False v. Fraudulent Return

Section 222(a) of the NIRC of 1997 should be interpreted to mean a separation of the three different situations.

In the case of Pacifichub Corp. v. Commissioner of Internal Revenue, the Court of Tax Appeals (CTA) held that Section 222(a) of the NIRC of 1997 should be interpreted to mean a separation of the three different situations of: 


1. False return,

2. Fraudulent return with intent to evade tax, and 

3. Failure to file a return; 

Which is strengthened immeasurably by the last portion of the provision that segregates the situations into three different classes, namely "falsity," "fraud" and "omission."

In any of the foregoing instances, the period within which to assess tax is ten years from discovery of the fraud, falsification or omission. 


DISCUSSION

There is a difference between "false return" and "fraudulent return".
While the first merely implies deviation from the truth, whether intentional or not, the second implies intentional or deceitful entry with intent to evade the taxes due. (Pacifichub Corp. v. Commissioner of Internal Revenue, CTA Case No. 8895, August 31, 2017)

False return	Fraudulent return
Contains wrong information due to mistake, carelessness or ignorance (Aznar v. CTA, G.R. No. L- 20569, August 23, 1974)	Intentional and deceitful with the sole aim of evading the correct tax due (Pacifichub Corp. v. Commissioner of Internal Revenue, CTA Case No. 8895, August 31, 2017)
Deviation from the truth, whether intentional or not	Intentional or deceitful entry with intent to evade the taxes due.
Does not make the taxpayer criminally liable	Filing a fraudulent return will make the taxpayer liable for the crime of moral turpitude as it entails willfulness and fraudulent intent on the part of the individual (Republic v. Marcos II, G.R. Nos. 130371 & 130855, August 4, 2009, 595 SCRA 43).
The tax may be assessed, or a proceeding in court for the collection of such tax may be begun without assessment, at any time within ten years after the discovery of the falsity, fraud or omission.

APPLICATION OF THE 10-YEAR PRESCRIPTIVE PERIOD

For the ten-year period under Section 222 (a) to apply, it is not enough that fraud is alleged in the complaint, it must be established by clear and convincing evidence 
The Court held in the case of Republic v. Lim De Yuthat in order for the ten-year period under Section 222 (a) to apply, it is not enough that fraud is alleged in the complaint, it must be established by clear and convincing evidence.