ii. Criminal Action

Prescriptive Period – When It Begins To Run

• From the day of the commission of the violation of the law; or
• If the same not be known at the time, from the discovery thereof AND the institution of judicial proceedings for the investigation and punishment (NIRC, Sec. 281)¹

Interruption of Prescriptive Period

• When proceedings are instituted against the guilty persons; or
• The prescriptive period does not run when the offender is absent from the Philippines (NIRC, Sec. 281)²; or

Examples of Punishable Crimes

• Attempt to evade or defeat tax (NIRC, Sec. 254)³; and
• Failure to file return, supply correct and accurate information, pay tax, withhold and remit tax and refund excess taxes withheld on compensation (NIRC, Sec. 255)⁴

Elements: Non-Filing of Tax Return

• The accused was a person required to make or file a return;
• The accused failed to make or file the return at the time required by law; and
• The failure was willful

Elements: Failure to Supply Correct Information

• The accused is a person required under the NIRC or by rules and regulations to pay any tax, make a return, keep any record or supply correct and accurate information;
• The accused failed to supply correct and accurate information; and
• Such failure was willful

“Willful Blindness” Doctrine

"Willful” in tax crimes means voluntary, intentional violation of a known legal duty, and bad faith or bad purpose need not be shown

Under Sec. 255 of the NIRC, willful blindness may establish willfulness when a taxpayer deliberately avoids confirming facts or complying with a known filing duty; mere inadvertence or negligence is insufficient.

Thus, an experienced businesswoman’s reliance on her husband to file their ITRs is not a valid reason to justify her non-filing, considering that she knew from the start that she and her husband are mandated by law to file their ITRs (People v. Kintanar, CTA EB Crim No. 006)⁵

“Willfulness” cannot be presumed from mere inadvertent or negligent acts. While the TP may have been negligent, negligence alone is not enough to convict; the prosecution must prove a willful failure to comply.

Example: TP entered showbiz at 8 yrs. old; at 12 yrs., engaged services of Tito Alfie Lorenzo as manager. TP entrusted all her transactions to manager, e.g., contract negotiations, signing, handling of fees, etc. Signed contracts without reading them; checks were issued in the name of manager, so TP had no idea how much she was earning per project (she simply trusted manager to make proper accounting). As custodian of records, manager took care of all financial matters, including compliance with tax obligations (People v. Judy Anne Santos, CTA Crim. Case No. O-012)⁶.

Filing of Criminal Action Against the Taxpayer

• A criminal action may be filed during the pendency of an administrative protest in the BIR.
• It is not a requirement for the filing thereof that there be a precise computation and assessment of the tax, since what is involved in the criminal action is not the collection of tax but a criminal prosecution for the violation of the NIRC, provided, however, that there is a prima facie showing of a willful attempt to evade taxes.
• 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. (Ungab v. Cusi, G.R. No. L-41919-24, 30 May 1980⁷; CIR v. Pascor Realty and Development Corporation, G.R. No. 128315, 29 June 1999⁸)
• Filing by the BIR of a civil suit for collection of the deficiency tax is considered a denial of the request for reconsideration.
• An indication to the taxpayer by the Commissioner “in clear and unequivocal language” of his final denial on the issuance of the warrant of distraint and levy. The subject of appeal is the final decision, not the warrant of distraint.
• A BIR demand letter sent to the taxpayer after his protest of assessment notice is considered as the final decision of the Commissioner on the protest.
• A letter of the BIR Commissioner reiterating to a taxpayer his previous demand to pay an assessment is considered a denial of the request for reconsideration or protest and is appealable to the CTA.
• Final notice before seizure considered as Commissioner’s decision on taxpayer’s request for reconsideration, when the taxpayer received no other response.

Note: The CIR does not always have to approve the filing of tax criminal cases. The Tax Code requirement of having the CIR approve the filing of civil and criminal cases is a delegable power. As the filing in this case was done after recommendation by the Regional Director who is at least the rank of a division chief, the requirement is deemed complied with. (People v. Valeriano⁹)