G.R. No.

L-41919-24 May 30, 1980

QUIRICO P. UNGAB, petitioner,
vs.
HON. VICENTE N. CUSI, JR., in his capacity as Judge of the Court of First Instance,
Branch 1, 16TH Judicial District, Davao City, THE COMMISSIONER OF INTERNAL
REVENUE, and JESUS N. ACEBES, in his capacity as State Prosecutor, respondents.

CONCEPCION JR., J:
Xxx there is no requirement for the precise computation and assessment of the tax before
there can be a criminal prosecution under the Code.
Xxx The crime is complete when the violator has, as in this case,
knowingly and willfully filed fraudulent returns with intent to evade and
defeat a part or all of the tax. 14
xxx The perpetration of the crime is grounded upon knowledge on the part
of the taxpayer that he has made an inaccurate return, and the
government's failure to discover the error xxx.
Besides, it has been ruled that a petition for reconsideration of an assessment may affect
the suspension of the prescriptive period for the collection of taxes, but not the prescriptive
period of a criminal action for violation of law. 16 Obviously, the protest of the petitioner
against the assessment of the District Revenue Officer cannot stop his prosecution for
violation of the National Internal Revenue Code.
G.R. No. 119322 June 4, 1996
COMMISSIONER ON INTERNAL REVENUE, SENIOR STATE PROSECUTOR AURORA
S. LAGMAN, SENIOR STATE PROSECUTOR BERNELITO R. FERNANDEZ, SENIOR
STATE PROSECUTOR HENRICK P. GINGOYON, ROGELIO F. VISTA, STATE
PROSECUTOR ALFREDO AGCAOILI, PROSECUTING ATTORNEY EMMANUEL
VELASCO, CITY PROSECUTOR CANDIDO V. RIVERA, AND ASSISTANT CITY
PROSECUTOR LEOPOLDO E. BARAQUIA, petitioners,
vs.
THE HONORABLE COURT OF APPEALS, THE HONORABLE TIRSO D'C VELASCO,
PRESIDING JUDGE, REGIONAL TRIAL COURT OF QUEZON CITY, BRANCH 88,
FORTUNE TOBACCO CORPORATION, LUCIO TAN, HARRY C. TAN, CARMEN KAO

TAN, FLORENCIO SANTOS, SALVADOR MISON, CHUNG POE KEE, ROJAS CHUA,
MARIANO TANENGLIAN, JUANITA LEE AND ANTONIO P. ABAYA, respondents.
DAGUPAN COMBINED COMMODITIES, INC., TOWNSMAN COMMERCIALS, INC.,
LANDMARK SALES AND MARKETING INC., CRIMSON CROCKER DISTRIBUTORS,
INC., MOUNT MATUTUM MARKETING CORP., FIRST UNION TRADING CORP.,
CARLSBURG AND SONS, INC., OMAR ALI DISTRIBUTORS, INC., ORIEL AND
COMPANY, NEMESIO TAN, QUINTIN CALLEJA, YOLANDA MANALILI, CARLOS CHAN,
ROMEO TAN, VICENTE CO, WILLIAM YU, LETICIA LIM, GLORIA LOPEZ, ROBERT
TANTAMCO, FELIPE LOY, ROLANDO CHUA, HONORINA TAN, WILLIE TANTAMCO,
HENRY WEECHEE, JESUS LIM, TEODORO TAN, ANTONIO APOSTOL, DOMINGO
TENG, CANDELARIO LI, ERLINDA CRUZ, CARLOS TUMPALAN, LARRY JOHN SY,
ERNESTO ONG, WILFREDO MACROHON, ANTONIO TIU, ROSARIO LESTER,
WILFREDO ONG, BONIFACIO CHUA, GO CHING CHUAN, HENRY CHUA, LOPE LIM
GUAN, EMILIO TAN, FELIPE TAN SEH CHUAN, ANDRES CO, FELIPE KEE, HENRY GO
CO, NARCISO GO, ADOLFO LIM, CO SHU, DANIEL YAO CABIGUN, GABRIELLE.
QUINTELA, NELSON TE, EMILLIO GO, EDWIN LEE, CESAR LEDESMA, JR., JAO
CHEP SENG, ARNULFO TAN, BENJAMIN T. HONG, PHILIP JAO, JOSE P. YU, AND
DAVID R. CORTES,respondents-intervenors.

KAPUNAN, J.:p
xxx For the purpose of determining the "Manufacturer's Registered Wholesale Price" a
cigarette manufacturer is required to file a Manufacturer's Declaration (BIR Form No. 31.03)
for each brand of cigarette manufactured, stating: a) Materials, b) Labor; c) Overhead; d)
Tax Burden and the Wholesale Price by Case. The data submitted therewith is verified by
the Revenue Officers and approved by the Commission of Internal Revenue. Any change in
the manufacturer's registered wholesale price of any brand cannot be effected without
submitting the corresponding Sworn Manufacturer's Declaration and verified by the
Revenue Officer and approved by the Commissioner on Internal Revenue. 22
Now, if every step in the production of cigarettes was closely monitored and supervised by
the BIR personnel specifically assigned to Fortune's premises, and considering that the
Manufacturer's Sworn Declarations on the data required to be submitted by the
manufacturer were scrutinized and verified by the BIR and, further, since the manufacturer's
wholesale price was duly approved by the BIR, then it is presumed that such registered
wholesale price is the same as, or approximates "the price, excluding the value-added tax,
at which the goods are sold at wholesale in the place production," otherwise, the BIR would
not have approved the registered wholesale price of the goods for purposes of imposing the
ad valorem tax due. In such case, and in the absence of contrary evidence, it was
precipitate and premature to conclude that private respondents made fraudulent returns or

wilfully attempted to evade payment of taxes due. "Wilful" means "premeditated; malicious;
done with intent, or with bad motive or purpose, or with indifference to the natural
consequence . . ." 24 "Fraud" in its general sense, "is deemed to comprise anything
calculated to deceive, including all acts, omissions, and concealment involving a breach of
legal or equitable duty, trust or confidence justly reposed, resulting in the damage to
another, or by which an undue and unconscionable advantage taken of another. 25
Fraud cannot be presumed. If there was fraud or wilful attempt to evade payment of ad
valorem taxes by private respondents through the manipulation of the registered wholesale
price of the cigarettes, it must have been with the connivance or cooperation of certain BIR
officials and employees who supervised and monitored Fortune's production activities to see
to it that the correct taxes were paid. But there is no allegation, much less evidence, of BIR
personnel's malfeasance. In the very least, there is the presumption that the BIR personnel
performed their duties in the regular course in ensuing the correct taxes were paid by
Fortune. 26
xxx
xxx it cannot be correctly asserted that private respondents have wilfully attempted to evade
or defeat the taxes sought to be collected from Fortune. In plain words, before one is
prosecuted for wilful attempt to evade or defeat any tax under Sections 253 and 255 of the
Tax code, the fact that a tax is due must first be proved.
xxx
In plain words, for criminal prosecution to proceed before assessment, there must be
a prima facie showing of a wilful attempt to evade taxes. Xxx In the mind of the trial court
and the Court of Appeals, Fortune's situation is quite apart factually since the registered
wholesale price of the goods, approved by the BIR, is presumed to be the actual wholesale
price, therefore, not fraudulent and unless and until the BIR has made a final determination
of what is supposed to be the correct taxes, the taxpayer should not be placed in the
crucible of criminal prosecution. xxx
On this point, the trial court stressed that the prosecutor conducting the preliminary
investigation should have allowed the production of the "Daily Manufacturer's Sworn
Statements" submitted by Fortune without which there was no valid basis for the allegation
that private respondents wilfully attempted to evade payment of the correct taxes. The
prosecutors should also have produced the "Daily Manufacturer's Sworn Statements" by
other cigarette companies, as sought by private respondents, to show that these companies
which had paid the ad valorem taxes on the same basis and in the same manner as Fortune
were not similarly criminally charged. But the investigating prosecutors denied private
respondents' motion, thus, indicating that only Fortune was singled out for prosecution.

G.R. No. 128315 June 29, 1999

COMMISSIONER OF INTERNAL REVENUE, petitioner,
vs.
PASCOR REALTY AND DEVELOPMENT CORPORATION, ROGELIO A. DIO and
VIRGINIA S. DIO,respondents.

PANGANIBAN, J.:
xxx
xxx 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. xxx 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.
xxx 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.
G.R. No. 120935

May 21, 2009

LUCAS G. ADAMSON, THERESE JUNE D. ADAMSON, and SARA S. DE LOS REYES,

in their capacities as President, Treasurer and Secretary of Adamson Management
Corporation, Petitioners,
vs.
COURT OF APPEALS and LIWAYWAY VINZONS-CHATO, in her capacity as
Commissioner of the Bureau of Internal Revenue, Respondents.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 124557

May 21, 2009

INTERNAL REVENUE, Petitioner,

vs.
COMMISSIONER OF COURT OF APPEALS, COURT OF TAX APPEALS, ADAMSON
MANAGEMENT CORPORATION, LUCAS G. ADAMSON, THERESE JUNE D.
ADAMSON, and SARA S. DE LOS REYES,Respondents.
DECISION
PUNO, C.J.:
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.
xxx 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.
xxx
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.lawphil.netIt did not state a demand or a period for payment.
Worse, it was addressed to the justice secretary, not to the taxpayers.
Xxx
Xxx That the BIR examiners Joint Affidavit attached to the Criminal Complaint contained
some details of the tax liabilities of private respondents does not ipso factomake 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 commencedwithout an assessment. xxx
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.
In the cases at bar, the Commissioner denied that she issued a formal assessment of the
tax liability of AMC, Lucas G. Adamson, Therese June D. Adamson and Sara S. de los
Reyes. She admits though that she wrote the recommendation letter22 addressed to the
Secretary of the DOJ recommending the filing of criminal complaints against AMC and the
aforecited persons for fraudulent returns and tax evasion.

The first issue is whether the Commissioners recommendation letter can be considered as
a formal assessment of private respondents tax liability.

has made an inaccurate return, and the governments failure to discover the error and
promptly to assess has no connections with the commission of the crime.

In the context in which it is used in the NIRC, an assessment is a written notice and demand
made by the BIR on the taxpayer for the settlement of a due tax liability that is there
definitely set and fixed. A written communication containing a computation by a revenue
officer of the tax liability of a taxpayer and giving him an opportunity to contest or disprove
the BIR examiners findings is not an assessment since it is yet indefinite.23

G.R. No. L-35266 January 21, 1991

We rule that the recommendation letter of the Commissioner cannot be considered a formal
assessment. Even a cursory perusal of the said letter would reveal three key points:

Sabido, Sabido & Associates for private respondent.

1. It was not addressed to the taxpayers.

2. There was no demand made on the taxpayers to pay the tax liability, nor a
period for payment set therein.

COMMISSIONER OF INTERNAL REVENUE, petitioner

vs.
LIANGA BAY LOGGING CO., INC. and the COURT OF TAX APPEALS, respondents.

NARVASA, J.:p
As to the "compromise penalty" of P300.00 also sought to be imposed, there is no basis
therefor, and, as the Court of Tax Appeals finally declares, "the imposition of the same
without the conformity of the taxpayer is illegal and unauthorized (Coll. v. U.S.T., 104 Phil.
1062; Phil. Int. Fair v. Coll., G.R. Nos. L-12928 & L-12932, March 31, 1962)."

3. The letter was never mailed or sent to the taxpayers by the Commissioner.
In fine, the said recommendation letter served merely as the prima facie basis for filing
criminal informations that the taxpayers had violated Section 45 (a) and (d), and 110, in
relation to Section 100, as penalized under Section 255, and for violation of Section 253, in
relation to Section 252 9(b) and (d) of the Tax Code.24
The next issue is whether the filing of the criminal complaints against the private
respondents by the DOJ is premature for lack of a formal assessment.

[G.R. No. 147188. September 14, 2004]

COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. THE ESTATE OF BENIGNO
P. TODA, JR., Represented by Special Co-administrators Lorna Kapunan and
Mario Luza Bautista, respondents.

xxx
DECISION
The law is clear. When fraudulent tax returns are involved as in the cases at bar, a
proceeding in court after the collection of such tax may be begun without assessment. xxx
Thus, the applicability of Ungab v. Cusi25 is evident to the cases at bar. In this seminal case,
this Court ruled that there was no need for precise computation and formal assessment in
order for criminal complaints to be filed against him. It quoted Mertens Law of Federal
Income Taxation, Vol. 10, Sec. 55A.05, p. 21, thus:
An assessment of a deficiency is not necessary to a criminal prosecution for willful attempt
to defeat and evade the income tax. A crime is complete when the violator has knowingly
and willfully filed a fraudulent return, with intent to evade and defeat the tax. The
perpetration of the crime is grounded upon knowledge on the part of the taxpayer that he

DAVIDE, JR., C.J.:

xxx
Tax avoidance and tax evasion are the two most common ways used by taxpayers in
escaping from taxation. Tax avoidance is the tax saving device within the means sanctioned
by law. This method should be used by the taxpayer in good faith and at arms length. Tax
evasion, on the other hand, is a scheme used outside of those lawful means and when
availed of, it usually subjects the taxpayer to further or additional civil or criminal liabilities.[23]

Tax evasion connotes the integration of three factors: (1) the end to be
achieved, i.e., the payment of less than that known by the taxpayer to be legally due, or the
non-payment of tax when it is shown that a tax is due; (2) an accompanying state of mind
which is described as being evil, in bad faith, willfull,or deliberate and not accidental;
and (3) a course of action or failure of action which is unlawful.[24]

When the late Toda undertook and agreed to hold the BUYER and Cibeles free from
any all income tax liabilities of Cibeles for the fiscal years 1987, 1988, and 1989, he
thereby voluntarily held himself personally liable therefor. Respondent estate cannot,
therefore, deny liability for CICs deficiency income tax for the year 1989 by invoking the
separate corporate personality of CIC, since its obligation arose from Todas contractual
undertaking, as contained in the Deed of Sale of Shares of Stock.

Xxx
G.R. No. L-22356
The scheme resorted to by CIC in making it appear that there were two sales of the
subject properties, i.e., from CIC to Altonaga, and then from Altonaga to RMI cannot be
considered a legitimate tax planning. Such scheme is tainted with fraud.
Fraud in its general sense, is deemed to comprise anything calculated to deceive,
including all acts, omissions, and concealment involving a breach of legal or equitable duty,
trust or confidence justly reposed, resulting in the damage to another, or by which an undue
and unconscionable advantage is taken of another.[30]

REPUBLIC OF THE PHILIPPINES, plaintiff-appellant,

vs.
PEDRO B. PATANAO, defendant-appellee.
Office of the Solicitor General Arturo A. Alafriz, Solicitor A. B. Afurong and L. O. Gal-lang for
plaintiff-appellant.
Tranquilino O. Calo, Jr. for defendant-appellee.

xxx The incidence of taxation depends upon the substance of a transaction. xxx

ANGELES, J.:

The two sale transactions should be treated as a single direct sale by CIC to RMI.xxx

xxx

Has the period of

assessment prescribed?
No. Section 269 of the NIRC of 1986 (now Section 222 of the Tax Reform Act of 1997)
read:
Put differently, in cases of (1) fraudulent returns; (2) false returns with intent to evade
tax; and (3) failure to file a return, the period within which to assess tax is ten years from
discovery of the fraud, falsification or omission, as the case may be.
Is respondent Estate liable
for the 1989 deficiency
income tax of Cibeles
Insurance Corporation?

July 21, 1967

In applying the principle underlying the civil liability of an offender under the Penal Code to a
case involving the collection of taxes, the court a quo fell into error. The two cases are
circumscribed by factual premises which are diametrically opposed to each either, and are
founded on entirely different philosophies. Under the Penal Code the civil liability is incurred
by reason of the offender's criminal act. Stated differently, the criminal liability gives birth to
the civil obligation such that generally, if one is not criminally liable under the Penal Code,
he cannot become civilly liable thereunder. The situation under the income tax law is the
exact opposite. Civil liability to pay taxes arises from the fact, for instance, that one has
engaged himself in business, and not because of any criminal act committed by him. The
criminal liability arises upon failure of the debtor to satisfy his civil obligation. The incongruity
of the factual premises and foundation principles of the two cases is one of the reasons for
not imposing civil indemnity on the criminal infractor of the income tax law. Another reason,
of course, is found in the fact that while section 73 of the National Internal Revenue Code
has provided the imposition of the penalty of imprisonment or fine, or both, for refusal or
neglect to pay income tax or to make a return thereof, it failed to provide the collection of
said tax in criminal proceedings. The only civil remedies provided, for the collection of
income tax, in Chapters I and II, Title IX of the Code and section 316 thereof, are distraint of
goods, chattels, etc. or by judicial action, which remedies are generally exclusive in the
absence of a contrary intent from the legislator. (People vs. Arnault, G.R. No. L-4288,
November 20, 1952; People vs. Tierra, G.R. Nos. L-17177-17180, December 28, 1964)
Considering that the Government cannot seek satisfaction of the taxpayer's civil liability in a
criminal proceeding under the tax law or, otherwise stated, since the said civil liability is not

deemed included in the criminal action, acquittal of the taxpayer in the criminal proceeding
does not necessarily entail exoneration from his liability to pay the taxes. It is error to hold,
as the lower court has held, that the judgment in the criminal cases Nos. 2089 and 2090
bars the action in the present case. The acquittal in the said criminal cases cannot operate
to discharge defendant appellee from the duty of paying the taxes which the law requires to
be paid, since that duty is imposed by statute prior to and independently of any attempts by
the taxpayer to evade payment. Said obligation is not a consequence of the felonious acts
charged in the criminal proceeding, nor is it a mere civil liability arising from crime that could
be wiped out by the judicial declaration of non-existence of the criminal acts charged.
(Castro vs. The Collector of Internal Revenue, G.R. No. L-12174, April 20, 1962).