Digested Cases in Taxation

1. 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
otheraccounting 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 Commissioners motionto 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
assessment. (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 evasion cases, discretion on whether to issue an assessment, or
to file a criminal caseagainst the taxpayer, or to do both.
2. Marcos II vs. CA
273 SCRA 47 1997
Facts: Ferdinand R. Marcos II assailed the decision of the Court of Appeals declaring the
deficiency income tax assessments and estate tax assessments upon the estate and
properties of his late father despite the pendency of the probate proceedings of the will
of the late President. On the other hand, the BIR argued that the States authority to
collect internal revenue taxes is paramount.
Petitioner further argues that "the numerous pending court cases questioning the late
president's ownership or interests in several properties (both real and personal) make the
total value of his estate, and the consequent estate tax due, incapable of exact
pecuniary determination at this time. Thus, respondents' assessment of the estate tax

and their issuance of the Notices of Levy and sale are premature and oppressive." He
points out the pendency of Sandiganbayan Civil Case Nos. 0001-0034 and 0141, which
were filed by the government to question the ownership and interests of the late
President in real and personal properties located within and outside the Philippines.
Petitioner, however, omits to allege whether the properties levied upon by the BIR in the
collection of estate taxes upon the decedent's estate were among those involved in the
said cases pending in the Sandiganbayan. Indeed, the court is at a loss as to how these
cases are relevant to the matter at issue. The mere fact that the decedent has pending
cases involving ill-gotten wealth does not affect the enforcement of tax assessments over
the properties indubitably included in his estate.
Issue: Is the contention of Marcos correct?
Held: No. The approval of the court, sitting in probate or as a settlement tribunal over the
deceaseds estate, is not a mandatory requirement in the collection of estate taxes.
There is nothing in the Tax Code, and in the pertinent remedial laws that implies the
necessity of the probate or estate settlement court's approval of the state's claim for
estate
taxes,
before
the
same
can
be
enforced
and
collected.
The enforcement of tax laws and the collection of taxes are of paramount importance for
the sustenance of government. Taxes are the lifeblood of government and should be
collected without unnecessary hindrance. However, such collection should be made in
accordance with law as any arbitrariness will negate the existence of government itself.
It is not the Department of Justice which is the government agency tasked to determine
the amount of taxes due upon the subject estate, but the Bureau of Internal Revenue
whose determinations and assessments are presumed correct and made in good faith.
The taxpayer has the duty of proving otherwise. In the absence of proof of any
irregularities in the performance of official duties, an assessment will not be disturbed.
Even an assessment based on estimates is prima facie valid and lawful where it does not
appear to have been arrived at arbitrarily or capriciously. The burden of proof is upon the
complaining party to show clearly that the assessment is erroneous. Failure to present
proof of error in the assessment will justify the judicial affirmance of said assessment. In
this instance, petitioner has not pointed out one single provision in the Memorandum of
the Special Audit Team which gave rise to the questioned assessment, which bears a
trace of falsity. Indeed, the petitioner's attack on the assessment bears mainly on the
alleged improbable and unconscionable amount of the taxes charged. But mere rhetoric
cannot supply the basis for the charge of impropriety of the assessments made.