7.

CIR vs Pascor realty - 309 scra 442 (contention-untenable) assessment is not necessary

An assessment contains not only a computation of tax liabilities, but also a demand for payment within a prescribed period. It also signals the
time when penalties and protests begin to accrue against the taxpayer. To enable the taxpayer to determine his remedies thereon, due
process requires that it must be served on and received by the taxpayer. Accordingly, an affidavit, which was executed by revenue officers
stating the tax liabilities of a taxpayer and attached to a criminal complaint for tax evasion, cannot be deemed an assessment that can be
questioned before the Court of Tax Appeals.

Statement of the Case

Before this Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court praying for the nullification of the October 30,
1996
Decision 1 of the Court of Appeals 2 in CA-GR SP No. 40853, which effectively affirmed the January 25, 1996 Resolution 3 of the Court of
Tax Appeals 4 CTA Case No. 5271. The CTA disposed as follows:

WHEREFORE, finding [the herein petitioner's] "Motion to Dismiss" as UNMERITORIOUS, the same is hereby DENIED.
[The CIR] is hereby given a period of thirty (30) days from receipt hereof to file her answer.

Petitioner also seeks to nullify the February 13, 1997 Resolution 5 of the Court of Appeals denying reconsideration.

The Facts

As found by the Court of Appeals, the undisputed facts of the case are as follows:

It appears that by virtue of Letter of Authority No. 001198, then BIR Commissioner Jose U. Ong authorized Revenue
Officers Thomas T. Que, Sonia T. Estorco and Emmanuel M. Savellano to examine the books of accounts and other
accounting records of Pascor Realty and Development Corporation. (PRDC) for the years ending 1986, 1987 and
1988. The said examination resulted in a recommendation for the issuance of an assessment in the amounts of
P7,498,434.65 and P3,015,236.35 for the years 1986 and 1987, respectively.

On March 1, 1995, the Commissioner of Internal Revenue filed a criminal complaint before the Department of Justice
against the PRDC, its President Rogelio A. Dio, and its Treasurer Virginia S. Dio, alleging evasion of taxes in the total
amount of P10,513,671 .00. Private respondents PRDC, et. al. filed an Urgent Request for
Reconsideration/Reinvestigation disputing the tax assessment and tax liability.

On March 23, 1995, private respondents received a subpoena from the DOJ in connection with the criminal complaint
filed by the Commissioner of Internal Revenue (BIR) against them.1âwphi1.nêt

In a letter dated May 17, 1995, the CIR denied the urgent request for reconsideration/reinvestigation of the private
respondents on the ground that no formal assessment of the has as yet been issued by the Commissioner.

Private respondents then elevated the Decision of the CIR dated May 17, 1995 to the Court of Tax Appeals on a
petition for review docketed as CTA Case No. 5271 on July 21, 1995. On September 6, 1995, the CIR filed a Motion to
Dismiss the petition on the ground that the CTA has no jurisdiction over the subject matter of the petition, as there was
no formal assessment issued against the petitioners. The CTA denied the said motion to dismiss in a Resolution dated
January 25, 1996 and ordered the CIR to file an answer within thirty (30) days from receipt of said resolution. The CIR
received the resolution on January 31, 1996 but did not file an answer nor did she move to reconsider the resolution.

Instead, the CIR filed this petition on June 7, 1996, alleging as grounds that:

Respondent Court of Tax Appeals acted with grave abuse of discretion and without jurisdiction in
considering the affidavit/report of the revenue officer and the indorsement of said report to the
secretary of justice as assessment which may be appealed to the Court of Tax Appeals;

Respondent Court Tax Appeals acted with grave abuse of discretion in considering the denial by
petitioner of private respondents' Motion for Reconsideration as [a] final decision which may be
appealed to the Court of Tax Appeals.

In denying the motion to dismiss filed by the CIR, the Court of Tax Appeals stated:

We agree with petitioners' contentions, that the criminal complaint for tax evasion is the
assessment issued, and that the letter denial of May 17, 1995 is the decision properly appealable
 to [u]s. Respondent's ground of denial, therefore, that there was no formal assessment issued, is
untenable.

It is the Court's honest belief, that the criminal case for tax evasion is already anassessment. The complaint, more
particularly, the Joint Affidavit of Revenue Examiners Lagmay and Savellano attached thereto, contains the details of
the assessment like the kind and amount of tax due, and the period covered:

Petitioners are right, in claiming that the provisions of Republic Act No. 1125, relating to exclusive appellate jurisdiction
of this Court, do not, make any mention of "formal assessment." The law merely states, that this Court has exclusive
appellate jurisdiction over decisions of the Commissioner of Internal Revenue on disputed assessments, and other
matters arising under the National Internal Revenue Code, other law or part administered by the Bureau of Internal
Revenue Code.

As far as this Court is concerned, the amount and kind of tax due, and the period covered, are sufficient details needed
for an "assessment." These details are more than complete, compared to the following definitions of the term as quoted
hereunder. Thus:

Assessment is laying a tax. Johnson City v. Clinchfield R. Co., 43 S.W. (2d) 386, 387, 163 Tenn. 332. (Words and
Phrases, Permanent Edition, Vol. 4, p. 446).

The word assessment when used in connection with taxation, may have more than one meaning. The ultimate purpose
of an assessment to such a connection is to ascertain the amount that each taxpayer is to pay. More commonly, the
word "assessment" means the official valuation of a taxpayer's property for purpose of taxation. State v. New York,
N.H. and H.R. Co. 22 A. 765, 768, 60 Conn. 326, 325. (Ibid. p. 445)

From the above, it can be gleaned that an assessment simply states how much tax is due from a taxpayer. Thus,
based on these definitions, the details of the tax as given in the Joint Affidavit of respondent's examiners, which was
attached to the tax evasion complaint, more than suffice to qualify as an assessment. Therefore, this assessment
having been disputed by petitioners, and there being a denial of their letter disputing such assessment, this Court
unquestionably acquired jurisdiction over the instant petition for review. 6

As earlier observed, the Court of Appeals sustained the CTA and dismissed the petition.

Hence, this recourse to this Court. 7

Ruling of the Court of Appeals

The Court of Appeals held that the tax court committed no grave abuse of discretion in ruling that the Criminal Complaint for tax evasion filed
by the Commissioner of Internal Revenue with the Department of Justice constituted an "assessment" of the tax due, and that the said
assessment could be the subject of a protest. By definition, an assessment is simply the statement of the details and the amount of tax due
from a taxpayer. Based on this definition, the details of the tax contained in the BIR examiners' Joint Affidavit, 8 which was attached to the
criminal Complaint, constituted an assessment. Since the assailed Order of the CTA was merely interlocutory and devoid of grave abuse of
discretion, a petition for certiorari did not lie.

Issues

Petitioners submit for the consideration of this Court following 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.

(3) Whether or not the CTA can take cognizance of the case in the absence of an assessment. 9

In the main, the Court will resolve whether the revenue officers' Affidavit-Report, which was attached to criminal revenue Complaint filed the
Department of Justice, constituted an assessment that could be questioned before the Court of Tax Appeals.

The Court's Ruling

The petition is meritorious.

Main Issue: Assessment

Petitioner argues that the filing of the criminal complaint with the Department of Justice cannot in any way be construed as a formal
assessment of private respondents' tax liabilities. This position is based on Section 205 of the National Internal Revenue Code 10 (NIRC),
which provides that remedies for the collection of deficient taxes may be by either civil or criminal action. Likewise, petitioner cites Section
223(a) of the same Code, which states that in case of failure to file a return, the tax may be assessed or a proceeding in court may be begun
without assessment.

Respondents, on the other hand, maintain that an assessment is not an action or proceeding for the collection of taxes, but merely a notice
that the amount stated therein is due as tax and that the taxpayer is required to pay the same. Thus, qualifying as an assessment was the
BIR examiners' Joint Affidavit, which contained the details of the supposed taxes due from respondent for taxable years ending 1987 and
1988, and which was attached to the tax evasion Complaint filed with the DOJ. Consequently, the denial by the BIR of private respondents'
request for reinvestigation of the disputed assessment is properly appealable to the CTA.

We agree with petitioner. Neither the NIRC nor the regulations governing the protest of assessments 11 provide a specific definition or form
of an assessment. However, the NIRC defines the specific functions and effects of an assessment. To consider the affidavit attached to the
Complaint as a proper assessment is to subvert the nature of an assessment and to set a bad precedent that will prejudice innocent
taxpayers.

True, as pointed out by the private respondents, an assessment informs the taxpayer that he or she has tax liabilities. But not all documents
coming from the BIR containing a computation of the tax liability can be deemed assessments.

To start with, an assessment must be sent to and received by a taxpayer, and must demand payment of the taxes described therein within a
specific period. Thus, the NIRC imposes a 25 percent penalty, in addition to the tax due, in case the taxpayer fails to pay deficiency tax within
the time prescribed for its payment in the notice of assessment. Likewise, an interest of 20 percent per annum, or such higher rates as may
be prescribed by rules and regulations, is to be collected form the date prescribed for its payment until the full payment. 12

The issuance of an assessment is vital in determining, the period of limitation regarding its proper issuance and the period within which to
protest it. Section 203 13 of the NIRC provides that internal revenue taxes must be assessed within three years from the last day within
which to file the return. Section 222, 14 on the other hand, specifies a period of ten years in case a fraudulent return with intent to evade was
submitted or in case of failure to file a return. Also, Section 228 15 of the same law states that said assessment may be protested only within
thirty days from receipt thereof. Necessarily, the taxpayer must be certain that a specific document constitutes an assessment. Otherwise,
confusion would arise regarding the period within which to make an assessment or to protest the same, or whether interest and penalty may
accrue thereon.

It should also be stressed that the said document is a notice duly sent to the taxpayer. Indeed, an assessment is deemed made only when
the collector of internal revenue releases, mails or sends such notice to the taxpayer. 16

In the present case, the revenue officers' Affidavit merely contained a computation of respondents' tax liability. It did not state a demand or a
period for payment. Worse, it was addressed to the justice secretary, not to the taxpayers.

Respondents maintain that an assessment, in relation to taxation, is simply understood' to mean:

A notice to the effect that the amount therein stated is due as tax and a demand for payment thereof. 17

Fixes the liability of the taxpayer and ascertains the facts and furnishes the data for the proper presentation of tax
rolls. 18

Even these definitions fail to advance private respondents' case. That the BIR examiners' Joint Affidavit attached to the Criminal Complaint
contained some details of the tax liabilities of private respondents does not ipso facto make it an assessment. The purpose of the Joint
Affidavit was merely to support and substantiate the Criminal Complaint for tax evasion. Clearly, it was not meant to be a notice of the tax
due and a demand to the private respondents for payment thereof.

The fact that the Complaint itself was specifically directed and sent to the Department of Justice and not to private respondents shows that
the intent of the commissioner was to file a criminal complaint for tax evasion, not to issue an assessment. Although the revenue officers
recommended the issuance of an assessment, the commissioner opted instead to file a criminal case for tax evasion. What private
respondents received was a notice from the DOJ that a criminal case for tax evasion had been filed against them, not a notice that the
Bureau of Internal Revenue had made an assessment.

In addition, what private respondents sent to the commissioner was a motion for a reconsideration of the tax evasion charges filed, not of an
assessment, as shown thus:

This is to request for reconsideration of the tax evasion charges against my client, PASCOR Realty and Development Corporation and for
the same to be referred to the Appellate Division in order to give my client the opportunity of a fair and objective hearing. 19

Additional Issues:
 Assessment Not

Necessary Before Filing of

Criminal Complaint

Private respondents maintain that the filing of a criminal complaint must be preceded by an assessment. This is incorrect, because Section
222 of the NIRC specifically states that in cases where a false or fraudulent return is submitted or in cases of failure to file a return such as
this case, proceedings in court may be commenced without an assessment. Furthermore, Section 205 of the same Code clearly mandates
that the civil and criminal aspects of the case may be pursued simultaneously. In Ungab v. Cusi,20 petitioner therein sought the dismissal of
the criminal Complaints for being premature, since his protest to the CTA had not yet been resolved. The Court held that such protests could
not stop or suspend the criminal action which was independent of the resolution of the protest in the CTA. This was because the
commissioner of internal revenue had, in such tax evasion cases, discretion on whether to issue an assessment or to file a criminal case
against the taxpayer or to do both.

Private respondents insist that Section 222 should be read in relation to Section 255 of the NLRC, 21 which penalizes failure to file a return.
They add that a tax assessment should precede a criminal indictment. We disagree. To reiterate, said Section 222 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
pre-assessment 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.

WHEREFORE, the petition is hereby GRANTED. The assailed Decision is REVERSED and SET ASIDE. CTA Case No. 5271 is likewise
DISMISSED. No costs.

SO ORDERED.