CIR V.

BENIPAYO  The report of Provincial Revenue Officer read that the taxpayer was able
G.R. No. L-13656 || 31 January 1962 || Appeal from CTA || Dizon, J.
CASE SUMMARY:
Respondent operates the Lucena Theater. Children who buy tickets get tax-free
tickets. BIR Agent reported that 1949-1951, the ratio of adults to children
patronizing the same was 3 to 1, but in the period in question, 1952-1953, the
ratio was reversed. This was taken as fraud, in that respondent must have sold
two tax-free 20-centavo tickets to adults to avoid amusement tax. BIR assessed
deficiency amusement tax. SC ruled that assessments must not be based on
mere presumptions. The report merely presumes that the conditions in 1949-
1951 were the same as those in 1952-1953. There must be clear proof
supporting the charge of fraud, and there is none here.
ISSUE: W/N there is sufficient evidence that respondent sold and issued to his
adult customers two tax-free 20-centavo children’s tickets, instead of one 40-
centavo ticket for each adult customer, to cheat the government?
FACTS:
 Responsent is the owner and operarator of the Lucena Theater.
 Internal Revenue Agent Romeo de Guia investigated respondent’s
amusement tax liability in connection with the operation of the threater
from 1952-1953.
 His report stated that respondent disproportionately issued tax-free 20-
centavo tickets. The ratio of adults to children patronizing the theater
was reversed, from 3 to 1 in 1949-1951, to 1 to 3 in 1952-1953. He
concluded that respondent must have fraudulently sold two tax-free 20-
centavo tickets (meant for children) to adults to avoid amusement tax
under the NIRC, Sec. 260.
 De Guia recommended deficiency amusement tax in the total amount of
Php 12,093.45. Petitioner issued an assessment in that amount.
 Respondent filed a protest at the BIR.
 The Conference Staff therein submitted its finding that the findings of
De Guia’s report were mere presumptions, and recommended its referral
to the Provincial Revenue Officer for further investigation.
to manipulate the issuance of tickets. Thus, the Conference Staff
recommended the issuance of deficiency amusement tax assessment.
 CTA: Assessment must not be based on mere presumptions. There are
no substantial facts to support the assessment here.
HELD/RATIO: NO. Assessments must not be based on mere presumptions,
and there must be clear proof to support a charge of fraud. As there is none
here, there is no reason to reverse the CTA.
 Assessment fixes tax liability, and as soon as it is served, the obligation
arises on the taxpayer to pay. Thus, the same must not be based on
presumptions, no matter how logical they may be. Assuming that the
average ratio of adults to children from 1949-1951 was 3 to 1, there was
no reason for it be exactly the same in 1952-1953. The conditions might
not have been the same.
 To sustain deficiency would amount to a finding that respondent cheated
and defrauded the government. Fraud is a serious charge and must be
supported by clear and convincing proof, which is lacking here.
 It is not true that respondent admitted to the anomalous practice. What
he seems to have admitted is that he adopted a rebate system applicable
to cases where adults and children came in groups and were all charged
20c of admission tickets. But this was discontinued when the BIR
informed respondent that the same was not in accordance with law.