Digested Cases in Taxation (on

Assessment, Levy and Distraint, and

Statute of Limitations)

presumptions are in favor of tax assessments.

Verily, failure to present proof of error in
assessments will justify judicial affirmance of said
assessment.

CIR vs. CA, Atlas Consolidated

242 SCRA 289
GR No. 104151 March 10, 1995
"Assessments are prima facie presumed correct
and made in good faith. So that, in the absence of
proof of any irregularities in the performance of
official duties, an assessment will not be
disturbed."

REPUBLIC vs. CA, and NIELSON & CO.,INC.

149 SCRA 351
GR No. L-38540 April 30, 1987
"The follow-up letter reiterating demand for
payment could be considered a notice of
assessment in itself if duly received by the
taxpayer."

FACTS: The Commissioner of Internal Revenue

served two notices and demand for payment of the
respective deficiency ad valorem and buiness taxes
for taxable years 1975 and 1976 against the
respondent
Atlas
Consolidated
Mining
and
Development Corporation (ACMDC). The latter
protested both assessments but the same were
denied, hence it filed two separate petitions for
review in the Court of Tax Appeals. The CTA
rendered a consolidated decision holding, inter alia,
that ACMDC was not liable for deficiency ad
valorem taxes on copper and silver for 1975 and
1976 thereby effectively sustaining the theory of
ACMDC that in computing the ad valorem tax on
copper mineral, the refining and smelting charges
should be deducted, in addition to freight and
insurance charges.
However, the tax court held ACMDC liable for the
amount consisting of 25% surcharge for late
payment of the ad valorem tax and late filing of
notice of removal of silver, gold and pyrite
extracted during certain periods, and for alleged
deficiency manufacturer's sales tax and such
contractor's tax for leasing out of its personal
properties. ACDMC elevated the matter to the
Supreme Court claiming that the leasing out was a
mere isolated transaction, hence should not be
subjected to contractor's tax.
ISSUE: Is the claim of the private respondent, with
respect to the contractor's tax, impressed with
merit?
HELD: No. It is being held that ACMDC was not a
manufacturer subject to the percentage tax
imposed by Section 186 of the tax code. However
such conclusion cannot be made with respect to
the contractor's tax being imposed on ACMDC. It
cannot validly claim that the leasing out of its
personal properties was merely an isolated
transaction. Its book of accounts shows that several
distinct payments were made for the use of its
personal properties such as its plane, motor boat
and dump truck. The series of transactions
engaged in by ACMDC for the lease of its aforesaid
properties could also be deduced from the fact that
during the period there were profits earned and
reported therefor. The allegation of ACMDC that it
did not realize any profit from the leasing out of its
said personal properties, since its income
therefrom covered only the costs of operation such
as salaries and fuel, is not supported by any
documentary or substantial evidence.
Assessments are prima facie presumed correct
and made in good faith. Contrary to the theory of
ACMDC, it is the taxpayer and not the BIR who has
the duty of proving otherwise. It is an elementary
rule that in the absence of proof of any
irregularities in the performance of official duties,
an assessment will not be disturbed. All

FACTS: The petitioner sought the review on

certiorari of the decision of the respondent Court of
Appeals reversing the decision of the then Court of
First Instance of Manila which ordered private
respondent Nielson & Co., Inc. to pay the
Government the amount of P11,496.00 as ad
valorem tax, occupation fees, additional residence
tax and 25% surcharge for late payment, for the
years 1949 to 1952. Petitioner claims that the
demand letter of 16 July 1955 showed an imprint
indicating that the original thereof was released
and mailed on 4 August 1955 by the Chief, Records
Section of the Bureau of Internal Revenue, and that
the original letter was not returned to said Bureau;
thus, said demand letter must be considered to
have been received by the private respondent.
According to petitioner, if service is made by
ordinary mail, unless the actual date of receipt is
shown, service is deemed complete and effective
upon the expiration of five (5) days after mailing.
As the letter of demand dated 16 July 1955 was
actually mailed to private respondent, there arises
the presumption that the letter was received by
private respondent in the absence of evidence to
the contrary. More so, where private respondent did
not offer any evidence, except the self-serving
testimony of its witness, that it had not received
the original copy of the demand letter dated 16 July
1955.
ISSUE: Was notice of assessment or demand
properly served to the respondent? Should the
receipt by the respondent of the succeeding followup demand notices be construed as receipt of the
original demand?
HELD: As to the first issue, no. As correctly
observed by the respondent court in its appealed
decision, while the contention of petitioner is
correct that a mailed letter is deemed received by
the addressee in the ordinary course of mail, still
this is merely a disputable presumption, subject to
controversion, and a direct denial of the receipt
thereof shifts the burden upon the party favored by
the presumption to prove that the mailed letter was
indeed received by the addressee. Since petitioner
has not adduced proof that private respondent had
in fact received the demand letter of 16 July 1955,
it can not be assumed that private respondent
received said letter.
As to the second issue, Yes.
Records show that petitioner wrote private
respondent a follow-up letter dated 19 September
1956, reiterating its demand for the payment of
taxes as originally demanded in petitioner's letter
dated 16 July 1955. This follow-up letter is
considered a notice of assessment in itself which
was duly received by private respondent in
accordance
with
its
own
admission.
And
consequently, under Section 7 of Republic Act No.
1125, the assessment is appealable to the Court of
Tax Appeals within thirty (30) days from receipt of

the letter. The taxpayer's failure to appeal in due

time, as in the case at bar, makes the assessment
in question final, executory and demandable. Thus,
private respondent is now barred from disputing
the correctness of the assessment or from invoking
any defense that would reopen the question of its
liability on the merits.
COLLECTOR OF INTERNAL REVENUE vs. VDA.
DE CODIERA
102 PHIL 1165
GR No. L-9675, September 28, 1957
"The property levied by a competent court may,
with the consent thereof, be distrained, subject to
the prior lien of the attachment creditor."
FACTS: The Collector of Internal Revenue sent a
warrant of distraint and levy against the properties
of Restituto Codiera for collection of certain
deficiency specific tax. However, it could not be
effected in view of the attachment of the said
properties of the CFI-Manila of another case. After
seven years, the Collector of Internal Revenue
issued a warrant of distraint and levy commanding
the City Treasurer of Cebu City to distrain the
goods, chattels, or effects and other personal
property of whatever character, and levy upon the
real property and interest in or rights to real
property of the estate of the deceased. The heirs of
the deceased filed the action with the CTA barring
the government to collect said deficiency on the
ground of prescription therefore praying to declare
null and void, and of no legal force and effect the
warrant of distraint and levy which the respondent
issued on March 7, 1955.
ISSUE: Does the attachment made by a court in a
civil case over certain properties of a taxpayer bar
the government from enforcing a warrant of
distraint and levy over the aforesaid properties in
order to collect the taxes due?
HELD: No. There may be a valid reason for nondistraint of the property which was due to the
attachment of the CFI-Manila in another case.
However, such property levied by a competent
court may, with the consent thereof, be
subsequently distrained, subject to the prior lien of
the attachment creditor. The attachment merely
deprives the Collector of Internal Revenue the
power to divest the Court of its jurisdiction over
said property but it does not impair such rights as
the Government may have for the collection of
taxes.
MAMBULAO LUMBER CO. vs. REPUBLIC
132 SCRA 1
GR No. L-37061, September 5, 1984
"Forest charges are internal revenue taxes and the
BIR has the sole power and duty to collect them.
Thus, an assessment made by the Bureau of
Forestry cannot be considered an assessment
made by the BIR."
FACTS: The Bureau of Forestry sent a demand
letter dated January 15, 1949 to Mambulao Lumber
Co. demanding for the payment of forest charges
and
surcharges.
Mambulao
protested
the
assessment. On August 29,1958, the BIR likewise
wrote a letter to the company demanding payment,
which subsequently requested reinvestigation. The
BIR gave the company twenty (20) days from
receipt within which to submit the results of its
verification of payments. For failure to comply and

failure to pay its tax liability despite demands, CIR

filed a complaint for collection with CFI-Manila on
August 25, 1961. The CFI-Manila and Court of
Appeals decided against Mambulao ordering it to
pay the tax liability. Petitioner argued that the
collection is barred by the statute of limitations
under Sections 332 of the NIRC. As stated, the
collection should be made within the five (5) year
period. From 1949 (date when the Bureau of
Forestry assessed and demand payment as forestry
charges and surcharges) up to 1961 (date of filing
of complaint), it is already more than five years.
ISSUE: Has the period of filing of collection
complaint prescribed?
HELD: No. The action for collection is not barred by
prescription. The basis of the complaint filed on
August 1961 was the demand letter made by the
CIR on August 29, 1958 and not the demand letter
of the Bureau of Forestry on January 1949. So that
the reckoning date of the 5-year period should be
from the date of the BIR letter and not that of the
Bureau of Forestry. This must be so because forest
charges are internal revenue taxes and the BIR has
the sole power and duty to collect them.
REPUBLIC vs. ARANETA
2 SCRA 144
GR No. L-14142, May 30, 1961
"Where the tax obligation is secured by a bond, the
prescriptive period for the action for the forfeiture
of the bond is governed by the Civil Code."
FACTS: The Solicitor General, in behalf of the
Republic of the Philippines, filed before CFI of
Manila an action against the defendant Araneta, as
principals, and Manila Surety, as surety, to recover
the internal revenue taxes including surcharges,
the payment of which was guaranteed by a bond
executed when the first extrajudicial demand for
payment was made. The appellant-taxpayers
contend that the appellee's cause of action has
prescribed, because the action for recovery of
internal revenue taxes and surcharge due brought
on 22 February 1957, was not commenced within
the period of five years after the assessment dated
15 May 1948 had been made, as provided for in
Section 331 of the Tax Code.
ISSUE: Has the action to recover the taxes due
from the taxpayer and the surety already
prescribed?
HELD: No. The appellant-taxpayers cannot invoke
prescription under the provisions of Section 331 of
the NIRC because the government is suing on the
bond executed and filed by them to guarantee
payment in 6 monthly installments of the tax
liability due from 1946 to 1948, which is a separate
and distinct obligation of the parties thereto. The
action to enforce the obligation on the bond
executed on March 18, 1949, having been filed in
court on February 22, 1957, was within the 10-year
prescriptive period to enforce a written contractual
obligation, as set by the Civil Code.
MARCOS II vs. CA
273 SCRA 47
GR No. 120880, June 5, 1997
"The approval of the court sitting in probate is not a
mandatory requirement in the collection of estate
taxes."

"In case of failure to file a return, the tax may be

assessed at anytime within 10 years after the
omission."
FACTS: Bongbong Marcos sought for the reversal
of the ruling of the Court of Appeals to grant CIR's
petition to levy the properties of the late Pres.
Marcos to cover the payment of his tax
delinquencies during the period of his exile in the
US. The Marcos family was assessed by the BIR
after it failed to file estate tax returns. However the
assessment were not protested administratively by
Mrs. Marcos and the heirs of the late president so
that they became final and unappealable after the
period for filing of opposition has prescribed.
Marcos contends that the properties could not be
levied to cover the tax dues because they are still
pending probate with the court, and settlement of
tax deficiencies could not be had, unless there is an
order by the probate court or until the probate
proceedings are terminated.
Petitioner also pointed out that applying
Memorandum Circular No. 38-68, the BIR's Notices
of Levy on the Marcos properties were issued
beyond the allowed period, and are therefore null
and void.
ISSUE: Are the contentions of Bongbong Marcos
correct?
HELD: No. The deficiency income tax assessments
and estate tax assessment are already final and
unappealable -and-the subsequent levy of real
properties is a tax remedy resorted to by the
government, sanctioned by Section 213 and 218 of
the National Internal Revenue Code. This summary
tax remedy is distinct and separate from the other
tax remedies (such as Judicial Civil actions and
Criminal actions), and is not affected or precluded
by the pendency of any other tax remedies
instituted by the government.
The approval of the court, sitting in probate, or as
a settlement tribunal over the deceased's estate is
not a mandatory requirement in the collection of
estate taxes. On the contrary, under Section 87 of
the NIRC, it is the probate or settlement court
which is bidden not to authorize the executor or
judicial administrator of the decedent's estate to
deliver any distributive share to any party
interested in the estate, unless it is shown a
Certification by the Commissioner of Internal
Revenue that the estate taxes have been paid. This
provision disproves the petitioner's contention that
it is the probate court which approves the
assessment and collection of the estate tax.
On the issue of prescription, the omission to file
an estate tax return, and the subsequent failure to
contest or appeal the assessment made by the BIR
is fatal to the petitioner's cause, as under Sec.223
of the NIRC, in case of failure to file a return, the
tax may be assessed at anytime within 10 years
after the omission, and any tax so assessed may be
collected by levy upon real property within 3 years
(now 5 years) following the assessment of the tax.
Since the estate tax assessment had become final
and unappealable by the petitioner's default as
regards protesting the validity of the said
assessment, there is no reason why the BIR cannot
continue with the collection of the said tax.
REPUBLIC vs. HIZON
320 SCRA 574
GR No. 130430, December 13, 1999

"A request for reconsideration of the

assessment does not effectively suspend
running of the precriptive period if the same is
after the assessment had become final
unappealable."

tax
the
filed
and

FACTS: On July 18, 1986, the BIR issued to

respondent Salud V. Hizon a deficiency income tax
assessment covering the fiscal year 1981-1982.
Respondent not having contested the assessment,
petitioner BIR, on January 12, 1989, served
warrants of distraint and levy to collect the tax
deficiency. However, for reasons not known, it did
not proceed to dispose of the attached properties.
More than three years later, the respondent
wrote the BIR requesting a reconsideration of her
tax deficiency assessment. The BIR, in a letter
dated August 11, 1994, denied the request. On
January 1, 1997, it filed a case with the RTC to
collect the tax deficiency. Hizon moved to dismiss
the case on two grounds: (1) that the complaint
was not filed upon authority of the BIR
Commissioner as required by Sec. 221 of the NIRC,
and (2) that the action had already prescribed.
Over petitioner's objection, the trial court granted
the motion and dismissed the complaint.
BIR on the other hand contends that
respondent's request for reinvestigation of her tax
deficiency
assessment
on
November
1992
effectively suspended the running of the period of
prescription.
ISSUE: Has the action for collection of the tax
prescribed?
HELD: Yes. Sec. 229 of the NIRC mandates that a
request for reconsideration must be made within 30
days from the taxpayer's receipt of the tax
deficiency assessment, otherwise the assessment
becomes final, unappealable and, therefore,
demandable. The notice of assessment for
respondent's tax deficiency was issued by
petitioner on July 18, 1986. On the other hand,
respondent made her request for reconsideration
thereof only on November 3, 1992, without stating
when she received the notice of tax assessment.
Hence, her request for reconsideration did not
suspend the running of the prescriptive period
provided under Sec. 223(c). Although the
Commissioner acted on her request by eventually
denying it on August 11, 1994, this is of no moment
and does not detract from the fact that the
assessment had long become demandable.
CIR vs. VILLA
22 SCRA 3
GR No. L-23988, January 2, 1968
"What may be the subject of a judicial review is the
decision of the Commissioner on the protest
against assessment, not the assessment itself."
FACTS: The spouses Villa filed joint income tax
returns for the years 1951 to 1956. The BIR issued
assessments for deficiency of income tax for the
said
years.
Without
contesting
the
said
assessments with the CIR, they filed a petition for
review with the CTA. The CTA took cognizance of
the of the appeal and rendered favorable judgment
to the spouses. The CIR appealed to the SC
questioning the jurisdiction of the CTA.
ISSUE: Is an appeal to the CTA proper in this case?
Is the CTA vested with jurisdiction?

HELD: No. The rule is that where a taxpayer

questions an assessment and asks the Collector to
reconsider or cancel the same because he (the
taxpayer) believes he is not liable therefor, the
assessment becomes a "disputed assessment" that
the Collector must decide, and the taxpayer can
appeal to the Court of Tax Appeals only upon
receipt of the decision of the Collector on the
disputed assessment. Since in the instant case the
taxpayer appealed the assessment of the
Commissioner
of
Internal
Revenue
without
previously contesting the same, the appeal was
premature and the Court of Tax Appeals had no
jurisdiction to entertain said appeal. For, as stated,
the jurisdiction of the Tax Court is to review by
appeal decisions of Internal Revenue on disputed
assessments. The Tax Court is a court of special
jurisdiction. As such, it can take cognizance only of
such matters as are clearly within its jurisdiction.
UNGAB vs. CUSI
97 SCRA 877
GR No. L-41919-24 May 30, 1980
An assessment of a deficiency is not necessary to
a criminal prosecution for wilful attempt to defeat
and evade the income tax."
FACTS: The BIR filed six criminal charges against
Quirico Ungab, a banana saplings producer, for
allegedly evading payment of taxes and other
violations of the NIRC. Ungab, subsequently filed a
motion to quash on the ground that (1) the
information are null and void for want of authority
on the part of the State Prosecutor to initiate and
prosecute the said cases; and (2)that the trial court
has no jurisdiction to take cognizance of the case in
view of his pending protest against the assessment
made by the BIR examiner. The trial court denied
the motion prompting the petitioner to file a
petition for certiorari and prohibition with
preliminary injunction and restraining order to
annul and set aside the information filed.
ISSUE: Is the contention that the criminal
prosecution is premature since the CIR has not yet
resolved the protest against the tax assessment
tenable?
HELD: No. The contention is without merit. 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 cognizance 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 wilful attempt to defeat
and evade the income tax. A crime is complete
when the violator has knowingly and wilfully 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.

CIR vs. PASCOR

309 SCRA 402
GR No. 128315 June 29, 1999
"An assessment is not necessary before a criminal
charge can be filed."
FACTS: The BIR examined the books of account of
Pascor Realty and Devt Corp for years 1986, 1987
and 1988, from which a tax liability of 10.5 Million
Pesos was found. Based on the recommendations
of the examiners, the CIR filed an information with
the DOJ for tax evasion against the officers of
Pascor. Upon receipt of the subpoena, the latter
filed
an
urgent
request
for
reconsideration/reinvestigation with the CIR, which
was immediately denied upon the ground that no
formal assessment has yet been issued by the
Commisioner. Pascor elevated the CIR's decision to
the CTA on a petition for review. The CIR filed a
Motion to Dismiss on the ground of lack of
jurisdiction of CTA as there was no formal
assessment made against the respondents. The
CTA dismissed the motion, hence this petition.
ISSUE: Is a formal assessment necessary in the
filing of a criminal complaint?
HELD: No. Section 222 of the NIRC states that an
assessment is not necessary before a criminal
charge can be filed. This is the general rule. Private
respondents failed to show that they are entitled to
an exception. Moreover, the criminal charge need
only be supported by a prima facie showing of
failure to file a required return. This fact need not
be proven by an assessment.
The issuance of an assessment must be
distinguished from the filing of a complaint. Before
an assessment is issued, there is, by practice, a
pre-assessment notice sent to the taxpayer. The
taxpayer is then given a chance to submit position
papers and documents to prove that the
assessment is unwarranted. If the commissioner is
unsatisfied, an assessment signed by him or her is
then sent to the taxpayer informing the latter
specifically and clearly that an assessment has
been made against him or her. In contrast, the
criminal charge need not go through all these. The
criminal charge is filed directly with the DOJ.
Thereafter, the taxpayer is notified that a criminal
case had been filed against him, not that the
commissioner has issued an assessment. It must
be stressed that a criminal complaint is instituted
not to demand payment, but to penalize the
taxpayer for violation of the Tax Code.
CIR V NLRC
GR No. 74965, November 3, 1994
Facts: On January 12, 1984, the CIR demanded
payment from private respondent Maritime
Company of the Philippines of deficiency common
carriers tax, fixed tax, 6% commercial brokers tax,
documentary stamp tax, income tax and
withholding tax totaling P17,284,882.45. The
assessment became final and executory, and with
private respondents failure to pay the tax
liabilities, the CIR issued warrants of distraint of
personal property and levy of real property which
were duly served on January 23, 1985. On April 16,
1985, a receipt of goods, articles and things was
executed covering, among others, 6 barges as
proof of constructive distraint of property but the
same was not signed by any representative of

private respondent because of the refusal of the

persons actually in possession of the barges.
It appeared that 4 of the barges constructively
distrained were also levied upon by a deputy sheriff
of Manila on July 20, 1985 and sold at public
auction to satisfy a judgment for unpaid wages and
other benefits of employees of private respondent.
Issue: Who has a preferential lien over the barges,
the Government or the companys employees?
Held: The court held that it is the government
which has preferential lien over the barges under
Articles 2241 and 2247 of the Civil Code.
Accordingly, the preferential lien of employees for
unpaid wages under Article 110 of the Labor Code
applies only to bankruptcy cases where the
employer is under liquidation due to bankruptcy.
The NIRC provides for the collection of delinquent
taxes by any of the following remedies: a) distraint
of personal property or levy of real property of the
delinquent taxpayer; b) civil or criminal action.
The court upheld the validity of distraint of the
barges against the levy on execution and the claim
of the Government predicated on a tax lien is
superior to the claim of a private litigant predicated
on a judgment. The tax lien attaches not only from
the service of the warrant of distraint of personal
property but from the time the tax became due and
payable. Besides, the distraint on the subject
properties of Maritime Company of the Philippines
as well as the notice of their seizure were made by
petitioner, through the CIR, a long before the writ
of execution was issued by RTC-Manila, Branch 31.
There is no question then that at the time the writ
of execution was issued, the two (2) barges, MCP-1
and MCP-4, were no longer properties of the
Maritime Company of the Philippines. The power of
the court in execution of judgment extends only to
properties unquestionably belonging to the
judgment debtor. Execution sales affect the rights
of the judgment debtor only, and the purchaser in
auction sale requires only such rights as the
judgment debtor had tat the time of the sale. It is
also well settled that the sheriff is not authorized to
attach or levy on property not belonging to the
judgment debtor.
UNGAB vs. CUSI
97 SCRA 877
GR No. L-41919-24 May 30, 1980
An assessment of a deficiency is not necessary to
a criminal prosecution for wilful attempt to defeat
and evade the income tax."
FACTS: The BIR filed six criminal charges against
Quirico Ungab, a banana saplings producer, for
allegedly evading payment of taxes and other
violations of the NIRC. Ungab, subsequently filed a
motion to quash on the ground that (1) the
information are null and void for want of authority
on the part of the State Prosecutor to initiate and
prosecute the said cases; and (2)that the trial court
has no jurisdiction to take cognizance of the case in
view of his pending protest against the assessment
made by the BIR examiner. The trial court denied
the motion prompting the petitioner to file a
petition for certiorari and prohibition with
preliminary injunction and restraining order to
annul and set aside the information filed.

ISSUE: Is the contention that the criminal

prosecution is premature since the CIR has not yet
resolved the protest against the tax assessment
tenable?
HELD: No. The contention is without merit. 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 cognizance 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 wilful attempt to defeat
and evade the income tax. A crime is complete
when the violator has knowingly and wilfully 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.
CIR vs. PASCOR
309 SCRA 402
GR No. 128315 June 29, 1999
"An assessment is not necessary before a criminal
charge can be filed."
FACTS: The BIR examined the books of account of
Pascor Realty and Devt Corp for years 1986, 1987
and 1988, from which a tax liability of 10.5 Million
Pesos was found. Based on the recommendations
of the examiners, the CIR filed an information with
the DOJ for tax evasion against the officers of
Pascor. Upon receipt of the subpoena, the latter
filed
an
urgent
request
for
reconsideration/reinvestigation with the CIR, which
was immediately denied upon the ground that no
formal assessment has yet been issued by the
Commisioner. Pascor elevated the CIR's decision to
the CTA on a petition for review. The CIR filed a
Motion to Dismiss on the ground of lack of
jurisdiction of CTA as there was no formal
assessment made against the respondents. The
CTA dismissed the motion, hence this petition.
ISSUE: Is a formal assessment necessary in the
filing of a criminal complaint?
HELD: No. Section 222 of the NIRC states that an
assessment is not necessary before a criminal
charge can be filed. This is the general rule. Private
respondents failed to show that they are entitled to
an exception. Moreover, the criminal charge need
only be supported by a prima facie showing of
failure to file a required return. This fact need not
be proven by an assessment.
The issuance of an assessment must be
distinguished from the filing of a complaint. Before
an assessment is issued, there is, by practice, a
pre-assessment notice sent to the taxpayer. The
taxpayer is then given a chance to submit position
papers and documents to prove that the
assessment is unwarranted. If the commissioner is
unsatisfied, an assessment signed by him or her is
then sent to the taxpayer informing the latter

specifically and clearly that an assessment has

been made against him or her. In contrast, the
criminal charge need not go through all these. The
criminal charge is filed directly with the DOJ.
Thereafter, the taxpayer is notified that a criminal
case had been filed against him, not that the
commissioner has issued an assessment. It must
be stressed that a criminal complaint is instituted
not to demand payment, but to penalize the
taxpayer for violation of the Tax Code.
CIR V NLRC GR No. 74965, November 3, 1994
Facts: On January 12, 1984, the CIR demanded
payment from private respondent Maritime
Company of the Philippines of deficiency common
carriers tax, fixed tax, 6% commercial brokers tax,
documentary stamp tax, income tax and
withholding tax totaling P17,284,882.45. The
assessment became final and executory, and with
private respondents failure to pay the tax
liabilities, the CIR issued warrants of distraint of
personal property and levy of real property which
were duly served on January 23, 1985. On April 16,
1985, a receipt of goods, articles and things was
executed covering, among others, 6 barges as
proof of constructive distraint of property but the
same was not signed by any representative of
private respondent because of the refusal of the
persons actually in possession of the barges.
It appeared that 4 of the barges constructively
distrained were also levied upon by a deputy sheriff
of Manila on July 20, 1985 and sold at public
auction to satisfy a judgment for unpaid wages and
other benefits of employees of private respondent.
Issue: Who has a preferential lien over the barges,
the Government or the companys employees?
Held: The court held that it is the government

which has preferential lien over the barges under

Articles 2241 and 2247 of the Civil Code.
Accordingly, the preferential lien of employees for
unpaid wages under Article 110 of the Labor Code
applies only to bankruptcy cases where the
employer is under liquidation due to bankruptcy.
The NIRC provides for the collection of delinquent
taxes by any of the following remedies: a) distraint
of personal property or levy of real property of the
delinquent taxpayer; b) civil or criminal action.
The court upheld the validity of distraint of the
barges against the levy on execution and the claim
of the Government predicated on a tax lien is
superior to the claim of a private litigant predicated
on a judgment. The tax lien attaches not only from
the service of the warrant of distraint of personal
property but from the time the tax became due and
payable. Besides, the distraint on the subject
properties of Maritime Company of the Philippines
as well as the notice of their seizure were made by
petitioner, through the CIR, a long before the writ
of execution was issued by RTC-Manila, Branch 31.
There is no question then that at the time the writ
of execution was issued, the two (2) barges, MCP-1
and MCP-4, were no longer properties of the
Maritime Company of the Philippines. The power of
the court in execution of judgment extends only to
properties unquestionably belonging to the
judgment debtor. Execution sales affect the rights
of the judgment debtor only, and the purchaser in
auction sale requires only such rights as the
judgment debtor had tat the time of the sale. It is
also well settled that the sheriff is not authorized to
attach or levy on property not belonging to the
judgment debtor.