SMI-ED Phil. Technology, Inc. v. Commissioner of Internal Revenue, G.R. No.

175410, November 12,

2014, citing Commissioner of Internal Revenue v. FMF Development Corporation,579 Phil. 174 (2008)

DECISION

LEONEN, J.:

FACTS: SMI-Ed Philippines is a PEZA-registered corporation authorized “to engage in the business of
manufacturing ultra high-density microprocessor unit package.”6

SMI-Ed Philippines “failed to commence operations.”. On August 1, 2000, it sold its buildings and some
of its installed machineries and equipment to Ibiden Philippines, Inc., another PEZA-registered
enterprise, for ¥2,100,000,000.00 (₱893,550,000.00). SMI-Ed Philippines was dissolved on November 30,
2000. In its quarterly income tax return for year 2000, SMI-Ed Philippines subjected the entire gross
sales of itsproperties to 5% final tax on PEZA registered corporations. SMI-Ed Philippines paid taxes
amounting to ₱44,677,500.00.

On Feb 2, 2001, SMI-Ed Philippines filed an administrative claim for the refund of ₱44,677,500.00 with
the Bureau of Internal Revenue (BIR). SMIEd Philippines alleged that the amount was erroneously paid.
It also indicated the refundable amount in its final income tax return filed on March 1, 2001. It also
alleged that it incurred a net loss of ₱2,233,464,538.00.

The BIR – did not act on SMI-Ed Philippines’ claim, which prompted the latter to file a petition for review
before the Court of Tax Appeals on September 9, 2002.

It also argued that the Court of Tax Appeals Second Division cannot make an assessment at the first
instance. Its jurisdiction to make an assessment since its jurisdiction, with respect to the decisions of
respondent, is merely appellate.

Even if the Court of Tax Appeals Second Division has such power, the period to make an assessment had
already prescribed under Section 203 of the National Internal Revenue Code of 1997 since the return for
the erroneous payment was filed on September 13, 2000. This is more than three (3) years from the last
day prescribed by law for the filing of the return.

The Court of Tax Appeals Second Division denied SMI-Ed Philippines’ claim for refund in the decision
dated December 29, 2004, WITH THE findings:

The court found that SMI-Ed Philippines’ administrative claim for refund and the petition for review with
the Court of Tax Appeals were filed within the two-year prescriptive period.

However, fiscal incentives given to PEZA-registered enterprises may be availed only by PEZA-registered
enterprises that had already commenced operations. Since SMI-Ed Philippines had not commenced
operations, it was not entitled to the incentives of either the income tax holiday or the 5% preferential
tax rate. Payment of the 5% preferential tax amounting to ₱44,677,500.00 was erroneous. (so erroneous
ang self-assessment ni SMI)
After finding that SMI-Ed Philippines sold properties that were capital assets under Section 39(A)(1) of
the National Internal Revenue Code of 1997, the Court of Tax Appeals Second Division subjected the sale
of SMIEd Philippines’ assets to 6% capital gains tax under Section 27(D)(5) of the same Code and Section
2 of Revenue Regulations No. 8-98. It was found liable for capital gains tax amounting to
₱53,613,000.00. Therefore, SMIEd Philippines must still pay the balance of ₱8,935,500.00 as deficiency
tax “which respondent should perhaps look into.

In its comment, respondent argued that the Court of Tax Appeals’ determination of petitioner’s liability
for capital gains tax was not an assessment.

Such determination was necessary to settle the question regarding the tax consequence of the sale of
the properties. This is clearly within the Court of Tax Appeals’ jurisdiction under Section 7 of Republic
Act No. 9282.42 Respondent also argued that “petitioner failed to justify its claim for refund.”

CTA EN BANC- AFFIRMED CTA DIVISION’S RULING

SMI-Ed Philippines filed a petition for review before this court on December 27, 2006, praying for the
grant of its claim for refund and the reversal of the Court of Tax Appeals En Banc’s decision.

ISSUES:

W/O the honorable CTA En Banc grievously erred and acted beyond its jurisdiction when it assessed for
deficiency tax in the first instance.

HELD:

Jurisdiction of the Court of Tax Appeals- there is jurisdiction

The term “assessment” refers to the determination of amounts due from a person obligated to make
payments. In the context of national internal revenue collection, it refers the determination of the taxes
due from a taxpayer under the National Internal Revenue Code of 1997.

The power and duty to assess national internal revenue taxes are lodged with the BIR.

Section 2 of the National Internal Revenue Code of 1997 provides:

SEC. 2. Powers and Duties of the Bureau of Internal Revenue. – The Bureau of Internal Revenue shall be
under the supervision and control of the Department of Finance and its powers and duties shall
comprehend the assessment and collection of all national internal revenue taxes, fees, and charges, and
the enforcement of all forfeitures, penalties, and fines connected therewith, including the execution of
judgments in all cases decided in its favor by the Court of Tax Appeals and the ordinary courts.

The Bureau shall give effect to and administer the supervisory and police powers conferred to it by this
Code or other laws. (Emphasis supplied) The BIR is not mandated to make an assessment relative to
every return filed with it. Tax returns filed with the BIR enjoy the presumption that these are in
accordance with the law. Tax returns are also presumed correct since these are filed under the penalty
of perjury.. Generally, however, the BIR assesses taxes when it appears, after a return had been filed,
that the taxes paid were incorrect or false, or fraudulent. The BIR also assesses taxes when taxes are due
but no return is filed.

Thus:

SEC. 6. Power of the Commissioner to Make assessments and Prescribe additional Requirements for Tax
Administration and Enforcement.–

(A) Examination of Returns and Determination of Tax Due. – After a return has been filed as required
under the provisions of this Code, the Commissioner or his duly authorized representative may
authorize the examination of any taxpayer and the assessment of the correct amount of tax: Provided,
however; That failure to file a return shall not prevent the Commissioner from authorizing the
examination of any taxpayer. The tax or any deficiency tax so assessed shall be paid upon notice and
demand from the Commissioner or from his duly authorized representative.

The Court of Tax Appeals has no power to make an assessment at the first instance. On matters such as
tax collection, tax refund, and others related to the national internal revenue taxes, the Court of Tax
Appeals’ jurisdiction is appellate in nature.

Thus, the BIR first has to make an assessment of the taxpayer’s liabilities. When the BIR makes the
assessment, the taxpayer is allowed to dispute that assessment before the BIR. If the BIR issues a
decision that is unfavorable to the taxpayer or if the BIR fails to act on a dispute brought by the
taxpayer, the BIR’s decision or inaction may be brought on appeal to the Court of Tax Appeals. The Court
of Tax Appeals then acquires jurisdiction over the case.

When the BIR’s unfavorable decision is brought on appeal to the Court of Tax Appeals, the Court of Tax
Appeals reviews the correctness of the BIR’s assessment and decision. In reviewing the BIR’s assessment
and decision, the Court of Tax Appeals had to make its own determination of the taxpayer’s tax
liabilities. The Court of Tax Appeals may not make such determination before the BIR makes its
assessment and before a dispute involving such assessment is brought to the Court of Tax Appeals on
appeal.

The Court of Tax Appeals’ jurisdiction is not limited to cases when the BIR makes an assessment or a
decision unfavorable to the taxpayer. Because Republic Act No. 1125 also vests the Court of Tax Appeals
with jurisdiction over the BIR’s inaction on a taxpayer’s refund claim, there may be instances when the
Court of Tax Appeals has to take cognizance of cases that have nothing to do with the BIR’s assessments
or decisions.

WHEN THE BIR FAILS TO ACT ON A CLAIM FOR REFUND OF VOLUNTARILY BUT MISTAKENLY PAID TAXES,
FOR EXAMPLE, THERE IS NO DECISION OR ASSESSMENT INVOLVED.

Taxes are generally self-assessed. They are initially computed and voluntarily paid by the taxpayer. The
government does not have to demand it. If the tax payments are correct, the BIR need not make an
assessment. The self-assessing and voluntarily paying taxpayer, however, may later find that he or she
has erroneously paid taxes. Erroneously paid taxes may come in the form of amounts that should not
have been paid. Thus, a taxpayer may find that he or she has paid more than the amount that should
have been paid under the law. Erroneously paid taxes may also come in the form of tax payments for
the wrong category of tax. Thus, a taxpayer may find that he or she has paid a certain kind of tax that he
or she is not subject to.

In these instances, the taxpayer may ask for a refund. If the BIR fails to act on the request for refund, the
taxpayer may bring the matter to the Court of Tax Appeals.

From the taxpayer’s self-assessment and tax payment up to his or her request for refund and the BIR’s
inaction, the BIR’s participation is limited to the receipt of the taxpayer’s payment. The BIR does not
make an assessment; the BIR issues no decision; and there is no dispute yet involved. Since there is no
BIR assessment yet, the Court of Tax Appeals may not determine the amount of taxes due from the
taxpayer. There is also no decision yet to review. However, there was inaction on the part of the BIR.
That inaction is within the Court of Tax Appeals’ jurisdiction.

In other words, the Court of Tax Appeals may acquire jurisdiction over cases even if they do not involve
BIR assessments or decisions.

In this case, the Court of Tax Appeals’ jurisdiction was acquired because petitioner brought the case on
appeal before the Court of Tax Appeals after the BIR had failed to act on petitioner’s claim for refund of
erroneously paid taxes. The Court of Tax Appeals did not acquire jurisdiction as a result of a disputed
assessment of a BIR decision.

Petitioner argued that the Court of Tax Appeals had no jurisdiction to subject it to 6% capital gains tax or
other taxes at the first instance. The Court of Tax Appeals has no power to make an assessment.

As earlier established, the Court of Tax Appeals has no assessment powers. In stating that petitioner’s
transactions are subject to capital gains tax, however, the Court of Tax Appeals was not making an
assessment. It was merely determining the proper category of tax that petitioner should have paid, in
view of its claim that it erroneously imposed upon itself and paid the 5% final tax imposed upon PEZA-
registered enterprises.

The determination of the proper category of tax that petitioner should have paid is an incidental matter
necessary for the resolution of the principal issue, which is whether petitioner was entitled to a refund.

The issue of petitioner’s claim for tax refund is intertwined with the issue of the proper taxes that are
due from petitioner. A claim for tax refund carries the assumption that the tax returns filed were
correct.55 If the tax return filed was not proper, the correctness of the amount paid and, therefore, the
claim for refund become questionable. In that case, the court must determine if a taxpayer claiming
refund of erroneously paid taxes is more properly liable for taxes other than that paid.

If the taxpayer is found liable for taxes other than the erroneously paid 5% final tax, the amount of the
taxpayer’s liability should be computed and deducted from the refundable amount.
Any liability in excess of the refundable amount, however, may not be collected in a case involving solely
the issue of the taxpayer’s entitlement to refund. The question of tax deficiencyis distinct and unrelated
to the question of petitioner’s entitlement to refund. Tax deficiencies should be subject to assessment
procedures and the rules of prescription. The court cannot be expected to perform the BIR’s duties
whenever it fails to do so either through neglect or oversight. Neither can court processes be used as a
tool to circumvent laws protecting the rights of taxpayers.

Petitioner’s entitlement to benefits given to PEZA-registered enterprises

Petitioner is not entitled to benefits given to PEZA-registered enterprises, including the 5% preferential
tax rate under Republic Act No. 7916 or the Special Economic Zone Act of 1995. This is because it never
began its operation.

Essentially, the purpose of Republic Act No. 7916 is to promote development and encourage
investments and business activities that will generate employment.59 Giving fiscal incentives to
businesses is one of the means devised to achieve this purpose. It comes with the expectation that
persons who will avail these incentives will contribute to the purpose’s achievement. Hence, to avail the
fiscal incentives under Republic Act No. 7916, the law did not say that mere PEZA registration is
sufficient.

Republic Act No. 7916 or The Special Economic Zone Act of 1995 provides that the fiscal incentives and
the 5% preferential tax rate are available only to businesses operating within the Ecozone.60 A business
is considered in operation when it starts entering into commercial transactions that are not merely
incidental to but are related to the purposes of the business. It is similar to the definition of “doing
business,” as applied in actions involving the right of foreign corporations to maintain court actions:

“a continuity of commercial dealings and arrangements, and contemplates, to that extent, the
performance of acts or works or the exercise of some of the functions normally incident to, and in
progressive prosecution of, the purpose and object of its organization” Petitioner never started its
operations since its registration on June 29, 199863 because of the Asian financial crisis.64 Petitioner
admitted this.65 Therefore, it cannot avail the incentives provided under Republic Act No. 7916. It is not
entitled to the preferential tax rate of 5% on gross income in lieu of all taxes. Because petitioner is not
entitled to a preferential rate, it is subject to ordinary tax rates under the National Internal Revenue
Code of 1997.

The BIR did not make a deficiency assessment for this declaration. Neither did the BIR dispute this
statement in its pleadings filed before this court. There is, therefore, no reason todoubt the truth that
petitioner indeed suffered a net loss in 2000.

Since petitioner had not started its operations, it was also not subject to the minimum corporate income
tax of 2% on gross income.70 Therefore, petitioner is not liable for any income tax.

Prescription
Section 203 of the National Internal Revenue Code of 1997 provides that as a general rule, the BIR has
three (3) years from the last day prescribed by law for the filing of a return to make an assessment. If
the return is filed beyond the last day prescribed by law for filing, the three-year period shall run from
the actual date of filing. This court said that the prescriptive period to make an assessment of internal
revenue taxes is provided “primarily to safeguard the interests of taxpayers from unreasonable
investigation.” Accordingly, the government must assess internal revenue taxes on time so as not to
extend indefinitely the period of assessment and deprive the taxpayer of the assurance that it will no
longer be subjected to further investigation for taxes after the expiration of reasonable period of
time.73

Rules derogating taxpayers’ right against prolonged and unscrupulous investigations are strictly
construed against the government.74

The BIR had three years from the filing of petitioner’s final tax return in 2000 to assess petitioner’s taxes.
Nothing stopped the BIR from making the correct assessment. The elevation of the refund claim with
the Court of Tax Appeals was not a bar against the BIR’s exercise of its assessment powers.

The BIR, however, did not initiate any assessment for deficiency capital gains tax.78 Since more than a
decade have lapsed from the filing of petitioner’s return, the BIR can no longer assess petitioner for
deficiency capital gains taxes, if petitioner is later found to have capital gains tax liabilities in excess of
the amount claimed for refund.

The Court of Tax Appeals should not be expected to perform the BIR’s duties of assessing and collecting
taxes whenever the BIR, through neglect or oversight, fails to do so within the prescriptive period
allowed by law.

WHEREFORE, the Court of Tax Appeals’ November 3, 2006 decision is SET ASIDE. The Bureau of Internal
Revenue is ordered to refund petitioner SMI-Ed Philippines Technology, Inc. the amount of 5% final tax
paid to the BIR, less the 6% capital gains tax on the sale of petitioner SMI-Ed Philippines Technology, Inc.
‘s land and building. In view of the lapse of the prescriptive period for assessment, any capital gains tax
accrued from the sale of its land and building that is in excess of the 5% final tax paid to the Bureau of
Internal Revenue may no longer be recovered from petitioner SMI-Ed Philippines Technology, Inc.

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Republic v. GMCC United Development Corp., G.R. No. 191856, December 7, 2016

3.b. If the three (3) year period to assess a tax return under Sec. 203 has already lapsed, the BIR can no
longer file acomplaint for tax evasion on the basis of such return.A reading of Sec. 203 will show that it
prohibits two acts after the expiration of the three-year period. First , an assessment for the collection
of the taxes in the return, and second, initiating a court proceeding on the basis of such return. The
State Prosecutor was correct in dismissing the complaint for tax evasion since it was clear that the
prescribed return cannot be used as basis for the case.
----------------------------------------------

Banco de Oro v. Republic, G.R. No. 198756, January 13, 2015

FACTS: By letter4 dated March 23, 2001, the Caucus of Development NGO Networks (CODE-NGO) "with
the assistance of its financial advisors, Rizal Commercial Banking Corp. ("RCBC"), RCBC Capital Corp.
("RCBC Capital"), CAPEX Finance and Investment Corp. ("CAPEX") and SEED Capital Ventures, Inc.
(SEED),"5 requested an approval from the Department of Finance for the issuance by the Bureau of
Treasury of 10-year zerocoupon Treasury Certificates (T-notes).6 The T-notes would initially be
purchased by a special purpose vehicle on behalf of CODE-NGO, repackaged and sold at a premium to
investors as the PEACe Bonds.7 The net proceeds from the sale of the Bonds"will be used to endow a
permanent fund (Hanapbuhay® Fund) to finance meritorious activities and projects of accredited non-
government organizations (NGOs) throughout the country."

Also on October 16, 2001, RCBC Capital entered into an underwriting Agreement44 with CODE-NGO,
whereby RCBC Capital was appointed as the Issue Manager and Lead Underwriter for the offering of the
PEACe Bonds.45 RCBC Capital agreed to underwrite46 on a firm basis the offering, distribution and sale
of the 35 billion Bonds at the price of ₱11,995,513,716.51.47 In Section 7(r) of the underwriting
agreement, CODE-NGO represented that "[a]ll income derived from the Bonds, inclusive of premium on
redemption and gains on the trading of the same, are exempt from all forms of taxation as confirmed by
Bureau of Internal Revenue (BIR) letter rulings dated 31 May 2001 and 16 August 2001, respectively."48

RCBC Capital sold the Government Bonds in the secondary market for an issue price of
₱11,995,513,716.51. Petitioners purchased the PEACe Bonds on different dates.49

ISSUE: W/O the assessment and collection had already prescribed

HELD: The collection of tax is not barred by prescription

The three (3)-year prescriptive period under Section 203 of the 1997 National Internal Revenue Code to
assess and collect internal revenue taxes is extended to 10 years in cases of (1) fraudulent returns; (2)
false returns with intent to evade tax; and (3) failureto file a return, to be computed from the time of
discovery of the falsity, fraud, or omission. Section 203 states:

SEC. 203. Period of Limitation Upon Assessment and Collection. - Except as provided in Section 222,
internal revenue taxes shall be assessed within three (3) years after the last day prescribed by law for
the filing of the return, and no proceeding in court without assessment for the collection of such taxes
shall be begun after the expiration of such period: Provided, That in a case where a return is filed
beyond the period prescribed by law, the three (3)-year period shall be counted from the day the return
was filed. For purposes of this Section, a return filed before the last day prescribed by law for the filing
thereof shall be considered as filed on such last day. (Emphasis supplied)

....

SEC. 222. Exceptions as to Period of Limitation of Assessment and Collection of Taxes.

(a) In the case of a false or fraudulent return with intent to evade tax or of failure to file a return, the tax
may be assessed, or a proceeding in court for the collection of such tax may be filed without
assessment, at any time within ten (10) years after the discovery of the falsity, fraud or omission:
Provided, That in a fraud assessment which has become final and executory, the fact of fraud shall be
judicially taken cognizance of in the civil or criminal action for the collection thereof.

Thus, should it be found that RCBC Capital/CODE-NGO sold the PEACe Bonds to 20 or more
lenders/investors, the Bureau of Internal Revenue may still collect the unpaid tax from RCBC
Capital/CODE-NGO within 10 years after the discovery of the omission.

In view of the foregoing, there is no need to pass upon the other issues raised by petitioners and
petitioners-intervenors.

Reiterative motion on the temporary restraining order

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Republic v. GMCC United Development Corp., G.R. No. 191856, December 7, 2016

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Commissioner of Internal Revenue v. Standard Chartered Bank, G.R. No. 192173, July 29, 2015

FACTS:

Respondent received CIR's Formal Letter of Demand for alleged deficiency income tax, final income tax,
withholding tax - final and compensation, and increments for the taxable year worth P 33,326,211.37.

Respondent protested the said assessment by filing a letter-protest with the CIR requesting the
assessment to be withdrawn.

In the middle of things, respondent paid the BIR the assessed deficiency for both the withholding taxes.

Respondent then filed for a petition for the cancellation and setting aside of the assessments which the
CTA granted. The CTA held that it has already prescribed as it covered the taxable year of 1998.

The NIRC provides that the assessments should have been issued within the three-year prescriptive
period. The CIR also presented the Waivers of Statute of Limitations executed by the parties which
extended the period to assess respondent. The CTA held that the CIR failed to strictly comply and
conform with the provisions of Revenue Memorandum Order No. 20-90. The CTA held that the waivers
were invalid.

ISSUE: Whether the assessments were already prescribed. Whether the waiver was invalid.

RULING:
Yes and yes.

The NIRC is clear that in a case where a return is filed beyond the period prescribed by law, the three-
year period shall be counted from the day the return was filed.

The waiver, as also provided by the NIRC, is an exception to the three-day prescription. But, as the CTA
first held, the provisions of the RMO should have been strictly complied with. Failing to comply renders
a waiver defective and ineffectual.

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Commissioner of Internal Revenue v. Bank of the Philippine Islands, G.R. No. 135446, September 23,
2003

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Commissioner of Internal Revenue v. Pascor Realty and Devt. Corp., G.R. No. 128315, June 29, 1999

Facts:
In this case, then BIR Commissioner Jose U. Ong authorized revenue officers to
examine the books of accounts and other accounting records of Pascor Realty
and Development Corporation (PRDC) for 1986, 1987 and 1988. This resulted in
a recommendation for the issuance of an assessment in the amounts
of P7,498,434.65 and P3,015,236.35 for the years 1986 and 1987, respectively.
On March 1, 1995, the Commissioner filed a criminal complaint before the DOJ
against PRDC, its President Rogelio A. Dio, and its Treasurer Virginia S. Dio,
alleging evasion of taxes in the total amount of P10,513,671.00. Private
respondents filed an Urgent Request for Reconsideration/Reinvestigation
disputing the tax assessment and tax liability.
The Commissioner denied the urgent request for reconsideration/reinvestigation
because she had not yet issued a formal assessment.
Private respondents then elevated the Decision of the Commissioner to the CTA
on a petition for review. The Commissioner filed a Motion to Dismiss the petition
on the ground that the CTA has no jurisdiction over the subject matter of the
petition, as there was yet no formal assessment issued against the
petitioners. The CTA denied the said motion to dismiss and ordered the
Commissioner to file an answer within thirty (30) days. The Commissioner did
not file an answer nor did she move to reconsider the resolution. Instead, the
Commissioner filed a petition for review of the CTA decision with the Court of
Appeals. The Court of Appeals upheld the CTA order. However, this Court
reversed the Court of Appeals decision and the CTA order, and ordered the
dismissal of the petition.
Issue:
Whether or not an assessment is necessary before criminal charges for tax
evasion may be instituted.
Held:
The Court ruled in the negative. An assessment contains not only a computation
of tax liabilities, but also a demand for payment within a prescribed period. It
also signals the time when penalties and interests begin to accrue against the
taxpayer. To enable the taxpayer to determine his remedies thereon, due
process requires that it must be served on and received by the
taxpayer. Accordingly, an affidavit, which was executed by revenue officers
stating the tax liabilities of a taxpayer and attached to a criminal complaint
for tax evasion, cannot be deemed an assessment that can be questioned before
the Court of Tax Appeals.
Neither the NIRC nor the revenue regulations governing the protest of
assessments[12] provide a specific definition or form of an assessment. However,
the NIRC defines the specific functions and effects of an assessment. To
consider the affidavit attached to the Complaint as a proper assessment is to
subvert the nature of an assessment and to set a bad precedent that will
prejudice innocent taxpayers.
True, as pointed out by the private respondents, an assessment informs the
taxpayer that he or she has tax liabilities. But not all documents coming from the
BIR containing a computation of the tax liability can be deemed assessments.
To start with, an assessment must be sent to and received by a taxpayer, and
must demand payment of the taxes described therein within a specific
period. Thus, the NIRC imposes a 25 percent penalty, in addition to the tax due,
in case the taxpayer fails to pay the deficiency tax within the time prescribed for
its payment in the notice of assessment. Likewise, an interest of 20 percent per
annum, or such higher rate as may be prescribed by rules and regulations, is to
be collected from the date prescribed for its payment until the full payment.[13]
The issuance of an assessment is vital in determining the period of limitation
regarding its proper issuance and the period within which to protest it. Section
203[14] of the NIRC provides that internal revenue taxes must be assessed within
three years from the last day within which to file the return. Section 222,[15] on
the other hand, specifies a period of ten years in case a fraudulent return with
intent to evade was submitted or in case of failure to file a return. Also, Section
228[16] of the same law states that said assessment may be protested only within
thirty days from receipt thereof. Necessarily, the taxpayer must be certain that a
specific document constitutes an assessment. Otherwise, confusion would arise
regarding the period within which to make an assessment or to protest the same,
or whether interest and penalty may accrue thereon.
It should also be stressed that the said document is a notice duly sent to the
taxpayer. Indeed, an assessment is deemed made only when the collector of
internal revenue releases, mails or sends such notice to the taxpayer.[17]
In the present case, the revenue officers’ Affidavit merely contained a
computation of respondents’ tax liability. It did not state a demand or a period for
payment. Worse, it was addressed to the justice secretary, not to the taxpayers.
Respondents maintain that an assessment, in relation to taxation, is simply
understood to mean:
“A notice to the effect that the amount therein stated is due as tax and a demand
for payment thereof.”[18]
“Fixes the liability of the taxpayer and ascertains the facts and furnishes the data
for the proper presentation of tax rolls.”[19]
Even these definitions fail to advance private respondents’ case. That the BIR
examiners’ Joint Affidavit attached to the Criminal Complaint contained some
details of the tax liabilities of private respondents does not ipso facto make it an
assessment. The purpose of the Joint Affidavit was merely to support and
substantiate the Criminal Complaint for tax evasion. Clearly, it was not meant to
be a notice of the tax due and a demand to the private respondents for payment
thereof.
The fact that the Complaint itself was specifically directed and sent to the
Department of Justice and not to private respondents shows that the intent of the
commissioner was to file a criminal complaint for tax evasion, not to issue an
assessment. Although the revenue officers recommended the issuance of an
assessment, the commissioner opted instead to file a criminal case
for tax evasion. What private respondents received was a notice from the DOJ
that a criminal case for tax evasion had been filed against them, not a notice that
the Bureau of Internal Revenue had made an assessment.
Private respondents maintain that the filing of a criminal complaint must be
preceded by an assessment. This is incorrect, because Section 222 of the NIRC
specifically states that in cases where a false or fraudulent return is submitted or
in cases of failure to file a return such as this case, proceedings in court may be
commenced without an assessment. Furthermore, Section 205 of the same
Code clearly mandates that the civil and criminal aspects of the case may be
pursued simultaneously. In Ungab v. Cusi,[20] petitioner therein sought the
dismissal of the criminal Complaints for being premature, since his protest to the
CTA had not yet been resolved. The Court held that such protests could not stop
or suspend the criminal action which was independent of the resolution of the
protest in the CTA. This was because the commissioner of internal revenue 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.
Private respondents insist that Section 222 should be read in relation to Section
255 of the NIRC,[21] which penalizes failure to file a return. They add that a tax
assessment should precede a criminal indictment. We disagree. To reiterate,
said Section 222 states that an assessment is not necessary before a criminal
charge can be filed. This is the general rule. Private respondents failed to show
that they are entitled to an exception. Moreover, the criminal charge need only
be supported by a prima facie showing of failure to file a required return. This
fact need not be proven by an assessment.
The issuance of an assessment must be distinguished from the filing of a
complaint. Before an assessment is issued, there is, by practice, a pre-
assessment notice sent to the taxpayer. The taxpayer is then given a chance to
submit position papers and documents to prove that the assessment is
unwarranted. If the commissioner is unsatisfied, an assessment signed by him
or her is then sent to the taxpayer informing the latter specifically and clearly that
an assessment has been made against him or her. In contrast, the criminal
charge need not go through all these. The criminal charge is filed directly with
the DOJ. Thereafter, the taxpayer is notified that a criminal case had been filed
against him, not that the commissioner has issued an assessment. It must be
stressed that a criminal complaint is instituted not to demand payment, but to
penalize the taxpayer for violation of the Tax Code.
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Commissioner of Internal Revenue v. GJM Philippines Manufacturing, Inc., G.R. No. 202695, February
29, 2016

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Commissioner of Internal Revenue v. Asalus Corp., G.R. No. 221590, February 22, 2017