Wednesday, January 25, 2012

CIR v. Pascor Realty

Facts: Authorized revenue officers examined the books of accounts and accounting records of Pascor Realty (PRDC), which resulted in a recommendation for the issuance of an assessment (P7.5M for 1986 and P3M for 1987). CIR filed a criminal complaint for tax evasion before the DOJ against PRDC, its President and Treasurer. The latter filed a request for reconsideration/reinvestigation. CIR denied such request and the respondents elevated the CIR’s decision to the CTA. CIR filed a Motion to Dismiss on the ground that CTA has no jurisdiction over the subject matter since no formal assessment has been issued against PRDC. The CTA denied the Motion stating that the criminal case for tax evasion is already an assessment. The amount and kind of tax due and the covered period are sufficient details for an assessment. CA agreed with the decision of the CTA. 

Issue: Whether the criminal complaint for tax evasion can be construed as an assessment 

Held: NO. 

Neither the NIRC nor the RRs define the word “assessment.” However, the specific functions and effects of an assessment are defined in the NIRC. To consider the affidavit attached to the complaint as a proper assessment is to subvert the nature of an assessment and set a bad precedent that will prejudice innocent taxpayers. An assessment informs the taxpayer that he has a tax liability. It must be sent to and received by a taxpayer and must demand payment of the taxes within a specific period. It is made only when the Collector of internal revenue releases, mails, or sends such notice to the taxpayer. In this case, the affidavit merely contained the computation of PRDC’s tax liability. It did not state a demand or a period for payment. Also, it was addressed to the justice secretary and not to the taxpayer.

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