REVENUE MEMORANDUM ORDER NO.

19-2007 issued on August 10,

2007 prescribes the Consolidated Revised Schedule of Compromise
Penalties for violations of the National Internal Revenue Code
(NIRC).
In all cases of criminal violations of the NIRC not involving the commission of
fraudulent act, the compromise penalties to be imposed shall follow strictly
the amounts in the "Revised Schedule of Compromise Penalties" (Annex A of
the Order). Certain acts/violations which are commonly resorted to by
taxpayers as means of tax evasion are deleted from the coverage thereof for
having met the requirements of the definition of fraudulent acts.
In no case shall the compromise penalty differ in amount from those specified
in the aforementioned Schedule, except when duly approved by the
Commissioner or concerned Deputy Commissioner, or in proper cases, by the
Regional Directors.
Although all amounts of compromise penalties incident to violations shall be
itemized in the assessment notice and/or demand letter, the same should not
form part of assessment notice that reflects deficiency basic tax, surcharge
and interest but should appear in a separate assessment notice/demand
letter as the amount suggested to the taxpayer to pay in lieu of criminal
prosecution. If paid, the compromise penalties shall be collected and
accounted for under the usual procedures, as internal revenue collection.
Since compromise penalties are only amounts suggested in settlement of
criminal liability, and may not therefore be imposed or exacted on the
taxpayer, the violation shall be referred to the appropriate office for criminal
action in the event that a taxpayer refuses to pay the suggested compromise
penalty. Cases involving fraud shall be referred to the concerned Division
having jurisdiction over the case, for the institution of the corresponding
criminal action.
The prescribed schedule of compromise penalties shall not prevent the
Commissioner of Internal Revenue (CIR) or his duly authorized representative
from accepting a compromise amount higher than what is provided in the
Order. A compromise offer lower than the prescribed amount may be
accepted after approval by the CIR or the concerned Deputy
Commissioner/Assistant Commissioner/Regional Director.

UNGAB vs. CUSI

97 SCRA 877

GR No. L-41919-24 May 30, 1980

"An assessment of a deficiency is not necessary to a criminal prosecution for
wilful attempt to defeat and evade the income tax."
FACTS: The BIR filed six criminal charges against Quirico Ungab, a banana
saplings producer, for allegedly evading payment of taxes and other
violations of the NIRC. Ungab, subsequently filed a motion to quash on the
ground that (1) the information are null and void for want of authority on the
part of the State Prosecutor to initiate and prosecute the said cases; and
(2)that the trial court has no jurisdiction to take cognizance of the case in
view of his pending protest against the assessment made by the BIR
examiner. The trial court denied the motion prompting the petitioner to file a
petition for certiorari and prohibition with preliminary injunction and
restraining order to annul and set aside the information filed.
ISSUE: Is the contention that the criminal prosecution is premature since the
CIR has not yet resolved the protest against the tax assessment tenable?
HELD: No. The contention is without merit. What is involved here is not the
collection of taxes where the assessment of the Commissioner of Internal
Revenue may be reviewed by the Court of Tax Appeals, but a criminal
prosecution for violations of the National Internal Revenue Code which is
within the cognizance of courts of first instance. While there can be no civil
action to enforce collection before the assessment procedures provided in the
Code have been followed, there is no requirement for the precise
computation and assessment of the tax before there can be a criminal
prosecution under the Code.
An assessment of a deficiency is not necessary to a criminal prosecution for
wilful attempt to defeat and evade the income tax. A crime is complete when
the violator has knowingly and wilfully filed a fraudulent return with intent to
evade and defeat the tax. The perpetration of the crime is grounded upon
knowledge on the part of the taxpayer that he has made an inaccurate
return, and the government's failure to discover the error and promptly to
assess has no connections with the commission of the crime.

CIR vs. CA
257 SCRA 200
GR No. 119322 June 4, 1996
"Before one is prosecuted for willful attempt to evade or defeat any tax, the
fact that a tax is due must first be proved."
FACTS: The CIR assessed Fortune Tobacco Corp for 7.6 Billion Pesos

representing deficiency income, ad valorem and value-added taxes for the

year 1992 to which Fortune moved for reconsideration of the assessments.
Later, the CIR filed a complaint with the Department of Justice against the
respondent Fortune, its corporate officers, nine (9) other corporations and
their respective corporate officers for alleged fraudulent tax evasion for
supposed non-payment by Fortune of the correct amount of taxes, alleging
among others the fraudulent scheme of making simulated sales to fictitious
buyers declaring lower wholesale prices, as allegedly shown by the great
disparity on the declared wholesale prices registered in the "Daily
Manufacturer's Sworn Statements" submitted by the respondents to the BIR.
Such documents when requested by the court were not however presented
by the BIR, prompting the trial court to grant the prayer for preliminary
injuction sought by the respondent upon the reason that tax liabiliity must be
duly proven before any criminal prosecution be had. The petitioner relying on
the Ungab Doctrine sought the lifting of the writ of preliminary mandatory
injuction issued by the trial court.
ISSUE: Whose contention is correct?
HELD: In view of the foregoing reasons, misplaced is the petitioners' thesis
citing Ungab v. Cusi, that the lack of a final determination of Fortune's exact
or correct tax liability is not a bar to criminal prosecution, and that while a
precise computation and assessment is required for a civil action to collect
tax deficiencies, the Tax Code does not require such computation and
assessment prior to criminal prosecution.
Reading Ungab carefully, the pronouncement therein that deficiency
assessment is not necessary prior to prosecution is pointedly and deliberately
qualified by the Court with following statement quoted from Guzik v. U.S.:
"The crime is complete when the violator has knowingly and wilfully filed a
fraudulent return with intent to evade and defeat a part or all of the tax." In
plain words, for criminal prosecution to proceed before assessment, there
must be a prima facie showing of a wilful attempt to evade taxes. There was
a wilful attempt to evade tax in Ungab because of the taxpayer's failure to
declare in his income tax return "his income derived from banana sapplings."
In the mind of the trial court and the Court of Appeals, Fortune's situation is
quite apart factually since the registered wholesale price of the goods,
approved by the BIR, is presumed to be the actual wholesale price, therefore,
not fraudulent and unless and until the BIR has made a final determination of
what is supposed to be the correct taxes, the taxpayer should not be placed
in the crucible of criminal prosecution. Herein lies a whale of difference
between Ungab and the case at bar.

CIR vs. PASCOR

309 SCRA 402
GR No. 128315 June 29, 1999
"An assessment is not necessary before a criminal charge can be filed."
FACTS: The BIR examined the books of account of Pascor Realty and Devt
Corp for years 1986, 1987 and 1988, from which a tax liability of 10.5 Million
Pesos was found. Based on the recommendations of the examiners, the CIR
filed an information with the DOJ for tax evasion against the officers of Pascor.
Upon receipt of the subpoena, the latter filed an urgent request for
reconsideration/reinvestigation with the CIR, which was immediately denied
upon the ground that no formal assessment has yet been issued by the
Commisioner. Pascor elevated the CIR's decision to the CTA on a petition for
review. The CIR filed a Motion to Dismiss on the ground of lack of jurisdiction
of CTA as there was no formal assessment made against the respondents.
The CTA dismissed the motion, hence this petition.
ISSUE: Is a formal assessment necessary in the filing of a criminal complaint?
HELD: No. Section 222 of the NIRC states that an assessment is not necessary
before a criminal charge can be filed. This is the general rule. Private
respondents failed to show that they are entitled to an exception. Moreover,
the criminal charge need only be supported by a prima facie showing of
failure to file a required return. This fact need not be proven by an
assessment.
The issuance of an assessment must be distinguished from the filing of a
complaint. Before an assessment is issued, there is, by practice, a preassessment notice sent to the taxpayer. The taxpayer is then given a chance
to submit position papers and documents to prove that the assessment is
unwarranted. If the commissioner is unsatisfied, an assessment signed by
him or her is then sent to the taxpayer informing the latter specifically and
clearly that an assessment has been made against him or her. In contrast,
the criminal charge need not go through all these. The criminal charge is filed
directly with the DOJ. Thereafter, the taxpayer is notified that a criminal case
had been filed against him, not that the commissioner has issued an
assessment. It must be stressed that a criminal complaint is instituted not to
demand payment, but to penalize the taxpayer for violation of the Tax Code.

SC releases first conviction for tax evasion

A FEW days back, the Supreme Court, in its resolution, in the case of People
of the Philippines v. Gloria V. Kintanar (GR 196340), affirmed the
conviction of a taxpayer for tax evasion due to non-filing of income-tax return

(ITR). The conviction carried with it the penalty of imprisonment ranging from
one to two years for each act of nonfiling of tax returns, in this case, two
years. This conviction may cause a chilling effect on those who are not
compliant with their tax obligations and most especially to those operating
outside the tax net.
The accused, Gloria Kintanar, was not able to satisfactorily convince the
Court of Tax Appeals as well as the Supreme Court that she did not
deliberately and willfully neglect to file her ITR. The anchor of her argument
was that there was actually intent to file and pay. In fact, she entrusted the
filing of the same to her husband who caused the filing of their joint ITRs
through a hired accountant. She said that since there was an intent, it cannot
be said that there was willful neglect to file her ITR. Both courts did not agree.
Section 255 of the Tax Code punishes every person required by the Tax Code
to pay any tax, make a return, keep any record, or supply correct and
accurate information, who willfully fails to pay such tax and make such
return.
What is willful then?
The Court of Tax Appeals (CTA) full court (en banc) had the occasion to define
what is willful. In resolving this Kintanar case, it reiterated that willful in tax
crimes statutes, is a voluntary, intentional violation of a known legal duty and
bad faith or bad purpose need not be shown. Thus, considering that the
accused admitted before the CTA that she is aware that she is mandated by
law to file her ITRs and is an experienced businesswoman, her omission was
considered willful and is a clear violation of Section 255 of the Tax Code.
Applying the case principle as promulgated above, it is an essential element,
therefore, in Section 255 of the Tax Code that a violator must be fully aware
of his/her legal duty to file her income-tax return. Without which, it may be
inferred that the crime cannot be consummated. However, is this not in
contravention of the legal principle that ignorance of the law excuses no
one? The law presumes that everybody know his/her tax obligations and
duties. Is there really a need to prove that an accused is fully aware of her tax
obligations?
Worth mentioning is the fact that accused tried to persuade the court that the
omission was not willful, considering that she entrusted the filing to her
husband who caused the filing through an accountant. The court believed
that this did not relieve the accused from her criminal liability. As principal,
she must assume responsibility over the acts of her accountant (Section 51
[F] of the NIRC of 1997). With this, it can be inferred from the decision of the
courts that a principal cannot use as a shelter from any criminal liability the

fact that she hired or appointed an individual to cause the filing of her ITR.
Generally, as principals, they are bound by the acts or omissions of these
hired accountant or duly authorized representatives except, of course, for
exceptions as provided by law.
It is also worth mentioning that each act of nonfiling of a tax return is a
separate offense and each is punishable as an act of tax evasion. Thus, the
penalty attaches to every tax-evasion case, which can be as many as there
are returns that are not filed.
As April 15 is fast approaching, we, as taxpayers, will again be preparing and
filing our tax returns. We are free to engage the services of an accountant or
appoint a duly authorized agent or representative to cause the filing of our
ITRs. However, in doing so, we must ensure that these hired or duly
authorized representatives file our tax returns correctly, on time and at the
proper venue.

People of the Philippines vs. Judy Anne Santos,

CTA CRIM. CASE NO. O-012, January 16, 2013
Bautista, J.
Facts:
The accused, Judy Anne Santos is charged for filing a false and fraudulent
Income Tax Return (ITR) for the taxable year 2002 by indicating therein
a gross income of P 8, 003,332.70, when in truth and in fact her correct
income for taxable year 2002 is P 16, 396, 234.70. She is prosecuted for
violation Section 255 of the 1997 NIRC as amended for her failure to
supply correct and accurate information, which resulted to an income tax
deficiency in the amount of P 1, 395,116.24, excluded interest and
penalties thereon in the amount of P 1, 319, 500. 94, or in the aggregate
income tax deficiency of P 2, 714,617.18.
Issue:
Whether or not the accused may be held liable for violation of Section 255
of the National Internal Revenue Code, as amended.
Held:
Section 255 enumerates the following offenses:
a. Willful failure to pay tax;
b. Willful failure to make a return;
c. Willful failure to keep any record;
d. Willful failure to supply correct and accurate information;
e. Willful failure to withhold or remit taxes withheld; or
f. Willful failure to refund excess taxes withheld on compensation.

One of the offenses above-enumerated is willful failure to supply correct

and accurate information, which is being attributed to the accused. The
elements of the said offense are as follows:
1. That a person is required to supply correct and accurate
information;
2. That there is failure to supply correct and accurate information at
the time or times required by law or rules and regulations; and
3. That such failure to supply correct and accurate information is done
wilfully.
Require to supply Correct and Accurate Information
Based on the records of the case, the accused unequivocally admitted
that as early as eight (8) years old, she entered the entertainment
industry, and that at present is an established movie actress, celebrity
endorser and showbiz personality. Further, for the subject taxable year
2002, she admitted that she entered into contracts for her engagement as
a professional entertainer, movie actress, and product endorser. With this,
accused is required to file an income tax return for all her income from all
sources.
The prosecution was able to prove that the accused, earning her
professional income as an entertainer is required to file an income tax
return, as she did, and that accused apparently supplied correct and
accurate information thereof.
Failure to Supply Correct and Accurate Information at the Time Required
by Law
The prosecution was able to prove the element of failure to supply correct
and accurate information at the time required by law.
The prosecution presented that there were:
a. Undeclared income form ABS-CBN Broadcasting Corporation
b. Undeclared income from Viva Productions, Inc.
c. Undeclared income from Star Cinema Productions, Inc.
d. Undeclared income from Regal Entertainment, Inc.
e. Undeclared income from Century Canning Corporation
From the foregoing, the prosecution was able to show that from the
declared Gross Taxable Professional Income of the accused in the amount
of P 8, 003, 332.70, in her ITR for the taxable year 2002, accused has an
aggregate amount of P16, 396, 234.70, or a gross underdeclaration of P 8,
362, 902.00.
Willful Failure to Supply Correct and Accurate Information
As early discussed, the prosecution was able to prove that the accused
failed to supply correct and accurate information in her ITR for the
year2002 for her failure declare her other income payments received from
other sources.

However, it is well settled that mere understatement of a tax is not itself

proof of fraud for the purpose of tax evasion.
Based on the records of the case, the accused denied the signature
appearing on top of the name Judy Anne Santos in the ITR for taxable
year 2002, presented by the prosecution, and that the Certified Public
Accountant, whos participation is limited to the preparation of the
Financial Statements attached to the return, likewise, denied signing the
return on behalf of the accused. Further, the working papers were all
provided by the manager of the accused.
The Court, therefore, finds the records bereft of any evidence to establish
the element of wilfulness on the part of the accused to supply the correct
and accurate information on her subject return.
The Court, however, only finds the accused negligent; and such is not
enough to convict her in the case at bench.
Negligence, whether slight or gross, is not equivalent to the fraud with
intent to evade the tax contemplated by law. Fraud must amount to
intentional wrong-doing with the sole object of avoiding the tax.
The Court also notes the intention of the accused to settle the case were it
not for the opposition of her Manager and then counsel, which negated
any motive of the accused to commit fraud.
In sum, the Court finds the failure of the prosecution to establish the guilt
of the accused beyond the required reasonable doubt.