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.

The Facts

- BIR Revenue Officers examine the books of accounts and other

accounting records of Pascor Realty and Development Corporation.
(PRDC) for the years ending 1986, 1987 and 1988.
- The said examination 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.
- CIR filed a criminal complaint before the Department of Justice against
the PRDC, alleging evasion of taxes in the total amount of
P10,513,671 .00.
- Private respondents PRDC, et. al. filed an Urgent Request for
Reconsideration/Reinvestigation disputing the tax assessment and tax
liability.
- CIR denied the urgent request for reconsideration/reinvestigation of the
private respondents on the ground that no formal assessment has as
yet been issued by the Commissioner.
- Private respondents then elevated the Decision of the CIR to the Court
of Tax Appeals on a petition for review.
- CIR filed 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
no formal assessment issued against the petitioners.
- CTA denied the said motion to dismiss
- In denying the motion to dismiss filed by the CIR, the Court of Tax Appeals
stated that the criminal complaint for tax evasion is the assessment issued,
and that the letter denial of May 17, 1995 is the decision properly appealable
to the CTA.
- Petitioners are right, in claiming that the provisions of Republic Act No. 1125,
relating to exclusive appellate jurisdiction of this Court, do not, make any
mention of "formal assessment." The law merely states, that this Court has
exclusive appellate jurisdiction over decisions of the Commissioner of Internal
Revenue on disputed assessments, and other matters arising under the
National Internal Revenue Code, other law or part administered by the
Bureau of Internal Revenue Code.

As far as this Court is concerned, the amount and kind of tax due, and the
period covered, are sufficient details needed for an "assessment."

- the Court of Appeals sustained the CTA and dismissed the petition.

Hence, this recourse to this Court.

 Issue

WON the revenue officers' Affidavit-Report, which was attached to criminal revenue
Complaint filed in the Department of Justice, constituted an assessment that could be
questioned before the Court of Tax Appeals. NO

The Court's Ruling

Neither the NIRC nor the regulations governing the protest of assessments 11 provide a
specific definition or form of an assessment. However, the NIRC defines the specific
functions and effects of an assessment. 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.

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.

an assessment must be sent to and received by a taxpayer, and must demand payment
of the taxes described therein within a specific period.

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.

In the present case, the revenue officers' Affidavit 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.

Although, the BIR examiners' Joint Affidavit attached to the Criminal Complaint
contained some details of the tax liabilities of private respondents, it does not ipso
facto make 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.

WHEREFORE, the petition is hereby GRANTED. The assailed Decision is REVERSED and
SET ASIDE. CTA Case No. 5271 is likewise DISMISSED. No costs.

Additional Issues:
 Assessment Not Necessary Before Filing of Criminal Complaint

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 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. In Ungab v. Cusi,20 petitioner therein sought the dismissal of the criminal
Complaints for being premature, since his protest to the CTA had not yet been resolved. The
Court held that such protests could not stop or suspend the criminal action which was
independent of the resolution of the protest in the CTA. 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.

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.
 IN THE FULL TEXT

The petition is meritorious.

Main Issue: Assessment

Petitioner argues that the filing of the criminal complaint with the Department of Justice cannot
in any way be construed as a formal assessment of private respondents' tax liabilities. This
position is based on Section 205 of the National Internal Revenue Code 10 (NIRC), which
provides that remedies for the collection of deficient taxes may be by either civil or
criminal action. Likewise, petitioner cites Section 223(a) of the same Code, which states
that in case of failure to file a return, the tax may be assessed or a proceeding in court
may be begun without assessment.

Respondents, on the other hand, maintain that an assessment is not an action or proceeding for
the collection of taxes, but merely a notice that the amount stated therein is due as tax and that
the taxpayer is required to pay the same. Thus, qualifying as an assessment was the BIR
examiners' Joint Affidavit, which contained the details of the supposed taxes due from
respondent for taxable years ending 1987 and 1988, and which was attached to the tax evasion
Complaint filed with the DOJ. Consequently, the denial by the BIR of private respondents'
request for reinvestigation of the disputed assessment is properly appealable to the CTA.

We agree with petitioner. Neither the NIRC nor the regulations governing the protest of
assessments 11 provide a specific definition or form of an assessment. However, the
NIRC defines the specific functions and effects of an assessment. 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.

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 specific period. Thus, the NIRC
imposes a 25 percent penalty, in addition to the tax due, in case the taxpayer fails to pay
deficiency tax within the time prescribed for its payment in the notice of assessment. Likewise,
an interest of 20 percent per annum, or such higher rates as may be prescribed by rules and
regulations, is to be collected form the date prescribed for its payment until the full payment. 12

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 13 of the NIRC
provides that internal revenue taxes must be assessed within three years from the last
day within which to file the return. Section 222, 14 on the other hand, specifies a period
of ten years in case a fraudulent return with intent to evade was submitted or in case of
failure to file a return. Also, Section 228 15 of the same law states that said assessment
may be protested only within thirty days from receipt thereof. Necessarily, the taxpayer
must be certain that a specific 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 the collector of internal revenue
releases, mails or sends such notice to the taxpayer. 16

In the present case, the revenue officers' Affidavit 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. 17

Fixes the liability of the taxpayer and ascertains the facts and furnishes the
data for the proper presentation of tax rolls. 18

Even these definitions fail to advance private respondents' case. That the BIR examiners'
Joint Affidavit attached to the Criminal Complaint contained some details of the tax
liabilities of private respondents does not ipso facto make 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.

In addition, what private respondents sent to the commissioner was a motion for a
reconsideration of the tax evasion charges filed, not of an assessment,

Additional Issues:

Assessment Not Necessary Before Filing of Criminal Complaint

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 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. In Ungab v. Cusi,20 petitioner therein
sought the dismissal of the criminal Complaints for being premature, since his protest to the
CTA had not yet been resolved. The Court held that such protests could not stop or suspend
the criminal action which was independent of the resolution of the protest in the CTA.
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.

Private respondents insist that Section 222 should be read in relation to Section 255 of the
NLRC, 21 which penalizes failure to file a return. They add that a tax assessment should
precede a criminal indictment. We disagree. 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.

SO ORDERED.