People v. Mendez

Joel C. Mendez, a doctor, ran clinics under several trade names in Quezon City, Makati, Pampanga and Dagupan. Acting on a complaint, the BIR issued a Letter of Authority to examine his records. He ignored three notices to produce documents, so the BIR relied on third-party information and the best evidence obtainable. BIR records showed that he had filed no ITR for 2001 and 2002, and the net worth and expenditures methods showed unreported income. His 2003 ITR, filed in Calasiao, Pangasinan, left out income from his other branches and reported a net loss. Two Amended Informations charged him with violating Section 255, alleging damage to the government in the 'estimated amount' of P1,522,152.14 for 2002 and P2,107,023.65 for 2003, exclusive of penalties, surcharges and interest. The CTA Division convicted him on both counts. It imposed an indeterminate penalty of one to two years' imprisonment and a P10,000 fine for each offense. It refused to award deficiency taxes, however, because no final assessment had been issued. The CTA En Banc affirmed.

1. 1Whether the CTA had jurisdiction over the criminal cases although the Informations alleged only 'estimated' amounts.
2. 2Whether Mendez's guilt under Section 255 was proved beyond reasonable doubt.
3. 3Whether a final assessment is a prerequisite to holding Mendez civilly liable for deficiency income taxes in the criminal case.

Mendez's petition was denied, and the People's petition was partly granted. Mendez was not estopped from raising jurisdiction. The CTA had exclusive original jurisdiction under RA 9282, because the Informations alleged principal taxes of P1,000,000 or more. Calling the amounts 'estimated' did not matter: they rested on best evidence obtainable after Mendez failed to produce his records, and they informed him of the charges. A subpoena duces tecum is not required before the BIR resorts to best evidence under Section 6. The Court found all elements of Section 255 present, namely a duty to file or supply information, failure to do so, and willfulness. For 2002 his unexplained expenditures showed income, and he had to file a return regardless of how much he earned. His failure to verify his 2003 return was willful blindness. On civil liability, Section 7(b)(1) of RA 9282 deems the civil action for taxes instituted with the criminal action. This impliedly repealed Section 205's requirement of a final CIR decision, so 'a formal assessment is no longer a condition precedent' to civil liability. The government must prove the tax liability by competent evidence other than an assessment, and it may still issue an assessment while the case is pending. Under the Court's guidelines, no prior assessment is needed to prosecute or to collect the tax in the criminal case, and an earlier civil collection suit or taxpayer's CTA petition is suspended and may be consolidated with the criminal action. The Court also reconciled CTA and regular-court jurisdiction under RA 11576 for cases filed from August 21, 2021. It affirmed the conviction and penalties and remanded the cases to the CTA Division to determine the civil liability.