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Why Cash Vouchers Resulted to a 4.5 Million Tax Assessment to Tambunting Pawnshop

0 Views· 11/26/23
Aryel Narvasa
Aryel Narvasa
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ETM discussed in this video the cost of using cash vouchers, that the PFRS, GAAP, PSA and GAAS are irrelevant to the Court of Tax Appeals and Supreme Court, what evidences are required by the Tax Code, what a purchases-taxpayer should keep in preparation of a BIR audit, why NC III Bookkeeping of TESDA is better than CPA license issued by the PRC... There will be a DOCUMENTARY ACCOUNTING COURSE, Tax Accounting to be held later on. For more details, visit EmelinoTMaestro.com.. For more videos about taxation, please go to Kataxpayer Facebook or EmelinoTMaestro YouTube Channel.... Hiring..... Barangay Estate Tax Specialista Assistants... Apply Now...
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Moreover, the issue on the submission of cash vouchers as evidence to prove expenses incurred has been addressed by this Court in the assailed Resolution, to wit:

"The trend then was to allow deductions based on cash vouchers which are signed by the payees. It bears to note that the cases cited by petitioner are pronouncements by this Court in 1980, 1982 and 1989.

However, latest jurisprudence has deviated from such interpretation of the law. Thus, this Court held in the case of Pilmico-Mauri Foods Corporation vs. Commissioner of Internal Revenue C.T.A. Case No. 6151, December 15, 2004;

[P]etitioner’s contention that the NIRC of 1977 did not impose substantiation requirements on deductions from gross income is bereft of merit. Section 238 of the 1977 Tax Code [now Section 237] provides:

x x x x

From the foregoing provision of law, a person who is subject to an internal revenue tax shall issue receipts, sales or commercial invoices, prepared at least in duplicate. The provision likewise imposed a responsibility upon the purchaser to keep and preserve the original copy of the invoice or receipt for a period of three years from the close of the taxable year in which the invoice or receipt was issued. The rationale behind the latter requirement is the duty of the taxpayer to keep adequate records of each and every transaction entered into in the conduct of its business. So that when their books of accounts are subjected to a tax audit examination, all entries therein could be shown as adequately supported and proven as legitimate business transactions. Hence, petitioner’s claim that the NIRC of 1977 did not require substantiation requirements is erroneous."

In order that the cash vouchers may be given probative value, these must be validated with official receipts.25

x x x x

Petitioner’s management and professional fees were disallowed as these were supported merely by cash vouchers, which the Court’s Division correctly found to have little probative value.26

Again, we affirm the foregoing holding of the CTA En Banc for the reasons therein stated. To reiterate, deductions for income tax purposes partake of the nature of tax exemptions and are strictly construed against the taxpayer, who must prove by convincing evidence that he is entitled to the deduction claimed.27 Tambunting did not discharge its burden of substantiating its claim for deductions due to the inadequacy of its documentary support of its claim. Its reliance on withholding tax returns, cash vouchers, lessor’s certifications, and the contracts of lease was futile because such documents had scant probative value. As the CTA En Banc succinctly put it, the law required Tambunting to support its claim for deductions with the corresponding official receipts issued by the service providers concerned.

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