### Facts

The case of Ngo v. Commissioner of Internal Revenue involves Lapaz Kaw Ngo, the President of Fishwealth Canning Corporation, who is accused of tax evasion for underdeclaring sales and taxable income. The case revolves around the validity of the second Letter of Authority (LOA) issued by the Bureau of Internal Revenue (BIR) for the examination of Fishwealth's books of accounts and other accounting records.

According to the Commissioner of Internal Revenue (CIR) and the revenue officers, Fishwealth unjustifiably refused to present its books of accounts and other accounting records during the investigation conducted under the first LOA. As a result, the revenue officers proceeded with the investigation through a Third Party Information (TPI) under the National Internal Revenue Code (NIRC). The TPI allegedly revealed that Fishwealth underdeclared its sales and taxable income by significant amounts, resulting in unpaid value-added tax (VAT) and income tax.

Fishwealth, through Lapaz Kaw Ngo, countered that the issuance of the second LOA was prohibited in the absence of fraud, irregularity, or mistake discovered during the first investigation. Fishwealth claimed that it had fully cooperated during the first examination and had paid and settled its deficiency taxes. Furthermore, Fishwealth disputed the revenue officers' findings, asserting that the alleged under-declaration was not substantial enough to constitute prima facie evidence of fraud.

The state prosecutor initially dismissed the complaint for tax evasion due to insufficiency of evidence and the improper service of the second LOA. However, the Secretary of Justice (SOJ) reversed the resolution and ordered the filing of an Information for tax evasion against Lapaz Kaw Ngo. On reconsideration, the SOJ reversed himself and held that there was no probable cause to indict Lapaz Kaw Ngo for tax evasion.

The Court of Appeals (CA) granted the certiorari petition filed by the CIR and ordered the filing of an Information for tax evasion against Lapaz Kaw Ngo. The CA ruled that the issuance of the second LOA was valid and that there was sufficient evidence to support the belief that Fishwealth had been concealing figures in its tax returns to evade payment of its tax liability.

Lapaz Kaw Ngo filed a Petition for Review on Certiorari before the Supreme Court, arguing that the CA erred in substituting its own determination of probable cause for that of the prosecutors. However, the Supreme Court denied the petition, affirming the CA's finding of probable cause for tax evasion against Lapaz Kaw Ngo.

### Issue

The main issue in this case is whether there is probable cause to indict Lapaz Kaw Ngo for tax evasion based on the under-declaration of sales and taxable income by Fishwealth Canning Corporation.

### Ruling

The Supreme Court affirmed the Court of Appeals' finding of probable cause for tax evasion against Lapaz Kaw Ngo and ordered the filing of an Information against him.

### Ratio

The Supreme Court explained that tax evasion is deemed complete when the taxpayer knowingly and willfully files a fraudulent return with the intent to evade and defeat taxes. In this case, the revenue officers' findings of significant under-declaration of sales and taxable income, as well as the discrepancy between Fishwealth's Importer's Detail Report and its audited financial statements and tax returns, support the existence of probable cause for tax evasion.

The Supreme Court also emphasized that the validity of the second LOA is immaterial in determining the existence of probable cause. The essence of tax evasion is the taxpayer's knowledge of making an inaccurate return, regardless of whether another LOA is issued. The Court held that the defenses raised by Lapaz Kaw Ngo are matters of evidence that should be addressed during the trial.

Therefore, the Supreme Court affirmed the CA's decision and ordered the filing of an Information for tax evasion against Lapaz Kaw Ngo.