SECOND DIVISION

[G.R. No. 197590. November 24, 2014.]

BUREAU OF INTERNAL REVENUE, as represented by the

COMMISSIONER OF INTERNAL REVENUE, petitioner, vs.
COURT OF APPEALS, SPOUSES ANTONIO VILLAN MANLY,
AND RUBY ONG MANLY, respondents.

DECISION

DEL CASTILLO, J : p

There is grave abuse of discretion when the determination of probable cause is

exercised in an arbitrary or despotic manner, due to passion or personal hostility, so
patent and gross as to amount to an evasion of a positive duty or a virtual refusal to
perform a duty enjoined by law. 1(1)

This Petition for Certiorari 2(2) under Rule 65 of the Rules of Court assails
the Decision 3(3) dated October 28, 2010 and the Resolution 4(4) dated May 10, 2011
of the Court of Appeals (CA) in CA-G.R. SP No. 112479.

Factual Antecedents

Respondent Antonio Villan Manly (Antonio) is a stockholder and the

Executive Vice-President of Standard Realty Corporation, a family-owned
corporation. 5(5) He is also engaged in rental business. 6(6) His spouse, respondent
Ruby Ong Manly, is a housewife. 7(7)

On April 27, 2005, petitioner Bureau of Internal Revenue (BIR) issued Letter
of Authority No. 2001 00012387 8(8) authorizing its revenue officers to investigate
respondent spouses' internal revenue tax liabilities for taxable year 2003 and prior
Copyright 1994-2019 CD Technologies Asia, Inc. Taxation 2019 Second Release 1
years.

On June 6, 2005, petitioner issued a letter 9(9) to respondent spouses requiring

them to submit documentary evidence to substantiate the source of their cash
purchase of a 256-square meter log cabin in Tagaytay City worth P17,511,010.00.
Respondent spouses, however, failed to comply with the letter. 10(10)

On June 23, 2005, the revenue officers executed a Joint Affidavit 11(11)
alleging that respondent Antonio's reported or declared annual income for the taxable
years 1998-2003 are as follows:
Net Profit
Taxable Rental Business Total sources
Compensation (1169-73 G. of Funds Tax Due/paid Cash
Income Masangkay St.,
Tondo, Manila

1998 [P]133,532.36 [P]191,915.10 [P]325,447.46 [P]55,834.00 [P]269,613.46

1999 142,550.50 260,961.78 403,512.28 79,254.00 324,258.28
2000 141,450.00 213,740.67 355,190.67 64,757.21 290,433.46
2001 151,500.00 233,396.62 384,896.62 73,669.00 311,227.62
2002 148,500.00 186,106.62 334,606.62 58,581.00 276,025.62
2003 148,100.00 152,817.53 300,917.93 48,729.00 252,188.93
––––––––––––––– ––––––––––––––– ––––––––––––––– –––––––––––––––
–––––––––––––––
[Total] P865,633.26 P1,238,938.32 P2,104,571.58 P380,824.21P1,723,747.37
12(12)
============== ============== ============== ==============
==============

and that despite his modest income for the said years, respondent spouses were able to
purchase in cash the following properties:

1) a luxurious vacation house in Tagaytay City valued at P17,511,010.00

13(13) in the year 2000, evidenced by a Deed of Absolute Sale 14(14) dated October
24, 2000;

2) a Toyota RAV4 for P1,350,000.00 in the year 2001, evidenced by a Sales

Invoice 15(15) dated June 28, 2001; and

3) a Toyota Prado for P2,000,000.00 in 2003, evidenced by a Deed of Sale

16(16) dated July 9, 2003. 17(17) TECIHD

Since respondent spouses failed to show the source of their cash purchases, the
Copyright 1994-2019 CD Technologies Asia, Inc. Taxation 2019 Second Release 2
revenue officers concluded that respondent Antonio's Income Tax Returns (ITRs) for
taxable years 2000, 2001, and 2003 were underdeclared. 18(18) And since the
underdeclaration exceeded 30% of the reported or declared income, it was considered
a prima facie evidence of fraud with intent to evade the payment of proper taxes due
to the government. 19(19) The revenue officers, thus, recommended the filing of
criminal cases against respondent spouses for failing to supply correct and accurate
information in their ITRs for the years 2000, 2001, and 2003, punishable under
Sections 254 20(20) and 255 21(21) in relation to Section 248 (B) 22(22) of Republic Act
No. 8424 or the "Tax Reform Act of 1997," hereinafter referred to as the National
Internal Revenue Code (NIRC). 23(23)

Respondent spouses, in their Joint Counter-Affidavit, 24(24) denied the

accusations hurled against them and alleged that they used their accumulated savings
from their earnings for the past 24 years in purchasing the properties. 25(25) They
also contended that the criminal complaint should be dismissed because petitioner
failed to issue a deficiency assessment against them. 26(26)

In response, the revenue officers executed a Joint Reply-Affidavit. 27(27)

Respondent spouses, in turn, executed a Joint Rejoinder-Affidavit. 28(28)

Ruling of the State Prosecutor

On August 31, 2006, State Prosecutor Ma. Cristina A. Montera-Barot issued a

Resolution 29(29) in I.S. No. 2005-573 recommending the filing of criminal charges
30(30) against respondent spouses, to wit:

WHEREFORE, premises considered, it is respectfully recommended

that [respondent] spouses ANTONIO VILLAN MANLY and RUBY ONG
MANLY be charged [with] the following:

(1) Three (3) counts of Violation of Section 254 — Attempt to

Evade or Defeat Tax of the NIRC for taxable years 2000, 2001,
and 2003;

(2) Three (3) counts for Violation of Section 255 of the NIRC —
Failure to Supply Correct and Accurate Information for taxable
years 2000, 2001 and 2003;

(3) Three counts of Violation of Section 255 of the NIRC — Failure

to Pay, as a consequence of [respondent spouses'] failure to
supply correct and accurate information on their tax returns for

Copyright 1994-2019 CD Technologies Asia, Inc. Taxation 2019 Second Release 3

 taxable years 2000, 2001, and 2003. 31(31)

Respondent spouses moved for reconsideration 32(32) but the State Prosecutor
denied the same in a Resolution 33(33) dated November 29, 2007.

Ruling of the Secretary of Justice

On appeal to the Secretary of Justice via a Petition for Review, 34(34) Acting
Justice Secretary Agnes VST Devanadera (Devanadera) reversed the Resolution of
the State Prosecutor. She found no willful failure to pay or attempt to evade or defeat
the tax on the part of respondent spouses as petitioner allegedly failed to specify the
amount of tax due and the likely source of income from which the same was based.
35(35) She also pointed out petitioner's failure to issue a deficiency tax assessment
against respondent spouses which is a prerequisite to the filing of a criminal case for
tax evasion. 36(36) The dispositive portion of the Resolution 37(37) dated July 27,
2009 reads:

WHEREFORE, the assailed Resolution is hereby REVERSED and SET

ASIDE. The Chief State Prosecutor is hereby directed to withdraw the
Information filed against [respondent spouses] Antonio Villan Manly and Ruby
Ong Manly, if one has been filed, and report the action taken thereon within ten
(10) days from receipt hereto.

SO ORDERED. 38(38)

Petitioner sought reconsideration 39(39) but Acting Justice Secretary

Devanadera denied the same in a Resolution 40(40) dated November 5, 2009.

Ruling of the Court of Appeals

Unfazed, petitioner filed a Petition for Certiorari 41(41) with the CA imputing
grave abuse of discretion on the part of Acting Justice Secretary Devanadera in
finding no probable cause to indict respondent spouses for willful attempt to evade or
defeat tax and willful failure to supply correct and accurate information for taxable
years 2000, 2001 and 2003.

On October 28, 2010, the CA rendered the assailed Decision 42(42) dismissing
the Petition for Certiorari. Although it disagreed that an assessment is a condition
sine qua non in filing a criminal case for tax evasion, the CA, nevertheless, ruled that
there was no probable cause to charge respondent spouses as petitioner allegedly
failed to state their exact tax liability and to show sufficient proof of their likely
Copyright 1994-2019 CD Technologies Asia, Inc. Taxation 2019 Second Release 4
source of income. 43(43) The CA further said that before one could be prosecuted for
tax evasion, the fact that a tax is due must first be proved. 44(44) Thus:

IN LIGHT OF ALL THE FOREGOING, the instant petition is hereby

DENIED, and the assailed Resolution of the Secretary of Justice dated July 27,
2009 dismissing I.S. No. 2005-573 against private respondents, AFFIRMED.
However, the dismissal of the instant case is without prejudice to the refiling by
the BIR of a complaint sufficient in form and substance before the appropriate
tribunal.

SO ORDERED. 45(45)

The CA likewise denied petitioner's Motion for Reconsideration 46(46) in its

Resolution 47(47) dated May 10, 2011.

Issues

Hence, petitioner filed the instant Petition contending that the CA committed
grave abuse of discretion amounting to lack or excess of jurisdiction in holding that:

I. A CATEGORICAL FINDING OF THE EXACT AMOUNT OF TAX

DUE FROM THE PRIVATE RESPONDENT SHOULD BE
SPECIFICALLY ALLEGED [AND THAT] SINCE THE BIR FAILED
TO MAKE SUCH FINDINGS THEY CONSEQUENTLY FAILED TO
BUILD A CASE FOR TAX EVASION AGAINST [RESPONDENT
SPOUSES] DESPITE THE WELL ESTABLISHED DOCTRINE
THAT IN TAX EVASION CASES, A PRECISE COMPUTATION OF
THE [TAX] DUE IS NOT NECESSARY. TaCDIc

II. THE BIR FAILED TO SHOW SUFFICIENT PROOF OF A LIKELY

SOURCE OF [RESPONDENT SPOUSES'] INCOME DESPITE THE
FACT THAT THE BIR WAS SUFFICIENTLY ABLE TO SHOW
PROOF OF SUCH INCOME. 48(48)

Petitioner's Arguments

Petitioner imputes grave abuse of discretion on the part of the CA in affirming

the dismissal of the criminal cases against respondent spouses. Petitioner contends
that in filing a criminal case for tax evasion, a prior computation or assessment of tax
is not required because the crime is complete when the violator knowingly and
willfully filed a fraudulent return with intent to evade a part or all of the tax. 49(49) In
this case, an analysis of respondent spouses' income and expenditure shows that their

Copyright 1994-2019 CD Technologies Asia, Inc. Taxation 2019 Second Release 5

cash expenditure is grossly disproportionate to their reported or declared income,
leading petitioner to believe that they underdeclared their income. 50(50) In
computing the unreported or undeclared income, which was likely sourced from
respondent Antonio's rental business, 51(51) petitioner used the expenditure method
of reconstructing income, a method used to determine a taxpayer's income tax liability
when his records are inadequate or inaccurate. 52(52) And since respondent spouses
failed to explain the alleged unreported or undeclared income, petitioner asserts that
criminal charges for tax evasion should be filed against them.

Respondent spouses' Arguments

Respondent spouses, on the other hand, argue that the instant Petition should
be dismissed as petitioner availed of the wrong remedy in filing a Petition for
Certiorari under Rule 65 of the Rules of Court. 53(53) And even if the Petition is
given due course, the same should still be dismissed because no grave abuse of
discretion can be attributed to the CA. 54(54) They maintain that petitioner miserably
failed to prove that a tax is actually due. 55(55) Neither was it able to show the source
of the alleged unreported or undeclared income as required by Revenue Memorandum
Order No. 15-95, Guidelines and Investigative Procedures in the Development of Tax
Fraud Cases for Internal Revenue Officers. 56(56) As to the method used by
petitioner, they claim that it completely ignored their lifetime savings because it was
limited to the years 1998-2003. 57(57)

Our Ruling

The Petition is meritorious.

Before discussing the merits of this case, we shall first discuss the procedural
matter raised by respondent spouses that petitioner availed of the wrong remedy in
filing a Petition for Certiorari under Rule 65 of the Rules of Court, instead of a
Petition for Review on Certiorari under Rule 45.

Indeed, the remedy of a party aggrieved by a decision, final order, or resolution

of the CA is to file a Petition for Review on Certiorari under Rule 45 of the Rules of
Court, which is a continuation of the appellate process over the original case. 58(58)
And as a rule, if the remedy of an appeal is available, an action for certiorari under
Rule 65 of the Rules of Court, which is an original or independent action based on
grave abuse of discretion amounting to lack or excess of jurisdiction, will not prosper
59(59) because it is not a substitute for a lost appeal. 60(60)

Copyright 1994-2019 CD Technologies Asia, Inc. Taxation 2019 Second Release 6

 There are, however, exceptions to this rule, to wit: 1) when public welfare and
the advancement of public policy dictate; 2) when the broader interest of justice so
requires; 3) when the writs issued are null and void; 4) when the questioned order
amounts to an oppressive exercise of judicial authority; 5) when, for persuasive
reasons, the rules may be relaxed to relieve a litigant of an injustice not
commensurate with his failure to comply with the prescribed procedure; 6) when the
judgment or order is attended by grave abuse of discretion; or 7) in other meritorious
cases. 61(61)

In this case, after considering the arguments raised by the parties, we find that
there is reason to give due course to the instant Petition for Certiorari as petitioner
was able to convincingly show that the CA committed grave abuse of discretion when
it affirmed the dismissal of the criminal charges against respondent spouses despite
the fact that there is probable cause to indict them.

Although the Court has consistently adopted the policy of non-interference in

the conduct and determination of probable cause, 62(62) which is exclusively within
the competence of the Executive Department, through the Secretary of Justice, 63(63)
judicial intrusion, in the form of judicial review, is allowed when there is proof that
the Executive Department gravely abused its discretion in making its determination
and in arriving at the conclusion it reached. 64(64)

Grave abuse of discretion is defined as a capricious and whimsical exercise of

judgment tantamount to lack or excess of jurisdiction, a blatant abuse of authority so
grave and so severe as to deprive the court of its very power to dispense justice, or an
exercise of power in an arbitrary and despotic manner, due to passion, prejudice or
personal hostility, so patent and gross as to amount to an evasion or to a unilateral
refusal to perform the duty enjoined or to act in contemplation of the law. 65(65)
Such is the situation in this case. CIaASH

Having resolved the foregoing procedural matter, we shall now proceed to

determine the main issue in this case.

Sections 254 and 255 of the NIRC pertinently provide:

SEC. 254. Attempt to Evade or Defeat Tax. — Any person who

willfully attempts in any manner to evade or defeat any tax imposed under this
Code or the payment thereof shall, in addition to other penalties provided by
law, upon conviction thereof, be punished by a fine of not less than Thirty
thousand pesos (P30,000.00) but not more than One hundred thousand pesos
(P100,000.00) and suffer imprisonment of not less than two (2) years but not
Copyright 1994-2019 CD Technologies Asia, Inc. Taxation 2019 Second Release 7
 more than four (4) years: Provided, That the conviction or acquittal obtained
under this Section shall not be a bar to the filing of a civil suit for the collection
of taxes.

SEC. 255. Failure to File Return, Supply Correct and Accurate

Information, Pay Tax, Withhold and Remit Tax and Refund Excess Taxes
Withheld on Compensation. — Any person required under this Code or by rules
and regulations promulgated thereunder to pay any tax, make a return, keep any
record, or supply correct and accurate information, who willfully fails to pay
such tax, make such return, keep such record, or supply such correct and
accurate information, or withhold or remit taxes withheld, or refund excess
taxes withheld on compensation at the time or times required by law or rules
and regulations shall, in addition to other penalties provided by law, upon
conviction thereof, be punished by a fine of not less than Ten thousand pesos
(P10,000.00) and suffer imprisonment of not less than one (1) year but not more
than ten (10) years.

In Ungab v. Judge Cusi, Jr., 66(66) we ruled that tax evasion is deemed
complete when the violator has knowingly and willfully filed a fraudulent return with
intent to evade and defeat a part or all of the tax. 67(67) Corollarily, an assessment of
the tax deficiency is not required in a criminal prosecution for tax evasion. 68(68)
However, in Commissioner of Internal Revenue v. Court of Appeals, 69(69) we
clarified that although a deficiency assessment is not necessary, the fact that a tax is
due must first be proved before one can be prosecuted for tax evasion. 70(70)

In the case of income, for it to be taxable, there must be a gain realized or

received by the taxpayer, which is not excluded by law or treaty from taxation. 71(71)
The government is allowed to resort to all evidence or resources available to
determine a taxpayer's income and to use methods to reconstruct his income. 72(72) A
method commonly used by the government is the expenditure method, which is a
method of reconstructing a taxpayer's income by deducting the aggregate yearly
expenditures from the declared yearly income. 73(73) The theory of this method is that
when the amount of the money that a taxpayer spends during a given year exceeds his
reported or declared income and the source of such money is unexplained, it may be
inferred that such expenditures represent unreported or undeclared income. 74(74)

In the case at bar, petitioner used this method to determine respondent spouses'
tax liability. Petitioner deducted respondent spouses' major cash acquisitions from
their available funds. Thus:
Cash Loans Withdrawal Funds Major Unexplained
(business) of Capital available AcquisitionsSources of
Copyright 1994-2019 CD Technologies Asia, Inc. Taxation 2019 Second Release 8
Funds

1998 P269,613.46 900,000.00 130,638.98 1,300,252.44

1999 324,258.28 (400,000.00) 39,281.87 1,263,792.59
2000 290,433.46 - 102,024.97 1,656,251.02 17,511,010.00
(15,854,758.98)
2001 311,227.62 - 406,309.70 717,537.32 1,350,000.00
(632,462.68)
2002 276,025.62 (100,000.00) 184,092.03 360,117.65
2003 252,188.93 - 245,167.97 857,474.55 2,000,000.00
(1,142,525.45)
––––––––––––– –––––––––––––
–––––––––––––
[Total:] P1,723,747.37 20,861,010.00
(17,629,747.11) 75(75)
============ ============
============

2000 2001 2003

Unexplained funds-under declaration [P]15,854,758,98 [P]632,462.68

[P]1,142,525.45
Taxable income [P]15,854,758.98 [P]632,462.68
[P]1,142,525.45
Income Tax due thereon:
First Php500,000.00 125,000.00 125,000.00
125,000.00
In excess of Php500,000.00 4,913,522.87 42,388.06
205,608.14
–––––––––––––– ––––––––––––
––––––––––––
Total income tax due (net tax paid) 4,973,765.66 93,719.06
281,879.14
Add: 50% Surcharge 2,486,882.83 46,859.53
165,304.07
20% Interest (up to 5/31/2005) - 825 4,104,376.29 77,337.43
272,751.72
––––––––––––––– ––––––––––––
––––––––––––––
Total Tax Due inclusive of Increments [P]11,565,024.79 [P]217,916.02
[P]655,369.01 76(76)
============== ===========
=============

Particulars 2000 2001 2003

Unexplained Funds [Under declaration] [P]15,854,758.98 [P]632,462.68

[P]1,142,525.45
Sources of Funds as per Financial Statements as

Copyright 1994-2019 CD Technologies Asia, Inc. Taxation 2019 Second Release 9

attached to the Income Tax Return [P]1,656,251.02 [P]717,537.32
[P]817,474.55
Percentage of underdeclaration 957.27% 88.14%133.24%
77(77)

And since the underdeclaration is more than 30% of respondent spouses'

reported or declared income, which under Section 248 (B) of the NIRC constitutes as
prima facie evidence of false or fraudulent return, petitioner recommended the filing
of criminal cases against respondent spouses under Sections 254 and 255, in relation
to Section 248 (B) of the NIRC.

The CA, however, found no probable cause to indict respondent spouses for
tax evasion. It agreed with Acting Justice Secretary Devanadera that petitioner failed
to make "a categorical finding of the exact amount of tax due from [respondent
spouses]" and "to show sufficient proof of a likely source of [respondent spouses']
income that enabled them to purchase the real and personal properties adverted to . . .
." 78(78)

We find otherwise.

The amount of tax due from respondent spouses was specifically alleged in the
Complaint-Affidavit. 79(79) The computation, as well as the method used in
determining the tax liability, was also clearly explained. The revenue officers likewise
showed that the underdeclaration exceeded 30% of the reported or declared income.

The revenue officers also identified the likely source of the unreported or
undeclared income in their Reply-Affidavit. The pertinent portion reads:

7. ...

[Respondent spouses] are into rental business and the net profit for six
(6) years before tax summed only to P1,238,938.32 (an average of more or less
Php200,000.00 annually). We asked respondent [Antonio] if we can proceed to
his rented property to [appraise] the earning capacity of the building [for]
lease/rent, but he declined our proposition. Due to such refusal made by the
respondent, [petitioner], thru its examiners, took pictures of the subject property
and came up with the findings that indeed the unexplained funds sought to have
been used in acquiring the valuable property in Tagaytay . . . came from the
underdeclaration of rental income. 80(80)

Apparently, the revenue officers considered respondent Antonio's rental business to

be the likely source of their unreported or undeclared income due to his unjustified

Copyright 1994-2019 CD Technologies Asia, Inc. Taxation 2019 Second Release 10

refusal to allow the revenue officers to inspect the building.

Respondent spouses' defense that they had sufficient savings to purchase the
properties remains self-serving at this point since they have not yet presented any
evidence to support this. And since there is no evidence yet to suggest that the money
they used to buy the properties was from an existing fund, it is safe to assume that that
money is income or a flow of wealth other than a mere return on capital. It is a basic
concept in taxation that income denotes a flow of wealth during a definite period of
time, while capital is a fund or property existing at one distinct point in time. 81(81)
AEDcIH

Moreover, by just looking at the tables presented by petitioner, there is a

manifest showing that respondent spouses had underdeclared their income. The huge
disparity between respondent Antonio's reported or declared annual income for the
past several years and respondent spouses' cash acquisitions for the years 2000, 2001,
and 2003 cannot be ignored. In fact, it makes us wonder how they were able to
purchase the properties in cash given respondent Antonio's meager income.

In view of the foregoing, we are convinced that there is probable cause to

indict respondent spouses for tax evasion as petitioner was able to show that a tax is
due from them. Probable cause, for purposes of filing a criminal information, is
defined as such facts that are sufficient to engender a well-founded belief that a crime
has been committed, that the accused is probably guilty thereof, and that he should be
held for trial. 82(82) It bears stressing that the determination of probable cause does
not require actual or absolute certainty, nor clear and convincing evidence of guilt; it
only requires reasonable belief or probability that more likely than not a crime has
been committed by the accused. 83(83)

In completely disregarding the evidence presented and in affirming the ruling

of the Acting Justice Secretary Devanadera that no probable cause exists, we find that
the CA committed grave abuse of discretion amounting to lack or excess of
jurisdiction. As we have said, if there is grave abuse of discretion, the court may step
in and proceed to make its own independent determination of probable cause as
judicial review is allowed to ensure that the Executive Department acts within the
permissible bounds of its authority or does not gravely abuse the same. 84(84)

We must make it clear, however, that we are only here to determine probable
cause. As to whether respondent spouses are guilty of tax evasion is an issue that must
be resolved during the trial of the criminal case, where the quantum of proof required
is proof beyond reasonable doubt.

Copyright 1994-2019 CD Technologies Asia, Inc. Taxation 2019 Second Release 11

 Before we close, we must stress that our ruling in this case should not be
interpreted as an unbridled license for our tax officials to engage in fishing
expeditions and witch-hunting. They should not abuse their investigative powers,
instead they should exercise the same within the bounds of the law. They must
properly observe the guidelines in making assessments and investigative procedures
to ensure that the constitutional rights of the taxpayers are well protected as we cannot
allow the floodgates to be opened for frivolous and malicious tax suits.

WHEREFORE, the Petition is hereby GRANTED. The Decision dated

October 28, 2010 and the Resolution dated May 10, 2011 of the Court of Appeals in
CA-G.R. SP No. 112479 are hereby REVERSED and SET ASIDE. The Resolutions
dated August 31, 2006 and November 29, 2007 of State Prosecutor Ma. Cristina A.
Montera-Barot in I.S. No. 2005-573 finding probable cause to indict respondent
spouses Antonio Villan Manly and Ruby Ong Manly for Violation of Sections 254
and 255 of the National Internal Revenue Code are hereby REINSTATED.

SO ORDERED.

Carpio, Brion, Mendoza and Leonen, JJ., concur.

Footnotes
1. Spouses Chua v. Hon. Ang, 614 Phil. 416, 432 (2009); Callo-Claridad v. Esteban,
G.R. No. 191567, March 20, 2013, 694 SCRA 185, 200; and Alberto v. Court of
Appeals, G.R. Nos. 182130 and 182132, June 19, 2013, 699 SCRA 104, 129.
2. Rollo, pp. 2-28.
3. CA rollo, pp. 614-629; penned by Associate Justice Franchito N. Diamante and
concurred in by Associate Justices Josefina Guevara-Salonga and Mariflor P.
Punzalan Castillo.
4. Id. at 665-666.
5. Rollo, p. 374.
6. Id.
7. Id. at 375.
8. Id. at 149.
9. Id. at 152.
10. Id. at 375.
11. Id. at 47-52.
12. Id. at 47-48.
13. Total Acquisition Cost; id. at 49.
14. Id. at 137-143.
15. Id. at 146.
16. Id. at 147.
Copyright 1994-2019 CD Technologies Asia, Inc. Taxation 2019 Second Release 12
17. Id. at 48.
18. Id. at 49.
19. Id. at 50.
20. SEC. 254. Attempt to Evade or Defeat Tax. — Any person who willfully attempts in
any manner to evade or defeat any tax imposed under this Code or the payment
thereof shall, in addition to other penalties provided by law, upon conviction thereof,
be punished by a fine of not less than Thirty thousand pesos (P30,000.00) but not
more than One hundred thousand pesos (P100,000.00) and suffer imprisonment of
not less than two (2) years but not more than four (4) years: Provided, That the
conviction or acquittal obtained under this Section shall not be a bar to the filing of a
civil suit for the collection of taxes.
21. SEC. 255. Failure to File Return, Supply Correct and Accurate Information, Pay
Tax, Withhold and Remit Tax and Refund Excess Taxes Withheld on Compensation.
— Any person required under this Code or by rules and regulations promulgated
thereunder to pay any tax, make a return, keep any record, or supply correct and
accurate information, who willfully fails to pay such tax, make such return, keep such
record, or supply such correct and accurate information, or withhold or remit taxes
withheld, or refund excess taxes withheld on compensation at the time or times
required by law or rules and regulations shall, in addition to other penalties provided
by law, upon conviction thereof, be punished by a fine of not less than Ten thousand
pesos (P10,000.00) and suffer imprisonment of not less than one (1) year but not
more than ten (10) years.
xxx xxx xxx
22. SEC. 248. Civil Penalties. —
xxx xxx xxx
(B) In case of willful neglect to file the return within the period prescribed by this
Code or by rules and regulations, or in case a false or fraudulent return is wilfully
made, the penalty to be imposed shall be fifty percent (50%) of the tax or of the
deficiency tax, in case any payment has been made on the basis of such return before
the discovery of the falsity or fraud: Provided, That a substantial underdeclaration of
taxable sales, receipts or income, or a substantial overstatement of deductions, as
determined by the Commissioner pursuant to the rules and regulations to be
promulgated by the Secretary of Finance, shall constitute prima facie evidence of a
false or fraudulent return: Provided, further, That failure to report sales, receipts or
income in an amount exceeding thirty percent (30%) of that declared per return, and a
claim of deductions in an amount exceeding (30%) of actual deductions, shall render
the taxpayer liable for substantial underdeclaration of sales, receipts or income or for
overstatement of deductions, as mentioned herein.
23. Rollo, p. 51.
24. Id. at 274-277.
25. Id. at 276.
26. Id. at 275.
27. Id. at 278-282.
Copyright 1994-2019 CD Technologies Asia, Inc. Taxation 2019 Second Release 13
28. Id. at 283-286.
29. Id. at 290-303. The Resolution bears the recommending approval of Assistant Chief
State Prosecutor Miguel F. Gudio, Jr. and the approval of Chief State Prosecutor
Jovencito R. Zuño.
30. Id. at 463-481. Seven separate Informations were filed against respondent spouses
before the Court of Tax Appeals, the Regional Trial Court, and the Metropolitan Trial
Court, which were subsequently dismissed without prejudice (See pp. 496-498,
542-546, 556, 558-564, 565, and 730-731).
31. Id. at 301-302.
32. Id. at 304-310.
33. Id. at 311-313.
34. Id. at 317-326.
35. Id. at 376-382.
36. Id. at 381.
37. Id. at 374-383; penned by Acting Justice Secretary Agnes VST Devanadera.
38. Id. at 382.
39. Id. at 384-403.
40. Id. at 404-405.
41. CA rollo, pp. 1-31.
42. Id. at 614-629.
43. Id. at 623-628.
44. Id. at 626-627.
45. Id. at 628.
46. Id. at 635-651.
47. Id. at 665-666.
48. Rollo, p. 13.
49. Id. at 697-699.
50. Id. at 704.
51. Id. at 703-706.
52. Id. at 700-703.
53. Id. at 733-738.
54. Id. at 738-744.
55. Id. at 739.
56. Id. at 741.
57. Id.
58. Chua v. Santos, 483 Phil. 392, 400-401 (2004).
59. Beluso v. Commission on Elections, G.R. No. 180711, June 22, 2010, 621 SCRA
450, 456.
60. Teh v. Tan, G.R. No. 181956, November 22, 2010, 635 SCRA 593, 604.
61. Associated Anglo-American Tobacco Corporation v. Court of Appeals, G.R. No.
167237, April 23, 2010, 619 SCRA 250, 257; Bausa v. Heirs of Juan Dino, 585 Phil.
526, 532 (2008); Galzote v. Briones, G.R. No. 164682, September 14, 2011, 657
SCRA 535, 541; Santos v. Orda, Jr., G.R. No. 189402, May 6, 2010, 620 SCRA 375,
Copyright 1994-2019 CD Technologies Asia, Inc. Taxation 2019 Second Release 14
 384.
62. Elma v. Jacobi, G.R. No. 155996, June 27, 2012, 675 SCRA 20, 56-57.
63. Callo-Claridad v. Esteban, supra note 1 at 189.
64. Elma v. Jacobi, supra note 62 at 57.
65. People v. Lagos, G.R. No. 184658, March 6, 2013, 692 SCRA 602, 608-609.
66. 186 Phil. 604 (1980).
67. Id. at 610-611.
68. Id. at 610.
69. 327 Phil. 1 (1996).
70. Id. at 35.
71. Chamber of Real Estate and Builders' Associations, Inc. v. Romulo, G.R. No.
160756, March 9, 2010, 614 SCRA 605, 627.
72. Li Yao v. Collector of Internal Revenue, 119 Phil. 207, 222 (1963).
73. Collector of Internal Revenue v. Jamir, 114 Phil. 650, 651-652 (1962).
74. See Annex "A" of Revenue Memorandum Order No. 15-95, Guidelines and
Investigative Procedures in the Development of Tax Fraud Cases for Internal
Revenue Officers.
75. Rollo, p. 156.
76. Id. at 50.
77. Id.
78. CA rollo, p. 627.
79. Rollo, p. 50.
80. Id. at 281.
81. Chamber of Real Estate and Builders' Associations, Inc. v. Romulo, supra note 71.
82. Advincula v. Court of Appeals, 397 Phil. 641, 650 (2000).
83. Alberto v. Court of Appeals, supra note 1 at 130-131.
84. Aguilar v. Department of Justice, G.R. No. 197522, September 11, 2013, 705 SCRA
629, 639.

Copyright 1994-2019 CD Technologies Asia, Inc. Taxation 2019 Second Release 15

 Endnotes

1 (Popup - Popup)
1. Spouses Chua v. Hon. Ang, 614 Phil. 416, 432 (2009); Callo-Claridad v. Esteban,
G.R. No. 191567, March 20, 2013, 694 SCRA 185, 200; and Alberto v. Court of
Appeals, G.R. Nos. 182130 and 182132, June 19, 2013, 699 SCRA 104, 129.

2 (Popup - Popup)
2. Rollo, pp. 2-28.

3 (Popup - Popup)
3. CA rollo, pp. 614-629; penned by Associate Justice Franchito N. Diamante and
concurred in by Associate Justices Josefina Guevara-Salonga and Mariflor P.
Punzalan Castillo.

4 (Popup - Popup)
4. Id. at 665-666.

5 (Popup - Popup)
5. Rollo, p. 374.

6 (Popup - Popup)
6. Id.

7 (Popup - Popup)
7. Id. at 375.

8 (Popup - Popup)
8. Id. at 149.

Copyright 1994-2019 CD Technologies Asia, Inc. Taxation 2019 Second Release 16

 9 (Popup - Popup)
9. Id. at 152.

10 (Popup - Popup)
10. Id. at 375.

11 (Popup - Popup)
11. Id. at 47-52.

12 (Popup - Popup)
12. Id. at 47-48.

13 (Popup - Popup)
13. Total Acquisition Cost; id. at 49.

14 (Popup - Popup)
14. Id. at 137-143.

15 (Popup - Popup)
15. Id. at 146.

16 (Popup - Popup)
16. Id. at 147.

17 (Popup - Popup)
17. Id. at 48.

Copyright 1994-2019 CD Technologies Asia, Inc. Taxation 2019 Second Release 17

 18 (Popup - Popup)
18. Id. at 49.

19 (Popup - Popup)
19. Id. at 50.

20 (Popup - Popup)
20. SEC. 254. Attempt to Evade or Defeat Tax. — Any person who willfully attempts in
any manner to evade or defeat any tax imposed under this Code or the payment
thereof shall, in addition to other penalties provided by law, upon conviction thereof,
be punished by a fine of not less than Thirty thousand pesos (P30,000.00) but not
more than One hundred thousand pesos (P100,000.00) and suffer imprisonment of
not less than two (2) years but not more than four (4) years: Provided, That the
conviction or acquittal obtained under this Section shall not be a bar to the filing of a
civil suit for the collection of taxes.

21 (Popup - Popup)
21. SEC. 255. Failure to File Return, Supply Correct and Accurate Information, Pay Tax,
Withhold and Remit Tax and Refund Excess Taxes Withheld on Compensation. —
Any person required under this Code or by rules and regulations promulgated
thereunder to pay any tax, make a return, keep any record, or supply correct and
accurate information, who willfully fails to pay such tax, make such return, keep such
record, or supply such correct and accurate information, or withhold or remit taxes
withheld, or refund excess taxes withheld on compensation at the time or times
required by law or rules and regulations shall, in addition to other penalties provided
by law, upon conviction thereof, be punished by a fine of not less than Ten thousand
pesos (P10,000.00) and suffer imprisonment of not less than one (1) year but not
more than ten (10) years.
xxx xxx xxx

22 (Popup - Popup)
22. SEC. 248. Civil Penalties. —
xxx xxx xxx

Copyright 1994-2019 CD Technologies Asia, Inc. Taxation 2019 Second Release 18

 (B) In case of willful neglect to file the return within the period prescribed by this
Code or by rules and regulations, or in case a false or fraudulent return is wilfully
made, the penalty to be imposed shall be fifty percent (50%) of the tax or of the
deficiency tax, in case any payment has been made on the basis of such return before
the discovery of the falsity or fraud: Provided, That a substantial underdeclaration of
taxable sales, receipts or income, or a substantial overstatement of deductions, as
determined by the Commissioner pursuant to the rules and regulations to be
promulgated by the Secretary of Finance, shall constitute prima facie evidence of a
false or fraudulent return: Provided, further, That failure to report sales, receipts or
income in an amount exceeding thirty percent (30%) of that declared per return, and a
claim of deductions in an amount exceeding (30%) of actual deductions, shall render
the taxpayer liable for substantial underdeclaration of sales, receipts or income or for
overstatement of deductions, as mentioned herein.

23 (Popup - Popup)
23. Rollo, p. 51.

24 (Popup - Popup)
24. Id. at 274-277.

25 (Popup - Popup)
25. Id. at 276.

26 (Popup - Popup)
26. Id. at 275.

27 (Popup - Popup)
27. Id. at 278-282.

28 (Popup - Popup)
28. Id. at 283-286.

Copyright 1994-2019 CD Technologies Asia, Inc. Taxation 2019 Second Release 19

 29 (Popup - Popup)
29. Id. at 290-303. The Resolution bears the recommending approval of Assistant Chief
State Prosecutor Miguel F. Gudio, Jr. and the approval of Chief State Prosecutor
Jovencito R. Zuño.

30 (Popup - Popup)
30. Id. at 463-481. Seven separate Informations were filed against respondent spouses
before the Court of Tax Appeals, the Regional Trial Court, and the Metropolitan Trial
Court, which were subsequently dismissed without prejudice (See pp. 496-498,
542-546, 556, 558-564, 565, and 730-731).

31 (Popup - Popup)
31. Id. at 301-302.

32 (Popup - Popup)
32. Id. at 304-310.

33 (Popup - Popup)
33. Id. at 311-313.

34 (Popup - Popup)
34. Id. at 317-326.

35 (Popup - Popup)
35. Id. at 376-382.

36 (Popup - Popup)
36. Id. at 381.

Copyright 1994-2019 CD Technologies Asia, Inc. Taxation 2019 Second Release 20

 37 (Popup - Popup)
37. Id. at 374-383; penned by Acting Justice Secretary Agnes VST Devanadera.

38 (Popup - Popup)
38. Id. at 382.

39 (Popup - Popup)
39. Id. at 384-403.

40 (Popup - Popup)
40. Id. at 404-405.

41 (Popup - Popup)
41. CA rollo, pp. 1-31.

42 (Popup - Popup)
42. Id. at 614-629.

43 (Popup - Popup)
43. Id. at 623-628.

44 (Popup - Popup)
44. Id. at 626-627.

45 (Popup - Popup)
45. Id. at 628.

Copyright 1994-2019 CD Technologies Asia, Inc. Taxation 2019 Second Release 21

 46 (Popup - Popup)
46. Id. at 635-651.

47 (Popup - Popup)
47. Id. at 665-666.

48 (Popup - Popup)
48. Rollo, p. 13.

49 (Popup - Popup)
49. Id. at 697-699.

50 (Popup - Popup)
50. Id. at 704.

51 (Popup - Popup)
51. Id. at 703-706.

52 (Popup - Popup)
52. Id. at 700-703.

53 (Popup - Popup)
53. Id. at 733-738.

54 (Popup - Popup)
54. Id. at 738-744.

Copyright 1994-2019 CD Technologies Asia, Inc. Taxation 2019 Second Release 22

 55 (Popup - Popup)
55. Id. at 739.

56 (Popup - Popup)
56. Id. at 741.

57 (Popup - Popup)
57. Id.

58 (Popup - Popup)
58. Chua v. Santos, 483 Phil. 392, 400-401 (2004).

59 (Popup - Popup)
59. Beluso v. Commission on Elections, G.R. No. 180711, June 22, 2010, 621 SCRA
450, 456.

60 (Popup - Popup)
60. Teh v. Tan, G.R. No. 181956, November 22, 2010, 635 SCRA 593, 604.

61 (Popup - Popup)
61. Associated Anglo-American Tobacco Corporation v. Court of Appeals, G.R. No.
167237, April 23, 2010, 619 SCRA 250, 257; Bausa v. Heirs of Juan Dino, 585 Phil.
526, 532 (2008); Galzote v. Briones, G.R. No. 164682, September 14, 2011, 657
SCRA 535, 541; Santos v. Orda, Jr., G.R. No. 189402, May 6, 2010, 620 SCRA 375,
384.

62 (Popup - Popup)
62. Elma v. Jacobi, G.R. No. 155996, June 27, 2012, 675 SCRA 20, 56-57.

Copyright 1994-2019 CD Technologies Asia, Inc. Taxation 2019 Second Release 23

 63 (Popup - Popup)
63. Callo-Claridad v. Esteban, supra note 1 at 189.

64 (Popup - Popup)
64. Elma v. Jacobi, supra note 62 at 57.

65 (Popup - Popup)
65. People v. Lagos, G.R. No. 184658, March 6, 2013, 692 SCRA 602, 608-609.

66 (Popup - Popup)
66. 186 Phil. 604 (1980).

67 (Popup - Popup)
67. Id. at 610-611.

68 (Popup - Popup)
68. Id. at 610.

69 (Popup - Popup)
69. 327 Phil. 1 (1996).

70 (Popup - Popup)
70. Id. at 35.

71 (Popup - Popup)
71. Chamber of Real Estate and Builders' Associations, Inc. v. Romulo, G.R. No.
160756, March 9, 2010, 614 SCRA 605, 627.

Copyright 1994-2019 CD Technologies Asia, Inc. Taxation 2019 Second Release 24

 72 (Popup - Popup)
72. Li Yao v. Collector of Internal Revenue, 119 Phil. 207, 222 (1963).

73 (Popup - Popup)
73. Collector of Internal Revenue v. Jamir, 114 Phil. 650, 651-652 (1962).

74 (Popup - Popup)
74. See Annex "A" of Revenue Memorandum Order No. 15-95, Guidelines and
Investigative Procedures in the Development of Tax Fraud Cases for Internal
Revenue Officers.

75 (Popup - Popup)
75. Rollo, p. 156.
76 (Popup - Popup)
76. Id. at 50.
77 (Popup - Popup)
77. Id.

78 (Popup - Popup)
78. CA rollo, p. 627.

79 (Popup - Popup)
79. Rollo, p. 50.

80 (Popup - Popup)
80. Id. at 281.

81 (Popup - Popup)
81. Chamber of Real Estate and Builders' Associations, Inc. v. Romulo, supra note 71.

Copyright 1994-2019 CD Technologies Asia, Inc. Taxation 2019 Second Release 25

 82 (Popup - Popup)
82. Advincula v. Court of Appeals, 397 Phil. 641, 650 (2000).

83 (Popup - Popup)
83. Alberto v. Court of Appeals, supra note 1 at 130-131.

84 (Popup - Popup)
84. Aguilar v. Department of Justice, G.R. No. 197522, September 11, 2013, 705 SCRA
629, 639.

Copyright 1994-2019 CD Technologies Asia, Inc. Taxation 2019 Second Release 26