Facts:

The case involves the Commission of Internal Revenue (CIR) as the petitioner and Aquafresh Seafoods, Inc. as the respondent. The events leading to the case began on June 7, 1999, when Aquafresh Seafoods, Inc. sold two parcels of land, including improvements, located in Barrio Banica, Roxas City, to Philips Seafoods, Inc. for a total consideration of Three Million One Hundred Thousand Pesos (Php 3,100,000.00). The properties were covered by Transfer Certificate of Titles Nos. T-21799 and T-21804. Following the sale, Aquafresh filed a Capital Gains Tax Return and paid Php 186,000.00 for the Capital Gains Tax (CGT) and Php 46,500.00 for the Documentary Stamp Tax (DST). Subsequently, Revenue District Officer Gil G. Tabanda issued Certificate Authorizing Registration No. 1071477. However, the Bureau of Internal Revenue (BIR) received reports suggesting that the properties were undervalued for tax purposes. This led the Special Investigation Division (SID) of the BIR to conduct an ...

Facts:

1. Sale of Properties: On June 7, 1999, respondent Aquafresh Seafoods Inc. sold two parcels of land, including improvements, to Philips Seafoods, Inc. for Php 3,100,000. The properties were located in Barrio Banica, Roxas City, and were covered under Transfer Certificate of Titles Nos. T-21799 and T-21804.
2. Tax Payment: Respondent filed a Capital Gains Tax Return (CGT) and paid Php 186,000 as CGT and Php 46,500 as Documentary Stamp Tax (DST). Revenue District Officer Gil G. Tabanda issued Certificate Authorizing Registration No. 1071477.
3. Undervaluation Report: The Bureau of Internal Revenue (BIR) received a report that the properties were undervalued. The Special Investigation Division (SID) conducted an ocular inspection and concluded that the properties were commercial with a zonal value of Php 2,000 per square meter.
4. Assessment Notices: On September 15, 2000, Regional Director Leonardo Q. Sacamos issued Assessment Notices for CGT and DST deficiencies amounting to Php 1,372,171.46 and Php 356,267.62, respectively, based on the SID's findings.
5. Protest and Denial: Respondent protested the assessments on October 1, 2000, but the protest was denied on December 1, 2000. The denial was affirmed on February 13, 2002.
6. CTA Petition: On March 19, 2002, respondent filed a petition for review before the Court of Tax Appeals (CTA), arguing that the properties were residential with a zonal value of Php 650 per square meter based on the 1995 Revised Zonal Values of Real Properties.
7. CTA Decision: On December 22, 2004, the CTA ruled in favor of respondent, canceling the assessments. The CTA held that the 1995 Revised Zonal Values should prevail, as there was no re-evaluation or revision of zonal values at the time of the sale.
8. CTA En Banc Decision: The CTA En Banc affirmed the decision on November 9, 2005, dismissing the appeal for lack of merit.

Issue:

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Ruling:

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Ratio:

1. Consultation Requirement: Under Section 6(E) of the NIRC, the CIR is authorized to determine the fair market value of real properties upon consultation with competent appraisers from both the public and private sectors. This requirement ensures that zonal valuations are fair and accurate.
2. Prevailing Zonal Values: The 1995 Revised Zonal Values of Real Properties, which classified the subject properties as residential, must be followed unless a revision is made in accordance with the law. The CIR failed to prove that a revision was made prior to the sale.
3. Zonal Valuation Guidelines: The guidelines allowing reclassification based on predominant use apply only when no zonal valuation has been prescribed. Since the properties were already classified and valued, the guidelines do not apply.
4. Efficient Tax Administration: Zonal valuation aims to minimize discretion in tax administration. The existing zonal values must be followed unless revised through proper procedures.