CTA upholds dismissal of tax case vs Napoles children over prescription rule

MANILA, Philippines – The Court of Tax Appeals (CTA) has thrown out the tax evasion case filed by the Bureau of Internal Revenue (BIR) against pork barrel scam mastermind Janet Lim Napoles’ children and their real estate firm.

The CTA, in an en banc ruling on June 8, upheld an earlier decision of the court’s 2nd Division which dismissed the case against James Christopher Napoles and Jo Christine Napoles, president and treasurer, respectively, of JCLN Global Properties Development Corporation. The court said the case was already barred by prescription.

The BIR accused the respondents of filing a false income tax return for 2010, saying the company declared only P1.7 million in gross income, despite earning about P44 million. 

The bureau said the undeclared income, used to acquire properties, led to underreporting of around P36 million and unpaid taxes of about P13.2 million, excluding penalties and interest.

The CTA 2nd Division first dismissed the complaint in August 2024, ruling that the allowable period to file the case had already lapsed.

The BIR then asked the CTA en banc to reverse the ruling, arguing that the prescriptive period should have been interrupted when it filed a complaint with the Department of Justice (DOJ) for preliminary investigation.

Through their lawyers, Napoles’s children, however, said the prescriptive period began on September 17, 2015, when the BIR filed its criminal complaint before the justice department.

They argued the filing did not stop the running of the prescriptive period, which continued until it expired on September 17, 2020. They added that when the information was filed before the CTA on July 19, 2024, the case was already barred by prescription.

The CTA en banc, in affirming the ruling of the court’s 2nd Division, cited Section 218 of the National Internal Revenue Code, which states that violations of the code “shall prescribe after five years, reckoned from the date of commission of the offense, if known, or, if not known, from the discovery thereof.”

The court said the filing of judicial proceedings for investigation and punishment interrupts the prescriptive period.

It noted that the BIR filed a joint complaint-affidavit and referral letter with the DOJ on September 17, 2015.

The DOJ later issued a resolution on December 1, 2016, finding probable cause to indict the respondents for alleged violations of the revenue code.

The CTA en banc ruled:  “Reckoned from September 17, 2015, the five-year prescriptive period lapsed on September 17, 2020. Thus, when petitioner filed the Information before the Court in Division on July 19, 2024, the criminal action had already prescribed. Accordingly, the dismissal of CTA Crim. Case No. 0-1193 on the ground of prescription is justified.” – Rappler.com