People vs. Judy Ann Santos, CTA Crim Case no. O-012, January 16, 2013.
Facts:
1. Income Tax Return (ITR) Filed by Judy Anne Santos:
Judy Anne Santos, an actress and endorser, filed her ITR for 2002, reporting a gross income of
₱8,003,332.70.
The Bureau of Internal Revenue (BIR) conducted an audit and contended that her actual income for 2002
was ₱16,396,234.70.
The discrepancy between the declared income and the BIR’s findings amounted to ₱8,362,902.00, which
led to a tax deficiency assessment of ₱1,395,116.24.
The tax deficiency was subject to interest and penalties, bringing the total to ₱2,714,617.18.
The BIR accused Santos of willfully failing to file a correct and accurate ITR, claiming she violated
Section 255 of the National Internal Revenue Code (NIRC), which prohibits willfully making false or
misleading statements in tax returns.
1. Nature of the Alleged Tax Evasion:
The BIR's claim was based on the assumption that the difference in reported income resulted from willful
concealment of income by Santos.
Specifically, the BIR believed that Santos deliberately omitted several income sources from her return to
avoid paying the correct taxes.
Santos denied any fraudulent intent, asserting that the omission was unintentional and that she had
relied on her accountants to file her taxes accurately.
2. Legal Proceedings:
Santos was charged under Section 255 of the NIRC, which imposes penalties for willful failure to file
accurate tax returns.
The prosecution argued that the large discrepancy in income reporting, coupled with the omission of
certain sources of income, pointed to fraud.
Santos, on the other hand, maintained that she had not intended to evade taxes and that the
discrepancies were merely the result of miscommunication or error by her accountants.
Issue:
whether Judy Anne Santos intentionally underreported her income to evade taxes, or if it was just an honest mistake, like a
miscommunication with her
Held:
The Court based its decision on Section 255 of the National Internal Revenue Code (NIRC), which lists the following
offenses:
Willful failure to pay tax
Willful failure to make a return
Willful failure to keep any record
Willful failure to provide correct and accurate information
Willful failure to withhold or remit taxes withheld
Willful failure to refund excess taxes withheld on compensation
In this case, Judy Anne Santos was accused of willfully failing to provide correct and accurate information in her 2002
Income Tax Return (ITR). For the prosecution to prove this charge, they had to show that:
1. Judy Anne was required to provide accurate information (she was earning income from her work as an actress and
endorser).
2. She failed to provide the correct and accurate information when required by law.
3. Her failure to provide this information was willful (intentional).
Here’s how the Court analyzed the case:
1. Required to Provide Correct and Accurate Information:
o Judy Anne had been working as an entertainer since she was a child and was a well-established actress
and endorser. As such, she was required by law to file an income tax return (ITR) for all her earnings
from all sources.
o The prosecution didn’t dispute this. Judy Anne did file an ITR, but the issue was whether the information
she provided was correct and complete.
2. Failure to Supply Correct and Accurate Information:
o The prosecution proved that Judy Anne had undeclared income from several companies, including ABS-
CBN, Viva Productions, Star Cinema, Regal Entertainment, and Century Canning Corporation.
o The income she declared in her ITR was ₱8,003,332.70, but the total actual income was ₱16,396,234.70.
This meant she had underreported her income by ₱8,362,902.00.
3. Willful Failure to Supply Information:
o While the prosecution showed that Judy Anne underreported her income, the court made an important
point: underreporting alone doesn’t prove fraud. Fraud means intentional wrongdoing with the sole
purpose of avoiding tax.
o Judy Anne denied that the signature on the ITR was hers and stated that the Certified Public Accountant
(CPA) involved only prepared the financial statements, not the actual return. The court also noted that
Judy Anne's manager handled the paperwork and presented the information.
o The court concluded that there was no clear evidence to prove that Judy Anne acted with the
intention to deceive or evade taxes. It found that she was negligent, not fraudulent. Negligence
(even if serious) is not the same as fraud in tax evasion cases.
4. Conclusion:
o The court found that the prosecution failed to prove that Judy Anne’s actions were willful and intentional.
Therefore, the case was dismissed, and Judy Anne was acquitted of tax evasion.
o The court also took into account Judy Anne’s intention to settle the case, which suggested she didn’t
have fraudulent motives.
