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.
G.R. No. 124557. May 21, 2009.*
COMMISSIONER OF INTERNAL REVENUE, petitioner, vs.COURT OF
APPEALS, COURT OF TAX APPEALS, ADAMSON MANAGEMENT
CORPORATION, LUCAS G. ADAMSON, THERESE JUNE D.
ADAMSON, and SARA S. DE LOS REYES, respondents.
Taxation; Assessments; Words and Phrases; In the context in which it is used in the National Internal
Revenue Code (NIRC), an assessment is a written notice and demand made by the Bureau of Internal
Revenue (BIR) on the taxpayer for the settlement of a due tax liability that is there denitely set and xeda
written communication containing a computation by a revenue ofcer of the tax liability of a taxpayer and
giving him an opportunity to contest or disprove the BIR examiners ndings is not an assessment since it is
yet indenite; A recommendation letter of the Commissioner to the Department of Justice (DOJ) Secretary
recommending the ling of a criminal complaint against a taxpayer for fraudulent returns and tax evasion
cannot be considered a formal assessment.The rst issue is whether the Commissioners recommendation
letter can be considered as a formal assessment of private respondents tax liability. 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 denitely set and xed. A written communication containing a
computation by a revenue ofcer of the tax liability of a taxpayer and giving him an opportunity to contest or
disprove the BIR examiners ndings is not an assessment since it is yet indenite. We rule that the
recommendation letter of the Commissioner cannot be considered a
_______________
* FIRST DIVISION.
28
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SUPREME COURT REPORTS ANNOTATED
Adamson vs. Court of Apepals
formal assessment. Even a cursory perusal of the said letter would reveal three key points: 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. 3. The letter was never mailed or sent to the taxpayers by the Commissioner.
In ne, the said recommendation letter served merely as the prima facie basis for ling 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.
Same; Same; When fraudulent tax returns are involved, a proceeding in court after the collection of
such tax may be begun without assessment; There is no need for precise computation and formal assessment
in order for criminal complaints to be led against a tax evader.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. Here, the private respondents had already led the capital gains tax return and
the VAT returns, and paid the taxes they have declared due therefrom. Upon investigation of the examiners of
the BIR, there was a preliminary nding of gross discrepancy in the computation of the capital gains taxes
due from the sale of two lots of AAI shares, rst to APAC and then to APAC Philippines, Limited. The
examiners also found that the VAT had not been paid for VAT-liable sale of services for the third and fourth
quarters of 1990. Arguably, the gross disparity in the taxes due and the amounts actually declared by the
private respondents constitutes badges of fraud. Thus, the applicability of Ungab v. Cusi (97 SCRA 877
[1980]) 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 led against him. It quoted
Mertens Law of Federal Income Taxation, Vol. 10, Sec. 55A.05, p. 21, thus: An assessment of a deciency 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 led 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
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.
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 an appeal only
from a
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VOL. 588, MAY 21, 2009
29
Adamson vs. Court of Apepals
nal decision or assessment of the Commissioner, or in cases where the Commissioner has not acted
within the period prescribed by the National Internal Revenue Code (NIRC).These laws have expanded
the jurisdiction of the CTA. However, they did not change the jurisdiction of the CTA to entertain an appeal
only from a nal decision or assessment of the Commissioner, or in cases where the Commissioner has not
acted within the period prescribed by the NIRC. In the cases at bar, the Commissioner has not issued an
assessment of the tax liability of private respondents.
PETITIONS for review on certiorari of the decisions and resolution of the
Court of Appeals.
The facts are stated in the opinion of the Court.
Abello, Concepcion, Regala & Cruz for Lucas G. Adamson, et al.
Redentor G. Liboro for petitioners.
PUNO, C.J.:
Before the Court are the consolidated cases of G.R. No. 120935and
G.R. No. 124557.
G.R. No. 120935 involves a petition for review on certiorariled by
petitioners LUCAS G. ADAMSON, THERESE JUNE D. ADAMSON,
and SARA S. DE LOS REYES (private respondents), in their respective
capacities as president, treasurer and secretary of Adamson Management
Corporation (AMC) against then Commissioner of Internal Revenue
Liwayway Vinzons-Chato (COMMISSIONER), under Rule 45 of the
Revised Rules of Court. They seek to review and reverse the Decision
promulgated on March 21, 1995 and Resolution issued on July 6, 1995 of
the Court of Appeals in CA-G.R. SP No. 35488 (Liwayway Vinzons-Chato,
et al. v. Hon. Judge Erna Falloran-Aliposa, et al.).
G.R. No. 124557 is a petition for review on certiorari led by the
Commissioner, assailing the Decision dated March 29, 1996 of the Court
of Appeals in CA-G.R. SP No. 35520, titled Commissioner of Internal
Revenue v. Court of Tax Appeals, Adamson Management Corporation,
Lucas G. Adamson, Therese June D.
30
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SUPREME COURT REPORTS ANNOTATED
Adamson vs. Court of Apepals
Adamson and Sara S. de los Reyes. In the said Decision, the Court of
Appeals upheld the Resolution promulgated on September 19, 1994 by the
Court of Tax Appeals (CTA) in C.T.A. Case No. 5075 (Adamson
Management Corporation, Lucas G. Adamson, Therese Adamson and Sara
de los Reyes v. Commissioner of Internal Revenue).
The facts, as culled from the ndings of the appellate court, follow:
On June 20, 1990, Lucas Adamson and AMC sold 131,897 common
shares of stock in Adamson and Adamson, Inc. (AAI) to APAC Holding
Limited (APAC). The shares were valued at P7,789,995.00.
1
On June 22,
1990, P159,363.21 was paid as capital gains tax for the transaction.
On October 12, 1990, AMC sold to APAC Philippines, Inc. another
229,870 common shares of stock in AAI for P17,718,360.00. AMC paid
the capital gains tax of P352,242.96.
On October 15, 1993, the Commissioner issued a Notice of Taxpayer
to AMC, Lucas G. Adamson, Therese June D. Adamson and Sara S. de los
Reyes, informing them of deciencies on their payment of capital gains
tax and Value Added Tax (VAT). The notice contained a schedule for
preliminary conference.
The events preceding G.R. No. 120935 are the following:
On October 22, 1993, the Commissioner led with the Department of
Justice (DOJ) her Afdavit of Complaint
2
against AMC, Lucas G.
Adamson, Therese June D. Adamson and Sara S. de los Reyes for
violation of Sections 45 (a) and (d),
3
and
_______________
1 Lucas G. Adamson and AMC v. CA and APAC Holding Limited, G.R. No. 106879, May 27, 1994, 232 SCRA 602.
2 I.S. No. 93-581.
3 The NIRC of the Philippines, Annotated, 16th and Revised Edition, Nolledo, J. and Nolledo, M. (1993), p. 414.
Section 45.Corporation Returns.
(A) Requirements.Every corporation, subject to the tax herein imposed, except foreign corporations not engaged in trade or
business in the Philippines shall render, in duplicate, a true and accurate quarterly income tax return and nal or adjustment return in
accordance with the provisions of Chapter IX of this Title. The return shall be led by the president, vice-
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VOL. 588, MAY 21, 2009
31
Adamson vs. Court of Apepals
110,
4
in relation to Section 100,
5
as penalized under Section
_______________
president or other principal ofcer, and shall be sworn to by such ofcer and by the treasurer or assistant treasurer.
x x x
(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 stock not traded thru a local stock exchange as prescribed under Sections 24 (e) 2 A, 25 (a) (6) (C) (i), 25(b)(5)
(C) (i), shall le a return within thirty (30) days after each transactions and a nal consolidated return of all transactions during the
taxable year on or before the fteenth (15th) day of the fourth (4th) month following the close of the taxable year.
4SECTION 110.Return and Payment of Value-Added Tax.
(A) Where to File the Return and Pay the Tax.Every person subject to value-added tax shall le a quarterly return of his gross
sales or receipts and pay the tax due thereon to a bank duly accredited by the Commissioner located in the revenue district where
such person is registered or required to be registered. However, in cases where there are no duly accredited agent banks within the
city or municipality, the return shall be led and any amount due shall be paid to any duly accredited bank within the district, or to
the Revenue District Ofcer, Collection Agent or duly authorized Treasurer of the city or municipality where such taxpayer has his
principal place of business. Only one consolidated return shall be led by the taxpayer for all the branches and lines of business
subject to value-added tax. If no tax is payable because the amount of input tax and any amount authorized to be offset against the
output tax is equal to or is in excess of the output tax due on the return, the taxpayer shall le the return with the Revenue District
Ofcer, Collection Agent or authorized municipal treasurer where the taxpayers principal place of business is located.
(B) Time for ling of return and payment of tax.The return shall be led and the tax paid within 20 days following the end of
each quarter specically prescribed for a VAT-registered person under regulations to be promulgated by the Secretary of Finance:
Provided, however, That any person whose registration is cancelled in accordance with paragraph (e) of Section 107 shall le a return
within 20 days from the cancellation of such registration.
(C) Initial returns.The Commissioner may prescribe an initial taxable period for any VAT-registered person for his rst return,
which in no case shall exceed 5 months.
5 Supra note 3 at pp. 588-590.
Section 100.Value-Added Tax on Sale of Goods.
(A) Rate and Base of Tax.There shall be levied, assessed and collected on every sale, barter or exchange of goods, a value-
added tax equivalent to 10% of the gross 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 following sales by VAT-registered persons shall be subject to zero
percent (0%):
(1) Export sales; and
(2) Sales to persons or entities whose exemption under special laws or international
agreements to which the Philippines is a signatory effectively subjects such sales to
zero rate.
Export Sales means the sale and shipment or exportation of goods from the Philippines to a foreign country, irrespective of any
shipping arrangement that may be agreed upon which may inuence or determine the transfer of ownership of the goods so exported,
or foreign currency denominated sales. Foreign currency denominated sales, means sales to nonresidents of goods assembled or
manufactured in the Philippines, for delivery to residents in the
32
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SUPREME COURT REPORTS ANNOTATED
Adamson vs. Court of Apepals
255,
6
and for violation of Section 253,
7
in relation to Sec-
_______________
Philippines and paid for in convertible foreign currency remitted through the banking system in the Philippines.
(B) Transactions Deemed Sale.The following transactions shall be deemed sale:
(1) Transfer, use or consumption not in the course of business of goods originally in-
tended for sale or for use in the course of business;
(2) Distribution or transfer to:
(a) Shareholders or investors as share in the prots of the registered person; or
b) Creditors in payment of debt;
(3) Consignment of goods if actual sale is not made within sixty (60) days following the date such goods were
consigned;
(4) Retirement from or cessation of business, with respect to inventories of taxable goods existing as of such
retirement or cessation.
(C) Changes in or Cessation of Status of a VAT-registered Person.The tax imposed in paragraph (a) of this Section shall
also apply to goods disposed of or existing as of a certain date if under circumstances to be prescribed in Regulations to be
promulgated by the Secretary of Finance, the status of a person as a VAT-registered person changes or is terminated.
(D) Determination of the Tax.
(1) Tax billed as a separate item in the invoice.If the tax is billed as a separate item in the invoice, the tax shall be
based on the gross selling price, excluding the tax. Gross selling price means the total amount of money or its
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 value-added tax. The excise tax, if any, on such goods or properties shall form part of the gross
selling price.
(2) Tax not billed separately or is billed erroneously in the invoice.In case the tax is not billed separately or is
billed erroneously in the invoice, the tax shall be determined by multiplying the gross selling price, including th amount
intended by the seller to cover the tax or the tax billed erroneously, by the factor 1/11 or such factor as may be prescribed
by regulations in case of persons partially exempt under special laws.
(3) Sales Returns, Allowances and Sales Discounts.The value of goods sold and subsequently returned or for
which allowances were granted by a VAT-registered person may be deducted from the gross sales or receipts for the
quarter in which a refund is made or a credit memorandum or refund is issued. Sales discount granted and indicated in the
invoice at the time of sale may be excluded from the gross sales within the same quarter.
(4) Authority of the Commissioner to Determine the Appropriate Tax Base.The Commissioner shall, by
regulations, determine the appropriate tax 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 unreasonably lower than the actual market value.
6 Id., at p. 1022.
Section 255.Penal Liability of Corporations.Any corporation, association or general co-partnership liable for any
of the acts or omissions penalized under this Code, in addition to the penalties imposed herein upon the responsible corporate
ofcers, partners or employees, shall, upon conviction, for each act or omission be ned for not less than ten thousand pesos but not
more than one hundred thousand pesos.
7Id., at p. 1021.
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Adamson vs. Court of Apepals
tion 252 (b) and (d) of the National Internal Revenue Code (NIRC).
8
AMC, Lucas G. Adamson, Therese June D. Adamson and Sara S. de los
Reyes led with the DOJ a motion to suspend proceedings on the ground
of prejudicial question, pendency of a civil case with the Supreme Court,
and pendency of their letter-request for re-investigation with the
Commissioner. After the preliminary investigation, State Prosecutor
Alfredo P. Agcaoili found probable cause. The Motion for Reconsideration
against the ndings of probable cause was denied by the prosecutor.
On April 29, 1994, Lucas G. Adamson, Therese June D. Adamson and
Sara S. de los Reyes were charged before the Regional Trial Court (RTC)
of Makati, Branch 150 in Criminal Case Nos. 94-1842 to 94-1846. They
led a Motion to Dismiss or Suspend the Proceedings. They invoked the
grounds that there was yet no nal assessment of their tax liability, and
there were still pending relevant Supreme Court and CTA cases. Initially,
the trial court denied the motion. A Motion for Reconsideration was
however led, this time assailing the trial courts lack of jurisdiction over
the nature of the subject cases. On August 8, 1994, the trial court granted
the Motion. It ruled that the complaints for tax evasion led by the
Commissioner should be regarded as a decision of the Commissioner
regarding the tax liabilities of Lucas G. Adamson, Therese June D.
Adamson and Sara S. de los Reyes, and appealable to the CTA. It further
held that the said cases cannot
_______________
Section 253. Attempt to evade or defeat tax.Any person who willfully attempts in any manner to evade or defeat any tax
imposed under this Code or the payment thereof shall, in addition to other penalties provided by law, upon conviction thereof, be
ned not more than ten thousand pesos or imprisoned for not more than two years, or both.
8 Id., pp. 1020-1021.
Section 252.General provisions.
x x x
(b) Any person who willfully aids or abets in the commission of a crime penalized herein or who causes the commission of any
such offense by another, shall be liable in the same manner as the principal.
x x x
(d) In the case of associations, partnerships, or corporations, the penalty shall be imposed on the partner, president, general
manager, branch manager, treasurer, ofcer-in-charge, and employees responsible for the violation.
34
34
SUPREME COURT REPORTS ANNOTATED
Adamson vs. Court of Apepals
proceed independently of the assessment case pending before the CTA,
which has jurisdiction to determine the civil and criminal tax liability of
the respondents therein.
On October 10, 1994, the Commissioner led a Petition for Review
with the Court of Appeals assailing the trial courts dismissal of the
criminal cases. She averred that it was not a condition prerequisite that a
formal assessment should rst be given to the private respondents before
she may le the aforesaid criminal complaints against them. She argued
that the criminal complaints for tax evasion may proceed independently
from the assessment cases pending before the CTA.
On March 21, 1995, the Court of Appeals reversed the trial courts
decision and reinstated the criminal complaints. The appellate court held
that, in a criminal prosecution for tax evasion, assessment of tax
deciency is not required because the offense of tax evasion is
complete or consummated when the offender has knowingly and
willfully led a fraudulent return with intent to evade the tax.
9
It ruled
that private respondents led false and fraudulent returns with intent
to evade taxes, and acting thereupon, petitioner led an Afdavit of
Complaint with the Department of Justice, without an accompanying
assessment of the tax deciency of private respondents, in order to
commence criminal action against the latter for tax evasion.
10
Private respondents led a Motion for Reconsideration, but the trial
court denied the motion on July 6, 1995. Thus, they led the petition in
G.R. No. 120935, raising the following issues:
1. WHETHER OR NOT THE RESPONDENT HONORABLE COURT OF APPEALS ERRED IN
APPLYING THE DOCTRINE INUNGAB V. CUSI (Nos. L-41919-24, May 30, 1980, 97 SCRA 877) TO
THE CASE AT BAR.
_______________
9 Rollo, p. 65.
10 Id., at p. 64.
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VOL. 588, MAY 21, 2009
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Adamson vs. Court of Apepals
2. WHETHER OR NOT AN ASSESSMENT IS REQUIRED UNDER THE SECOND CATEGORY OF
THE OFFENSE IN SECTION 253 OF THE NIRC.
3. WHETHER OR NOT THERE WAS A VALID ASSESSMENT MADE BY THE COMMISSIONER
IN THE CASE AT BAR.
4. WHETHER OR NOT THE FILING OF A CRIMINAL COMPLAINT SERVES AS AN IMPLIED
ASSESSMENT ON THE TAX LIABILITY OF THE TAXPAYER.
5. WHETHER OR NOT THE FILING OF THE CRIMINAL INFORMATION FOR TAX EVASION IN
THE TRIAL COURT IS PREMATURE BECAUSE THERE IS YET NO BASIS FOR THE CRIMINAL
CHARGE OF WILLFULL INTENT TO EVADE THE PAYMENT OF A TAX.
6. WHETHER OR NOT THE DOCTRINES LAID DOWN IN THE CASES OF YABES V. FLOJO (No.
L-46954, July 20, 1982, 115 SCRA 286) AND CIR V. UNION SHIPPING CORP. (G.R. No. 66160, May 21,
1990, 185 SCRA 547) ARE APPLICABLE TO THE CASE AT BAR.
7. WHETHER OR NOT THE COURT OF TAX APPEALS HAS JURISDICTION OVER THE
DISPUTE ON WHAT CONSTITUTES THE PROPER TAXES DUE FROM THE TAXPAYER.
In parallel circumstances, the following events preceded G.R. No.
124557:
On December 1, 1993, AMC, Lucas G. Adamson, Therese June D.
Adamson and Sara S. de los Reyes led a letter request for re-investigation
with the Commissioner of the Examiners Findings earlier issued by the
Bureau of Internal Revenue (BIR), which pointed out the tax deciencies.
On March 15, 1994 before the Commissioner could act on their letter-
request, AMC, Lucas G. Adamson, Therese June D. Adamson and Sara S.
de los Reyes led a Petition for Review with the CTA. They assailed the
Commissioners nding of tax evasion against them. The Commissioner
moved to dismiss the petition, on the ground that it was premature, as she
had not yet issued a formal assessment of the tax liability of therein
petitioners. On September 19, 1994, the CTA denied the Motion to
Dismiss. It considered the criminal complaint led by the Commissioner
with the
36
36
SUPREME COURT REPORTS ANNOTATED
Adamson vs. Court of Apepals
DOJ as an implied formal assessment, and the ling of the criminal
informations with the RTC as a denial of petitioners protest regarding the
tax deciency.
The Commissioner repaired to the Court of Appeals on the ground that
the CTA acted with grave abuse of discretion. She contended that, with
regard to the protest provided under Section 229 of the NIRC, there must
rst be a formal assessment issued by the Commissioner, and it must be in
accord with Section 6 of Revenue Regulation No. 12-85. She maintained
that she had not yet issued a formal assessment of tax liability, and the tax
deciency amounts mentioned in her criminal complaint with the DOJ
were given only to show the difference between the tax returns led and
the audit ndings of the revenue examiner.
The Court of Appeals sustained the CTAs denial of the Commissioners
Motion to Dismiss. Thus, the Commissioner led the petition for review
under G.R. No. 124557, raising the following issues:
1. WHETHER OR NOT THE INSTANT PETITION SHOULD BE DISMISSED FOR FAILURE TO
COMPLY WITH THE MANDATORY REQUIREMENT OF A CERTIFICATION UNDER OATH
AGAINST FORUM SHOPPING;
2. WHETHER OR NOT THE CRIMINAL CASE FOR TAX EVASION IN THE CASE AT BAR CAN
PROCEED WITHOUT AN ASSESSMENT;
3. WHETHER OR NOT THE COMPLAINT FILED WITH THE DEPARTMENT OF JUSTICE CAN
BE CONSTRUED AS AN IMPLIED ASSESSMENT; and
4. WHETHER OR NOT THE COURT OF TAX APPEALS HAS JURISDICTION TO ACT ON
PRIVATE RESPONDENTS PETITION FOR REVIEW FILED WITH THE SAID COURT.
The issues in G.R. No. 124557 and G.R. No. 120935 can be
compressed into three:
1. WHETHER THE COMMISSIONER HAS ALREADY RENDERED AN ASSESSMENT
(FORMAL OR OTHERWISE) OF THE
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VOL. 588, MAY 21, 2009
37
Adamson vs. Court of Apepals
TAX LIABILITY OF AMC, LUCAS G. ADAMSON, THERESE JUNE D. ADAMSON AND SARA S.
DE LOS REYES;
2. WHETHER THERE IS BASIS FOR THE CRIMINAL CASES FOR TAX EVASION TO
PROCEED AGAINST AMC, LUCAS G. ADAMSON, THERESE JUNE D. ADAMSON AND SARA S.
DE LOS REYES; and
3. WHETHER THE COURT OF TAX APPEALS HAS JURISDICTION TO TAKE
COGNIZANCE OF BOTH THE CIVIL AND THE CRIMINAL ASPECTS OF THE TAX
LIABILITY OF AMC, LUCAS G. ADAMSON, THERESE JUNE D. ADAMSON AND SARA S. DE
LOS REYES.
The case of CIR v. Pascor Realty, et al.
11
is relevant. In this case, then
BIR Commissioner Jose U. Ong authorized revenue ofcers 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 led 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 led 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 led 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
_______________
11 G.R. No. 128315, June 29, 1999, 309 SCRA 402.
38
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SUPREME COURT REPORTS ANNOTATED
Adamson vs. Court of Apepals
le an answer within thirty (30) days. The Commissioner did not le an
answer nor did she move to reconsider the resolution. Instead, the
Commissioner led 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. We held:
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 afdavit, which was executed by revenue ofcers 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 specic
denition or form of an assessment. However, the NIRC denes the specic functions and effects of an
assessment. To consider the afdavit 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 specic period. Thus, the NIRC imposes a 25 percent penalty, in addition to
the tax due, in case the taxpayer fails to pay the deciency 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
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12 Revenue Regulation No. 12-85.
13 NIRC (1997)
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VOL. 588, MAY 21, 2009
39
Adamson vs. Court of Apepals
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 le
_______________
Sec. 205.Remedies for the Collection of Delinquent Taxes.The civil remedies for the collection of internal revenue, fees, or
charges, and increment thereto resulting from delinquency shall be:
(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, and by levy upon real
property and interest in or rights to real property; and
(b) By civil or criminal action.
Either of these remedies or both simultaneously may be pursued in the discretion of the authorities charged with the collection of
such taxes: Provided, however, That the remedies of distraint and levy shall not be availed of where the amount of tax involved is not
more than One hundred pesos (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 nally decided by the Commissioner.
The Bureau of Internal Revenue shall advance the amounts needed to defray costs of collection by means of civil or criminal
action, including the preservation or transportation of personal property distrained and the advertisement and sale thereof, as well as
of real property and improvements thereon.
14 Id.
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 ling 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 led beyond the period prescribed by law, the three (3)-year period shall be counted from the day the return was led. For
purposes of this Section, a return led before the last day prescribed by law for the ling thereof shall be considered as led on such
last day.
40
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SUPREME COURT REPORTS ANNOTATED
Adamson vs. Court of Apepals
the return. Section 222,
15
on the other hand, species a period of ten years in case a fraudulent return with
intent to evade was submitted or in case of failure to le a return. Also, Section 228
16
of the same law states
that
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15 Id.
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 le a return, the tax may be
assessed, or a proceeding in court for the collection of such tax may be led 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
nal and executory, the fact of fraud shall be judicially taken cognizance of in the civil or criminal action for the
collection thereof.
(b) If before the expiration of the time prescribed in the Section 203 for the assessment of the tax, both the
Commissioner and the taxpayer have agreed in writing to its assessment after such time, the tax may be assessed within
the period agreed upon. The period so agreed upon may be extended by subsequent written agreement made before the
expiration of the period previously agreed upon.
(c) Any internal revenue tax which has been assessed within the period of limitation as prescribed in paragraph (a)
hereof may be collected by distraint or levy or by a proceeding in court within ve (5) years following the assessment of
the tax.
(d) Any internal revenue tax, which has been assessed within the period agreed upon as provided in paragraph (b)
hereinabove, may be collected by distraint or levy or by a proceeding in court within the period agreed upon writing
before the expiration of the ve (5)-year period. The period so agreed upon may be extended by subsequent written
agreements made before the expiration of the period previously agreed 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 led in accordance with the
provisions of any tax amnesty law or decree.
16 Id.
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Adamson vs. Court of Apepals
said assessment may be protested only within thirty days from receipt thereof. Necessarily, the taxpayer must
be certain that a specic 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
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Section 228.Protesting of Assessment.When the Commissioner or his duly authorized representative nds that proper taxes
should be assessed, he shall rst notify the taxpayer of his ndings: Provided, however, That a reassessment notice shall not be
required in the following cases:
(a) When the nding for any deciency tax is the result of mathematical error in the computation of the tax as
appearing on the face of the return; or
(b) When a discrepancy has been determined between the tax withheld and the amount actually remitted by the
withholding agent; or
(c) When a taxpayer who opted to claim a refund or tax credit of excess creditable withholding tax for a taxable
period was determined to have carried over and automatically applied the same amount claimed against the estimated tax
liabilities for the taxable quarter or quarters of the succeeding taxable year; or
(d) When the excise tax due on excisable articles has not been paid; 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 non-exempt persons.
The taxpayer shall be informed in writing of the law and the facts on which the assessment is made; otherwise, the assessment
shall be void.
Within a period to be prescribed by implementing rules and regulations, the taxpayer shall be required to respond to said notice. If
the taxpayer fails to respond, the Commissioner or his duly authorized representative shall issue an assessment based on his
ndings.
42
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SUPREME COURT REPORTS ANNOTATED
Adamson vs. Court of Apepals
the collector of internal revenue releases, mails or sends such notice to the taxpayer.
17
In the present case, the revenue ofcers Afdavit 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 denitions fail to advance private respondents case. That the BIR examiners Joint Afdavit
attached to the Criminal Complaint contained some details of the tax liabilities of private respondents does
notipso facto make it an assessment. The purpose of the Joint Afdavit 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 specically directed and sent to the Department of Justice and not
to private respondents shows that the intent of the commissioner was to le a criminal complaint for tax
evasion, not to issue an assessment. Although the revenue ofcers recommended the issuance of an
assessment, the commissioner opted instead to le 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 led against them, not a
notice that the Bureau of Internal Revenue had made an assessment.
Private respondents maintain that the ling of a criminal complaint must be preceded by an assessment.
This is incorrect, because Section 222 of the NIRC specically states that in cases where a false or fraudulent
return is submitted or in cases of failure to le a return such as this case, proceedings in court may be
commenced without an assessment. Further-
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17Basilan Estates v. Commissioner of Internal Revenue, No. L-22492, September 5, 1967, 21 SCRA 17.
18 Citing Philippine Law Dictionary, 2nd ed., p. 49.
19 Citing Blacks Law Dictionary, 5th ed., p. 107.
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Adamson vs. Court of Apepals