ALLIED BANKING CORP. v.
CIR; GR NO 175097; FEBRUARY 5, 2010 Assessment Notices was in fact the final decision of the CIR on the letter-protest it filed and that the available
FACTS:
BIR issued PAN to ABC for deficiency of documentary stamp and gross receipt tax on industry issue for
taxable year 2001. ABC received PAN on May 18, 2004 and filed a protest on May 27, 2004. On July 16, 2004,
the BIR wrote a Formal Letter of Demand (FLD) with Assessment Notices to ABC. ABC received PAN on Aug. 30,
2004.
CTA Division
On Sept. 29, 2004, ABC filed for Petition for Review with CTA. CIR filed an Answer on Dec. 7, 2004. On
July 28, 2005, CIR filed a Motion to Dismiss on the ground that ABC failed to file an administrative protest on the
FLD with Assessment Notices. On Oct. 12, 2005, CTA granted the Motion to Dismiss.
CTA En Banc
ABC appealed the dismissal to CTA En Banc. CTA En Banc denied the Petition for Review and Motion
for Reconsideration. CTA En Banc declared that it is absolutely necessary for the taxpayer to file an administrative
protest in order for CTA to have jurisdiction. It emphasized that an administrative protest is an integral part of the
remedies given to a taxpayer in challenging the legality or validity of an assessment. According to the CTA En
Banc, although there are exceptions to the doctrine of exhaustion of administrative remedies, the instant case
does not fall in any of the exceptions.
ISSUE:
WON the FLD dated last July 6, 2004 can be construed as a final decision of the CIR appealable to CTA
under RA 9282.
HELD:
YES. Based on the language and tenor of the FLD, the demand letter indicated that it is the final
decision of the BIR on the matter. The SC has, time and again, reminded the CIR to indicate, in a clear and
unequivocal language, whether his action on a disputed assessment constitutes final determination thereon in
order for the taxpayer concerned to determine when his right to appeal to the tax the tax court accrues.
The SC’s decision does not go against the provisions of Sec. 228 of NIRC. What the court emphasizes
is that in this particular case, the FLD with Assessment Notices which was not administratively protested by the
petitioner can be considered a final decision of the CIR appealable to the CTA because the words used,
specifically the words “final decision” and “appeal”, taken together led petitioner to believe that the FLD with
remedy was appeal the same to CTA.
BANCO DE ORO v. REP OF PH; GR NO. 198756; AUG. 16, 2016
FACTS:
Mej complicated tungod kay tax jargons na ang ginabutang. Ang importante ang issue and ruling.
Hihihi.
ISSUE:
WON petitioners should have challenged first the 2011 BIR rulings before the Secretary of Finance
(SOF), consistent with the doctrine of exhaustion of administrative remedies.
HELD:
As a general rule, interpretative rulings of the BIR are reviewable by the SOF. However, the SC held
that because of the special circumstances availing this case –namely: the question involved is purely legal; the
urgency of judicial intervention given the impending maturity of PEACe Bonds; and the futility of an appeal to
SOF as the latter appeared to have adopted the challenged BIR rulings –there was no need for the petitioners to
exhaust all the administrative remedies before seeking judicial relief.
SC held that the Court of Tax Appeals (CTA) has exclusive jurisdiction to determine the constitutionality
or validity of tax laws, rules and regulations, and other administrative issuance of the CIR. Pursuant to RA No.
1125, as amended, the law intends the CTA to have exclusive jurisdiction to resolve ALL tax problems.
CIR v CTA AND PETRON CORP; GR NO. 207843; JULY 15, 2015
FACTS:
Petron, which is engaged in the manufacture and marketing of petroleum products, imports and alkylate
as a raw material or blending component for the manufacture of ethanol-blended motor gasoline. During the
period of 2009-2011 and April of 2012, Petron imported alkylate. CIR then issued an Authorities to Release Goods
(ATRIGs), categorically stating that Petron’s importation of alkylate is exempt from the payment of excise tax
because it was not among those articles enumerated as subject to excise tax under Title VI of RA 8424.
HOWEVER, with respect to Petron’s alkylate importations covering the period Sept. 2011 to June 2012 (excluding
April 2012), the CIR inserted, WITHOUT PRIOR NOTICE, a reservation for ATRIGs issued:
 This is without prejudice to the collection of the corresponding excise taxes, penalties and interest
depending on the final resolution of the Office of the Commissioner on the issue of whether this item is
subject to the excise tax under the NIRC 1997, as amended.
In June 2012, Petron’s imported alkylate was subjected by the Collector of Customs Port Limay, Bataan
(upon instructions of the Commissioner of Customs [COC]) excise tax and an additional VAT of 12% on the
imposed excise tax. The excise tax was based on the Customs Memorandum Circular (CMC) No. 164-2012.
Petron then filed a Petition for Review before the CTA raising the issue of whether its importation of
alkylate as a blending component is subject to excise tax as contemplated under Sec. 148 of the NIRC.
ISSUE:
WON CTA has jurisdiction over the petition assailing the imposition of excise tax on Petron’s importation
of alkylate based on Sec. 148 (e) of the NIRC.
HELD:
NO. The CTA is a court of special jurisdiction, with power to review by appeal of decisions involving tax
disputes rendered either by CIR or COC. Conversely, it has no jurisdiction to determine the validity of a ruling
issued by the CIR or COC in the exercise of its quasi-legislative powers to interpret tax laws.
In this case, Petron’s liability was premised on the COCs issuance of CMC No. 164-2012, which gave
effect to the CIR’s June 19, 2012 Letter interpreting Sec. 148 (e) of NIRC as to include alkylate among the articles
subject to customs duties, hence, Petron’s petition before the CTA ultimately challenging the legality and
constitutionality of the CIR’s aforesaid interpretation of tax provisions. In line with the foregoing discussion,
however, the CIR correctly argues that CTA had no jurisdiction to take cognizance of the petition as its resolution
would necessarily involve a declaration of validity or constitutionality of the CIR’s interpretation of Sec. 148 (e) of
the NIRC, which is subject to review by the Secretary of Finance and ultimately by the regular courts.
CIR V. ISABELA CULTURAL CORP; GR NO. 135210; JULY 11, 2001
SYNOPSIS
Respondent was assessed an income tax deficiency by the Bureau of Internal Revenue (BIR) in the
reduced amount of P325,869.44. It moved for reconsideration and led a letter attaching certain documents in
support of its protest. The BIR sent a Final Notice Before Seizure to respondent demanding payment of the
subject assessment within 10 days from receipt thereof and that failure on respondent's part would constrain the
BIR to collect through summary remedies. The notice, however, did not contain a categorical statement that the
BIR has denied respondent's motion for reconsideration.
Respondent, nonetheless, led a petition for review with the Court of Tax Appeals alleging that the final
notice of seizure was petitioner's final decision. The tax court dismissed the same. On appeal, the Court of
Appeals ruled that the final notice before seizure had effectively denied petitioner's request for reconsideration of
the assessment. Hence, this recourse by the BIR.
A final demand from the BIR reiterating the immediate payment of a tax deficiency previously made, is
tantamount to a denial of the taxpayer's request for reconsideration. Such letter amounts to a final decision on a
disputed assessment and is thus appealable to the Court of Tax Appeals. The petition was denied and the
assailed decision of the Court of Appeals was affirmed.
SYLLABUS
TAXATION; NATIONAL INTERNAL REVENUE CODE; TAX DEFICIENCY ASSESSMENT; FINAL DEMAND
LETTER FROM BUREAU OF INTERNAL, REVENUE (BIR) REITERATING IMMEDIATE PAYMENT,
TANTAMOUNT TO DENIAL OF REQUEST FOR RECONSIDERATION; CASE AT BAR.
— A final demand letter from the Bureau of Internal Revenue, reiterating to the taxpayer the immediate
payment of a tax deficiency assessment previously made, is tantamount to a denial of the taxpayer's request for
reconsideration. Such letter amounts to a final decision on a disputed assessment and is thus appealable to the
Court of Tax Appeals (CTA). Indisputably, respondent received an assessment letter dated February 9, 1990,
stating that it had delinquent taxes due; and it subsequently led its motion for reconsideration on March 23, 1990.
In support of its request for reconsideration, it sent to the CIR additional documents on April 18, 1990. The next
communication respondent received was already the Final Notice Before Seizure dated November 10, 1994. In
the light of the above facts, the Final Notice Before Seizure cannot but be considered as the commissioner's
decision disposing of the request for reconsideration led by respondent, who received no other response to its
request. Not only was the Notice the only response received; its content and tenor supported the theory that it was
the CIR's final act regarding the request for reconsideration. The very title expressly indicated that it was a final
notice prior to seizure of property. The letter itself clearly stated that respondent was being given "this LAST
OPPORTUNITY" to pay; otherwise, its properties would be subjected to distraint and levy. How then could it have
been made to believe that its request for reconsideration was still pending determination, despite the actual threat
seizure of its properties? Furthermore, Section 228 of the National Internal Revenue Code states that a delinquent
taxpayer may nevertheless directly appeal a disputed assessment, if its request for reconsideration remains
unacted upon 180 days after submission thereof. In this case, the said period of 180 days had already lapsed
when respondent led its request for reconsideration on March 23, 1990, without any action on the part of the CIR.
Lastly, jurisprudence dictates that a final demand letter for payment of delinquent taxes may be considered a
decision on a disputed or protested assessment. (COPY-PASTED FROM CD-ASIAONLINE)
JUDY ANNE SANTOS v. PP; GR. NO. 173176; AUG. 6, 2008
FACTS:
 BIR Com Parayno wrote to DOJ Sec Gonzales a letter regarding the possible filing of criminal charges
against Judy Anne Santos (JUDAY). In said letter, BIR Com Parayno summarized the findings of the investigating
BIR officers that Juday did not correctly declared her annual income return for the year 2002. The non-declaration
by Juday amounted to at least 84.18% of the income declared in her return was considered a substantial under
declaration of income, which constituted prima facie evidence of false or fraudulent return under Sec 248(b) of
NIRC. Further, Juday’s failure to account her other revenues and her under declaration of her income amounted
to manifest violations of Sec. 254 and 255, as well as Sec 248 (B) of NIRC.
The CTA issued a warrant of arrest of Juday. Tax court, however, lifted the said warrant after Juday
voluntarily appeared and submitted to the court. She posted bail. Consequently, Juday, filed with the CTA first
division a Motion to Quash. The CTA first division denied the MTQ. Juday then filed a Motion for Extension of
Time to File Petition for Review with the CTA En Banc. The CTA en banc denied the motion.
ISSUE:
WON the resolution of CTA division denying an MTQ is a proper subject of an appeal to CTA en banc
under Sec. 18 of RA 1125, as amended.
HELD:
NO. Generally speaking, the Petition for Review filed with the CTA en banc as a mode for appealing a
decision, resolution, or order of CTA Division, under Sec 18 of RA 1125, as amended, is not totally a new remedy.
To the contrary, the CTA merely adopts the procedure for petitions for review and appeals long established and
practiced in the PH courts.
According to Sec. 1 Rule 41 of the Rules of Court, an appeal may be taken only from judgment or final
order that completely disposes of the case or of a matter therein when declared to be appealable. Said provision,
thus, explicitly states that no appeal may be taken from an interlocutory order. THE DENIAL OF A MOTION TO
QUASH IS AN INTERLOCUTORY ORDER WHICH IS NOT THE PROPER SUBJECT OF AN APPEAL OR
PETITION FOR CERTIORARI. Thus, CTA en banc did not err in denying Juday’s Motion for Extension to File
Petition for Review, when such Petition for Review is the wrong remedy to assail an interlocutory order denying
her Motion to Quash.
LASCONA LAND CO. INC., v. CIR; GR NO 171251; MARCH 5, 2012
FACTS:
CIR issued an assessment notice against Lascona Land Co. Inc. (LASCONA) informing the latter of its
tax deficiency for the year 1993. Consequently, Lascona filed a letter of protest but was denied by Odulio, the OIC
RD of BIR, Makati City. The denial of the letter of protest was allegedly because the case was not elevated to the
CTA as mandated by the provision of the last paragraph of Sec 228 of the Tax Code. Thus, the assessment had
become final, executory and demandable.
Lascona then appealed the decision before the CTA alleging that the RD BIR erred in ruling that the
failure to appeal to the CTA within 30 days from the lapse of 180-day period rendered the assessment final and
executory. CTA then nullified the subject assessment. It held that cases of inaction by CIR on the protested
assessment, Sec 228 of NIRC provided two options for the taxpayer: 1.) appeal to CTA within 30 days from the
lapse of 180-day period; and 2.) wait until the Commissioner denies its protest before he elevates the case.
ISSUE:
WON the subject assessment has become final, executory and demandable due to the failure of
petitioner to file an appeal before the CTA within 30 days from the lapse of the 180-day period pursuant to Sec.
228 of NIRC.
HELD:
NO. In Sec 228 of the NIRC, when the law provided for the remedy to appeal the inaction of the CIR, it
did not intend to limit it to a single remedy of filing an appeal after the lapse of the 180-day prescribed period.
Precisely, when a taxpayer protested an assessment, he naturally expects the CIR to decide either positively or
negatively. A taxpayer cannot be prejudiced if he chooses to wait for the final decision of the CIR on the protested
assessment. More so, because the law and jurisprudence have always contemplated a scenario where the CIR
will decide on the protested assessment.
It must be emphasized, however, that in a case of an inaction of CIR on the protested assessment,
while the Court reiterate –the taxpayer has two options, either: 1.) file a petition for review with CTA within 30 days
after the expiration of the 180-day period; 2.) await the final decision of the Commissioner on the disputed
assessment and appeal such final decision to the CTA within 30 days after the receipt of copy of such decisions,
these options are mutually exclusive and resort to one bars the application of the other.
Accordingly, considering that Lascona opted to wait for the final decision of the CIR on the protested
assessment, it has then the right to appeal such final decision to the Court by filing a petition for review within 30
days after the receipt of a copy of the decision or ruling, even after the expiration of the 180-day period fixed by
law for the CIR to act on the disputed assessment. Thus, Lascona, when it filed an appeal on April 12, 1999
before the CTA, after its receipt of the Letter dated March 3, 1999 on March 12, 1999, the appeal was timely
made as it was filed within 30 days from the receipt of the copy of the decision.
MITSUBISHI MOTORS PHILIPPINES CORP. v. BOC; GR NO. 209830; JULY 17, 2015
FACTS:
During the post-audit investigation of the DoF, it was revealed that allegedly, the petitioner fraudulently
secured their tax credit certificates (TCCs). These TCCs were used in the payment of various customs duties and
taxes from Mitsubishi’s importation. Thereafter, BOC demanded that the petitioner pay its unsettled tax and
custom duties, but to no avail. Hence, it was constrained to file complaint.
Mitsubishi alleged that the TCCs were in fact authentic, and, thus their remittance to BOC should be
considered as proper settlement of the taxes of customs duties it incurred in connection with its importation.
The case went up to the CA. In a resolution, the CA referred the records of the collection case to CTA
for proper disposition of the appeal taken by BOC. However, the CA did not dismiss the appeal outright but only to
refer the matter to the CTA. BOC filed MR and argued that since CA has no jurisdiction over their appeal, it cannot
perform any action except to order its dismissal. Said petition was, however, denied.
ISSUE:
WON CA correctly referred the records of the collection case to CTA for proper disposition of the appeal
taken by BOC.
HELD:
No. Jurisdiction is defined as the power and authority of the court to hear, try, and decide a case. In
order for the court or an adjudicative body to have authority to dispose of the case on the merits, it must acquire,
among others, jurisdiction over the subject matter. Thus, when a court has no jurisdiction over the subject matter,
the only power it has is to dismiss the action. Thus, SC found that CA erred in referring the records of collection to
the CTA for proper disposition of appeal taken by BOC.
Sec 7 of RA 1125, as amended by RA 9282 and juxtapose with Sec 3, Rule 4 of the Revised Rules of
Court to Tax Appeals, as amended explicitly provide that the CTA has exclusive appellate jurisdiction over tax
collection cases originally decided by the RTC.
In the case, the CA has no jurisdiction over BOC’s appeal; hence, it cannot perform any action on the
same except to order its dismissal pursuant to Sec. 2, Rule 50 of the Rules of Court. Therefore, the act of CA in
referring respondent’s wrongful appeal before to the CTA under the guise of furthering the interest of substantial
justice is blatantly erroneous, and thus, stands to be corrected.
OCEANIC WIRELESS NETWORK, INC. v. CIR; GR NO. 148380; DEC. 9, 2005
FACTS:
On March 17, 1988, Oceanic Wireless Network Inc. (OCEANIC) received from BIR its deficiency tax
assessments for the taxable year 1984. Petitioner filed a protest and requested reconsideration or cancellation of
the same on April 12, 1988. Acting in behalf of the BIR Comm, Chief BIR Accounts and Receivable and Billing
Division, Mr. Severino Buot, denied request for reinvestigation. Further, he requested Oceanic to pay within 10
days from receipt of the letter, otherwise, the case shall be referred to the Collection Enforcement Division of BIR
National Office for the issuance of warrant of distraint and levy without further notice. Oceanic failed to pay.
Thus, there were the issuance of warrants of distraint and/or levy and garnishment.
On Nov. 8, 1991, Oceanic filed for Petition for Review with the CTA to contest the issuance of the
warrants to enforce the collection of tax assessment. CTA dismissed the petition citing lack of jurisdiction. Said
petition was filed beyond the 30-day period reckoned from the time when the letter of demand (Jan 24, 1991) was
received.
ISSUE:
WON a demand letter of tax deficiency assessments issued and signed by subordinate officer who was
acting in behalf of the CIR, is deemed final and executory and subject to appeal to the CTA/
HELD:
YES. The letter of demand dated Jan. 24, 1991, unquestionably constitutes the final action taken by the
BIR on petitioner’s request for reconsideration when it reiterated the tax deficiency assessments due from
Oceanic, and request its payment. Failure to do so would result in the issuance of a warrant of distraint and/or
levy to enforce its collection without further notice. In addition, the letter contained a notation indicating the
Oceanic’s request for reconsideration had been denied for lack of supporting documents. The demand letter
received by Oceanic verily signified a character of finality. Therefore, it was tantamount to a rejection of the
request for reconsideration.
On the issue of WON said demand letter indeed attained finality despite the fact that it was issued and
signed by the Chief of the Accounts and Receivable and Billing Division instead of the BIR Comm: the answer is
in the affirmative. As a general rule, the Commissioner of CIR may delegate any power vested upon him by law to
Division Chiefs or to officials of higher rank. However, he CANNOT, delegate the four powers granted to him
under Sec. 7 of RA 8424, as amended.
It is clear from the provision of the said law that the act of the issuance of the demand letter by the
Chief of Accounts Receivable and Billing Division does not fall under any of the exceptions that have been
mentioned as non-delegable. Sec 6 of the Code further states that the authority to make tax assessments may be
delegated to subordinate officers. Said assessments has the same force and effect as that issued by the
Commissioner himself, if not reviewed or revised by the latter in such case.
 PHILIPPINE BRITISH ASSURANCE COMPANY, INC. v. REP OF PH; GR NO. 185558; FEB. 2, 2010
FACTS:
Philippine British Assurance Company, Inc. (PBACI) issues custom bonds to its clients in favor of BOC.
These bonds secured the release of imported goods in order that the goods may be released from the BOC
without prior payment of the corresponding customs duties and taxes.
Republic, represented by BOC, filed a complaint against PBACI before the RTC. It was alleged that the
PBACI had outstanding unliquidated custom bonds with BOC. RTC ruled in favor of BOC. PBACI filed MR but
was denied. PBACI then filed an appeal to CA. CA dismissed the case for lack of jurisdiction.
ISSUE:
WON CA has jurisdiction over the case albeit the case being in the nature of a tax collection case.
HELD:
Yes, because this is not a tax collection case. The original complaint filed with the trial court was in the
nature of a collection case, purportedly to collect on the obligation of petitioner by virtue of bonds executed by its
favor of BOC, essentially a contractual obligation.
As PBACI correctly pointed out, an action to collect on a bond to secure the payment of taxes is not a
tax collection case, but rather a simple case of enforcement of contract liability.
PHILIPPINE JOURNALIST, INC. v. CIR; GR NO. 162852; DEC. 16, 2004
FACTS
The Revenue District Office of the Bureau of Internal Revenue (BIR) issued Letter of Authority for
Revenue Officer Federico de Vera, Jr. and Group Supervisor Vivencio Gapasin to examine petitioner’s books of
account and other accounting records for internal revenue taxes. Revenue District Officer Jaime Concepcion
invited petitioner to send a representative to an informal conference for an opportunity to object and present
documentary evidence relative to the proposed assessment. Petitioner’s Comptroller, LorenzaTolentino, executed
a “Waiver of the Statute of Limitation Under the National Internal Revenue Code (NIRC)”. Records show that, it
did not bear the date of acceptance, that petitioner was not furnished a copy of the waiver, and the waiver was
signed only by the Revenue District Officer. The tax liability exceeds One Million Pesos (P1,000,000.00).
ISSUE
Whether the waiver is in accordance with RMO No. 20-90 to validly extend the three-year prescriptive
period under the NIRC.
HELD
NO.
The waiver document is incomplete and defective and thus the three-year prescriptive period was not
tolled or extended and continued to run. Consequently, the Assessment/Demand was invalid because it was
issued beyond the three (3) year period. In the same manner, Warrant of Distraint and/or Levy which petitioner
received thereafter is also null and void for having been issued pursuant to an invalid assessment.
The NIRC, under Sections 203 and 222, provides for a statute of limitations on the assessment and
collection of internal revenue taxes in order to safeguard the interest of the taxpayer against unreasonable
investigation. Unreasonable investigation contemplates cases where the period for assessment extends
indefinitely because this deprives the taxpayer of the assurance that it will no longer be subjected to further
investigation for taxes after the expiration of a reasonable period of time.
A waiver of the statute of limitations under the NIRC, to a certain extent, is a derogation of the
taxpayers’ right to security against prolonged and unscrupulous investigations and must therefore be carefully and
strictly construed. xxx Thus, the law on prescription, being a remedial measure, should be liberally construed in
order to afford such protection.
The waiver is also defective from the government side because it was signed only by a revenue district
officer, not the Commissioner, as mandated by the NIRC and RMO No. 20-90. The waiver is not a unilateral act
by the taxpayer or the BIR, but is a bilateral agreement between two parties to extend the period to a date certain.
The conformity of the BIR must be made by either the Commissioner or the Revenue District Officer. This case
involves taxes amounting to more than One Million Pesos (P1,000,000.00) and executed almost seven months
before the expiration of the three-year prescription period. For this, RMO No. 20-90 requires the Commissioner of
Internal Revenue to sign for the BIR.
Source of Digest: https://engrjhez.wordpress.com
Spouses Emmanuel D. Pacquiao and Jinkee J. Pacquiao vs. CTA and CIR
G.R. No. 213394, April 6, 2016
Ponente: Mendoza, J.
FACTS:
Prior to their election as public officers, the petitioners relied heavily on Emmanuel “Manny” Pacquiao's
claim to fame as a world-class professional boxer. His success able to amass income from both the Philippines
and the United States of America (US). His income from the US came primarily from the purses he received for
the boxing matches he took part under Top Rank, Inc. On the other hand, his income from the Philippines
consisted of talent fees received from various Philippine corporations for product endorsements, advertising
commercials and television appearances. In compliance with his duty to his home country,
Pacquiao filed his 2008 income tax return on April 15, 2009 reporting his Philippine-sourced income and was
subsequently amended to include his US-sourced income.
The controversy began on March 25, 2010, when Pacquiao received a Letter of Authority (March
LA) from the Regional District Office No. 43 (RDO) of the Bureau of Internal Revenue (BIR) for the examination of
his books of accounts and other accounting records for the period covering January 1, 2008 to December 31,
2008.
On April 15, 2010, Pacquiao filed his 2009 income tax return, which although reflecting his Philippines-
sourced income, failed to include his income derived from his earnings in the US. He also failed to file his Value
Added Tax (VAT) returns for the years 2008 and 2009.
To determine his tax liabilities, CIR issued a July LA, authorizing BIR’s National Investigating Division to
examine the books of accounts and other accounting records of both Pacquiao and Jinkee for the last 15 years,
from 1995 to 2009. On September 21, 2010 and September 22, 2010, the CIR replaced the July LA by issuing to
both Pacquiao and Jinkee separate electronic versions of the July LA pursuant to Revenue Memorandum
Circular (RMC) No. 56-2010.
Petitioner, through counsel, wrote a letter questioning the propriety of the CIR Investigation. According
to the petitioners, they were already subjected to an earlier investigation by the BIR for the years prior to 2007,
and no fraud was ever found to have been committed. They added that pursuant to the March LA issued by the
RDO, they were already being investigated for the year 2008. NID informed the counsel of the petitioners that the
July LA issued by the CIR had effectively cancelled and superseded the March LA issued by its RDO and it
stated: “Although fraud had been established in the instant case as determined by the Commissioner, your clients
would still be given the opportunity to present documents as part of their procedural rights to due process with
regard to the civil aspect thereof. Moreover, any tax credits and/or payments from the taxable year 2007 & prior
years will be properly considered and credited in the current investigation.”
The CIR informed the petitioners that its reinvestigation of years prior to 2007 was justified because the
assessment thereof was pursuant to a "fraud investigation" against the petitioners under the "Run After Tax
Evaders" (RATE) program of the BIR.
On January 5 and 21, 2011, the petitioners submitted various income tax related documents for the
years 2007-2009. As for the years 1995 to 2006, the petitioners explained that they could not furnish the bureau
with the books of accounts and other, tax related documents as they had already been disposed in accordance
with Section 235 of the Tax Code.
On June 21; 2011 petitioners made their last compliance in submitting their tax-related documents.
CIR made its initial assessment finding that the petitioners were unable to fully settle their tax liabilities.
Thus, the CIR issued its Notice of Initial Assessment-Informal Conference (NIC), dated January 31, 2012, directly
addressed to the petitioners, informing them that based on the best evidence obtainable, they were liable for
deficiency income taxes in the amount of P714,061,116.30 for 2008 and P1,446,245,864.33 for 2009, inclusive of
interests and surcharges.
On February 20, 2012, the CIR issued the Preliminary Assessment Notice (PAN), informing the
petitioners that based on third-party information allowed under Section 5(B) and 6 of the NIRC, petitioners liable
not only for deficiency income taxes in the amount of P714,061,116.30 for 2008 and P1,446;245,864.33 for 2009,
but aiso for their non-payment of their VAT liabilities in the amount P4,104,360.01 for 2008 and P 24,901,276.77
for 2009.
The petitioners filed their protest against the PAN.
After denying the protest, the BIR issued its Formal Letter Demand(FLD), dated May 2, 2012, finding the
petitioners liable for deficiency income tax and VAT amounting to P766,899,530.62 for taxable years 2008 and
P1,433,421,214.61 for 2009, inclusive of interests and surcharges. Again, the petitioners questioned the findings
of the CIR.
On May 14, 2013, the BIR issued its Final Decision on Disputed Assessment (FDDA) addressed
to Pacquiao only, informing him that the CIR found him liable for deficiency income tax and VAT for taxable years
2008 and 2009 which, inclusive of interests and surcharges, amounted to a total of P2,261,217,439.92. The
Accounts Receivable Monitoring Division of the BIR (BIR-ARMD), issued the Preliminary Collection Letter (PCL)
dated July 19, 2013, demanding that both Pacquiao and Jinkee pay the said amount.
On August 7, 2013, the BIR-ARMD sent Pacquiao and Jinkee the Final Notice Before Seizure (FNBS),
informing the petitioners of their last opportunity to make the necessary settlement of deficiency income and VAT
liabilities before the bureau would proceed against their property.
Although they no longer questioned the BIR's assessment of their deficiency VAT liability, the petitioners
requested that they be allowed to pay the same in four (4) quarterly installments. Eventually, through a series of
installments, Pacquiao and Jinkee paid a total P32,196,534.40 in satisfaction of their liability for deficiency VAT.
The petitioners filed a petition for review with the CTA, contending that the assessment were defective
as it is based on allegations that they were guilty of fraud. They also questioned the validity of the attempt by the
CIR to collect deficiency taxes from Jinkee, arguing that she was denied due process, alleging that although all
correspondence were addressed to both of them, the FDDA was void for it was only addressed to Manny
Pacquiao. Consequently, PCL and FNBS should also be declared void as it was based on the FDDA. Pacquiao
contended that the CIR assessment was only based on their best possible sources and that the same did not
consider the taxes paid by Pacquiao to the US authorities for his fights, but also deduction claimed by him for his
expenses.
Pending the CTA resolution, petitioners sought the suspension of the issuance of warrants of distraint
and/or levy and warrants of garnishment.
On October 14, 2013, the BIR-ARMD informed the petitioners that they were denying their request to
defer the collection enforcement action for lack of legal basis. The same letter also informed the petitioners that
despite their initial payment, the amount to be collected from both of them still amounted to P3,259,643,792.24,
for deficiency income tax for taxable years 2008 and 2009, and P46,920,235.74 for deficiency VAT for the same
period. A warrant of distraint and/or levy against Pacquiao and Jinkee was included in the letter.
 Petitioners filed the subject Urgent Motion for the CTA to lift the warrants of distraint, levy and
garnishments issued by the CIR against their .assets and to enjoin the CIR from collecting the assessed
deficiency taxes pending the resolution of their appeal.
On April 22, 2014, the CTA issued the first assailed resolution granting the petitioner's Urgent Motion,
ordering the CIR to desist from collecting on the deficiency tax assessments against the petitioners.
CTA noted that the amount sought to be collected was way beyond the petitioners' net worth, which,
based on Pacquiao's Statement of Assets, Liabilities and Net Worth (SALN), only amounted to
P1,185,984,697.00. Considering that the petitioners still needed to cover the costs of their daily subsistence, the
CTA opined that the collection of the total amount of P3,298,514,894.35 from the petitioners would be highly
prejudicial to their interests and should, thus, be suspended pursuant to Section 11 of R.A. No. 1125, as
amended.
The CTA, however, saw no justification that the petitioners should deposit less than the disputed
amount. They were, thus, required to deposit the amount of P3,298,514,894.35 or post a bond in the amount of
P4,947,772,341.53. The petitioners sought partial reconsideration of the April 22, 2014 CTA resolution, praying for
the reduction of the amount of the bond required or an extension of 30 days to file the same.
On July 11, 2014, the CTA issued the second assailed resolution denying the petitioner's motion to
reduce the required cash deposit or bond, but allowed them an extension of thirty (30) days within which to file the
same. Hence, this petition.
ISSUES:
(1) Whether or not petitioners’ appeal to CTA will suspend the collection of tax
(2) Whether or not petitioners’ case falls within the exception provided under Section 11, RA 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 case should be remanded to the CTA for the conduct of preliminary hearing
RULING:
The Petition is PARTIALLY GRANTED. The Writ of Preliminary is issued to enjoin CTA from
implementing its April 22, 2014 and July 11, 2014 Resolution. The petitioners were ordered to deposit a cash
bond in the amount of P3,298,514,894.35 or post a bond of P4,947,772,341.53, as a condition to restrain the
collection of the deficiency taxes assessed against them. The case is REMANDED to the CTA which is ordered to
conduct preliminary hearings to determine whether the dispensation or reduction of the required cash deposit or
bond provided under Section 11, Republic Act No. 1125 is proper to restrain the collection of deficiency taxes
assessed against the petitioners. CTA shall compute the amount of the bond in accordance with A.M. No. 15-02-
01-CTA and should also take into account the amounts already paid by the petitioners.
On the first issue:
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. 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 to file a surety bond.
The application of the exception to the rule is the crux of the subject controversy. Specifically, Section
11 provides:
SEC. 11. Who May Appeal; Mode of Appeal; Effect of Appeal. - Any party adversely affected
by a decision, ruling or inaction of the Commissioner of Internal Revenue, the Commissioner
of Customs, the Secretary of Finance, the Secretary of Trade and Industry or the Secretary of
Agriculture or the Central Board of Assessment Appeals or the Regional Trial Courts may file
an appeal with the CTA within thirty (30) days after the receipt of such decision or ruling or
after the expiration of the period fixed by law for action as referred to in Section 7(a)(2) herein.
xxxx
No appeal taken to the CTA from the decision of the Commissioner of Internal Revenue or the
Commissioner of Customs or the Regional Trial Court, provincial, city or municipal treasurer or
the Secretary of Finance, the Secretary of Trade and Industry and Secretary of Agriculture, as
the case may be shall 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:
Provided, however, That when in the opinion of the Court the collection by the aforementioned
government agencies may jeopardize the interest of the Government and/or the taxpayer, the
Court at any stage of the proceeding may suspend the said collection and require the
taxpayer either to deposit the amount claimed or to file a surety bond for not more than double
the amount with the Court.
The Court said, “Section 11 of Republic Act No. 1125 is therefore premised on the assumption that the
collection by summary proceedings is by itself in accordance with existing laws; and then what is suspended is the
act of collecting, whereas, in the case at bar what the respondent Court suspended was the use of the method
employed to verify the collection which was evidently illegal after the lapse of the three-year limitation period. The
respondent Court issued the injunction in question on the basis of its findings that the means intended to be used
by petitioner in the collection of the alleged deficiency taxes were in violation of law.  It would certainly be an
absurdity on the part of the Court of Tax Appeals to declare that the collection by the summary methods of
distraint and levy was violative of the law, and then, on the same breath require the petitioner to deposit or file a
bond as a prerequisite of the issuance of a writ of injunction. Let us suppose, for the sake of argument, that the
Court a quo would have required the petitioner to post the bond in question and that the taxpayer would refuse or
fail to furnish said bond, would the Court a quo be obliged to authorize or allow the Collector of Internal Revenue
to proceed with the collection from the petitioner of the taxes due by a means it previously declared to be contrary
to law?”
 Thus, despite the amendments to the law, the Court still holds that the CTA has ample authority to issue
injunctive writs to restrain the collection of tax and to even dispense with the deposit of the amount claimed or the
filing of the required bond, whenever the method employed by the CIR in the collection of. tax jeopardizes the
interests of a taxpayer for being patently in violation of the law. Such authority emanates from the jurisdiction
conferred to it not only by Section 11 of R.A. No. 1125, but also by Section 7 of the same law, which provides:
Sec. 7. Jurisdiction. - The Court of Tax Appeals shall exercise:
a. Exclusive appellate jurisdiction to review by appeal, as herein provided:
l. Decisions of the Commissioner of Internal Revenue in cases involving disputed
assessments, refunds of internal revenue taxes, fees or other charges, penalties imposed in
relation thereto, or other matters arising under the National Internal Revenue or other laws
administered by the Bureau of Internal Revenue;
xxxx
[Emphasis Supplied]
From all the foregoing, it is clear that the authority of the courts to issue injunctive writs to
restrain the collection of tax and to dispense with the deposit of the amount claimed or the
filing of the required bond is not simply confined to cases where prescription has set in. As
explained by the Court in those cases, whenever it is determined by the courts that the
method employed by the Collector of Internal Revenue in the collection of tax is not
sanctioned by law, the bond requirement under Section 11 of R.A. No. 1125 should be
dispensed with. The purpose of the rule is not only to prevent jeopardizing the interest of the
taxpayer, but more importantly, to prevent the absurd situation wherein the court would
declare "that the collection by the summary methods of distraint and levy was violative of law,
and then, in the same breath require the petitioner to deposit or file a bond as a prerequisite
for the issuance of a writ of injunction.”
On the second issue:
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 should first be highlighted that in rendering the assailed resolution, the CTA, without stating the facts
and law, made a determination that the illegality of the methods employed by the CIR to effect the collection of tax
was not patent.
Though it may be true that it would have been premature for the CTA to immediately determine whether
the assessment made against the petitioners was valid or whether the warrants were properly issued and
served, still, it behooved upon the CTA to properly determine, at least preliminarily, whether the CIR, in its
assessment of the tax liability of the petitioners, and its effort of collecting the same,  complied with the law and the
pertinent issuances of the BIR itself. The CTA should have conducted a preliminary hearing and received
evidence so it could have properly determined whether the requirement of providing the required security under
Section 11, R.A. No. 1125 could be reduced or dispensed with pendente lite.
On the third issue:
Absent any evidence and preliminary determination by the CTA, the Court cannot make any factual
finding and settle the issue of whether the petitioners should comply with the security requirement under Section
11, R.A. No. 1125. The determination of whether the methods, employed by the CIR in its assessment,
jeopardized the interests of a taxpayer for being patently in violation of the law is a question of fact that calls for
the reception of evidence which would serve as basis. In this regard, the CTA is in a better position to initiate this
given its time and resources. The remand of the "case to the CTA on this question is, therefore, more sensible
and proper. For the Court to make any finding of fact on this point would be premature.
On the fourth issue:
As the CTA is in a better, position to make such a preliminary determination, a remand to the CTA is in
order. To resolve the issue of whether the petitioners should be required to post the security bond under Section
11 of R.A. No. 1125, and, if so, in what, amount, the CTA must take into account, among others, the following:
First. Whether the requirement of a Notice of Informal Conference was complied with;
Second. Whether the 15-year period subject of the CIR's investigation is arbitrary and excessive;
Third. Whether fraud was duly established;
Fourth. Whether the FLD issued against the petitioners was irregular;
Fifth. Whether the FDDA, the PCL, the FNBS, and the Warrants of Distraint and/or Levy were
validly issued. In its hearing, the CTA must also determine if the following allegations of the
petitioners have merit:
a. The FDDA and PCL were issued against petitioner Pacquiao only. The Warrant of Distraint and/or
Levy/Garnishment issued by the CIR, however, were made against the assets of both petitioners;
b. The warrants of garnishment had been served on the banks of both petitioners even before the
petitioners received the FDDA and PCL;
c. The Warrant of Distraint and/or Levy/Garnishment against the petitioners was allegedly
made prior to the expiration of the period allowed for the petitioners to pay the assessed
deficiency taxes;
d. The Warrant of Distraint and/or Levy/Garnishment against petitioners failed to take into
consideration that the deficiency VAT was already paid in full; and
e. Petitioners were not given a copy of the Warrants. Sections 207[68] and 208[69] of the Tax Code
require the Warrant of Distraint and/or Levy/Garnishment be served upon the taxpayer.
In case the CTA finds that the petitioners should provide the necessary security under Section 11 of R.A. 1125, a
recomputation of the amount thereof is in order. If there would be a need for a bond or to reduce the same, the
CTA should take note that the Court, in A.M. No. 15-92-01-CTA, resolved to approve the CTA  En Banc Resolution
No. 02-2015, where the phrase "amount claimed" stated in Section 11 of R.A. No. 1125
was construed to refer to the principal amount of the deficiency taxes, excluding penalties, interests and
surcharges. Moreover, the CTA should.also consider the claim of the petitioners that they already paid a total of
P32,196,534.40 deficiency VAT assessed against' them.

Digest Source: SCRIBD