590 Phil. 801
CARPIO MORALES, J.:
The right of the respondent to assess petitioner for deficiency income tax, VAT and Documentary Stamp Tax for the year 1995 has not prescribed pursuant to Section 222(a) of the 1997 Tax Code. Petitioner's 1995 Income Tax Return (ITR) filed on April 11, 1996 was false and fraudulent for its deliberate failure to declare its true sales. Petitioner declared in its 1995 Income Tax Return that it was on its pre-operation stage and has not declared its income. Investigation by the revenue officers of the respondent, however, disclosed that it has been operating/doing business and had sales operations for the year 1995 in the total amount of P7,156,336.08 which it failed to report in its 1995 ITR. Thus, for the year 1995, petitioner filed a fraudulent annual income return with intent to evade tax. Likewise, petitioner failed to file Value-Added Tax (VAT) Return and reported the amount of P7,156,336.08 as its gross sales for the year 1995. Hence, for failure to file a VAT return and for filing a fraudulent income tax return for the year 1995, the corresponding taxes may be assessed at any time within ten (10) years after the discovery of such omission or fraud pursuant to Section 222(a) of the 1997 Tax Code.The aforecited Section 222(a)[8] of the 1997 Tax Code provides:
The subject deficiency tax assessments have already become final, executory and demandable for failure of the petitioner to file a protest within the reglementary period provided for by law. The "alleged protest" allegedly filed on June 25, 2004 at the Legal Division, Revenue Region No. 8, Makati City is nowhere to be found in the BIR Records nor reflected in the Record Book of the Legal Division as normally done by our receiving clerk when she receive[s] any document. The respondent, therefore, has legal basis to collect the tax liability either by distraint and levy or civil action.[7] (Emphasis and underscoring supplied)
In the case of a false or fraudulent return with intent to evade tax or of failure to file a return, the tax may be assessed, or a proceeding in court for the collection of such tax may be filed without assessment, at any time within ten (10) years after the discovery of the falsity, fraud, or omission: Provided, That in a fraud assessment which has become final and executory, the fact of fraud shall be judicially taken cognizance of in the civil or criminal action for the collection thereof. (Underscoring supplied)The Bureau of Internal Revenue (BIR) in fact filed on March 10, 2005 a criminal complaint before the Department of Justice against the officers and accountant of petitioner for violation of the provisions of "The National Internal Revenue Code of 1977, as amended,[9] covering the taxable year 1995." The criminal complaint was docketed as I.S. No. 2005-203.
Grave abuse of discretion implies such capricious and whimsical exercise of judgment as equivalent to lack of jurisdiction or, in other words, when the power is exercised in an arbitrary or despotic manner by reason of passion or personal hostility, and it must be so patent and gross as to amount to an evasion of positive duty or a virtual refusal of duty enjoined or to act at all in contemplation of law.[28]I.
x x x in holding that the legality of the mode of acquiring the documents which are the bases of the above discussed deficiency tax assessments, the subject matter of the Petition for Review now pending in the Honorable Second Division, is not material and relevant to the issue of prescription.II.
x x x in holding that Mr. Leonardo Sablan's testimony, if allowed, would violate RA 2338 which prohibits the BIR to reveal the identity of the informer since 1) the purpose of the subpoena is to elicit from him the whereabouts of the original accounting records, documents and receipts owned by the Petitioner and not to discover if he is the informer since the identity of the informer is not relevant to the issues raised; 2) RA 2338 cannot legally justify violation of the Petitioner's property rights by a person, whether he is an informer or not, since such RA cannot allow such invasion of property rights otherwise RA 2338 would run counter to the constitutional mandate that "no person shall be deprive[d] of life, liberty or property without due process of law."III.
x x x in holding that the issuance of subpoena ad testificandum would constitute a violation of the prohibition to reveal the identity of the informer because compliance with such prohibition has been rendered moot and academic by the voluntary admissions of the Respondent himself.IV.
x x x in holding that the constitutional right of an accused to examine the witness against him does not exist in this case. The Petitioner's liability for tax deficiency assessment which is the main issue in the Petition for Review is currently pending at the Honorable Second Division. Therefore, it is a prejudicial question raised in the criminal case filed by the herein Respondent against the officers of the Petitioner with the Department of Justice.V.
x x x in dismissing the request for subpoena ad testificandum because the Opposition thereto submitted by the Respondent was not promptly filed as provided by the Rules of Court thus, it is respectfully submitted that, Respondent has waived his right to object thereto.VI.
x x x when the Honorable Court of Tax Appeals ruled that the purpose of the Petitioner in requesting for written interrogatories is to annoy, embarrass, or oppress the witness because such ruling has no factual basis since Respondent never alleged nor proved that the witnesses to whom the interrogatories are addressed will be annoyed, embarrassed or oppressed; besides the only obvious purpose of the Petitioner is to know the whereabouts of accounting records and documents which are in the possession of the witnesses to whom the interrogatories are directed and to ultimately get possession thereof. Granting without admitting that there is annoyance, embarrassment or oppression; the same is not unreasonable.VII.
x x x when it failed to rule that the BIR officers and employees are not covered by the prohibition under RA 2338 and do not have the authority to withhold from the taxpayer documents owned by such taxpayer.VIII.
x x x when it required the "clear and unequivocal proof" of relevance of the documents as a condition precedent for the issuance of subpoena duces tecum.IX.
x x x when it quashed the subpoena duces tecum as the Honorable Court had issued an outstanding order to the Respondent to certify and forward to the CTA all the records of the case because up to the date of this Petition the BIR records have not been submitted yet to the CTA.[27]
while the questions for the revenue officers read:
- Under what circumstances do you know petitioner corporation? Please state in what capacity, the date or period you obtained said knowledge.
- Do you know a Ms. Elnora Carpio, who from 1995 to the early part of 1996 was the book keeper of petitioner? Please state how you came to know of Ms. Carpio.
- At the time that Ms. Carpio was book keeper of petitioner did she consult you or show any accounting documents and records of petitioner?
- What documents, if any, did you obtain from petitioner?
- Were these documents that you obtained from petitioner submitted to the Bureau of Internal Revenue (BIR)? Please describe said documents and under what circumstances the same were submitted.
- Was the consent of the petitioner, its officers or employees obtained when the documents that you obtained were submitted to the BIR? Please state when and from whom the consent was obtained.
- Did you execute an affidavit as an informer in the assessment which was issued by the BIR against petitioner for the tax year 1995 and other years?[30] (Underscoring supplied)
Petitioner impugns the manner in which the documents in question reached the BIR, Sablan having allegedly submitted them to the BIR without its (petitioner's) consent. Petitioner's lack of consent does not, however, imply that the BIR obtained them illegally or that the information received is false or malicious. Nor does the lack of consent preclude the BIR from assessing deficiency taxes on petitioner based on the documents. Thus Section 5 of the Tax Code provides:
- Where did you obtain the documents, particularly the invoices and official receipts, which [were] used by your office as evidence and as basis of the assessment for deficiency income tax and value added tax for the tax year 1995 issued against petitioner?
- Do you know Mr. Leonardo Sablan? Please state under what circumstance you came to know Mr. Sablan?[31] (Underscoring supplied)
In ascertaining the correctness of any return, or in making a return when none has been made, or in determining the liability of any person for any internal revenue tax, or in collecting any such liability, or in evaluating tax compliance, the Commissioner is authorized:The law thus allows the BIR access to all relevant or material records and data in the person of the taxpayer,[32] and the BIR can accept documents which cannot be admitted in a judicial proceeding where the Rules of Court are strictly observed.[33] To require the consent of the taxpayer would defeat the intent of the law to help the BIR assess and collect the correct amount of taxes.
(A) To examine any book, paper, record or other data which may be relevant or material to such query; (B) To obtain on a regular basis from any person other than the person whose internal revenue tax liability is subject to audit or investigation, or from any office or officer of the national and local governments, government agencies and instrumentalities, including the Bangko Sentral ng Pilipinas and government-owned and -controlled corporations, any information such as, but not limited to, costs and volume of production, receipts or sales and gross incomes of taxpayers, and the names, addresses, and financial statements of corporations, mutual fund companies, insurance companies, regional operating headquarters of multinational companies, joint accounts, associations, joint ventures or consortia and registered partnerships and their members; (C) To summon the person liable for tax or required to file a return, or any officer or employee of such person, or any person having possession, custody, or care of the books of accounts and other accounting records containing entries relating to the business of the person liable for tax, or any other person, to appear before the Commissioner or his duly authorized representatives at a time and place specified in the summons and to produce such books, papers, records, or other data, and to give testimony; (D) To take such testimony of the person concerned, under oath, as may be relevant or material to such inquiry; and (E) To cause revenue officers and employees to make a canvass from time to time of any revenue district or region and inquire after and concerning all persons therein who may be liable to pay any internal revenue tax, and all persons owning or having the care, management or possession of any object with respect to which a tax is imposed.
x x x x (Emphasis and underscoring supplied)