TAXATION I
EMILIO E. LIM, SR. and ANTONIA SUN LIM, petitioners, vs. COURT OF APPEALS and PEOPLE OF THE PHILIPPINES, respondents.
G.R. Nos. 48134-37. October 18, 1990. FERNAN, C.J.:
NATURE: The instant petition for review on certiorari seeks the reversal of the Court of Appeals decision which affirmed in toto the judgments of the then Court of First Instance in four (4) Criminal cases instituted by the Bureau of Internal Revenue against petitioners.
Topic: Judicial Remedies in Detail (Section 220, NIRC) > Period within which the action may be filed > Where should these cases be filed.
Doctrine: 1) The 5-year prescriptive period provided for under Sec. 354 of the Tax Code should be reckoned from the date the final notice and demand was served on the taxpayer. 2) In addition to the fact of discovery, there must be a judicial proceeding for the investigation and punishment of the tax offense before the five-year limiting period begins to run. 3) PD 69 provides that judgment in the criminal case shall not only impose the penalty but shall order payment of the taxes subject of the criminal case. This decree, however, cannot be applied to criminal cases filed prior to the effectivity thereof i.e. January 1,1973
FACTS: Petitioner spouses Lim were engaged in the dealership of various household appliances. They filed income tax returns for the years 1958 and 1959. In 1959, a raid was conducted at their business address in Manila and in their premises at Quezon City. Seized from the Lim were business and accounting records which served as bases for an investigation undertaken by the Bureau of Internal Revenue (BIR).
Senior Revenue Examiner Daet submitted a memorandum with the findings that the income tax returns filed by petitioners for the years 1958 and 1959 were false or fraudulent. On April 7, 1965, Acting Commissioner Tabios informed the couple that there deficiency income taxes are P922, 913.04.
BIR rendered a final decision holding that there was no cause for reversal of the assessment against the Lim couple. The final notice and demand for payment was served through their daughter in law on July 3, 1968 for the amount of P1,237,190.55 including interest, surcharges and penalty for late payment. BIR referred the matter to the Manila’s Fiscal’s Office for investigation and prosecution. Four 4 criminal information were filed against petitioners for violation of NIRC.
Relative to Criminal Cases Nos. 1788 and 1789 which involved petitioners' refusal to pay the deficiency income taxes due, both parties are in accord that by their nature, the violations as charged could only be committed after service of notice and demand for payment of the deficiency taxes upon the taxpayers. Petitioners maintain that the five-year period of limitation under Section 354 should be reckoned from April 7, 1965, the date of the original assessment while the Government insists that it should be counted from July 3, 1968 when the final notice and demand was served on petitioners' daughter-in-law.
RTC finds the accused spouses Lim guilty of a violation of Section 51 penalized under Section 73 of the National Internal Revenue Code and each is hereby sentenced in each case to pay a fine of P2,000.00 and to pay the government pursuant to Presidential Decree No. 69. CA affirmed RTC. 23 days later Antonio Lim, Sr. died.
ISSUE: 1.) Whether the prescriptive period commenced to run from 1965 date of 1st assessment or discovery (accdg to Lim spouses) or from final notice on 1968 (government);
2.)Whether the RTC had jurisdiction over the tax collection case;
HELD: 1) We hold for the Government. The 5-year prescriptive period provided for under Sec. 354 of the Tax Code should be reckoned from the date the final notice and demand was served on the taxpayer. Section 51 (b) of the Tax Code provides: "(b) Assessment and payment of deficiency tax.—After the return is filed, the Commissioner of Internal Revenue shall examine it and assess the correct amount of the tax. The tax or deficiency in tax so discovered shall be paid upon notice and demand from the Commissioner of lnternal Revenue." Inasmuch as the final notice and demand for payment of the deficiency taxes was served on petitioners on July 3, 1968, it was only then that the cause of action on the part of the BIR accrued. This is so because prior to the receipt of the letter-assessment, no violation has yet been committed by the taxpayers. The offense was committed only after receipt was coupled with the wilful refusal to pay the taxes due within the alloted period. The two criminal informations, having been filed on June 23, 1970, are well-within the five-year prescriptive period and are not time-barred.
In addition to the fact of discovery, there must be a judicial proceeding for the investigation and punishment of the tax offense before the five-year limiting period begins to run. Note the conjunctive word "and" between the phrases "the discovery thereof' and "the institution of judicial proceedings for its investigation and proceedings." In other words, in addition to the fact of discovery, there must be a judicial proceeding for the investigation and punishment of the tax offense before the five-year limiting period begins to run. It was on September 1,1969 that the offenses subject of Criminal Cases Nos. 1790 and1791 were indorsed to the Fiscal's Office for preliminary investigation.Inasmuch as a preliminary investigation is a proceeding for investigation and punishment of a crime, it was only on September 1,1969 that the prescriptive period commenced. x x x The Court is inclined to adopt the view of the Solicitor General. For while that particular point might have been raised in the Ching Lak case, the Court, at that time, did not give a definitive ruling which would have settled the question once and for all. As Section 354 stands in the statute book (and to this day it has remained unchanged) it would indeed seem that the tax cases,such as the present ones, are practically imprescriptible for as long as the period from the discovery and institution of judicial proceedings for its investigation and punishment, up to the filing of the information in court does not exceed five (5) years.
2) No. The petition, however, is impressed with merit insofar as it assails the inclusion in the judgment of the payment of deficiency taxes in Criminal Cases Nos. 1788-1789. The trial court had absolutely no jurisdiction in sentencing the Lim couple to indemnify the Government for the taxes unpaid. The lower court erred in applying Presidential Decree No. 69,particularly Section 316 thereof, which provides that "judgment in the criminal case shall not only impose the penalty but shall order payment of the taxes subject of the criminal case", because that decree took effect only011 January 1, 1973 whereas the criminal cases subject of this appeal were instituted on June 23, 1970. Save in two specific instances, Presidential Decree No. 69 has no retroactive application.
FERDINAND R. MARCOS II, petitioner, vs. COURT OFAPPEALS, THE COMMISSIONER OF THE BUREAU OFINTERNAL REVENUE and HERMINIA D. DE GUZMAN, respondents.
G.R. No. 120880. June 5, 1997. TORRES, JR., J.
Topic: Judicial Remedies in Detail (Section 220, NIRC) > Period within which the action may be filed > Where should these cases be filed.
Doctrine: 1) The approval of the court, sitting in probate, or as a settlement tribunal over the deceased is not a mandatory requirement in the collection of estate taxes. 2) The deficiency tax assessment, if it has already become final, executory, and demandable, may be collected through the summary remedy of distraint or levy pursuant to Section 205 of the NIRC. 3) The omission to file an estate tax return, and the subsequent failure to contest or appeal the assessment made by the BIR is fatal, as under Section 223 of the NIRC, in case of failure to file a return,the tax may be assessed at any time within ten years after the omission, and any tax so assessed may be collected by levy upon real property within three years following the assessment of the tax.
FACTS: Bongbong Marcos sought for the reversal of the ruling of the Court of Appeals to grant CIR's petition to levy the properties of the late Pres. Marcos to cover the payment of his tax delinquencies during the period of his exile in the US. The Marcos family was assessed by the BIR after it failed to file estate tax returns.
The investigation disclosed that the Marcoses failed to file a written notice of the death of the decedent, an estate tax returns [sic], as well as several income tax returns covering the years 1982 to 1986, - all in violation of the National Internal Revenue Code (NIRC).
BR issued deficiency tax assessment against the estate of the late president, deficiency tax assessment against the Income Tax Returns of the Spouses Marcos for the years 1985 to 1986, and the deficiency Income Tax assessment of petitioner Ferdinand 'Bongbong' Marcos II for the years 1982 to 1985.
However the assessment were not protested administratively by Mrs. Marcos and the heirs of the late president so that they became final and unappealable after the period for filing of opposition has prescribed. Marcos contends that the properties could not be levied to cover the tax dues because they are still pending probate with the court, and settlement of tax deficiencies could not be had, unless there is an order by the probate court or until the probate proceedings are terminated. Petitioner also pointed out that applying Memorandum Circular No. 38-68, the BIR's Notices of Levy on the Marcos properties were issued beyond the allowed period, and are therefore null and void.
On the other hand, it is argued by the BIR, that the state's authority to collect internal revenue taxes is paramount. Thus, the pendency of probate proceedings over the estate of the deceased does not preclude the assessment and collection, through summary remedies, of estate taxes over the same. According to the respondent, claims for payment of estate and income taxes due and assessed after the death of the decedent need not be presented in the form of a claim against the estate. These can and should be paid immediately. The probate court is not the government agency to decide whether an estate is liable for payment of estate of income taxes. Well-settled is the rule that the probate court is a court with special and limited jurisdiction.
ISSUE: Whether or not the proper avenues of assessment and collection of the said tax obligations were taken by the respondent Bureau.
HELD: Yes. Approval of the court,sitting in probate, or as a settlement tribunal over the deceased is not a mandatory requirement in the collection of estate taxes. It cannot therefore be argued that the Tax Bureau erred in proceeding with the levying and sale of the properties allegedly owned by the late President, on the ground that it was required to seek first the probate court’s sanction. There is nothing in the Tax Code, and in the pertinent remedial laws that implies the necessity of the probate or estate settlement court’s approval of the state’s claim for estate taxes, before the same can be enforced and collected.
The Notices of Levy upon real property were issued within the prescriptive period and in accordance with the provisions of the present Tax Code. The deficiency tax assessment, having already become final, executory, and demandable, the same can now be collected through the summary remedy of distraint or levy pursuant to Section 205 of the NIRC.
The omission to file an estate tax return, and the subsequent failure to contest or appeal the assessment made by the BIR is fatal to the petitioner’s cause, as under the above-cited provision, in case of failure to file a return, the tax may be assessed at anytime within ten years after the omission, and any tax so assessed may be collected by levy upon real property within three years following the assessment of the tax. Since the estate tax assessment had become final and unappealable by the petitioner’s default as regards protesting the validity of the said assessment, there is now no reason why the BIR cannot continue with the collection of the said tax. Any objection against the assessment should have been pursued following the avenue paved in Section 229 of the NIRC on protests on assessments of internal revenue taxes.
JUDY ANNE L. SANTOS, Petitioner, v. PEOPLE OF THE PHILIPPINES and BUREAU OF INTERNAL REVENUE, Respondents.
G.R. NO. 173176 : August 26, 2008. CHICO-NAZARIO, J.:
Topic: Judicial Remedies in Detail (Section 220, NIRC) > Period within which the action may be filed > Where should these cases be filed.
Doctrine:
FACTS: Bureau of Internal Revenue (BIR) Commissioner Parayno, Jr. wrote to the Department of Justice (DOJ) Secretary Raul M. Gonzales a letter[5] regarding the possible filing of criminal charges against petitioner. In his letter he referred for preliminary investigation and filing of an information in court if evidence so warrants, the Joint Affidavit from the National Investigation Division recommending the criminal prosecution of MS. JUDY ANNE LUMAGUI SANTOS for substantial under declaration of income, which constitutes as prima facie evidence of false or fraudulent return under Section 248(B) of the NIRC and punishable under Sections 254 and 255 of the Tax Code.
Prosecution Attorney issued a Resolution finding probable cause and recommending the filing of a criminal information against petitioner. An information was filed before the Court of Tax Appeals.
The CTA First Division issued in 2005 a warrant for the arrest of petitioner. The tax court lifted and recalled the warrant of arrest in 2005 after petitioner voluntarily appeared and submitted herself to its jurisdiction and filed the required bail bond in the amount of P20,000.00.
Petitioner filed with the CTA First Division a Motion to Quash. CTA First Division in its resolution, denied petitioner's Motion to Quash and accordingly scheduled her arraignment. Petitioner filed with the CTA en banc a Motion for Extension of Time to File Petition for Review. CTA En Banc denied the petitioner's Motion for Extension of Time to File Petition for Review for lack of merit.
ISSUE: Whether a resolution of a CTA division denying a motion to quash is a proper subject of an appeal to the CTA en banc under section 11 of RA no. 9282, amending section 18 of RA no. 1125.
Section 18 of Republic Act No. 1125,25 as amended by Republic Act No. 9282,26 provides:
SEC. 18. Appeal to the Court of Tax Appeals En Banc. - No civil proceedings involving matters arising under the National Internal Revenue Code, the Tariff and Customs Code or the Local Government Code shall be maintained, except as herein provided, until and unless an appeal has been previously filed with the CTA and disposed of in accordance with the provisions of this Act. A party adversely affected by a resolution of a Division of the CTA on a motion for reconsideration or new trial, may file a Petition for Review with the CTA en banc.
HELD: No. The denial of a motion to quash is an interlocutory order which is not the proper subject of an appeal or a petition for certiorari .
Although the filing of a Petition for Review with the CTA en banc from a decision, resolution, or order of the CTA Division, was newly made available to the CTA, such mode of appeal has long been available in Philippine courts of general jurisdiction. Hence, the Revised CTA Rules no longer elaborated on it but merely referred to existing rules of procedure on petitions for review and appeals,
According to Section 1, Rule 41 of the Revised Rules of Court, governing appeals from the Regional Trial Courts (RTCs) to the Court of Appeals, an appeal may be taken only from a judgment or final order that completely disposes of the case or of a matter therein when declared by the Rules to be appealable. Said provision, thus, explicitly states that no appeal may be taken from an interlocutory order.
It is also a recognized reason of the law in permitting appeal only from a final order or judgment, and not from an interlocutory or incidental one, is to avoid multiplicity of appeals in a single action, which must necessarily suspend the hearing and decision on the merits of the case during the pendency of the appeal. If such appeal were allowed, the trial on the merits of the case would necessarily be delayed for a considerable length of time, and compel the adverse party to incur unnecessary expenses, for one of the parties may interpose as many appeals as incidental questions may be raised by him, and interlocutory orders rendered or issued by the lower court.37
There is no dispute that a court order denying a motion to quash is interlocutory. The denial of the motion to quash means that the criminal information remains pending with the court, which must proceed with the trial to determine whether the accused is guilty of the crime charged therein. Equally settled is the rule that an order denying a motion to quash, being interlocutory, is not immediately appealable, nor can it be the subject of a Petition for Certiorari. Such order may only be reviewed in the ordinary course of law by an appeal from the judgment after trial.
Instant Petition for Review is DENIED.
COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. MELCHOR J. JAVIER, JR. and THE COURT OF TAX APPEALS, respondents.
G.R. No. 78953. July 31, 1991. SARMIENTO, J.:
Topic: f. Effects of failure to pay the tax on time: Additions to the tax (Chapter I, Title X, NIRC) > Surcharges > b. Fraud Penalty (Section 248B, NIRC)
Doctrine: The fraud contemplated by law is actual and not constructive. Courts never sustain findings of fraud upon circumstances which create only suspicion and the mere understatement of at ax is not itself proof of fraud for the purpose of tax evasion. There was no actual and intentional fraud through willful and deliberate misleading of the Bureau of Internal Revenue,case at bar; Error or mistake of law is not fraud.
FACTS: Melon bank erroneously remitted to Javier 1M US Dollar instead of 1Thousand US Dollar, Melon Bank filed a complaint in the Court of First Instance. Fiscal of CIF filed an information charging spouses Javier with the crime of estafa, alleging that they misappropriated, misapplied, and converted to their own personal use and benefit the amount of 999Thousand US Dollar.
Javier filed his Income Tax Return for the taxable year 1977 and stating in the footnote of the return that “Taxpayer was recipient of some money received from abroad which he presumed to be a gift but turned out to be an error and is now subject of litigation.”
Javier received a letter from the acting Commissioner of Internal Revenue together with income assessment notices for the years 1976 and 1977, demanding that Javier should pay the corresponding amount as deficiency assessments for the years 1976 and 1977 respectively.
Javier wrote the BIR that he was paying the deficiency income assessment for the year 1976 but denying that he had any undeclared income for the year 1977 and requested that the assessment for 1977 be made to await final court decision on the case filed against him for filing an allegedly fraudulent return.
Javier received from Acting Commissioner of Internal Revenue a letter stating in reply to his letter-protest that “the amount of Mellon Bank’s erroneous remittance which you were able to dispose, is definitely taxable.”
The Commissioner also imposed a 50% fraud penalty against Javier. Disagreeing, Javier filed an appeal before the respondent Court of Tax Appeals. CTA ruled that there is no fraud and ordered that the 50% penalty.
ISSUE: Whether a taxpayer who merely states as a footnote in his income tax return that a sum of money that he erroneously received and already spent is the subject of a pending litigation and there did not declare it as income is liable to pay the 50% penalty for filing a fraudulent return.
HELD: No. There is no fraud. “Taxpayer was the recipient of some money from abroad which he presumed to be a gift but turned out to be an error and is now subject of litigation;” that it was an “error or mistake of fact or law” not constituting fraud, that such notation was practically an invitation for investigation and that Javier had literally “laid his cards on the table.”
The fraud contemplated by law is actual and not constructive.It must be intentional fraud, consisting of deception willfully and deliberately done or resorted to in order to induce another to give up some legal right. Negligence, whether slight or gross, is not equivalent to the fraud with intent to evade the tax contemplated by law. It must amount to intentional wrong-doing with the sole object of avoiding the tax. It necessarily follows that a mere mistake cannot be considered as fraudulent intent, and if both petitioner and respondent Commissioner of Internal Revenue committed mistakes in making entries in the returns and in the assessment, respectively, under the inventory method of determining tax liability, it would be unfair to treat the mistakes of the petitioner as tainted with fraud and those of the respondent as made in good faith.
Fraud is never imputed and the courts never sustain findings of fraud upon circumstances which, at most, create only suspicion and the mere understatement of a tax is not itself proof of fraud for the purpose of tax evasion.
In the case at bar, there was no actual and intentional fraud through willful and deliberate misleading of the government agency concerned, the Bureau of Internal Revenue, headed by the herein petitioner. The government was not induced to give up some legal right and place itself at a disadvantage so as to prevent its lawful agents from proper assessment of tax liabilities because Javier did not conceal anything. Error or mistake of law is not fraud. The petitioner’s zealousness to collect taxes from the unearned windfall to Javier is highly commendable. Unfortunately, the imposition of the fraud penalty in this case is not justified by the extant facts.