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CIR V PASCOR REALTY & DEVT CORP et. al.

GR No. 128315, June 29, 1999


Facts:
The CIR authorized certain BIR officers to examine the books of accounts and other accounting records of
Pascor Realty and Development Corp. (PRDC) for 1986, 1987 and 1988. The examination resulted
in recommendation for the issuance of an assessment of P7,498,434.65 and P3,015,236.35 for 1986 and
1987, respectively. The Commissioner filed acriminal complaint for tax evasion against PRDC, its president
and treasurer before the DOJ. Private respondents filed immediately an urgent request for
reconsideration on reinvestigation disputing the tax assessment and tax liability. The Commissioner
denied private respondents request for reconsideration/reinvestigation on the ground that no formal
assessment has been issued which the latter elevated to the CTA on a petition for review. The
Commissionersmotion to dismiss on the ground of the CTAs lack of jurisdiction denied by CTA and
ordered the Commissioner to file an answer. Instead of complying with the order of CTA, Commissioner
filed a petition with the CA alleging grave abuse of discretion and lack of jurisdiction on the part of CTA
for considering the affidavit/report of the revenue officers and the endorsement of said report as
assessment which may be appealed to the CTA. The CA sustained the CTA decision and dismissed the
petition.

Issues:
(1) Whether or not the criminal complaint for tax evasion can be construed as an assessm ent. (2) Whether
or not an assessment is necessary before criminal charges for tax evasion may be instituted.
Held:
The filing of the criminal complaint with the DOJ cannot be construed as a formal assessment. Neither the
Tax Code nor the revenue regulations governing the protest assessments provide a specific definition or
form of an assessment.
An assessment must be sent to and received by the taxpayer, and must demand payment of the taxes
described therein within a specific period. The revenue officers affidavit merely contained a computation
of respondents tax liability. It did not state a demand or period for payment. It was addressed to the
Secretary of Justice not to the taxpayer. They joint affidavit was meant to support the criminal complaint
for tax evasion; it was not meant to be a notice of tax due and a demand to private respondents for the
payment thereof. The fact that the complaint was sent to the DOJ, and not to private respondent, shows
that commissioner intended to file a criminal complaint for tax evasion, not to issue an assessment.

An assessment is not necessary before criminal charges can be filed. A criminal charge need not only be
supported by a prima facie showing of failure to file a required return. The CIR had, in such tax eva sion
cases, discretion on whether to issue an assessment, or to file a criminal caseagainst the taxpayer, or to
do both.

COMMISSIONER OF INTERNAL REVENUE vs. LEAL


GR. No. 113459, November 18, 2002
Facts:
Pursuant to Sec. 116 of the Tax Code which imposes percentage tax on dealers in securities and lending
investors, the Commissioner of Internal Revenue issued Memorandum Order (RMO) No. 15 -91 dated
March 11, 1991, imposing five percent (5%) lending investors tax on pawnshops based on their gross
income and requiring all investigating units of the Bureau to investigate and assess the lending investors
tax due from them. The issuance of RMO No. 15-91 was an offshoot of petitioners evaluation that the
nature of pawnshop business is akin to that of lending investors.
Subsequently, petitioner issued Revenue Memorandum Circular No. 43 -91 dated May 27, 1992,
subjecting the pawn ticket to the documentary stamp tax as prescribed in Title VII of the Tax Code.
Adversely affected by those revenue orders, herein respondent Josefina Leal, owner and operator of
Josefina Pawnshop in San Mateo, Rizal, asked for a reconsideration of both RMO No. 15 -91 and RMC No.
43-91 but the same was denied with finality by petitioner in October 30, 1991.
Consequently, on March 18, 1992, respondent filed with the RTC a petition for prohibition seeking to
prohibit petitioner from implementing the revenue orders.
Petitioner, through the Office of the Solicitor-General, filed a motion to dismiss the petition on the
ground that the RTC has no jurisdiction to review the questioned revenue orders and to enjoin their
implementation. Petitioner contends that the subject revenue orders were issued pursuant to his power
to make rulings or opinions in connection with the Implementation of the provisi ons of internal
revenue laws. Thus, the case falls within the exclusive appellate jurisdiction of the Court of Tax Appeals,
citing Sec. 7(1) of RA 1125.
The RTC issued an order denying the motion to dismiss holding that the revenue orders are not
assessments to implement a Tax Code provision, but are in effect new taxes (against pawnshops) which
are not provided for under the Code, and which only Congress is empowered to impose. The Court of
Appeals affirmed the order issued by the RTC.
Issue:
Whether or not the Court of Tax Appeals has jurisdiction to review rulings of the Commissioner
implementing the Tax Code.
Held:
The jurisdiction to review rulings of the Commissioner pertains to the Court of Tax Appeals and NOT to
the RTC. The questioned RMO and RMC are actually rulings or opinions of the Commissioner
implementing the Tax Code on the taxability of the Pawnshops.
Under RA 1125, An Act Creating the Court of Tax Appeals, such rulings of the Commissioner of Internal
Revenue are appealable to that court:
Sec. 7 Jurisdiction The Court of Tax Appeals shall exercise exclusive appellate jurisdiction to review by
appeal, as herein provided
1. Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds
of internal revenue taxes, fees or other charges, penalties imposed in relation thereto, or other matters

arising under the National Revenue Code or other laws or part of law administered by the Bureau of
Internal Revenue.

Tan Guan vs. Court of Tax Appeals GR L-23676, 27 April 1967


Facts:
In 1947, Tan Guan and Sia Lin, Chinamen, organized and registered the Philippine Surplus Company, a
general partnership. A general partnership is exempt from income tax although it is required to file a n
income tax return. Profits, whether distributed or not, are considered income of the partners. Acting upon
a confidential report, however, that the company posted fictitious expesnes in its books to avoid taxes,
the BIR investigated in 1954 the books of the partnership and discovered that the expenses were not
covered by receipts, that the names of payees were erased, and that the payees did not report the sums
in question in their income tax. The BIR disallowed expense deductions for the year 1948 amount ing to
P206,380 for being fictitious. Said sum was treated as income of the individual partners, and thus, the BIR
assessed P50,956.57 as deficiency income tax against Tan Guan. Tan Guan appealed.
Issue:
Whether the deduction claimed by the company as business income should be allowed, and thus absolve
Tan Guan of the assessed tax liability.
Held:
The Commissioners finding on the facts constituting fraud, proven, and found established by the Court of
Tax Appeals, was not rebutted by the taxpayer. Tan Guan did not present any evidence to disprove the
findings that the expenses are fictitious; considering that the investigation on Tan Guans liability was
made prior to the expiration of the 5-year period to preserve and keep receipts as set fgorth in Section
337 of the Tax Code. As the determination of the Commissioner is presumed correct, it behooves the
taxpayers to rebut such presumption. For failure to overcome the burden, Tan Guan or the company
cannot claim the expenses as deduction from gross income.

SEA-LAND SERVICE, INC. VS. COURT OF APPEALSG.R. No. 122605 April 30, 2001
FACTS
Petitioner
Sea-Land
Service
Incorporated,
an
American
international
shipping
company licensed by the Securitiesand Exchange Commission to do business in the Philippines entered
into a contract with the United States Government totransport military household goods and effects of
U.S. military personnel assigned to the Subic Naval Base. Sea-Land paidits corresponding corporate
income tax for the taxable year 1984 at the rate of 1.5% in accordance with Section 25(a)(2) of the National
Internal Revenue Code in relation to Article 9 of the RP-US Tax Treaty. Subsequently, Sea-Land filed a
claimfor refund alleging that the taxes it paid were made in mistake because under the RP -US Military
Base Agreement, it isexempt from the payment of taxes.

ISSUE:
Does the income that petitioner derived from services in transporting the household goods and effects of
U.S.military personnel fall within the tax exemption provided in the RP -US Military Bases Agreement?
RULING:
NO. Laws granting exemption from tax are construed strictissimi juris against the taxpayer and liberally
in favor of the taxing power. The transport or shipment of household goods and effects of U.S. military
personnel is not included in theterm "construction, maintenance, operation and defense of the bases.
Neither could the performance of this service to theU.S. government be interpreted as directly related to
the defense and security of the Philippine territories

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