Case Summary (G.R. No. 210238)
Facts of the Case
The BIR issued Revenue Regulation 8-2001, introducing the Voluntary Assessment Program (VAP), allowing taxpayers to receive audit and investigation privileges under specific conditions. Chiat Corp. participated in this program and qualified for the years 1999 and 2000. However, the BIR later issued a Letter of Authority (LOA) to examine the corporation’s accounting records. Despite multiple notices to present the required documentation, Chiat Corp. failed to comply. Consequently, the BIR uncovered significant discrepancies, including substantial underreporting of sales and income, as well as numerous tax compliance failures, which led to the BIR issuing various assessment notices that became final due to lack of protest from Chiat Corp.
Charges Filed Against Officers
As a result of Chiat Corp.'s non-compliance and the identified tax deficiencies, the BIR filed charges against the petitioners for tax evasion and fraud, accusing them of multiple violations under the NIRC. The petitioners denied the allegations, arguing the charges lacked factual basis, were premature, and breached their rights to due process. They further contended that Chiat Corp. had no assets to satisfy the tax liabilities and that they were not responsible for the preparation and filing of tax returns.
Proceedings Before the Prosecutor
Initially, the State Prosecutor dismissed the complaint against the petitioners in July 2006. The BIR sought reconsideration, which was denied, and further attempts to overturn the dismissal through the Department of Justice (DOJ) were unsuccessful. The DOJ upheld the dismissal, leading the BIR to escalate the issue to the Court of Appeals.
Ruling of the Court of Appeals
The Court of Appeals ruled in favor of the BIR, asserting that there was sufficient probable cause to indict the petitioners based on evidence provided. The CA criticized the DOJ for overlooking critical documentation that supported the existence of probable cause, thereby ordering the filing of the formal charges in the appropriate court. Chiat Corp. attempted to seek a reconsideration of this decision, which was denied.
Subsequent Developments and Petition for Review
While the case was under review by the Supreme Court, the petitioners indicated that an Amended Information had been filed against them in the Court of Tax Appeals (CTA). The CTA then ruled in favor of the petitioners, dismissing the related criminal cases based on the principle of prescription—denoting that the legal action had exceeded the allowable time for prosecution of such offenses.
Issue Presented
The primary issue presented was whether the Court of Appeals erred in finding probable cause for violations of the NIRC after the CTA dismissals due to prescription rendered the proceedings moot.
Supreme Court's Ruling
The Supreme Court concurred that the issue was rendered moot and academic due to the CTA's dismissal of the cases bas
...continue readingCase Syllabus (G.R. No. 210238)
The Facts
- The Bureau of Internal Revenue (BIR) issued Revenue Regulation 8-2001, known as the Voluntary Assessment Program (VAP), which allowed taxpayers to have last priority in audits and investigations for internal revenue taxes related to the taxable year ending December 31, 2000, and prior years, under certain conditions.
- Chiat Sing Cardboard Corporation (Chiat Corp.) availed itself of the VAP and received a certificate of qualification for the years 1999 and 2000. The BIR clarified that participation in the VAP does not shield a taxpayer from fraud or illegal acts.
- On March 25, 2003, the BIR issued a Letter of Authority (LOA) for the examination of Chiat Corp.'s accounting records for the years 1999 and 2000. However, the required documents were not provided despite several follow-ups.
- An investigation revealed several discrepancies in Chiat Corp.'s tax declarations, including:
- Underreported sales of P160,588,321.63 and P113,578,182.69 for 1999 and 2000, respectively.
- Underreported income of P10,663,130.96 for 1999 and P5,678,909.13 for 2000.
- Income derived from undeclared importation of raw materials.
- Failure to withhold taxes on labor costs totaling P427,010,000.00.
- A deliberate misrepresentation of taxable bases to evade correct tax payments, resulting in understated tax liabilities exceeding 30%.
- Following this, the BIR issued a series of notices, including a Notice of Informal Conference (NIC), Preliminary Assessment Notice (PAN), Formal Letter of Demand (FLD), and Final Assessment Notice (FAN). Chiat Corp. did not contest these assessments, leading to a final assessment of deficiency taxes amounting to P33,847,574.18 for 1999 and 2000.
Criminal Charges and Denials
- On May 19, 2005, the BIR charged the officers of Chiat Corp., including petitioners Imelda Sze, Sze Kou For, and Teresita Ng, with tax evasion