COMMISSIONER OF INTERNAL REVENUE v. HON. RAUL M. GONZALEZ, Secretary of Justice, L. M.

Its motion for reconsideration having been denied, petitioner challenged the ruling of respondent
CAMUS ENGINEERING CORPORATION (represented by LUIS M. CAMUS and LINO D. MENDOZA) Secretary via a certiorari petition in the CA. On October 31, 2006, the CA rendered the assailed
decisionaw denying the petition and concurred with the findings and conclusions of respondent
G.R. No. 177279 : October 13, 2010 Secretary. Petitioners motion for reconsideration was likewise denied by the appellate

FACTS ISSUES

Pursuant to Letter of Authority (LA) No. 00009361 dated August 25, 2000 issued by then
Commissioner of Internal Revenue (petitioner) Dakila B. Fonacier, Revenue Officers Remedios C.
Advincula, Jr., Simplicio V. Cabantac, Jr., Ricardo L. Suba, Jr. and Aurelio Agustin T. Zamora
supervised by Section Chief Sixto C. Dy, Jr. of the Tax Fraud Division (TFD), National Office, conducted
a fraud investigation for all internal revenue taxes to ascertain/determine the tax liabilities of
respondent L. M. Camus Engineering Corporation (LMCEC) for the taxable years 1997, 1998 and
1999. cr1aw The audit and investigation against LMCEC was precipitated by the information
provided by an "informer" that LMCEC had substantial underdeclared income for the said period. For
failure to comply with the subpoena duces tecum issued in connection with the tax fraud
investigation, a criminal complaint was instituted by the Bureau of Internal Revenue (BIR) against
LMCEC on January 19, 2001 for violation of Section 266 of the NIRC In view of the above findings,
assessment notices together with a formal letter of demand dated August 7, 2002 were sent to
LMCEC through personal service on October 1, 2002. Since the company and its representatives
refused to receive the said notices and demand letter, the revenue officers resorted to constructive
servicecra1aw in accordance with Section 3, Revenue Regulations (RR) No. 12-99
1. Whether or not the Court of Appeals erroneously sustained the findings of the Secretary of Justice
who gravely abused his discretion by dismissing the complaint based on grounds which are not even
elements of the offenses charged.
2. Whether or not the Court of Appeals erroneously sustained the findings of the Secretary of
Justice who gravely abused his discretion by dismissing petitioners evidence, contrary to law.
3. Whether or not the Court of Appeals erroneously sustained the findings of the Secretary of Justice
who gravely abused his discretion by inquiring into the validity of a Final Assessment Notice which
has become final, executory and demandable pursuant to Section 228 of the Tax Code of 1997 for
failure of private respondent to file a protest against the same. 37chanroblesvirtuallawlibrary
RULING
The court granted the petition.

LMCEC argued that petitioner is now estopped from further taking any action against it and its
There is no dispute that prior to the filing of the complaint with the DOJ, the report on the tax fraud
corporate officers concerning the taxable years 1997 to 1999. With the grant of immunity from audit
investigation conducted on LMCEC disclosed that it made substantial underdeclarations in its income
from the companys availment of ERAP and VAP, which have a feature of a tax amnesty, the element
tax returns for 1997, 1998 and 1999. Pursuant to RR No. 12-99 a PAN was sent to and received by
of fraud is negated the moment the Bureau accepts the offer of compromise or payment of taxes by
LMCEC on February 22, 2001 wherein it was notified of the proposed assessment of deficiency taxes
the taxpayer. The act of the revenue officers in finding justification under Section 6(B) of the NIRC
amounting to P430,958,005.90 (income tax - P318,606,380.19 and VAT - P112,351,625.71) covering
(Best Evidence Obtainable) is misplaced and unavailing because they were not able to open the
taxable years 1997, 1998 and 1999. ra1aw In response to said PAN, LMCEC sent a letter-protest to
books of the company for the second time, after the routine examination, issuance of termination
the TFD, which denied the same on April 12, 2001 for lack of legal and factual basis and also for
letter and the availment of ERAP and VAP. LMCEC thus maintained that unless there is a prior
having been filed beyond the 15-day reglementary period. allawlibraryPrivate respondents
determination of fraud supported by documents not yet incorporated in the docket of the case,
assertions regarding the qualifications of the "informer" of the Bureau deserve scant consideration.
petitioner cannot just issue LAs without first terminating those previously issued. It emphasized the
We have held that the lack of consent of the taxpayer under investigation does not imply that the
fact that the BIR officers who filed and signed the Affidavit-Complaint in this case were the same
BIR obtained the information from third parties illegally or that the information received is false or
ones who appeared as complainants in an earlier case filed against Camus for his alleged "failure to
malicious. Nor does the lack of consent preclude the BIR from assessing deficiency taxes on the
obey summons in violation of Section 5 punishable under Section 266 of the NIRC of 1997" (I.S. No.
taxpayer based on the documents. cra1aw In the same vein, herein private respondents cannot be
00-956 of the Office of the City Prosecutor of Quezon City). After preliminary investigation, said case
allowed to escape criminal prosecution under Sections 254 and 255 of the NIRC by mere imputation
was dismissed for lack of probable cause in a Resolution issued by the Investigating Prosecutor on
of a "fictitious" or disqualified informant under Section 282 simply because other than disclosure of
May 2, 2001. awPetitioner filed a motion for reconsideration which was denied by the Chief State
the official registry number of the third party "informer," the Bureau insisted on maintaining the
Prosecutor. lPetitioner appealed to respondent Secretary of Justice but the latter denied its petition
confidentiality of the identity and personal circumstances of said "informer."
for review under Resolution dated December 13, 2005.

1
The formal letter of demand calling for payment of the taxpayers deficiency tax or taxes shall state
the fact, the law, rules and regulations or jurisprudence on which the assessment is based,
otherwise the formal letter of demand and the notice of assessment shall be void. l
From the documents gathered and the data obtained therein, the substantial underdeclaration as
defined under Section 248(B) of the NIRC of 1997 by your corporation of its income had been
confirmed. Tax amnesty is a general pardon to taxpayers who want to start a clean tax slate. It also
gives the government a chance to collect uncollected tax from tax evaders without having to go
through the tedious process of a tax case. Even assuming arguendo that the issuance of RR No. 2-99
is in the nature of tax amnesty, it bears noting that a tax amnesty, much like a tax exemption, is
never favored nor presumed in law and if granted by statute, the terms of the amnesty like that of a
tax exemption must be construed strictly against the taxpayer and liberally in favor of the taxing
authority.
The determination of probable cause is part of the discretion granted to the investigating prosecutor
and ultimately, the Secretary of Justice. However, this Court and the CA possess the power to review
findings of prosecutors in preliminary investigations. Although policy considerations call for the
widest latitude of deference to the prosecutors findings, courts should never shirk from exercising
their power, when the circumstances warrant, to determine whether the prosecutors findings are
supported by the facts, or by the law. In so doing, courts do not act as prosecutors but as organs of
the judiciary, exercising their mandate under the Constitution, relevant statutes, and remedial rules
to settle cases and controversies. Clearly, the power of the Secretary of Justice to review does not
preclude this Court and the CA from intervening and exercising our own powers of review with
respect to the DOJs findings, such as in the exceptional case in which grave abuse of discretion is
committed, as when a clear sufficiency or insufficiency of evidence to support a finding of probable
cause is ignored.
Design v. CIR
G.R. No. 177982 October 17, 2008
CARPIO MORALES, J.
Lessons Applicable: BIR power to gather information without consent
Laws Applicable:
FACTS:
 March 17, 2004: CIR assessed Fitness by Design Inc. for deficiency Income Taxes for the year of
1995 for P 10,647, 529.69
2
 February 1, 2005: CIR issued a warrant of distraint and levy against petitioner which prompted
petitioner to file a Petition for Review before the CTA where he alleged his defense of
prescription based on Sec. 203 of the Tax Code.
 CIR answer: Tax return was false and fraudulent for deliberately failing to declare its true sales
of P 7,156,336.08 and failure to file a VAT return for it. Since petitioner failed to file a protest,
it is subject to either distraint or levy. Moreover, it cited Sec. 222 (a) of 1997 Tax Code where
false and fraudulent return with intent to evade tax or failure to file a return prescribe 10 years
after the discovery of the falsity, fraud or omission.
 March 10, 2005: BIR filed a criminal complaint before the DOJ against the officers and
accountant of petitioner for violation against the 1977 NIRC.
 During the preliminary hearing on the issue of prescription, petitioner's former bookkeeper
attested that his former colleague, CPA Sablan, illegally took custody of accounting records and
turned them over to the BIR.
 Petitioner then requested a subpoena ad testificandum for Sablan who failed to appear.
 CTA: Denied the motion for issuance of subpoena and disallowed the submission of written
interrogatories to Sablan who is NOT a party to the case nor was his testimony relevant. It also
violates Section 2 of Republic Act No. 2338, as implemented by Section 12 of Finance
Department Order No. 46-66, proscribing the revelation of identities of informers of violations
of internal revenue laws, except when the information is proven to be malicious or
false. Moreover, the subpoena is NOT needed to obtain affidavit of the informer.
ISSUE: W/N BIR can use the information without petitioner's consent
HELD: YES.
 Sec. 5 of the tax code provides that the BIR is authorized to obtain from any person other than
the person whose internal revenue tax liability is subject to audit or investigation and can even
summon any person having possession, custody or care of the books of accountants and other
accounting records containing entries relating to the business of the person liable for tax. This
includes even those which cannot be admitted in a judicial proceeding where the Rules of Court
are strictly observed. CTA case is not a criminal prosecution where he can cross examine the
witness against him. CTA can enforce its order by citing them for indirect contempt.
OCEANIC WIRELESS NETWORK, INC v. COMMISSIONER OF INTERNAL REVENUE, THE COURT OF TAX
APPEALS, and THE COURT OF APPEALS
G.R. NO. 148380 December 9, 2005
Oceanic Wireless Network v. CIR
Facts:
 Petitioner Oceanic Wireless Network, Inc. challenges the authority of the Chief of the
Accounts Receivable and Billing Division of BIR National Office to decide and/or act with finality on
behalf of the CIR on protests against disputed tax deficiency assessments.
On March 1988 petitioner received from the Bureau of Internal Revenue (BIR) deficiency tax
assessments for the taxable year 1984 in the total amount of P8,644,998.71.
Petitioner filed its protest against the tax assessments and requested a reconsideration or
cancellation of the same in a letter to the BIR Commissioner dated April 12, 1988.
Acting in behalf of the BIR Commissioner, then Chief of BIR, reiterated the tax assessments
while denying petitioner’s request for reinvestigation in a letter dated January 24, 1991
Upon petitioner’s failure to pay the subject tax assessments within the prescribed period,
the Assistant Commissioner for Collection, acting for the Commissioner of Internal Revenue, issued
the corresponding warrants of distraint and/or levy and garnishment.
On November 8, 1991, petitioner filed a Petition for Review with the Court of Tax Appeals
(CTA) to contest the issuance of the warrants to enforce the collection of the tax assessments. This
was docketed as CTA Case No. 4668.
The CTA dismissed the petition for lack of jurisdiction in a decision dated September 16, 1994,
declaring that said petition was filed beyond the thirty (30)-day period reckoned from the time when
the demand letter of January 24, 1991 by the Chief of the BIR Accounts Receivable and Billing
Division was presumably received by petitioner.
Petitioner filed a Motion for Reconsideration arguing that the demand letter of January 24,
1991 cannot be considered as the final decision of the Commissioner of Internal Revenue on its
protest because the same was signed by a mere subordinate and not by the Commissioner himself.[
Issue:
Whether or not a demand letter for tax deficiency assessments issued and signed by a
subordinate officer who was acting in behalf of the Commissioner of Internal Revenue, is deemed
final and executory and subject to an appeal to the Court of Tax Appeals.
RULING:
Yes. The general rule is that the Commissioner of Internal Revenue may delegate any power
vested upon him by law to Division Chiefs or to officials of higher rank. He cannot, however, delegate
the four powers granted to him under the National Internal Revenue Code (NIRC) enumerated in
Section 7.
3
As amended by Republic Act No. 8424, Section 7 of the Code authorizes the BIR
Commissioner to delegate the powers vested in him under the pertinent provisions of the Code to
any subordinate official with the rank equivalent to a division chief or higher.
Moreover, A request for reconsideration must be made within thirty (30) days from the
taxpayer’s receipt of the tax deficiency assessment, otherwise, the decision becomes final,
unappealable and therefore, demandable. A tax assessment that has become final, executory and
enforceable for failure of the taxpayer to assail the same as provided in Section 228 can no longer be
contested
Here, petitioner failed to avail of its right to bring the matter before the Court of Tax
Appeals within the reglementary period upon the receipt of the demand letter reiterating the
assessed delinquent taxes and denying its request for reconsideration which constituted the final
determination by the Bureau of Internal Revenue on petitioner’s protest. Being a final disposition by
said agency, the same would have been a proper subject for appeal to the Court of Tax Appeals.
The rule is that for the Court of Tax Appeals to acquire jurisdiction, an assessment must
first be disputed by the taxpayer and ruled upon by the Commissioner of Internal Revenue to
warrant a decision from which a petition for review may be taken to the Court of Tax Appeals.
Where an adverse ruling has been rendered by the Commissioner of Internal Revenue with
reference to a disputed assessment or a claim for refund or credit, the taxpayer may appeal the
same within thirty (30) days after receipt thereof.
Commissioner vs Kudos Metal Corporation
GR 178087, May 5, 2010
Facts:
The BIR reviewed and audited Kudos Metal’s records after the latter filed its income tax return.
Meanwhile, Pasco, the corporation’s accountant, executed two waivers of raising the defense of
prescription so that the BIR may complete its investigation even after the 3-year period of
assessment expires. The waivers, however, were executed with the following defects: first, Pasco
was not duly authorized to sign the waiver in behalf of Kudos; second, the date of acceptance by the
Commissioner were not indicated in the first waiver; and lastly, the fact of receipt by Kudos Metal of
its file copy was not indicated in the original copies of the waivers.
When BIR issued a PAN for the taxable year 1998, followed by FAN, which was dated September 3,
2003 and received by Kudos Metal on November 3, 2003, the latter protested the assessments. The
BIR insisted on collecting the tax so Kudos Metal brought the issue before the CTA, claiming that the
government’s right to assess taxes had prescribed.
Issue 1: W/N the notices of assessment were issued by BIR beyond the 3-year prescriptive period
Held:
Yes. The period for assessment prescribed already because the waivers allowing the extension of
the period were void. Section 222 of the NIRC and RMO-20-90, which lays down the procedure for
the proper execution of waivers, were not complied with. Most importantly, the date of acceptance
by the BIR was not indicated so there is no way to determine if the suspension was made within the
prescriptive period. The BIR as a result is now barred from collecting the unpaid taxes from Kudos
Metal.
Issue 2: W/N Kudos Metal is estopped from claiming prescription by executing the waivers
Held:
No. The doctrine of estoppel, which is predicated on equity, is not applicable here because there is a
detailed procedure for the proper execution of a waiver. The BIR failed to comply with the
requirements of such law, plain and simple. It cannot now use estoppel to make up for its failure
most especially because a waiver of the statute of limitations, which derogates a taxpayer’s right to
security against prolonged and unscrupulous investigations, must be carefully and strictly construed.
Aquafresh protested the assessments. Aquafresh's argued that the subject properties were
located in Barrio Banica, Roxas, where the pre-defined zonal value was Php 650.00 per square meter
based on the “Revised Zonal Values of Real Properties in the City of Roxas”. Aquafresh argued that
since there was already a pre-defined zonal value for properties located in Barrio Banica, the BIR
officials had no business re-classifying the subject properties to commercial.
ISSUE: Whether the existing Revised Zonal Values of Real Properties in the City of Roxas or the fair
market value as determined by BIR will be used as basis for the capital gains tax and documentary
tax
HELD: The Revised Zonal Values of Real Properties in the City of Roxas must be followed for purposes
of computing the CGT and DST.
It is undisputed that at the time of the sale of the subject properties found in Barrio Banica,
Roxas City, the same were classified as “RR,” or residential, based on the 1995 Revised Zonal Value
of Real Properties. CIR, thus, cannot unilaterally change the zonal valuation of such properties to
“commercial” without first conducting a re-evaluation of the zonal values as mandated under
Section 6(E) of the NIRC.
Zonal value is determined for the purpose of establishing a more realistic basis for real
property valuation. Since internal revenue taxes, such as CGT and DST, are assessed on the basis of
valuation, the zonal valuation existing at the time of the sale should be taken into account.

COMMISSION OF INTERNAL REVENUE vs. AQUAFRESH SEAFOODS, INC.

G.R. No. 170389; October 20, 2010; SECOND DIVISION; 634 SCRA 82

FACTS:

Aquafresh Seafoods Inc. sold to Philips Seafoods, Inc. two parcels of land, including
improvements thereon, for Php 3,100, 000.00. Aquafresh paid Php 186,000.00, representing the
Capital Gains Tax (CGT) and Php 46,500.00, representing the Documentary Stamp Tax (DST) due from
the said sale.

The Bureau of Internal Revenue (BIR) received a report that the lots sold were undervalued
for taxation purposes. After an investigation, BIR concluded that the subject properties were
commercial with a zonal value of Php 2,000.00 per square meter. BIR assessed Aquafresh of CGT and
DST defencies in the sum of Php 1,372,171.46 and Php 356,267.62, respectively.