Construction Co. claiming fictitious purchases

The Bureau of Internal Revenue (BIR) today filed a criminal complaint with the Department of Justice against DQT BUILDERS CORPORATION (DQT) and its responsible corporate officers – Chairman/President ENGR. DOMINGO Q. TAN and Chief Financial Officer ROSALINA D. TAN – for one (1) count of attempt to evade or defeat payment of income tax by overstating its expenses by P70.27 million in 2007, one (1) count of attempt to evade or defeat payment of Value Added Tax (VAT) by overstating its purchases by P70.27 million in 2007, one (1) count of willful failure to supply correct and accurate information in its Income Tax Return (ITR) by overstating its expenses for taxable year 2007 and four (4) counts of willful failure to supply correct and accurate information in its VAT Return by overstating its purchases for taxable year 2007, all in violation of Section 254 and Section 255 of the National Internal Revenue Code of 1997, as amended (Tax Code).

DQT is a domestic corporation engaged in the general construction business, including the construction, enlarging, repairing, developing or engaging in any work upon buildings, house & condominium, roads, plants, bridges, airfields, pier, waterworks, railroads and other structures. DQT is located at Enverga cor. Merchan St., Lucena City, Quezon Province.

Using Summary Lists of Purchases and documents from the BIR LN Task Force, investigators discovered that DQT overstated its expenses in its ITR for taxable year 2007 and over-claimed input taxes in its VAT returns for 2007 by reflecting fictitious purchases amounting to P70.27 million. The sham purchases were confirmed by DQT’s alleged suppliers BSO Trading (PP13.62M), JP Tomas Construction Supply (P29.9M) and Cresar Enterprises (P26.75M) who, however, all denied having had any transaction with DQT.

Confronted with the said findings by the BIR, Engr. Domingo said that he paid the transactions in question in cash but nevertheless failed to produce the sales invoices showing said purchases. Under the Tax Code, for an expense to be deductible from taxable income, among others, it must be supported by receipts, records or other pertinent papers.

The scheme of DQT and respondents Domingo and Rosalina of claiming fictitious purchases – overstating expenses claimed against taxable income and over-claiming input taxes deducted from output taxes – reduced the income tax and VAT liabilities of DQT, to the prejudice of the government.

DQT is being sued for a total tax deficiency amounting to P76.52 MILLION, including surcharges and interest, for taxable years 2007, broken down as follows: P55.75M – Income Tax; and P20.77M – VAT.

The case against DQT BUILDERS CORPORATION (DQT) and its responsible corporate officers – Chairman/President ENGR. DOMINGO Q. TAN and Chief Financial Officer ROSALINA D. TAN – is the eighty-seventh (87th) filed under the Run After Tax Evaders (RATE) program of the BIR under the leadership of Commissioner Kim S. Jacinto-Henares.