Fitness by Design Inc V tax digest

7/22/2019 Fitness by Design Inc V tax digest

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FITNESS BY DESIGN INC V. CIR (*from upper batch)

Facts:

Commissioner on Internal Revenue (respondent) assessed Fitness by Design, Inc. (petitioner) for deficiency income taxes for the tax year 1995.

Petitioner protested and filed a Petition for Review with Motion to Suspend Collection of Income Tax, before the Court of Tax Appeals andraised prescription as a defense. A preliminary hearing on the issue of prescription was conducted during which petitioners former bookkeeper

attested that certified public accountant Leonardo Sablan illegally took custody of petitioners accounting records, invoices, and official

receipts and turned them over to the BIR.

Petitioner requested for the issuance of subpoena ad testificandum to Sablan for the hearing and of subpoena duces tecum to the BIR for the

production of the Affidavit of the Informer bearing on the assessment in question. In addition, petitioner submitted written interrogatories

addressed to Sablan. The CTA denied petitioners motion for Issuance of Subpoenas and disallowed the submission by petitioner of written

interrogatories to Sablan. The CTA found that to require Sablan to testify would violate Section 2 of Republic Act No. 2338, as implemented by

Section 12 of Finance Department Order No. 46-66, proscribing the revelation of identities of informers of violations of internal revenue laws,

except when the information is proven to be malicious or false. Petitioner filed a rule 65.

Issue: Did the CTA err in denying the motions for subpoenas and written interrogatories?

Held:

The CTA did NOT err. In requesting the issuance of the subpoenas and the submission of written interrogatories, petitioner sought to establish

that its accounting records and related documents, invoices, and receipts which were the bases of the assessment against it were illegally

obtained. The only issues, however, which surfaced during the preliminary hearing before the CTA, were whether respondents issuance of

assessment against petitioner had prescribed and whether petitioners tax return was false or fraudulent.

Besides, as the CTA held, the subpoenas and answers to the written interrogatories would violate Section 2 of Republic Act No. 2338 as

implemented by Section 12 of Finance Department Order No. 46-66. Petitioner claims, however, that it only intended to elicit information on

the whereabouts of the documents it needs in order to refute the assessment, and not to disclose the identity of the informer . Petitioners

position does not persuade. The interrogatories addressed to Sablan and the revenue officers show that they were intended to confirm

petitioners belief that Sablan was the informer.

Lastly, Petitioner impugns the manner in which the documents in question reached the BIR, Sablan having allegedly submitted them to the BIR

without its (petitioners) consent. Petitioners lack of consent does not, however, imply that the BIR obtained them illegally or that theinformation received is false or malicious. Nor does the lack of consent preclude the BIR from assessing deficiency taxes on petitioner based on

the documents. Section 5 of the Tax Code allows the BIR access to all relevant or material records and data in the person of the taxpayer, and

the BIR can accept documents which cannot be admitted in a judicial proceeding where the Rules of Court are strictly observed. To require the

consent of the taxpayer would defeat the intent of the law to help the BIR assess and collect the correct amount of taxes

1. While the CIR has the authority to prescribe real property values and divide the

Philippines into zones, the same has to be done upon consultation with competent

appraisers both from the public and private sectors.It is undisputed that at the time of the sale of the subject properties, the same were classified asRR, or residential,based on the 1995 Revised Zonal Value of Real Properties. Petitioner CIR,thus, cannot unilaterally change the zonal valuation of such properties to commercial without firstconducting a re-evaluation of the zonal values as mandated under Section 6(E) of the NIRC.Petitioner failed to prove that it had complied with Revenue Memorandum No. 58-69 and that arevision of the 1995 Revised Zonal Values of Real Properties was made prior to the sale of the

subject properties.Republic of the Philippines v. Aquafresh Seafoods, Inc., G.R. No. 170389,

October 20, 2010

The facts of the case are as follows:

On June 7, 1999, respondent Aquafresh Seafoods Inc. sold to Philips Seafoods, Inc. two parcels of land, including improvements thereon, located

at Barrio Banica, Roxas City, for the consideration of Three Million One Hundred Thousand Pesos (Php 3,100, 000.00). Said properties were

covered under Transfer Certificate of Titles Nos. T-21799 and T-21804.


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Respondent then filed a Capital Gains Tax Return/Application for Certification Authorizing Registration and paid the amount of Php186,000.00,

representing the Capital Gains Tax (CGT) and the amount of Php46,500.00, representing the Documentary Stamp Tax (DST) due from the said

sale. Subsequently, Revenue District Officer Gil G. Tabanda issued Certificate Authorizing Registration No. 1071477.

The Bureau of Internal Revenue (BIR), however, received a report that the lots sold were undervalued for taxation purposes. This prompted the

Special Investigation Division (SID) of the BIR to conduct an occular inspection over the properties. After the investigation, the SID concludedthat the subject properties were commercial with a zonal value of Php2,000.00 per square meter.

On September 15, 2000, Regional Director Leonardo Q. Sacamos (Director Sacamos) of the Revenue Region Iloilo City sent two Assessment

Notices apprising respondent of CGT and DST defencies in the sum of Php1,372,171.46 and Php356,267.62, respectively. Director Sacamos

relied on the findings of the SID that the subject properties were commercial with a zonal valuation of Php2,000.00 per square meter.

On October 1, 2000, respondent sent a letter protesting the assessments made by Director Sacamos. On December 1, 2000, Director Sacamos

denied respondent's protest for lack of legal basis. Respondent appealed, but the same was denied with finality on February 13, 2002.

On March 19, 2002, respondent filed a petition for review3 before the CTA seeking the reversal of the denial of its protest. The main thrust of

respondent's petition was that the subject properties were located in Barrio Banica, Roxas, where the pre-defined zonal value was Php650.00 per

square meter based on the "Revised Zonal Values of Real Properties in the City of Roxas under Revenue District Office No. 72 Roxas City"

(1995 Revised Zonal Values of Real Properties). Respondent asserted that the subject properties were classified as "RR" or residential and not

commercial. Respondent argued that since there was already a pre-defined zonal value for properties located in Barrio Banica, the BIR officials

had no business re-classifying the subject properties to commercial.

On December 22, 2004, the CTA promulgated a Decision4 ruling in favor of respondent,

8. CIR vs. HANTEX TRADING CO., INC.

G.R. No. 136975; March 31, 2005

Facts: Hantex Trading Co is a company organized under the Philippines. It is engaged in the sale of plastic products, it imports synthetic resin

and other chemicals for the manufacture of its products. For this purpose, it is required to file an Import Entry and Internal Revenue Declaration

(Consumption Entry) with the Bureau of Customs under Section 1301 of the Tariff and Customs Code. Sometime in October 1989, Lt. Vicente

Amoto, Acting Chief of Counter-Intelligence Division of the Economic Intelligence and Investigation Bureau (EIIB), received confidential

information that the respondent had imported synthetic resin amounting to P115,599,018.00 but only declared P45,538,694.57. Thus, Hentexreceive a subpoena to present its books of account which it failed to do. The bureau cannot find any original copies of the products Hentex

imported since the originals were eaten by termites. Thus, the Bureau relied on the certified copies of the respondents Profit and Loss

Statement for 1987 and 1988 on file with the SEC, the machine copies of the Consumption Entries, Series of 1987, submitted by the informer,

as well as excerpts from the entries certified by Tomas and Danganan. The case was submitted to the CTA which ruled that Hentex have tax

deficiency and is ordered to pay, per investigation of the Bureau. The CA ruled that the income and sales tax deficiency assessments issued by

the petitioner were unlawful and baseless since the copies of the import entries relied upon in computing the deficiency tax of the respondent

were not duly authenticated by the public officer charged with their custody, nor verified under oath by the EIIB and the BIR investigators.

Issue: Whether or not the final assessment of the petitioner against the respondent for deficiency income tax and sales tax for the latters 1987

importation of resins and calcium bicarbonate is based on competent evidence and the law.

Held: Central to the second issue is Section 16 of the NIRC of 1977, as amended which provides that the Commissioner of Internal Revenue hasthe power to make assessments and prescribe additional requirements for tax administration and enforcement. Among such powers are those

provided in paragraph (b), which provides that Failure to submit required returns, statements, reports and other documents.When a report

required by law as a basis for the assessment of any national internal revenue tax shall not be forthcoming within the time fixed by law or

regulation or when there is reason to believe that any such report is false, incomplete or erroneous, the Commissioner shall assess the proper

tax on the best evidence obtainable. This provision applies when the Commissioner of Internal Revenue undertakes to perform her

administrative duty of assessing the proper tax against a taxpayer, to make a return in case of a taxpayers failure to file one, or to amend a

return already filed in the BIR. The best evidence envisaged in Section 16 of the 1977 NIRC, as amended, includes the corporate and

accounting records of the taxpayer who is the subject of the assessment process, the accounting records of other taxpayers engaged in the

same line of business, including their gross profit and net profit sales. Such evidence also includes data, record, paper, document or any


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evidence gathered by internal revenue officers from other taxpayers who had personal transactions or from whom the subject taxpayer

received any income; and record, data, document and information secured from government offices or agencies, such as the SEC, the Central

Bank of the Philippines, the Bureau of Customs, and the Tariff and Customs Commission. However, the best evidence obtainable under Section

16 of the 1977 NIRC, as amended, does not include mere photocopies of records/documents. The petitioner, in making a preliminary and final

tax deficiency assessment against a taxpayer, cannot anchor the said assessment on mere machine copies of records/documents. Mere

photocopies of the Consumption Entries have no probative weight if offered as proof of the contents thereof. The reason for this is that such

copies are mere scraps of paper and are of no probative value as basis for any deficiency income or business taxes against a taxpayer.

BONIFACIO SY PO VS. COURT OF TAX APPEALS (AUGUST 18, 1988) (*from upper batch)

DOCTRINE - Tax assessments by tax examiners are presumed correct and made in good faith. The taxpayer has the duty to prove otherwise. In

the absence of proof of any irregularities in the performance of duties, an assessment duly made by the BIR examiner and approved by his

superior officers will not be disturbed. All presumptions are in favour of the correctness of tax assessments. (Venzuela 3D 2012)

Po Bien Sing was the sole proprietor of Silver Cup Wine Factory engaged in the manufacture and sale of compounded liquors. On the basis of a

denunciation against Silver Cup allegedly for tax evasion amounting to millions of pesos, an investigation was conducted by the BIR. A

subpoena duces tecum was issued against Silver Cup requesting the production of accounting records and other related documents. Po Bien

Sing did not produce the said documents so the BIR investigation team entered the factory and seized the different brands of alcohol products

inside. On the basis of the investigation teams report, Silver Cup was assessed deficiency income tax of P5,596,003.68 which Po Bien Sing

protested. However, since he still did not present the documents requested, the assessment remained. BIR then issued warrants of distraint

and levy. In short, the protests were denied so Po Bien Sing (represented by his wife because he was already dead) brought the case to the

Supreme Court.

The basis issue is whether or not the assessment is valid and has legal basis.

The Supreme Court ruled that the assessment was valid. One of the powers of the Commissioner of Internal Revenue under the NIRC is to

make an assessment with the available information in case the taxpayer makes a fraudulent return or does not make a return at all. This

basically speaks of the principle of best evidence obtainable. In this case, the failure of Po Bien Sing to produce the required documents left

the Commissioner with no choice but to exercise the said power. The assessment was not arbitrary as alleged by So Bien Sing because it was

based on the number bottles of wines seized during the raid and sworn statements of the employees.

50% surcharge was also imposed and .05% monthly interest. (FYI kung itanong ni sir.)

Tax assessments by tax examiners are presumed correct and made in good faith. The burden to prove otherwise is on the taxpayer. In the

absence of proof of any irregularities in the performance of duties, an assessment duly made by a BIR examiner and approved by his superior

officers will not be disturbed. All presumptions are in favor of the correctness of the tax.

Furthermore, the taxpayer should not only prove that the tax assessment is wrong. He must also prove what is the correct and just liability by a

full and fair disclosure of all pertinent data in is possession. Otherwise, the tax court proceedings would settle nothing and the whole process

may be repeated again if the taxpayer does not like the subsequent assessment.

CIR V. BENIPAYO (ASSESSMENTS CANNOT BE BASED ON MERE PRESUMPTIONS) *from upper batch

DOCTRINEThe assessment determines the tax liability of a taxpayer. As it is imperative to be accurate, the assessment must be based on

actual facts. Although there is a presumption of correctness in the assessment, such presumption cannot be based on another presumption as

well, not matter how reasonable or logical such may be. The basis of the presumption of correctness must be actual facts. (Noel3D 2012)

Benipayo was the owner and operator of the Lucena Theater. He charged ) 20 centavos for childrens tickets and 40 centavos for adults

tickets. The 20c tickets for children were tax free while those for adults were not. During 1949-1951, the ratio of the customers was 1 child for

every 3 adults. However, during the 1952-1953, the ratio was 3 children for every adult. This led the Revenue Agent to conclude that Benipayo

fraudulently sold 20c tax-free tickets to adults instead of the 40c taxable tickets in order to avoid the corresponding amusement tax. As such,

the BIR assessed Benipayo of amusement tax liability. Benipayo claims that the reports were bare presumptions and conclusions and that there

was no proof of fraud committed by him.

Another report was made wherein the agents of the BIR supervised the sale of tickets. During this period, the tickets for the adults soared

while those of the children decreased. The Revenue Agent claims that this shows that fraud was indeed committed during the questioned

period.


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The Supreme Court ruled that there was no factual basis for the assessment of amusement tax. It ruled that assessments should not be based

on mere presumptions no matter how reasonable or logical. The fact that the ratio changed is no proof that the ratio was the same during the

questioned period. The assessment must be based on actual facts. The presumption of correctness should not be based on another

presumption that the ratio during the questioned period was the same as that of the succeeding period.

The discrepancy can actually be explained by the fact that Benipayo adopted a rebate system wherein adults and children who came as a group

all paid 20c. He discontinued this practice after being informed by the BIR that this was illegal.

MERALCO SECURITIES CORP. VS. SAVELLANO (OCTOBER 23, 1982) (*from upper batch)

DOCTRINEMandamus cannot lie to compel the Commissioner to impose a deficiency tax assessment. Mandamus only lies when the act is

ministerial in nature, and not discretionary, as assessments are, with regard to the Commissioner. Should the Commissioner choose not to

impose deficiency tax assessments due to want of proof, the courts cannot interfere with such discretionary function. (Noel 3D 2012)

Maniago submitted to CIR a confidential denunciation against Meralco for tax evasion for paying income tax only for 25% of the dividends it

received from Manila Electric Company. The Commissioner initiated an investigation but found that Meralco complied with the requirements

of the law which states that in the case of dividends received by a domestic or foreign resident corporation liable to tax u nder this

Chapter.only 25% thereof shall be returnable for the purposes of the tax imposed under this section. Maniago filed a petition for mandamus

to compel the Commissioner to issue a deficiency tax assessment so he could get his informers reward. The trial court granted the mandamus

so the CIR brought the case to the Supreme Court.

The Supreme Court ruled that the trial court had no jurisdiction to take cognizance of the case because the subject matter thereof clearly fallswithin the scope of those under the exclusive jurisdiction of the CTA. The determination of the correctness or incorrectness of a tax assessment

falls within the jurisdiction of the CTA and not the trial court.

Furthermore, the proper procedure was to appeal the decision of the Commissioner to the CTA within 30 days from receipt thereof. Since no

appeal was perfected, the assessment became final.

Finally, the rule of mandamus only lies to enforce the performance of a ministerial act or duty and not to control the performance of a

discretionary power. Discretion here means the power or the right conferred upon the office by law of acting officially under certain

circumstances according to the dictates of his own judgment and conscience and not controlled by the judgment or conscience of others. As

such, mandamus may not lie against the Commissioner to compel him to impose a tax assessment not found by him to be due or proper for

that would be tantamount to a usurpation of executive functions.

REPUBLIC VS. HIZON (DECEMBER 13, 1999) (*Mendoza 3D 2009 2010)

(DOCTRINE) The issues in this case revolve around the lack of approval of the CIR in filing the collection case and the summary nature of

collection cases in relation to the prescription of an action for collection. The court ruled that in accordance with Sec. 221 of the NIRC as

implemented by RAO 5-83, the authority to file complaints for collection of tax liabilities has been validly delegated to the Revenue Regions

particularly to the Special Attorneys and Special Counsels designated by the Regional Director. As such, approval of the CIR is no longer

necessary. In the case at bar, it was the Chief of the Legal Division with the approval of the Regional Director who instituted the case. Anent the

second issue, the petitioner is incorrect in saying that the action has prescribed. When the BIR served warrants of distraint or levy on Hizon, the

running of the period to collect was suspended. The summary nature of collection by distraint or levy allows the enforcement of such collection

to proceed beyind the statutory period. (Francisco3D 2012)

FACTS

On July 18, 1986, the BIR issued to Hizon a deficiency income tax assessment of P1,113,359.68 covering the fiscal year 1981-1982

Not having contested the assessment, CIR, on January 12, 1989, served warrants of distraint and levy to collect the tax deficiency.

However, for reasons not known, it did not proceed to dispose of the attached properties

More than three years later, Salud wrote the BIR requesting a reconsideration of her tax deficiency assessment

The BIR, in a letter dated August 11, 1994, denied the request

On January 1, 1997, it filed a case with the RTC to collect the tax deficiency

o Signed by the Chief of the Legal Division, BIR Region 4, and verified by the Bureau's Regional Director in Pampanga


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Salud moved to dismiss the case on two grounds:

o That the complaint was not filed upon authority of the BIR Commissioner as required by 221 of the National Internal Revenue

Code, and

o That the action had already prescribed

The RTC granted the motion and dismissed the complaint

Hence, this petition

ISSUES & ARGUMENTS

W/N the institution of the civil case was filed without the approval of the CIR in violation of 221 of the NIRC

W/N the action for the collection has already prescribed when filed

HOLDING & RATIO DECIDENDI

THE FILING OF THE CIVIL CASE WAS IN ACCORDANCE WITH THE NIRC, AS WELL AS THE RAOs ISSUED IN IMPLEMENTING THE NIRC

221 of the NIRC is to be implemented by Revenue Administrative Order No. 5-83 of the BIR, providing that the complaints for

collection within the jurisdiction of the of Revenues Regions are handled and filed by the Special Attorneys and Special Counsels assigned in the

Legal Branches of the concerned Revenue Regions

Furthermore, Revenue Administrative Order No. 10-95 specifically authorizes the Litigation and Prosecution Section of the Legal

Division of regional district offices to institute the necessary civil and criminal actions for tax collection. As the complaint filed in this case was

signed by the BIR's Chief of Legal Division for Region 4 and verified by the Regional Director, there was, therefore, compliance with the law

THE ACTION HAS ALREADY PRESCRIBED WHEN IT WAS FILED. HOWEVER, IT IS WITHOUT PREJUDICE TO THE DISPOSITION OF THE PROPERTIES

COVERED BY THE WARRANTS OF DISTRAINT AND LEVY WHICH THE BIR SERVED TO HIZON, AS SUCH WOULD BE A MERE CONTINUATION OF THE

SUMMARY REMEDY IT HAD TIMELY BEGUN

Sec. 229 of the Code mandates that a request for reconsideration must be made within 30 days from the taxpayer's receipt of the

tax deficiency assessment, otherwise the assessment becomes final, unappealable and, therefore, demandable.

The notice of assessment for Hizons tax deficiency was issued by BIR on July 18, 1986. On the other hand, Hizon made her request

for reconsideration thereof only on November 3, 1992, without stating when she received the notice of tax assessment. She explained that she

was constrained to ask for a reconsideration in order to avoid the harassment of BIR collectors. In all likelihood, she must have been referring to

the distraint and levy of her properties by BIR's agents which took place on January 12, 1989. Even assuming that she first learned of the

deficiency assessment on this date, her request for reconsideration was nonetheless filed late since she made it more than 30 days thereafter.

Hence, her request for reconsideration did not suspend the running of the prescriptive period provided under 223(c). Although the

Commissioner acted on her request by eventually denying it on August 11, 1994, this is of no moment and does not detract from the fact that

the assessment had long become demandable

It is contended that the running of the prescriptive period under 223(c) was suspended when the BIR timely served the warrants of

distraint and levy on Hizon on January 12, 1989 by citing Advertising Associates Inc., v. Court of Appeals, and argued that it could still avail of

the other remedy under 223(c) of filing a case in court for collection of the tax deficiency, as the BIR in fact did on January 1, 1997. But its

reliance in the said case was misplaced since the Court held that the timely service of a warrant of distraint or levy suspends the running of the

period to collect the tax deficiency in the sense that the disposition of the attached properties might well take time to accomplish, extending


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even after the lapse of the statutory period for collection. In those cases, the BIR did not file any collection case but merely relied on the

summary remedy of distraint and levy to collect the tax deficiency

For the foregoing reasons, we hold that petitioner's contention that the action in this case had not prescribed when filed has no

merit. Our holding, however, is without prejudice to the disposition of the properties covered by the warrants of distraint and levy which

petitioner served on respondent, as such would be a mere continuation of the summary remedy it had timely begun. Although considerable

time has passed since then, as held in Advertising Associates Inc. v. Court of Appeals and Palanca v. Commissioner of Internal Revenue, the

enforcement of tax collection through summary proceedings may be carried out beyond the statutory period considering that such remedy was

seasonably availed of

Meralco Securities v Savellano

Facts:

The late Juan G. Maniago (substituted in these proceedings by his wife and children) submitted to petitioner Commissioner of Internal Revenue

confidential denunciation against the Meralco Securities Corporation for tax evasion for having paid income tax only on 25 % of the dividends it

received from the Manila Electric Co, thereby allegedly shortchanging the government of income tax due from 75% of the said dividends.

Commissioner caused the investigation of the denunciation after which he found and held that no deficiency corporate income tax was due

from the Meralco Securities Corporation since under the law then prevailing (in the case of dividends received by a domestic or foreign resident

corporation liable to corporate income tax only 25% shall be returnable for the purposes of the tax. The Commissioner rejected Maniago's

contention that the Meralco from whom the dividends were received is not a domestic corporation liable to tax.

In a letter, the Commissioner denied Maniago's claim for informer's reward on a non-existent deficiency. This action of the Commissioner was

sustained by the Secretary of Finance. Maniago filed a petition for mandamus to compel the Commissioner to impose the alleged deficiency tax

assessment on the Meralco Securities Corporation and to award to him the corresponding informer's reward under the provisions of R.A. 2338.

The Commissioner filed a motion to dismiss, arguing that since in matters of issuance and non-issuance of assessments, he is clothed under the

National Internal Revenue Code and existing rules and regulations with discretionary power in evaluating the facts of a case and since

mandamus win not lie to compel the performance of a discretionary power, he cannot be compelled to impose the alleged tax deficiency

assessment.

On the other hand, the Meralco Securities Corporation averred that since no taxes have actually been recovered and/or collected, Maniago has

no right to recover the reward prayed for

The respondent judge rendered a decision granting the writ prayed for and ordering the Commissioner to assess and collect from the MeralcoSecurities Corporation the sum of P51,840,612.00 as deficiency corporate income tax plus interests and surcharges due thereon and to pay 25%

to Maniago as informer's reward.

Issue:

Whether or not mandamus is proper in this case


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Held:

No. It is furthermore a well-recognized rule that mandamus only lies to enforce the performance of a ministerial act or duty and not to control

the performance of a discretionary power. Purely administrative and discretionary functions may not be interfered with by the courts.

Discretion means the power or right conferred upon the office by law of acting officially under certain circumstances according to the dictates

of his own judgment and conscience and not controlled by the judgment or conscience of others. Mandamus may not be resorted to so as tointerfere with the manner in which the discretion shall be exercised or to influence or coerce a particular determination

Moreover, since the office of the Commissioner of Internal Revenue is charged with the administration of revenue laws, which is the primary

responsibility of the executive branch of the government, mandamus may not be against the Commissioner to compel him to impose a tax

assessment not found by him to be due or proper for that would be tantamount to a usurpation of executive functions.

In the case, after the Commissioner who is specifically charged by law with the task of enforcing and implementing the tax laws and the

collection of taxes had after a mature and thorough study rendered his decision or ruling that no tax is due or collectible, and his decision is

sustained by the Secretary, such decision or ruling is a valid exercise of discretion in the performance of official duty and cannot be controlled

much less reversed by mandamus.

No deficiency taxes may therefore be assessed and collected against the said corporation. Since no taxes are to be collected, no informer's

reward is due to private respondents as the informer's heirs. Since no assessment, much less any collection, has been made in the instant case,

respondent judge's writ for the Commissioner to pay respondents 25% informer's reward is gross error and without factual nor legal basis.

*Respondent judge has no jurisdiction to take cognizance of the case because the subject matter thereof clearly falls within the scope of cases

now exclusively within the jurisdiction of the Court of Tax Appeals.

*The determination of the correctness or incorrectness of a tax assessment to which the taxpayer is not agreeable, falls within the jurisdiction

of the Court of Tax Appeals and not of the Court of First Instance.

Tax evasion; failure to comply with subpoena duces tecum not relevant to tax evasion; forum shopping. A violation of section 266 (failure to

obey summons) of the National Internal Revenue Code (NIRC) involves a separate offense and hence litis pendencia is not present considering

that the outcome of this complaint is not determinative of the issue as to whether probable cause exists to charge the taxpayer with the crimes

of attempt to evade or defeat tax and willful failure to supply correct and accurate information and pay tax defined and penalized under

sections 254 and 255, respectively, of the NIRC. For the crime of tax evasion in particular, compliance by the taxpayer with such subpoena, if

any had been issued, is irrelevant. Thus, the Secretary of Justice erred in holding that the Commissioner of Internal Revenue committed forum

shopping when it filed the complaint for tax evasion during the pendency of its appeal from the City Prosecutors dismissal of the complaint

involving the act of disobedience to the summons in the course of the preliminary investigation on the taxpayers co rrect tax liabilities for the

taxable years 1997, 1998 and 1999. Commissioner of Internal Revenue vs Hon. Raul M. Gonzalez, Secretary of Justice, L.M. Camus EngineeringCorporation (represented by Luis M. Camus and Lino D. Mendoza), G.R. No. 177279, October 13, 2010.

Tax evasion; lack of consent by taxpayer under investigation. Lack of consent by the taxpayer under investigation does not imply that the

Bureau of Revenue (BIR) obtained the information from third parties illegally or that the information received is false or malicious. Nor does the

lack of consent preclude the BIR from assessing deficiency taxes on the taxpayer based on the documents. In the same vein, the taxpayer

cannot be allowed to escape criminal prosecution under sections 254 and 255 of the National Internal Revenue Code (NIRC) by mere

imputation of a fictitious or disqualified informant under section 282 of the NIRC simply because other than disclosure of the official registry


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number of the third party informer, the BIR insisted on maintaining the confidentiality of the identity and personal circumstances of said

informer. Commissioner of Internal Revenue vs Hon. Raul M. Gonzalez, Secretary of Justice, L.M. Camus Engineering Corporation

(represented by Luis M. Camus and Lino D. Mendoza), G.R. No. 177279, October 13, 2010.

Voluntary Assessment Program; Revenue Regulations No. 2-99; Economic Recovery Assistance Payment (ERAP) Program; immunity. Revenue

Regulations No. 2-99 explained in its Policy Statement that considering the scarcity of financial and human resources as well as the timeconstraints within which the Bureau of Internal Revenue (BIR) has to clean the *BIRs+ backlog of unaudited tax returns in o rder to keep

updated and be focused with the most current accounts in pr eparation for the full implementation of a computerized tax administration, the

said revenue regulation was issued providing for last priority in audit and investigation of tax returns to accomplish thesaid objective

without, however, compromising therevenue collection that would have been generated from audit and enforcement activities. The program

granted immunity from audit and investigation of income tax, VAT and percentage tax returns for 1998. It expressly excluded withholding tax

returns. Since such immunity from audit and investigation does not preclude the collection of revenues generated from audit and enforcement

activities, it follows that the BIR is likewise not barred from collecting any tax deficiency discovered as a result of tax fraud investigations.

Commissioner of Internal Revenue vs Hon. Raul M. Gonzalez, Secretary of Justice, L.M. Camus Engineering Corporation (represented by Luis M.

Camus and Lino D. Mendoza), G.R. No. 177279, October 13, 2010.

Voluntary Assessment Program; immunity. Availment by the taxpayer of the voluntary assessment program (VAP) under Revenue Regulations

No, 8-2001, as amended, did not amount to settlement of its assessed tax deficiencies for the period 1997 to 1999, nor immunity from

prosecution for filing fraudulent return and attempt to evade or defeat tax. From the express terms of the said revenue regulations, taxpayer is

not qualified to avail of the VAP granting taxpayers the privilege of last priority in the audit and investigation of all internal revenue taxes for

the taxable year 2000 and all prior years under certain conditions, considering that, first, it was issued a preliminary assessment notice (PAN) on

February 19, 2001, and, second, it was the subject of investigation as a result of verified informed filed by a tax informer under section 282 of

the National Internal Revenue Code duly recorded in the BIR official registry even prior to the issuance of the PAN, which are excepted from

coverage of the VAP under said regulations. Moreover, the taxpayer cannot invoke the availment of VAP to foreclose any subsequent audit of

its account books and other accounting records in view of the strong finding of underdeclaration in its payment of the correct income tax

liability by more than 30% as supported by the written report of the Tax Fraud Division. Under the regulations, a taxpayer who has availed of

the VAP shall not be audited except upon authorization and approval of the Commissioner of Internal Revenue when there is strong evidence

or finding of understatement in the payment of its correct tax liability by more than 30% as supported by a written report of the appropriate

office detailing the facts and the law on which such finding is based. Commissioner of Internal Revenue vs Hon. Raul M. Gonzalez, Secretary of

Justice, L.M. Camus Engineering Corporation (represented by Luis M. Camus and Lino D. Mendoza), G.R. No. 177279, October 13, 2010.

Voluntary Assessment Program; estoppel. Given the explicit conditions for the grant of immunity from audit under the said revenue

regulations, the Secretary of Justice erred in declaring that the Commissioner of Internal Revenue is estopped from assessing any tax deficiency

against the taxpayer after the issuance of the documents of immunity from audit/investigation and settlement of tax liabilities. The State can

never be in estoppel, and this is particularly true in matters involving taxation. The errors of certain administrative officers should never be

allowed to jeopardize the governments financial position. Commissioner of Internal Revenue vs Hon. Raul M. Gonzalez, Secretary of Justice,

L.M. Camus Engineering Corporation (represented by Luis M. Camus and Lino D. Mendoza), G.R. No. 177279, October 13, 2010.

Voluntary Assessment Program; exception to rule that examination and inspection should be made only once a taxable year. The discovery of

substantial underdeclarations of income by the taxpayer for taxable years 1997, 1998 and 1999 upon verified information provided by an

informer under section 282 of theNational Internal Revenue Code (NIRC), as well as the necessity of obtaining information from third parties

to ascertain correctness of the return filed or evaluation of tax compliance in collecting taxes (as a result of the disobedience to the summons

issued by the Bureau of Internal Revenue against the taxpayer) are circumstances warranting exception from the general rule in section 235 of

the NIRC. Commissioner of Internal Revenue vs Hon. Raul M. Gonzalez, Secretary of Justice, L.M. Camus Engineering Corporation (represented

by Luis M. Camus and Lino D. Mendoza), G.R. No. 177279, October 13, 2010.

Tax evasion; failure to comply with subpoena duces tecum not relevant to tax evasion; forum shopping. A violation of section 266 (failure to

obey summons) of the National Internal Revenue Code (NIRC) involves a separate offense and hence litis pendencia is not present considering

that the outcome of this complaint is not determinative of the issue as to whether probable cause exists to charge the taxpayer with the crimes

of attempt to evade or defeat tax and willful failure to supply correct and accurate information and pay tax defined and penalized under


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sections 254 and 255, respectively, of the NIRC. For the crime of tax evasion in particular, compliance by the taxpayer with such subpoena, if

any had been issued, is irrelevant. Thus, the Secretary of Justice erred in holding that the Commissioner of Internal Revenue committed forum

shopping when it filed the complaint for tax evasion during the pendency of its appeal from the City Prosecutors dismissal of the complaint

involving the act of disobedience to the summons in the course of the preliminary investigation on the taxpayers correct tax liabilities for the

taxable years 1997, 1998 and 1999. Commissioner of Internal Revenue vs Hon. Raul M. Gonzalez, Secretary of Justice, L.M. Camus Engineering

Corporation (represented by Luis M. Camus and Lino D. Mendoza), G.R. No. 177279, October 13, 2010.

Tax evasion; lack of consent by taxpayer under investigation. Lack of consent by the taxpayer under investigation does not imply that the

Bureau of Revenue (BIR) obtained the information from third parties illegally or that the information received is false or malicious. Nor does the

lack of consent preclude the BIR from assessing deficiency taxes on the taxpayer based on the documents. In the same vein, the taxpayer

cannot be allowed to escape criminal prosecution under sections 254 and 255 of the National Internal Revenue Code (NIRC) by mere

imputation of a fictitious or disqualified informant under section 282 of the NIRC simply because other than disclosure of the official registry

number of the third party informer, the BIR insisted on maintaining the confidentiality of the identity and personal circum stances of said

informer. Commissioner of Internal Revenue vs Hon. Raul M. Gonzalez, Secretary of Justice, L.M. Camus Engineering Corporation

(represented by Luis M. Camus and Lino D. Mendoza), G.R. No. 177279, October 13, 2010.

Voluntary Assessment Program; Revenue Regulations No. 2-99; Economic Recovery Assistance Payment (ERAP) Program; immunity. Revenue

Regulations No. 2-99 explained in its Policy Statement that considering the scarcity of financial and human resources as well as the time

constraints within which the Bureau of Internal Revenue (BIR) has to clean the *BIRs+ backlog of unaudited tax returns in order to keep

updated and be focused with the most current accounts in preparation for the full implementation of a computerized tax administration, the

said revenue regulation was issued providing for last priority in audit and investigation of tax returns to accomplish thesaid objective

without, however, compromising the revenue collection that would have been generated from audit and enforcement activities. The program

granted immunity from audit and investigation of income tax, VAT and percentage tax returns for 1998. It expressly excluded withholding tax

returns. Since such immunity from audit and investigation does not preclude the collection of revenues generated from audit and enforcement

activities, it follows that the BIR is likewise not barred from collecting any tax deficiency discovered as a result of tax fraud investigations.

Commissioner of Internal Revenue vs Hon. Raul M. Gonzalez, Secretary of Justice, L.M. Camus Engineering Corporation (represented by Luis M.

Camus and Lino D. Mendoza), G.R. No. 177279, October 13, 2010.

Voluntary Assessment Program; immunity. Availment by the taxpayer of the voluntary assessment program (VAP) under Revenue Regulations

No, 8-2001, as amended, did not amount to settlement of its assessed tax deficiencies for the period 1997 to 1999, nor immunity from

prosecution for filing fraudulent return and attempt to evade or defeat tax. From the express terms of the said revenue regulations, taxpayer is

not qualified to avail of the VAP granting taxpayers the privilege of last priority in the audit and investigation of all internal revenue taxes for

the taxable year 2000 and all prior years under certain conditions, considering that, first, it was issued a preliminary assessment notice (PAN) on

February 19, 2001, and, second, it was the subject of investigation as a result of verified informed filed by a tax informer under section 282 of

the National Internal Revenue Code duly recorded in the BIR official registry even prior to the issuance of the PAN, which are excepted from

coverage of the VAP under said regulations. Moreover, the taxpayer cannot invoke the availment of VAP to foreclose any subsequent audit of

its account books and other accounting records in view of the strong finding of underdeclaration in its payment of the correct income tax

liability by more than 30% as supported by the written report of the Tax Fraud Division. Under the regulations, a taxpayer who has availed of

the VAP shall not be audited except upon authorization and approval of the Commissioner of Internal Revenue when there is strong evidence

or finding of understatement in the payment of its correct tax liability by more than 30% as supported by a written report of the appropriate

office detailing the facts and the law on which such finding is based. Commissioner of Internal Revenue vs Hon. Raul M. Gonzalez, Secretary of

Justice, L.M. Camus Engineering Corporation (represented by Luis M. Camus and Lino D. Mendoza), G.R. No. 177279, October 13, 2010.

Voluntary Assessment Program; estoppel. Given the explicit conditions for the grant of immunity from audit under the said revenue

regulations, the Secretary of Justice erred in declaring that the Commissioner of Internal Revenue is estopped from assessing any tax deficiency

against the taxpayer after the issuance of the documents of immunity from audit/investigation and settlement of tax liabilities. The State can

never be in estoppel, and this is particularly true in matters involving taxation. The errors of certain administrative officers should never be

allowed to jeopardize the governments financial position. Commissioner of Internal Revenue vs Hon. Raul M. Gonzalez, Secretary of Justice,

L.M. Camus Engineering Corporation (represented by Luis M. Camus and Lino D. Mendoza), G.R. No. 177279, October 13, 2010.


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Voluntary Assessment Program; exception to rule that examination and inspection should be made only once a taxable year. The discovery of

substantial underdeclarations of income by the taxpayer for taxable years 1997, 1998 and 1999 upon verified information provided by an

informer under section 282 of the National Internal Revenue Code (NIRC), as well as the necessity of obtaining information from third parties

to ascertain correctness of the return filed or evaluation of tax compliance in collecting taxes (as a result of the disobedience to the summons

issued by the Bureau of Internal Revenue against the taxpayer) are circumstances warranting exception from the general rule in section 235 of

the NIRC. Commissioner of Internal Revenue vs Hon. Raul M. Gonzalez, Secretary of Justice, L.M. Camus Engineering Corporation (represented

by Luis M. Camus and Lino D. Mendoza), G.R. No. 177279, October 13, 2010.

Fitness by Design Inc V tax digest

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