Ungab v. Cusi, Jr.

Doctrines:

• Computation and assessment of deficiency taxes is not a pre-requisite for criminal prosecution under the Code. 
• Petition for reconsideration of assessment of deficiency taxes suspends the prescriptive period for the collection of taxes, not the prescriptive period of a criminal action for violation of law. 

Facts: BIR Examiner Ben Garcia examined the income tax returns filed by Quirico P. Ungab for the calendar year ending December 31, 1973.  He discovered that petitioner failed to report his income derived from sales of banana saplings. As a result, the BIR District Revenue Officer at Davao City sent a “Notice of Taxpayer” to the petitioner informing him that there is due from him the amount of P104,980.81, representing income, business tax and forest charges for the year 1973 and inviting petitioner to an informal conference where the petitioner, duly assisted by counsel. Petitioner protested the assessment, claiming that he was only a dealer or agent on commission basis in the banana sapling business. BIR Examiner Ben Garcia, however, was fully convinced that the petitioner had filed a fraudulent income tax return so that he submitted a “Fraud Referral Report,” to the Tax Fraud Unit of the BIR. Special Investigation Division of the BIR found sufficient proof that the herein petitioner is guilty of tax evasion for the taxable year 1973 and recommended his prosecution.

CIR approved the prosecution. State Prosecutor Jesus Acebes conducted a preliminary investigation and finding probable cause, filed 6 informations against the petitioner with the CFI Davao.

Petitioner filed a motion to quash on the grounds that (1) the informations are null and void for want of authority on the part of the State Prosecutor to initiate and prosecute the said cases; and (2) the trial court has no jurisdiction to take cognizance of the above-entitled cases in view of his pending protest against the assessment made by the BIR Examiner. The trial court denied the motion. Petitioner filed the instant recourse and was issued a TRO.

Petitioner seeks the annulment of the informations, alleging that while the respondent State Prosecutor may initiate the investigation of and prosecute crimes and violations of penal laws when duly authorized, certain requisites, enumerated by this Court in its decision in the case of Estrella vs. Orendain, should be observed before such authority may be exercised; otherwise, the provisions of the Charter of Davao City on the functions and powers of the City Fiscal will be meaningless because according to said charter he has charge of the prosecution of all crimes committed within his jurisdiction; and since “appropriate circumstances are not extant to warrant the intervention of the State Prosecution to initiate the investigation, sign the informations and prosecute these cases, said informations are null and void.” 

Issue: Whether or not an assessment of a deficiency is necessary to a criminal prosecution.

Held: No. What is involved here is not the collection of taxes where the assessment of the Commissioner of Internal Revenue may be reviewed by the Court of Tax Appeals, but a criminal prosecution for violations of the National Internal Revenue Code which is within the recognizance of Courts of First Instance. While there can be no civil action to enforce collection before the assessment procedures provided in the Code have been followed, there is no requirement for the precise computation and assessment of the tax before there can be a criminal prosecution under the Code. 

“An assessment of a deficiency is not necessary to a criminal prosecution for willful attempt to defeat and evade the income tax. A crime is complete when the violator has knowingly and willfully filed a fraudulent return with intent to evade and defeat the tax. The perpetration of the crime is grounded upon knowledge on the part of the taxpayer that he has made an inaccurate return, and the government’s failure to discover the error and promptly to assess has no connections with the commission of the crime.”

It has been ruled that a petition for reconsideration of an assessment may affect the suspension of the prescriptive period for the collection of taxes, but not the prescriptive period of a criminal action for violation of law. Obviously, the protest of the petitioner against the assessment of the District Revenue Officer cannot stop his prosecution for violation of the NIRC. Accordingly, the respondent Judge did not abuse his discretion in denying the motion to quash filed by the petitioner.