I Gly REPUBliC OF THE PHiliPPINES Caun al Tax Appeals QUEZONCITY SECOND DIVISION PEOPLE OF THE PHILIPPINES,CTA CRIM. CASENO. 0 -013 -versus-JOEL C. MENDEZ, Plaintiff,For:ViolationofSection255ofR.A.No. 8424 Accused. X -- - --------------------- X PEOPLE OF THE PHILIPPINES, -versus-JOEL C. MENDEZ, Plaintiff.CTA CRIM. CASE NO. 0 -015 1 For:ViolationofSection255ofR.A.No. 8424 Members: CASTANEDA, JR.,Chairperson CASANOVA, and MINDARO-GRULLA, JJ. Accused.Promulgated: JAN0 5 XDECISION CASTANEDA, JR., J. : STATEMENT OFFACTS AccusedJoelC. Mendez ischargedbefore thisCourt withthe crimeof violationof Section255of Republic Act(R.A.)No.8424, otherwiseknownas the"TaxReformActof1997",asamended,underthefollowingAmended Informations, whichreadas follows: jh--' 243 ' / DECISION CTA CRIM. CASENOS. 0-013 and0 -015 Page 2 of 52 CriminalCaseNo. 0-013 "Thatonoraboutthe15thdayofApril2003,at QuezonCity,andwithinthejurisdictionofthisHonorable Court,theabove-namedaccused,adulyregistered taxpayer,andsoleproprietorof'WeighLessCenter', 'MendezBody andFaceSalonandSpa',and'Mendez Body andFaceSkinClinic',withprincipalofficeatNo.31Roces Avenue, QuezonCity, andwithseveralbranchesinQuezon City,MakatiCity,SanFernando,PampangaandDagupan City,didthenandthere,willfully,unlawfullyandfeloniously, failtofilehisincometaxreturn(ITR)withtheBureau of InternalRevenuefortaxableyear2002,tothedamageand prejudiceoftheGovernmentintheestimatedamountof P1 ,522, 152.14,exclusiveofpenalties,surchargesand interest. CONTRARY TOLAW." CriminalCaseNo. 0-015 "Thatonor about the15thof April2004, atDagupan City,andwithinthejurisdictionof thisHonorableCourt,the above-namedaccused, a dulyregisteredtaxpayer,andsole proprietorof'WeighLessCenter','MendezBodyandFace SalonandSpa',and'MendezBodyandFaceSkinClinic', withseveralbranchesinQuezonCity,MakatiCity,San Fernando,PampangaandDagupanCity,engagedinthe businessofcosmeticsurgeryanddermatology,willfully, unlawfullyandfeloniously,didthenandthere,failtosupply correctandaccurateinformationinhisincometaxreturn (ITR)fortaxableyear2003filedintheRevenueDistrictof Calasiao,Pangasinan,bymakingitappearunderoaththat hisincomefortaxableyear2003wasderivedmainlyfrom hisbranchinDagupanCity,andfailingtodeclarehis consolidatedincomefromhisother'WeighLessCenter' , 'MendezBody andFaceSalonandSpa',and'Mendez Body andFace SkinClinic' branches, to the damage andprejudice oftheGovernmentintheestimatedamountof P2,1 07,023.65,exclusiveofpenalties,surchargesand interest.' CONTRARY TOL A W . " ~ 244 ,. DECISION CTAGRIM. CASENOS. 0 -013 and0 -015 Page3 of 52 OnJanuary 30,20061 andMarch 20,20062,thisCourt issued Warrants ofArrestagainsttheaccusedinCriminalCaseNos.0-013and0-015, respectively. AccusedvoluntarilysurrenderedbeforethisCourtandpostedthe requiredbailbondforhisprovisionalliberty,bywayofcashbondsinthe amountofP20,000.00each,inCriminalCaseNo.0-013onFebruary10, 20063 andinCriminal CaseNo. 0-015 onMarch 29,20064. Uponarraignmentinbothcases,accused,assistedbyhisdefense counselde parte,entereda pleaof "Not Guilty" to the crimes charged.5 OnSeptember27,2006andOctober2,2006,thePreliminary Conferencewereheld. Duringpre-trial,CTA Grim.CaseNo.0-013 andCTA Grim.CaseNo. 0-015 were consolidatedas per agreement by the parties. Trialproceeded,whereintheprosecutionpresentedbothtestimonial anddocumentary evidence. Theprosecutionpresentedtwenty(20)witnessestoestablish accused'sculpability,namely:Atty.GraceB.Cruz,Ms.ClavelinaS.Nacar, Messrs.RomeoE.Naranjo,VonM.Lentejas,AlexC.Perez,Atty.Mahinardo G.Mailig,Messrs.FloranteAninag,JosephCatapia,Ms.PerlitaR.DeLara, Mr.JosephRodriguez,Ms.Arabelle0 .Petilla,Ms.EmmaC.Asusano, Messrs. JoseVillareal,EliasS.Olasiman,Atty.Salvador C. Alcuino,Jr. ,Ms. NorilynCaborda,Mr.BenjaminMolina,Jr.,Ms.MenchieDeLeon,Ms. JosefinaWanRemollo,andMr. AlexanderD. Martinez.Theprosecutionalsor--1 2 3 4 CTA Grim. CaseNo. 0 -013, docket,p. 179. CTA Grim. CaseNo. 0-015, docket,p.176. CTA Grim. CaseNo. 0-013, docket , p. 191 . CTA Grim. CaseNo. 0 -015, docket,p. 185. Resolutions dated March 22, 2006 andApril19, 2006. 245 DECISION CTA CRIM. CASENOS. 0-013 and0-015 Page 4 of 52 presenteditsdocumentaryevidencemarkedasExhibits"A"to"L6",which were admittedby thisCourt as evidence for theprosecution.6 OnMarch24,2008,accusedfiledhis"DemurrertoEvidence,"which theCourt deniedina Resolution dated August 15,2008.7 Foritspart,thedefensepresentedevidence,whichconsistsofthe testimoniesof theaccusedhimself,Ms.CherryPerez,andMs.Ma.UtaD. Gregorio;anddocumentaryevidencemarkedasExhibits"1"to"39-A. "The saidexhibits were admittedas evidence for the accused, except Exhibits "17", "20","32",and"34";whichweredeniedadmissioninaResolutiondated January26, 2010for failureof theaccused'scounseltopresent theoriginals thereof for comparison.8 OnOctober 5, 2010, aResolutionwasissuedby thisCourtsubmitting thecasefordecision,9 consideringthattheaccusedhadalreadyfiledhis "Memorandum" onMarch1,201010 andthat theprosecutionhadalso filedits "Memorandum"11 throughregisteredmailonSeptember14,2010and receivedby thisCourt onSeptember 30, 2010. Evidence for the Prosecution Atty.GraceBelarmino-Cruz,oneof theRevenueOfficersassignedin theNationalInvestigationDivision(NID)oftheBureauofInternalRevenue (BIR),testifiedthatinaMemorandumdatedSeptember8,2004,theNID Chief,Atty. ArnelSD.Guballa,referredtoherinvestigatingteamthecaseof jk-6 8 9 10 11 CTA Grim. CaseNos. 0 -013 and0-015, Vol.3,docket, pp. 1942-1944 and2039-2040. Ibid., pp, 2073-2083. Ibid., pp. 2405-2406 and2476-2478. Ibid., p.2563. Ibid.,pp.2444-2461 . Ibid., pp.2509-2562. 246 DECISION CTA GRIM. CASENOS. 0 -013 and0 -015 Page5 of 52 taxpayer Dr. Joel C.Mendez for appropriate action. The case was precipitated bya confidentialletter-complaint against thesubject-taxpayer for allegednon-issuance of officialreceipts for services rendered.12 Onthebasis of theinitialinvestigationandrecommendation,a Letter of Authority(LOA)No.2001 -0000243813 datedNovember8,2004wasissued for theexaminationof books of accounts andother accountingrecords for the periodcoveringtaxableyears2001,2002and2003ofaccusedDr.Joel CortezMendez.AccordingtoAtty.Cruz,thesaidLOAwasservedon November 10,2004 together withthe First Letter-Notice14 for theproduction of booksof accountsandaccountingrecords.ThesaidLOA wasdulyreceived byCherryPerez,whoallegedlyrepresentedherselfastheauthorized representativeofaccusedDr.Mendez.DespitereceiptoftheFirstLetter-Notice,accusedDr.Mendezdidnotsubmittherequireddocuments,as specifiedinthesaidnotice.Asa consequence,aSecondLetter-Notice 15 and aFinalRequest16 forpresentationand/orproductionoftherequired records/documentswereservedupon-theaccusedDr.Mendez,andduly receivedonNovember 24, 2004andJanuary11,2005, respectively,thruhis accountant andemployee namedRichardBiananandCarla Yadao. Duetothefailureoftheaccusedtopresentorproducetheneeded recordsanddocumentsforexaminationdespiteseveralnotices,the investigationproceededthrough"ThirdPartyInformation"andthe" B e s t ~ 12 13 14 15 16 Exhibit "I/IMIW";TSN. November 6, 2006,pp. 6-11 . Exhibit "A". Exhibit "8". Exhibit "C". Exhibit "0". 247 DECISION CTA CRIM. CASENOS. 0 -013 and0 -015 Page 6 of 52 EvidenceObtainableRule" allowedunder Section5(B),inrelationtoSection 6(A)and(B)of the Tax Code of 1997. Inthecourseofgatheringinformationandbestobtainableevidence pertainingtotheaccused, theteamverifiedcertaindataandinformationfrom theBIRIntegratedTaxSystem(BIR-ITS)anddifferent government agencies, includingprivate offices andentities. VerificationofthebusinessactivitiesofaccusedDr.JoelC.Mendez disclosedthathehasbeenoperatingasasingleproprietor,doingbusiness for taxableyears2001 , 2002, and2003under thefollowingtradenamesand addresses: a.MendezBodyandFaceSalonandSpa- 31-BA.Roces Avenue,QuezonCity,registeredwithROONo.39-South QuezonCity onMay 6, 2002; 17 b.MendezBodyandFaceSalonandSpa- B-3,3/FNew FarmersPlaza,Cubao,QuezonC i t ~ ,registeredwithROO No. 40-Cubao onOctober 24, 2003; 8 c.MendezBodyandFaceSkinClinic- ThePlazaBuilding, Greenbelt, AyalaCenter,MakatiCity, registeredwithROO No. 47-East Makati onApril30,2004;19 d.WeighLessCenter- SMCity,SanFernando,Pampanga, registeredwithROONo. 21-SanFernando,Pampangaon January 17,2003;20 and e.MendezWeighlessCenter- 2/FCSIMall ,LucaoDistrict, DagupanCity,registeredwithROONo.4-Calasiao, Pangasinan onMay 16, 2003.21 Verificationof thetaxrecordsfromtheBIR-ITSrevealedthataccused Dr.Mendezdidnotfilehisincometaxreturnsfortaxableyears2001and)L-17 18 19 20 21 Exhibit "0 ". Exhibit "EEE". Exhibit "RRR". Exhibit "AAA". Exhibit "MMM". 248 DECISION CTA GRIM. CASENOS. 0 -013 and0 -015 Page 7 of 52 2002.Thiswascorroboratedbythedirecttestimoniesofthefollowing RevenueDistrictOfficerswhoissuedthecorrespondingcertifications evidencingthefailureof theaccusedtofilehisincome taxreturnsfor taxable years 2001and2002: a.RevenueDistrictOfficerClavelinaS.NacarofROONo. 39-SouthQuezonCity- CertificationdatedFebruary22, 200522 ' b.RevenueDistrictOfficerRomeoE.NaranjoofROONo. 40-Cubao,QuezonCity- CertificationdatedMarch7, 200523 and ' c.RevenueDistrictOfficerFloranteR.AninagofROONo. 21-SanFernando, - RevenueCertification datedFebruary 22, 2005. 4 Mr.AlexC.Perez,ChiefoftheDocumentProcessingSectionof RevenueDistrictNo.39-SouthQuezonCity,corroboratedthetestimonyof Atty.CruzandidentifiedtheCertificationdatedMarch9,2005,attestingthat accusedDr.MendezhasnorecordonfileastohisAnnualIncomeTax Returnfortaxableyears1995to2000peritsofficeITSinquirydespitethe existence andoperationof his business, WeighLess Center.25 Duringtheinvestigation,itwasfurthergatheredthat theaccusedfiled hisincometaxreturnfortaxableyear2003withRevenueDistrictOffice (ROO)No.4-Calasiao,Pangasinan,forhisMendezWeighLessCenter locatedat CSICity Mall,LucaoDistrict, OagupanCity despite theexistenceof hisprincipalplaceofbusinessat31RacesAvenue,QuezonCity,as evidencedbytheCertificationdatedFebruary23,2005andtheletterdated August15,2006issuedbyMr.JosephM. Catapia,RevenueDistrictOfficer ft-22 23 24 25 Exhibit "G";TSN, November 13,2006, pp. 11 -16. Exhibit "EEE"; TSN,November 13, 2006, pp. 33-34. Exhibit "888";TSN,November 27, 2006,pp. 21 -23. Exhibit "F5";TSN, November 13, 2006, pp. 59-60. DECISION CTA CRIM. CASE NOS. 0-013 and0 -015 Page 8 of 52 ofROONo. 4,andincometaxreturnof theaccused.Saidcertificationwas alsoidentified during trialby Mr. JosephM. Catapiahimself.26 The team wasalso able toestablish that the filingby theaccusedof his incometaxreturnwithRevenueDistrictOfficeNo.4wasirregularandwas intendedtoevadepaymentofcorrecttaxessinceaccusedDr.Mendez, operatingasasingleproprietorofdifferentbusinesses,isrequiredtofile consolidatedincometaxreturn,viz.,anincometaxreturncontainingthe summary of hisincome fromallsources or business operations inandoutside MetroManilainaccordance withSection51 (A)(4)(a)and(B) . Theteamlikewisefoundthatthenon-filingof accusedDr.Mendezof hisincometaxreturnsfor taxableyears2001and2002waswillfulanddone withdeliberate intent toevadepayment of taxes, consideringthat the accused hadbeenoperatingseveralbusinessesforincomeandmakingcapital investments as early as1993. Asaresultof theinvestigationanddocumentary evidencegathered, it wasestablishedthatdespitehavingpracticedhisprofessionthroughthe operationofhisbusinesses,accusedfailedtofilehisincometaxreturnsfor taxable years 2001and2002, andunder declaredin2003. Mr. VonLentejas testified27 that asaspecialist at thePublicReference UnitoftheSecuritiesandExchangeCommission(SEC) ,hesigned authenticatedcopiesofdocumentsissuedbythesaidUnitandhehadthe occasion to examine certifiedcopies of the followingdocuments: 26 27 1.SECRegistrationNo. A 1996-06633 of WeighLessCenter, Co.,datedSeptember23,1996,togetherwithArticlesotf