entire amount, in0lusive o+ t)e
,elin;uen01 penalties. Ien0e, on >a1 16, 1999, it ma,e a partial
pa1ment o+ *500,000.00. !ssuming t)at t)e %#R ,eman,e, pa1ment o+
t)e unpai, balan0e o+ its ta. obligation pa1able b1 &une 16, 1999, t)e
unpai, balan0e o+ t)e 0orporation2s ,elin;uent in0ome ta. s)all be
0ompute, as +ollo9s(
'alen,ar Kear 1997
#n0ome ta. ,ue per return *1,000,000.00
!,,( 26J sur0)arge +or late :ling an,
late pa1ment *260,000.00
20J interest per annum +rom 5-16-99
to 6-16-99 ?*1,000,000.00
times .016666-@ *16,666.-0 *266,666.-0
44444 44444
!mount ,ue as o+ 6-16-99 *1,266,666.-0
ess( *artial pa1ment on 6-16-99*500,000.00
44444
%alan0e as o+ 6-16-99 *766,666.-0
!,,( 20J interest per annum +rom 6-16-99
to 6-16-99 ?*766,666.-0 times .016666-@ *15,555.5-
44444
!mount still ,ue ?e.0lusive o+ t)e suggeste, 0ompromise
penalt1 +or late :ling an, late pa1ment *711,111.1-
LLLLLLLLL
#+ t)e sai, ta.pa1er +ails to pa1 t)e amount o+ *711,111.1- b1 &une 16,
1999, no +urt)er 26J sur0)arge +or late pa1ment o+ t)e ta. s)all be
impose,. #nstea,, onl1 t)e 20J interest per annum s)all be impose,
against t)e ta.pa1er against t)e ta.pa1er, 0ompute, +rom ,ue ,ate
t)ereo+ ?i.e., &une 16, 1999@ until pai,. #+ sai, ta.pa1er pa1s t)e same on
partial pa1ment basis, t)e 20J interest per annum s)all be 0ompute, on
t)e ,iminis)ing balan0e t)ereo+, pursuant to t)e pro0e,ures in t)e
pre0e,ing #llustration No. 1, Se0tion 6.6 )ereo+.
SE'"#$N 6. Suggeste, 'ompromise *enalt1 in E.tra-/u,i0ial Settlement
o+ a "a.pa1er2s 'riminal Violation. 4 Se0tion 205 o+ t)e "a. 'o,e o+ 199-
provi,es t)at A!ll 0riminal violations ma1 be 0ompromise, e.0ept( ?a@
t)ose alrea,1 :le, in 0ourt, or ?b@ t)ose involving +rau,.A ")is means
t)at, in general, t)e ta.pa1er2s 0riminal liabilit1 arising +rom )is violation
o+ t)e pertinent provision o+ t)e 'o,e ma1 be settle, e.tra-/u,i0iall1
instea, o+ t)e %#R instituting against t)e ta.pa1er a 0riminal a0tion in
'ourt. ! 0ompromise in e.tra-/u,i0ial settlement o+ t)e ta.pa1er2s
0riminal liabilit1 +or )is violation is 0onsensual in 0)ara0ter, )en0e, ma1
not be impose, on t)e ta.pa1er 9it)out )is 0onsent. Ien0e, t)e %#R ma1
onl1 suggest settlement o+ t)e ta.pa1er2s liabilit1 t)roug) a
0ompromise.
")e e.tra-/u,i0ial settlement o+ t)e ta.pa1er2s 0riminal liabilit1 an, t)e
amount o+ t)e suggeste, 0ompromise penalt1 s)all 0on+orm 9it) t)e
s0)e,ule o+ 0ompromise penalties provi,e, un,er Revenue
>emoran,um $r,er No. 1-90 or as )erea+ter revise,.
SE'"#$N -. Repealing 'lause. 4 !n1 revenue issuan0e 9)i0) is
in0onsistent )ere9it) s)all be 0onsi,ere, repeale,, amen,e,, or
mo,i:e, a00or,ingl1.
SE'"#$N 7. EBe0tivit1. 4
7.1 General Rule. 4 #n general, t)e provisions o+ t)ese Regulations
s)all be eBe0tive beginning &anuar1 1, 1997 pursuant to t)e provisions
o+ Se0tion 7 o+ R.!. No. 7525, ot)er9ise Hno9n as t)e National #nternal
Revenue 'o,e o+ 199-.
7.2 'omputation o+ Sur0)arge an, #nterest on =e:0ien01 "a.
!ssessment. 4 !n1 ,e:0ien01 ta. assessment issue, beginning &anuar1
1, 1997 s)all be governe, b1 t)e rules pres0ribe, in t)ese Regulations.
7.< $t)er *rovisions. 4 !n1 provision o+ t)ese Regulations not
ot)er9ise spe0i:0all1 provi,e, in t)e National #nternal Revenue 'o,e o+
199- s)all taHe eBe0t :+teen ?16@ ,a1s a+ter publi0ation in an1
ne9spaper o+ general 0ir0ulation.
?SG=.@ E=G!R=$ %. ES*#R#"U
Se0retar1 o+ Einan0e
Re0ommen,ing !pproval(
?SG=.@ %EE"I$VEN . RU!$
'ommissioner o+ #nternal Revenue
!NNED !
*reliminar1 !ssessment Noti0e
!%' 'orporation
12< >aHati !venue
>aHati 'it1
"#N( 000-000-000-000
Gentlemen(
*lease be in+orme, t)at a+ter investigation t)ere )as been +oun, ,ue
+rom 1ou ,e:0ien01 in0ome ta. +or 0alen,ar 1ear 199-, as s)o9n
)ereun,er(
!ssessment No. NNNNNNN
"a.able in0ome per return *1,000,000.00
!,,( =is0repan0ies per investigation
1. Un,e0lare, rental in0ome *200,000.00
2. Non-,e,u0tible interest e.penses <00,000.00
<. Un,o0umente, representation e.penses 160,000.00
5. Non-,e,u0tible ba, ,ebt e.pense 260,000.00 900,000.00
44444 44444
"a.able in0ome per investigation*1,900,000.00
44444
#n0ome ta. ,ue t)ereon ?<6J@ *666,000.00
ess( #n0ome ta. pai, per return <60,000.00
44444
%alan0e *<16,000.00
!,,( 60J sur0)arge +or :ling o+ +rau,ulent return *16-,600.00
20J interest per annum +rom 5-16-96 to <-16-97 6<,000.00
220,600.00O
44444
"$"! !>$UN" =UE *6<6,600.00O
O*lease note t)at t)e interest an, t)e total amount ,ue 9ill )ave to be
a,/uste, i+ pai, be1on, <-16-97
")e 0omplete ,etails 0overing t)e a+orementione, ,is0repan0ies
establis)e, ,uring t)e investigation o+ t)is 0ase are s)o9n in t)e
a00ompan1ing !NNED !-1 o+ t)is letter o+ ,eman,.
")e 60J sur0)arge )as been impose, pursuant to t)e provisions o+
Se0tion 257?%@ o+ t)e National #nternal Revenue 'o,e, as amen,e, b1
R.!. No. 7525, 9)i0) tooH eBe0t on &anuar1 1, 1997, in vie9 o+ 1our
+ailure to report +or in0ome ta. purposes 1our a+orementione, rental
in0ome. Su0) omission ren,ers 1our in0ome ta. return :le, +or t)e
ta.able 0alen,ar 1ear 199- as a +alse or +rau,ulent return.
")e 20J interest per annum )as been impose, pursuant to t)e
provisions o+ Se0tion 259?%@ o+ t)e sai, 'o,e.
*ursuant to t)e provisions o+ Se0tion 227 o+ t)e National #nternal
Revenue 'o,e o+ 199- an, its implementing Revenue Regulations, 1ou
are )ereb1 given t)e opportunit1 to present in 9riting 1our si,e o+ t)e
0ase 9it)in :+teen ?16@ ,a1s +rom re0eipt )ereo+. #+ 9e +ail to )ear +rom
1ou 9it)in t)e sai, perio,, 1ou s)all be 0onsi,ere, in ,e+ault, in 9)i0)
0ase, a +ormal letter o+ ,eman, an, assessment noti0e s)all be issue,
b1 t)is $30e 0alling +or pa1ment o+ 1our a+oresai, ,e:0ien01 in0ome
ta., in0lusive o+ t)e a+orementione, 0ivil penalt1 an, interest.
Fe )ope t)at 1ou 9ill give t)is matter 1our pre+erential attention.
Ver1 trul1 1ours,
!NNED !-1
!%' '$R*$R!"#$N
12< >aHati !venue
>aHati 'it1
"#N( 000-000-000-000
=E"!#S $E =#S'RE*!N'#ES
!ssessment No. NNNNNNNN
1. Un,e0lare, rental in0ome ?*200,000.00@. 4 Veri:0ation ,is0lose,
t)at 1ou ,erive, t)is rental in0ome +rom t)e lease o+ 1our buil,ing to
DKM '$R*$R!"#$N ,uring t)e ta. 1ear 199- but t)e same, 9it)out an1
legal /usti:0ation, 9as neit)er re0or,e, in 1our booHs o+ a00ounts nor
,e0lare, in 1our in0ome ta. return, t)ereb1 resulting to t)e
un,erstatement o+ 1our reporte, ta.able in0ome +or t)e sai, ta. 1ear.
2. Non-,e,u0tible interest e.pense ?*<00,000.00@. 4 Veri:0ation
,is0lose, t)at t)is interest e.pense, 0laime, as ,e,u0tion +rom 1our
gross in0ome +or t)e ta. 1ear 199-, 9as a0tuall1 in0urre, in 0onne0tion
9it) 1our loan +rom >r. &U!N '!S"R$. #t 9as, )o9ever, +urt)er ,is0lose,
t)at >r. 'astro o9ns an, 0ontrols 60J o+ 1our outstan,ing 0apital sto0H.
Ien0e, t)is interest e.pense is not a vali, ,e,u0tion +rom 1our gross
in0ome, pursuant to Se0tion <5?%@?2@, in relation to Se0tion <6?%@?2@ o+
t)e National #nternal Revenue 'o,e 9)i0) provi,es t)at no ,e,u0tion
s)all be allo9e, in respe0t o+ interest e.pense in0urre, bet9een an
in,ivi,ual an, a 0orporation more t)an :+t1 per0ent ?60J@ in value o+ t)e
outstan,ing sto0H o+ 9)i0) is o9ne,, ,ire0tl1 or in,ire0tl1, b1 or +or su0)
in,ivi,ual.
<. Un,o0umente, representation e.penses ?*60,000.00@. 4
Veri:0ation ,is0lose, t)at t)is item o+ ,e,u0tion +rom 1our gross in0ome
+or t)e ta. 1ear 199- is in +a0t unsubstantiate, 9it) an1 ,o0umentar1
evi,en0e, )en0e, ,isallo9e, in au,it.
5. Non-,e,u0tible ba, ,ebt e.pense ?*260,000.00@. 4 Veri:0ation
,is0lose, t)at t)is item o+ ,e,u0tion +rom 1our gross in0ome +or t)e ta.
1ear 199- 9as, in +a0t, a mere provision +or estimate, un0olle0tible
a00ounts +rom 1our 0ustomers as o+ t)e en, o+ t)e sai, 1ear. Un,er
Se0tion <5?E@ o+ t)e sai, 'o,e, a mere provision +or estimate,
un0olle0tible a00ounts is not allo9able ,e,u0tion +rom gross in0ome. #n
general, +or ba, ,ebts to be ,e,u0tible, t)e +ollo9ing statutor1 re;uisites
must )ave been 0omplie, 9it)(
5.1 ")at, t)e ,ebts ,ue +rom 1our ,ebtor or ,ebtors must )ave been
as0ertaine, a0tuall1 9ort)less as o+ t)e en, o+ t)e ta.able 1earG an,
5.2 ")at, t)e same )ave been a0tuall1 0)arge, or 9ritten-oB in 1our
booHs o+ a00ounts as o+ t)e en, o+ t)e sai, ta.able 1ear.
5.< ")at, t)e sai, a00ounts re0eivable )ave a0tuall1 been 0)arge, oB
or 9ritten-oB t)e booHs o+ a00ounts as o+ t)e en, o+ t)e ta.able 1ear.
")e re0or,s o+ t)is 0ase ,is0lose, t)at 1ou )ave not intro,u0e, an1
evi,en0e to overt)ro9 t)e vali,it1 o+ our sai, :n,ings.
#t is re;ueste, t)at 1our a+oresai, ,e:0ien01 in0ome ta. liabilit1 be pai,
imme,iatel1 upon re0eipt )ereo+, in0lusive o+ penalties in0i,ent to
,elin;uen01. ")is is our :nal ,e0ision. #+ 1ou ,isagree, 1ou ma1 appeal
t)is :nal ,e0ision 9it) t)e 'ourt o+ "a. !ppeals 9it)in t)irt1 ?<0@ ,a1s
+rom ,ate o+ re0eipt )ereo+, ot)er9ise our sai, ,e:0ien01 in0ome ta.
assessment s)all be0ome :nal, e.e0utor1 an, ,eman,able.
Ver1 trul1 1ours,
!NNED %
E$R>! E""ER $E =E>!N=
!%' 'orporation
12< >aHati !venue
>aHati 'it1
"#N( 000-000-000-000
Gentlemen(
*lease be in+orme, t)at a+ter investigation t)ere )as been +oun, ,ue
+rom 1ou ,e:0ien01 in0ome ta. +or 0alen,ar 1ear 199-, as s)o9n
)ereun,er(
!ssessment No. NNNNNNN
"a.able in0ome per return *1,000,000.00
!,,( =is0repan0ies per investigation
1. Un,e0lare, rental in0ome *200,000.00
2. Non-,e,u0tible interest e.penses <00,000.00
<. Un,o0umente, representation e.penses 160,000.00
5. Non-,e,u0tible ba, ,ebt e.pense 260,000.00 900,000.00
44444 44444
"a.able in0ome per investigation*1,900,000.00
44444
#n0ome ta. ,ue t)ereon ?<6J@ *666,000.00
ess( #n0ome ta. pai, per return <60,000.00
44444
%alan0e *<16,000.00
!,,( 60J sur0)arge +or :ling o+ +rau,ulent return *16-,600.00
20J interest per annum +rom 5-16-96 to <-16-97 6<,000.00
220,600.00O
44444
"$"! !>$UN" =UE *6<6,600.00O
O*lease note t)at t)e interest an, t)e total amount ,ue 9ill )ave to be
a,/uste, i+ pai, be1on, <-16-97
")e 0omplete ,etails 0overing t)e a+orementione, ,is0repan0ies
establis)e, ,uring t)e investigation o+ t)is 0ase are s)o9n in t)e
a00ompan1ing S'IE=UE 1 o+ t)is letter o+ ,eman,.
")e 60J sur0)arge )as been impose, pursuant to t)e provisions o+
Se0tion 257?%@ o+ t)e National #nternal Revenue 'o,e, as amen,e, b1
R.!. No. 7525, 9)i0) tooH eBe0t on &anuar1 1, 1997, in vie9 o+ 1our
+ailure to report +or in0ome ta. purposes 1our a+orementione, rental
in0ome. Su0) omission ren,ers 1our in0ome ta. return :le, +or t)e
ta.able 0alen,ar 1ear 199- as a +alse or +rau,ulent return.
")e 20J interest per annum )as been impose, pursuant to t)e
provisions o+ Se0tion 259?%@ o+ t)e sai, 'o,e.
#n vie9 t)ereo+, 1ou are re;ueste, to pa1 1our a+oresai, ,e:0ien01
in0ome ta. liabilit1 t)roug) t)e ,ul1 aut)oriCe, agent banH in 9)i0) 1ou
are enrolle, 9it)in t)e time s)o9n in t)e en0lose, assessment noti0e.
Ver1 trul1 1ours,
!NNED '
!%' 'orporation
12< >aHati !venue
>aHati 'it1
"#N( 000-000-000-000
E#N! =E'#S#$N $N =#S*U"E= !SSESS>EN"
Gentlemen(
Re+erring to 1our letter ,ate, >a1 16, 1999, please be in+orme, t)at
1our protest against our 0alen,ar 1ear 199- ,e:0ien01 in0ome ta.
assessment in t)e amount o+ *6<6,600.00, t)e sub/e0t matter o+ our
0overing letter o+ ,eman, ,ate, >ar0) 16, 1999, is )ereb1 ,enie, +or
la0H o+ +a0tual an, legal basis. ")e a+oresai, assessment is premise, on
t)e +ollo9ing(
1. Un,e0lare, rental in0ome ?*200,000.00@. 4 Veri:0ation ,is0lose,
t)at 1ou ,erive, in0ome +rom t)e lease o+ 1our buil,ing to DKM
'orporation ,uring t)e 1ear 199- but t)is 9as not re0or,e, in 1our
booHs o+ a00ounts an, also not reporte, in 1our in0ome ta. return.
2. Non-,e,u0tible interest e.pense ,e,u0tion ?*<00,000.00@. 4
Veri:0ation ,is0lose, t)at t)is interest e.penses 9as in0urre, in
0onne0tion 9it) 1our loan +rom >R. &U!N '!S"R$. #t 9as also ,is0lose,
t)at >r. 'astro o9ns 60J o+ t)e outstan,ing sto0H o+ !%' 'orporation.
Ien0e t)e sai, interest e.pense is non-,e,u0tible in 0omputing !%'
'orporation2s ta.able in0ome pursuant to Se0tion <5?%@?2@?a@, in relation
to Se0tion <6?%@?2@ o+ t)e N#R', t)at interest pai, on a loan transa0tion
bet9een an in,ivi,ual an, a 0orporation more t)an :+t1 per0ent ?60J@ in
value o+ t)e outstan,ing sto0H o+ 9)i0) is o9ne,, ,ire0tl1 or in,ire0tl1,
b1 or +or su0) in,ivi,ual s)all be ,e,u0tible +rom gross in0ome +or
in0ome ta. purposes.
<. Un,o0umente, representation e.penses ?*160,000.00@. 4
Veri:0ation ,is0lose, t)at t)e vera0it1 o+ t)is item o+ ,e,u0tion )as not
been establis)e,, )en0e, ,isallo9e, as a ,e,u0tion +rom gross in0ome.
5. Non-,e,u0tible ba, ,ebt e.pense ?*260,000.00@. 4 Veri:0ation
,is0lose, t)at t)is 9as a mere provision +or estimate, 0olle0tible
a00ounts as o+ t)e en, o+ t)e 1ear 199-. Un,er Se0tion <5?E@, N#R', a
mere provision +or estimate, un0olle0tible a00ounts is not ,e,u0tible
+rom gross in0ome. "o be ,e,u0tible, t9o re;uisites must be met(
5.1 ")at, t)e ,ebts ,ue +rom 1our ,ebtor8s ?a00ounts re0eivable@ )ave
been as0ertaine, a0tuall1 9ort)less as o+ t)e en, o+ t)e ta.able 1earG
an,
5.2 ")at, t)e sai, a00ounts re0eivable )ave a0tuall1 been 0)arge, oB
or 9ritten-oB t)e booHs o+ a00ounts as o+ t)e en, o+ t)e ta.able 1ear.
")e re0or,s o+ t)is 0ase ,is0lose, t)at 1ou )ave not intro,u0e, an1
evi,en0e to overt)ro9 t)e vali,it1 o+ our sai, :n,ings.
#t is re;ueste, t)at 1our a+oresai, ,e:0ien01 in0ome ta. liabilit1 be pai,
imme,iatel1 upon re0eipt )ereo+, in0lusive o+ penalties in0i,ent to
,elin;uen01. ")is is our :nal ,e0ision. #+ 1ou ,isagree, 1ou ma1 appeal
t)is :nal ,e0ision 9it) t)e 'ourt o+ "a. !ppeals 9it)in t)irt1 ?<0@ ,a1s
+rom ,ate o+ re0eipt )ereo+, ot)er9ise our sai, ,e:0ien01 in0ome ta.
assessment s)all be0ome :nal, e.e0utor1 an, ,eman,able.
Ver1 trul1 1ours,
!NNED =
'$NS"RU'"#VE SERV#'E $E N$"#'E8S
>E>$R!N=U> E$R(
")e 'ommissioner8Regional =ire0tor
")ru ')annel
SU%&E'" (
Name o+ "a.pa1er( NNNNNNNNNNNNNNNNNN
!,,ress( NNNNNNNNNNNNNNNNNN
".#.N.( NNNNNNNNNNNNNNNNNN
Pin, o+ "a.es( NNNNNNNNNNNNNNNNNN
!mount( *NNNNNNNNNNNNNNNNN
")is is to report t)at #8Fe personall1 serve, on t)e sub/e0t ta.pa1er at
t)e above given a,,ress on NNNNNNNNNNNNNN, 1999, t)e +ormal letter o+
,eman, an, assessment noti0e, ,ate, NNNNNNNNNNNNNNN, 1999, 0alling +or
pa1ment o+ )is8its above state, ta. liabilit1. Io9ever, t)e ta.pa1er
re+use, to a0Hno9le,ge re0eipt t)ereo+. #8Fe also trie, to serve t)e
same on NNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN, t)e ta.pa1er2s ,ul1
aut)oriCe, representative, but t)e latter liHe9ise re+use, to a0Hno9le,ge
re0eipt t)ereo+.
=ue to t)e +oregoing, t)e sai, +ormal letter o+ ,eman, an, assessment
noti0e 9ere 0onstru0tivel1 ,elivere, b1 leaving t)e same 0onspi0uousl1
at t)e ta.pa1er2s resi,en0e8pla0e o+ business at NNNNNNNNNNNNNNNNNNNNN, on
NNNNNNNNNNNN, 1999.
NNNNNNNNNNNNNNNNNNNNNNN
Revenue $30er
NNNNNNNNNNNNNNNNNNNNNNNNN NNNNNNNNNNNNNNNNNNNNNNNNN
Name an, Signature o+ Fitness Name an, Signature o+ Fitness
NNNNNNNNNNNNNNNNNNNNNNNNN NNNNNNNNNNNNNNNNNNNNNNNNN
=esignation =esignation