Meilinda Marie Malacat LGM212

LM3A Case Digest

G.R. No. 210238, January 6, 2020

IMELDA SZE, SZE KOU FOR, & TERESITA NG, Petitioners
vs. BUREAU OF INTERNAL REVENUE, Respondents

Reyes, J. Jr., J.

Facts:
The Bureau of Internal Revenue (BIR) issued the Voluntary Assessment Program (VAP) granting
taxpayers the privilege of last priority in the audit and investigation of all internal revenue taxes
for the taxable year December 31, 2000, and all prior years under certain conditions. Chiat Sing
Cardboard Corporation (Chiat Corp.) availed the VAP and was issued a certificate of
qualification for 1999 and 2000.

Due to Chiat Corp’s refusal to present its records, BIR conducted an investigation and discovered
some undeclared amounts which were assessed as deficiency taxes for 1999 and 2000 amounting
to P33,847,574.18. Failing to interpose protest, BIR’s assessment became final, executory, and
demandable.

In 2005, BIR charged the officers of Chiat Corp., petitioners Imelda T. Sze (Sze), Sze Kou For
(For), and Teresita A. Ng (Ng), with tax evasion and/or tax fraud in violation of the National
Internal Revenue Code of 1997 (NIRC). However, the Department of Justice (DOJ) denied the
complaint.

In 2012, the Court of Appeals (CA) resolved that probable cause was sufficiently established,
and ordered the DOJ to file the corresponding Information with the proper court.

Issue:
WHETHER the CA erred in finding probable cause for violation of the NIRC.

Ruling:
The CA’s decision in finding probable cause was rendered moot and academic by the Court on
Tax Appeals (CTA) decision dismissing all the cases on the ground of prescription.

Section 281 of the Tax Reform Act of 1997 states that the prescriptive period for violation of the
law is five years.
SEC. 281. Prescription for Violations of any Provision of this Code. — All violations of any
provision of this Code shall prescribe after five (5) years.

Prescription shall begin to run from the day of the commission of the violation of the law, and if
the same be not known at the time, from the discovery thereof and the institution of judicial
proceedings for its investigation and punishment.

The prescription shall be interrupted when proceedings are instituted against the guilty persons
and shall begin to run again if the proceedings are dismissed for reasons not constituting
jeopardy.

The CTA explained that Revenue Memorandum Circular 101-90 provides that an offense under
the tax code is considered discovered only after the manner of commission and the nature and
extent of fraud has been definitely ascertained. This occurs when the BIR renders its final
decision and requires the taxpayer to pay the deficiency tax.

The CTA determined that the FLD and the FAN for taxable years 1999 and 2000 were served on
Chiat Corp. on February 7, 2005. Chiat Corp. did not file a protest, resulting in the finality,
demandability, and executory nature of the assessment for deficiency taxes. Counting 30 days
from the service of the FLD and the FAN, the violations were considered discovered on March 9,
2005. The BIR's revenue officers filed their joint affidavit in the DOJ for preliminary
investigation on May 26, 2005. However, the original Information was only filed in court on
April 23, 2014, which exceeded the five-year prescriptive period. Therefore, the action had
prescribed.

WHEREFORE, the petition is DISMISSED for being moot and academic.