DIGESTS
Statutory Offenses & Penalties
Rationale for the imposition of interest on the tax due.
The imposition of the monthly interest was considered as not constituting a penalty “but a just compensation to the state for the delay in paying the tax, and for the concomitant use by the taxpayer of funds that rightfully should be in the government’s hands ….”
What is therefore sought to be avoided is for the taxpayer to make use of funds that should have been paid to the government.
~~~Commissioner of Internal Revenue vs. Itogon-Suyoc Mines, Inc., et al. (G.R. No. L-25299, 29 July 1969, En Banc, J. Fernando)
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Application of Sections 248(A)(3) and 249 of the NIRC of 1997.
It would appear that, as early as 23 September 1991, the estate already received a pre-assessment notice indicating a deficiency estate tax of P538,509.50. Within the ten-day period given in the pre-assessment notice, respondent Commissioner received a letter from petitioner expressing the latter’s readiness to pay the basic deficiency estate tax of P538,509.50 as soon as the trial court would have approved the withdrawal of that sum from the estate but requesting that the surcharge, interests and penalties be waived. On 04 October 1991, however, petitioner received from the Commissioner notice insisting payment of the tax due on or before the lapse of thirty (30) days from receipt thereof. The deficiency estate tax of P538,509.50 was not paid until 19 December 1991.
The delay in the payment of the deficiency tax within the time prescribed for its payment in the notice of assessment justifies the imposition of a 25% surcharge in consonance with Section 248A(3) of the Tax Code. The basic deficiency tax in this case being P538,509.50, the twenty-five percent thereof comes to P134,627.37. Section 249 of the Tax Code states that any deficiency in the tax due would be subject to interest at the rate of twenty percent (20%) per annum, which interest shall be assessed and collected from the date prescribed for its payment until full payment is made. The computation of interest by the CTA –
“Deficiency estate tax x Interest Rate x Terms
P538,509.5 20% per annum 11/2 mo./12 mos
(11/04/91 to 12/19/91)
= P13,462.74″
conforms with the law, i.e., computed on the deficiency tax from the date prescribed for its payment until it is paid.
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When the 25% surcharge and 20% interest per annum may not be imposed.
The CIR contends that a 25% surcharge and a 20% interest per annum must be imposed upon Petron for respondent’s excise tax liabilities as mandated under Sections 248 and 249 of the NIRC. Petitioner considers the tax returns filed by respondent for the years 1995 to 1998 as fraudulent on the basis of the post-audit finding that the TCCs were void. It argues that the prescriptive period within which to lawfully assess Petron for its tax liabilities has not prescribed under Section 222 (a) of the Tax Code. The CIR explains that respondent’s assessment on 30 January 2002 of respondent’s deficiency excise tax for the years 1995 to 1998 was well within the ten-year prescription period.
In the light of the main ruling in this case, we affirm the CTA En Banc Decision finding Petron to be an innocent transferee for value of the subject TCCs. Consequently, the Tax Returns it filed for the years 1995 to 1998 are not considered fraudulent. Hence, the CIR had no legal basis to assess the excise taxes or any penalty surcharge or interest thereon, as respondent had already paid the appropriate excise taxes using the subject TCCs.
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The 50% surcharge is not a penalty.
Additions of this kind (i.e., the 50% surcharge) to the maintain are not penalties but civil administrative sanctions, provided primarily as a safeguard for the protection of the state revenue and to reimburse the government for the heavy expense of investigation and the loss resulting from the taxpayer’s fraud. This is made plain by the fact that such surcharges are enforceable, like the primary tax itself, by distraint or civil suit.
~~~Castro vs. The Collector of Internal Revenue (G.R. No. L-12174, 26 April 1962, En Banc, J. J.B.L. Reyes)
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Acquittal does not operate tp discharge the taxpayer from the duty to pay the tax.
The acquittal in the criminal case could not operate to discharge petitioner from the duty to pay the tax, since that duty is imposed by statute prior to and independently of any attempts on the part of the taxpayer to evade payment. The obligation to pay the tax is not a mere consequence of the felonious acts charged in the information, nor is it a mere civil liability derived from crime that would be wiped out by the judicial declaration that the criminal acts charged did not exist.
~~~Castro vs. The Collector of Internal Revenue (G.R. No. L-12174, 26 April 1962, En Banc, J. J.B.L. Reyes)
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The civil action filed by a taxpayer to question an FDDA is not deemed instituted with the criminal case for tax evasion filed by the government; Distinction between a tax evasion (criminal) case, and petition for review to assail an FDDA.
Rule 9, Section 11 of A.M. No. 05-11-07-CTA, otherwise known as the RRCTA, states that:
SEC. 11. Inclusion of civil action in criminal action. – In cases within the jurisdiction of the Court, the criminal action and the corresponding civil action for the recovery of civil liability for taxes and penalties shall be deemed jointly instituted in the same proceeding. The filing of the criminal action shall necessarily carry with it the filing of the civil action. No right to reserve the filing of such civil action separately from the criminal action shall be allowed or recognized.
Petitioner claimed that by virtue of the above provision, the civil aspect of the criminal case, which is the Petition for Review Ad Cautelam, is deemed instituted upon the filing of the criminal action. Thus, the CTA had long acquired jurisdiction over the civil aspect of the consolidated criminal cases. Therefore, the CTA erred in dismissing the case.
We do not agree.
Rule 111, Section 1(a) of the Rules of Court provides that what is deemed instituted with the criminal action is only the action to recover civil liability arising from the crime. Civil liability arising from a different source of obligation, such as when the obligation is created by law, such civil liability is not deemed instituted with the criminal action.
It is well-settled that the taxpayer’s obligation to pay the tax is an obligation that is created by law and does not arise from the offense of tax evasion, as such, the same is not deemed instituted in the criminal case.
In the case of Republic of the Philippines v. Patanao [127 Phil. 105 (1967)], We held that:
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. x x x 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. x x x. (Citations omitted and emphasis ours)
Further, in a more recent case of Proton Pilipinas Corp. v. Republic of the Phils., We ruled that:
While it is true that according to the aforesaid Section 4, of Republic Act No. 8249, the institution of the criminal action automatically carries with it the institution of the civil action for the recovery of civil liability, however, in the case at bar, the civil case for the collection of unpaid customs duties and taxes cannot be simultaneously instituted and determined in the same proceedings as the criminal cases before the Sandiganbayan, as it cannot be made the civil aspect of the criminal cases filed before it. It should be borne in mind that the tax and the obligation to pay the same are all created by statute; so are its collection and payment governed by statute. The payment of taxes is a duty which the law requires to be paid. 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. Hence, the payment and collection of customs duties and taxes in itself creates civil liability on the part of the taxpayer. Such 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. (Citations omitted and emphasis ours)
Under Sections 254 and 255 of the NIRC, the government can file a criminal case for tax evasion against any taxpayer who willfully attempts in any manner to evade or defeat any tax imposed in the tax code or the payment thereof. The crime of tax evasion is committed by the mere fact that the taxpayer knowingly and willfully filed a fraudulent return with intent to evade and defeat a part or all of the tax. It is therefore not required that a tax deficiency assessment must first be issued for a criminal prosecution for tax evasion to prosper.
While the tax evasion case is pending, the BIR is not precluded from issuing a final decision on a disputed assessment, such as what happened in this case. In order to prevent the assessment from becoming final, executory and demandable, Section 9 of RA No. 9282 allows the taxpayer to file with the CTA, a Petition for Review within 30 days from receipt of the decision or the inaction of the respondent.
The tax evasion case filed by the government against the erring taxpayer has, for its purpose, the imposition of criminal liability on the latter. While the Petition for Review filed by the petitioner was aimed to question the FDDA and to prevent it from becoming final. The stark difference between them is glaringly apparent. As such, the Petition for Review Ad Cautelam is not deemed instituted with the criminal case for tax evasion.
In fact, in the Resolution dated June 6, 2012, the CTA recognized the separate and distinct character of the Petition for Review from the criminal case, to wit:
As regards, [petitioner’s] Urgent Motion (With Leave of Court for Confirmation that the Civil Action for Recovery of Civil Liability for Taxes and Penalties is Deemed Instituted in the Consolidated Criminal Cases) filed on May 30, 2012, the same is hereby GRANTED. The civil action for recovery of the civil liabilities of [petitioner] for taxable year 2008 stated in the [FDDA] dated May 18, 2012 is DEEMED INSTITUTED with the instant consolidated criminal cases, without prejudice to the right of the [petitioner] to avail of whatever additional legal remedy he may have, to prevent the said FDDA from becoming final and executory for taxable year 2008. (Emphasis ours)
In the said resolution, what is deemed instituted with the criminal action is only the government’s recovery of the taxes and penalties relative to the criminal case. The remedy of the taxpayer to appeal the disputed assessment is not deemed instituted with the criminal case. To rule otherwise would be to render nugatory the procedure in assailing the tax deficiency assessment.
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Application of Section 281 of the NIRC of 1997 (Prescription for Violations of any Provision of this Code).
Petitioner also asserts that the offense has prescribed. Petitioner invokes Section 340 (now 281 of 1997 NIRC) of the Tax Code which provides that violations of any provision of the Code prescribe in five (5) years. Petitioner asserts that in this case, it began to run in 1979, when she failed to pay the correct corporate tax due during that taxable year. Hence, when the BIR instituted criminal proceedings on June 8, 1989, by filing a complaint for violation of the Tax Code with the Department of Justice for preliminary investigation it was beyond the prescriptive period of five (5) years. At most, the BIR had until 1984 to institute criminal proceedings.
On the other hand, the Solicitor General avers that the information for violation of the Tax Code was filed within the prescriptive period of five (5) years provided in Section 340 (now 281 in 1997 NIRC) of the Code. It is only when the assessment has become final and unappealable that the five (5) year period commences to run. A notice of assessment was issued on July 16, 1984. When petitioner failed to question or protest the deficiency assessment thirty (30) days therefrom, or on August 16, 1984, it became final and unappealable. Consequently, it was from this period that the prescriptive period of five (5) years commenced. Thus, the complaint filed with the DOJ on June 8, 1989 was within the prescribed period.
We agree with the Solicitor General that the offense has not prescribed. Petitioner was charged with failure to pay deficiency income tax after repeated demands by the taxing authority. In Lim, Sr. v. Court of Appeals [190 SCRA 616 (1990)], we stated that by its nature the violation could only be committed after service of notice and demand for payment of the deficiency taxes upon the taxpayer. Hence, it cannot be said that the offense has been committed as early as 1980, upon filing of the income tax return. This is so because prior to the finality of the assessment, the taxpayer has not committed any violation for nonpayment of the tax. The offense was committed only after the finality of the assessment coupled with taxpayer’s willful refusal to pay the taxes within the allotted period. In this case, when the notice of assessment was issued on July 16, 1984, the taxpayer still had thirty (30) days from receipt thereof to protest or question the assessment. Otherwise, the assessment would become final and unappealable. As he did not protest, the assessment became final and unappealable on August 16, 1984. Consequently, when the complaint for preliminary investigation was filed with the DOJ on June 8, 1989, the criminal action was instituted within the five (5) year prescriptive period.
~~~Tupaz vs. Ulep, et al. (G.R. No. 127777, 1 October 1999, 1st Div., J. Pardo)
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