CIR vs ERON SUBIC POWER
FACTS:
Enron is a domestic corporation registered with the Subic Bay
Metropolitan Authority as a freeport enterprise. It filed its annual
income tax return for the year 1996 on April 12, 1997. The BIR issued
Enron a tax assessment with alleged P2,880,817.25 deficiency
income tax. Enron disputed the proposed deficiency assessment in
its first protest letter.
On May 26, 1999, Enron received from the CIR a formal assessment
notice requiring it to pay the alleged deficiency income tax of
P2,880,817.25 for the taxable year 1996. Enron protested this
deficiency tax assessment.
Due to the non-resolution of its protest within the 180-day period,
Enron elevated the matter with the Court of Tax Appeals. It argued
that the deficiency tax assessment disregarded the provisions of
Section 228 of the NIRC by not providing the legal and factual bases
of the assessment.
CTA - granted Enron’s petition
CA - affirmed the CTA decision, holding that the audit working papers
did not substantially comply with Section 228 of the NIRC because
they failed to show the applicability of the cited law to the facts of
the assessment
CIR insisted that the same has been substantially complied with
already because during the pre-assessment stage, the representative
of Enron has been advised of the said factual and legal bases of the
assessment.
ISSUE: W/N there was a valid final assessment notice issued to
ENRON? (NO)
HELD:
Section 228 of the NIRC provides that the taxpayer shall be informed
in writing of the law and the facts on which the assessment is made.
Otherwise, the assessment is void. In this case, the CIR merely issued
a formal assessment and indicated therein the supposed tax,
surcharge, interest and compromise penalty due thereon. The CIR
did not provide Enron with the written bases of the law and facts on
which the subject assessment is based. It did not bother to explain
how it arrived at such an assessment. Moreso, it failed to mention
the specific provision of the Tax Code or rules and regulations which
were not complied with by Enron. Further, just because the CIR
issued an advice to ENRON’s representative during the pre-
assessment stage does not necessarily mean that Enron was
informed of the law and facts on which the deficiency tax
assessment was made.
CIR vs UNITED SALVAGE and TOWAGE PHILS.
FACTS:
Respondent is engaged in the business of sub-contracting work for
service contractors engaged in petroleum operations in the
Philippines. In the course of respondent’s operations, petitioner
found respondent liable for deficiency tax liabilities. USTP filed a
protest against the assessments alleging, among others, that the
Notices of Assessment are bereft of any facts, law, rules and
regulations or jurisprudence from which it is based; thus, the
assessments are void. They also contend that the right of the
government to assess and collect deficiency taxes has already
prescribed on account of the failure to issue a valid notice of
assessment within the applicable period.
ISSUE:
1. W/N the tax assessments were bereft of any factual and legal
basis? (YES)
2. W/N petitioner’s right to collect the deficiency tax has already
prescribed? (YES)
HELD:
1. In order to determine whether the requirement for a valid
assessment is duly complied with, it is important to ascertain the
governing law at the time the assessment was issued. In this case,
the assessment was issued on January 19, 1998, when the Tax Code
was already in effect. The old requirement of merely notifying the
taxpayer of the CIR's findings was changed in 1998 to informing the
taxpayer of not only the law, but also of the facts on which an
assessment would be made; otherwise, the assessment itself would
be invalid.
In the present case, assessment notice shows that other than a
tabulation of the alleged deficiency taxes due, no further detail
regarding the assessment was provided by petitioner. Only the
resulting interest, surcharge and penalty were anchored with legal
basis. CIR should have at least attached a detailed notice of
discrepancy or stated an explanation why the amount is collectible
against respondent and how the same was arrived at.
2. Petitioner has 3 years from the date of actual filing of the tax
return to assess a national internal revenue tax or to commence
court proceedings for the collection thereof without an assessment.
The Preliminary Collection Letter for deficiency taxes for taxable year
1992 was only issued on 2002, despite the fact that the FANs for the
deficiency tax for taxable year 1992 was issued as early as 1996. 5
yrs. had already lapsed, beyond the 3-yr prescriptive period before
collection was pursued by petitioner.
SAMAR ELECTRIC COOPERATIVE vs CIR
FACTS:
PILMICI MAURI FOODS vs CIR
FACTS:
Petitioner was assessed deficiency income, value-added and
withholding tax for the taxable year 1996. In the assessment,
petitioner’s claim for business deduction on purchases of raw
materials was disallowed on the ground that petitioner failed to
support sales invoices which are compliant with Section 238 of the
1977 Tax Code, particularly in the name of the purchaser and the
date of the transaction. The CTA found that the alterations in the
sales invoices gave rise to serious doubts as to their authenticity.
Petitioner argues that Section 29 of the 1977 Tax Code is applicable
to determine the deductibility of an expense, particularly, (1) the
expense must be ordinary and necessary; (2) it must be paid or
incurred within the taxable year; and (3) it must be paid or incurred
in carrying on a trade or business. Petitioner argues that, prior to the
promulgation of the 1997 Tax Code, the law does not require the
production of official receipts to prove an expense.
ISSUE: W/N Section 238 of the 1977 Tax Code, particularly the
requirements on the information reflected in the receipts and
invoices, is applicable to determine business deductibility of
expenses? (YES)
HELD: The law intends for Section 29 and 238 of the 1977 Tax Code
to be read together, and not for one provision to be accorded
preference over the other. While official receipts are not the only
pieces of evidences which can prove deductible expenses, if
presented, they shall be subjected to examination. The petitioner
submitted the receipts as evidence of its business deductions.
Accordingly, Section 238 of the 1977 Tax Code is applicable to
determine if such receipts and invoices may substantiate such claims
for deduction.
It is the Taxpayer’s burden to properly invoke the applicable legal
provisions in pursuit of its goal to reduce its tax liabilities. The CTA,
on the other hand, is not bound to rule solely on the basis of the
laws cited by the CIR. Were it otherwise, the tax court's appellate
power of review shall be rendered useless. It would leave the CTA
with only two options: (a) affirming the CIR's legal findings; or (b)
altogether absolving the taxpayer from liability.
FITNESS vs CIR
FACTS:
Fitness received a copy of the Final Assessment Notice dated March
17, 2004. The Final Assessment Notice assessed that Fitness had a
tax deficiency in the amount of P10,647,529.69. Fitness filed a
protest to the Final Assessment Notice on June 25, 2004. According
to Fitness, the Commissioner's period to assess had already
prescribed. Further, the assessment was without basis since the
company was only incorporated on May 30, 1995.
The Commissioner issued a Warrant of Distraint and/or Levy. Fitness
filed with CTA a Petition for Review. The Commissioner claimed that
its right to assess had not yet prescribed under Section 222(a) of the
National Internal Revenue Code because the 1995 Income Tax
Return filed by Fitness was false and fraudulent for its alleged
intentional failure to reflect its true sales. Thus, Fitness' respective
taxes may be assessed at any time within 10 years from the
discovery of fraud or omission.
The CTA granted Fitness' Petition on the ground that the assessment
has already prescribed. It also ruled that the Final Assessment Notice
is invalid for failure to comply with the requirements of Section 228
of NIRC.
ISSUES
1. Whether the Final Assessment Notice issued against respondent
Fitness by Design, Inc. is a valid assessment? (NO)
2. Whether the assessment has already prescribed? (YES)
HELD
1. The disputed Final Assessment Notice is not a valid assessment.
First, it lacks the definite amount of tax liability for which respondent
is accountable. It does not purport to be a demand for payment of
tax due, which a final assessment notice should supposedly be. An
assessment, in the context of the NIRC, is a "written notice and
demand made by the BIR on the taxpayer for the settlement of a tax
liability that is definitely set and fixed." Although the disputed notice
provides for the computations of respondent's tax liability, the
amount remains indefinite. It only provides that the tax due is still
subject to modification, depending on the date of payment.
Second, there are no due dates in the Final Assessment Notice. This
negates petitioner's demand for payment. Petitioner's contention
that April 15, 2004should be regarded as the actual due date cannot
be accepted. The
2. Fraud is a question of fact that should be alleged and duly
proven. "The willful neglect to file the required tax return or the
fraudulent intent to evade the payment of taxes, considering that
the same is accompanied by legal consequences, cannot be
presumed." In this case, the Final Assessment Notice and its
attachments failed to substantiate the Commissioner's allegations of
fraud against respondent.
CIR vs PASCOR
FACTS:
The CIR authorized certain BIR officers to examine the books of
accounts and other accounting records of Pascor Realty and
Development Corp. (PRDC) for 1986, 1987 and 1988. The
examination resulted in recommendation for the issuance of an
assessment of P7,498,434.65 and P3,015,236.35 for 1986 and 1987,
respectively. On March 1, 1995, Commissioner filed a criminal
complaint for tax evasion against PRDC, its president and treasurer
before the DOJ. Private respondents filed immediately an urgent
request for reconsideration on reinvestigation disputing the tax
assessment and tax liability.
On March 23, 1995, private respondents received a subpoena from
the DOJ in connection with the criminal complaint. In a letter dated,
May 17, 1995, the Commissioner denied private respondent’s
request for reconsideration (reinvestigation on the ground that no
formal assessment has been issued which the latter elevated to the
CTA on a petition for review. The Commissioner’s motion to dismiss
on the ground of the CTA’s lack of jurisdiction inasmuch as no formal
assessment was issued against private respondent was denied by
CTA and ordered the Commissioner to file an answer but did not
instead filed a petition with the CA alleging grave abuse of discretion
and lack of jurisdiction on the part of CTA for considering the
affidavit/report of the revenue officers and the endorsement of said
report as assessment which may be appealed to he CTA. The CA
sustained the CTA decision and dismissed the petition.
Issue:
1. Whether or not the criminal complaint for tax evasion can be
construed as an assessment? (NO)
2. Whether or not an assessment is necessary before criminal
charges for tax evasion may be instituted? (NO)
Ruling:
1. No. The filing of the criminal complaint with the DOJ cannot be
construed as a formal assessment. Neither the Tax Code nor the
revenue regulations governing the protest assessments provide a
specific definition or form of an assessment.
An assessment must be sent to and received by the taxpayer, and
must demand payment of the taxes described therein within a
specific period. The revenue officer’s affidavit merely contained a
computation of respondent’s tax liability. It did not state a demand
or period for payment. It was addressed to the Secretary of Justice
not to the taxpayer. They joint affidavit was meant to support the
criminal complaint for tax evasion; it was not meant to be a notice of
tax due and a demand to private respondents for the payment
thereof. The fact that the complaint was sent to the DOJ, and not to
private respondent, shows that commissioner intended to file a
criminal complaint for tax evasion, not to issue an assessment.
2. No. An assessment is not necessary before criminal charges can be
filed. A criminal charge need not only be supported by a prima facie
showing of failure to file a required return. The CIR had, in such tax
evasion cases, discretion on whether to issue an assessment, or to
file a criminal case against the taxpayer, or to do both.
ADAMSON vs CA
FACTS: A deficiency tax assessment was issued against Petitioners
relating to their payment of capital gains tax and VAT on their sale of
shares of stock and parcels of land. Subsequent to the preliminary
conference, the CIR filed with the Department of Justice her Affidavit
of Complaint against Petitioners. The Court of Appeals ultimately
ruled that, in a criminal prosecution for tax evasion, assessment of
tax deficiency is not required because the offense of tax evasion is
complete or consummated when the offender has knowingly and
willfully filed a fraudulent return with intent to evade the tax.
ISSUES:
(1) Dis the CIR issue an assessment? (NO)
(2) Must a criminal prosecution for tax evasion be preceded by a
deficiency tax assessment? (YES)
HELD:
(1) NO. The recommendation letter of the Commissioner cannot be
considered a formal assessment as (a) it was not addressed to the
taxpayers; (b) there was no demand made on the taxpayers to pay
the tax liability, nor a period for payment set therein; (c) the letter
was never mailed or sent to the taxpayers by the Commissioner. It
was only an affidavit of the computation of the alleged liabilities and
thus merely served as prima facie basis for filing criminal
informations.
(2) YES. When fraudulent tax returns are involved as in the cases at
bar, a proceeding in court after the collection of such tax may be
begun without assessment considering that upon investigation of the
examiners of the BIR, there was a preliminary finding of gross
discrepancy in the computation of the capital gains taxes due from
the transactions. The Tax Code is clear that the remedies may
proceed simultaneously.
ESTATE OF JULIANA DIEZ vs CIR
FACTS:
During the lifetime of the decedent, Juliana Vda. De Gabriel, her
business affairs were managed by the Philippine Trust Company
(Philtrust). Two days after her death, Philtrust, through its Trust
Officer, Atty. Antonio M. Nuyles, filed her Income Tax Return for
1978. The return did not indicate that the decedent had died.
Philtrust also filed a verified petition for appointment as Special
Administrator wit. The court a quo appointed one of the heirs as
Special Administrator. Philtrust’s motion for reconsideration was
denied by the probate court.
In the meantime, the BIR conducted an administrative investigation
on the decedent’s tax liability and found a deficiency income tax for
the year 1977 in the amount of P318,233.93. Thus, on November 18,
1982, the BIR sent by registered mail a demand letter and
Assessment Notice addressed to the decedent “c/o Philippine Trust
Company, Sta. Cruz, Manila” which was the address stated in her
1978 Income Tax Return. No response was made by Philtrust. The
BIR was not informed that the decedent had actually passed away.
ISSUE: W/N the service of deficiency tax assessment against the
estate of Juliana Diez Vda. de Gabriel was a valid service in order to
bind the Estate. (NO)
HELD:
No. The relationship between the decedent and Philtrust was one of
agency, which is a personal relationship between agent and
principal. Death of the agent or principal automatically terminates
the agency. In this instance, the death of the decedent on April 3,
1979 automatically severed the legal relationship between her and
Philtrust, and such could not be revived by the mere fact that
Philtrust continued to act as her agent.
Since the relationship between Philtrust and the decedent was
automatically severed at the moment of the Taxpayer’s death, none
of Philtrust’s acts or omissions could bind the estate of the Taxpayer.
Service on Philtrust of the demand letter and Assessment Notice was
improperly done. Assessment must, in consonance with due process,
requires that it must be served on and received by the taxpayer. In
this case, it was served to Philtrust, a disinterested party.