Martes, Setyembre 22, 2015

PHILIPPINES’s BIR CHIEF KIM HENARES DELIBERATELY DECEIVED THE FILIPINO PEOPLE.



Bureau of Internal Revenue (BIR) Commissioner Kim Henares’s excuses to conceal the real truth about the P1.56-B tax evasion case involving Philippine Daily Inquirer (PDI) Chair Marixi Rufino-Prieto firm Golden Donuts, Inc. (GDI), the exclusive Philippine Franchisee of the global brand “Dunkin’ Donuts”:

1.   That GDI’s representatives purportedly complained to her that my tax assessment against the company was inaccurate;

2. That she ordered two (2) re-investigations conducted by different groups of revenue officers who supposedly arrived at the same results, purportedly finding my tax assessment to be incorrect;

3. That the authority to decide and declare finality of a certain assessment is a function vested by law upon the Commissioner of Internal Revenue; and

4.   That the compact disc (CD) which I presented to the RATE “Run After Tax Evaders” team was allegedly not compliant with the requirements prescribed under Revenue Memorandum Order (RMO) No. 29-2002.


The foregoing assertions are discussed in the same sequence and manner, vis:


1.   That GDI’s representatives purportedly complained to her that my tax assessment against the company was inaccurate.

My firm stance:

My tax audit/investigation resulted in several findings of irregularities which were properly supported by mathematical computations based on actual data contained in GDI’s financial records and appropriately substantiated with pieces of documentary evidence, culminated in the deficiency tax assessment against GDI amounting to PhP 1.56-B, including increments. Among others, are as follows:

a.  GDI keeps two (2) sets of books of accounts.

One is the duly-registered hardbound computer-generated books of accounts which were the bases of my tax assessment, and the other is the unregistered not-permanently-bound “manually-posted original books of accounts” which GDI claimed as the basis of its Trial Balance for financial statements and income tax return purposes.

Is it not that keeping two (2) sets of books of accounts, a fraudulent act or criminal tax violation?

b.  GDI supplied false information on the tax return.

GDI adopts a “computer-assisted accounting system” with duly-registered hardbound computer-generated books of accounts.

The compact disc (CD) submitted by GDI to the Bureau for audit, and the duly-registered hardbound computer-generated books of accounts, as I have appropriately validated, reflected a Net Taxable Income amounting to PhP 135.2 million while the Annual Income Tax Return (AITR) reflected a Net Loss of PhP 44.9 million.

On the basis of these information alone, it can readily be deduced that GDI under-declared its income on the tax return.

Is it not that supplying false information on the tax return, a fraudulent act or criminal tax violation?

c.   GDI under-declared its Sales on the tax return in two (2) instances:

i.     The CD and the duly-registered books (hardbound computer-generated), as I have appropriately validated, reflected a Sales amounting to PhP 1.928 billion while the amount reflected on the AITR was only PhP 1.031 billion; a huge discrepancy (substantial under-declaration) amounting to PhP 897 million.

The SUPREME COURT ruled in the case of Paper Industries Corporation of the Philippines vs. Court of Appeals, et al., 250 SCRA 434 that “where the books of accounts reflected a Sales or Receipts higher than that reflected in the return, the books of accounts should prevail. This is so, because the books of accounts are kept by the taxpayer and are prepared under its control and supervision; and they reflected what may be deemed to be admission against interest.”

The representations made by GDI in the CD and duly-registered books submitted and presented by it to the Bureau for audit and examination amounted to admissions against interest which it cannot disown and change at its convenience of pleasure.

Is it not that substantial under-declaration of Sales on the tax return, a fraudulent act or criminal tax violation?

ii.    Other independent relevant documents, such as but not limited to: (a) Franchise Agreement between GDI and Dunkin’ Donuts of America, Inc.; (2) Technical Service Agreement between GDI and its affiliate-Antares Management, Inc. (AMI); and other BIR filings of GDI (i.e. final withholding tax remittance returns and VAT returns), further revealed that GDI’s Sales topped PhP 2.366 billion but the amount recorded in its duly-registered books (hardbound computer-generated) was only PhP 1.928 billion; a huge discrepancy (substantial unrecorded and undeclared sales) amounting to PhP 438 million.

The information contained in the enumerated documents were utilized in further determining GDI’s Sales on the basis of the provisions of Section 5(A) of the 1997 National Internal Revenue Code (1997 NIRC), as amended, which reads:

Power of the Commissioner to obtain information, and to summon, examine, and take testimony of persons. – In ascertaining the correctness of any return, or in making a return when none has been made, or in determining the liability of any person for any internal revenue tax, or in collecting any such liability, or in evaluating tax compliance, the Commissioner is authorized:

(A)   To examine any book, paper, record, or other data which may be relevant or material to such inquiry;”

The method of validation I used was already upheld by the Court of Tax Appeals in the case of Asia Coal Corporation vs. Commissioner of Internal Revenue (CTA Case No. 6803, February 13, 2008) that “the respondent may utilize any kind of document, x x x to determine the correct sales of the petitioner…”

Is it not that deliberate non-recording of sales in the duly-registered books of accounts and non-declaration of the same on the tax return, are fraudulent acts or criminal tax violations?

d.  GDI substantially under-remitted VAT.

Under the VAT principle - Output VAT is concomitant to Sales or Revenue account. Thus, an under-declaration of Sales results in the under-remittance of VAT.

For year 2007, GDI substantially under-declared its Sales on the tax return, consequently VAT was significantly under-remitted.

Is it not that substantial under-remittance of VAT, a fraudulent act or criminal tax violation?

Just to say it again. All the above enumerated findings of irregularities, and all other discrepancies stated in my audit memorandum report submitted, were appropriately substantiated with pieces of documentary evidence submitted by GDI itself.


2.   That she ordered two (2) re-investigations conducted by different groups of revenue officers who supposedly arrived at similar results, purportedly finding my tax assessment to be incorrect.

My firm stance:

The PhP 1.56 billion deficiency tax assessment against GDI obtained finality. Thus, re-investigations are no longer warranted.

Once the deficiency tax assessment obtained finality, the right of the government to collect the deficiency tax becomes absolute; thus, precludes the taxpayer from questioning the correctness of the assessment and from raising any justification or defense that would pave the way for a re-investigation.

There is no LAW that authorizes the Commissioner to order two (2) re-investigations of a FINAL, EXECUTORY and DEMANDABLE assessment.

However, notwithstanding the ensuing finality of the afore-said deficiency tax assessment against GDI, no less than the Commissioner herself allowed such re-investigations.

The “first re-investigation”, which is no longer warranted because my tax assessment which remained undisturbed after review and evaluation by high-ranking officers in the district and regional levels and already covered by Final Assessment Notices (FANs) bearing Demand No. 41-B072-07 and all dated October 29, 2010 obtained finality, was assigned to Revenue Officer Stanley Ong, under Group Supervisor Gregorio S. Tumanguil, who was the same revenue officer who conducted the review of the case and recommended for the issuance of the statutory notices of assessment (PAN and FANs) when he was yet with the Assessment Division of the Regional Office in Quezon City.

I am not a lawyer though I believe that Revenue Officer Stanley Ong who conducted the “first re-investigation” could no longer disturb my tax assessment by himself for reasons of principle of estoppel. The equitable principle of estoppel forbids the revenue officer who conducted the “first re-investigation” from taking inconsistent position against his concurrence to my original audit findings that culminated in the deficiency tax assessment amounting to P1.56 billion which is already FINAL, EXECUTORY and DEMANDABLE but which was re-investigated by no other than him.

The second re-investigation, which again is no longer necessary because my tax assessment obtained finality, was referred to Atty. Grace Cruz of the National Investigation Division, BIR National Office in Diliman, Quezon City. I strongly admire Atty. Cruz of her investigative expertise in administrative cases. Lest I be misconstrued. I am not saying that Atty. Cruz is short of proficiency in tax accounting and tax auditing. No result of re-investigation was submitted by Atty. Cruz.

So, how can BIR Commissioner Kim Henares claim that her groups of revenue officers who conducted the two (2) separate re-investigations came up with the same findings that my tax assessment against GDI was incorrect?

Just to reiterate. The P1.56-B tax deficit of GDI has become due and demandable; thus, it already legally belongs to the Filipino people.


3.   That the authority to decide and declare finality of a certain assessment is a function vested by law upon the Commissioner of Internal Revenue.

My firm position:

Her assertion does not find basis in LAW.

It is the LAW that determines finality of a certain assessment as clearly provided under Revenue Regulations (RR) No. 12-99 as amended by RR No. 18-2013 which the Commissioner herself promulgated, in relation to Section 228 of the 1997 NIRC, as amended.

The tax assessment against GDI became final, executory and demandable in two (2) instances, vis:

a.  GDI’s letter of protest against the Final Assessment Notices (FANs) is invalid based on the following facts and law, and regulations.

The alleged letter of protest merely stated “protest against PAN adopted in toto”. It did not state the facts, the applicable law, rules and regulations, or jurisprudence on which the protest was based. It is neither a request for reconsideration nor reinvestigation.

The rules on protesting an assessment is found in Section 3 subsection 3.1.5 of Revenue Regulations (RR) No. 12-99, that reads:

Disputed Assessment. – The taxpayer or his duly authorized representative may protest administratively against the aforesaid formal letter of demand and assessment notice within thirty (30) days from date of receipt thereof.”

“The taxpayer shall state the facts, the applicable law, rules and regulations, or jurisprudence on which his protest is based, otherwise, his protest shall be considered void and without force and effect.”

“If the taxpayer fails to file a valid protest against the formal letter of demand and assessment notice within thirty (30) days from date of receipt thereof, the assessment shall become final, executory and demandable.”

The said Regulations must be taken in relation to Section 228 of the 1997 Tax Code, which reads:

Protesting an Assessment. –

Such assessment may be protested administratively by filing a request for reconsideration or reinvestigation within thirty (30) days from receipt of the assessment in such form and manner as may be prescribed by implementing rules and regulations. x x x otherwise, the assessment shall become final.”

Clearly, what the law demands is a valid administrative protest against the formal letter of demand and assessment notice which required the taxpayer to comply with the following:

i.   The protest must be through a request for reconsideration or reinvestigation;

ii.    The protest must be in the form and manner as prescribed under RR No. 12-99, which provides that said protest must state the facts, the law, rules and regulations, or jurisprudence on which the protest is based; and

iii.   Must be filed within thirty (30) days from receipt of the assessment.

The COURT OF TAX APPEALS in the case of Allied Banking Corporation vs. Commissioner of Internal Revenue (CTA Case No. 4581, March 25, 1992) cited that, “[f]ailure to comply with any or all of these requirements results in the assessment against the taxpayer becoming final and unappealable.”

The letter should not just state “protest against PAN adopted in toto”, because the administrative protest required to be filed as an answer to the formal letter of demand and assessment notice is distinct and not the same as the protest filed against the PAN.

The COURT OF TAX APPEALS emphasized in the case of Security Bank Corporation vs. Commissioner of Internal Revenue (CTA Case No. 6564, November 28, 2006) and further accentuated in the case of Bank of the Philippine Islands vs. Commissioner of Internal Revenue (CTA Case No. 7397, April 9, 2008) that:

“[A] protest to the preliminary assessment notice is not the same as the protest required to be filed as an answer to the final assessment notice. In fact, a preliminary assessment notice may or may not even be protested to by the taxpayer, and the fact of non-protest shall not in any way make the preliminary assessment notice final and unappealable. What is clear from Section 319-A of the Tax Code of 1977, as amended, is that failure on the part of the taxpayer to protest or reply to a preliminary assessment notice paves the way for the issuance of a final assessment notice. However, evident under said Section (now Section 228 of the 1997 Tax Code) is that failure on the part of the taxpayer to file a valid administrative protest through a request for reconsideration or reinvestigation on the final assessment notice, shall result in the finality of the said FAN.” (Annotation supplied)

The SUPREME COURT in the case of Allied Banking Corporation vs. Commissioner of Internal Revenue (G.R. No. 175097, February 5, 2010) heightened that:

“It is the Formal Letter of Demand and Assessment Notice that must be administratively protested or disputed within 30 days, and not the PAN.”

b.  GDI failed to submit the required documents in support of its protest required by law.

Section 228 of the 1997 National Internal Revenue Code (1997 Tax Code), as amended, provides:

“Within sixty (60) days from filing of the protest, all relevant supporting documents shall have been submitted; otherwise, the assessment shall become final.”

In the instant case, when GDI submitted documents in support of its protest, it was already beyond the sixty (60)-day period in violation of the above-cited provisions of the 1997 NIRC, as amended.

That GDI filed its INVALID PROTEST against the Formal Letter of Demand and Final Assessment Notices (FANs) on November 30, 2010 but it submitted documents only on March 24, 2011. Hence, it was already 114 days after the date of its filing of the protest; notwithstanding that said documents contained the same information as that already contained in the same documents submitted by GDI on November 27, 2009 covered by its letter dated November 27, 2009, which I have already considered, and the same were already taken up in the Adjusted Final Audit Findings sent to GDI covered by the Post Reporting Notice dated July 19, 2010 which became the bases of the Preliminary Assessment Notices (PANs) and Final Assessment Notices (FANs).

In a meeting held sometime on April, 2011 at the National Office in connection with the instant case which was attended to by Atty. Claro Ortiz, Head Revenue Executive Assistant; Atty. Sixto Dy, Chief, National Investigation Division; Atty. Abegail Gamboa, Chief of Staff of DCIR Estela Sales; and myself, it was ascertained that the tax assessment has become final, executory and demandable, in view of GDI’s failure to comply with the requirements as prescribed. “These are scraps of paper”, that’s Atty. Ortiz saying.


4.   That the compact disc (CD) which I presented to the RATE “Run After Tax Evaders” team was allegedly not compliant with the requirements prescribed under Revenue Memorandum Order (RMO) No. 29-2002.

My firm stance:

The RATE coordinator, members, and Mr. Wilfredo Reyes, the pioneer CAATTs (Computer-Assisted Audit Tools and Techniques) user, failed to consider and evaluate the documents attached to the docket of GDI case and the findings for deficiency tax assessment which were based on entries per duly-registered books of accounts (hardbound computer-generated), as I have appropriately validated; and other independent relevant documents, such as but not limited to, Franchise Agreement; Technical Service Agreement, and other BIR returns filed by GDI, such as: VAT returns and Final Withholding Tax Remittance Returns.

The CD, which was neither mentioned nor objected to by GDI in its INVALID PROTEST, that I presented to the RATE team is used by Henares and her minions as scapegoat in not filing tax evasion case against GDI by claiming that said CD is not compliant with the requirements prescribed under RMO No. 29-2002 - that it should be properly labeled with the name of the taxpayer, taxable year and serial no. and volume no. and signed by the taxpayer and RDO.

I pointed out that GDI adopts a “computer-assisted accounting system” wherein it is still required to register a “hardbound computer-generated books of accounts” which were the bases of my audit findings. Thus, the CD, which they used as scapegoat in not filing fraud case against GDI, need not be strictly compliant with the requirements provided under the aforesaid RMO in regards to the markings to be inscribed thereon.

RMO No. 29-2002 clearly provides that in case the taxpayer has no capability to submit in CD-ROM form, procedures under the MANUAL SYSTEM shall prevail. In other words, if the taxpayer adopts a computer system of accounting but has no capability to integrate the different components of accounting system (i.e., books of accounts and other related accounting records) in a CD-ROM form, it shall still be required to register a “hardbound computer-generated books of accounts”, as in the case of GDI.

I suggested to the RATE team that they may recommend for the issuance of a Subpoena Duces Tecum (SDT) to compel GDI produce its duly-registered hardbound computer-generated books of accounts, but the suggestion was just ignored.


BIR Commissioner Kim Henares, tagged as the “unyielding tax-evader-buster”, lied when she told GMA-7 in a telecast interview, that my tax assessment against GDI was faulty, to conceal the real truth. What is crystal clear is that, she appeared to be lawyering for a tax evader. Her continued intense refusal to appropriately act on the case (i.e., to either enforce collection of the subject due and demandable tax deficit or pursue tax evasion case against the subject taxpayer), notwithstanding her knowledge of the findings of fraudulent acts or criminal tax violations perpetrated by GDI, is a crystal clear manifestation of coddling and defending “Dunkin’ Donuts” local seller – a bigtime tax evader.

Atty. Kim Henares, just tell the whole truth and nothing but the truth.

Othello E Dalanon

Sabado, Setyembre 19, 2015

BIR's Kim Henares coddles and lawyers for tax evader!



Philippines’s Bureau of Internal Revenue Commissioner Kim Henares, who established a reputation that of an unyielding tax-evader-buster, coddles and lawyers for Philippine Daily Inquirer (PDI) Chair Marixi Rufino-Prieto firm Golden Donuts, Inc. (GDI), the exclusive Philippine Franchisee of the global brand “Dunkin’ Donuts” – a bigtime tax evader.

Othello E. Dalanon, in his official capacity as former BIR Revenue Officer, conducted investigation of the 2007 financial records of GDI for internal revenue tax purposes where he discovered and documented irregularities perpetrated by the said company that culminated in the tax assessment amounting to PhP 1.56 billion, including increments.

Dalanon personally reported GDI’s omissions to Commissioner Henares and recommended to her the criminal prosecution for tax evasion under the much-vaunted “Run After Tax Evaders” (RATE) Program of the Bureau; but she intentionally failed to pursue fraud case against the said company because its secretary – Marixi Rufino-Prieto who also happens to be the Chairperson of Philippine Daily Inquirer (PDI) – is President BS Aquino 3rd’s friend.

The aforesaid deficiency tax assessment obtained finality because GDI failed to file a VALID PROTEST against the Formal Letter of Demand and Assessment Notice (FAN).

However, Henares intentionally did not enforce collection thereof, purportedly because representatives of GDI complained to her that Dalanon’s tax assessment against the said company was allegedly faulty; that is why she ordered two (2) re-investigations conducted by different groups of revenue officers who supposedly arrived at similar results, finding Dalanon’s assessment to be incorrect, she said.

There is no LAW that authorizes the Commissioner to order two (2) re-investigations of a FINAL, EXECUTORY and DEMANDABLE assessment.

Once the deficiency tax assessment obtained finality, the right of the government to collect the deficiency tax becomes absolute; thus, precludes the taxpayer from questioning the correctness of the assessment and from raising any justification or defense that would pave the way for a re-investigation.

Notwithstanding the ensuing finality of the said assessment, the Commissioner allowed such re-investigations.

The “first re-investigation”, which is no longer warranted because Dalanon’s tax assessment which remained undisturbed after review and evaluation conducted by high-ranking officers in the district and regional levels of the agency, and already covered by Formal Letter of Demand and Assessment Notices (FANs) bearing Demand No. 41-B072-07 and all dated October 29, 2010 obtained finality, was assigned to Revenue Officer Stanley Ong, under Group Supervisor Gregorio S. Tumanguil, who was the same revenue officer that conducted the review of the case and recommended for the issuance of the statutory notices of assessment (PAN and FAN) when he was yet with the Assessment Division of the Regional Office in Quezon City.

Former Revenue Officer Dalanon is not a lawyer though he believes that Revenue Officer Stanley Ong who conducted the “first re-investigation” could no longer disturb the former’s tax assessment for reasons of principle of estoppel. The equitable principle of estoppel forbids the latter, who conducted the “first re-investigation”, from taking inconsistent position against his concurrence to the former’s original audit findings that culminated in the deficiency tax assessment amounting to PhP 1.56-B which is already FINAL, EXECUTORY and DEMANDABLE but which was re-investigated by no other than Revenue Officer Ong himself.

The “second re-investigation”, which is also no longer necessary as Dalanon’s tax assessment obtained finality, was referred to Atty. Grace Cruz of the National Investigation Division in the National Office of the BIR. Dalanon strongly admires Atty. Cruz of her investigative expertise in administrative cases. Lest it be misconstrued. Dalanon is not saying that Atty. Cruz is short of proficiency in tax accounting and tax auditing. No result of re-investigation was submitted by Atty. Cruz.

So, how can Henares claim that her groups of revenue officers who conducted the supposed two (2) separate re-investigations came up with the same findings that Dalanon’s assessment against GDI was incorrect?

Henares also claims that the authority to decide and declare finality of a certain assessment is a function vested by law upon the Commissioner of Internal Revenue.

Her assertion does not find basis in LAW.

It is the LAW that determines finality of a certain assessment as clearly provided under Revenue Regulations (RR) No. 12-99 as amended by RR No. 18-2013 which the Commissioner herself promulgated, in relation to Section 228 of the 1997 National Internal Revenue Code (1997 Tax Code), as amended.

Just to reiterate. The P1.56 billion tax deficit of GDI “Dunkin’ Donuts” has become DUE and DEMANDABLE, thus, it already legally belongs to the FILIPINO people; but Henares intentionally did not collect.

Atty. Kim Henares, just tell the truth and nothing but the truth!!!

Othello E Dalanon

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