G.R. No. L-22447 September 12, 1975
THOMSON SHIRTS FACTORY (AARON GO & CO.), petitioner, vs. THE COMMISSIONER OF INTERNAL REVENUE, respondent.

FACTS

In July 1955, BIR agents, armed with a search warrant, raided the premises of Thomson Shirts Factory and seized several notebooks and loose sheets containing entries in Chinese characters from locked cabinets. These documents were translated by BIR translator Ong Seng Hoon. Based on his translations, the Commissioner of Internal Revenue assessed the petitioner a deficiency sales tax of P20,775.03 for 1954-1955, plus penalties. The petitioner denied ownership of the documents and offered a compromise. Subsequently, the original Chinese documents were lost while in BIR custody.
The petitioner appealed to the Court of Tax Appeals, contesting the assessment. It specifically denied ownership of the seized records, challenged the reliability of Ong’s translations, and questioned their admissibility as secondary evidence after the originals were lost. The Tax Court upheld the assessment for the tax deficiency but absolved the petitioner from penalties, leading to this appeal.

ISSUE

The primary issue is whether the translations of the lost Chinese documents are admissible and reliable as a valid basis for the deficiency tax assessment.

RULING

The Supreme Court affirmed the Tax Court’s decision, ruling the assessment valid. On ownership, the Court applied the presumption that the possessor of property is its owner. The documents were found in the petitioner’s locked cabinets, and the manager’s prior correspondence acknowledged they were seized from the factory. The petitioner’s bare denial and inconsistent claim that they belonged to another factory at a different address were insufficient to rebut this presumption.
Regarding the translations’ reliability, the Court held that Ong Seng Hoon, though a Chinese citizen employed on a contract basis, was a de facto officer whose official acts were presumptively regular. The petitioner provided no evidence of bad faith or error in the translations. The contents, detailing transactions with textile dealers, were consistent with the petitioner’s business.
On admissibility, the Court ruled the translations were admissible as secondary evidence under the rule on lost documents. The loss of the originals was admitted. The execution and contents of the originals were sufficiently established by the manager’s own statements, including his reference to the seized books and his explanation that the Chinese entries were for personal use. The translations, as official records made in the regular course of duty, were competent substitutionary evidence. Therefore, the BIR properly relied on them to substantiate the tax deficiency.