Jose Aznar v CTA and CIR; G.R. No. L-20569; 23 Aug 1974

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The CIR having doubts on the veracity of the reported income of the obviously wealthy deceased taxpayer, the latter’s assets and liabilities during¬† the period of 1941 to 1951 were ascertained. The findings clearly indicated that said taxpayer did not correctly declare the income reported in his income tax returns from 1946 to 1951, as the yearly increases in his net worth were very much more than what was reported during said period. Respondent CIR issued an assessment notice which, after reinvestigation, significantly reduced the assessed deficiency income tax.

Whether or not fraud with intent to evade taxes could be presumed from the deceased’s erroneous income tax returns.

NO. The fraud contemplated by law is actual and not constructive. It must be intentional fraud, consisting of deception willfully and deliberately done or resorted to in order to induce another to give up some legal right. Negligence, whether slight or gross, is not equivalent to the fraud with intent to evade tax. It must amount to intentional wrongdoing with the sole object of avoiding the tax. It necessarily follows that a mere mistake cannot be considered as fraudulent intent. If both petitioner and respondent CIR committed mistakes in making entries in the returns and in the assessment, respectively, it would be unfair to treat the mistakes of the petitioner as tainted with fraud and those of respondent as made in good faith.

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