TAXATION 2

GR Nos. L-20569
August 24, 1974
AZNAR v CIR
Facts:
Matias H. Aznar who i! on Ma" 1#, 195#, $r!!%!ssor o& $!tition!r, uring his 'i&!ti(! as a r!si!nt o& )!*u )it", &i'! his in%o(!
ta+ r!turns on th! %ash an is*urs!(!nt *asis.
,h! )-R ha.ing his ou*ts on th! .!ra%it" o& th! r!$ort! in%o(! o& on! o*.ious'" w!a'th", $ursuant to th! authorit" grant! hi( *"
/!%tion 0# o& th! N-R), %aus! 1.-.R. 2+a(in!r Honorio Gu!rr!ro to as%!rtain th! ta+$a"!r3s tru! in%o(! &or sai "!ars *" using th!
n!t worth an !+$!nitur!s (!tho o& ta+ in.!stigation.
,h! &inings %'!ar'" ini%at! that th! ta+$a"!r i not !%'ar! %orr!%t'" th! in%o(! r!$ort! in his in%o(! ta+ r!turns &or th! a&or!sai
"!ars.
in his '!tt!r at! No.!(*!r 2#, 1952, noti&i! th! ta+$a"!r o& th! ass!ss! ta+ !'in4u!n%" to th! a(ount o& 5720,002.66, $'us
%o($ro(is! $!na't".
,h! ta+$a"!r r!4u!st! a r!in.!stigation whi%h was grant! &or th! $ur$os! o& .!ri&"ing th! (!rits o& th! .arious o*6!%tions o& th!
ta+$a"!r to th! !&i%i!n%" in%o(! ta+ ass!ss(!nt o& No.!(*!r 2#, 1952.
7n 8!*ruar" 20, 1950, )-R, thru th! )it" ,r!asur!r o& )!*u, $'a%! th! $ro$!rti!s o& Matias H. Aznar un!r istraint an '!." to
s!%ur! $a"(!nt o& th! !&i%i!n%" in%o(! ta+ in 4u!stion.
Matias H. Aznar &i'! his $!tition &or r!.i!w o& th! %as! with th! ),A on A$ri' 1, 1955, with a su*s!4u!nt $!tition i((!iat!'"
th!r!a&t!r to r!strain r!s$on!nt &ro( %o''!%ting th! !&i%i!n%" ta+ *" su((ar" (!tho.
7n Mar%h 5, 1962, th! ),A %on%'u! that th! ta+ 'ia*i'it" o& th! 'at! Matias H. Aznar &or th! "!ar 1946 to 1951, in%'usi.! shou' *!
5227,7##.64 (inus 596.#7 r!$r!s!nting th! ta+ %r!it &or 1945, or 5227,691.77.
Aznar3s %ont!ntion is that th! $r!s%ri$ti.! $!rio o& &i.! "!ars 'i(itation u$on ass!ss(!nt an %o''!%tion &ro( th! &i'ing o& th! r!turns
$ro.i! &or in /!!. 001 o& th! N-R) ha !+$ir!.
H! argu!s that sin%! th! 1946 in%o(! ta+ r!turn %ou' *! $r!su(! &i'! *!&or! Mar%h 1, 1947 an th! noti%! o& &ina' an 'ast
ass!ss(!nt was r!%!i.! *" th! ta+$a"!r on Mar%h 2, 1955, a $!rio o& a*out # "!ars ha !'a$s! an th! &i.! "!ar $!rio $ro.i!
*" 'aw 9/!%. 001 o& th! Nationa' -nt!rna' R!.!nu! )o!: ha a'r!a" !+$ir!. ,h! sa(! argu(!nt is a.an%! on th! ta+$a"!r3s
r!turn &or 1947, whi%h was &i'! on Mar%h 1, 194#, an th! r!turn &or 194#, whi%h was &i'! on 8!*ruar" 2#, 1949.
)-R, on th! oth!r han, ar! o& th! &ir( *!'i!& that r!garing th! $r!s%ri$ti.! $!rio &or ass!ss(!nt o& ta+ r!turns, /!%tion 002 o& th!
Nationa' -nt!rna' R!.!nu! )o! shou' a$$'" *!%aus!, as in this %as!, ;9a: In the case of a false or fraudulent return with intent to
evade tax or of a failure to file a return, the tax a! "e assessed, or a #roceedin$ in court for the collection of such tax a!
"e "e$un without assessent, at an! tie within ten !ears after the discover! of the falsit!, fraud or oission; 9/!%. 002 9a:
o& th! N-R):.
Aznar argu!s that /!%. 002 o& th! N-R) o!s not a$$'" *!%aus! th! ta+$a"!r i not &i'! &a's! an &rauu'!nt r!turns with int!nt to
!.a! ta+, whi'! r!s$on!nt )o((ission!r o& -nt!rna' R!.!nu! insists %ontrariwis!, with r!s$on!nt )ourt o& ,a+ A$$!a's %on%'uing
that th! .!r" ;su*stantia' un!r !%'arations o& in%o(! &or si+ %ons!%uti.! "!ars !'o4u!nt'" !(onstrat! th! &a'sit" or &rauu'!n%! o&
th! in%o(! ta+ r!turns with an int!nt to !.a! th! $a"(!nt o& ta+.;
Issue: <=N th! right o& th! )-R to ass!ss !&i%i!n%" in%o(! ta+!s o& th! 'at! Matias H. Aznar &or th! "!ars 1946, 1947, an 194# ha a'r!a"
$r!s%ri*! at th! ti(! th! ass!ss(!nt was (a! on No.!(*!r 2#, 1952. N7.
Ratio:
,h! )ourt ru'! that th! $ro$!r an r!asona*'! int!r$r!tation o& sai $ro.ision shou' *! that in th! thr!! i&&!r!nt %as!s o& 91: &a's!
r!turn, 92: &rauu'!nt r!turn with int!nt to !.a! ta+, 90: &ai'ur! to &i'! a r!turn, th! ta+ (a" *! ass!ss!, or a $ro%!!ing in %ourt &or
th! %o''!%tion o& su%h ta+ (a" *! *!gun without ass!ss(!nt, at an" ti(! within t!n "!ars a&t!r th! is%o.!r" o& th! 91: &a'sit", 92:
&rau, 90: o(ission. ,h! )ourt sai that th! 'aw shou' *! int!r$r!t! to (!an a s!$aration o& th! thr!! i&&!r!nt situations o& &a's!
r!turn, &rauu'!nt r!turn with int!nt to !.a! ta+, an &ai'ur! to &i'! a r!turn is str!ngth!n! i((!asura*'" *" th! 'ast $ortion o& th!
$ro.ision whi%h s!gr!gat!s th! situations into thr!! i&&!r!nt %'ass!s, na(!'" ;&a'sit";, ;&rau; an ;o(ission;. ,hat th!r! is a
i&&!r!n%! *!tw!!n ;&a's! r!turn; an ;&rauu'!nt r!turn; %annot *! !ni!. <hi'! th! &irst (!r!'" i($'i!s !.iation &ro( th! truth,
wh!th!r int!ntiona' or not, th! s!%on i($'i!s int!ntiona' or !%!it&u' !ntr" with int!nt to !.a! th! ta+!s u!.
,h! orinar" $!rio o& $r!s%ri$tion o& 5 "!ars within whi%h to ass!ss ta+ 'ia*i'iti!s un!r /!%. 001 o& th! N-R) shou' *! a$$'i%a*'! to
nor(a' %ir%u(stan%!s, *ut whenever the government is placed at a disadvantage so as to prevent its lawful agents from proper
assessment of tax liabilities due to false returns, fraudulent return intended to evade payment of tax or failure to file returns, the
period of ten years provided for in Sec. 332 (a) NIRC, from the time of the discovery of the falsity, fraud or omission even
seems to be inadeuate and should be the one enforced.
There "ein$ undou"tedl! false tax returns in this case, The Court affirs the conclusion of the CTA that %ec& ''2 (a) of the
NIRC should a##l! and that the #eriod of ten !ears within which to assess #etitioner*s tax lia"ilit! had not ex#ired at the tie
said assessent was ade&
TAXATION 2
GR Nos. L-120##0
>un! 5, 1997
+ARCO% II v CA
Facts:
7n /!$t!(*!r 29, 19#9, &or(!r 5r!si!nt 8!rinan Mar%os i! in Hono'u'u, Hawaii, ?/A.
7n >un! 27, 1990, a /$!%ia' ,a+ Auit ,!a( was %r!at! to %onu%t in.!stigations an !+a(inations o& th! ta+ 'ia*i'iti!s an
o*'igations o& th! 'at! $r!si!nt, as w!'' as that o& his &a(i'", asso%iat!s an ;%roni!s;.
,h! in.!stigation is%'os! that th! Mar%os!s &ai'! to &i'! a writt!n noti%! o& th! !ath o& th! !%!!nt, an !stat! ta+ r!turns @sicA, as
w!'' as s!.!ra' in%o(! ta+ r!turns %o.!ring th! "!ars 19#2 to 19#6, B a'' in .io'ation o& th! Nationa' -nt!rna' R!.!nu! )o! 9N-R):.
7n >u'" 26, 1991, th! 1-R issu! th! &o''owingC 91: D!&i%i!n%" !stat! ta+ ass!ss(!nt 9against th! !stat! o& th! 'at! $r!si!nt
8!rinan Mar%os in th! a(ount o& 520,290,607,60#.00 5!sos:E 92: D!&i%i!n%" in%o(! ta+ ass!ss(!nt 9against th! /$ous!s
8!rinan an -(!'a Mar%os in th! a(ounts o& 5149,551.70 an 51#4,009,707.40 r!$r!s!nting !&i%i!n%" in%o(! ta+ &or th! "!ars
19#5 an 19#6:E 90: D!&i%i!n%" in%o(! ta+ ass!ss(!nt 9against $!tition!r 8!rinan ;1ong*ong; Mar%os -- in th! a(ounts o& 525#.70
$!sosE 59,0#6.40 5!sosE 54,0##.00 5!sosE an 56,076.60 5!sos r!$r!s!nting his !&i%i!n%" in%o(! ta+!s &or th! "!ars 19#2 to
19#5:.
7n 8!*ruar" 22, 1990, th! 1-R )o((ission!r issu! tw!nt"-two noti%!s o& '!." on r!a' $ro$!rt" against %!rtain $ar%!'s o& 'an own!
*" th! Mar%os!s B to satis&" th! a''!g! !stat! ta+ an !&i%i!n%" in%o(! ta+!s o& /$ous!s Mar%os.
7n >un! 25, 1990, $!tition!r 8!rinan ;1ong*ong; Mar%os -- &i'! th! instant $!tition &or certiorari an $rohi*ition un!r Ru'! 65 o&
th! Ru'!s o& )ourt, with $ra"!r &or t!($orar" r!straining or!r an=or writ o& $r!'i(inar" in6un%tion.
5!tition!r s$!%i&i%a''" $oints out that a$$'"ing M!(oranu( )ir%u'ar No. 0#-6#, i($'!(!nting /!%tions 01# an 024 o& th! o' ta+
%o! 9R!$u*'i% A%t 5200:, th! 1-R3s Noti%!s o& L!." on th! Mar%os $ro$!rti!s, w!r! issu! *!"on th! a''ow! $!rio, an ar!
th!r!&or! nu'' an .oi.
Issue: <=N th! R!.!nu! M!(oranu( )ir%u'ar No. 0#-6# is a$$'i%a*'! with r!gar to $r!s%ri$ti.! $!rio. N7.
Ratio:
,h! )ourt ru'! that th! Noti%!s o& L!." u$on r!a' $ro$!rt" w!r! issu! within th! $r!s%ri$ti.! $!rio an in a%%oran%! with th!
$ro.isions o& th! $r!s!nt ,a+ )o!. ,h! !&i%i!n%" ta+ ass!ss(!nt, ha.ing a'r!a" *!%o(! &ina', !+!%utor", an !(ana*'!, th!
sa(! %an now *! %o''!%t! through th! su((ar" r!(!" o& istraint or '!." $ursuant to /!%tion 205 o& th! N-R).
,h! a$$'i%a*'! $ro.ision in r!gar to th! $r!s%ri$ti.! $!rio &or th! ass!ss(!nt an %o''!%tion o& ta+ !&i%i!n%" in this instan%! is
!rticle 223 of the NIRC, whi%h $!rtin!nt'" $ro.i!sC
Sec. 223. "#ceptions as to a period of limitation of assessment and collection of ta#es. (a) In the case of
a false or fraudulent return with intent to evade tax or of a failure to file a return, the tax may be assessed, or a
proceeding in court for the collection of such tax may be begun without assessment, at any time within ten (10)
years after the discovery of the falsity, fraud, or omission !rovided, "hat, in a fraud assessment which has
become final and executory, the fact of fraud shall be #udicially ta$en cogni%ance of in the civil or criminal action
for the collection thereof.
xxx xxx xxx
(c) &ny internal revenue tax which has been assessed within the period of limitation above prescribed, may be
collected by distraint or levy or by a proceeding in court within three years following the assessment of the tax.
xxx xxx xxx
,h! o(ission to &i'! an !stat! ta+ r!turn, an th! su*s!4u!nt &ai'ur! to %ont!st or a$$!a' th! ass!ss(!nt (a! *" th! 1-R is &ata' to th!
$!tition!r3s %aus!, as un!r th! a*o.!-%it! $ro.ision, in case of failure to file a return, the ta# may be assessed at any time $ithin ten
years after the omission, an an" ta+ so ass!ss! (a" *! %o''!%t! *" '!." u$on r!a' $ro$!rt" within thr!! "!ars &o''owing th! ass!ss(!nt o&
th! ta+. /in%! th! !stat! ta+ ass!ss(!nt ha *!%o(! &ina' an una$$!a'a*'! *" th! $!tition!r3s !&au't as r!gars $rot!sting th! .a'iit" o& th!
sai ass!ss(!nt, th!r! is now no r!ason wh" th! 1-R %annot %ontinu! with th! %o''!%tion o& th! sai ta+. An" o*6!%tion against th! ass!ss(!nt
shou' ha.! *!!n $ursu! &o''owing th! a.!nu! $a.! in /!%tion 229 o& th! N-R) on $rot!sts on ass!ss(!nts o& int!rna' r!.!nu! ta+!s.