CTA Case No. 1997 (Decision)

c t i t I ' I .:l I �� L I t ;, vl 1:U � \.T .\PPBALS QU~ZON CITY - v ' . us - . C.. .. . C E � 9 ? X- X . hi 1 Ll 1f thn d is1.o of es- 0 e '!� 6 t ~d a ' l'',~ �a" ss ss n�.. n d n i. 0 ti tio d. ici .n y nc':'m t ~s L th ,, gr g. c.!UJn 1 , 411 . 2 .. :r t.h ttlX - A le ;1 .tl'R 1 53 , 1 54, and 1 ?8, pl r di ti . al r sd t :x in tb amou t r � �6 . 5 f the a f'ixt-� d n r" n s am t. f 676 . 7 th 19 (' 1 ~7 / .r ' nr 195'1 f.r th tic-n o a priPt i ng X' �s s nc .: pri�nl (.. t;. � e ;) la~ r ~0 the e�, 1�s 1953 , 1951+, 19"' ' 1�56 , 1(�57, " 1'5, ' clusi f-'' o~� stn t P to~ �1 n ~ r s . () 1 d.r . fe si . t n t r cf t cr tic LklOr ssoci ticn t ' u ~ 1 y n~ n .~ porator 0 a p il j 1~ r �ss . vi tu c" i y o . 3fl7 ( t 1 1, ' 195 .... s u d y ~hi") 81 ire r t: ' tl "'it ir ' mi,.. z ~ ~rn n. -'0 con u t d at til:'; a ..;ion f t no ks ac oun'-s, urp s ~ s r ... r ' .m p� ~ rs (' ~tj t i er t� i' ,~ .l. J, 182

;4 11 o. 1 97 -- cvr t :r� r m 195'4 t l 7, 1 c us1v � . (JJ � 4, BI r ) .t:he u rit inve tig te possibl t - ~V si o was r pt bv l r>t ter dated b � !l. y 1 ' 1959 h b ssoc sserl t t e i 1 "'ir t ... , b ..1 �y . ( � 10, I r . . ) 0 0 .t bAr 2 , 1960 , 'eni p 1~1 I v sti" t r 1 ., .:; r �s r t p titi ne ss s ef� � h of 4, 2 .6 th _ 1 busi e- t x 11 111~1 s rio: -rrc � { � 55- 57 , J.l! T EL .) I 1 ~t h '1 ' 1961 , t c i 1 i .C3 rict �1 ' f BI � 7, 'ebu ~itv a v s p t ... t p es j otions th pr lS ~ adj st- m t r in & i fo m 1 .onfere c~ scheaul �On april 12 , 1,61 an t su ritten �r ~ d docu- t ry id c .o� c:q p rt his s . � (np . 79- 82, I re . ) 1 tt r - y 17, 1 �1 , ss to th 'hi r, r sti � tio. h, I t'r al .v ~ubm:itt d his bj t:l ns 0 t ns , th .. pr nts ht ... s. c:!S h. 1 i y in t XS 1 or .b y ""s y pr s 53 , 1954 , 1955', :m 1 56 h al "

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' D!�C sro ' A ; AS " � 0 � 1997 -1 gati � as eque ted , the statu e f limitatio eon- t i nu � to run u til el t..ven . ~� rs h~ pa se , d thus th coll ect on fo th e taxe had p es ib vd having b n d after 1v� ( 5) years f o the dat f a essmen � ( .JP � 155-15q, TA rec . ) s dent , 0 tho otb ~r h nd, aintains t e p sit vie .� Res nnent all ges that tne r1 ht f the e t t as ess an11 c 11 ct the ta e i .- qu sti .s ' b r:r a by the st tute of limitati s . u r th . :" l' ViSi ns 0 �- .(.'.�, io 332( ) the r x t h --: Co .r t h s the i ght t o sf-'ess an c 11 t th t X s que.,ti 'th a iod (I t e (1 ) y ars, ,..OU ti r , th- datt c th dis- c v . o o ~ to r 3, 1960 , th . dat, there ort � . d ny ni r {'pe ia Inve""tig toT' o 'Pll"' , ol'- his 1 vesti ;:, ti n n h in ing of the CA1si t y , fraucu- 1 ent ss o 111issio s i t ince t asse :. sro ts ainst p tit . o er e issued on ril .6 , 196 3, --n ne 2 , 1963 , fo r the cefi 1 ncy i c m an usin�.:- s t Ps , esnc~tiv 1-, t h e s .m. ere 1ssu f. ? y ears , 7 m nths an'l 22 s t; the l t st, or 11 1 thi n tn t n - ~~l' pe iod provid i snid S ct� on 332 1 ) f the T x ~o Th P r 1 e t �' vis !. s 0 law , Sec .io s 331, 33- - 354 of h ' � X ~ d eli . 0 by 1. 0 rtie n ,1 t ~~ l th i r tiV: c a . r quo t h r inbel .w�

E IS� v .... i'A "4A"E ,o., t99? � - 13 ... \ Sec . J31 .. .P.er:.in:l o-r:_l.~tr1�t;;t.;Lo.Q U.;l.Q.D. aJ\n:S~fi r-: e.ot~ rd'\: coJ..l,,H~l..JilU . .. ~ Jxcep- as provided in t ..1.e succeeding section, internal- r avenuz tnx.:.!:; s:1o.ll 'be. assesbed ,.,;;_t �in l'ive ypreorcrsseda~:f:t'Slgtr the return wus filed , and no i r I n court \J'i"vh >Ut assess:nc.r.:t fo tic collection of such tax,.., shw.ll be begun r.ft:e.r ex�::i:r~+:ion of s�,ch .i!'"�:r.Lo~.l . lor thG: pu. pos{(s of' t!-:.j_H S!~ction, (l. return f'.U.e 'l before t.e lp~ '!; day .:n..r.wcl�ibocl by l-9~..; tor �c:ho filing thnrBofl s~>1~ 11 br� cor�~ :.Jer:ed :: s fiJ.0d on ~n..c'~ l 'st C.r..;y�: P'~"a..)i[ ,i-Jc�g , '.t:l1at this 11r:-5.tatio n '>h':"lL no�;; r,TQly f;o cc:S7;)'9 t�l:-e:1C.y i.:...ves t ::...;u teu. ~1r .1.cr c.o �:::~tc n:;prov;: 1 of' t.hi s od.e; . ""''ec . j~,-)<-.;.,. ,. J ,, ~e I 1� r'.iS,. s ~uP.....;l.ar. -�. QQ�. 0 -+".' .....................~.:�..::__~.ol. af\1w.s i� f:L;I< r n;, .ar co :.l~.:-:ti.r'.l1 l<~ru; . - (a) In the c;ass of ~ 1_ alsr or :f:l'rtu- di:.lnn': :rt:tkrn wit:: ..:.nt~-nt to :vo:le f~e.~r. or of "'~f'r-i,m:\e to fi::.e n retur n , the � trl:l'= !:'lay be assess.e,t , ..n~ n. J)l"OCeE:;d:i.n~; in coL:r t f �r tne collGction of such tax n:�1:.~ �,; hc,;nn ui U'wu:t -=-s.Jet:z, v�:~ ,. .f't <:d..y tics w:!:th.~n ~:.B., yfwrs after t .~; di~.covery cf . t::he J.�ulsity� , ro.u or orrJ.ssi.~n~ r..:t ~.Y. -:.:.i.o..1 , � ihat in ft frau.d as .;lees "c _J:; 1.-rhic~: hns bc,.ome fine l a..n--:. n..te .... ,"._" 't.",..';. J�r ' �.,, l. ~.; ,�_',"'f' J�. ��,-.'.a,,,,p:J-.," 1, �,.J...J,.C..>. .1.. -~- 0... d; t 1� �: J..l_ c i "J . I � ""..,[� (._,. J"-' t v - - l:,r token co ,"'n .._z nc-:~ o ir r~. � vil \} Cl1 ; nj_ - � n.:l !'C�vi...ln l'o:i." th:: collPct:t~�n t~���. re:.; � (J'I. s ar"c!"'d~c: by Prenid.2.nti:1l Decree Nc . 6/ . ,) � ::x; ( :w .issu! .,_L q_l.lr.:Jtion ot i.dleth.H' Q.r >10~ �vh.c. }8C.:I.tl 'Jli <):r' 1S in- come �ax '!'e�~ 1rns ,for 1 ~)3 , 1.954 anJ 1958. n1�2 !'; ls e t axes .

.. 1� 'Jt .. l' t1 I , r ,., - \ftU! "'C (" ~ h d. 1 i'~ f'f! /!' ..r ~h "' J'!<:< n hi tl . ,, ' l th~ 'I~U . t (L ' 1,.n ' "'! " 1. . . ol ~�~ r' r� ,.., ! r. ct ' re"';l fr a . 0 ( p � .�., , I � �:- ~ � ) t 1 ~ 1 n ' ~oo 7U }j '1 ' r.t 1951 '0 ti .. ,1." ~$ �tn of t . v-n ' .'.". ~ ' W..r�'i" "' r t if' J ' 'l 0 1b O. tO . L\ t 195

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- D OJ F: I 1 "l :,.o . (; l <)1 ,~ ~'. t:. - .18 �- a~ts el :urt J'l 1nt to l'\0 oth~ tbon the i.nt o ~i t n 1 r delib ? ata qu st1~ n\" tn� t the tr nsa , it is 'Wh , to � Jiil..,~� tl r lnalH! t.r ~ �'1 tl~l �t1o It. 'f.h."" ~0 �r>iiss1.o s . t..t1 :' , ...l .lll '~-:) '!' l�~vJ~r ::1 ~ ul~ ct hav~ bee:n cttt fo tt th. �ir 1 f '":r or. ��o ase ~ ntl~ , ~~he eo ~>r; fss t<- n~ :1:,:l ~ tt:t h i!\ g to 199

J; o. 1 97 ... 9 - � 1~ ' r s rt ti 1 - I ..iJ. n P i�> :t. n:.l ~ .,pt:.~, �tjs d�fe .. ;;; ce tabl . d ~.J1 t ' u't Snff ce tl ut ~ 'Y n 11 .h. Y' t gr s i c .. the1r t 1t .. "'~1. nd or st 1 t ..i t x r ~turn, ut 3. �!ill �lso t ile or th t 0 �r. r n h fi. t' ic, r' ., otne � tici.. n.:r s ' .lur t th h ~.'11 th d"' uc i:;j ry n ry ~ !- <~ � th a 'J!!~ --1 . . ..... ('! ; ha rr b en ��~!' I. ly T1 t i tic h .Y ' 1 r la .. -...'. t \ is qu�, �t�� o ., s1 :;, r 1 t.e . e \.Ji r0 '.1 h by h~ 11 . he 'hse c ... o v , th ,1 Q' 11t i l t:v' u ,(1 is pn . 2 J5-? 6 , 1 r � ) ... r s h a" � c h � "'r- , 0

rm . 1997 -2 - 11 tin th,t t sses ,.., t is r o e u o ill - ' .x r ~ fense f p es ripti n . a Jt 1.~ h a e g. a oA i th � r~ctice 0 . h's pro- fe si ~ , h h � , riv - t a 1 w f !" si . e�} . ,"\S c�ntive e rs; an~ h h n i t h e k ~ . o.ks of �c u tn o~ �a hi ix d r pri il ~g tax t opeTate h i s pr ting or ss or a tn. or ~t.re taY he 1ch ~t s ~ s or th~ same eriod , th .s. ar ~'i te P"' of s e v rle the pas ent of hi s ~ pi tim� te t � L� is asnertion l a t _e wa s actin trt f' ith hen he f il d ~ ay hi ~ orivil ge ta ap ec . ' b i th 1""1!' d .nt f the u~ crat1.n L h had the b _l e t h :., t h w :- d f .ndi 1. SS ci t ion, ! b t'S ~ ' :: a b r lead r anc not as a 1 ~ r s .e, under l ie J ct 875 , e0tion 5(b) th ..r 0 . it ,r1nts t ~ l ab r leaaers the ri ght or Jr1 ileg t def f1 h e 11 rker�~ i the """urt of I due!t:rial 1 ~a ::s 'f.r th nt . ec .s rtly ei~ , a lawyP , s \11 t . u r t . t sa. ,h� l .~b r l r-- ders rho ar no 1-l -vrye r . a r ' t h~ i r in th t this l a-w d es is b� t' 1 't r 1 ii er - .rtr1 a 1 ": e :r 1n �th active r ~ i c~ o hi rof . s 1 n, h n n t at r b 201

;; l)t,!,CISI N - :~~CASt .0 . 1 7 - 21 - per 1 ttad or h a rd t<.' S1Y that hf!i! w s appearing before th ,ou:r t . of lndnstr1~1 1 ~l ati n s n t as a la1 �or but as a l abo e:1d e:r . It is cnlv naturally ight top Psume that he h,d a ' peared in t a ou"'t as a l a\f!Y�= ct' 1 bo:r 1 d ~ :r o'~" both . 'Fra an ne d l"l.ct be )roved by 0lr ct evtdence . I. t can be inft'.rrred nro';) rl f rom th c:tr umsta ces of each case. {7\epubl:tc of the Phili � ines v . Bl as Genzal s, G . ~ . Nc . L- 17.62, Apr . 30 J 1965. F aud occurs _o "' t fre::tuent l y vdth r egard to th ~:� failure o f a taxpayer t o re o rt or underil e~J.a t'e hi~ tru ~ nccm to v ~ de ta es . ~r~u~ ls arise in case wber- t here a. e excessive and un.--ubst snttsted r~~u ti ~ r' :a (S� co) ertenrs, Law o �"' 1" deral In ome rra.:xati cn Vol . 10 , ha � 55 , ;). 32) . In th ins'tant case, here 1:ms d Ji�1itel;,. a S1 bstantj..91 under- declaration 'f inc me. o � pctiticn(�t" t o .. more than en~ taxable � y ar . Ther i.�re!!' no 8.ccou�1ting bo k anc r~.,o ds on �: h. ch hi :> ;- T'i nttng busine>ss activi- i ~ v esti g ati '1 "' a ~nts or to t his Court , as r~ ards th fc.lsi t:r an��)e r"tn.g in his tax returns ror th~ yr:a.-r-s i nYol ved . hes~ circumst:u;c s are i~'lf'icati e o f and are cl e r evi f. en''!C showing f"r ud cotru:a:t tted by p ~ titi ner. ( Avoltno vs . ~ol . op Int . qev ., 8 SC A 572;

-o. '1997 ... 22 - n ee::. fo:r , r i s i�.: l t:Y" of� +- e c :ur.-.:.ssi on 1 t' f t he 1 ~3 e h 't.. il "J r t tld h;ts .' l � l 0 to 195J , i n u. o.� ly ' 1er i .:1.~ ~ - U!"' 1 ,). 00 tr~ ce:t s .... . to ile., ~ "' or t '�e rot C-(:.1 . t;J; y r 19.> 7 -1 I t l .c: a; }'t:: ~ .. n~ . .dav n � etlti o n ~ r e to by cr pr ov1 e� th t; .:n �� :/ t i ...' y 1 2 03

1997 3 ... e lle; h f tlC t � ~ in t th"'~ ~ y be v q, a ~e -t �tjm,, with! "' s . n ye~. t t- :r h v t.~ 1~c r".f , i t f 1 ~J.e r aud o.r 1 . .. questi h,ot h~ r5 s nt � 1 26 , 1 )t 3 .i d Ju. f� ")1 , � .. r i c " t~.. (10) ;fl'"S counted ft h .. .,.. 2 ... ,. 1 6t ,. wn oro th t ~s :ln. au t p h�.s th@ i .ov y of the t .. ta., tbe rj;ht of t t . 1~ .t�.. r: i'3 , l<15l� �ne 195�'> 1 the t ~J x "cr t.ne e rs 1956 1 1c::5'7 ~ nd 19""3 , ou~U.P at; oi; t-ax fer .h. 1 )4, 195'5, 1$56 , 19?7 ~ d t is... ov �� O.to.er ?;-� . 1 60 r].Q th ilin c"' tb :o 1 ''or h a , &h of jud�'ci. 1 � "' , 1 ;'\ ion f t ..1<".1t ... 'X ('r Cu. Vfil , .{. .. � 5 I!"" t ~"er � ,, . !') ... . ll:6J' ~,r 'd ' .A ' in ,. c � \ - c . l..- 1 ~) Jul y ":) t 96 ', 2'+ ',, �

D� I I C ~~E NO . 1 97' T .. 2lt - P iscilla "state, Inc . vs . Cell . of nt . v. , c C s No . 331, ov . 29 , 196 , ff ' L-1 3 82 , M 9 , 1 6tt- , II S; tA 130; ollozos v � Ce11. � O i I t .� . ev ..., GTA as No . 618 , s~~pt . 9 , 1 59 , aff ' (1 in o . L- 16441 1 11 rch '31 , 1965, 13 s, lf69 ) a s made (),. Janua �y 20 , 1970 , 9 yea s, ths and ? d s . I s w 11 . th. th J t n (10) y~ r pres ripti~ e i od . oming to t h 2nd 3 d , 4th ,. 5th , n<i 6th ssu s, ' aw~ oi 1 � terrel t t e '){ill dispos tho at th sam ti e. And aft ..r ~ ing held t , t th I r_ �.ht p r e snonde t t an as~ess co1le t -h e taxes i l que,;)tion .ot a vi prescri under s t on 3 2 ) I ' the ~ t () al Intern 1 f'V fiUE' _;ode , an p-tit1cn r t h vin ssailed the corr ctn ss of the assess e t, xce t on 'the grounc1 of prescrip io'1 , t A assess e t is pr sum c T' -ct , v lid a d legal (I terprovi 1 ial . 4 ut u ~ vs . 11 . l t . ev .. , 98 Jh 1. 2907; c 11. . f I t . .v . vr: . 0 ol Lan r ansp � c ' 107 Ph. 1. 965, 974) . In everal c ~~ es, tlis ~ urt � s net hesitat i sust<.Li nin the imp j_ ti n of th c 50 f raud pe l ty (J>r Secti n 72 of the X ' ode 1 hcs c. ses ~uer the 'lt t i r the t payc"' t ev ad a f th taxes du tho er learly tab11sh d. ( P�t' z v. ';TA nd ell . o . I t. s v . ' .n. lfo . L-105 7, y 3 ' 19 8; ou za gvj o v . Call . CT r'..)., (}5

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