Adamson vs CA

G.R.No.120935. May21,2009.*

LUCASG. ADAMSON, THERESE JUNED. ADAMSON,and SARA S. DE LOS REYES, in their capacities asPresident, Treasurer and Secretary of AdamsonManagement Corporation, petitioners, vs. COURT OFAPPEALS and LIWAYWAY VINZONSCHATO, in hercapacity as Commissioner of the Bureau of InternalRevenue,respondents.

G.R.No.124557.May21,2009.*

COMMISSIONEROFINTERNALREVENUE,petitioner,vs. COURT OF APPEALS, COURT OF TAX APPEALS,ADAMSONMANAGEMENTCORPORATION,LUCASG.ADAMSON,THERESEJUNED.ADAMSON,andSARAS.DELOSREYES,respondents.

Taxation; Assessments; Words and Phrases; In the context inwhich it is used in the National Internal Revenue Code (NIRC), anassessment is a written notice and demand made by the Bureau ofInternal Revenue (BIR) on the taxpayer for the settlement of a duetax liability that is there definitely set and fixed—a writtencommunication containing a computation by a revenue officer of thetax liability of a taxpayer and giving him an opportunity to contestor disprove the BIR examiner’s findings is not an assessment since itis yet indefinite; A recommendation letter of the Commissioner to theDepartment of Justice (DOJ) Secretary recommending the filing of acriminal complaint against a taxpayer for fraudulent returns andtax evasion cannot be considered a formal assessment.—The firstissue iswhether theCommissioner’s recommendation letter canbeconsidered as a formal assessment of private respondents’ taxliability. In the context in which it is used in the NIRC, anassessmentisawrittennoticeanddemandmadebytheBIRonthetaxpayer for the settlement of a due tax liability that is theredefinitely set and fixed. A written communication containing a

computationbya revenue officer of the tax liability of a taxpayerand giving him an opportunity to contest or disprove the BIRexaminer’s findings is not an assessment since it is yet indefinite.WerulethattherecommendationletteroftheCommissionercannotbeconsidereda

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*FIRSTDIVISION.

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28 SUPREMECOURTREPORTSANNOTATED

Adamson vs. Court of Apepals

formalassessment.Evenacursoryperusalof thesaid letterwouldrevealthreekeypoints:1.Itwasnotaddressedtothetaxpayers.2.There was no demand made on the taxpayers to pay the taxliability, nor a period for payment set therein. 3. The letter wasnevermailedorsenttothetaxpayersbytheCommissioner.Infine,the said recommendation letter served merely as the prima faciebasis for filing criminal informations that the taxpayers hadviolatedSection45(a)and(d),and110,inrelationtoSection100,aspenalizedunderSection255,andforviolationofSection253,inrelationtoSection2529(b)and(d)oftheTaxCode.

Same; Same; When fraudulent tax returns are involved, aproceeding in court after the collection of such tax may be begunwithout assessment; There is no need for precise computation andformal assessment in order for criminal complaints to be filedagainst a tax evader.—The law is clear. When fraudulent taxreturnsareinvolvedasinthecasesatbar,a proceeding in courtafter the collection of such tax may be begun withoutassessment. Here, the private respondents had already filed thecapital gains tax return and theVAT returns, and paid the taxesthey have declared due therefrom. Upon investigation of theexaminers of the BIR, there was a preliminary finding of grossdiscrepancyinthecomputationofthecapitalgainstaxesduefromthesaleoftwolotsofAAIshares,firsttoAPACandthentoAPACPhilippines, Limited. The examiners also found that the VAT hadnotbeenpaidforVATliablesaleofservicesforthethirdandfourthquartersof1990.Arguably,thegrossdisparityinthetaxesdueandthe amounts actually declared by the private respondentsconstitutesbadgesoffraud.Thus,theapplicabilityofUngab v. Cusi

(97SCRA877[1980])isevidenttothecasesatbar.Inthisseminalcase, this Court ruled that there was no need for precisecomputationandformalassessmentinorderforcriminalcomplaintstobe filedagainsthim. ItquotedMerten’sLawofFederal IncomeTaxation, Vol. 10, Sec. 55A.05, p. 21, thus: An assessment of adeficiency is not necessary to a criminal prosecution for willfulattempt to defeat and evade the income tax. A crime is completewhen the violator has knowingly and willfully filed a fraudulentreturn,withintenttoevadeanddefeatthetax.Theperpetrationofthecrimeisgroundeduponknowledgeonthepartofthetaxpayerthat he has made an inaccurate return, and the government’sfailure to discover the error and promptly to assess has noconnectionswiththecommissionofthecrime.

Same; Court of Tax Appeals; Republic Act Nos. 8424 and 9282,even as they expanded the jurisdiction of the Court of Tax Appeals(CTA), did not change the jurisdiction of the CTA to entertain anappeal only from a

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VOL.588,MAY21,2009 29


final decision or assessment of the Commissioner, or in cases wherethe Commissioner has not acted within the period prescribed by theNational Internal Revenue Code (NIRC).—These laws haveexpandedthejurisdictionoftheCTA.However,theydidnotchangethejurisdictionoftheCTAtoentertainanappealonlyfromafinaldecision or assessment of theCommissioner, or in caseswhere theCommissioner has not acted within the period prescribed by theNIRC. In the cases at bar, the Commissioner has not issued anassessmentofthetaxliabilityofprivaterespondents.

PETITIONS for review on certiorari of the decisions andresolutionoftheCourtofAppeals.

ThefactsarestatedintheopinionoftheCourt. Abello, Concepcion, Regala & Cruz for Lucas G.

Adamson,et al. Redentor G. Liboro forpetitioners.

PUNO, C.J.:BeforetheCourtaretheconsolidatedcasesofG.R. No.

120935andG.R. No. 124557.G.R. No. 120935 involves a petition for review on

certiorari filed by petitioners LUCAS G. ADAMSON,THERESE JUNE D. ADAMSON, and SARA S. DE LOSREYES(privaterespondents),intheirrespectivecapacitiesas president, treasurer and secretary of AdamsonManagement Corporation (AMC) against thenCommissioner of Internal Revenue Liwayway VinzonsChato (COMMISSIONER), under Rule 45 of the RevisedRules of Court. They seek to review and reverse theDecision promulgated on March 21, 1995 and ResolutionissuedonJuly6,1995oftheCourtofAppeals inCAG.R.SPNo.35488(Liwayway VinzonsChato, et al. v. Hon. JudgeErna FalloranAliposa, et al.).

G.R. No. 124557 is a petition for review on certiorarifiled by the Commissioner, assailing the Decision datedMarch29,1996oftheCourtofAppealsinCAG.R.SPNo.35520,titledCommissioner of Internal Revenue v. Court ofTax Appeals, Adamson Management Corporation, Lucas G.Adamson, Therese June D.

30



Adamson and Sara S. de los Reyes.InthesaidDecision,theCourt of Appeals upheld the Resolution promulgated onSeptember19,1994bytheCourtofTaxAppeals(CTA)inC.T.A.CaseNo.5075(Adamson Management Corporation,Lucas G. Adamson, Therese Adamson and Sara de los Reyesv. Commissioner of Internal Revenue).

The facts, as culled from the findings of the appellatecourt,follow:

On June 20, 1990, Lucas Adamson and AMC sold131,897commonsharesofstockinAdamsonandAdamson,Inc. (AAI) to APACHolding Limited (APAC). The shareswere valued at P7,789,995.00.1 On June 22, 1990,P159,363.21 was paid as capital gains tax for thetransaction.

On October 12, 1990, AMC sold to APAC Philippines,Inc. another 229,870 common shares of stock in AAI forP17,718,360.00. AMC paid the capital gains tax ofP352,242.96.

OnOctober15,1993,theCommissionerissueda“NoticeofTaxpayer”toAMC,LucasG.Adamson,ThereseJuneD.Adamson and Sara S. de los Reyes, informing them of

deficienciesontheirpaymentofcapitalgainstaxandValueAdded Tax (VAT). The notice contained a schedule forpreliminaryconference.

TheeventsprecedingG.R. No. 120935 arethefollowing:On October 22, 1993, the Commissioner filed with the

Department of Justice (DOJ) her Affidavit of Complaint2

against AMC, Lucas G. Adamson, Therese June D.AdamsonandSaraS.delosReyesforviolationofSections45(a)and(d),3and

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1Lucas G. Adamson and AMC v. CA and APAC Holding Limited,

G.R.No.106879,May27,1994,232SCRA602.

2I.S.No.93581.

3The NIRC of the Philippines, Annotated,16thandRevisedEdition,

Nolledo,J.andNolledo,M.(1993),p.414.Section 45. Corporation Returns.—

(A) Requirements.—Everycorporation,subjecttothetaxhereinimposed,except

foreigncorporationsnotengagedintradeorbusinessinthePhilippinesshallrender,

induplicate,atrueandaccuratequarterlyincometaxreturnandfinaloradjustment

returninaccordancewiththeprovisionsofChapterIXofthisTitle.Thereturnshall

befiledbythepresident,vice

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VOL.588,MAY21,2009 31


110,4inrelationtoSection100,5aspenalizedunderSection

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presidentorotherprincipalofficer,andshallbesworntobysuchofficerandbythe

treasurerorassistanttreasurer.

xxx

(D) Return on Capital Gains Realized from Sale of Shares of Stock.—Every

corporation deriving capital gains from the sale or exchange of shares of stocknot

tradedthrualocalstockexchangeasprescribedunderSections24(e)2A,25(a)(6)

(C)(i),25(b)(5)(C)(i),shallfileareturnwithinthirty(30)daysaftereachtransactions

andafinalconsolidatedreturnofalltransactionsduringthetaxableyearonorbefore

thefifteenth(15th)dayofthefourth(4th)monthfollowingthecloseofthetaxable

year.

4 SECTION 110. Return and Payment of ValueAdded Tax.—

(A) Where to File the Return and Pay the Tax.—Everypersonsubjecttovalue

addedtaxshallfileaquarterlyreturnofhisgrosssalesorreceiptsandpaythetaxdue

thereontoabankdulyaccreditedbytheCommissionerlocatedintherevenuedistrict

where such person is registered or required to be registered. However, in cases

wheretherearenodulyaccreditedagentbankswithinthecityormunicipality, the

returnshallbe filedandanyamountdueshallbepaid toanydulyaccreditedbank

within the district, or to the Revenue District Officer, Collection Agent or duly

authorizedTreasurerofthecityormunicipalitywheresuchtaxpayerhashisprincipal

placeofbusiness.Onlyoneconsolidatedreturnshallbefiledbythetaxpayerforall

the branches and lines of business subject to valueadded tax. If no tax is payable

becausetheamountofinputtaxandanyamountauthorizedtobeoffsetagainstthe

outputtaxisequaltoorisinexcessoftheoutputtaxdueonthereturn,thetaxpayer

shallfilethereturnwiththeRevenueDistrictOfficer,CollectionAgentorauthorized

municipaltreasurerwherethetaxpayer’sprincipalplaceofbusinessislocated.

(B) Time for filing of return and payment of tax.—Thereturnshallbefiledand

thetaxpaidwithin20days followingtheendofeachquarterspecificallyprescribed

foraVATregisteredpersonunderregulationstobepromulgatedbytheSecretaryof

Finance: Provided, however, That any person whose registration is cancelled in

accordancewithparagraph(e)ofSection107shallfileareturnwithin20daysfrom

thecancellationofsuchregistration.

(C) Initial returns.—The Commissionermay prescribe an initial taxable period

for anyVATregisteredperson forhis first return,which inno case shall exceed 5

months.

5Supranote3atpp.588590.Section 100. ValueAdded Tax on Sale of Goods.—

(A) Rate and Base of Tax.—Thereshallbelevied,assessedandcollectedonevery

sale,barterorexchangeofgoods,avalueadded taxequivalent to10%of thegross

selling price or gross value in money of the goods or properties sold, bartered or

exchanged, such tax to be paid by the seller or transferor: Provided, That the

followingsalesbyVATregisteredpersonsshallbesubjecttozeropercent(0%):

(1) Exportsales;and

(2) Sales to persons or entities whose exemption under special laws or

international

agreementstowhichthePhilippinesisasignatoryeffectivelysubjectssuchsalesto

zerorate.

“Export Sales” means the sale and shipment or exportation of goods from the

Philippinestoa foreigncountry, irrespectiveofanyshippingarrangementthatmay

beagreeduponwhichmayinfluenceordeterminethetransferofownershipofthe

goods so exported, or foreign currency denominated sales. “Foreign currency

denominatedsales,”meanssalestononresidentsofgoodsassembledormanufactured

inthePhilippines,fordeliverytoresidentsinthe

32



255,6andforviolationofSection253,7inrelationtoSec

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Philippinesandpaidforinconvertibleforeigncurrencyremittedthroughthebanking

systeminthePhilippines.

(B) Transactions Deemed Sale.—The following transactions shall be

deemedsale:

(1) Transfer,useorconsumptionnot inthecourseofbusinessofgoods

originallyin

tendedforsaleorforuseinthecourseofbusiness;

(2) Distributionortransferto:

(a) Shareholders or investors as share in the profits of the registered

person;or

b) Creditorsinpaymentofdebt;

(3) Consignmentofgoodsifactualsaleisnotmadewithinsixty(60)days

followingthedatesuchgoodswereconsigned;

(4) Retirementfromorcessationofbusiness,withrespecttoinventories

oftaxablegoodsexistingasofsuchretirementorcessation.

(C) Changes in or Cessation of Status of a VATregistered Person.—Thetax

imposed in paragraph (a) of this Section shall also apply to goods disposed of or

existingasofacertaindateifundercircumstancestobeprescribedinRegulationsto

be promulgated by the Secretary of Finance, the status of a person as a VAT

registeredpersonchangesoristerminated.

(D) Determination of the Tax.—

(1) Tax billed as a separate item in the invoice.—Ifthetaxisbilledasa

separateitemintheinvoice,thetaxshallbebasedonthegrosssellingprice,

excludingthetax.“Grosssellingprice”meansthetotalamountofmoneyorits

equivalent which the purchaser pays or is obligated to pay to the seller in

consideration of the sale, barter or exchange of the goods, excluding the

valueaddedtax.Theexcisetax,ifany,onsuchgoodsorpropertiesshallform

partofthegrosssellingprice.

(2) Tax not billed separately or is billed erroneously in the invoice.—In

casethetaxisnotbilledseparatelyorisbillederroneouslyintheinvoice,the

tax shall be determined by multiplying the gross selling price, including th

amountintendedbythesellertocoverthetaxorthetaxbillederroneously,

bythefactor1/11orsuchfactorasmaybeprescribedbyregulationsincaseof

personspartiallyexemptunderspeciallaws.

(3) Sales Returns, Allowances and Sales Discounts.—Thevalueofgoods

sold and subsequently returned or forwhich allowanceswere granted by a

VATregisteredpersonmaybededucted fromthegrosssalesorreceipts for

thequarterinwhicharefundismadeoracreditmemorandumorrefundis

issued.Salesdiscountgrantedandindicatedintheinvoiceatthetimeofsale

maybeexcludedfromthegrosssaleswithinthesamequarter.

(4) Authority of the Commissioner to Determine the Appropriate Tax

Base.—TheCommissionershall,byregulations,determinetheappropriatetax

base in cases where a transaction is deemed a sale, barter or exchange of

goods under paragraph (b) hereof, or where the gross selling price is

unreasonablylowerthantheactualmarketvalue.

6Id.,atp.1022. Section 255. Penal Liability of Corporations.—Any corporation,

associationorgeneralcopartnershipliableforanyoftheactsoromissionspenalized

under this Code, in addition to the penalties imposed herein upon the responsible

corporate officers, partners or employees, shall, upon conviction, for each act or

omission be fined for not less than ten thousand pesos but not more than one

hundredthousandpesos.

7 Id.,atp.1021.

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VOL.588,MAY21,2009 33


tion252(b)and(d)oftheNationalInternalRevenueCode(NIRC).8

AMC,LucasG.Adamson,ThereseJuneD.AdamsonandSaraS.delosReyesfiledwiththeDOJamotiontosuspendproceedingsonthegroundofprejudicialquestion,pendencyof a civil case with the Supreme Court, and pendency oftheir letterrequest for reinvestigation with theCommissioner. After the preliminary investigation, StateProsecutor Alfredo P. Agcaoili found probable cause. TheMotionforReconsiderationagainstthefindingsofprobablecausewasdeniedbytheprosecutor.

OnApril29,1994,LucasG.Adamson,ThereseJuneD.AdamsonandSaraS.delosReyeswerechargedbeforetheRegional Trial Court (RTC) of Makati, Branch 150 inCriminalCaseNos.941842to941846.TheyfiledaMotiontoDismiss or Suspend the Proceedings. They invoked thegroundsthattherewasyetnofinalassessmentoftheirtaxliability, and there were still pending relevant SupremeCourt andCTA cases. Initially, the trial court denied themotion. A Motion for Reconsideration was however filed,thistimeassailingthetrialcourt’slackofjurisdictionoverthenatureofthesubjectcases.OnAugust8,1994,thetrialcourtgranted theMotion. It ruled that the complaints fortaxevasion filedby theCommissionershouldberegardedas a decision of the Commissioner regarding the tax

liabilitiesofLucasG.Adamson,ThereseJuneD.Adamsonand Sara S. de los Reyes, and appealable to the CTA. Itfurtherheldthatthesaidcasescannot

_______________

Section 253. Attempt to evade or defeat tax.—Anypersonwhowillfullyattempts

inanymannertoevadeordefeatanytaximposedunderthisCodeorthepayment

thereofshall,inadditiontootherpenaltiesprovidedbylaw,uponconvictionthereof,

be fined not more than ten thousand pesos or imprisoned for not more than two

years,orboth.

8 Id.,pp.10201021.Section 252. General provisions.

xxx

(b) Anypersonwhowillfullyaidsorabetsinthecommissionofacrimepenalized

hereinorwhocausesthecommissionofanysuchoffensebyanother,shallbeliable

inthesamemannerastheprincipal.

xxx

(d) Inthecaseofassociations,partnerships,orcorporations,thepenaltyshallbeimposed on the partner, president, general manager, branch manager, treasurer,

officerincharge,andemployeesresponsiblefortheviolation.

34



proceed independently of the assessment case pendingbeforetheCTA,whichhasjurisdictiontodeterminethecivilandcriminaltaxliabilityoftherespondentstherein.

OnOctober10,1994, theCommissioner filedaPetitionfor Review with the Court of Appeals assailing the trialcourt’sdismissalof the criminal cases.Sheaverred that itwasnota conditionprerequisite thata formalassessmentshouldfirstbegiventotheprivaterespondentsbeforeshemay file the aforesaid criminal complaints against them.She argued that the criminal complaints for tax evasionmay proceed independently from the assessment casespendingbeforetheCTA.

OnMarch 21, 1995, theCourt of Appeals reversed thetrialcourt’sdecisionandreinstatedthecriminalcomplaints.Theappellatecourtheldthat, in a criminal prosecutionfor tax evasion, assessment of tax deficiency is notrequired because the offense of tax evasion iscomplete or consummated when the offender has

knowingly and willfully filed a fraudulent returnwith intent to evade the tax.9 It ruled that privaterespondents filed false and fraudulent returns withintent to evade taxes, and acting thereupon,petitioner filed an Affidavit of Complaint with theDepartment of Justice, without an accompanyingassessment of the tax deficiency of privaterespondents, in order to commence criminal actionagainst the latter for tax evasion.10

Private respondents filed aMotion forReconsideration,butthetrialcourtdeniedthemotiononJuly6,1995.Thus,they filed the petition in G.R. No. 120935, raising thefollowingissues:

1. WHETHER OR NOT THE RESPONDENT HONORABLECOURTOFAPPEALSERREDINAPPLYINGTHEDOCTRINEINUNGAB V. CUSI (Nos.L4191924,May30, 1980, 97SCRA877)TOTHECASEATBAR.

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9 Rollo,p.65.

10Id.,atp.64.

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VOL.588,MAY21,2009 35


2. WHETHER OR NOT AN ASSESSMENT IS REQUIREDUNDER THE SECOND CATEGORY OF THE OFFENSE INSECTION253OFTHENIRC.

3. WHETHERORNOTTHEREWASAVALIDASSESSMENTMADEBYTHECOMMISSIONERINTHECASEATBAR.

4. WHETHER OR NOT THE FILING OF A CRIMINALCOMPLAINTSERVESASANIMPLIEDASSESSMENTONTHETAXLIABILITYOFTHETAXPAYER.

5. WHETHER OR NOT THE FILING OF THE CRIMINALINFORMATION FOR TAXEVASION IN THE TRIALCOURT ISPREMATURE BECAUSE THERE IS YET NO BASIS FOR THECRIMINAL CHARGE OF WILLFULL INTENT TO EVADE THEPAYMENTOFATAX.

6. WHETHER OR NOT THE DOCTRINES LAID DOWN INTHECASESOFYABES V. FLOJO (No. L46954, July 20, 1982,115SCRA286)ANDCIR V. UNION SHIPPING CORP. (G.R.No.66160,May21,1990,185SCRA547)AREAPPLICABLETOTHE

CASEATBAR.7. WHETHERORNOTTHECOURTOFTAXAPPEALSHAS

JURISDICTIONOVERTHEDISPUTEONWHATCONSTITUTESTHEPROPERTAXESDUEFROMTHETAXPAYER.

Inparallelcircumstances,thefollowingeventsprecededG.R. No. 124557:

OnDecember1,1993,AMC,LucasG.Adamson,ThereseJune D. Adamson and Sara S. de los Reyes filed a letterrequest for reinvestigation with the Commissioner of the“Examiner’s Findings” earlier issued by the Bureau ofInternal Revenue (BIR), which pointed out the taxdeficiencies.

OnMarch15,1994beforetheCommissionercouldactontheirletterrequest,AMC,LucasG.Adamson,ThereseJuneD. Adamson and Sara S. de los Reyes filed a Petition forReview with the CTA. They assailed the Commissioner’sfinding of tax evasion against them. The Commissionermoved to dismiss the petition, on the ground that it waspremature,asshehadnotyetissuedaformalassessmentofthe tax liability of therein petitioners. On September 19,1994,theCTAdeniedtheMotiontoDismiss.ItconsideredthecriminalcomplaintfiledbytheCommissionerwiththe

36



DOJasanimpliedformalassessment,andthefilingofthecriminal informations with the RTC as a denial ofpetitioners’protestregardingthetaxdeficiency.

TheCommissioner repaired to theCourt ofAppeals onthe ground that the CTA acted with grave abuse ofdiscretion. She contended that, with regard to the protestprovidedunderSection229oftheNIRC,theremustfirstbea formal assessment issued by the Commissioner, and itmustbeinaccordwithSection6ofRevenueRegulationNo.1285.Shemaintainedthatshehadnotyetissuedaformalassessmentoftaxliability,andthetaxdeficiencyamountsmentioned in her criminal complaint with the DOJ weregivenonly to showthedifferencebetween the taxreturnsfiledandtheauditfindingsoftherevenueexaminer.

TheCourtofAppealssustainedtheCTA’sdenialoftheCommissioner’sMotiontoDismiss.Thus,theCommissioner

filedthepetitionforreviewunderG.R. No. 124557,raisingthefollowingissues:

1. WHETHERORNOT THE INSTANT PETITION SHOULDBE DISMISSED FOR FAILURE TO COMPLY WITH THEMANDATORY REQUIREMENT OF A CERTIFICATION UNDEROATHAGAINSTFORUMSHOPPING;

2. WHETHER OR NOT THE CRIMINAL CASE FOR TAXEVASIONINTHECASEATBARCANPROCEEDWITHOUTANASSESSMENT;

3. WHETHERORNOTTHECOMPLAINTFILEDWITHTHEDEPARTMENT OF JUSTICE CAN BE CONSTRUED AS ANIMPLIEDASSESSMENT;and

4. WHETHERORNOTTHECOURTOFTAXAPPEALSHASJURISDICTION TO ACT ON PRIVATE RESPONDENTS’PETITIONFORREVIEWFILEDWITHTHESAIDCOURT.

The issues inG.R. No. 124557 and G.R. No. 120935canbecompressedintothree:

1. WHETHER THE COMMISSIONER HAS ALREADYRENDERED AN ASSESSMENT (FORMAL OR OTHERWISE)OF THE

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VOL.588,MAY21,2009 37


TAX LIABILITY OF AMC, LUCAS G. ADAMSON, THERESEJUNE D. ADAMSON AND SARA S. DE LOS REYES;

2. WHETHER THERE IS BASIS FOR THE CRIMINALCASES FOR TAX EVASION TO PROCEED AGAINST AMC,LUCAS G. ADAMSON, THERESE JUNE D. ADAMSON ANDSARA S. DE LOS REYES; and

3. WHETHER THE COURT OF TAX APPEALS HASJURISDICTION TO TAKE COGNIZANCE OF BOTH THECIVIL AND THE CRIMINAL ASPECTS OF THE TAXLIABILITY OF AMC, LUCAS G. ADAMSON, THERESEJUNE D. ADAMSON AND SARA S. DE LOS REYES.

ThecaseofCIR v. Pascor Realty, et al.11 isrelevant.In this case, then BIR Commissioner Jose U. Ongauthorized revenue officers to examine the books ofaccountsandotheraccountingrecordsofPascorRealtyandDevelopmentCorporation(PRDC)for1986,1987and1988.This resulted in a recommendation for the issuance of an

assessment in the amounts of P7,498,434.65 andP3,015,236.35fortheyears1986and1987,respectively.

On March 1, 1995, the Commissioner filed a criminalcomplaint before the DOJ against PRDC, its PresidentRogelioA.Dio,and itsTreasurerVirginiaS.Dio,allegingevasion of taxes in the total amount of P10,513,671.00.Private respondents filed an Urgent Request forReconsideration/Reinvestigation disputing the taxassessmentandtaxliability.

The Commissioner denied the urgent request forreconsideration/reinvestigation because she had not yetissuedaformalassessment.

Private respondents then elevated the Decision of theCommissioner to the CTA on a petition for review. TheCommissionerfiledaMotiontoDismissthepetitionontheground that theCTAhas no jurisdiction over the subjectmatter of the petition, as there was yet no formalassessmentissuedagainstthepetitioners.TheCTAdeniedthesaidmotiontodismissandorderedtheCommissionerto

_______________

11G.R.No.128315,June29,1999,309SCRA402.

38



file an answerwithin thirty (30) days. TheCommissionerdidnot file ananswernor did shemove to reconsider theresolution. Instead, the Commissioner filed a petition forreviewoftheCTAdecisionwiththeCourtofAppeals.TheCourt of Appeals upheld the CTA order. However, thisCourtreversedtheCourtofAppealsdecisionandtheCTAorder,andorderedthedismissalofthepetition.Weheld:

“Anassessmentcontainsnotonlyacomputationoftaxliabilities,butalsoademand forpaymentwithinaprescribedperiod. It alsosignals the time when penalties and interests begin to accrueagainst the taxpayer. To enable the taxpayer to determine hisremedies thereon, due process requires that it must be served onandreceivedbythetaxpayer.Accordingly,anaffidavit,whichwasexecutedbyrevenueofficersstatingthetaxliabilitiesofataxpayerand attached to a criminal complaint for tax evasion, cannot be

deemedanassessment that canbe questionedbefore theCourt ofTaxAppeals.

Neither the NIRC nor the revenue regulations governing theprotest of assessments12 provide a specific definition or form of anassessment.However, theNIRCdefines the specific functions andeffects of an assessment. To consider the affidavit attached to theComplaint as a proper assessment is to subvert the nature of anassessmentandtosetabadprecedent thatwillprejudice innocenttaxpayers.

True,aspointedoutby theprivate respondents,anassessmentinforms the taxpayer thatheor shehas tax liabilities.Butnotalldocuments coming from the BIR containing a computation of thetaxliabilitycanbedeemedassessments.

Tostartwith,anassessmentmustbesent toandreceivedbyataxpayer,andmustdemandpaymentofthetaxesdescribedthereinwithin a specific period. Thus, the NIRC imposes a 25 percentpenalty,inadditiontothetaxdue,incasethetaxpayerfailstopaythedeficiencytaxwithinthetimeprescribedforitspaymentinthenoticeofassessment.Likewise,aninterestof20percentperannum,orsuchhigherrateasmaybeprescribedbyrulesandregulations,istobecollectedfromthedateprescribedfor itspaymentuntilthefullpayment.”13

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12RevenueRegulationNo.1285.

13NIRC(1997)

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VOL.588,MAY21,2009 39


Theissuanceofanassessmentisvitalindeterminingtheperiodof limitation regarding its proper issuance and the period withinwhichtoprotestit.Section20314oftheNIRCprovidesthatinternalrevenuetaxesmustbeassessedwithinthreeyearsfromthelastdaywithinwhichtofile

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“Sec. 205. Remedies for the Collection of Delinquent Taxes.—The civil

remediesforthecollectionofinternalrevenue,fees,orcharges,andincrement

theretoresultingfromdelinquencyshallbe:

(a) By distraint of goods, chattels, or effects, and other personal

property of whatever character, including stocks and other securities,

debts, credits, bank accounts, and interest in and rights to personal

property,andbylevyuponrealpropertyandinterestinorrightstoreal

property;and

(b) Bycivilorcriminalaction.

Either of these remedies or both simultaneously may be pursued in the

discretionoftheauthoritieschargedwiththecollectionofsuchtaxes:Provided,

however,Thattheremediesofdistraintandlevyshallnotbeavailedofwhere

theamountoftaxinvolvedisnotmorethanOnehundredpesos(P100).

The judgment in the criminal case shall not only impose the penalty but

shall also order payment of the taxes subject of the criminal case as finally

decidedbytheCommissioner.

TheBureauofInternalRevenueshalladvancetheamountsneededtodefray

costs of collection by means of civil or criminal action, including the

preservation or transportation of personal property distrained and the

advertisementandsalethereof,aswellasofrealpropertyandimprovements

thereon.”

14Id.

“SEC. 203. Period of Limitation Upon Assessment and Collection.—Except

as provided in Section 222, internal revenue taxes shall be assessedwithin

three(3)yearsafterthelastdayprescribedbylawforthefilingofthereturn,

andnoproceedingincourtwithoutassessmentforthecollectionofsuchtaxes

shall be begun after the expiration of such period:Provided, That in a case

whereareturnisfiledbeyondtheperiodprescribedbylaw,thethree(3)year

periodshallbecountedfromthedaythereturnwasfiled.Forpurposesofthis

Section,areturnfiledbeforethelastdayprescribedbylawforthefilingthereof

shallbeconsideredasfiledonsuchlastday.”

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the return. Section 222,15 on the other hand, specifies a period often years in case a fraudulent return with intent to evade wassubmittedorincaseoffailuretofileareturn.Also,Section22816ofthesamelawstatesthat

_______________

15 Id.

“Sec. 222. Exceptions as to Period of Limitation of Assessment and

Collection of Taxes.—

(a) Inthecaseofa falseor fraudulentreturnwithintenttoevade

taxoroffailuretofileareturn,thetaxmaybeassessed,oraproceeding

incourtforthecollectionofsuchtaxmaybefiledwithoutassessment,at

anytimewithinten(10)yearsafterthediscoveryofthefalsity,fraudor

omission:Provided,Thatinafraudassessmentwhichhasbecomefinal

andexecutory,thefactoffraudshallbejudiciallytakencognizanceofin

thecivilorcriminalactionforthecollectionthereof.

(b) IfbeforetheexpirationofthetimeprescribedintheSection203

fortheassessmentofthetax,boththeCommissionerandthetaxpayer

haveagreedinwritingtoitsassessmentaftersuchtime,thetaxmaybe

assessedwithintheperiodagreedupon.Theperiodsoagreeduponmay

be extended by subsequent written agreement made before the

expirationoftheperiodpreviouslyagreedupon.

(c) Any internal revenue tax which has been assessed within the

period of limitation as prescribed in paragraph (a) hereof may be

collectedbydistraintorlevyorbyaproceedingincourtwithinfive(5)

yearsfollowingtheassessmentofthetax.

(d) Any internal revenue tax,which has been assessedwithin the

period agreedupon as provided in paragraph (b) hereinabove,may be

collectedbydistraintorlevyorbyaproceedingincourtwithintheperiod

agreeduponwritingbeforetheexpirationofthefive(5)yearperiod.The

period so agreed upon may be extended by subsequent written

agreementsmadebeforetheexpirationoftheperiodpreviouslyagreed

upon.

(e) Provided, however, That nothing in the immediately preceding

Section and paragraph (a) hereof shall be construed to authorize the

examination and investigation or inquiry into any tax return filed in

accordancewiththeprovisionsofanytaxamnestylawordecree.”

16 Id.

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VOL.588,MAY21,2009 41


said assessment may be protested only within thirty days fromreceipt thereof. Necessarily, the taxpayer must be certain that aspecific document constitutes an assessment. Otherwise, confusionwould arise regarding the period within which to make anassessmentortoprotestthesame,orwhetherinterestandpenaltymayaccruethereon.It should also be stressed that the said document is a notice dulysent to the taxpayer. Indeed, an assessment is deemedmade onlywhen

_______________

“Section 228. Protesting of Assessment.—When the Commissioner or his

dulyauthorizedrepresentativefindsthatpropertaxesshouldbeassessed,he

shall first notify the taxpayer of his findings: Provided, however, That a

reassessmentnoticeshallnotberequiredinthefollowingcases:

(a) When the finding for any deficiency tax is the result of

mathematicalerror inthecomputationofthetaxasappearingonthe

faceofthereturn;or

(b) When a discrepancy has been determined between the tax

withheldandtheamountactuallyremittedbythewithholdingagent;or

(c) When a taxpayerwho opted to claim a refund or tax credit of

excesscreditablewithholdingtaxforataxableperiodwasdeterminedto

havecarriedoverandautomaticallyappliedthesameamountclaimed

againsttheestimatedtaxliabilitiesforthetaxablequarterorquarters

ofthesucceedingtaxableyear;or

(d) Whentheexcisetaxdueonexcisablearticleshasnotbeenpaid;

or

(e) When an article locally purchased or imported by an exempt

person, such as, but not limited to, vehicles, capital equipment,

machineries and spare parts, has been sold, traded or transferred to

nonexemptpersons.

Thetaxpayershallbeinformedinwritingofthelawandthefactsonwhich

theassessmentismade;otherwise,theassessmentshallbevoid.

Withinaperiodtobeprescribedbyimplementingrulesandregulations,the

taxpayer shall be required to respond to said notice. If the taxpayer fails to

respond,theCommissionerorhisdulyauthorizedrepresentativeshallissuean

assessmentbasedonhisfindings.”

42



thecollectorofinternalrevenuereleases,mailsorsendssuchnoticetothetaxpayer.17

Inthepresentcase,therevenueofficers’Affidavitmerelycontainedacomputationofrespondents’taxliability.Itdidnotstateademandor a period for payment. Worse, it was addressed to the justicesecretary,nottothetaxpayers.

Respondents maintain that an assessment, in relation totaxation,issimplyunderstoodtomean:

“Anoticetotheeffectthattheamountthereinstatedisdueastaxandademandforpaymentthereof.”18

“Fixestheliabilityofthetaxpayerandascertainsthefactsand furnishes the data for the proper presentation of taxrolls.”19

Eventhesedefinitionsfailtoadvanceprivaterespondents’case.That the BIR examiners’ Joint Affidavit attached to the CriminalComplaint contained some details of the tax liabilities of private

respondentsdoesnotipso factomakeitanassessment.Thepurposeof the Joint Affidavit wasmerely to support and substantiate theCriminalComplaintfortaxevasion.Clearly,itwasnotmeanttobeanoticeofthetaxdueandademandtotheprivaterespondentsforpaymentthereof.

The fact that the Complaint itself was specifically directed andsent to the Department of Justice and not to private respondentsshows that the intent of the commissioner was to file a criminalcomplaintfortaxevasion,nottoissueanassessment.Althoughtherevenue officers recommended the issuance of an assessment, thecommissioner opted instead to file a criminal case for tax evasion.WhatprivaterespondentsreceivedwasanoticefromtheDOJthata criminal case for taxevasionhadbeen filedagainst them,notanotice that the Bureau of Internal Revenue had made anassessment.

Private respondents maintain that the filing of a criminalcomplaint must be preceded by an assessment. This is incorrect,because Section 222 of the NIRC specifically states that in caseswhereafalseorfraudulentreturnissubmittedorincasesoffailureto file a return such as this case, proceedings in court may becommencedwithout an assessment.Further

_______________

17 Basilan Estates v. Commissioner of Internal Revenue, No. L22492,

September5,1967,21SCRA17.

18CitingPhilippineLawDictionary,2nded.,p.49.

19 CitingBlack’sLawDictionary,5thed.,p.107.

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VOL.588,MAY21,2009 43


more,Section205ofthesameCodeclearlymandatesthatthecivilandcriminalaspectsofthecasemaybepursuedsimultaneously.InUngab v. Cusi,20 petitioner therein sought the dismissal of thecriminal Complaints for being premature, since his protest to theCTAhadnotyetbeenresolved.TheCourtheld that suchprotestscould not stop or suspend the criminal action which wasindependent of the resolution of the protest in theCTA. Thiswasbecause the commissioner of internal revenue had, in such taxevasioncases,discretiononwhethertoissueanassessmentortofileacriminalcaseagainstthetaxpayerortodoboth.Private respondents insist that Section 222 should be read inrelationtoSection255oftheNIRC,21whichpenalizesfailuretofile

areturn.Theyaddthatataxassessmentshouldprecedeacriminalindictment.We disagree. To reiterate, saidSection 222 states thatanassessmentisnotnecessarybeforeacriminalchargecanbefiled.This is the general rule. Private respondents failed to show thatthey are entitled to an exception. Moreover, the criminal chargeneedonlybesupportedbyaprima facieshowingoffailuretofilearequiredreturn.Thisfactneednotbeprovenbyanassessment.

_______________

20Nos.L4191924,May30,1980,97SCRA877.

21 “SEC. 255. Failure to File Return, Supply Correct and Accurate

Information, Pay Tax, Withhold and Remit Tax and Refund Excess Taxes

Withheld on Compensation.—Anypersonrequiredunder thisCodeorbyrules

andregulationspromulgatedthereunder topayanytax,makeareturn,keep

anyrecord,orsupplycorrectandaccurateanyinformation,whowillfullyfailsto

paysuchtax,makesuchreturn,keepsuchrecord,orsupplycorrectandaccurate

information, or withhold or remit taxes withheld, or refund excess taxes

withheldoncompensation,at thetimeor timesrequiredby laworrulesand

regulations shall, in addition to other penalties provided by law, upon

convictionthereof,bepunishedbyafineofnot lessthanone(1)yearbutnot

morethanten(10)years.

Any person who attempts to make it appear for any reason that he or

another has in fact filed a return or statement, or actually files a return or

statement and subsequently withdraws the same return or statement after

securing the official receiving seal or stamp of receipt of an internal revenue

officewherein the samewas actually filed shall, upon conviction therefor, be

punishedbyafineofnotlessthanTenthousandpesos(P10,000)butnotmore

than Twenty thousand pesos (P20,000) and suffer imprisonment of not less

thanone(1)yearbutnotmorethanthree(3)years.”

44



Theissuanceofanassessmentmustbedistinguishedfromthefilingofacomplaint.Beforeanassessmentisissued,thereis,bypractice,apreassessmentnoticesenttothetaxpayer.Thetaxpayeristhengiven a chance to submit position papers and documents to provethat the assessment is unwarranted. If the commissioner isunsatisfied,anassessmentsignedbyhimorheristhensenttothetaxpayer informing the latter specifically and clearly that anassessment has been made against him or her. In contrast, thecriminalchargeneednotgothroughallthese.Thecriminalchargeis filed directlywith theDOJ. Thereafter, the taxpayer is notified

that a criminal case had been filed against him, not that thecommissionerhas issuedanassessment. Itmustbestressed thatacriminal complaint is instituted not to demand payment, but topenalizethetaxpayerforviolationoftheTaxCode.”

In the cases at bar, the Commissioner denied that sheissued a formal assessment of the tax liability of AMC,LucasG.Adamson,ThereseJuneD.AdamsonandSaraS.de los Reyes. She admits though that she wrote therecommendationletter22 addressed to the Secretary of theDOJ recommending the filing of criminal complaintsagainst AMC and the aforecited persons for fraudulentreturnsandtaxevasion.

The first issue is whether the Commissioner’srecommendation letter can be considered as a formalassessmentofprivaterespondents’taxliability.

In the context in which it is used in the NIRC, anassessmentisawrittennoticeanddemandmadebytheBIRonthetaxpayerforthesettlementofaduetaxliabilitythatis theredefinitely set and fixed.Awritten communicationcontaining a computation by a revenue officer of the taxliability of a taxpayer and giving him an opportunity tocontest or disprove theBIR examiner’s findings is not anassessmentsinceitisyetindefinite.23

We rule that the recommendation letter of theCommissioner cannot be considered a formal assessment.Evenacursoryperusalofthesaidletterwouldrevealthreekeypoints:

_______________

22Annex“F,”Rollo (G.R.No.120935),pp.252258.

23 Tax Law and Jurisprudence,2ndEdition,Vitug,J.andAcosta,E.,

(2000),p.282.

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VOL.588,MAY21,2009 45


1. Itwasnotaddressedtothetaxpayers.2. Therewasnodemandmadeonthetaxpayersto

pay the tax liability, nor a period for payment settherein.

3. The letter was never mailed or sent to the

taxpayersbytheCommissioner.Infine,thesaidrecommendationletterservedmerelyas

theprima facie basis for filing criminal informations thatthetaxpayershadviolatedSection45(a)and(d),and110,inrelationtoSection100,aspenalizedunderSection255,and forviolationofSection253, inrelationtoSection2529(b)and(d)oftheTaxCode.24

The next issue is whether the filing of the criminalcomplaints against theprivate respondents by theDOJ isprematureforlackofaformalassessment.

Section 269 of the NIRC (now Section 222 of the TaxReformActof1997)provides:

“Sec. 269. Exceptions as to period of limitation of assessmentand collection of taxes.—(a) In the case of a false or fraudulentreturnwithintenttoevadetaxoroffailuretofileareturn,thetaxmaybeassessed,oraproceedingincourtafterthecollectionofsuchtaxmaybebegunwithoutassessment,atanytimewithintenyearsafterthediscoveryofthefalsity,fraudoromission:Provided, Thatin a fraud assessmentwhich has become final and executory, thefact of fraud shall be judicially taken cognizance of in the civil orcriminalactionforcollectionthereof…”

The law is clear. When fraudulent tax returns areinvolved as in the cases at bar,a proceeding in courtafter the collection of such tax may be begunwithout assessment. Here, the private respondents hadalready filed the capital gains tax return and the VATreturns, and paid the taxes they have declared duetherefrom.UponinvestigationoftheexaminersoftheBIR,therewasapreliminaryfindingofgrossdiscrepancyinthecomputationofthecapitalgainstaxesduefromthesaleoftwo lots of AAI shares, first to APAC and then to APACPhilippines, Limited. The examiners also found that theVAThadnotbeenpaidforVATliablesaleof

_______________

24Supra,pp.38.

46



servicesforthethirdandfourthquartersof1990.Arguably,the gross disparity in the taxes due and the amountsactually declared by the private respondents constitutesbadgesoffraud.

Thus, the applicability ofUngab v. Cusi25 is evident tothecasesatbar.Inthisseminalcase,thisCourtruledthatthere was no need for precise computation and formalassessment in order for criminal complaints to be filedagainst him. It quoted Merten’s Law of Federal IncomeTaxation,Vol.10,Sec.55A.05,p.21,thus:

“An assessment of a deficiency is not necessary to a criminalprosecutionforwillfulattempttodefeatandevadetheincometax.Acrime is completewhentheviolatorhasknowinglyandwillfullyfileda fraudulentreturn,with intent toevadeanddefeat the tax.Theperpetration of the crime is groundeduponknowledge on thepart of the taxpayer that he hasmade an inaccurate return, andthegovernment’sfailuretodiscovertheerrorandpromptlytoassesshasnoconnectionswiththecommissionofthecrime.”

This hoary principle still underlies Section 269 andrelatedprovisionsofthepresentTaxCode.

We now go to the issue of whether the CTA has nojurisdictiontotakecognizanceofboththecriminalandcivilcaseshereatbar.

UnderRepublicActNo.1125(AnActCreatingtheCourtof Tax Appeals) as amended, the rulings of theCommissionerareappealabletotheCTA,thus:

“SEC. 7. Jurisdiction.—The Court of Tax Appeals shallexercise exclusive appellate jurisdiction to review by appeal, ashereinprovided—

(1) DecisionsoftheCommissionerofInternalRevenueincases involving disputed assessments, refunds of internalrevenue taxes, fees or other charges, penalties imposed inrelation thereto, orothermattersarisingunder theNationalInternal Revenue Code or other laws or part of lawadministeredbytheBureauofInternalRevenue;

_______________

25Nos.L4191924,May30,1980,97SCRA877.

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VOL.588,MAY21,2009 47


Republic Act No. 8424, titled “An Act Amending theNational Internal Revenue Code, As Amended, And ForOther Purposes,” later expanded the jurisdiction of theCommissionerand,correspondingly,thatoftheCTA,thus:

“SEC. 4. Power of the Commissioner to Interpret Tax Laws andto Decide Tax Cases.—Thepowerto interprettheprovisionsof thisCodeandother tax lawsshallbeunder theexclusiveandoriginaljurisdictionoftheCommissioner,subjecttoreviewbytheSecretaryofFinance.

The power to decide disputed assessments, refunds of internalrevenue taxes, fees or other charges,penalties imposed in relationthereto, or othermatters arising under thisCode or other laws orportionsthereofadministeredbytheBureauofInternalRevenueisvested in the Commissioner, subject to the exclusive appellatejurisdictionoftheCourtofTaxAppeals.”

The latest statute dealing with the jurisdiction of theCTAisRepublicActNo.9282.26Itprovides:

“SEC. 7. Section7of thesameAct isherebyamendedtoreadasfollows:

Sec. 7. Jurisdiction.—TheCTAshallexercise:(a) Exclusive appellate jurisdiction to review by appeal,

ashereinprovided:(1) Decisions of the Commissioner of Internal

Revenue in cases involving disputed assessments,refunds of internal revenue taxes, fees or othercharges, penalties in relation thereto, or othermattersarising under theNational InternalRevenue or otherlawsadministeredbytheBureauofInternalRevenue;

(2) Inaction by the Commissioner of InternalRevenue in cases involving disputed assessments,refundsofinternal

_______________

26AnActExpandingTheJurisdictionOfTheCourtOfTaxAppeals(CTA),

Elevating Its Rank To The Level Of A Collegiate Court With Special

Jurisdiction And Enlarging Its Membership, Amending For The Purpose

CertainSectionsOfRepublicActNo.1125,AsAmended,OtherwiseKnownAs

TheLawCreatingTheCourtOfTaxAppeals,AndForOtherPurposes.

48



revenue taxes, fees or other charges, penalties inrelation thereto, or other matters arising under theNational Internal Revenue Code or other lawsadministered by the Bureau of Internal Revenue,where theNational InternalRevenueCodeprovidesaspecificperiodofaction,inwhichcasetheinactionshallbedeemedadenial;

(3) Decisions, ordersor resolutionsof theRegionalTrial Courts in local tax cases originally decided orresolved by them in the exercise of their original orappellatejurisdiction;

xxx(b) Jurisdictionover cases involving criminaloffensesas

hereinprovided:(1) Exclusive original jurisdiction over all criminal

offensesarisingfromviolationsoftheNationalInternalRevenue Code or Tariff and Customs Code and otherlawsadministeredby theBureauof InternalRevenueor the Bureau of Customs: Provided, however, Thatoffensesorfeloniesmentionedinthisparagraphwherethe principal amount of taxes and fees, exclusive ofchargesandpenalties,claimedislessthanOnemillionpesos (P1,000,000.00) or where there is no specifiedamountclaimedshallbetriedbytheregularcourtsandthe jurisdiction of the CTA shall be appellate. Anyprovision of law or theRules ofCourt to the contrarynotwithstanding, the criminal action and thecorresponding civil action for the recovery of civilliability for taxes and penalties shall at all times besimultaneously institutedwith, and jointly determinedin the same proceeding by the CTA, the filing of thecriminalactionbeingdeemedtonecessarilycarrywithit the filing of the civil action, andno right to reservethe filling of such civil action separately from thecriminalactionwillberecognized.

(2) Exclusive appellate jurisdiction in criminaloffenses:

(a) Over appeals from the judgments,resolutionsorordersoftheRegionalTrialCourtsin tax cases originally decided by them, in theirrespectedterritorialjurisdiction.

(b) Over petitions for review of the

judgments, resolutions or orders of theRegionalTrial Courts in the exercise of their appellatejurisdiction over tax cases originally decided bytheMetropolitanTrialCourts,Municipal

49

VOL.588,MAY21,2009 49


Trial Courts andMunicipal Circuit Trial Courtsintheirrespectivejurisdiction.

(c) Jurisdiction over tax collection cases ashereinprovided:

(1) Exclusive original jurisdiction in taxcollection cases involving final and executoryassessments for taxes, fees, charges andpenalties: Provided, however, That collectioncases where the principal amount of taxes andfees, exclusive of charges and penalties, claimedis less than One million pesos (P1,000,000.00)shall be tried by the proper Municipal TrialCourt, Metropolitan Trial Court and RegionalTrialCourt.

(2) Exclusive appellate jurisdiction in taxcollectioncases:

(a) Over appeals from the judgments,resolutions or orders of the Regional TrialCourts in tax collection cases originallydecided by them, in their respectiveterritorialjurisdiction.

(b) Over petitions for review of thejudgments, resolutions or orders of theRegional Trial Courts in the exercise oftheir appellate jurisdiction over taxcollection cases originally decided by theMetropolitan Trial Courts,Municipal TrialCourtsandMunicipalCircuitTrialCourts,intheirrespectivejurisdiction.

These lawshave expanded the jurisdiction of theCTA.However,theydidnotchangethejurisdictionoftheCTAtoentertainanappealonlyfromafinaldecisionorassessmentof theCommissioner, or in caseswhere theCommissionerhasnotactedwithintheperiodprescribedbytheNIRC.Inthe cases at bar, the Commissioner has not issued an

assessmentofthetaxliabilityofprivaterespondents.Finally, we hold that contrary to private respondents’

stance,thedoctrineslaiddowninCIR v. Union ShippingCo. andYabes

50



v. Flojo are not applicable to the cases at bar. In theseearlier cases, the Commissioner already rendered anassessmentofthetaxliabilitiesofthedelinquenttaxpayers,forwhichreasontheCourtruledthatthefilingofthecivilsuitforcollectionofthetaxesduewasafinaldenialofthetaxpayers’requestforreconsiderationofthetaxassessment.

INVIEWWHEREOF,premisesconsidered,judgmentisrendered:

1. In G.R. No. 120935, AFFIRMING the CAdecision dated March 21, 1995, which set aside theRegional Trial Court’s Order dated August 8, 1994,and REINSTATING Criminal Case Nos. 941842 to941846forfurtherproceedingsbeforethetrialcourt;and

2. In G.R. No. 124557, REVERSING andSETTINGASIDEtheDecisionoftheCourtofAppealsdatedMarch29,1996,andORDERINGthedismissalofC.T.A.CaseNo.5075.

Nocosts.SOORDERED.

Carpio, Corona, LeonardoDe Castro and Bersamin, JJ.,concur.

Judgment affirmed in G.R. No. 120935; while judgmentin G.R. No. 124557 reversed and set aside.

Notes.—Before one is prosecuted for wilful attempt toevadeordefeatanytaxunderSections253and255oftheTaxCode, the fact that a tax is duemust first beproved.(Commissioner of Internal Revenue vs. Court of Appeals,257SCRA200[1996])

Whiletaxavoidanceschemesandarrangementsarenotprohibited, tax laws cannot be circumvented in order toevadethepaymentofjusttaxes.(Commissioner of Internal

Revenue vs. Lincoln Philippine Life Insurance Company,Inc.,379SCRA423[2002])

——o0o——

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