fitness vs cir- powers of the cir

8/12/2019 Fitness vs CIR- Powers of the CIR

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Applicable Doctrine: Powers of the Commissioner

G.R. No. 177982 October 17, 2008

FITNESS BY DESIGN, INC.,petitioner, vs. COMMISSIONER ON INTERNALREVENUE,respondent

Facts:On March 17, 2004 the Commissioner assessed Fitness by Design a

deficiency in income tax for 10,647,529.69 for 1995. On the other hand, petitionersaid that the assessment was beyond the prescriptive period of 3 years. Awarrant of distraint or levy was then issued and thus petitioner was forced to filea petition for review with motion to suspend collection. In his answer, the CIRalleged that the action has not prescribed because petitioners ITR for 1995,which was filed on April 11, 1996, was false and fraudulent for its deliberatefailure to declare its true sales. Hence, for failure to file a VAT return and for

filing a fraudulent income tax return for the year 1995, the correspondingtaxes may be assessed at any time within ten (10) years after the discoveryof such omission or fraud pursuant to Section 222(a) of the 1997 Tax Code.

And in fact the BIR also filed a criminal complaint for tax evasion against thepetitioner. The petitioner then requested for an issuance of subpoena ducestecum and submitted written interrogatories addressed to Revenue officers ofinvestigation division of the BIR in order to establish that its accounting recordsand related documents, invoices, and receipts which were the bases of theassessment against it were illegally obtained and was given to BIR without itsconsent. Both were denied by the CTA.

Issue:1. WON the CTAs quashal of the subpoena is proper.

Discussion:Yes.

In requesting the issuance of the subpoenas and the submission of writteninterrogatories, petitioner sought to establish that its accounting records andrelated documents, invoices, and receipts which were the bases of theassessment against it were illegally obtained. The only issues, however, whichsurfaced during the preliminary hearing before the CTA, were whetherrespondents issuance of assessment against petitioner had prescribed andwhether petitioners tax return was false or fraudulent.The CTA also held that theissuance of subpoena against the revenue officers would be violate RA 2338which prohibits the BIR to reveal the identity of the informer.

Furthermore, the lack of consent on delivering the documents to the BIRby the revenue officers does not imply that the BIR obtained them illegally or thatthe information received is false or malicious.

Section 5 of the Tax Code provides:


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In ascertaining the correctness of any return, or in making a return when nonehas been made, or in determining the liability of any person for any internalrevenue tax, or in collecting any such liability, or in evaluating tax compliance, theCommissioner is authorized:

(A) To examine any book, paper, record or other data which may be relevant ormaterial to such query;

(B) To obtain on a regular basis from any person oth er than the personwhose internal revenue tax liability is subject to audit or investigation,orfrom any office or officer of the national and local governments, governmentagencies and instrumentalities, including the Bangko Sentral ng Pilipinas andgovernment-owned and controlled corporations, any information such as, butnot limited to, costs and volume of production, receipts or sales and grossincomes of taxpayers, and the names, addresses, and financial statements ofcorporations, mutual fund companies, insurance companies, regional operating

headquarters of multinational companies, joint accounts, associations, jointventures or consortia and registered partnerships and their members;

(C) To summon the person liable for tax or required to file a return, or any officeror employee of such person, or any person having possession, custody, orcare of the books of accounts and other accounting records containingentries relating to the business of the person liable for tax, or any otherperson, to appear before the Commissioner or his duly authorizedrepresentatives at a time and place specified in the summons and to producesuch books, papers, records, or other data, and to give testimony;

(D) To take such testimony of the person concerned, under oath, as may berelevant or material to such inquiry; and

(E) To cause revenue officers and employees to make a canvass from time totime of any revenue district or region and inquire after and concerning all personstherein who may be liable to pay any internal revenue tax, and all personsowning or having the care, management or possession of any object with respectto which a tax is imposed.

The law thus allows the BIR access to all relevant or material records and data inthe person of the taxpayer,and the BIR can accept documents which cannot be

admitted in a judicial proceeding where the Rules of Court are strictly observed.To require the consent of the taxpayer would defeat the intent of the law to helpthe BIR assess and collect the correct amount of taxes. Lastly, the subpoenarequested

Held:Petition dismissed.


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fitness vs cir- powers of the cir

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