Republic of the Philippines

DEPARTMENT OF JUSTICE
National Prosecution Service
OFFICE OF THE CITY PROSECUTOR
City of Manila

BUREAU OF INTERNAL REVENUE,

Complainant/s,
NPS DOCKET NO.
XV-07-INV-25B-00668

-versus-
FOR: VIOLATION OF
SEC. 266 IN REL. TO
SECS. 5, 14, 253(d)
AND 256 ALL OF THE
TAX CODE OF 1997
GANSHU XIAO,
REJANE P. CAYETA,
DANILA P. CAYETA,
OF LZZ TRADING CORPORATION,
Respondent/s.
X- - - - - - - - - - - - - - - - - - - - - - - - -x

COUNTER-AFFIDAVIT

I, GANSHU XIAO, of legal age, married, Chinese National and

with business address at 636 Sto. Cristo St., San Nicolas, Manila, after
having been duly sworn to in accordance with law, depose and state -
THAT:

1. I am the President/Chairman of LZZ TRADING

CORPORATION with business address at 636 Sto. Cristo St.,
San Nicolas, Manila;

2. I am unfairly and indiscriminately charged before this

Honorable Office by the Bureau of Internal Revenue,
 represented by Atty. Neil Patrick J. Ramos, Rica Kristina D.
Reyes and Jaypee A. Legaspi for Violation of Section 266 in
relation to Sections 5, 14, Section 253 (d) and 256 all of the
Tax Code of 1997;

3. I was appalled when I was informed that there was a Subpoena

from Senior Assistant City Prosecutor Roman T. Cobrado for the
case filed against me by the Bureau of Internal Revenue (BIR)
allegedly for violation of Sections 266 in relation to Sections 5 &
14, Sections 253 (d) and 256 all of the Tax Code of 1997 with
NPS Docket No. XV-07-INV-25B-00668;

4. The business of LZZ TRADING CORPORATION since its

establishment and all throughout the years of its operation had
been complying and acting in accordance with laws of the
Republic of the Philippines, in particular the Rules and
Regulations, Memorandum and other Orders issued by the
complainant Bureau of Internal Revenue in relation to the Tax
Code of 1997;

5. I as President/Chairman of the corporation had made it a point

to the supervisor and administrator of our office to be in
compliance in maintaining and presentation of Records, such
as Quarterly Income Tax Return, Monthly and Quarterly VAT
Returns, Monthly Remittance of Return of Income Taxes
Withheld on Compensation, Monthly Remittance Return of
Creditable Income Tax Withheld (Expanded), and Annual
Income Tax Returns and Audited Financial Statements.

6. The issuance of the Letter of Authority SN: eLA202300008459

(AUDM29-029-2023-064146) dated November 21, 2023 is not

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 in accord with recent Memorandum of the BIR, stating that
issuance of Letter of Authority shall cover only the taxable
years where prima facie evidence of fraud or violation of the
provisions of the Tax Code (NIRC) has been established. In this
case, no prior issuance of Letter of Authority was presented as
proof that investigation of subsequent or prior years has been
conducted and that the scheme was established.

7. Contrary to the claim of BIR officers that we deliberately and

continuously refused to heed their request for examination and
presentation documents pertaining to the Books of Accounts
and Accounting Records included in the Checklist of
Requirements. There was no proof that LZZ TRADING
CORPORATION including me and the other officers of the
corporation had actually received any Letter of Authority
together with Checklist of Requirements, the Notices dated
November 21, 2023 and February 6, 2024 for presentation of
accounting records and book of accounts and other accounting
records for taxable year 2022. Thus, the basis of the BIR
officers to recommend the issuance of subpoena duces tecum
is clearly unfounded and irregular;

8. The subpoena duces tecum was served in contravention of the

rules and prevailing jurisprudence on the matter.

9. In the Affidavit of Service of Subpoena Duces Tecum, there is

no indication or even a hint that previous efforts were made to
locate the persons named in the subpoena (Ganshu Xiao,
Rejane P. Cayeta and Danila P. Cayeta), or that the summons
or subpoena was served upon a person who is in charge of the
office or regular place of business of the named respondents.

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10. The record of this case shows that contrary to BIR Officer’s
allegations that they made several attempts on April 11, 2024
and April 216, 2024, there was only one actual attempt made
to serve the subpoena, that is on April 19, 2024. After the
officers went to the office/business address at such date, they
just immediately left the subpoena to one CRISTINE FELISA
JOY CABUG-OS. Nowhere can it be found in their return or
Affidavit of Service, or any other document in the complaint for
that matter that such substituted service was resorted to
because they failed to locate our persons, as named
respondents, despite reasonable efforts in doing so.

11. The truth is that no efforts were ever exerted to locate our
persons in order to serve the subpoena personally. From what
they have been informed, the officers serving the subpoena,
upon arriving at our place of work simply asked the first person
they saw there if we were in the said place. This person
happened to be CRISTINE FELISA JOY CABUG-OS, who is just a
SALES LADY. Upon being informed of our absence, they simply
left the subpoena and asked CRISTINE FELISA JOY CABUG-OS
to receive the same. Applying the rules and the law to the
factual circumstances in this case, it is evident that the service
of the subpoena, which is the sole basis of the complaint, was
ineffective. As such, it is considered to have no force and effect;

12. Aside from not being served with summons in the manner
required under the law, we were totally unable to receive the
subpoena itself. The person to whom it was given neither
provide us the copy of the subpoena, nor did she notify us of
its existence and contents. It was only when we received the

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 instant complaint did we come to know that such subpoena had,
indeed, been issued against us.

13. In sum, we submitted that there is no legal basis to hold

that the crime complained of has been committed. We were not
duly served with summons, as we did not in fact receive the
same. Absent any service of summons on our person, we
cannot be said to have neglected to comply with its directives.

14. The complainant BIR officers did not complied with the
procedure of service. The Revenue Officer who served the
subpoena should have complied with what is required of her in
connection with the service of the subpoena duces tecum (SDT)
particularly under III.D. 1 and IV.B of the same memorandum
order which has been in effect for almost a year prior to the
filing of this case, to wit:

“D. Service of SDT

1. The duly issued SDT must be served within three

(3) working days from receipt by the concerned
Revenue Officers. Rule 14 of the Rules of Court
governs the procedure to be observed in matters
relating to service of SDTs. Thus, strict compliance
with following rules of procedure is hereby enjoined:

a. Whenever practicable, the SDT shall be served by

handling a copy thereof to the person named
therein, or, if he refuses to receive and sign for it,
by tendering it to him, witnessed by another
revenue officer accompanying the server.

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 b. If, for justifiable causes, personal service cannot
be made, service may be effected:
b.1. By leaving a copy of the SDT at the
dwelling place or residence of the
subject individual, with some person of
suitable age and discretion then residing
therein, witnessed by another revenue
officer accompanying the server; or
b.2 By leaving a copy at the office or
regular place of business of the person
named therein, with some competent
person in charge thereof, witnessed by
another revenue officer accompanying
the server”.

IV. FILING OF A CASE FOR FAILURE TO OBEY SDT

A. Xxx xxx xxx
B. In preparation of the Affidavit Complaint, the
Revenue Officers, as the persons who have
personal knowledge of the non-compliance with
the SDT because they are the ones who
requested for the issuance of the SDT, served
the same to the taxpayer, and were present
during the compliance date indicated in the SDT
shall be the complainants”.

15. Clearly not all the elements of the crime of violation of

Section 266 in relation to Section 5, 14, 253 (d) and 256 all of
the Tax Code of 1997 (NIRC) as amended, are present
justifying reasonable certainty for indictment of herein
respondents, to wit: a) subpoena duces tecum (SDT) was

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 issued against the taxpayer in relation to the BIR tax audit or
examination; b) the SDT was duly and validly served upon
the taxpayer; and c) failure of the taxpayer to comply with
thew request for submission of documents indicated in the SDT.
(emphasis ours)

16. We have no knowledge of the order of the BIR-Legal

Division to appear before them on April 19, 2024, by virtue of
the subpoena duces tecum dated April 5, 2024 duly signed by
the Regional Director, and to bring the books of accounts and
other accounting records of LZZ TRADING CORPORATION
for Taxable Year 2022.

17. I did not personally received the Subpoena Duces Tecum

issued by complainant Bureau of Internal Revenue (BIR) and I
was not informed of the same. As per report submitted to me
upon receipt of the subpoena for this case, the “TINDERA
(SALES LADY)” who received the said Subpoena Duces Tecum
did not report the matter or forward the same to the
supervisor/administrator’s office.

18. The failure to appear on said proceeding on April 19, 2024

is a result of complainant BIR officers failure to comply with the
procedure of service of SDT.

19. The LZZ TRADING CORPORATION is willing to comply

with the purpose of the Subpoena Duces Tecum, to submit the
documents of books of accounts and other accounting records
of LZZ TRADING CORPORATION for Taxable Year 2022
included in the Checklist of Requirements as requested by the

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 Bureau of Internal Revenue (BIR) if given the proper and
available time.

20. We have also signified our intention to pay the penalty fee if
there is any for the late submission/compliance of our
corporation.

In view of the forgoing, we are requesting for the DISMISSAL

of the instant case against us.

DONE AND EXECUTED this ____ day of February 2025 at the

City of Manila.

GANSHU XIAO
Affiant

SUBSCRIBED AND SWORN to before me this ___ day of February

2025.

I HEREBY CERTIFY that I personally examined the affiant and

that I am satisfied that the affiant executed and understood his affidavit.

ROMAN T. COBRADO
Senior Assistant City Prosecutor