Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 197590               November 24, 2014
BUREAU OF INTERNAL REVENUE, as represented by the
COMMISSIONER OF INTERNAL REVENUE,Petitioner, 
vs.
COURT OF APPEALS, SPOUSES ANTONIO VILLAN MANLY,
and RUBY ONG MANLY, Respondents.
DECISION
DEL CASTILLO, J.:
There is grave abuse of discretion when the determination of
probable cause is exercised in an arbitrary or despotic manner, due
to passion or personal hostility, so patent and gross as to amount
to an evasion of a positive duty or a virtual refusal to perform a duty
enjoined by law.1 This Petition for Certiorari2 under Rule 65 of the
Rules of Court assails the Decision3 dated October 28, 2010 and
the Resolution4 dated May 10, 2011 of the Court of Appeals (CA) in
CA-G.R. SP No. 112479.
Factual Antecedents
Respondent Antonio Villan Manly (Antonio) is a stockholder and
the Executive Vice-President of Standard Realty Corporation, a
family-owned corporation.5 He is also engaged in rental
business.6 His spouse, respondent Ruby Ong Manly, is a
housewife.7
On April 27, 2005, petitioner Bureau of Internal Revenue (BIR)
issued Letter of Authority No. 2001 00012387 8authorizing its
revenue officers to investigate respondent spouses’ internal
revenue tax liabilities for taxable year 2003 and prior years.
1
On June 6, 2005, petitioner issued a letter9 to respondent spouses
requiring them to submit documentary evidence to substantiate the
source of their cash purchase of a 256-square meter log cabin in
Tagaytay City worth ₱17,511,010.00. Respondent spouses,
however, failedto comply with the letter.10
On June 23, 2005, the revenue officers executed a Joint
Affidavit11 alleging that respondent Antonio’s reported or declared
annual income for the taxable years 1998-2003 are as follows:

Net Profit
Rental
Business
Taxable
(1169-73 Total
Compen Tax
  G. sources CASH
sation Due/paid
Masangk of Funds
Income
ay St.,
Tondo,
Manila
199 [P]133,5 [P] [P] [P]55,83 [P]
8 32.36 191,915. 325,447. 4.00< 269,613.4
10 46 6
199 142,550. 260,961. 403,512. 79,254.0 324,258.2
9 50 78 28 0 8
200 141,450. 213,740. 355,190. 64,757.2 290,433.4
0 00 67 67 1 6
200 151,500. 233,396. 384,896. 73,669.0 311,227.6
1 00 62 62 0 2
200 148,500. 186,106. 334,606. 58,581.0 276,025.6
2 00 62 62 0 2
200 148,100. 152,817. 300.917. 48,729.0 252,188.9
3 00 53 93 0 3
[Tot
al] ₱865,63 ₱1,238,9 ₱2,104,5 ₱380,82 ₱1,723,7

2
 3.26 38.32 71.58 4.21 47.3712

and that despite his modestincome for the said years, respondent
spouses were able to purchase in cash the following properties:
1) a luxurious vacation house in Tagaytay City valuedat
₱17,511,010.0013 in the year 2000, evidenced by a Deed of
Absolute Sale14 dated October 24, 2000;
2) a Toyota RAV4 for ₱1,350,000.00 in the year 2001,
evidenced by a Sales Invoice15 dated June 28, 2001; and
3) a Toyota Prado for ₱2,000,000.00 in 2003, evidenced by a
Deed of Sale16 dated July 9, 2003.17
Since respondent spouses failed to showthe source of their cash
purchases, the revenue officers concluded that respondent
Antonio’s Income Tax Returns (ITRs) for taxable years 2000,
2001,and 2003 were underdeclared.18 And since the under
declaration exceeded 30% of the reported or declared income, it
was considered a prima facie evidence of fraud with intent to evade
the payment of proper taxes due to the government. 19 The revenue
officers, thus, recommended the filing of criminal cases against
respondent spouses for failing to supply correct and accurate
information intheir ITRs for the years 2000, 2001, and 2003,
punishable under Sections 25420 and 25521 in relation to Section
248(B)22 of Republic Act No. 8424 or the "Tax Reform Act of 1997,"
hereinafter referred to as the National Internal Revenue Code
(NIRC).23
Respondent spouses, in their Joint Counter-Affidavit, 24 denied the
accusations hurled against them and alleged that they used their
accumulated savings from their earnings for the past24 years in
purchasing the properties.25 They also contended that the criminal
complaint should be dismissed because petitioner failed to issue a
deficiency assessment against them.26

3
In response, the revenue officers executed a Joint Reply-
Affidavit.27 Respondent spouses, in turn, executed a Joint
Rejoinder-Affidavit.28
Ruling of the State Prosecutor
On August 31, 2006, State ProsecutorMa. Cristina A. Montera-
Barot issued a Resolution29 in I.S. No. 2005-573 recommending the
filing of criminal charges30 against respondent spouses, to wit:
WHEREFORE, premises considered, it is respectfully
recommended that [respondent] spouses ANTONIO VILLAN
MANLY and RUBY ONG MANLY be charged [with] the following:
(1) Three (3) counts of Violation of Section 254 – Attempt to
Evade or Defeat Tax of the NIRC for taxable years 2000,
2001, and 2003;
(2) Three (3) counts for Violation of Section 255 of the NIRC –
Failure to Supply Correct and Accurate Information for taxable
years 2000, 2001 and 2003;
(3) Three counts of Violation ofSection 255 of the NIRC –
Failure to Pay, as a consequence of [respondent spouses’]
failure to supply correct and accurate information on their tax
returns for taxable years 2000, 2001, and 2003. 31
Respondent spouses moved for reconsideration32 but the State
Prosecutor denied the same in a Resolution33 dated November 29,
2007.
Ruling of the Secretary of Justice
On appeal to the Secretary of Justice via a Petition for
Review,34 Acting Justice Secretary Agnes VST Devanadera
(Devanadera) reversed the Resolution of the State Prosecutor. She
found no willfulfailure to pay or attempt to evade or defeat the tax
on the part of respondent spouses as petitioner allegedly failed to
specify the amount of tax due and the likely source of income from
4
which the same was based.35 She also pointed out petitioner’s
failure to issue a deficiency tax assessment against
respondentspouses which is a prerequisite to the filing of a criminal
case for tax evasion.36 The dispositive portion of the
Resolution37 dated July 27, 2009 reads:
WHEREFORE, the assailed Resolution is hereby REVERSED and
SET ASIDE. The Chief State Prosecutor ishereby directed to
withdraw the Information filed against [respondent spouses]
Antonio Villan Manly and Ruby Ong Manly, if one has been filed,
and report the action taken thereon within ten (10) days from
receipt hereto.
SO ORDERED.38
Petitioner sought reconsideration39 but Acting Justice Secretary
Devanadera denied the same in a Resolution40dated November 5,
2009.
Ruling of the Court of Appeals
Unfazed, petitioner filed a Petition for Certiorari 41 with the CA
imputing grave abuse of discretion on the part of Acting Justice
Secretary Devanadera in finding no probable cause to indict
respondent spouses for willfulattempt to evade or defeat tax and
willful failure to supply correct and accurate information for taxable
years 2000, 2001 and 2003.
On October 28, 2010, the CA rendered the assailed
Decision42 dismissing the Petition for Certiorari. Although it
disagreed that anassessment is a condition sine qua nonin filing a
criminal case for tax evasion, the CA, nevertheless, ruled that there
was no probable cause to charge respondent spouses as petitioner
allegedly failed to state their exact tax liability and to show sufficient
proof of their likely source of income.43 The CA further said that
before one could be prosecuted for tax evasion,the fact that a tax is
due must first be proved.44 Thus:

5
IN LIGHT OF ALL THE FOREGOING, the instant petition is hereby
DENIED, and the assailed Resolution of the Secretary of Justice
dated July 27, 2009 dismissing I.S. No. 2005-573 against private
respondents, AFFIRMED. However, the dismissal of the instant
case is without prejudice to the refiling by the BIR of a complaint
sufficient in form and substance before the appropriate tribunal.
SO ORDERED.45
The CA likewise denied petitioner’s Motion for Reconsideration 46 in
its Resolution47 dated May 10, 2011.
Issues
Hence, petitioner filed the instant Petition contending that the CA
committed grave abuse of discretion amounting to lackor excess of
jurisdiction in holding that:
I. A CATEGORICAL FINDING OF THE EXACT AMOUNT OF
TAX DUE FROM THE PRIVATE RESPONDENT SHOULD BE
SPECIFICALLY ALLEGED [AND THAT] SINCE THE BIR
FAILED TO MAKE SUCH FINDINGS
THEYCONSEQUENTLYFAILED TO BUILD A CASE FOR
TAX EVASION AGAINST [RESPONDENT SPOUSES]
DESPITE THE WELL ESTABLISHED DOCTRINE THAT IN
TAX EVASION CASES, A PRECISE COMPUTATION OF THE
[TAX] DUE IS NOT NECESSARY.
II. THE BIR FAILED TO SHOW SUFFICIENT PROOF OF A
LIKELY SOURCE OF [RESPONDENT SPOUSES’] INCOME
DESPITE THE FACT THAT THE BIR WAS SUFFICIENTLY
ABLE TO SHOW PROOF OF SUCH INCOME.48
Petitioner’s Arguments
Petitioner imputes grave abuse of discretion on the part of the CA
in affirming the dismissal of the criminal cases against respondent
spouses. Petitioner contends that in filing a criminal case for tax
evasion, a prior computation or assessment of tax is not required
6
because the crime is complete when the violator knowingly and
willfully filed a fraudulent return with intentto evade a part or all of
the tax.49 In this case, an analysis of respondent spouses’ income
and expenditure shows that their cash expenditure is grossly
disproportionate to their reported or declared income, leading
petitioner to believe that they under declared their income. 50 In
computing the unreported or undeclared income, which was likely
sourced from respondent Antonio’s rental business,51 petitioner
used the expenditure method of reconstructing income, a method
used to determine a taxpayer’s income tax liability when his records
are inadequate or inaccurate.52 And since respondent spouses
failed to explain the alleged unreported or undeclared income,
petitioner asserts that criminal charges for tax evasion should be
filed against them.
Respondent spouses’ Arguments
Respondent spouses, on the other hand, argue that the instant
Petition should be dismissed as petitioner availed of the wrong
remedy in filing a Petition for Certiorari under Rule 65 of the Rules
of Court.53 And even if the Petition is given due course, the same
should still be dismissed because no grave abuse of discretion can
be attributed to the CA.54 They maintain that petitioner miserably
failed to prove that a tax is actually due. 55 Neither was it able to
show the source of the alleged unreported or undeclared income
as required by Revenue Memorandum Order No. 15-95, Guidelines
and Investigative Procedures in the Development of Tax Fraud
Cases for Internal Revenue Officers.56 As to the method used by
petitioner, they claim that it completely ignored their lifetime savings
because it was limited to the years 1998-2003. 57
Our Ruling
The Petition is meritorious.
Before discussing the merits of thiscase, we shall first discuss the
procedural matter raised by respondent spouses that petitioner
availed of the wrong remedy in filing a Petition for Certiorari under
7
Rule 65 of the Rules of Court, instead of a Petition for Review on
Certiorari under Rule 45.
Indeed, the remedy of a party aggrieved by a decision, final order,
or resolution of the CA is to file a Petition for Review on Certiorari
under Rule 45 of the Rules of Court, which is a continuation of the
appellate process over the original case.58 And as a rule, if the
remedy of an appeal is available, an action for certiorari under Rule
65 of the Rules of Court, which is anoriginal or independent action
based on grave abuse of discretion amounting to lack or excess of
jurisdiction, will not prosper59 because it is not a substitute for a lost
appeal.60
There are, however, exceptions to this rule, to wit: 1) when public
welfare and the advancement of public policy dictate; 2) when the
broader interest of justice so requires; 3) when the writs issued are
null and void; 4) when the questioned order amounts to an
oppressive exercise of judicial authority; 5) when, for persuasive
reasons, the rules may be relaxed to relieve a litigant of an injustice
not commensurate with his failure to comply with the prescribed
procedure; 6) when the judgment or order is attended by grave
abuse of discretion; or 7) in other meritorious cases. 61
In this case, after considering the arguments raised by the parties,
we find that there is reason to give due course to the instant
Petition for Certiorari as petitioner was able to convincingly show
that the CA committed grave abuse of discretion when it affirmed
the dismissal of the criminal charges against respondent spouses
despite the fact that there isprobable cause toindict them.
Although the Court has consistently adopted the policy of non-
interference in the conduct and determination of probable
cause,62 which is exclusively within the competence of the
Executive Department, through the Secretary of Justice, 63 judicial
intrusion, in the form of judicial review, is allowed when there is
proof that the Executive Department gravely abused its discretion
in making its determination and in arriving atthe conclusion it
reached.64
8
Grave abuse of discretion is defined as a capricious and whimsical
exercise of judgment tantamount to lack or excess of jurisdiction, a
blatant abuse of authority so grave and so severe as to deprive the
court of its very power to dispense justice, or an exercise of
powerin an arbitrary and despotic manner, due to passion,
prejudice or personal hostility, sopatent and gross as to amount to
an evasion or to a unilateral refusal to perform the duty enjoined or
to act in contemplation of the law.65 Such is the situation in this
case.
Having resolved the foregoing procedural matter, we shall now
proceed to determine the main issue in this case.
Sections 254 and 255 of the NIRC pertinently provide:
SEC. 254. Attempt to Evade or Defeat Tax. – Any person who
willfully attempts in any manner to evade or defeat any tax imposed
under this Code or the payment thereof shall, in addition to other
penalties provided by law, upon conviction thereof, be punished by
a fine of not less than Thirty thousand pesos (₱30,000.00) but not
more than One hundred thousand pesos (₱100,000.00) and suffer
imprisonment of not less than two (2) years but not more than four
(4) years: Provided, That the conviction or acquittal obtained under
this Section shall not be a bar to the filing of a civil suit for the
collection of taxes.
SEC. 255. Failure to File Return, Supply Correct and Accurate
Information, Pay Tax, Withhold and Remit Tax and Refund Excess
Taxes Withheld on Compensation. – Any person required under
this Code or by rules and regulations promulgated thereunder to
pay any tax, make a return, keep any record, or supply correct and
accurate information, who willfully fails to pay such tax, make such
return, keep such record, or supply such correct and accurate
information, or withhold or remit taxes withheld, or refund excess
taxes withheld on compensation at the time or times required by
law or rules and regulations shall, in addition to other penalties
provided by law, upon conviction thereof, be punished by a fine of
not less than Ten thousand pesos (₱10,000.00) and suffer
9
imprisonment of not less than one (1) year but not more than ten
(10) years.
In Ungab v. Judge Cusi, Jr.,66 we ruled that tax evasion is deemed
complete when the violator has knowingly and willfully filed a
fraudulent return with intent to evade and defeat a part or all of the
tax.67 Corollarily, an assessment of the tax deficiency is notrequired
in a criminal prosecution for tax evasion.68 However, in
Commissioner of Internal Revenue v. Court of Appeals, 69 we
clarified that although a deficiency assessment is not necessary,
the fact that a tax is due must first be proved before one can be
prosecuted for tax evasion.70
In the case of income, for it to be taxable, there must be a gain
realized or received by the taxpayer, which is not excluded by law
or treaty from taxation.71 The government is allowed to resort to all
evidence or resources available to determine a taxpayer’s income
and to use methods to reconstruct his income. 72 A method
commonly used by the government isthe expenditure method,
which is a method of reconstructing a taxpayer’s income by
deducting the aggregate yearly expenditures from the declared
yearly income.73 The theory of this method is that when the amount
of the money that a taxpayer spends during a given year exceeds
his reported or declared income and the source of such money is
unexplained, it may be inferred that such expenditures represent
unreported or undeclared income.74
In the case at bar, petitioner used this method to determine
respondent spouses’ tax liability.  Petitioner deducted respondent
1âwphi1

spouses’ major cash acquisitions from their available funds. Thus:

Cash Loans Withdr Funds Major Unexplain

(busine awal available Acquisiti ed
ss) of ons Sources
Capital of Funds
199 P 900,000 130,63 1,300,252.
10
8 269,613. .00 8.98 44
46
199 324,258. (400,00 39,281 1,263,792.
9 28 0.00) .87 59
200 290,433. - 102,02 1,656,251. 17,511,0 (15,854,7
0 46 4.97 02 10.00 58.98)
200 311,227. - 406,30 717,537.3 1,350,00 (632,462.
1 62 9.70 2 0.00 68)
200 276,025. (100,00 184,09 360,117.6
2 62 0.00) 2.03 5
200 252,188. - 245,16 857,474.5 2,000,00 (1,142,52
3 93 7.97 5 0.00 5.45)
[Tot ₱1,723,7 20,861,0 (17,629,7
75

al:] 47.37 10.00 47.11)

2000 2001 2003
Unexplained funds – under [P]15,854, [P]632,4 [P]
declaration 758.98 62.68 1,142,525
.45
Taxable income [P]15,854, [P]632,4 [P]
758.98 62.68 1,142,525
.45
Income Tax due thereon:
First Php500,000.00 125,000.0 125,000. 125,000.0
0 00 0
In excess of Php500,000.00 4,913,522. 42,388.0 205,608.1
87 6 4
Total income tax due (net tax 4,973,765. 93,719.0 281,879.1
paid) 66 6 4
Add: 50% Surcharge 2,486,882. 46,859.5 165,304.0
83 3 7

11
20% Interest (up to 5/31/2005) - 4,104,376. 77,337.4 272,751.7
825 29 3 2

[P]
Total Tax Due inclusive of [P]11,565, [P]217,9
655,369.0 76

Increments 024.79 16.02

1

Particulars 2000 2001 2003

Unexplained [P]15,854,758 [P]632,462. [P]1,142,525
Funds .98 68 .45
[Underdeclarat
ion]
Sources of [P]1,656,251. [P]717,537. [P]817,474.5
Funds as per 02 32 5
Financial
Statements as
attached to the
Income Tax
Return
Percentage of 957.27% 88.14% 133.24%77
underdeclarati
on

And since the underdeclaration is more than 30%of respondent

spouses’ reported or declared income, which under Section 248(B)
of the NIRC constitutes as prima facie evidence of false or
fraudulent return, petitioner recommended the filing of criminal
cases against respondent spouses under Sections 254 and 255, in
relation to Section 248(B) of the NIRC.
The CA, however, found no probable cause to indict respondent
spouses for tax evasion. It agreed with Acting Justice Secretary
Devanadera that petitioner failed to make "a categorical finding of
the exact amount of tax due from [respondent spouses]" and "to
show sufficient proof of a likely source of [respondent spouses’]
12
income that enabled them to purchase the real and personal
properties adverted to x x x."78 We find otherwise.
The amount of tax due from respondent spouses was specifically
alleged in the Complaint-Affidavit.79 The computation, as wellas the
method used in determining the tax liability, was also clearly
explained. The revenue officers likewise showed that the under
declaration exceeded 30% of the reported or declared income.
The revenue officers alsoidentified the likely source of the
unreported or undeclared income intheir Reply-Affidavit. The
pertinent portion reads:
7. x x x x
[Respondent spouses] are into rental business and the net profit for
six (6) years before tax summed only to ₱1,238,938.32 (an average
of more or less Php200,000.00 annually). We asked respondent
[Antonio] if we can proceed to his rented property to [appraise] the
earning capacity of the building [for] lease/ rent, but he declined our
proposition. Due to such refusal made by the respondent,
[petitioner], thru its examiners,took pictures of the subject property
and came up with the findings that indeed the unexplained funds
sought to have been used in acquiring the valuable property in
Tagaytay x x x came from the underdeclaration of rental income. 80
Apparently, the revenue officers considered respondent Antonio’s
rental business to be the likely source of their unreported or
undeclared income due to his unjustified refusal to allow the
revenue officers to inspect the building.
Respondent spouses’ defense that they had sufficient savings to
purchase the properties remains self-serving at thispoint since they
have not yet presented any evidence to support this. And since
there is no evidence yet to suggest that the money they used to
buy the properties was from an existing fund, it is safe to assume
that that money is income or a flowof wealth other than a mere
return on capital. It is a basic concept in taxation that income
13
denotes a flow of wealth during a definite period of time, while
capital is a fund or property existing at one distinct point in time. 81
Moreover, by just looking at the tables presented by petitioner,
there is a manifest showing that respondent spouses had under
declared their income. The huge disparity between respondent
Antonio’s reported or declared annual income for the past several
years and respondent spouses’ cash acquisitions for the years
2000, 2001, and 2003 cannot be ignored. Infact, it makes
uswonder how they were able to purchase the properties in cash
given respondent Antonio’s meager income.
In view of the foregoing,we are convinced that there is probable
cause to indict respondent spouses for tax evasion aspetitioner
was able to show that a tax is due from them. Probable cause, for
purposes of filing a criminal information, is defined as such facts
that are sufficient to engender a well-founded belief that a crime
has been committed, that the accusedis probably guilty thereof,
and that he should be held for trial.82 It bears stressing that the
determination of probable cause does not require actual or
absolute certainty, nor clear and convincing evidence of guilt; it
only requires reasonable belief or probability that more likely than
not a crime has been committed by the accused.83
In completely disregarding the evidence presented and in affirming
the ruling of the Acting Justice Secretary Devanadera that no
probable cause exists, we find that the CA committed grave abuse
of discretion amounting to lack or excess of jurisdiction. As we have
said, ifthere is grave abuse of discretion, the court may step in and
proceed to make its own independent determination of probable
cause as judicial review is allowed to ensure that the Executive
Department acts within the permissible bounds of its authority or
does not gravely abuse the same.84
We must make it clear, however, that we are only here to
determine probable cause.  As to whether respondent spouses are
1âwphi1

guilty of tax evasion is an issue that must be resolved during the

14
trial of the criminal case, where the quantum of proof required is
proof beyond reasonable doubt.
Before we close, we must stress that our ruling in this case should
not be interpreted as an unbridled license for our tax officials to
engage in fishing expeditions and witch-hunting. They should not
abuse their investigative powers, instead they should exercise the
same within the bounds of the law. They must properly observe the
guidelines in making assessments and investigative procedures to
ensure that the constitutional rights of the taxpayers are well
protected as we cannot allow the floodgates to be opened for
frivolous and malicious tax suits.
WHEREFORE, the Petition is hereby GRANTED. The Decision
dated October 28, 2010 and the Resolution dated May 10, 2011 of
the Court of Appeals in CA-G.R. SP No. 112479 are hereby
REVERSED and SET ASIDE. The Resolutions dated August 31,
2006 and November 29, 2007 of State Prosecutor Ma. Cristina A.
Montera-Barot in LS. No. 2005-573 finding probable cause to indict
respondent spouses Antonio Villan Manly and Ruby Ong Manly for
Violation of Sections 254 and 255 of the National Internal Revenue
Code are hereby REINSTATED.
SO ORDERED.
MARIANO C. DEL CASTILLO
Associate Justice
WE CONCUR:
ANTONIO T. CARPIO
Associate Justice
Chairperson
ARTURO D. BRION JOSE CATRAL MENDOZA
Associate Justice Associate Justice
MARVIC M.V.F. LEONEN
Associate Justice
15
 ATTESTATION
I attest that the conclusions in the above Decision had been
reached in consultation before the case was assigned to the writer
of the opinion of the Court's Division.
ANTONIO T. CARPIO
Associate Justice
Chairperson
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution and the
Division Chairperson's Attestation, I certify that the conclusions in
the above Decision had been reached in consultation before the
case was assigned to the writer of the opinion of the Court's
Division.
MARIA LOURDES P.A. SERENO
Chief Justice

Footnotes
 Spouses Chua v. Hon. Ang, 614 Phil 416, 432 (2009); Callo-
1

Claridad v. Esteban, G.R. No. 191567, March 20, 2013, 694

SCRA 185, 200; and Alberto v. Court of Appeals, G.R. Nos.
182130 and 182132, June 19, 2013, 699 SCRA 104, 129.
2
 Rollo, pp. 2-28.
 CA rollo, pp. 614-629; penned by Associate Justice Franchito
3

N. Diamante and concurred in by Associate Justices Josefina

Guevara-Salonga and Maritlor P. Punzalan Castillo.
4
 Id. at 665-666.
5
 Rollo, pp. 374.
16
6
 Id.
7
 Id. at 375.
8
 Id. at 149.
9
 Id. at 152.
10
 Id. at 375.
11
 Id. at 47-52.
12
 Id. at 47-48.
13
 Total Acquisition Cost; id. at 49.
14
 Id. at 137-143.
15
 Id. at 146.
16
 Id. at 147.
17
 Id. at 48.
18
 Id. at 49.
19
 Id. at 50.
 SEC. 254. Attempt to Evade or Defeat Tax. – Any person
20

who willfully attempts in any manner to evade or defeat any

tax imposed under this Code or the payment thereof shall, in
addition to other penalties provided by law, upon conviction
thereof, be punished by a fine of not less than Thirty thousand
pesos (₱30,000.00) but not more than One hundred thousand
pesos (₱100,000.00) and suffer imprisonment of not less than
two (2) years but not more than four (4) years: Provided,That
the conviction or acquittal obtained under this Section shall not
be a bar to the filing of a civil suit for the collection of taxes.
 SEC. 255. Failure to File Return, Supply Correct and
21

Accurate Information, Pay Tax, Withhold and Remit Tax and

17
Refund Excess Taxes Withheld on Compensation. – Any
person required under this Code or by rules and regulations
promulgated thereunder to pay any tax, make a return, keep
any record, or supply correct and accurate information, who
willfully fails to pay such tax, make such return, keep such
record, or supply such correct and accurate information, or
withhold or remit taxes withheld, or refund excess taxes
withheld on compensation at the time or times required by law
or rules and regulations shall, in addition to other penalties
provided by law, upon conviction thereof, be punished by a
fine of not less than Ten thousand pesos (₱10,000.00) and
suffer imprisonment of not less than one (1) year but not more
than ten (10) years.
xxxx
 SEC. 248. Civil Penalties. –
22

xxxx
(B) In case of willful neglect to file the return within the
period prescribed by this Code or by rules and
regulations, or in case a false or fraudulent return is
wilfully made, the penalty to be imposed shall be fifty
percent (50%) of the tax or of the deficiency tax, in case
any payment has been made on the basis of such return
before the discovery of the falsity or fraud: Provided, That
a substantial under declaration of taxable sales, receipts
or income, or a substantial overstatement of deductions,
as determined by the Commissioner pursuant to the rules
and regulations to be promulgated by the Secretary of
Finance, shall constitute prima facie evidence of a false or
fraudulent return: Provided, further, That failure to report
sales, receipts or income in an amount exceeding thirty
percent (30%) of that declared per return, and a claim of
deductions in an amount exceeding (30%) of actual
deductions, shall render the taxpayer liable for substantial

18
 underdeclaration of sales, receipts or income or for
overstatement of deductions, as mentioned herein.
 Rollo, p. 51.
23

 Id. at 274-277.
24

 Id. at 276.
25

 Id. at 275.
26

 Id. at 278-282.
27

 Id. at 283-286.
28

 Id. at 290-303. The Resolution bears the recommending

29

approval of Assistant Chief State Prosecutor Miguel F. Gudio,

Jr. and the approval of Chief State Prosecutor Jovencito R.
Zuño.
 Id. at 463-481. Seven separate Informations were filed
30

against respondent spouses before the Court of Tax Appeals,

the Regional Trial Court, and the Metropolitan Trial Court,
which were subsequently dismissed without prejudice (See pp.
496-498,542-546, 556, 558-564, 565, and 730-731).
 Id. at 301-302.
31

 Id. at 304-310.
32

 Id. at 311-313.
33

 Id. at 317-326.
34

 Id. at 376-382.
35

 Id. at 381.
36

 Id. at 374-383; penned by Acting Justice Secretary Agnes

37

VST Devanadera.

19
  Id. at 382.
38

 Id. at 384-403.
39

 Id. at 404-405.
40

 CA rollo, pp. 1-31.

41

 Id. at 614-629.
42

 Id. at 623-628.
43

 Id. at 626-627.
44

 Id. at 628.
45

 Id. at 635-651.
46

 Id. at 665-666.
47

 Rollo, p. 13.
48

 Id. at 697-699.
49

 Id. at 704.
50

 Id. at 703-706.
51

 Id. at 700-703.
52

 Id. at 733-738.
53

 Id. at 738-744.
54

 Id. at 739.
55

 Id. at 741.
56

 Id.
57

 Chua v. Santos, 483 Phil. 392, 400-401 (2004).

58

20
  Beluso v. Commission on Elections, G.R. No. 180711, June
59

22, 2010, 621 SCRA 450, 456.

 Teh v. Tan, G.R. No. 181956, November 22, 2010, 635
60

SCRA 593, 604.

 Associated Anglo-American Tobacco Corporation v. Court of
61

Appeals, G.R. No. 167237, April 23, 2010, 619 SCRA 250,
257; Bausa v. Heirs of Juan Dino, 585 Phil. 526, 532 (2008);
Galzote v. Briones, G.R. No. 164682, September 14, 2011,
657 SCRA 535, 541; Santos v. Orda, Jr., G.R. No. 189402,
May 6, 2010, 620 SCRA 375, 384.
 Elma v. Jacobi, G.R. No. 155996, June 27, 2012, 675 SCRA
62

20, 56-57.
 Callo-Claridad v. Esteban, supra note 1 at 189.
63

 Elma v. Jacobi, supra note 62 at 57.

64

 People v. Lagos, G.R. No. 184658, March 6, 2013, 692

65

SCRA 602, 608-609.

 186 Phil. 604 (1980).
66

 Id. at 610-611.
67

 Id. at 610.
68

 327 Phil. 1 (1996).

69

 Id. at 35.
70

 Chamber of Real Estate and Builders’ Associations, Inc. v.

71

Romulo, G.R. No. 160756, March 9, 2010, 614 SCRA 605,

627.
 Li Yao v. Collector of Internal Revenue,119 Phil. 207, 222
72

(1963).

21
  Collector of Internal Revenue v. Jamir, 114 Phil. 650, 651-
73

652 (1962).
 See Annex "A" of Revenue Memorandum Order No. 15-95,
74

Guidelines and Investigative Procedures in the Development

of Tax Fraud Cases for Internal Revenue Officers.
 Rollo, p. 156.
75

 Id. at 50.
76

 Id.
77

 CA rollo, p. 627.

78

 Rollo, p. 50.
79

 Id. at 281.
80

 Chamber of Real Estate and Builders’ Associations, Inc. v.

81

Romulo, supra note 71.

 Advincula v. Court of Appeals, 397 Phil. 641, 650 (2000).
82

 Alberto v. Court of Appeals, supra note 1 at 130-131.

83

 Aguilar v. Department of Justice, G.R. No. 197522,

84

September 11, 2013, 705 SCRA 629, 639.

22