TAXATION 2 REMEDIES: PRELIMINARY PROVISIONS FITNESS BY DESIGN V. COMMISSIONER OF INTERNAL REVENUE G.R. No.

177982 October 17, 2008 FACTS: On March 17, 2004, the Commissioner on Internal Revenue (respondent) assessed Fitness by Design, Inc. (petitioner) for deficiency income taxes for the tax year 1995 in the total amount of P10,647,529.69. Petitioner protested the assessment on the ground that it was issued beyond the three-year prescriptive period under Section 203 of the Tax Code. Additionally, petitioner claimed that since it was incorporated only on May 30, 1995, there was no basis to assume that it had already earned income for the tax year 1995. On February 1, 2005, respondent issued a warrant of distraint and/or levy against petitioner, drawing petitioner to file on March 1, 2005 a Petition for Review before the Court of Tax Appeals before which it reiterated its defense of prescription. In his Answer, respondent alleged: The right of the respondent to assess petitioner for deficiency income tax, VAT and Documentary Stamp Tax for the year 1995 has not prescribed pursuant to Section 222(a) of the 1997 Tax Code. Petitioner's 1995 Income Tax Return (ITR) filed on April 11, 1996 was false and fraudulent for its deliberate failure to declare its true sales. Petitioner declared in its 1995 Income Tax Return that it was on its pre-operation stage and has not declared its income. Investigation by the revenue officers of the respondent, however, disclosed that it has been operating/doing business and had sales operations for the year 1995 in the total amount of P7,156,336.08 which it failed to report in its 1995 ITR. Thus, for the year 1995, petitioner filed a fraudulent annual income return with intent to evade tax. Likewise, petitioner failed to file Value-Added Tax (VAT) Return and reported the amount of P7,156,336.08 as its gross sales for the year 1995. Hence, for failure to file a VAT return and for filing a fraudulent income tax return for the year 1995, the corresponding taxes may be assessed at any time within ten (10) years after the discovery of such omission or fraud pursuant to Section 222(a) of the 1997 Tax Code. The subject deficiency tax assessments have already become final, executory and demandable for failure of the petitioner to file a protest within the reglementary period provided for by law. The "alleged protest" allegedly filed on June 25, 2004 at the Legal Division, Revenue Region No. 8, Makati City is nowhere to be found in the BIR Records nor reflected in the Record Book of the Legal Division as normally done by our receiving clerk when she receive[s] any document. The respondent, therefore, has legal basis to collect the tax liability either by distraint and levy or civil action. the CTA denied petitioner's Motion for Issuance of Subpoenas and disallowed the submission by petitioner of written interrogatories to Sablan, who is not a party to the case, and the revenue officers, it finding that the testimony, documents, and admissions sought are not relevant. Besides, 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. In any event, the CTA held that there was no need to issue a subpoena duces tecum to obtain the Affidavit of the Informer as the same formed part of the BIR records of the case, the production of which had been ordered by it. ISSUE: 1. W/N the submission of petitioners documents to the BIR without its consent means that the latter obtained it illegally. RATIO: 1. No. Petitioner impugns the manner in which the documents in question reached the BIR, Sablan having allegedly submitted them to the BIR without its (petitioner's) consent. Petitioner's lack of consent does not, however, imply that the BIR obtained them illegally or that the information received is false or malicious. Nor does the lack of consent preclude the BIR from assessing deficiency taxes on petitioner based on the documents. Thus Section 5 of the Tax Code provides: In ascertaining the correctness of any return, or in making a return when none has been made, or in determining the liability of any person for any internal revenue tax, or in collecting any such liability, or in evaluating tax compliance, the Commissioner is authorized: (A) To examine any book, paper, record or other data which may be relevant or material to such query; (B) To obtain on a regular basis from any person other than the person whose internal revenue tax liability is subject to audit or investigation, or from any office or officer of the national and local governments, government agencies and instrumentalities, including the Bangko Sentral ng Pilipinas and government-owned and -controlled corporations, any information such as, but not limited to, costs and volume of production, receipts or sales and gross incomes of taxpayers, and the names, addresses, and financial statements of corporations, mutual fund companies, insurance companies, regional operating headquarters of multinational companies, joint accounts, associations, joint ventures or consortia and registered partnerships and their members; (C) To summon the person liable for tax or required to file a return, or any officer or employee of such person, or any person having possession, custody, or care of the books of accounts and other accounting records containing entries relating to the business of the person liable for tax, or any other person, to appear before the Commissioner or his duly authorized representatives at a time and place specified in the summons and to produce such books, papers, records, or other data, and to give testimony; (D) To take such testimony of the person concerned, under oath, as may be relevant or material to such inquiry; and (E) To cause revenue officers and employees to make a canvass from time to time of any revenue district or region and inquire after and concerning all persons therein who may be liable to pay any internal revenue tax, and all persons owning or having the care, management or possession of any object with respect to which a tax is imposed. x x x x (Emphasis and underscoring supplied) The law thus 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. Petitioner's invocation of the rights of an accused in a criminal prosecution to cross examine the witness against him and to have compulsory process issued to secure the attendance of witnesses and the production of other evidence in his behalf does not lie. CTA Case No. 7160 is not a criminal prosecution, and even granting that it is related to I.S. No. 2005-203, the respondents in the latter proceeding are the officers and accountant of petitioner-corporation, not petitioner. From the complaint and supporting affidavits in I.S. No. 2005-203, Sablan does not even appear to be a witness against the respondents therein. DISPOSITIVE PORTION: WHEREFORE, in light of the foregoing disquisition, the petition is DISMISSED. ATILANO BARTOLOME BAUTISTA CABRALES CASTRO DUEAS FERMIN GUEVARA MACALINO SAMSON TAGRA VALLO WILWAYCO 1

TAXATION 2 REMEDIES: PRELIMINARY PROVISIONS conferred upon him under Section 16 of the Tax Code. Costs against petitioner. SO ORDERED. The tax figures arrived at by the Commissioner of Internal Revenue are by no means arbitrary. 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 a Bureau of Internal Revenue examiner and approved by his superior officers will not be disturbed. All presumptions are in favor of the correctness of tax assessments. On the whole, we find that the fraudulent acts detailed in the decision under review had not been satisfactorily rebutted by the petitioner. There are indeed clear indications on the part of the taxpayer to deprive the Government of the taxes due. The existence of fraud as found by the respondents can not be lightly set aside absent substantial evidence presented by the petitioner to counteract such finding. The findings of fact of the respondent Court of Tax Appeals are entitled to the highest respect. We do not find anything in the questioned decision that should disturb this long-established doctrine. OTHER DOCTRINE: The applicable legal provision is Section 16(b) of the National Internal Revenue Code of 1977 as amended. It reads: Sec. 16. Power of the Commissioner of Internal Revenue to make assessments. xxx xxx xxx (b) Failure to submit required returns, statements, reports and other documents. - When a report required by law as a basis for the assessment of an 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 of Internal Revenue shall assess the proper tax on the best evidence obtainable. In case a person fails to file a required return or other document at the time prescribed by law, or willfully or otherwise, files a false or fraudulent return or other documents, the Commissioner shall make or amend the return from his own knowledge and from such information as he can obtain through testimony or otherwise, which shall be prima facie correct and sufficient for all legal purposes. DISPOSITIVE PORTION: WHEREFORE, the Petition is DENIED. The Decision of the respondent Court of Tax Appeals is hereby AFFIRMED. Costs against the petitioner. SO ORDERED.

SY PO vs. CA G.R. No. 81446 August 18, 1988 FACTS: Petitioner is the widow of the late Mr. Po Bien Sing. In the taxable years 1964 to 1972, the deceased Po Bien Sing was the sole proprietor of Silver Cup Wine Factory. He was engaged in the business of manufacture and sale of compounded liquors, using alcohol and other ingredients as raw materials. On the basis of a denunciation against Silver Cup allegedly "for tax evasion amounting to millions of pesos" the then Secretary of Finance Cesar Virata directed the Finance-BIR-NBI team constituted to conduct the corresponding investigation in a memorandum dated April 2, 1971. Accordingly, a letter and a subpoena duces tecum dated April 13,1971 and May 3,1971, respectively, were issued against Silver Cup requesting production of the accounting records and other related documents for the examination of the team. Mr. Po Bien Sing did not produce his books of accounts as requested. This prompted the team with the assistance of the PC Company, Cebu City, to enter the factory bodega of Silver Cup and seized different brands, consisting of 1,555 cases of alcohol products. On the basis of the team's report of investigation, the respondent Commissioner of Internal Revenue assessed Mr. Po Bien Sing deficiency income tax for 1966 to 1970 and for deficiency specific tax for January 2,1964 to January 19, 1972. Petitioner protested the deficiency assessments. The corresponding report recommended the reiteration of the assessments in view of the taxpayer's persistent failure to present the books of accounts for examination, compelling respondent to issue warrants of distraint and levy. The warrants were admittedly received by petitioner on October 14, 1981, which petitioner deemed respondent's decision denying her protest on the subject assessments. ISSUE: Whether or not the assessments have valid and legal bases? RATIO: YES. The law is specific and clear. The rule on the "best evidence obtainable" applies when a tax report required by law for the purpose of assessment is not available or when the tax report is incomplete or fraudulent. In the instant case, the persistent failure of the late Po Bien Sing and the herein petitioner to present their books of accounts for examination for the taxable years involved left the Commissioner of Internal Revenue no other legal option except to resort to the power

CIR vs, Benipayo G.R. No. L-13656 January 31, 1962 FACTS: Respondent is the owner and operator of the Lucena Theater located in the

ATILANO BARTOLOME BAUTISTA CABRALES CASTRO DUEAS FERMIN GUEVARA MACALINO SAMSON TAGRA VALLO WILWAYCO 2

TAXATION 2 REMEDIES: PRELIMINARY PROVISIONS municipality of Lucena, Quezon. Internal Revenue Agent Romeo de Guia investigated respondent's amusement tax liability in connection with the operation of said theater during the period from August, 1952 to September, 1953. On October 15, 1953 De Guia submitted his report to the Provincial Revenue Agent to the effect that respondent had disproportionately issued tax-free 20-centavo children's tickets. His finding was that during the years 1949 to 1951 the average ratio of adults and children patronizing the Lucena Theater was 3 to 1, i.e., for every three adults entering the theater, one child was also admitted, while during the period in question, the proportion is reversed - three children to one adult. From this he concluded that respondent must have fraudulently sold two tax-free 20-centavo tickets, in order to avoid payment of the amusement tax prescribed in Section 260 of the National Internal Revenue Code. Based on the average ratio between adult and children attendance in the past years, Examiner de Guia recommended a deficiency amusement tax assessment against respondent in the sum of P11,193.45, inclusive of 25% surcharge, plus a suggested compromise penalty of P900.00 for violation of section 260 of the National Internal Revenue Code, or a total sum of P12,093.45 covering the period from August, 1952 to September, 1953 inclusive. Petitioner issued a deficiency amusement tax assessment against respondent, demanding from the latter the payment of the total sum of P12,152.93 within thirty days from receipt thereof. Respondent filed the corresponding protest with the Conference Staff of the BIR. After due hearing, the Conference Staff submitted to petitioner CIR its finding to the effect that the "meager reports of these fieldmen (Examiner de Guia and the Provincial Revenue Agent of Quezon) are mere presumptions and conclusions, devoid of findings of the fact of the alleged fraudulent practices of the herein taxpayer". In view thereof, and as recommended by the Conference Staff, petitioner referred the case back to the Provincial Revenue Agent of Quezon for further investigation. The report submitted by Provincial Revenue Officer H.I. Bernardo after this last investigation partly reads as follows:. The returns from July 1-11, showed that 31.43% of the entire audience of 12,754 consisted of adults, the remaining 68.57% of children. During this said period due, perhaps, to the absence of agents in the premises, subject taxpayer was able to manipulate the issuance of tickets in the way and manner alleged in Asst. De Guia's indorsement report mentioned above. But during the period from July 14 - 24, 1955, when agents of this Office supervised in the sales of admission tickets the sales for adults soared upwards to 76% while that for children dropped correspondingly to 24%. It is opined without fear of contradiction that the ratio of three (3) adults to every one (1) child in the audience or a proportion of 75:25 as reckoned in Asst. De Guia's indorsement report to this Office's new findings of a proportion of 76:24, represents and conveys the true picture of the situation under the law of averages, provided that the film being shown is not a children's show. There is no hard and fast rule in this regard, but this findings would seem to admit no contradiction. After considering said report, the Conference Staff of the BIR recommended to the Collector of Internal Revenue the issuance of the deficiency amusement tax assessment in question. ISSUE: Whether or not there is sufficient evidence in the record showing that respondent, during the period under review, sold and issued to his adult customers two tax-free 20-centavo children's tickets, instead of one 40-centavo ticket for each adult customer; to cheat or defraud the Government RATIO: ITt should be borne in mind that to sustain the deficiency tax assessed against respondent would amount, in effect, to a finding that he had, for a considerable period of time, cheated and defrauded the government by selling to each adult patron two children's tax-free tickets instead of one ticket subject to the amusement tax provided for in Section 260 of the National Internal Revenue Code. Fraud is a serious charge and, to be sustained, it must be supported by clear and convincing proof which, in the present case, is lacking. The claim that respondent admitted having resorted to the anomalous practice already mentioned is not entirely correct. What respondent appears to have admitted was that during a certain limited period he had adopted a sort of rebate system applicable to cases where adults and children .This practice was, however, discontinued when he was informed by the Bureau of Internal Revenue that it was not in accordance with law. SC Affirmed CA: An assessment fixes and determines the tax liability of a taxpayer. As soon as it is served, an obligation arises on the part of the taxpayer concerned to pay the amount assessed and demanded. Hence, assessments should not be based on mere presumptions no matter how reasonable or logical said presumptions may be. Assuming arguendo that the average ratio of adults and children patronizing the Lucena Theater from 1949 to 1951 was 3 to 1, the same does not give rise to the inference that the same conditions existed during the years in question (1952 and 1953). The fact that almost the same ratio existed during the month of July, 1955 does not provide a sufficient inference on the conditions in 1952 and 1953. . . In order to stand the test of judicial scrutiny, the assessment must be based on actual facts. The presumption of correctness of assessment being a mere presumption cannot be made to rest on another presumption that the circumstances in 1952 and 1953 are presumed to be the same as those existing in 1949 to 1951 and July 1955. In the case under consideration there are no substantial facts to support the assessment in question. ... DISPOSITIVE PORTION: WHEREFORE, the appealed judgment is hereby affirmed with costs.

MERALCO SECURITIES CORPORATION vs. SAVELLANO G.R. No. L-36181 October 23, 1982 FACTS: In 1967, the late Juan G. Maniago (substituted in these proceedings by his wife and children) submitted to petitioner CIR 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. for the years 1962-1966, thereby allegedly shortchanging the government of income tax due from 75% of the said dividends. Petitioner CIR 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 on the dividends it received from the Manila Electric Co., since under the law then prevailing "in the case of dividends received by a domestic or foreign resident corporation liable to (corporate income) tax under this Chapter . . . .only twenty-five per centum thereof shall be returnable for the purposes of the tax imposed under this section." The Commissioner accordingly rejected Maniago's contention that the Meralco from whom the dividends were received is "not a domestic corporation liable to tax under this Chapter." In a letter dated April 5, 1968, the Commissioner informed Maniago of his findings and ruling and therefore 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 in the Court of First Instance of Manila, against

ATILANO BARTOLOME BAUTISTA CABRALES CASTRO DUEAS FERMIN GUEVARA MACALINO SAMSON TAGRA VALLO WILWAYCO 3

TAXATION 2 REMEDIES: PRELIMINARY PROVISIONS the Commissioner of Internal Revenue and the Meralco Securities Corporation 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. 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 against the Meralco Securities Corporation. On the other hand, the Meralco Securities Corporation filed its answer interposing as special and/or affirmative defenses that the petition states no cause of action, that the action is premature, that mandamus win not lie to compel the Commissioner of Internal Revenue to make an assessment and/or effect the collection of taxes upon a taxpayer. The respondent judge rendered a decision granting the writ prayed for and ordering the Commissioner of Internal Revenue to assess and collect from the Meralco Securities Corporation the sum of P51,840,612.00 as deficiency corporate income tax for the period 1962 to 1969 plus interests and surcharges due thereon and to pay 25% thereof to Maniago as informer's reward. Hence, the Commissioner filed a separate petition with this Court praying that the decision of respondent judge dated January 10, 1973 and his order dated April 6, 1973 be reconsidered for respondent judge has no jurisdiction over the subject matter of the case and that the issuance or non-issuance of a deficiency assessment is a prerogative of the Commissioner of Internal Revenue not reviewable by mandamus. The Meralco Securities Corporation (now First Philippine Holdings Corporation) likewise appealed the same decision of respondent judge. ISSUES: 1. Whether or not the respondent judge can compel the Commissioner of Internal Revenue to assess deficiency corporate income tax against Meralco Securities 2. Whether or not the lower court had jurisdiction over the case RATIO: 1. No. 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. Section 7 of Republic Act No. 1125, enacted June 16, 1954, granted to the Court of Tax Appeals exclusive appellate jurisdiction to review by appeal, among others, decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties imposed in relation thereto, or other matters arising under the National Internal Revenue Code or other law or part of law administered by the Bureau of Internal Revenue. The question of whether or not to impose a deficiency tax assessment on Meralco Securities Corporation undoubtedly comes within the purview of the words "disputed assessments" or of "other matters arising under the National Internal Revenue Code. 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. Thus, even assuming arguendo that the right granted the taxpayers affected to question and appeal disputed assessments, under section 7 of Republic Act No. 1125, may be availed of by strangers or informers like the late Maniago, the most that he could have done was to appeal to the Court of Tax Appeals the ruling of petitioner Commissioner of Internal Revenue within thirty (30) days from receipt thereof pursuant to section 11 of Republic Act No. 1125. 3 He failed to take such an appeal to the tax court. The ruling is clearly final and no longer subject to review by the courts. 4 It is furthermore a well-recognized rule that mandamus only lies to enforce the performance of a ministerial act or duty 5 and not to control the performance of a discretionary power. 6 Purely administrative and discretionary functions may not be interfered with by the courts. 7 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 he 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. Thus, 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, now Minister of Finance (whose act is that of the President unless reprobated), 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. A contrary view, whereby any stranger or informer would be allowed to usurp and control the official functions of the Commissioner of Internal Revenue would create disorder and confusion, if not chaos and total disruption of the operations of the government. Considering then that respondent judge may not order by mandamus the Commissioner to issue the assessment against Meralco Securities Corporation when no such assessment has been found to be due, 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. Informer's reward is contingent upon the payment and collection of unpaid or deficiency taxes. An informer is entitled by way of reward only to a percentage of the taxes actually assessed and collected. 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. DISPOSITIVE PORTION: WHEREFORE, the petitions are hereby granted and the questioned decision of respondent judge dated January 10, 1973 and order dated April 6, 1973 are hereby reversed and set aside. With costs against private respondents.

JUDY ANN SANTOS VS PEOPLE G.R. No. 173176 August 26, 2008 FACTS: BIR Commissioner Parayno wrote to the DOJ Secretary Gonzales. He was referring to conducting a preliminary investigation and filing of an information in court if evidence so warrant based on the affidavit attached on the letter. He recommended the prosecution of Judy Anne Santos for substantial underdeclaration of income, which constitutes a prima facie evidence of false or fraudulent return under Sec. 254 and 255 of the Tax Code. The BIR found that Judy Anne reported an income of 8M although BIRs findings show that she earned at least 16.4M in the same year.

ATILANO BARTOLOME BAUTISTA CABRALES CASTRO DUEAS FERMIN GUEVARA MACALINO SAMSON TAGRA VALLO WILWAYCO 4

TAXATION 2 REMEDIES: PRELIMINARY PROVISIONS Note: I think this part is not relevant The Prosecution Attorney issued a resolution finding probable cause and recommending the filing of an information against Judy Ann for violation of Sec. 255 in relation to Sec. 254 and 248N of the NIRC. Later, an Information was filed by the Prosecution Attorney before the CTA alleging that Judy Ann willfully, unlawfully, and feloniously file a false and fraudulent income tax return for the year 2002 by indicating therein a gross income of 8M when in truth her correct income for the year is 16.4M (around 1.4M income tax deficiency CTA then issued a warrant of arrest. But it was lifited when Judy Ann appeared voluntarily and filed the required bail bond. Juday filed a Motion to Quash the Information on the following grounds: the facts alleged in the information do not constitute an offense the officer who filed the information had no authority to do so (relevant) CTA has no jurisdiction over the subject matter of the case Information is void ab initio, being violative of due process and equal protection of the laws CTA denied the MTQ. Her arraignment was scheduled. She appeals to the SC via a petition for review. She argues that the Prosecution Attorney lacks authority to file the Information. She asserts that the information was filed without the approval of the BIR Commissioner in violation of Sec. 220 of the NIRC. On the same ground of lack authority, she asserts that it is the City Prosecutor of QC who has the authority to file the information not the Prosecution Attorney since the crime was committed in Quezon City. ISSUE: WON the Prosecution Attorney has the authority to file the information? YES RATIO: Approval was already given by the Commissioner Judaysargument must fail in light of BIR Commissioner Parayno's letter dated 19 May 2005 to DOJ Secretary Gonzales referring "for preliminary investigation and filing of an information in court if evidence so warrants," the findings of the BIR officers recommending the criminal prosecution of petitioner. In said letter, BIR Commissioner Parayno already gave his prior approval to the filing of an information in court should the DOJ, based on the evidence submitted, find probable cause against petitioner during the preliminary investigation. Section 220 of the NIRC, as amended, simply requires that the BIR Commissioner approve the institution of civil or criminal action against a tax law violator, but it does not describe in what form such approval must be given. In this case, BIR Commissioner Parayno's letter of 19 May 2005 already states his express approval of the filing of an information against petitioner and his signature need not appear on the Resolution of the State Prosecutor or the Information itself. Prosecution Attorney has authority to file the information Republic v. Hizon G.R. No. 130430 December 13, 1999 FACTS: On July 18, 1986, the BIR issued to respondent a deficiency income tax assessment of P1,113,359.68 covering the fiscal year 1981-1982. Respondent not having contested the assessment, petitioner, 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 3 years after, respondent wrote the BIR requesting a reconsideration of her tax deficiency assessment. The BIR denied the request. On January 1, 1997, it filed a case with the Regional Trial Court to collect the tax deficiency. Petitioner argues that respondents request for reinvestigation of her tax deficiency assessment on November 3, 1992 effectively suspended the running of the period of prescription such that the government could still file a case for tax collection. ISSUES: Moreover, there is nothing in the Revised Quezon City Charter which would suggest that the power of the City Prosecutor to investigate and prosecute crimes, misdemeanors, and violations of ordinances committed within the territorial jurisdiction of the city is to the exclusion of the State Prosecutors. In fact, the Office of the State Prosecutor exercises control and supervision over City Prosecutors under Executive Order No. 292, otherwise known as the Administrative Code of 1987. DISPOSITIVE PORTION: WHEREFORE, premises considered, the instant Petition for Review is hereby DENIED. Costs against petitioner. SO ORDERED. Although the City Prosecutor has the power to investigate crimes, misdemeanors, and violations of ordinances committed within the territorial jurisdiction of the city, and which can be prosecuted before the trial courts of the said city. The charge against petitioner, however, is already within the exclusive original jurisdiction of the CTA, as the Information states that her gross underdeclaration resulted in an income tax deficiency of P1,395,116.24, excluding interest and penalties. The City Prosecutor does not have the authority to appear before the CTA, which is now of the same rank as the Court of Appeals. In contrast, the DOJ is the principal law agency of the Philippine government which shall be both its legal counsel and prosecution arm.[52] It has the power to investigate the commission of crimes, prosecute offenders and administer the probation and correction system.[53] Under the DOJ is the Office of the State Prosecutor whose functions are described. The power or authority of the Chief State Prosecutor and his deputies in the Department of Justice to prosecute cases is national in scope; and the Special Prosecutor's authority to sign and file informations in court proceeds from the exercise of said person's authority to conduct preliminary investigations.[

1.

w/n the complaint was without approval of the BIR Commissioner as required by

ATILANO BARTOLOME BAUTISTA CABRALES CASTRO DUEAS FERMIN GUEVARA MACALINO SAMSON TAGRA VALLO WILWAYCO 5

TAXATION 2 REMEDIES: PRELIMINARY PROVISIONS Sec 221of the NIRC

2. 1.

w/n the action had already prescribed

RATIO: No. RAO Nos. 5-83 and 10-95 are in harmony with this statutory mandate. As amended by R.A. No. 8424, the NIRC is now even more categorical. Sec. 7 of the present Code authorizes the BIR Commissioner to delegate the powers vested in him under the pertinent provisions of the Code to any subordinate official with the rank equivalent to a division chief or higher, except the following: (a) The power to recommend the promulgation of rules and regulations by the Secretary of Finance; (b) The power to issue rulings of first impression or to reverse, revoke or modify any existing ruling of the Bureau; (c) The power to compromise or abate under 204(A) and (B) of this Code, any tax deficiency: Provided, however, that assessments issued by the Regional Offices involving basic deficiency taxes of five hundred thousand pesos (P500,000.00) or less, and minor criminal violations as may be determined by rules and regulations to be promulgated by the Secretary of Finance, upon the recommendation of the Commissioner, discovered by regional and district officials, may be compromised by a regional evaluation board which shall be composed of the Regional Director as Chairman, the Assistant Regional Director, heads of the Legal, Assessment and Collection Divisions and the Revenue District Officer having jurisdiction over the taxpayer, as members; and (d) The power to assign or reassign internal revenue officers to establishments where articles subject to excise tax are produced or kept. None of the exceptions relates to the Commissioners power to approve the filing of tax collection cases. 2. No. Sec. 229 of the Code mandates that a request for reconsideration must be made within 30 days from the taxpayers receipt of the tax deficiency assessment, otherwise the assessment becomes final, unappealable and, therefore, demandable. The notice of assessment for respondents tax deficiency was issued by petitioner on July 18, 1986. On the other hand, respondent 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. 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 Sec 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. DISPOSITIVE PORTION: WHEREFORE the petition is DENIED.

Petitioner Rovero in 1947 arrived at the Makati Airport on board a PAL plane which came from Bangkok. He brought with him several pieces of baggage, among which was a Chinese vase which he declared and valued at P15. The vase together with some of the baggage were retained by the Customs officials for they suspected that they contained merchandise not declared which should pay customs duty. In the course of the examination of said Chinese vase, it was found that it had a false bottom which upon being broken open was seen to hold a tin can containing 259 pieces of jewelry with precious stones, which the Customs officials appraised at P23,736. Rovero never mentioned to said Customs officials the presence of said pieces of jewelry in the Chinese vase. The jewelry was, therefore, seized as property subject to forfeiture under sec1363 (m-2) in relation to sec1292 of the Revised Administrative Code (RAC). Rovero admitted that the pieces of jewelry belonged to him, he having bought them in Bangkok for $4,353, and that he purposely concealed them in the false bottom of the Chinese vase and reasoned out that he was afraid that he might be robbed by hold-up men, and that he did not then have enough cash with which to pay the duties and taxes which he figured to amount to about P6,000. Evidently, the Customs officials were not impressed by his explanation. Rovero was found guilty of violating sec2703 of the RAC and a fine. In a decision, the Commissioner of Customs found that Rovero had attempted to import the jewelry by fraudulent entry; that it was not the first time that Rovero was guilty of fraudulent entry against the Government because there had been an instance where jewelries were found in his wallet. For this reason the Commissioner of Customs declared that the seizure of said 259 pieces of jewelry was proper, and that such jewelry was subject to forfeiture under sec1363 (m-2) of the RAC; but that under sec1365 of the same Code, forfeiture was waived and in lieu thereof a fine in an amount equal to three times the appraised value of the jewelry was imposed, it being understood that the jewelry may be delivered to Rovero upon payment of the legal duties, compensating tax and other charges due thereon, plus the fine, and that upon his failure to take delivery of the articles, and after the decision has become final the jewelry will be sold at public auction for the satisfaction of the Government's claim. Not satisfied with that decision Rovero appealed the case to the CFI Manila which later affirmed the decision of the Commissioner of Customs. After promulgation of the decision of the SC, Rovero wrote to the Commissioner of Customs a letter, stating that the case of the 259 pieces of jewelry was still pending in this Tribunal, and petitioning for a reappraisal of said jewelry. Acting upon said petition the Collector of Customs in a memorandum order created a Committee on Reappraisement. The next day, the Committee filed its report, were the jewelries were reappraised at P9,880. The Secretary of Finance granted authority "for the setting aside of the original appraisement and for the collection of the fine imposed by the Supreme Court and of the customs duties and charges based on the reappraisement value of P9,800." Incidentally, it should be here stated that according to the RECEIPT, dated Aug. 23, 1951, Rovero received from the Collector of Customs the 259 pieces of jewelry after he had paid the corresponding duty and all charges and the fine of trebel the reappraised value of P9,880 (not the original appraisal of P23,736). By order, CFI declared that it appearing from the "manifestation of satisfaction of judgment" that the full amount of the judgment had not been paid, said manifestation be stricken from the record and he ordered the Sheriff to carry out the order of execution. MR denied. Thus, this present petition. ISSUE: W/N cases which become final and executory after the final judgment of a court, where compromise requested on the ground of doubtful validity of the assessment can be compromised. HELD: NO. It must be clear that the said supervision and control over the judicial

Rovero v. Amparo G.R. No. L-5482 May 5, 1952 FACTS:

ATILANO BARTOLOME BAUTISTA CABRALES CASTRO DUEAS FERMIN GUEVARA MACALINO SAMSON TAGRA VALLO WILWAYCO 6

TAXATION 2 REMEDIES: PRELIMINARY PROVISIONS proceedings cannot be extended to the modification of a final decision of a court. The Commissioner of Customs may supervise and control the filing of pleadings, the conduct of the hearing, the presentation of evidence and even the taking of an appeal from the decision of the CFI, adverse to the Government, to the SC. But surely he cannot under the guise of supervision and control of judicial proceedings, modify or alter a final decision of a court, including an appellate court or stay execution of a final judgment in favor of the Government by receiving of said Government anything less than what the judgment calls for. It is argued that the parties to a case may enter into a compromise about even a final judgment rendered by a court, and it is contended by petitioner that the appraisal ordered by the Commissioner of Customs and sanctioned by the Department of Finance was authorized by Sec1369 of the same Code. The contention may be correct as regards private parties who are the owners of the property subject-matter of the litigation, and who are therefore free to do with what they own or what is awarded to them, as they please, even to the extent of renouncing the award, or condoning the obligation imposed by the judgment of the adverse party. Not so, however in the present case. Here, the Commissioner of Customs is not a private party and is not the owner of the money involved in the fine based on the original appraisal. He is a mere agent of the Government and acts as a trustee of the money or property in his hands or coming thereto by virtue of a favorable judgment. Unless expressly authorized by his principal or by law, he is not authorized to accept anything different from or anything less than what is adjudicated in favor of the Government. When the Republic of the Philippines won the case in court by virtue of a final judgment, it acquired a vested right to the money represented by the fine based on the original appraisement of the jewelry in question. In the form of a fine, the President alone under Art VII, Sec10 of the Constitution can remit such fine; in the form of money or property belonging to the Government, only the Legislature by suitable enactment may dispose of it. Moreover, the right of compromise claimed on behalf of the Commissioner under Sec1369 of the RAC is clearly inapplicable at this stage of the judicial proceedings. For the Government, the time for compromise is over. There no longer is any necessity or reason for its exercise. Art 1809 of the old CC and Art 2028 of the NCC define a COMPROMISE as a contract whereby the parties in interest by giving, promising or retaining something or otherwise making reciprocal concessions, avoid a litigation or terminate one already commenced. Black's Law Dictionary says: "A compromise is an agreement between two or more persons, who, for preventing for putting an end to a lawsuit, adjust their difficulties by mutual consent in manner which they agree on, and which every one of them prefers to the hope of gaining, balanced by the danger of losing." Here, as far as the Republic is concerned, the period for compromise had definitely ended. The original controversy about the legality of the seizure of the jewelry, the imposition of the fine treble the appraised value of P23,736 has not only been taken to court, but it has been finally decided by the highest Tribunal. Whatever expense caused to the Government as a result of the suit in court, including the appeal will be reimbursed to it, because of the adjudication of costs in its favor. There is no longer any uncertainty as to the result of the litigation because the Government has definitely and finally won it. In other words, there is nothing more to compromise. DISPOSITIVE PORTION: In view of all the foregoing, the motion for reconsideration is denied. COMPANY OF THE PHILIPPINES, DOMINGO C. NIANGAR, DANIEL C. SABINO, FERNANDO S. TULIAO and TULMAR TRADING CORPORATION G.R. No. 74965 November 9, 1994 FACTS: On January 12, 1984 the Commissioner of Internal Revenue sent two letters of demand to the respondent Maritime Company of the Philippines for deficiency common carriers tax, fixed tax, 6% Commercial Brokers tax, documentary stamp tax, income tax and withholding taxes in the total amount of P17,284,882.45. The assessment became final and executory as private respondent did not contest it. But they did not pay their tax liability either, so the CIR issued warrants of distraint of personal property and levy of real property of private respondent. Copies of the warrants, both dated January 23, 1985, were served on January 28, 1985 on Yoly T. Petrache, private respondents accountant. On April 16, 1985 a Receipt for Goods, Articles, and Things Seized under Authority of the National Internal Revenue Code was executed, covering, among other things, six barges identified as MCP-1,2,3,4,5 and 6. This receipt is required by 303 (now 206) of the NIRC as proof of the constructive distraint of property. It is an undertaking by the taxpayer or person in possession of the property covered that he will preserve the property and deliver it upon order of the court or the Internal Revenue Commissioner. The receipt was prepared by the BIR for the signature of a representative of Maritime Co., but it was not signed. The individuals who had possession of the barges had refused to sign the receipt. Now, it appears that four of the barges placed under constructive distraint were levied upon execution by respondent deputy sheriff of Manila on July 20, 1985 to satisfy a judgment for unpaid wages and other benefits of employees of respondent Maritime Co. The four barges were then sold by the deputy sheriff at a public auction to on August 12, 1985. The highest bidder, Daniel C. Sabino, subsequently sold them to Fernando S. Tuliao and Tulmar Trading Corporation. On September 4, 1985, petitioner asked the Labor Arbiter to annul the sale and to enjoin the sheriff from disposing of the proceeds, or, in the alternative, remit them to the Bureau of Internal Revenue so that the amount could be applied to the payment of Maritime Co.s tax liabilities. Labor Arbiter Ceferina Diosana denied the motion on the ground that the CIR failed to show that the barges which were levied upon and sold, had been validly placed under constructive distraint. The Labor Arbiter likewise rejected the contention that the governments claim for taxes was preferred under Art. 2247, in relation to Art. 2241(1) of the Civil Code, on the ground that under these provisions only taxes and fees which are due on specific movables enjoyed preference, whereas the taxes claimed by petitioner were not due on the four barges in question. ISSUE: WON the warrant of distraint served by the Revenue Seizure Officer is valid, against the writ of execution subsequently levied upon the same property by the deputy sheriff of Manila to satisfy the claims of employees in the NLRC Case Domingo C. Niangar, et al. v. Maritime Co. for P490,749.21. HELD/RATIO: YES, the petition is granted. The National Internal Revenue Code provides for the collection of delinquent taxes by any of the following remedies: (a) distraint of personal property or levy of real property of the delinquent taxpayer and (b) civil or criminal action.

COMMISSIONER OF INTERNAL REVENUE, vs. NATIONAL LABOR RELATIONS COMMISSION, DEPUTY CITY SHERIFF CARMELO V. CACHERO, MARITIME

ATILANO BARTOLOME BAUTISTA CABRALES CASTRO DUEAS FERMIN GUEVARA MACALINO SAMSON TAGRA VALLO WILWAYCO 7

TAXATION 2 REMEDIES: PRELIMINARY PROVISIONS With respect to the four barges in question, petitioner resorted to constructive distraint pursuant to 303 (now 206) of the NIRC. Although the warrant of distraint in this case had been issued earlier (January 23, 1985) than the levy on execution in the labor case on July 20, 1985, the Labor Arbiter nevertheless held that there was no valid distraint on the ground that the receipt of property distrained had not been signed by the taxpayer: His own receipts for goods attached to his motions does not show that it was received by Maritime; neither does it show any signature of any of Maritimes Officers. Apart from the foregoing, Sheriff Cachero stated that before he sold the subject four barges, he conducted an investigation on the ownership of the barges. He did not find any lien or encumbrance on any of the said four barges. Thus it cannot be true that the Commissioner effected a valid warrant of distraint of personal property on the barges in question. This case has the same facts as Republic v. Enriquez, where the validity of the distraint of the six barges, which included the four in this case, was sustained against the levy on execution made by another deputy sheriff of Manila in another case filed against Maritime Company. The SC found that the Receipt for Goods, Articles and Things Seized under Authority of the National Internal Revenue Code covering the six barges had been duly executed. The petitioners admitted that the receipt of property distrained had not been signed by the taxpayer or person in possession of the property allegedly because they had refused; but the receipt had been duly acknowledged by the Coast Guard which obviously had the barges in its possession. In addition, the record of the prior case also shows that on October 4, 1985, the Commissioner of Internal Revenue issued a Notice of Seizure of Personal Property stating that the goods and chattels listed on its reverse side, among which were the four barges (MCP-2, MCP-3, MCP-5, and MCP-6), had been distrained. The Notice of Seizure of Personal Property, a copy of which was received by Atty. Redentor R. Melo in behalf of Maritime Company of the Philippines, together with the receipt of the Coast Guard, belies the claim of the deputy sheriff that when he levied upon the four barges there was no indication that the barges had previously been placed under distraint. Accordingly, what was said in the prior case in upholding the validity of distraint fully applies in this case: It is settled that the claim of the government predicated on a tax lien is superior to the claim of a private litigant predicated on a judgment. The tax lien attaches not only from the service of the warrant of distraint of personal property but from the time the tax became due and payable. Besides, the distraint on the subject properties of Maritime Company of the Philippines as well as the notice of their seizure were made by petitioner, through the Commissioner of Internal Revenue, long before the writ of execution was issued by the Regional Trial Court of Manila, Branch 31. There is no question then that at the time the writ of execution was issued, the two (2) barges, MCP1 and MCP-4, were no longer properties of the Maritime Company of the Philippines. The power of the court in execution of judgments extends only to properties unquestionably belonging to the judgment debtor. Execution sales affect the rights of the judgment debtor only, and the purchaser in an auction sale acquires only such right as the judgment debtor had at the time of sale. It is also well-settled that the sheriff is not authorized to attach or levy on property not belonging to the judgment debtor. Nor is there any merit in the contention of the NLRC that taxes are absolutely preferred claims only with respect to movable or immovable properties on which they are due and that since the taxes sought to be collected in this case are not due on the barges in question the governments claim cannot prevail over the claims of employees of the Maritime Company of the Philippines which, pursuant to Art. 110 of the Labor Code, enjoy first preference. Republic v. Peralta rejected a similar contention: . . . [T]he claim of the Bureau of Internal Revenue for unpaid tobacco inspection fees constitutes a claim for unpaid internal revenue taxes which gives rise to a tax lien upon all the properties and assets, movable and immovable, of the Insolvent as taxpayer. Clearly, under Articles 2241 No. 1,2242 No. 1, and 2246-2249 of the Civil Code, this tax claim must be given preference over any other claim of any other creditor, in respect of any and all properties of the Insolvent. In addition, the SC has held that Art. 110 of the Labor Code applies only in case of bankruptcy or judicial liquidation of the employer. This is clear from the text of the law: ART. 110. Worker preference in case of bankruptcy.In the event of bankruptcy or liquidation of an employers business, his workers shall enjoy first preference as regards wages due them for services rendered during the period prior to the bankruptcy or liquidation, any provision of law to the contrary notwithstanding. Unpaid wages shall be paid in full before other creditors may establish any claims to a share in the assets of the employer. This case does not involve the liquidation of the employers business. OTHER DOCTRINES: Constructive distraint of the property of a taxpayer.To safeguard the interest of the Government, the Commissioner of Internal Revenue may place under constructive distraint the property of a delinquent taxpayer or any taxpayer who, in his opinion, is retiring from any business subject to tax, or intends to leave the Philippines, or remove his property therefrom, or hide or conceal his property, or perform any act tending to obstruct the proceedings, for collecting the tax due or which may be due from him. The constructive distraint of personal property shall be effected by requiring the taxpayer or any person having possession or control of such property to sign a receipt covering the property distrained and obligate himself to preserve the same intact and unaltered and not to dispose of the same in any manner whatever without the express authority of the Commissioner of Internal Revenue. In case the taxpayer or the person having the possession and control of the property sought to be placed under constructive distraint refuses or fails to sign the receipt herein referred to, the revenue officer effecting the constructive distraint shall proceed to prepare a list of such property and in the presence of two witnesses leave a copy thereof in the premises where the property distrained is located, after which the said property shall be deemed to have been placed under constructive distraint. - Article 110 of the Labor Code cannot be viewed in isolation but must be read in relation to the Civil Code scheme on classification and preference of credits. (Development Bank of the Philippines vs. National Labor Relations Commission, 222 SCRA 264 [1993])

DISPOSITIVE PORTION: WHEREFORE, the petition for certiorari is GRANTED and the resolution dated April 4, 1986 of respondent NLRC in NLRC Case No. NCR-12-4233-84 is SET ASIDE insofar as it denies the governments claim for taxes, and respondent deputy sheriff Carmelo V.

ATILANO BARTOLOME BAUTISTA CABRALES CASTRO DUEAS FERMIN GUEVARA MACALINO SAMSON TAGRA VALLO WILWAYCO 8

TAXATION 2 REMEDIES: PRELIMINARY PROVISIONS Cachero or his successor is ORDERED to remit the proceeds of the auction sale to the Bureau of Internal Revenue to be applied as party payment of respondent Maritime Companys tax liabilities. SO ORDERED.

ATILANO BARTOLOME BAUTISTA CABRALES CASTRO DUEAS FERMIN GUEVARA MACALINO SAMSON TAGRA VALLO WILWAYCO 9