EMMANUEL D. PACQUIAO and JINKEE J. PACQUIAO , petitioners, vs . vs.

THE COURT OF
TAX APPEALS-FIRST DIVISION and THE COURT OF TAX APPEALS and THE
COMMISSIONER OF INTERNAL REVENUE THE COMMISSIONER OF INTERNAL
REVENUE, respondents.
[G.R. No. 213394. April 6, 2016.]
Francis Floro Perez
1-A

Facts:
Emmanuel Pacquiao’s fame and success as a world-class professional boxer enabled him
to amass income from both the Philippines and the United States of America (US). The
controversy began on March 25,2010 when the BIR investigated the petitioner’s tax return for the
year 2009 through a Letter of Authority (LA). Because it did not include his earnings in US
earnings and his VAT returns. Three months later the CIR issued a LA which cancelled and
superseded the BIR LA. In its letter the CIR stated that it was going to investigate the tax returns
of the petitioners from 1995 to 2009 for alleged fraud under the RATE program of the Bureau of
Internal Revenue. In response the petitioners submitted tax related documents. However they
failed to produce documents from 1995 to 2006 as pursuant of the Tax Code.

Since the petitioners could not produce the pertinent documents, the CIR made its own initial
investigation and found the petitioners liable for deficiencies in their income taxes “based on best
evidence obtainable”. The CIR sent a preliminary assessment notice that the petitioners were
liable for deficiency in their income taxes and non payment of their VAT liabilities. The Final
Decision on Disputed Assessment addressed to Emmanuel Pacquiao only, informed him that his
total income tax and VAT deficiency for the taxable years of 2009 amounted to 2,261217439.92
pesos inclusive of interests and surcharges. Petitioners did not contest the VAT liability and paid
32,196,534.40.

The petitioners appealed to the CTA and contended that the CIR assessment was not based
on actual transaction documents therefore defective. They filed through the Court of Tax Appeals
(CTA) to lift the warrants of distraint/levy and garnishment issued to them and said that they were
willing to pay bond that is reasonable. The CTA approved the petitioner’s Urgent motion
and ordered the CIR to desist from collecting desist from collecting on the deficiency tax
assessments against the petitioners pursuant to Section 11 of R.A. No. 1125. On the other hand
the CTA required the petitioners to deposit the amount of P3,298,514,894.35 or post a bond in
the amount of P4,947,772,341.53 and saw no justification that the petitioners should pay less
than the disputed amount. Hence the petitioners appealed to the Supreme Court.

Issues:
1.Whether or not the appeal will suspend the collection of tax.
2.Whether or not the petitioner's case falls within the exception provided under Section 11, R.A.
No. 1125.
3.Whether or not the Court can make a preliminary determination on whether the CIR used
methods not sanctioned by law.
4.Whether or not the petition should be remanded to the CTA.
Held:
1. No, the appeal to the CTA will not suspend the collection of tax, but there is an exception
according to Section 11 of R.A. No. 1125, as amended by R.A. No. 9282 embodies the rule that
an appeal to the CTA from the decision of the CIR will not suspend the payment, levy, distraint,
and/or sale of any property of the taxpayer for the satisfaction of his tax liability as provided by
existing law. The exception applies when, in the view of the CTA, the collection may jeopardize
the interest of the Government and/or the taxpayer, it may suspend the said collection and require
the taxpayer either to deposit the amount claimed or the surety bond.

Petitioners assail the issuance of CTA to require them to pay the cash deposit on the basis
of the assessment of the CIR. However, the Court ruled that CTA has the authority to issue
injunctive writs to restrain the collection of taxes and to even dispense with the deposit of the
amount claimed of the required bond.

2. Whether or not the petitioner's case falls within the exception provided under Section 11,
R.A. No. 1125 cannot be determined at this point

The Court finds no sufficient basis in the records for the Court to determine whether the
dispensation of the required cash deposit or bond provided under Section 11, R.A. No. 1125 is
appropriate.

It is premature for this Court to rule on the issues of whether or not the warrants were
defectively issued; or whether the service thereof was done in violation of the rules; or whether or
not respondent's assessments were valid. These matters are evidentiary in nature, the resolution
of which can only be made after an evidentiary in nature, the resolution of which can only be made
after a full blown trial full blown trial.

3.
No. In the absence of evidence and a preliminary determination by the CTA, the Court
cannot make any factual findings and settle the issue of whether the CIR used methods not
sanctioned by law in investigating the petitioners. All the arguments presented by both sides are
mere allegations and can only be considered as evidence after a preliminary investigation.

4.
Yes. A remand to the CTA is in order because it is within the CTA’s jurisdiction to make
preliminary determination as to whether the petitioners should be required to post a security bond
under Section 11 of R.A. No. 1125, taking into consideration the following; (1) Whether the
requirement of a Notice of Informal Conference was compiled. (2) Whether the 15 - year period
subject of the CIR's investigation is arbitrary and excessive. (3) Whether fraud was duly
established (4) Whether the FLD issued against the petitioners was irregular. (5)Whether the
FDDA, the PCL, the FNBS, and the Warrants of Distraint and / or Levy were validly issued.

Therefore a Writ of Preliminary Injunction was issued, enjoining the implementation of the
CTA Case No. 8683, The case was REMANDED to the CTA which was ordered to conduct a
preliminary hearing to determine whether Section 11, Republic Act No. 1125 is proper to restrain
the collection of deficiency taxes assessed against the petitioners.