Case Digest (G.R. No. 197590)
Facts:
Bureau of Internal Revenue v. Court of Appeals; Spouses Antonio Villan Manly and Ruby Ong Manly, G.R. No. 197590, November 24, 2014, Supreme Court Second Division, Del Castillo, J., writing for the Court.
The petitioner is the Bureau of Internal Revenue (BIR) represented by the Commissioner of Internal Revenue; the respondents are spouses Antonio Villan Manly (a stockholder and Executive Vice‑President of Standard Realty Corporation and a lessor) and Ruby Ong Manly (his wife). On April 27, 2005, the BIR issued Letter of Authority No. 2001 00012387 authorizing an investigation of the spouses’ internal revenue tax liabilities for taxable year 2003 and prior years. On June 6, 2005 the BIR requested documentary proof of the source of the spouses’ cash purchase of a Tagaytay log cabin (256 sqm; acquisition cost P17,511,010). The spouses did not comply.
On June 23, 2005 revenue officers executed a Joint Affidavit detailing Antonio’s declared compensation and rental net profits for 1998–2003 and listing substantial cash acquisitions (the Tagaytay house, a Toyota RAV4 and a Toyota Prado). The officers concluded that returns for 2000, 2001 and 2003 were underdeclared and, because the underdeclaration exceeded 30% of reported income, constituted prima facie evidence of fraud under Section 248(B) NIRC; they recommended criminal charges under Sections 254 and 255 NIRC.
State Prosecutor Ma. Cristina A. Montera‑Barot, in I.S. No. 2005‑573, issued a Resolution (Aug. 31, 2006) recommending prosecution for three counts each under Sections 254 and 255. Her denial of the spouses’ motion for reconsideration was dated Nov. 29, 2007. The spouses appealed to the Secretary of Justice; Acting Justice Secretary Agnes Devanadera reversed the State Prosecutor on July 27, 2009, finding no willful attempt to evade tax, faulting the BIR for not specifying the amount of tax due or the likely source of income, and noting the absence of a deficiency assessment; she directed the Information’s withdrawal.
The BIR filed a Petition for Certiorari with the Court of Appeals (CA) alleging grave abuse by Acting Secretary Devanadera. The CA dismissed the petition and affirmed the Secretary’s Resolution on Oct. 28, 2010, holding that the BIR failed to allege the exact amount of tax due and to show sufficient proof of the likely source of income; it stated that proof a tax is due must precede prosecution for tax evasion. The CA denied reconsideration by Resolution dated May 10, 2011.
Petitioner then filed a Petition for Certiorari under Rule 65 with the Supreme Court, alleging the CA gravely abused it...(Pro-only)
Issues:
- Was a Petition for Certiorari under Rule 65 proper, i.e., did the Court of Appeals commit grave abuse of discretion warranting Rule 65 relief?
- Did the BIR need a prior deficiency assessment or a categorical allegation of the exact tax amount before prosecuting respondents for tax evasion under Sections 254 and 255, NIRC?
- Did the BIR present sufficient proof of a likely source of the spouses’ unreported ...(Pro-only)
Ruling:
- (Pro-only)
Ratio:
- (Pro-only)
Doctrine:
- (Pro-only)