Revenue v. Ariete

CARPIO, J.:

The Case The Commissioner of Internal Revenue (petitioner) filed this Petition for Review1 to reverse the Court of Appeals' (CA) Decision2 dated 14 June 2004 in CA-G.R. SP No. 70693. In the assailed decision, the CA affirmed the Court of Tax Appeals' (CTA) Decision3 and Resolution dated 15 January 2002 and 3 May 2002, respectively. The CTA cancelled the assessments issued against Julieta Ariete (respondent) for deficiency income taxes of ₱191,463.04 for the years 1993, 1994, 1995, and 1996.

The Facts On 21 May 1997, George P. Mercado filed an Affidavit with the Special Investigation Division, Revenue Region No. 19, Davao City. The affidavit attested that respondent earned substantial income in 1994, 1995, and 1996 without paying income tax.4 The Chief of the Special Investigation Division (SID Chief) issued Mission Order No. 118-97 dated 23 May 1997, directing a Revenue Officer to conduct preliminary verification of the denunciation made and submit a progress report. The SID Chief also sent a request to access the BIR records of Revenue District No. 112, Tagum, Davao del Norte (RDO), inquiring if the income tax returns of respondent for the years 1993 to 1996 are available for examination.

The RDO replied that respondent had no records of income tax returns for the years 1993 to 1996.5 On 15 October 1997, the Revenue Officer submitted a report stating that respondent admitted her non-filing of income tax returns.6lawph!l On 2 December 1997, respondent filed her income tax returns for the years 1993, 1994, 1995, and 1996 under Revenue Memorandum Order (RMO) No. 59-97 as amended by RMO No. 60-97 and RMO No. 63-97, otherwise known as the Voluntary Assessment Program (VAP).7 On 28 July 1998, the Regional Director issued a Letter of Authority to investigate respondent for tax purposes covering the years 1993 to 1996.1avvphi1 On 14 October 1998, the Revenue Officer submitted a Memorandum to the SID Chief recommending that respondent be assessed with deficiency income taxes for the years 1993 to 1996. On 22 January 1999, four assessment notices were issued against respondent. The total deficiency income taxes, inclusive of interests and surcharges amounted to ₱191,463.04: 1993 ₱ 6,462.188 1994 47,187.399 1995 24,729.6410 1996 113,083.8311