G.R. No. 177279 - Commissioner of Internal Revenue vs. Gonzalez

The Commissioner of Internal Revenue (CIR) issued Letter of Authority (LA) No. 00009361 dated August 25, 2000 authorizing a tax fraud investigation of L. M. Camus Engineering Corporation (LMCEC) for taxable years 1997, 1998, and 1999. Revenue Officers under the Tax Fraud Division (TFD) conducted the audit and investigation.
The investigation was triggered by information from a confidential informant alleging substantial underdeclared income by LMCEC for the said years.

Investigation revealed substantial underdeclarations of income. The total deficiency taxes assessed amounted to Php 430,958,005.90 (Income Tax of Php 318,606,380.19; Value Added Tax (VAT) of Php 112,351,625.71).
The Preliminary Assessment Notice (PAN) was received by LMCEC on February 22, 2001. The underdeclared income by year was:

Assessment notices and formal demand letter dated August 7, 2002 were served personally on October 1, 2002; upon refusal, constructive service was effected under Revenue Regulations No. 12-99.
On May 21, 2003, the CIR referred a criminal complaint to the Secretary of Justice against LMCEC and its officers (Luis M. Camus and Lino D. Mendoza) for violations of Sections 254 and 255 of the NIRC.

LMCEC denied liability for the alleged deficiencies, asserting the case was a civil matter and the DOJ lacked jurisdiction; they challenged the validity of assessment notices citing absence of serial numbers and defects in service.
LMCEC claimed prior routine examinations and that only one examination per taxable year is allowed under the NIRC.
The company availed of tax amnesty programs: Economic Recovery Assistance Payment (ERAP) for 1998 and Voluntary Assessment Program (VAP) for 1999; for 1997, tax liabilities were terminated via a Letter of Termination dated June 1, 1999.
LMCEC contended estoppel against the CIR after availment of tax amnesty programs and argued that no tax fraud was proven or prior LA properly terminated before issuing LA No. 00009361.
It pointed out that a prior complaint for failure to obey summons (I.S. No. 00-956) was dismissed for lack of probable cause.

Petitioner asserted the case was criminal and both administrative and judicial remedies may be pursued simultaneously as provided by Section 205 of the NIRC.
On the missing control number in the assessment notices, petitioner argued it was a mere internal requirement not affecting validity. They emphasized the finality of the assessment due to LMCEC’s failure to timely protest.
The BIR maintained the investigations complied with procedures including Revenue Memorandum Orders requiring prior preliminary investigations before issuing LA in tax fraud cases.
The "immunity from audit" under ERAP and VAP does not bar tax fraud investigations or subsequent assessments; the programs exclude withholding tax or do not cover all tax types.
The petitioner denied forum shopping, clarifying the separate nature of I.S. No. 00-956 and the present case.
Petitioner invoked Section 5 of the NIRC authorizing information gathering from third parties and support from such informant reports.

Chief State Prosecutor found no probable cause citing LMCEC’s payments under ERAP, VAP, issuance of immunity certificates, invalidity of unnumbered assessment notices, absence of prior determination of fraud, and risk of “fishing expedition.”
The Secretary of Justice affirmed the dismissal, echoing findings that tax liabilities were settled or terminated, fraud was unproven, procedural irregularities existed, one examination rule under Section 235 favored LMCEC, and petitioner committed forum shopping.

The CA upheld the Secretary of Justice’s dismissal of the complaint, agreeing that the evidence was insufficient to establish probable cause for criminal prosecution.

Petitioner alleged grave abuse of discretion by the Secretary of Justice and the CA in dismissing the complaint, disregarding substantial evidence and the finality of assessments.
Petitioner argued the criminal charges for violation of Sections 254 and 255 of the NIRC were proper as LMCEC knowingly underdeclared income and failed to pay correct taxes.

Whether there was sufficient probable cause to prosecute LMCEC and its corporate officers for violations of Sections 254 (Attempt to Evade or Defeat Tax) and 255 (Willful Failure to Pay Tax) of the National Internal Revenue Code.

Whether the assessment notices and formal demand were valid and properly served despite lacking control numbers.

Whether the availment of tax amnesty programs (ERAP and VAP) and the issuance of Certificate of Immunity and Letter of Termination extinguished tax liabilities, barred further investigation and prosecution, and estopped the CIR from pursuing the case.

Whether the single examination rule under Section 235 of the NIRC applies to preclude multiple audits or investigations in the absence of a prior determination of fraud.

Whether the filing of criminal charges while an earlier complaint (I.S. No. 00-956) was pending constitutes impermissible forum shopping.