SC issues rules over tax breach

The Supreme Court said in its latest ruling that an assessment for deficiency taxes is not a prerequisite for collection of the taxpayer-accused's civil liability for unpaid taxes in the criminal prosecution for tax law violations.

This was the ruling of the SC En Banc, which was penned by Associate Justice Mario V. Lopez, as it denied the petition for review oncertiorari filed by Joel C. Mendez and partly granting the petition for review on certiorari filed by the Office of the Solicitor General.

The ruling of the Court of Tax Appeals was challenged by Mendez after he was found guilty of violating the National Internal Revenue Code, as amended, while the OSG assailed the CTA's non-imposition of civil liability on him.

Mendez is a single proprietor doing business under several trade names and businesses.

Criminally charged

In 2006, he was criminally charged for violation of Section 255 of the NIRC for not filing his 2002 Income Tax Return in the estimated amount of P1,522 million and willfully failing to supply correct and accurate information in his 2003 ITR, to the government's prejudice, in the estimated amount of P2.107 million.

The CTA Division found Mendez guilty of both criminal charges, but as to his civil liability, the CTA Division held that a final assessment issued by the Commissioner of Internal Revenue is required before the taxpayer can be held civilly liable for deficiency taxes.

Mendez's conviction and the non-imposition of deficiency taxes were affirmed by the CTA En Banc, prompting both Mendez and the OSG to file separate petitions before the Supreme Court.

The petition of Mendez was denied by the Court and affirmed his conviction, finding his contentions a mere rehash of the arguments which were raised and already considered by the CTA.

Petition partly granted

The OSG's petition was partly granted by the Court, ruling that the CTA Division had jurisdiction over Mendez's cases since his potential liability in each are more than P1,000,000, in accordance with Republic Act 9282, the law in force when the criminal charges were filed.

The Court, however, clarified that following the effectivity of RA 11576 on 21 August 2021, for tax cases filed upon such date, jurisdiction shall be as follows:

(a) Exclusive original jurisdiction over tax collection cases involving P1 million or more remains with the CTA;

(b) Exclusive original jurisdiction over tax collection cases involving less than P1 million shall be exercised by the proper first-level courts;

(c) Exclusive appellate jurisdiction over tax collection cases originally decided by the first-level courts shall be exercised by the Regional Trial Court;

(d) Exclusive original jurisdiction over criminal offenses or felonies where the principal amount of taxes and fees, exclusive of charges and penalties, claimed is P1 million or more remains with the CTA;

(e) Exclusive original jurisdiction over criminal offenses or felonies where the principal amount of taxes and fees, exclusive of charges and penalties, claimed is less than P1 million shall be exercised by the proper first-level courts; and

(f) Exclusive appellate jurisdiction over criminal offenses or felonies originally decided by the first-level courts remains with the RTC.