CIR vs. Hon. Raul M. Gonzales, et.al.

GR No. 177279, October 13, 2010

FACTS:
Pursuant to Letter of Authority (LA) No. 00009361 dated Auust !"# !000 issued $y then
Co%%issioner of &nterna' (e)enue (*etitioner) +a,i'a -. Fona.ier# (e)enue /ffi.ers (e%edios
C. Ad)in.u'a# 0r.# Si%*'i.io 1. Ca$anta.# 0r.# (i.ardo L. Su$a# 0r. and Aure'io Austin T. 2a%ora
su*er)ised $y Se.tion Chief Si3to C. +y# 0r. of the Ta3 Fraud +i)ision (TF+)# Nationa' /ffi.e#
.ondu.ted a fraud in)estiation for a'' interna' re)enue ta3es to as.ertain4deter%ine the ta3
'ia$i'ities of res*ondent L. 5. Ca%us 6nineerin Cor*oration (L5C6C) for the ta3a$'e years
1997# 1998 and 1999.
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The audit and in)estiation aainst L5C6C 9as *re.i*itated $y the
infor%ation *ro)ided $y an :infor%er; that L5C6C had su$stantia' underde.'ared in.o%e for the
said *eriod. For fai'ure to .o%*'y 9ith the su$*oena ducestecum issued in .onne.tion 9ith the
ta3 fraud in)estiation# a .ri%ina' .o%*'aint 9as instituted $y the -ureau of &nterna' (e)enue
(-&() aainst L5C6C on 0anuary 19# !001 for )io'ation of Se.tion !66 of the N&(C (&.S. No. 00<
9"6 of the /ffi.e of the City Prose.utor of =ue>on City).
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-ased on data o$tained fro% an :infor%er; and )arious .'ients of L5C6C#
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it 9as
dis.o)ered that L5C6C fi'ed fraudu'ent ta3 returns 9ith su$stantia' underde.'arations of ta3a$'e
in.o%e for the years 1997# 1998 and 1999. Petitioner thus assessed the .o%*any of tota'
defi.ien.y ta3es a%ountin to P?30#9"8#00".90 (in.o%e ta3 < P318#606#380.19 and )a'ue<
added ta3 @1ATA < P11!#3"1#6!".71) .o)erin the said *eriod. The Pre'i%inary Assess%ent
Noti.e (PAN) 9as re.ei)ed $y L5C6C on Fe$ruary !!# !001.
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&n )ie9 of the a$o)e findins# assess%ent noti.es toether 9ith a for%a' 'etter of
de%and dated Auust 7# !00! 9ere sent to L5C6C throuh *ersona' ser)i.e on /.to$er 1#
!00!.
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Sin.e the .o%*any and its re*resentati)es refused to re.ei)e the said noti.es and
de%and 'etter# the re)enue offi.ers resorted to .onstru.ti)e ser)i.e
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in a..ordan.e 9ith
Se.tion 3# (e)enue (eu'ations ((() No. 1!<99
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.
/n 5ay !1# !003# *etitioner# throuh then Co%%issioner Bui''er%o L. Parayno# 0r.#
referred to the Se.retary of 0usti.e for *re'i%inary in)estiation its .o%*'aint aainst L5C6C#
Luis 5. Ca%us and Lino +. 5endo>a# the 'atter t9o 9ere sued in their .a*a.ities as President
and Co%*tro''er# res*e.ti)e'y. The .ase 9as do.,eted as &.S. No. !003<77?. &n the 0oint
Affida)it e3e.uted $y the re)enue offi.ers 9ho .ondu.ted the ta3 fraud in)estiation# it 9as
a''eed that des*ite the re.ei*t of the fina' assess%ent noti.e and for%a' de%and 'etter
on /.to$er 1# !00!# L5C6C fai'ed and refused to *ay the defi.ien.y ta3 assess%ent in the tota'
a%ount ofP630#16?#631.61# in.'usi)e of in.re%ents# 9hi.h had $e.o%e fina' and e3e.utory as a
resu't of the said ta3*ayerCs fai'ure to fi'e a *rotest thereon 9ithin the thirty (30)<day
re'e%entary *eriod.
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Ca%us and 5endo>a fi'ed a 0oint Counter<Affida)it .ontendin that L5C6C .annot $e
he'd 'ia$'e 9hatsoe)er for the a''eed ta3 defi.ien.y 9hi.h had $e.o%e due and
de%anda$'e. Considerin that the .o%*'aint and its anne3es a'' sho9ed that the suit is a
si%*'e .i)i' a.tion for .o''e.tion and not a ta3 e)asion .ase# the +e*art%ent of 0usti.e (+/0) is
not the *ro*er foru% for -&(Cs .o%*'aint. They a'so assai' as in)a'id the assess%ent noti.es
9hi.h $ear no seria' nu%$ers and shou'd $e sho9n to ha)e $een )a'id'y ser)ed $y an Affida)it
of Constru.ti)e Ser)i.e e3e.uted and s9orn to $y the re)enue offi.ers 9ho ser)ed the sa%e. As
stated in L5C6CCs 'etter<*rotest dated +e.e%$er 1!# !00! addressed to (e)enue +istri.t
/ffi.er ((+/) C'a)e'ina S. Na.ar of (+ No. ?0# Cu$ao# =ue>on City# the .o%*any had a'ready
underone a series of routine e3a%inations for the years 1997# 1998 and 1999D under the N&(C#
on'y one e3a%ination of the $oo,s of a..ounts is a''o9ed *er ta3a$'e year.
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L5C6C further asserted that it fi'ed on A*ri' !0# !001 a *rotest on the PAN issued $y
*etitioner for ha)in no $asis in fa.t and 'a9. Eo9e)er# unti' no9 the said *rotest re%ains
unreso')ed. As to the a''eed infor%ant 9ho *ur*orted'y su**'ied the :.onfidentia' infor%ation#;
L5C6C $e'ie)es that su.h *erson is fi.titious and his true identity and *ersona'ity .ou'd not $e
*rodu.ed. Een.e# this .ase is another for% of harass%ent aainst the .o%*any as 9hat had
$een found $y the /ffi.e of the City Prose.utor of =ue>on City in &.S. No. 00<9"6. Said .ase
and the *resent .ase $oth ha)e so%ethin to do 9ith the audit4e3a%ination of L5C6C for
ta3a$'e years 1997# 1998 and 1999 *ursuant to LA No. 00009361.
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I%%&'(
The .ore issue to $e reso')ed is 9hether L5C6C and its .or*orate offi.ers %ay $e
*rose.uted for )io'ation of Se.tions !"? (Atte%*t to 6)ade or +efeat Ta3) and !"" (Fi''fu'
Fai'ure to Su**'y Corre.t and A..urate &nfor%ation and Pay Ta3).
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Fe do not aree.
A noti.e of assess%ent is:
@AA de.'aration of defi.ien.y ta3es issued to a @tAa3*ayer 9ho fai's to res*ond to a
Pre<Assess%ent Noti.e (PAN) 9ithin the *res.ri$ed *eriod of ti%e# or 9hose
re*'y to the PAN 9as found to $e 9ithout %erit. The Noti.e of Assess%ent sha''
infor% the @tAa3*ayer of this fa.t# and that the re*ort of in)estiation su$%itted $y
the (e)enue /ffi.er .ondu.tin the audit sha'' $e i)en due .ourse.
The for%a' 'etter of de%and .a''in for *ay%ent of the ta3*ayerCs defi.ien.y ta3
or ta3es sha'' state t+e ,act, t+e la-, rules an. re/ulat0ons or
1ur0s2ru.ence on -+0c+ t+e assess3ent 0s base., ot+er-0se t+e ,or3al
letter o, .e3an. an. t+e not0ce o, assess3ent s+all be vo0..
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As it is# the for%a'ity of a .ontro' nu%$er in the assess%ent noti.e is not a reGuire%ent for
its )a'idity $ut rather the .ontents thereof 9hi.h shou'd infor% the ta3*ayer of the de.'aration of
defi.ien.y ta3 aainst said ta3*ayer. -oth the for%a' 'etter of de%and and the noti.e of
assess%ent sha'' $e )oid if the for%er fai'ed to state the fa.t# the 'a9# ru'es and reu'ations or
Huris*ruden.e on 9hi.h the assess%ent is $ased# 9hi.h is a %andatory reGuire%ent under
Se.tion !!8 of the N&(C.
Se.tion !!8 of the N&(C *ro)ides that the ta3*ayer sha'' $e infor%ed in 9ritin of the 'a9
and the fa.ts on 9hi.h the assess%ent is %ade. /ther9ise# the assess%ent is )oid. To
i%*'e%ent the *ro)isions of Se.tion !!8 of the N&(C# (( No. 1!<99 9as ena.ted. Se.tion 3.1.?
of the re)enue reu'ation reads:
3.1.?. Formal Letter of Demand and Assessment Notice. The for%a'
'etter of de%and and assess%ent noti.e sha'' $e issued $y the Co%%issioner or
his du'y authori>ed re*resentati)e. 4+e letter o, .e3an. call0n/ ,or 2a53ent
o, t+e ta62a5er7s .e,0c0enc5 ta6 or ta6es s+all state t+e ,acts, t+e la-, rules
an. re/ulat0ons, or 1ur0s2ru.ence on -+0c+ t+e assess3ent 0s base.,
ot+er-0se, t+e ,or3al letter o, .e3an. an. assess3ent not0ce s+all be
vo0.. The sa%e sha'' $e sent to the ta3*ayer on'y $y reistered %ai' or $y
*ersona' de'i)ery. 3 3 3.
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(6%*hasis su**'ied.)
The For%a' Letter of +e%and dated Auust 7# !00! .ontains not on'y a detai'ed
.o%*utation of L5C6CCs ta3 defi.ien.ies $ut a'so detai's of the s*e.ified dis.re*an.ies#
e3*'ainin the 'ea' and fa.tua' $ases of the assess%ent. &t a'so reiterated that in the a$sen.e
of a..ountin re.ords and other do.u%ents ne.essary for the *ro*er deter%ination of the
.o%*anyCs interna' re)enue ta3 'ia$i'ities# the in)estiatin re)enue offi.ers resorted to the :-est
6)iden.e /$taina$'e; as *ro)ided in Se.tion 6(-) of the N&(C (third *arty infor%ation) and in
a..ordan.e 9ith the *ro.edure 'aid do9n in (5C No. !3<!000 dated No)e%$er !7# !000.
Ta3 a%nesty is a enera' *ardon to ta3*ayers 9ho 9ant to start a .'ean ta3 s'ate. &t a'so
i)es the o)ern%ent a .han.e to .o''e.t un.o''e.ted ta3 fro% ta3 e)aders 9ithout ha)in to o
throuh the tedious *ro.ess of a ta3 .ase.
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6)en assu%in arguendo that the issuan.e of ((
No. !<99 is in the nature of ta3 a%nesty# it $ears notin that a ta3 a%nesty# %u.h 'i,e a ta3
e3e%*tion# is ne)er fa)ored nor *resu%ed in 'a9 and if ranted $y statute# the ter%s of the
a%nesty 'i,e that of a ta3 e3e%*tion %ust $e .onstrued stri.t'y aainst the ta3*ayer and 'i$era''y
in fa)or of the ta3in authority.
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Ta3 assess%ents $y ta3 e3a%iners are *resu%ed .orre.t and %ade in ood faith# and a''
*resu%*tions are in fa)or of the .orre.tness of a ta3 assess%ent un'ess *ro)en other9ise.
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Fe ha)e he'd that a ta3*ayerCs fai'ure to fi'e a *etition for re)ie9 9ith the Court of Ta3
A**ea's 9ithin the statutory *eriod rendered the dis*uted assess%ent fina'# e3e.utory and
de%anda$'e# there$y *re.'udin it fro% inter*osin the defenses of 'ea'ity or )a'idity of the
assess%ent and *res.ri*tion of the Bo)ern%entCs riht to assess.
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&ndeed# any o$He.tion
aainst the assess%ent shou'd ha)e $een *ursued fo''o9in the a)enue *a)ed in Se.tion !!9
(no9 Se.tion !!8) of the N&(C on *rotests on assess%ents of interna' re)enue ta3es.
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(e.ords $ear out that the assess%ent noti.e and For%a' Letter of +e%and dated Auust 7#
!00! 9ere du'y ser)ed on L5C6C on/.to$er 1# !00!. Pri)ate res*ondents did not fi'e a %otion
for re.onsideration of the said assess%ent noti.e and for%a' de%andD neither did they a**ea' to
the Court of Ta3 A**ea's. Se.tion !!8 of the N&(C
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*ro)ides the re%edy to dis*ute a ta3
assess%ent 9ithin a .ertain *eriod of ti%e. &t states that an assess%ent %ay $e *rotested $y fi'in
a reGuest for re.onsideration or rein)estiation 9ithin 30 days fro% re.ei*t of the assess%ent $y
the ta3*ayer. No su.h ad%inistrati)e *rotest 9as fi'ed $y *ri)ate res*ondents see,in
re.onsideration of the Auust 7# !00! assess%ent noti.e and for%a' 'etter of de%and. Pri)ate
res*ondents .annot $e'ated'y assai' the said assess%ent# 9hi.h they a''o9ed to 'a*se into fina'ity#
$y raisin issues as to its )a'idity and .orre.tness durin the *re'i%inary in)estiation after the -&(
has referred the %atter for *rose.ution under Se.tions !"? and !"" of the N&(C.