CIR vs. Pascor Realty & Dev.

Corp
G.R. No. 128315; June 29, 1999
Facts:
The books of accounts and other records of defendant Pascor Realty (PDRC) for years
1986-1988 were examined by Rev. Officers Que and Estorco by virtue of a Letter of Authority
by the CIR which resulted in an assessment for 1986 and 1987. Sometime in 1995, a criminal
complaint for tax evasion was filed by CIR against PDRC and its officers. PDRC filed an Urgent
Request for Reconsideration/Reinvestigation to dispute said assessment and tax liability. Said
request was denied by the CIR on the ground that no formal assessment has been issued yet.
Respondents elevated the case to the CTA, while petitioners filed a motion to dismiss on the
ground of lack of jurisdiction as no formal assessment was issued yet against PDRC. CTA denied
the motion to dismiss of CIR on the ground that the criminal case for tax evasion can be
considered an assessment and as such, can be subject of a protest. The decision of the CTA was
sustained by the Court of Appeals citing the same reason. Hence, this petition.
Issue:
(1) WON the criminal complaint for Tax Evasion can be construed as an assessment.
(2) WON an assessment is necessary before criminal charges for tax evasion may be
instituted.
Held:
(1) No. The Supreme Court said that to constitute an assessment it must be: (1) sent and
received by a taxpayer and (2) must demand payment of the taxes described therein
within a specific period. In the case at bar, the fact that the joint affidavit attached to the
Criminal Complaint contained details of tax liabilities does not ipso facto make it an
assessment. The purpose of which was to substantiate the Criminal Complaint for tax
evasion and NOT a notice of tax due and demand to the respondent for payment thereof.
Moreover, the fact that the complaint was addressed to the DOJ and not to the
respondent taxpayer, shows the intent of the CIR to file a criminal complaint and not to
issue a tax assessment.
A distinction must be made between a tax assessment and the filling of a criminal
complaint. A tax assessment is usually preceded by a pre-assessment notice sent to the
taxpayer whereby the taxpayer is given a chance to submit a position paper and
documents to prove that said assessment is unwarranted. Subsequently, if the CIR is not
convinced, he will now issue an assessment signed by him and informing the taxpayer
clearly that an assessment has been issued to him (taxpayer). On the other hand, a
criminal complaint does not follow same procedure and is filed directly to the DOJ.

Then the taxpayer is notified that a criminal case is filed against him. The purpose of
which is not to demand payment but rather to penalize the erring taxpayer. To
consider the affidavit attached to the Complaint as a proper assessment is to subvert the
nature of an assessment and to set a bad precedent that will prejudice innocent taxpayers.
(2) No. The Supreme Court cited Sec. 222 of the NIRC which specifically state that in case
of a false or fraudulent return is submitted or in case of failure to file a return,
proceedings in Court may be commenced without an assessment. Moreover, citing the
case of Ungab vs. Cusi, the Court held that a protest could not stop or suspend a criminal
action which is independent of the resolution of said protest in the CTA. It is because the
CIR has the discretion, in tax evasion cases, on whether to issue an assessment or to file a
criminal case against taxpayer or both.