G.R. No. 247737 , August 8, 2023
McDonald’s Philippines Realty Corporation, Petitioner, vs. Commissioner of Internal Revenue, Respondent.

FACTS

The case involves a petition concerning the cancellation of a tax assessment on the ground of prescription. The specific legal issue revolves around the interpretation of Section 222(a) of the National Internal Revenue Code (NIRC), which provides for an extraordinary ten-year prescriptive period for assessment or collection of taxes in certain cases. The concurring and dissenting opinion of Justice Dimaampao agrees with the majority’s decision to grant the petition and cancel the assessment due to the Commissioner of Internal Revenue’s failure to prove the application of the ten-year period. However, Justice Dimaampao dissents from the ponencia’s abandonment of the doctrine established in Aznar v. Court of Tax Appeals. The Aznar doctrine declared that Section 222(a) of the NIRC contemplates three distinct scenarios: false returns, fraudulent returns with intent to evade tax, and failure to file a return, and that a “false return” involves a deviation from the truth, whether intentional or not. The ponencia, in contrast, adopted the view that “false returns” under Section 222(a) must be qualified by the phrase “with intent to evade tax,” meaning the falsity must be deliberate or willful.

ISSUE

Whether the interpretation of “false return” under Section 222(a) of the NIRC requires an intent to evade tax, thereby limiting the extraordinary ten-year prescriptive period only to returns that are deliberately or willfully false, or whether “false return” encompasses both intentional and unintentional deviations from the truth, as held in the Aznar doctrine.

RULING

Justice Dimaampao’s concurring and dissenting opinion argues for the retention of the Aznar doctrine. The ruling within this opinion is that a “false return” under Section 222(a) of the NIRC is not qualified by the phrase “with intent to evade tax” and therefore includes both intentional and unintentional false returns. The opinion asserts that the provision recognizes three separate scenarios: (1) false returns, (2) fraudulent returns with intent to evade tax, and (3) failure to file a return. It emphasizes the textual distinction in the statute, where the phrase “with intent to evade tax” only follows “fraudulent return” and is not linked to “false return.” The opinion cites the legislative history of the provision, showing little change since 1939, and a line of jurisprudence, including Aznar, Javier, Jr., and Fitness by Design, Inc., that consistently distinguished false returns (deviation from truth, intentional or not) from fraudulent returns (intentional deceit to evade tax). It critiques contrary cases like Estate of Toda, Jr., Asalus Corp., and Philippine Daily Inquirer, Inc., for requiring intent for false returns, noting that the cited basis, B.F. Goodrich Phils., Inc., did not expressly establish such a requirement. The opinion concludes that abandoning the settled Aznar doctrine is unjustified, as it correctly interprets the plain language of the law and aligns with the principle that tax statutes are construed strictly against the government.