A Subpoena Duces Tecum (SDT) issued by the Bureau of Internal Revenue (BIR) must be complied with within 14 days from date of issuance. To recall our topic last week, an SDT is issued by the BIR requiring any person liable for tax or required to file a return or any officer or employee of such person, or any person having possession, custody, or care of the books of accounts and other accounting records containing entries relating to the business of the person liable for tax.
Aside from the requirements on the service of subpoena discussed in our previous article, the concerned Revenue Officers are required to be present during the appointed time, date and place set for the presentation of the books of accounts and other accounting records in order to check if the records presented are the complete records being required as stated in the SDT. Non-compliance therewith shall subject violators to administrative liability.
Upon verification by the concerned Revenue Officers that the records presented are substantially complete, the documents presented shall be consolidated with the records of the case and shall be referred back to the appropriate office for continuation of the investigation.
The concerned Revenue Officer shall submit a written report to the issuing office that the documents/records indicated in the SDT have been submitted or that there was either no submission or that the documents presented were so incomplete.
Note that failure of a duly summoned person to appear to testify, or to appear and produce books of accounts, records, memoranda or other papers, or to furnish information as required shall be subject to a fine of not less than P5,000 but not more than P10,000 and suffer imprisonment of not less than one year but not more than two years, upon conviction.
As such, in case there is no submission or incomplete presentation of the required books of accounts and other accounting records, the issuing office shall then forward the case to the prosecutorial office for filing of a criminal case against the non-compliant taxpayer. If the taxpayer concerned is a corporation, an association or a general partnership, the sanctions mandated under Section 256 of the National Internal Revenue Code (NIRC), as amended, shall likewise be imposed and invoked in the filing of a criminal case.
Payment of the administrative penalty shall not excuse the taxpayer/person summoned from complying with the SDT.
Last October, the Court of Tax Appeals (CTA) upheld the dismissal of criminal charges filed in 2015 by the BIR against a hotel company chain based on the supposed failure to obey the SDT for submission of documents requested by the BIR. The CTA upheld the dismissal of the criminal complaint on the ground that the BIR representatives were able to conduct an audit and examination of the company’s records at its office without indication that they were prevented from doing so. Hence, it could reasonably be inferred that BIR was able to access and examine whatever is lacking in the submitted documents as of such date of inspection of company records.
The CTA held that in the absence of the accounting records of a taxpayer, the BIR may determine his liability by estimation. Otherwise, the ability to collect and assess taxes is made unfairly dependent on a taxpayer’s ability to conceal. In this case however, if there were documents not yet presented or submitted, BIR should have informed the company. As illustrated in the above case, due process and the rules of fairness are applicable even in criminal investigations involved in alleged non-compliance with a BIR-issued subpoena for production of documents.
Not all is lost when a notice to submit documents is issued against a taxpayer. But a word of warning to the wise : it is best not to ignore such notice for it may result in the issuance of an SDT, non-compliance with which may result in a criminal prosecution.
First published on The Daily Tribune.
For further information, please contact:
Nilo T. Divina, Managing Partner, DivinaLaw
nilo.divina@divinalaw.com
