COLLECTOR OF INTERNAL REVENUE, PETITIONER, VS. ALBERTO M. K. JAMIR, RESPONDENT.

In his income tax return for the year 1954, Alberto M. K. Jamir
declared a gross income of P75,858.65 and claimed deductions
aggregating F58,134.50, thereby showing a net income of P17,774.15,
upon which he paid Pl,634 as income tax. Upon examination of his
aforementioned return, as well as of his books of accounts and other
records, the Collector of Internal Revenue, however, assessed, as
deficiency income tax due from him, the sum of P16.395 computed as
follows:

1.	Purchases overstated	P 1,118.95
2.	Unrecorded income	31,274.91
3.	Bank charges	45.67
4.	Car depreciation	400.00
5.	Salary of driver	720.00
6.	Transportation	576.20

A reconsideration of this assessment having been denied, Jamir
appealed to the Court of Tax Appeals, which after due notice and
hearing, rendered a decision reducing the amount due as deficiency
income tax for the year 1954 to P552.00, computed as follows:

1.	Overstated purchases	P 1,118.95
2.	Bank charges	P45.67
3.	Car depreciation (1/4)	200.00
4.	Salary of driver (1/4)	360.00
6.	Transportation expenses	576.20	P2,300.82
		—————-	—————-

The main issue is whether Jamir had had an undeclared income for the
year 1954 aggregating P31,274.91, consisting, according to appellant,
of the sums of P1,281.24 and P29,993.67, representing the amounts by
which his expenses for February and May, 1954, respectively, had
exceeded his income therefor. It appears that, by using the so-called
“expenditures method”, the Government considered as an undeclared
income so much of Jamir’s expenditures for said months as was in excess
of his reported income for the same months. Although the Court of Tax
Appeals, in effect, sanctioned the adoption of the “expenditures
method”, it held—and, we think, correctly—that, the same should be
applied by deducting the aggregate yearly expenditures from the declared yearly income, not the expenditures incurred each month
from the declared income therefor. In the case at bar, Jamir’s total
income for the year 1954 (P75,858.65) exceeded (P17,774.15) the total
deductions (P58,134.50) claimed by him. Indeed, Jamir explained and
introduced evidence to the effect that said sums of P1,281.24 and
P29,993.67 represented advances made to him by customers in the months
of February and May, 1954, and that the income derived from the
corresponding transactions were entered in his books of account in
subsequent months, and this explanation was found by the Court of Tax
Appeals to have been proven satisfactorily. The records before us do
not warrant a different conclusion.

The next question raised by appellant refers to Jamir’s claim for
car depreciation and salary of his driver in the sums of P800.00 and
Pl,440.00, respectively. Although petitioner had disallowed one-half
(1/2) of these claims, it appearing that the car was used by Jamir for
personal and business purposes, the lower court allowed, as deductions,
three-fourths (3/4) of said amounts, the car having been used by Jamir
“more for business than for personal purposes”. Petitioner assails this
as an error, but, considering the attending circumstances, we do not
feel justified in disturbing the action taken by said Court.

It is next urged that the same should have upheld instead of
eliminating, the 50% surcharge imposed in the contested assessment, for
alleged fraud on the part of Jamir. It appearing, however, that Jamir
had not had the undeclared income of P31,274.91, upon which the
contested assessment is mainly based, it follows necessarily that he
was not guilty of the fraud imputed to him and that the 50% surcharge
has been properly eliminated.

WHEREFORE, the decision appealed from is hereby affirmed, without costs. It is so ordered.

Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Barrera, Paredes, Dizon, and De Leon, JJ., concur.