Commissioner of Internal Revenue

versus Hon. Raul M. Gonzales, Secretary of Justice

G.R. No. 177279, October 13, 2010
Third Division, Villarama Jr., J.

Facts: The Commissioner of Internal Revenue (CIR) conducted a fraud

investigation for all internal revenue taxes to ascertain/determine the tax
liabilities of respondent L. M. Camus Engineering Corporation (LMCEC) for the
taxable years 1997, 1998 and 1999, thus, a criminal complaint was lodged
against LMCEC. The fraud found were underdeclarations of taxable income
for the subject taxable periods. A Preliminary Assessment Notice (PAN) was
received by LMCEC on February 22, 2001 through personal service. LMCEC
failed and refused to pay the deficiency tax assessment, which had become
final and executory because of the said taxpayer's failure to file a protest
thereon within the thirty 30-day prescribed period, LMCEC denies liability, and
assail the validity of the assessment notices issued upon them. The Chief State
Prosecutor issued a resolution, finding no sufficient evidence to establish
probable cause against respondents LMCEC, Camus and Mendoza, and that
there was no prior determination of fraud. Secretary of Justice Gonzales on
denied the petition for review. The CIR thus filed the criminal complaint against
the private respondents for violation of the Tax Code, concurred with the Chief
State Prosecutor's conclusion that there is insufficient evidence to establish
probable cause to charge private respondents finding that the assessment
notices are unnumbered, hence irregular and suspicious.

Issue(s): (Whether LMCEC and its corporate officers may be prosecuted for
violation of Sections 254 (Attempt to Evade or Defeat Tax) and 255 (Willful
Failure to Supply Correct and Accurate Information and Pay Tax).

Decision: Yes. As it is, the formality of a control number in the assessment notice
is not a requirement for its validity but rather the contents thereof which should
inform the taxpayer of the declaration of deficiency tax against said taxpayer.
Both the formal letter of demand and the notice... of assessment shall be void
if the former failed to state the fact, the law, rules and regulations or
jurisprudence on which the assessment is based, which is a mandatory
requirement under Section 228 of the NIRC. The discussed finidng of the
preliminary investigation, affords a prima facie case for tax fraud. Tax evasion
is complete when the taxpayer has x x x knowingly and willfully filed [a]
fraudulent return with intent to evade and defeat x x x the tax." Thus, Secretary
Gonzales erred in holding that petitioner committed forum shopping when it
filed the present criminal complaint during the pendency of its appeal from
the City Prosecutor's dismissal of I.S. No. 00-956 involving the act of
disobedience to the summons in the course of the... preliminary investigation
on LMCEC's correct tax liabilities for taxable years 1997, 1998 and 1999.
Secretary Gonzales, fully concurred with private respondents' contention that
the assessment notices were invalid for being unnumbered and the tax
liabilities therein stated have already been settled and/or terminated.

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