1.
COMMISSIONER OF INTERNAL Court of Tax Appeals First Division rendered a
REVENUE, v. PHILIPPINE NATIONAL
BANK,
Before this court is a petition for review under
Rule 45 of the Rules of Court, seeking to annul
the decision and resolution of the Court of Tax
Appeals En Banc  reduced amount of P23,762,347.83 representing
FACTS: In several transactions including but not
limited to the sale of real properties, lease and
commissions, PNB allegedly earned income and
paid the corresponding income taxes due which
were collected and remitted by various payors as
withholding agents to the BIR during the taxable
year 2000.
On April 2001, PNB filed its tentative income tax
return for taxable year 2000 which [it]
subsequently amended on July, 2001.
 PNB filed again an amended income tax return
for taxable year 2000 on June, 2002, declaring no
income tax liability. as it incurred a net loss in the
amount of P11,318,957,602.00 and a gross loss
of P745,713,454.00 from its Regular Banking Unit
(RBU) transactions.
However PNB had a 10% final income tax liability
of P210,364,280.00 on taxable income of
P1,959,931,182.00 earned from its Foreign
Currency Deposit Unit (FCDU) transactions for the
same year. 
Likewise, in the same return, PNB reported a
total amount of P245,888,507.00 final and
creditable withholding taxes which was applied
against the final income tax due of
P210,364,280.00 leaving an overpayment of
P35,524,227.00.
In its second amended return, PNB ‘s income tax
overpayment of P35,524,227.00 consisted of the
balance of the prior year's (1999) excess credits
of P9,057,492.00 to be carried-over as tax credit
to the succeeding quarter/year and excess
creditable withholding taxes for taxable year 2000
in the amount of P26,466,735.00 which PNB
opted to be refunded.
On November, 2002, PNB filed a claim for refund
or the issuance of a tax credit certificate in the
amount of P26,466,735.40 for the taxable year
2000 with the BIR.
Due to BIR's inaction on its administrative claim,
PNB appealed before CTA by way of a Petition for
Review on April, 2003.
decision in favor of respondent as follows:
WHEREFORE, premises considered, the petition
is hereby GRANTED. Accordingly, respondent is
hereby ORDERED TO REFUND or ISSUE A TAX
CREDIT CERTIFICATE to petitioner in the
unutilized excess creditable withholding taxes for
taxable year 2000.
Petitioner’s motion for reconsideration was
subsequently denied for lack of merit.
On appeal, the Court of Tax Appeals En Banc
sustained the First Division’s ruling.  It held that
the fact of withholding and the amount of taxes
withheld from the income payments received by
respondent were sufficiently established by the
creditable withholding tax certificates, and there
was no need to present the testimonies of the
various payors or withholding agents who issued
the certificates and made the entries therein.  It
also held that respondent need not prove actual
remittance of the withheld taxes to the Bureau of
Internal Revenue because the functions of
withholding and remittance of income taxes are
vested in the payors who are considered the
agents of petitioner.
CTA en Banc also denied the Motion for
Reconsideration.
Hence, this instant petition was filed.
Petitioner claims that the Court of Tax Appeals
“erred on a question of law in ordering the refund
to respondent of alleged excess creditable
withholding taxes because(:)
A.  Respondent failed to prove that the creditable
withholding taxes amounting to P23,762,347.83
are duly supported by valid certificates of
creditable tax withheld at source;
B.  Respondent failed to prove actual remittance
of the alleged withheld taxes to the Bureau of
Internal Revenue (BIR); and
C.  Respondent failed to discharge its burden of
proving its entitlement to a refund.”
Petitioner questions the validity of respondent’s
certificates of creditable tax withheld at source
(withholding tax certificates) and contends that
even if the original certificates were offered in
evidence, respondent failed to present the various
withholding agents to: (1) identify and testify on
their contents; and (2) prove the subsequent
remittance of the withheld taxes to the Bureau of
Internal Revenue. Moreover, petitioner faults
respondent for presenting the withholding tax
certificates only before the Court of Tax Appeals,
and not at the first instance when it filed its claim
for refund administratively before the Bureau of
Internal Revenue.
The petition, however, should be denied.  
The questions on whether respondent’s claim for
refund of unutilized excess creditable withholding
taxes amounting to P23,762,347.83 were duly
supported by valid certificates of creditable tax
withheld at source and whether it had sufficiently
proven its claim are questions of fact.  These
issues require a review, examination, evaluation,
or weighing of the probative value of evidence
presented, especially the withholding tax
certificates, which this court does not have the
jurisdiction to do, barring the presence of any
exceptional circumstance, as it is not a trier of
facts.
Besides, as pointed out by respondent, petitioner
did not object to the admissibility of the 622
withholding tax certificates when these were
formally offered by respondent before the tax
17
court.    Hence, petitioner is deemed to have
18
admitted the validity of these documents.   
Petitioner’s “failure to object to the offered
evidence renders it admissible, and the court
cannot, on its own, disregard such evidence.”
This court accords respect to the conclusion
reached by the Court of Tax Appeals and will not
presumptuously set it aside absent any showing
21
of gross error or abuse on its part. cralawlawlibrary
The certificate of creditable tax withheld at
22
source  is the competent proof to establish the
23
fact that taxes are withheld.    It is not
necessary for the person who executed and
prepared the certificate of creditable tax withheld
at source to be presented and to testify
personally to prove the authenticity of the
certificates.
Moreover, as correctly held by the Court of Tax
Appeals En Banc, the figures appearing in the
withholding tax certificates can be taken at face
value since these documents were executed
under the penalties of perjury, pursuant to
Section 267 of the 1997 National Internal
Revenue Code, as amended,
SEC. 267.  Declaration under Penalties of Perjury.
– Any declaration, return and other statements
required under this Code, shall, in lieu of an oath,
contain a written statement that they are made
under the penalties of perjury.  Any person who
willfully files a declaration, return or statement
containing information which is not true and
correct as to every material matter shall, upon
conviction, be subject to the penalties prescribed
for perjury under the Revised Penal Code.
Thus, upon presentation of a withholding tax
certificate complete in its relevant details and
with a written statement that it was made under
the penalties of perjury, the burden of evidence
then shifts to the Commissioner of Internal
Revenue to prove that (1) the certificate is not
complete; (2) it is false; or (3) it was not issued
regularly.
Petitioner's posture that respondent is required to
establish actual remittance to the Bureau of
Internal Revenue deserves scant consideration.
Proof of actual remittance is not a condition to
claim for a refund of unutilized tax credits.  Under
Sections 57 and 58 of the 1997 National Internal
Revenue Code, as amended, it is the payor-
withholding agent, and not the payee-refund
claimant such as respondent, who is vested with
the responsibility of withholding and remitting
income taxes.
Finally, petitioner’s allegation that the submission
of the certificates of withholding taxes before the
Court of Tax Appeals was late is untenable.  The
samples of the withholding tax certificates
attached to respondent’s comment bore the
receiving stamp of the Bureau of Internal
Revenue’s Large Taxpayers Document Processing
29
and Quality Assurance Division.    As observed
by the Court of Tax Appeals En Banc, “[t]he
Commissioner is in no position to assail the
authenticity of the CWT certificates due to PNB’s
alleged failure to submit the same before the
administrative level since he could have easily
directed the claimant to furnish copies of these
documents, if the refund applied for casts him
30
any doubt.”    Indeed, petitioner’s inaction
prompted respondent to elevate its claim for
refund to the tax court.
More importantly, the Court of Tax Appeals is not
precluded from accepting respondent’s evidence
assuming these were not presented at the
administrative level.  Cases filed in the Court of
Tax Appeals are litigated de novo.   Thus,
respondent “should prove every minute aspect of
its case by presenting, formally offering and
submitting . . . to the Court of Tax Appeals [all
evidence] . . . required for the successful
32
prosecution of [its] administrative claim.”
cralawlawlibrary
WHEREFORE, the petition is DENIED.
2. SM Investments Corp. v. CIR
CTA Case No. 9322
November 19, 2019
FACTS: On April 2, 2014, 2 petitioner filed through
the Electronic Filing and Payment System (EFPS) its
Annual Income Tax Return (ITR) for the year ended
December 31, 2013, while on April 3, 2014,
petitioner received through electronic mail the BIR's
acknowledgement receipt. On the same date, or on
April 3, 2014, petitioner manually filed the subject
Annual ITR.
Meanwhile, under Item No. 20 of petitioner's Annual
ITR, it appears that petitioner made an overpayment
in the amount of P1,388,739,568.00, which it
intends to refund through the issuance of a Tax
Credit Certificate (TCC).
Consequently, on February 18, 2015, petitioner filed
its administrative claim for refund. The BIR, through
OIC - Assistant Commissioner Large Taxpayers
Service, Nestor S. Valeroso, issued a Letter of
Authority (LOA) to inspect petitioner's pertinent
records. However, the BIR failed to act on
petitioner's claim for refund. Thus, on April 1, 2016,
petitioner was constrained to file the instant Petition
for Review.
Respondent filed his Answer where he essentially
argued that petitioner failed to submit the relevant
documents under RMO No. 53-98, in connection to
his claim for refund. Trial then ensued. Petitioner
presented witnesses. On the other hand,
respondent’s counsel manifested that she has no
witness to present.
CTA Special Second Division rendered a Decision, the
dispositive portion of which states:
“WHEREFORE, the instant Petition for
Review is PARTIALLY GRANTED.
Accordingly, let a tax refund or a tax credit
certificate be issued in favor of petitioner
in the total amount of P179,295,580.72,
representing petitioner's excess and
unutilized Creditable Withholding Tax for
the calendar year ended December 31,
2013.
SO ORDERED.”
Respondent then filed his Motion for Partial
Reconsideration, averring that petitioner is not
entitled to such refund.
Petitioner likewise filed its Motion for Partial
Reconsideration. It posits that it was able to comply
with all the essential basic conditions to prove its
entitlement to its claim for refund or, in the
alternative, for the issuance of a Tax Credit
Certificate (TCC) for its excess and unutilized
Creditable Withholding Tax (CWT) for the calendar
year ended 31 December 2013. Further, it contends
that it provided evidence to support its CWT for the
taxable year 2007
ISSUE: Whether petitioner is entitled to its claim for
refund or issuance of a TCC in the amount of
P1,170,533,633.00, representing its alleged excess
and unutilized CWT for the calendar year ended
December 31, 2013.
RULING: After due consideration of the issues raised
by the parties, the Court resolves to deny
respondent's Motion for Partial Reconsideration and
to partially grant petitioner's Motion for Partial
Reconsideration.
(1) SMIC’s Motion for Partial Reconsideration
SMIC contends that it was able to comply with all the
essential basic conditions to prove its entitlement to
its claim for refund or, in the alternative, for the
issuance of a Tax Credit Certificate (TCC) for its
excess and unutilized Creditable Withholding Tax
(CWT) for the calendar year ended 31 December
2013. Further, it contends that it provided evidence
to support its CWT for the taxable year 2007
In the assailed Decision, the Court considered SMIC's
CWT for taxable year 2013 in the amount of
P1,156,578,400.97 as properly supported by BIR
Form No. 2307, but the total refundable CWT
amounted only to P209,071,035.06, after the Court
disallowed some amounts due to (a) failure to prove
that the income payments pertaining thereto were
not properly reported in SMIC’s books; (b) the fact
that some amounts were not fully supported by
original copies of BIR Form No. 2307; and (c) some
amounts being supported by mere photocopies of
BIR Form No. 2307.

(2) SMIC’s Compliance with the requisites to
prove its entitlement to its claim for refund
SMIC avers that contrary to the observation of the
Court, the income related to the disallowed CWT
were duly reported as income in its 2013 ITR and
recorded in its books. Further, it argues that it
offered its explanation/reconciliation of its
recording/entry in its books of accounts and ITR.
SMIC notes that the ICPA provided a comparative
table summarizing the total amount of income
payments per CWT and taxable gross income per FS
and per ITR, with corresponding explanation
regarding the discrepancy in the amounts reflected
in the report. SMIC also asserts that the Court
disregarded the categorical finding of the duly
commissioned ICPA that the pertinent gross income
upon which the claimed CWT relates to was
reported as taxable income in its ITR.
A second look at the ICPA report shows, among
others, the following:
“12. We wish to note that the amount
in the CWT Return are not broken
down into specific transaction for it to
be traced to the books. Moreover, the
amount in the CWT are usually
consolidated for the month or quarter,
such that it is difficult to trace it to the
books. Nevertheless, we have provided
a comparative analysis where we
mapped the CWT per customer against
the income per FS/ITR per customer.
This procedure reveals the amount of
income per customer subjected to
withholding tax.
Xxx xxx xxx
Our review of Petitioner's ITR,
particularly, Schedule 9 thereof,
audited financial statements, and our
interview with Petitioner's personnel,
the following summarizes the total
amount of gross income per CWT
reported as taxable gross income:
Xxx xxx xx
The amount of rent income reported in
the ITR is higher by Php20,747,184.
Since the income per ITR is higher, it is
reasonable to assume that all gross
income covered by CWT were all
reported as taxable income. However,
it could be possible that some tenants
did not withhold or failed to issue the
related CWT in 2013.”
The Court scrutinized the findings contained in the
said report to verify the categorical statement made
by the ICPA. Considering that this case involves a
claim for refund in a substantial amount, the Court
cannot just rely on the "reasonable assumption" that
the gross income covered by CWT was reported as
taxable income. Likewise, the unclear explanation of
the "possibility" that some tenants did not withhold
or failed to issue the related CWT in 2013 is
unacceptable. Further, mere statements of "timing
differences" and "different rules for accounting and
tax purposes"15 are inadequate to reconcile the
discrepancy between the income payments per CWT
certificates and petitioner's books/AFS/ITR. The
same must be supported by documents and other
appropriate evidence.
Also, SMIC contends that the source of the CWT
subject of refund was primarily from the disposal of
properties to SM Prime Holdings, Inc., and that the
following income payments which allegedly pertain
to its disposal of properties. However, scrutiny of
Annex I of the ICPA report reveals that the subject
transactions were recorded in its books differently.
It is noted that the largest amount of CWT in the
amount of P807,070,650.00 with related income
payment of P16,141,413,000.00 was recorded by
SMIC as Rent Income and Miscellaneous Income-
Parking Terminal per the ICPA report and not as
disposal of assets. Moreover, in the income mapping
made by the ICPA, of the P16,141,413,000.00
income payment, only P63,564,924.44 was recorded
in SMIC's books. If the P63,564,924.44 does not
pertain to the transfer of properties with SM Prime
Holdings,Inc., it would be erroneous to place such
amount adjacent to P16, 141,413,000.00.
Further, the ICPA report shows gain on sale of
properties in the amount of P17,266,997,914.00.
However, Annex I of the same report shows a total
of P17,355,065,752.31. Thus, SMIC or the ICPA
failed to reconcile the difference in gross
income/income payment of P88,067,838.31
(P17,355,065,752.31 per ITR/FS in Annex I less
P17,266,997,914.00 per ICPA findings). There was no
explanation either as to the discrepancy of
P17,248,095,385.31 between the gross
income/income payment per SAWT/BIR Form No.
2307 and per SMIC's books/ITR.
To proceed, the corresponding gain on the alleged
sale of properties was mentioned by the Court-
commissioned ICPA in his report and was quoted by
the Court in the assailed decision. An excerpt of the
said report is reproduced as follows:
Xxx xxx xxx
(e) The gain on sale of properties
pertain to the sale of various properties
to one of Petitioner's affiliates.
However, due to accounting rules, no
gain was recognized in the Petitioner's
books. Nevertheless, Petitioner was
subjected to withholding tax based on
the gross selling price of the
transaction, the capital gain of which
were reported as taxable income. Note
that while the CWT shows the gross
income, the amount reported in the ITR
is only the gain on sale. This proves that
the total amount of gross selling price
Php17,266,997,914, which was
subjected to withholding tax and
covered by CWT, were fully reported as
taxable income in the ITR with the
return of taxable gain of
Php5,607,579,580.
Proof of gross selling price and
supporting deeds of sale are presented
as Exhibits P-2265 to P-2272. How the
gain was computed is presented as
Exhibit P-2277."
However, neither the ICPA nor SMIC explained the
details of such transaction so that the Court can
better appreciate the documentary evidence
submitted. Further, SMIC or the ICPA failed to
determine which CWT certificates support the said
sale/disposal or exchange of properties.
The ICPA referred to several documents that prove
the gross selling price related to the gain on sale of
properties. Upon verification, the Deeds of Exchange
entered into by petitioner and SM Prime Holdings,
Inc. in relation to the transfer of properties amount
to P16,141,413,000.00
When the transactions refer to disposal or transfer
of properties, the Court evaluated the corresponding
schedule of Disposal of Assets as reported by the
ICPA (Annex I) to check whether they have been
properly recorded in the books and consequently
reported in the ITR. It is noteworthy that the total
amount of P16,141,413,000.00 or any of the
amounts in the foregoing list does not tally with any
of the amounts in the !CPA's list of income payments
received from disposal of assets as shown in Annex
1.
Moreover, in the computation of the gain on
disposal of properties, Except for the Deeds of
Exchange, SMIC did not mention the documents
supporting this computation or even the exhibit
pertaining to the CWT certificate substantiating the
CWT that arose from this transaction.
In its attempt to prove that the foregoing gain of
P5,601,476,029.00 was reported in its 2013 ITR,
SMIC stated in its Memorandum that while the gross
income on sale of properties per CWT amounted to
P17,266,997,914.00, the ITR only showed gross
income of P5,607,579,580.00. The discrepancy was
not shown in the ITR because the amount presented
as gross income in the ITR constitutes only the gain
on sale pursuant to Section 32(A)(3) of the NIRC, as
amended, while the amounts in the CWT certificates
represent the gross selling price upon which the
withholding tax was based.
The difference between the gross selling price and
gain on sale mentioned above should equal to the
net book value of the properties sold, as found in the
computation of gain previously shown. However, the
Court found discrepancies, and again, no explanation
was offered by SMIC or the ICPA concerning these
discrepancies.
It may be said that the Court disregarded the
categorical statement of the ICPA that the pertinent
gross income upon which the claimed CWT relates to
was reported as taxable income in its ITR, simply
because his actual findings do not support his
statement. Section 3 of Rule 13 of the Revised Rules
of the Court of Tax Appeals, as amended, provides:
"SEC. 3. Findings of Independent CPA. –
The submission by the independent
CPA of pre-marked documentary
exhibits shall be subject to verification
and comparison with the original
documents, the availability of which
shall be primary responsibility of the
party possessing such documents and,
secondarily, by the independent CPA.
The findings and conclusions of the
independent CPA may be challenged
by the parties and shall not be
conclusive upon the Court, which may,
in whole or in part, adopt such
findings and conclusions subject to
verification." (Emphasis supplied)
In relation thereto, the Court did not overlook the
explanations offered by the ICPA and petitioner
pertaining to the reporting of the income payments
in its books and ITR. The explanation, if any was
given, was insufficient to convince the Court of
SMIC's assertions.
After submitting documentary evidence, albeit with
inadequate explanation, the Court cannot be
expected to sufficiently evaluate the related income
payments of its claimed CWT vis-a-vis the proper
recording in its books and subsequent declaration in
its income tax. On this score, it is worth stressing
that claims for refund are considered tax
exemptions which are construed strictly against the
taxpayer.
(3) SMIC’s Explanation of the Reporting of its
Income in its Books and ITR
(a) Disallowance of claimed CWT amounting to
P 17,567,246.73, P 239,208.99, and
P114,592,822.07
The CWT amounting to P17,567,246.73 was
disallowed due to improper recording of the
corresponding income of P383,246,997.60 in the
petitioner's books and for failure to substantiate the
same with original copies of BIR Form No. 2307.
Similarly, the CWT amounting to P239,208.99, with
the corresponding gross income amounting to
P4,142,473.82, were disallowed due to failure to
submit original Certificates of Taxes Withheld (BIR
Form No. 2307).
With regard to the disallowed CWT for the taxable
year 2007 in the amount of P114,592,822.07, the
same pertains to the CWT carried over from the
taxable year 2007, together with the CWT for the
year 2012 of P296,840,444.23, which were offset
against SMIC's income tax due for taxable year
2013.55 The Court ruled that for failure to offer
supporting evidence, the same is not considered in
offsetting SMIC's income tax due for the year 2013.
SMIC argues that the Annual ITR for the year 2007
with the copy of the SAWT for the 1st to 4th
quarters of 2007, are enough to establish that the
excess credits reflected in the 2013 ITR and used to
pay the tax due in 2013 are valid, existing and duly
supported by necessary documents. 57 Moreover,
SMIC contends that pursuant to Section 235, in
relation to Section 203 of the NIRC, it is mandated to
keep its record for only three (3) years. It cited
Section 2.58.3(C) of Revenue Regulations No. 2-98,
which states:
"SECTION 2.58.3. Claim for Tax Credit
or Refund.
(C) Excess Credits- An individual or
corporate taxpayer's excess expanded
withholding tax credits for the taxable
quarter/year shall automatically be
allowed as a credit against his income
tax due for the taxable quarters/years
immediately succeeding the taxable
quarters/years in which the excess
credit arose, provided he submits with
his income tax return, a copy of the
first page of his income tax return for
the previous taxable period showing
the amount of his excess withholding
tax credits, and on which return he has
not opted for a cash refund or tax
credit certificate." (Emphasis supplied)
It should be noted that the foregoing applies to the
automatic crediting of excess CWT against the
income tax due for the taxable quarters/year
immediately succeeding the taxable quarters/year in
which the excess credit arose. In this case, SMIC
seeks to be allowed to automatically credit its 2007
excess CWT to its 2013 income tax liability so that its
refundable CWT will not be reduced.
Further, this case involves a claim for refund of
excess CWT. The well-settled rule is that tax refunds
are in the nature of tax exemptions and as such, are
regarded as in derogation of sovereign authority and
to be construed in strictissimi juris against the
person or entity claiming it.
To reiterate, case law dictates that in a claim for tax
refund or tax credit, the applicant must prove not
only entitlement to the claim but also compliance
with all the documentary and evidentiary
requirements therefor. The Supreme Court ruled on
the importance of submitting supporting documents
in a claim for refund, thus:
“xxx First, a judicial claim for refund or
tax credit in the CTA is by no means an
original action but rather an an appeal
by way of petition for review of a
previous, unsuccessful administrative
claim. Therefore, as in every appeal or
petition for review, a petitioner has to
convince the appellate court that the
quasi-judicial agency a quo did not
have any reason to deny its claims. In
this case, it was necessary for
petitioner to show the CTA not only
that it was entitled under substantive
law to the grant of its claims but also
that it satisfied all the documentary
and evidentiary requirements for an
administrative claim for refund or tax
credit. Second, cases filed in the CTA
are litigated de novo. Thus, a petitioner
should prove every minute aspect of
its case by presenting, formally
offeringand submitting its evidence to
the CTA. Since it is crucial for a
petitioner in a judicial claim for refund
or tax credit to show that its
administrative claim should have been
granted in the first place, part of the
evidence to be submitted to the CTA
must necessarily include whatever is
required for the successful prosecution
of an administrative claim." (Emphasis
supplied.)
Thus, the Court aptly ruled that the CWT in the
amount of P17,567,246.73, P239,208.99, and
P114,592,822.07 should be disallowed for failure to
properly substantiate the same.
(4) Respondent’s Motion for Partial
Reconsideration
Respondent avers that it is incumbent upon the
claimant to prove actual remittance of the alleged
withheld taxes to the BIR. Also, respondent points
out that the fact of withholding of taxes is one thing,
while the fact of remittance is another. Thus,
petitioner should have presented evidence to prove
actual remittance of the alleged taxes to the BIR.
Finally, respondent posits that he is not obliged to
prove before the Court the non-remittance of the
alleged withheld taxes. It is the duty of petitioner to
prove otherwise.
Citing Revenue Regulations (RR) No. 2-98 and
Section 2 of Revenue Regulations (RR) No. 2-2006,
respondent asserts that proof of actual remittance of
the taxes withheld to the BIR is indispensable in a
claim for refund of excess CWTs. Considering that
SMIC failed to prove that the alleged withheld taxes
came to the hands of the BIR, it is unquestionably
not entitled to any refund.
SMIC counters that proof of withholding is not its
responsibility and that the CIR cannot invoke RR No.
2-2006 and RR No. 2-98 to justify the imposition of
additional requirement on the refund claimant
beyond what is being asked for under the law and
established in relevant jurisprudence to unduly
burden it
The Court finds CIR's motion bereft of merit.
Pursuant to Section 58(8) of NIRC, as amended, and
as implemented by Section 2.58(8) of RR No. 2-98,
every payor/withholding agent is required to
furnish each payee/income recipient with a written
statement showing the amount of income
payments made by payor/withholding agent and
the corresponding tax deducted and withheld
therefrom. Said statement refers to SIR Form No.
2307 (Certificate of Creditable Tax Withheld at
Source) which is a proof of the fact of withholding.
Subsequently, Section 2.58.3(8) of RR No. 2-98, as
amended, clearly provides:
"SECTION 2.58.3. Claim for Tax Credit
or Refund.-
 Xxx
(B) Claims for tax credit or refund of
any creditable income tax which was
deducted and withheld on income
payments shall be given due course
only when it is shown that the income
payment has been declared as part of
the gross income and the fact of
withholding is established by a copy of
the withholding tax statement duly
issued by the payor to the payee
showing the amount paid and the
amount of tax withheld therefrom.
Proof of remittance is the
responsibility of the withholding
agent." (Emphasis supplied.)
To conclude, SMIC was able to convince the Court
that it is partially entitled to its claim. However,
respondent failed to discharge his burden to warrant
the partial reconsideration of the assailed Decision in
his favor.
"WHEREFORE, instant Petition for Review is
PARTIALLY GRANTED. Accordingly, let a tax refund
or a tax credit certificate be issued in favor of
petitioner in the total amount of P986,366,230.72,
representing petitioner's excess and unutilized
Creditable Withholding Tax for the calendar year
ended December 31, 2013, computed as follows:

Thus, SMIC is correct in holding that it is not

responsible for the proof of remittance of the
creditable taxes withheld.

Further, the Supreme Court consistently held that

the certificate of creditable tax withheld at source is
the competent proof to establish the fact that taxes
are withheld, to wit:

"Thus, upon presentation of a

withholding tax certificate complete in
its relevant details and with a written
statement that it was made under the
penalties of perjury, the burden of
evidence then shifts to the
Commissioner of Internal Revenue to
prove that (1) the certificate is not
complete; (2) it is false; or (3) it was
not issued regularly.

Petitioner's posture that respondent is

required to establish actual remittance
to the Bureau of Internal Revenue
deserves scant consideration. Proof of
actual remittance is not a condition to
claim for a refund of unutilized tax
credits. Under Sections 57 and 58 of
the 1997 National Internal Revenue
Code, as amended, it is the payor-
withholding agent, and not the payee-
refund claimant such as respondent,
who is vested with the responsibility
of withholding and remitting income
taxes." (Emphasis supplied)

3. CIR v. GONZALES
G.R. No. 177279
October 13, 2010
FACTS: Pursuant to Letter of Authority (LA) dated
August 25, 2000 issued by then CIR (Petitioner)
Dakila B. Fonacier, Revenue Officers Remedios C.
Advincula, Jr., Simplicio V. Cabantac, Jr., Ricardo L.
Suba, Jr. and Aurelio Agustin T. Zamora supervised
by Section Chief Sixto C. Dy, Jr. of the Tax Fraud
Division (TFD), National Office conducted a fraud
investigation for all internal revenue taxes to
ascertain/determine the tax liabilities of respondent
L. M. Camus Engineering Corporation (LMCEC) for
the taxable years 1997, 1998 and 1999. The audit
and investigation against LMCEC was founded by the
information provided by an "informer" that LMCEC
had substantial underdeclared income for the said
period. For failure to comply with the subpoena
duces tecum issued in connection with the tax fraud
investigation, a criminal complaint was instituted by
the BIR against LMCEC on January 19, 2001 for
violation of Section 266 of the NIRC.
Based on data obtained from an "informer" and
various clients of LMCEC, it was discovered that
LMCEC filed fraudulent tax returns with substantial
underdeclarations of taxable income for the years
1997, 1998 and 1999. Petitioner thus assessed the
company of total deficiency taxes amounting to
₱430,958,005.90 (income tax - ₱318,606,380.19 and
value-added tax [VAT] - ₱112,351,625.71) covering
the said period. The Preliminary Assessment Notice
(PAN) was received by LMCEC on February 22, 2001.
In view of the CIR’s findings, assessment notices
together with a formal letter of demand were sent to
LMCEC through personal service. Since the company
and its representatives refused to receive the said
notices and demand letter, the revenue officers
resorted to constructive service in accordance with
Section 3, Revenue Regulations (RR) No. 12-99.
On May 2003, petitioner, through then
Commissioner Guillermo L. Parayno, Jr., referred to
the Secretary of Justice for preliminary investigation
its complaint against LMCEC, Luis M. Camus and Lino
D. Mendoza, the latter two were sued in their
capacities as President and Comptroller,
respectively.  In the Joint Affidavit executed by the
revenue officers who conducted the tax fraud
investigation, it was alleged that despite the receipt
of the final assessment notice and formal demand
letter, LMCEC failed and refused to pay the
deficiency tax assessment in the total amount of
₱630,164,631.61, inclusive of increments, which had
become final and executory as a result of the said
taxpayer’s failure to file a protest thereon within the
30-day reglementary period.
Camus and Mendoza filed a Joint Counter-Affidavit
contending that LMCEC cannot be held liable
whatsoever for the alleged tax deficiency which had
become due and demandable. Considering that the
complaint and its annexes all showed that the suit is
a simple civil action for collection and not a tax
evasion case, the DOJ is not the proper forum for
BIR’s complaint. They also assail as invalid the
assessment notices which bear no serial numbers
and should be shown to have been validly served by
an Affidavit of Constructive Service executed and
sworn to by the revenue officers who served the
same. As stated in LMCEC’s letter-protest addressed
to Revenue District Officer (RDO) Clavelina S. Nacar,
the company had already undergone a series of
routine examinations for the years 1997, 1998 and
1999; under the NIRC, only one examination of the
books of accounts is allowed per taxable year.
LMCEC further averred that it had availed of the
Bureau’s Tax Amnesty Programs (Economic Recovery
Assistance Payment [ERAP] Program and the
Voluntary Assessment Program [VAP]) for 1998 and
1999; for 1997, its tax liability was terminated and
closed under Letter of Termination issued by
petitioner and signed by the Chief of the Assessment
Division.
LMCEC argued that petitioner is now estopped from
further taking any action against it and its corporate
officers concerning the taxable years 1997 to 1999.
With the grant of immunity from audit from the
company’s availment of ERAP and VAP, which have a
feature of a tax amnesty, the element of fraud is
negated the moment the Bureau accepts the offer of
compromise or payment of taxes by the taxpayer.
The act of the revenue officers in finding justification
under Section 6(B) of the NIRC (Best Evidence
Obtainable) is misplaced and unavailing because
they were not able to open the books of the
company for the second time, after the routine
examination, issuance of termination letter and the
availment of ERAP and VAP. LMCEC thus maintained
that unless there is a prior determination of fraud
supported by documents not yet incorporated in the
docket of the case, petitioner cannot just issue LAs
without first terminating those previously issued.
LMCEC further asserted that it filed a protest on the
PAN issued by petitioner for having no basis in fact
and law. However, until now the said protest
remains unresolved. As to the alleged informant who
purportedly supplied the "confidential information,"
LMCEC believes that such person is fictitious and his
true identity and personality could not be produced.
Hence, this case is another form of harassment
against the company as what had been found by the
Office of the City Prosecutor of Quezon City in the
criminal case filed against them.
In the Joint Reply-Affidavit executed by the Bureau’s
revenue officers, petitioner disagreed with the
contention of LMCEC that the complaint filed is not
criminal in nature, pointing out that LMCEC and its
officers Camus and Mendoza were being charged for
the criminal offenses defined and penalized under
Sections 254 (Attempt to Evade or Defeat Tax) and
255 (Willful Failure to Pay Tax) of the NIRC. This finds
support in Section 205 of the same Code which
provides for administrative (distraint, levy, fine,
forfeiture, lien, etc.) and judicial (criminal or civil
action) remedies in order to enforce collection of
taxes. Both remedies may be pursued either
independently or simultaneously. In this case, the
BIR decided to simultaneously pursue both remedies
and thus aside from this criminal action, the Bureau
also initiated administrative proceedings against
LMCEC.
On the lack of control number in the assessment
notice, petitioner explained that such is a mere office
requirement in the Assessment Service for the
purpose of internal control and monitoring; hence,
the unnumbered assessment notices should not be
interpreted as irregular or anomalous. Petitioner
stressed that LMCEC already lost its right to file a
protest letter after the lapse of the thirty (30)-day
reglementary period.
As to the Letter of Termination signed by Ruth Vivian
G. Gandia of the Assessment Division, petitioner
pointed out that LMCEC failed to mention that the
undated Certification issued by RDO Pablo C.
Cabreros, Jr. of RD No. 40 stated that the report of
the 1997 Internal Revenue taxes of LMCEC had
already been submitted for review and approval of
higher authorities. LMCEC also cannot claim as
excuse from the reopening of its books of accounts
the previous investigations and examinations. Under
Section 235 (a), an exception was provided in the
rule on once a year audit examination in case of
"fraud, irregularity or mistakes, as determined by the
Commissioner". Petitioner explained that the
distinction between a Regular Audit Examination and
Tax Fraud Audit Examination lies in the fact that the
former is conducted by the district offices of the
Bureau’s Regional Offices, the authority emanating
from the Regional Director, while the latter is
conducted by the TFD of the National Office only
when instances of fraud had been determined by the
petitioner.
Petitioner further asserted that LMCEC’s claim that it
was granted immunity from audit when it availed of
the VAP and ERAP programs is misleading. LMCEC
failed to state that its availment of ERAP under RR
No. 2-99 is not a grant of absolute immunity from
audit and investigation, aside from the fact that said
program was only for income tax and did not cover
VAT and withholding tax for the taxable year 1998. 
Petitioner also pointed out that LMCEC’s assertion
correlating this case with the criminal case filed
against it is misleading because said case involves
another violation and offense (Sections 5 and 266 of
the NIRC). Said case was filed by petitioner due to
the failure of LMCEC to submit or present its books
of accounts and other accounting records for
examination despite the issuance of subpoena duces
tecum against Camus in his capacity as President of
LMCEC.
On September 2003, he Chief State Prosecutor
issued a Resolution finding no sufficient evidence to
establish probable cause against respondents
LMCEC, Camus and Mendoza. It was held that since
the payments were made by LMCEC under ERAP and
VAP pursuant to the provisions of RR Nos. 2-99 and
8-2001 which were offered to taxpayers by the BIR
itself, the latter is now in estoppel to insist on the
criminal prosecution of the respondent taxpayer.
The voluntary payments made thereunder are in the
nature of a tax amnesty. The unnumbered
assessment notices were found highly irregular and
thus their validity is suspect; if the amounts
indicated therein were collected, it is uncertain how
these will be accounted for and if it would go to the
coffers of the government or elsewhere. On the
required prior determination of fraud, the Chief
State Prosecutor declared that the Office of the City
Prosecutor ruled that (1) there was no prior
determination of fraud, (2) there was indiscriminate
issuance of LAs, and (3) the complaint was more of
harassment. In view of such findings, any ensuing LA
is thus defective and allowing the collection on the
assailed assessment notices would already be in the
context of a "fishing expedition" or "witch-hunting."
Consequently, there is nothing to speak of regarding
the finality of assessment notices in the aggregate
amount of ₱630,164,631.61.
Petitioner filed a motion for reconsideration which
was denied by the Chief State Prosecutor.
Petitioner appealed to respondent Secretary of
Justice.
SECRETARY OF JUSTICE: denied its petition for
review and found that petitioner’s claim that there is
yet no finality as to LMCEC’s payment of its 1997
taxes since the audit report was still pending review
by higher authorities, is unsubstantiated and
misplaced. It was noted that the Termination Letter
issued by the Commissioner is explicit that the
matter is considered closed. As for taxable year
1998, respondent Secretary stated that the record
shows that LMCEC paid VAT and withholding tax in
the amount of ₱61,635.40 and ₱38,404.55,
respectively. This eventually gave rise to the
issuance of a certificate of immunity from audit for
1998 by the Office of the Commissioner of Internal
Revenue. For taxable year 1999, respondent
Secretary found that pursuant to earlier LA No.
38633 , LMCEC’s 1999 tax liabilities were still
pending investigation for which reason LMCEC
assailed the subsequent issuance of LA No.
00009361 calling for a similar investigation of its
alleged 1999 tax deficiencies when no final
determination has yet been arrived on the earlier LA
No. 38633.
On the allegation of fraud, respondent Secretary
ruled that petitioner failed to establish the existence
of the following circumstances indicating fraud in the
settlement of LMCEC’s tax liabilities: (1) there must
be intentional and substantial understatement of tax
liability by the taxpayer; (2) there must be
intentional and substantial overstatement of
deductions or exemptions; and (3) recurrence of the
foregoing circumstances. First, petitioner miserably
failed to explain why the assessment notices were
unnumbered; second, the claim that the tax fraud
investigation was precipitated by an alleged
"informant" has not been corroborated nor was it
clearly established, hence there is no other
conclusion but that the Bureau engaged in a "fishing
expedition"; and furthermore, petitioner’s course of
action is contrary to Section 235 of the NIRC allowing
only once in a given taxable year such examination
and inspection of the taxpayer’s books of accounts
and other accounting records.
CA: denied petition for certiorari and concurred with
the findings and conclusions of respondent Secretary
ISSUE: whether LMCEC and its corporate officers
may be prosecuted for violation of Sections 254
(Attempt to Evade or Defeat Tax) and 255 (Willful
Failure to Supply Correct and Accurate Information
and Pay Tax).
RULING: We grant the petition.
There is no dispute that prior to the filing of the
complaint with the DOJ, the report on the tax fraud
investigation conducted on LMCEC disclosed that it
made substantial underdeclarations in its income tax
returns for 1997, 1998 and 1999. Pursuant to RR No.
12-99,38 a PAN was sent to and received by LMCEC
on February 22, 2001 wherein it was notified of the
proposed assessment of deficiency taxes. In
response to said PAN, LMCEC sent a letter-protest to
the TFD, which denied the same for lack of legal and
factual basis and also for having been filed beyond
the 15-day reglementary period.
As mentioned in the PAN, the revenue officers were
not given the opportunity to examine LMCEC’s books
of accounts and other accounting records because
its officers failed to comply with the subpoena duces
tecum earlier issued, to verify its alleged
underdeclarations of income reported by the
Bureau’s informant under Section 282 of the NIRC.
Hence, a criminal complaint was filed by the Bureau
against private respondents for violation of Section
266 which provides:
SEC. 266. Failure to Obey Summons. –
Any person who, being duly summoned
 to appear to testify, or to appear and
produce books of accounts, records,
memoranda, or other papers, or to
furnish information as required under
the pertinent provisions of this Code,
neglects to appear or to produce such
books of accounts, records,
memoranda, or other papers, or to
furnish such information, shall, upon
conviction, be punished by a fine of not
less than Five thousand pesos (P5,000)
but not more than Ten thousand pesos
(P10,000) and suffer imprisonment of
not less than one (1) year but not more
than two (2) years.
It is clear that the criminal complaint (docketed as IS
No. 00-956) nvolves a separate offense and hence
litis pendentia is not present considering that the
outcome of I.S. No. 00-956 is not determinative of
the issue as to whether probable cause exists to
charge the private respondents 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. For the crime of tax evasion in
particular, compliance by the taxpayer with such
subpoena, if any had been issued, is irrelevant. As
we held in Ungab v. Cusi, Jr., 41 "[t]he crime is
complete when the [taxpayer] has x x x knowingly
and willfully filed [a] fraudulent [return] with intent
to evade and defeat x x x the tax." Thus, respondent
Secretary erred in holding that petitioner committed
forum shopping when it filed the present criminal
complaint during the pendency of its appeal from
the City Prosecutor’s dismissal of I.S. No. 00-956
involving the act of disobedience to the summons in
the course of the preliminary investigation on
LMCEC’s correct tax liabilities for taxable years 1997,
1998 and 1999.
In the Details of Discrepancies attached as Annex B
of the PAN,42 private respondents were already
notified that inasmuch as the revenue officers were
not given the opportunity to examine LMCEC’s books
of accounts, accounting records and other
documents, said revenue officers gathered
information from third parties. Such procedure is
authorized under Section 5 of the NIRC.
Private respondents’ assertions regarding the
qualifications of the "informer" of the Bureau
deserve scant consideration. We have held that the
lack of consent of the taxpayer under investigation
does not imply that the 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. 43 In
the same vein, herein private respondents cannot be
allowed to escape criminal prosecution under
Sections 254 and 255 of the NIRC by mere
imputation of a "fictitious" or disqualified informant
under Section 282 simply because other than
disclosure of the official registry number of the third
party "informer," the Bureau insisted on maintaining
the confidentiality of the identity and personal
circumstances of said "informer."
Subsequently, petitioner sent to LMCEC by
constructive service allowed under Section 3 of RR
No. 12-99, assessment notice and formal demand
informing the said taxpayer of the law and the facts
on which the assessment is made, as required by
Section 228 of the NIRC. Respondent Secretary,
however, fully concurred with private respondents’
contention that the assessment notices were invalid
for being unnumbered and the tax liabilities therein
stated have already been settled and/or terminated.
We do not agree.
A notice of assessment is a declaration of
deficiency taxes issued to a taxpayer who
fails to respond to a PAN within the
prescribed period of time, or whose reply to
the PAN was found to be without merit. The
Notice of Assessment shall inform the
taxpayer of this fact, and that the report of
investigation submitted by the Revenue
Officer conducting the audit shall be given
due course.
The formal letter of demand calling for
payment of the taxpayer’s deficiency tax or
taxes shall state the fact, the law, rules and
regulations or jurisprudence on which the
assessment is based, otherwise the formal
letter of demand and the notice of
assessment shall be void.
As it is, the formality of a control number in the
assessment notice is not a requirement for its
validity but rather the contents thereof which should
inform the taxpayer of the declaration of deficiency
tax against said taxpayer. Both the formal letter of
demand and the notice of assessment shall be void if
the former failed to state the fact, the law, rules and
regulations or jurisprudence on which the
assessment is based, which is a mandatory
requirement under Section 228 of the NIRC.
The Formal Letter of Demand contains not only a
detailed computation of LMCEC’s tax deficiencies but
also details of the specified discrepancies, explaining
the legal and factual bases of the assessment. It also
reiterated that in the absence of accounting records
and other documents necessary for the proper
determination of the company’s internal revenue tax
liabilities, the investigating revenue officers resorted
to the "Best Evidence Obtainable" as provided in
Section 6(B) of the NIRC (third party information)
and in accordance with the procedure laid down in
RMC No. 23-2000.
In the same letter, Assistant Commissioner Percival
T. Salazar informed private respondents that the
estimated tax liabilities arising from LMCEC’s
underdeclaration amounted to ₱186,773,600.84 in
1997, ₱150,069,323.81 in 1998 and ₱163,220,111.13
in 1999. These figures confirmed that the non-
declaration by LMCEC for the taxable years 1997,
1998 and 1999 of an amount exceeding 30% income
eclared in its return is considered a substantial
underdeclaration of income, which constituted
prima facie evidence of false or fraudulent return
under Section 248(B)48 of the NIRC, as amended.
On the alleged settlement of the assessed tax
deficiencies by private respondents, respondent
Secretary found the latter’s claim as meritorious on
the basis of the Certificate of Immunity From Audit
issued on December 6, 1999 pursuant to RR No. 2-99
and Letter of Termination dated June 1, 1999 issued
by Revenue Region No. 7 Chief of Assessment
Division Ruth Vivian G. Gandia. Petitioner, however,
clarified that the certificate of immunity from audit
covered only income tax for the year 1997 and does
not include VAT and withholding taxes, while the
Letter of Termination involved tax liabilities for
taxable year 1997 (EWT, VAT and income taxes) but
which was submitted for review of higher authorities
as per the Certification of RD No. 40 District Officer
Pablo C. Cabreros, Jr.50 For 1999, private
respondents supposedly availed of the VAP pursuant
to RR No. 8-2001.
RR No. 2-99 issued on February 7, 1999 explained in
its Policy Statement that considering the scarcity of
financial and human resources as well as the time
constraints within which the Bureau has to "clean
the Bureau’s 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 the said
objective "without, however, compromising the
revenue collection that would have been generated
from audit and enforcement activities." The program
named as "Economic Recovery Assistance Payment
(ERAP) Program" granted immunity from audit and
investigation of income tax, VAT and percentage tax
returns for 1998. It expressly excluded withholding
tax returns (whether for income, VAT, or percentage
tax purposes). Since such immunity from audit and
investigation does not preclude the collection of
revenues generated from audit and enforcement
activities, it follows that the Bureau is likewise not
barred from collecting any tax deficiency discovered
as a result of tax fraud investigations. Respondent
Secretary’s opinion that RR No. 2-99 contains the
feature of a tax amnesty is thus misplaced.
Tax amnesty is a general pardon to taxpayers who
want to start a clean tax slate. It also gives the
government a chance to collect uncollected tax from
tax evaders without having to go through the
tedious process of a tax case.51 Even assuming
arguendo that the issuance of RR No. 2-99 is in the
nature of tax amnesty, it bears noting that a tax
amnesty, much like a tax exemption, is never
favored nor presumed in law and if granted by
statute, the terms of the amnesty like that of a tax
exemption must be construed strictly against the
taxpayer and liberally in favor of the taxing
authority.52
For the same reason, the availment by LMCEC of VAP
under RR No. 8-2001 as amended by RR No. 10-
2001, through payment supposedly made in October
29, 2001 before the said program ended on October
31, 2001, 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. As correctly asserted by petitioner, from the
express terms of the aforesaid revenue regulations,
LMCEC 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 PAN
on February 19, 2001, and second, it was the subject
of investigation as a result of verified information
filed by a Tax Informer under Section 282 of the NIRC
duly recorded in the BIR Official Registry as
Confidential Information (CI) No. 29-200053 even
prior to the issuance of the PAN.
Moreover, private respondents cannot invoke
LMCEC’s 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 LMCEC’s payment of correct
income tax liability by more than 30% as supported
by the written report of the TFD detailing the facts
and the law on which such finding is based, pursuant
to the tax fraud investigation authorized by
petitioner under LA No. 00009361. This conclusion
finds support in Section 2 of RR No. 8-2001 as
amended by RR No. 10-2001
Given the explicit conditions for the grant of
immunity from audit under RR No. 2-99, RR No. 8-
2001 and RR No. 10-2001, we hold that respondent
Secretary gravely erred in declaring that petitioner is
now estopped from assessing any tax deficiency
against LMCEC after issuance of the aforementioned
documents of immunity from audit/investigation
and settlement of tax liabilities. It is axiomatic that
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 government’s financial
position.
Respondent Secretary’s other ground for assailing
the course of action taken by petitioner in
proceeding with the audit and investigation of
LMCEC -- the alleged violation of the general rule in
Section 235 of the NIRC allowing the examination
and inspection of taxpayer’s books of accounts and
other accounting records only once in a taxable year
-- is likewise untenable. As correctly pointed out by
petitioner, the discovery of substantial
underdeclarations of income by LMCEC for taxable
years 1997, 1998 and 1999 upon verified
information provided by an "informer" under Section
282 of the NIRC, as well as the necessity of obtaining
information from third parties to ascertain the
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
against the private respondents), are circumstances
warranting exception from the general rule in
Section 235.55
As already stated, the substantial underdeclared
income in the returns filed by LMCEC for 1997, 1998
and 1999 in amounts equivalent to more than 30%
(the computation in the final assessment notice
showed underdeclarations of almost 200%)
constitutes prima facie evidence of fraudulent return
under Section 248(B) of the NIRC. Prior to the
issuance of the preliminary and final notices of
assessment, the revenue officers conducted a
preliminary investigation on the information and
documents showing substantial understatement of
LMCEC’s tax liabilities which were provided by the
Informer, following the procedure under RMO No.
15-95.56 Based on the prima facie finding of the
existence of fraud, petitioner issued LA No.
00009361 for the TFD to conduct a formal fraud
investigation of LMCEC.57 Consequently, respondent
Secretary’s ruling that the filing of criminal complaint
for violation of Sections 254 and 255 of the NIRC
cannot prosper because of lack of prior
determination of the existence of fraud, is bereft of
factual basis and contradicted by the evidence on
record.
Tax assessments by tax examiners are presumed
correct and made in good faith, and all presumptions
are in favor of the correctness of a tax assessment
unless proven otherwise.58 We have held that a
taxpayer’s failure to file a petition for review with
the Court of Tax Appeals within the statutory period
rendered the disputed assessment final, executory
and demandable, thereby precluding it from
interposing the defenses of legality or validity of the
assessment and prescription of the Government’s
right to assess.59 Indeed, any objection against the
assessment should have been pursued following the
avenue paved in Section 229 (now Section 228) of
the NIRC on protests on assessments of internal
revenue taxes.
Records bear out that the assessment notice and
Formal Letter of Demand dated August 7, 2002 were
duly served on LMCEC on October 1, 2002. Private
respondents did not file a motion for reconsideration
of the said assessment notice and formal demand;
neither did they appeal to the Court of Tax Appeals.
Section 228 of the NIRC 61 provides the remedy to
dispute a tax assessment within a certain period of
time. It states that an assessment may be protested
by filing a request for reconsideration or
reinvestigation within 30 days from receipt of the
assessment by the taxpayer. No such administrative
protest was filed by private respondents seeking
reconsideration of the August 7, 2002 assessment
notice and formal letter of demand. Private
respondents cannot belatedly assail the said
assessment, which they allowed to lapse into finality,
by raising issues as to its validity and correctness
during the preliminary investigation after the BIR has
referred the matter for prosecution under Sections
254 and 255 of the NIRC.

4. People v. Kintanar
C.T.A. EB CRIM. NO. 006
December 3, 2010
FACTS: Criminal charges were filed against Petitioner
Gloria Kintara for willfully, unlawfully and feloniously
failing to file her ITR with the Bureau of Internal
Revenue for the year 2000 and 2001, amounting to P
1,329,319.95 and P 1,517,242.12 respectively, which
violates Sec. 225 of the NIRC. She was engaged in
business and earning income as distributor of
Forever Living Products Philippines, Inc (FLPPI).
The Tax Fraud Division, issued an Access Letter
dated July 18, 2002 addressed to the RDO of
Paranaque, to furnish the investigating team copies
of the Spouses Kintara’s 1) income tax return (ITR),
with Financial Statements; 2) Value Added Tax (VAT)
Returns; 3) Percentage Tax Returns; and 4) BIR
Registration certificate. The RDO issued a
certification that spouses Kintanar have no record or
file for the years 1999 to 2001. Another Access
Letter was addressed to FLPPI to furnish the
investigation team payment records earned by the
Spouses, to which the FLPPI complied with.
After the preliminary investigation on ascertaining
the veracity of the confidential information filed
against the spouses Kintanar on their alleged tax
evasion scheme, they found that spouses Kintanar
were able to generate a large amount of income, as
distributors or independent contractors of FLPPI.
The following letters and notices were then sent to
the Spouses Kintanar, but all were ignored by the
Spouses:
1) Letter of Authority, dated March 28, 2003, which was received
by petitioner's husband on April 3, 2003;
2) Second Request for Presentation of Records, dated April 21,
2003, was received by a certain George Llorente on April23, 2003;
3) Final Notice, dated May 5, 2003, demanding from spouses the
documents needed for examination.
4) Subpoena Duces Tecum, dated June 11, 2003, requesting the
spouses to appear and bring books of account and records;
5) Letter by Chief Rosimo of the Tax Fraud Division, dated
September 3, 2003, requesting them to appear;
6) Preliminary Assessment Notice, dated December 9, 2003,
together with the Details of Discrepancies, for taxable years 1999
to 2002;
7) Memorandum, dated February 26, 2004;
8) Formal Letter of Demand, dated February 26, 2004, together
with Assessment Notices;
On August 31, 2004, a letter of protest, together
with photocopies of their joint income tax return for 2000
to 2002, were sent to Atty. Arnel Guballa, Chief of the
National Investigation Division by petitioner's husband,
who undertook to submit additional documents and
agreements, within 60 days thereof.
9) Letter of Chief Guballa, dated September 30, 2004, informing
them that no documents have yet been received by the NID and
spouses Kintanar have 60 days from the time the protest was
filed, or until November 3, 2004, within which to submit
supporting documents; otherwise, the assessment shall become
final, executory and demandable;
10) Final Decision on Disputed Assessment, dated December 13,
2004.
All these letters were ignored by the spouses. An
RDO of Cavite presented, and testified that
petitioner has no record of any ITRs filed, except that
she is registered as a "one-time transaction
taxpayer" on June 28, 2000, representing a one-time
transaction for capital gains tax and documentary
stamp tax.
The Defense’s Evidence: The defense presented
petitioner herself and her husband, Benjamin G.
Kintanar, and documentary evidence, such as
Certificate of Creditable Tax Withheld for the years
2000 and 2002, Joint Annual Income Tax Returns, BPI
checks, and 2 identical Certifications issued by a
certain RDO.
Petitioner Gloria Kintanar also testified that she did
not willfully and feloniously fail to file her ITRs; that
she has no personal knowledge of actual filing of
said returns because it was her husband who filed
their ITR.
Her husband, Benjamin Kintanar, also testified that
he was the one who filed their ITRs; that they filed
joint ITRs from years 1997 to 2004, through their
hired accountant, Marina Mendoza; that it was
Mendoza who prepared the ITRs; that he gave all the
documents necessary for filing the ITRs and relied on
Mendoza in preparing the ITRs; that he has no
knowledge of the amount and address stated
therein and where their ITRs were filed.
CTA DIVISION: It found petitioner guilty beyond
reasonable doubt of Violation of Section 255 of
the NIRC. Petitioner filed a Motion for
Reconsideration but was denied, she then
subsequently filed for a Petition for Review.
CTA EN BANC: Sustained the CTA Division’s ruling.
In both C.T.A. Crim. Case Nos. 0-033 and 0-034
petitioner was charged with Violation of Section 255
of the NIRC of 1997, as amended, which provides, as
follows:
"SEC. 255. Failure to File Return, Supply Correct and
Accurate Information, Pay Tax, Withhold and Remit
Tax, and Refund Excess Taxes Withheld on
Compensation.- Any person required under this Code
or by rules and regulations promulgated thereunder to
pay any tax, mal{e a return, keep any record, or supply
correct and accurate information, who willfully fails to
keep any record, or supply such correct and accurate
information, or withhold or remit taxes withheld, or
refund excess taxes withheld on compensation, at the
time or times required by law or rules and regulations
shall, in addition to other penalties provided by law,
upon conviction thereof, be punished by a fine of not
less than Ten thousand pesos (P10,000) and suffer
imprisonment of not less than one (1) year but not
more than ten (10) years.”
ISSUE:
1. WON petitioner is guilty of violating Sec.
225 if the NIRC
RATIO: The Decision is Affirmed.
1. Yes. As proven by the prosecution, all the
elements that violates Sec. 225 are present
in this case.
Section 255 of the NIRC contemplates four different
situations punishable by law, each of which
constitutes failure to perform in a timely manner, an
obligation imposed by the NIRC of 1997, as
amended, to wit:
1) To pay any tax;
2) To make a return;
3) To keep any record; and
4) To supply correct and accurate information.
PERSON REQUIRED TO MAKE OR FILE A RETURN
As regards the first element, the prosecution has
established that petitioner is duty bound to make or
file a return. On direct examination, petitioner
testified that she and her husband were engaged in
business and earned income in the form of
commissions, as distributors or independent
contractors of FLPPI. Considering that petitioner
earned a substantial income, as
distributor/independent contractor of FLPPI; she is,
therefore, required to make or file her annual
income tax return.
Husband and Wife. - Married individuals,
whether citizens, resident or nonresident
aliens, who do not derive income purely
from compensation, shall file a return for
the taxable year to include the income of
both spouses, but where it is impracticable
for the spouses to file one return, each
spouse may file a separate return of income
but the returns so filed shall be
consolidated by the Bureau for purposes of
verification for the taxable yea
PETITIONER FAILED TO MAKE OR FILE THE RETURN
AT THE TIME REQUIRED BY LAW
As regards the second element, the testimonial and
documentary evidence adduced by the prosecution
shows that petitioner failed to make or file her ITRs
for taxable years 2000 and 2001.
Pursuant to Section 51, subsections (B) and
(C) (1), of the NIRC of 1997, as amended, a
person with legal residence or principal
place of business in the Philippines, shall file
his return with an authorized agent bank,
Revenue District Officer, Collection Agent or
duly authorized Treasurer of the city or
municipality. The return shall be filed on or
before the 15th day of April of each year
 covering income for the preceding taxable
year.
Under the above-provision, petitioner was supposed
to register, file her ITR and pay the corresponding
income taxes due with the authorized agent bank,
RDO, Collection Agent or duly authorized Treasurer
of the city, where she has her legal residence or
principal place of business. However, upon thorough
investigation and from the evidence adduced by the
prosecution, petitioner has no record of filing of the
required ITRs, within the reglementary period, with
any of the RDOs of the BIR.
The prosecution has established that petitioner was
a resident of No.2 Granada St., Merville Park
Subdivision, Paranaque, for the years 2000 and
2001. Therefore, petitioner should have filed her
ITRs in Paranaque City. However, there is no record
of filing of the required ITRs. In fact, a Certification
dated September 17, 2002 was issued by RDO No. 52
of Paranaque City, stating that petitioner has no
record on file for the years 1999 to 2001. And an
RDO testified that petitioner, with TIN 206-631-823,
is not a registered taxpayer of said revenue district.
The Certificates that Petitioner presented in her
defense for filing ITRs was not considered by the
Court because of inconsistencies: The document
does not have any seal of the BIR, it is undated, it
was filed in an improper venue, it failed to indicate
the TIN of the accused, and the prosecution was able
to prove that no ITR was filed, either by the accused
or her husband, or by anyone on their behalf, for the
taxable years 2000 and 2001 at RDO
THE FAILURE TO MAKE OR FILE A RETURN WAS
WILLFUL
As regards the third element of "willfulness", the
prosecution has sufficiently proven beyond
reasonable doubt that petitioner deliberately failed
to make or file a return.
Petitioner’s defense that she did not voluntary,
intentional, deliberate, or malicious failure to file a
return on her part because she did not actively
participate in the filing of her joint ITR with her
husband because she relied on him and that he hired
an accountant, Mendoza, to handle their tax
obligations cannot be sustained.
First, petitioner's sole reliance on her husband to file
their ITRs is not a valid reason to justify her non-
filing, considering that she knew from the start that
she and her husband are mandated by law to file
their ITRS.
Second, as a businesswoman, she should have taken
ordinary care of her tax duties and obligations and
she should know that their ITRs should be filed, and
she should have made sure that their ITRs were filed.
She cannot just left entirely to her husband the filing
of her ITRs. Petitioner cannot find solace on her
claim that her husband hired an accountant, who
was tasked to handle the filing and payment of their
tax obligations. This allegation was a bare testimony
of petitioner's husband, and yields nothing, but mere
uncorroborated statements.
Petitioner testified that she does not even know how
much was her tax obligation, nor did she bother to
inquire or determine the facts surrounding the filing
of her ITRs. Such neglect or omission, as aptly found
by the Former Second Division, is tantamount to
"deliberate ignorance" or "conscious avoidance".
Finally, the records show that despite several letters
and notices sent to Petitioner for them to comply
with their tax obligations but they just ignored them,
they opted not to comply. The evidence on record
shows that only a protest letter made by petitioner's
husband dated August 31, 2004 was the reply given
by the petitioner. It took petitioner more than one
year to send said reply. Evidently, such non-
compliance with the BIR's notices clearly shows
petitioner's intent not to file her ITRs.