G.R. No. 247737, August 8, 2023
MCDONALD’S PHILIPPINES REALTY CORPORATION, PETITIONER, VS. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

FACTS

The case involves the applicability of the prescriptive period for tax assessment. Petitioner McDonald’s Philippines Realty Corporation (MPRC) filed its 2007 Quarterly Value-Added Tax (VAT) returns. The Commissioner of Internal Revenue (CIR) issued an assessment, which MPRC contested as barred by the ordinary three-year prescriptive period. The CIR and the Court of Tax Appeals En Banc (CTA EB) insisted that the extraordinary 10-year prescriptive period under Section 222(a) of the National Internal Revenue Code of 1997 (1997 NIRC) applied because MPRC filed a false return by not declaring substantial receipts from interest income. MPRC asserted the three-year period was applicable as it did not file a false return with intent to evade tax.

ISSUE

Whether the filing of a false return without intent to evade tax warrants the application of the 10-year prescriptive period for assessment under Section 222(a) of the 1997 NIRC.

RULING

No. The filing of a false return without intent to evade tax does not warrant the application of the 10-year prescriptive period. The concurring opinion abandons the ruling in Aznar v. Court of Tax Appeals, which applied the 10-year period to false returns in general. It holds that subsequent jurisprudence, such as CIR v. B.F. Goodrich Phils., Inc., CIR v. Estate of Toda, Jr., Republic of the Phils. v. GMCC United Development Corp., and CIR v. Philippine Daily Inquirer, Inc., requires that for the 10-year period to apply, the false return must be filed with intent to evade tax. Mere deviation from the truth or error in the return, without fraudulent intent, is insufficient. The burden of proving such intent rests on the BIR, which it failed to discharge in this case. Therefore, the ordinary three-year prescriptive period applies, and the assessment is prescribed.