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CIR v.

CTA and FORTUNE TOBACCO  The Court share with the view of both the RTC and CA that before the tax
liabilities of Fortune are first finally determined, it cannot be correctly
Kapunan, J. | June 4, 1996 | Topic: Prosecution for Tax Fraud
asserted Fortune have wilfully attempted to evade or defeat the taxes sought
to be collected from Fortune
FACTS:  In plain words, before one is prosecuted for wilful attempt to evade or
defeat any tax under Sec 253 and 255 of the Tax code, the fact that a tax is
 CIR filed a complaint with the DOJ against Fortune for alleged fraudulent tax due must first be proved
evasion for supposed non-payment by Fortune of the correct amount of o This is because supposed the CIR eventually resolves Fortune’s
income tax, ad valorem tax, and VAT in 1992, depriving the government of MFR of the assessments by pronouncing that Fortune is not liable
P7.5 billion for any deficiency assessment, then, the criminal complaints filed
 Complaint referred to the DOJ Task Force on revenue cases, which found against private respondents will have no leg to stand on.
sufficient basis to further investigate the allegations against Fortune
o FORTUNE filed a Verified MTD:
 CIR and CTA have still to determine FORTUNE’s tax
liability for 1992; without any tax liability, there can be no
tax evasion
 Exclusive jurisdiction to determine tax liability is vested
with the CTA; therefore, the DOJ is without jurisdiction to
conduct preliminary investigation.
 The complaint of CIR is not supported with adequate
o MTD denied by DOJ
 Fortune filed petition for certiorari and prohibition with prayer for
preliminary injunction with RTC -> ruled in favor of Fortune
 CIR appealed to CA -> ruled in favor of Fortune

ISSUE: W/N Fortune’s tax liabilities must be assessed first before it can be prosecuted
for tax evasion - YES


 Before Fortune could be prosecuted for tax evasions under Sec 253 and 25
of the Tax Code, the fact that the deficiency income, ad valorem and value-
added taxes were due from Fortune for the year 1992 should first be
o Under Sec 229 of the Tax Code, the taxpayer has the right to move
for reconsideration of the assessment issued by CIR within 30 days
from receipt of the assessment; and if the MR is denied, it may
appeal to the CA within 30 days from receipt of CIR’s decision.
 IN THE CASE, Fortune received CIR's assessment notice dated Aug 13,
1993 on Aug 24, 1993 asking for the payment of the deficiency taxes.
Within 30 days from receipt thereof, Fortune moved for reconsideration.
CIR has not resolved the request for reconsideration up to the present