Case Summary (G.R. No. 87479)
Key Dates
– October 10, 2005: Original informations filed in CTA Criminal Case Nos. O-013 and O-015
– August 8 & 11, 2006: Amended informations approved by CTA Division
– January 5, 2011: CTA Division decision finding Mendez guilty
– May 27, 2011: CTA Division resolution denying motions for reconsideration
– December 11, 2012: CTA En Banc decision affirming conviction and non-imposition of deficiency taxes
– July 8, 2013: CTA En Banc resolution denying motions for reconsideration
– March 28, 2023: Supreme Court decision (G.R. Nos. 208310–11, 208662)
Applicable Law
– 1987 Philippine Constitution (due process; jurisdiction)
– 1997 National Internal Revenue Code (NIRC), as amended:
• Section 205 (civil remedies in criminal cases; judgment must order payment “as finally decided by the Commissioner”)
• Section 222(a) (exception to assessment requirement when return is false, fraudulent, or not filed)
• Section 255 (penalty for willful failure to file return or supply correct information)
– Republic Act No. 9282 (CTA Law of 2004): grants CTA original jurisdiction over tax-law criminal offenses involving P1,000,000 or more in principal taxes
– Batas Pambansa Blg. 129, as amended by RA 11576 (jurisdictional thresholds of trial courts)
Antecedents
Acting on a complaint of unissued official receipts, the BIR issued a Letter of Authority on November 8, 2004, and subsequent notices, all of which Mendez ignored. Third-party information and best-evidence methods revealed that between 2001 and 2003, Mendez (1) conducted business under multiple trade names; (2) incurred substantial expenditures on rent, advertising, vehicles, and foreign travel; and (3) failed to file his 2001 and 2002 ITRs and filed an incomplete 2003 ITR. Netted against these findings, the BIR computed alleged unreported incomes of ₱1,522,152.14 for 2002 and ₱2,107,023.65 for 2003. Mendez pleaded not guilty.
Issue
Whether a formal, final assessment of deficiency taxes is a prerequisite to imposing civil liability for unpaid taxes in a criminal prosecution under Section 255 of the NIRC.
CTA Division Ruling
The CTA Division (January 5, 2011) convicted Mendez for willful failure to file a return for 2002 and willful failure to supply correct information in 2003, under Section 255. It held that although no prior deficiency assessment is needed to sustain a criminal prosecution, the Commissioner’s final determination is necessary before the court may impose civil liability for unpaid taxes. A fine of ₱10,000 and imprisonment of one to two years were imposed for each count.
CTA En Banc Ruling
On December 11, 2012, the CTA En Banc affirmed the conviction and the non-imposition of deficiency taxes, agreeing that no final deficiency assessment had been issued by the Commissioner. Motions for reconsideration were denied on July 8, 2013.
Supreme Court Ruling
Jurisdiction: Under RA 9282, the CTA has exclusive original jurisdiction over tax-law criminal offenses when the principal amount of taxes claimed is P1,000,000 or more. The Amended Informations expressly alleged estimated deficiency taxes of ₱1,522,152.14 and ₱2,107,023.65, satisfying the jurisdictional threshold. The use of “estimated” does not render the Informations infirm when the numerical amounts are clear.
Guilt: The prosecution proved beyond reasonable doubt that Mendez (a) was required by Sections 51 and 74 of the NIRC to file accurate returns; (b) willfully failed to file for 2002 and willfully filed an inaccurate return for 2003; and (c) consciously avoided compliance despite formal notices. The indeterminate penalties (one to two years’ imprisonment) and fines of ₱10,000 are affirmed.
Assessment Requirement: A formal assessment or notice-and-demand is not a prerequisite for holding a taxpayer criminally liable under Section 255. Section 222(a) explicitly permits a criminal proceeding without assessment where a return is false, fraudulent, or not filed. Although Section 205 directs criminal judgments to order payment of taxes “as finally decided by the Commissioner,” RA 9282’s mandate that the criminal action and correspo
Case Syllabus (G.R. No. 87479)
Case Title and Citation
- Supreme Court En Banc decision promulgated on March 28, 2023
- Consolidated petitions: G.R. Nos. 208310-11 and G.R. No. 208662
- Parties:
• People of the Philippines (Petitioner) vs. Joel C. Mendez (Respondent)
• Joel C. Mendez (Petitioner) vs. People of the Philippines (Respondent)
Parties and Procedural Posture
- Joel C. Mendez: Filipino citizen, medical doctor, sole proprietor of Weigh Less Center and related clinics under various trade names
- People of the Philippines represented by the Office of the Solicitor General (OSG) and BIR revenues officers
- Two criminal cases consolidated upon agreement at arraignment:
• CTA Crim. Case No. O-013: failure to file ITR for TY 2002
• CTA Crim. Case No. O-015: failure to supply correct information in ITR for TY 2003 - Trial before CTA Division; appealed to CTA En Banc; appealed to the Supreme Court
Antecedents and Charges
- Separate Amended Informations filed, charging violation of Section 255 of the National Internal Revenue Code (Tax Code, 1997, as amended)
- O-013: Alleged non-filing of 2002 ITR, damage and prejudice estimated at P1,522,152.14, exclusive of penalties, surcharges and interest
- O-015: Alleged misstatement in 2003 ITR, damage and prejudice estimated at P2,107,023.65, exclusive of penalties, surcharges and interest
- Joel pleaded not guilty, both cases consolidated, pre-trial and trial ensued
BIR Investigation and Evidence Gathering
- BIR issued Letter of Authority (LoA) to examine books and accounting records for TY 2001–2003
- Three written requests (First Letter-Notice, Second Letter-Notice, Final Request) to produce records, all ignored by Joel
- BIR resorted to:
• Third-party information (SEC and DTI registrations of clinics and partnerships dating from 1993–2004)
• BIR-Integrated Tax System showing unfiled ITR for TY 2001, 2002 and irregular filing in RDO-Calasiao for 2003
• Net worth and expenditure methods: large rental and advertising expenses, vehicle purchases, frequent foreign travels
• Certified true copies: contracts of lease, advertisements in national dailies, certifications from private companies
CTA Division Findings and Ruling
- Found Joel guilty beyond reasonable doubt of:
• Willful failure to file ITR for TY 2002 (O-013)
• Willful failure to supply correct and accurate information in ITR for TY 2003 (O-015) - Held that:
• Notices deemed received through Joel’s authorized accountant
• BIR may assess based on third-party information and best obtainable evidence (Section 6(B), Tax Code)
• Net worth and expenditure methods established unreported income
• Joel’s repeated non-filing signified willfulness, and reliance on accountant amounted to “willful blindness” - On civil liability for deficiency taxes, ruled that:
• A final assessment by the CIR under Section 205 of the Tax Code is necessary before imposing civil liability in criminal case - Imposed indeterminate penalty of 1–2 years imprisonment and P10,000 fine for each offense