CHINA BANKING CORPORATION VS.

CIR

GR NO. 172509

FACTS:

On 8 May 1989, petitioner CBC, through its vice-president, sent a letter of protest to the BIR. CBC raised
the following defenses: (1) double taxation, as the bank had previously paid the DST on all its transactions
involving sales of foreign bills of exchange to the Central Bank; (2) absence of liability, as the liability for
the DST in a sale of foreign exchange through telegraphic transfers to the Central Bank falls on the buyer
— in this case, the Central Bank; (3) due process violation, as the bank's records were never formally
examined by the BIR examiners; (4) validity of the assessment, as it did not include the factual basis
therefore; (5) exemption, as neither the tax-exempt entity nor the other party was liable for the payment
of DST before the effectivity of Presidential Decree Nos. (PD) 1177 and 1931 for the years 1982 to 1986.
In the protest, the taxpayer requested a reinvestigation so as to substantiate its assertions.

On 6 December 2001, more than 12 years after the filing of the protest, the Commissioner of Internal
Revenue (CIR) rendered a decision reiterating the deficiency DST assessment and ordered the payment
thereof plus increments within 30 days from receipt of the Decision. On 18 January 2002, CBC filed a
Petition for Review with the CTA. On 11 March 2002, the CIR filed an Answer with a demand for CBC to
pay the assessed DST. The taxpayer now comes to this Court with a Rule 45 Petition, reiterating the
arguments it raised at the CTA level and invoking for the first time the argument of prescription. Petitioner
CBC states that the government has three years from 19 April 1989, the date the former received the
assessment of the CIR, to collect the tax. Within that time frame, however, neither a warrant of distraint
or levy was issued, nor a collection case filed in court.

ISSUE:

whether the right of the BIR to collect the assessed DST from CBC is barred by prescription

HELD:

Right of the BIR to collect the assessed DST is barred by the statute of limitations. The attempt of the BIR
to collect the tax through its Answer with a demand for CBC to pay the assessed DST in the CTA on 11
March 2002 did not comply with Section 319 (c) of the 1977 Tax Code, as amended. The demand was
made almost thirteen years from the date from which the prescriptive period is to be reckoned. Thus, the
attempt to collect the tax was made way beyond the three-year prescriptive period. The BIR's Answer in
the case filed before the CTA could not, by any means, have qualified as a collection case as required by
law. Under the rule prevailing at the time the BIR filed its Answer, the regular courts, and not the CTA,
had jurisdiction over judicial actions for collection of internal revenue taxes. It was only on 23 April 2004,
when Republic Act Number 9282 took effect, 17 that the jurisdiction of the CTA was expanded to include,
among others, original jurisdiction over collection cases in which the principal amount involved is one
million pesos or more.

The running of the statute of limitations was not suspended by the request for reinvestigation. The
provision is clear. A request for reinvestigation alone will not suspend the statute of limitations. Two
things must concur: there must be a request for reinvestigation and the CIR must have granted it.

SG | 1
PNB V. CIR

GR 206019

FACTS:

Gotesco entered into a loan agreement with PNB on April 7, 1995. The loan was secured by a real estate
mortgage of a six-hectare property known as Ever Ortigas Commercial Complex. Gotesco subsequently
defaulted on its loan obligations and PNB foreclosed the mortgaged. On October 20, 2000, Gotesco filed
a civil case against PNB before the RTC of Pasig, Branch 168 for the annulment of the foreclosure
proceedings, specific performance and damages with prayer for temporary restraining order (TRO) and/or
preliminary injunction. As PNB prepared to consolidate its ownership over the foreclosed property, PNB
withheld and remitted to the BIR withholding taxes amounting to P74,400,028.49, or 6% of the bid price.
Realizing that it made a mistake, PNB filed an administrative claim for refund of excess withholding taxes
on October 27, 2005. The next day, PNB filed its petition for review for the claim for refund before the tax
court. PNB claimed that it inadvertently applied the 6% creditable withholding tax rate on the sale, when
it should have applied the 5% creditable withholding tax rate on the sale of ordinary asset under Section
2.57.2(J)(B) of RR No. 2-98, as amended by RR No. 6-01. PNB claimed that it erroneously withheld and
remitted an excess P12,400,004.71. The Court of Tax Appeals First Division denied PNB’s claim for the
refund of excess creditable withholding tax for insufficiency of evidence. The CTA division agreed that the
applicable rate is 5% and not 6% but it held that PNB failed to produce evidence that Gotesco did not
utilize or credit the withheld taxes from its tax liabilities. PNB filed an MR with the division attaching
Gotesco’s 2003 Income Tax Return and the schedule of prepaid taxes. The CTA Division, however, denied
the MR because PNB should have presented the Certificates of Creditable Tax Withheld at Source (BIR
Form No. 2307) issued to Gotesco as supporting documents to breakdown the creditable taxes withheld
in Gotesco’s 2003 income tax return. The CTA division stated that BIR Forms No. 2307 will confirm whether
or not that the amount being claimed by PNB was indeed not utilized by Gotesco to offset its taxes. PNB
appealed the decision through a petition for review before the CTA En Banc which was also denied.

ISSUE:

Whether or not PNB is entitled to the refund of creditable withholding taxes erroneously paid to the BIR.
Subsumed in this main issue is the evidentiary value under the premises of BIR Form No. 2307

HELD:

The Supreme Court held that although PNB was not able to submit Gotesco’s BIR Form No. 2307, PNB
submitted evidence sufficiently showing Gotesco’s non-utilization of the taxes withheld subject of the
refund. Gotesco had continued to assert ownership over the Ever Ortigas Commercial Complex as
evidenced by the following: (1) it challenged the validity of the foreclosure sale which was the transaction
subject to the creditable withholding tax; (2) its 2003 Audited Financial Statements declared the property
as still owned by Gotesco. The SC held that Gotesco’s relentless refusal to recognize PNB’s ownership over
the property constitutes proof that Gotesco will not do any act inconsistent with its claim of ownership
over the property, including claiming the creditable tax imposed on the sale. Other pieces of evidence also
supported Gotesco’s non-utilization of the claimed creditable withholding tax. The detailed breakdown of
the withholding taxes claimed by Gotesco in its 2003 income tax return amounting to P6,014,433 showed
that the creditable taxes came from rental payments of Gotesco’s tenants and not from the foreclosure

SG | 2
sale. Also, Gotesco’s former accountant testified that the tax credits claimed for 2003 did not include any
portion of the amount claimed by PNB for refund. All in all, the evidence presented by PNB sufficiently
proved its entitlement to the claimed refund. There is no need for PNB to present Gotesco’s BIR Form No.
2307 because the information contained in the said form may be very well gathered from other
documents already presented by PNB, such as BIR Form 1606. BIR Form 2307 is basically a statement
showing the amount paid for the subject transaction and the amount of tax withheld. The probative value
of BIR Form 2307 is to establish only the fact of withholding of the claimed creditable withholding tax.
There is nothing in BIR Form No. 2307 which would establish either utilization or non-utilization, as the
case may be, of the creditable withholding tax. While perhaps it may be necessary to prove that the
taxpayer did not use the claimed creditable withholding tax to pay for his/its tax liabilities, there is no
basis in law or jurisprudence to say that BIR Form No. 2307 is the only evidence that may be adduced to
prove such non-use. In sum, PNB was able to establish that Gotesco did not use the claimed creditable
withholding taxes, to reiterate: (1) Gotesco’s 2003 Audited Financial Statements proved that Gotesco did
not recognize the foreclosure sale and the payment of PNB of the creditable withholding taxes; (2)
Gotesco’s 2003 ITRs show that the withholding tax claimed for refund was not used by Gotesco; (3) the
testimony of Gotesco’s former accountant proving that Gotesco did not use the creditable withholding
taxes claimed by PNB; and (4) The Withholding Tax Remittance Returns (BIR Form 1606) proving that the
amount was withhenld and paid by PNB. Ergo, the evidence on record sufficiently proves that the claimed
creditable withholding tax was withheld and remitted to the BIR, that such withholding and remittance
was erroneous, and that the claimed creditable withholding tax was not used by Gotesco to settle its tax
liabilities.

SG | 3
CBK POWER CO LTD. VS. CIR

GR 183383

FACTS:

CBK Power is a limited partnership duly organized and existing under the laws of the Philippines, and
primarily engaged in the development and operation of hydro electric power generating plants in Laguna.
In February 2001, CBK Power borrowed money from Industrial Bank of Japan, Fortis-Netherlands,
Raiffesen Bank, Fortis-Belgium, and Mizuho Bank for which it remitted interest payments from May 2001
to May 2003. It allegedly withheld final taxes from said payments based on the following rates: (a) fifteen
percent (15%) for Fortis-Belgium, Fortis-Netherlands, and Raiffesen Bank; and (b) twenty percent (20%)
for Industrial Bank of Japan and Mizuho Bank. However, according to CBK Power, under the relevant tax
treaties between the Philippines and the respective countries in which each of the banks is a resident, the
interest income derived by the aforementioned banks are subject only to a preferential tax rate of 10%
Accordingly, on April 14, 2003, CBK Power filed a claim for refund of its excess final withholding taxes
allegedly erroneously withheld and collected. Due to CIR’s inaction, CBK Power appealed to CTA Division.
The latter partially granted the refund. One of the refunds was disallowed because of failure on the part
of CBK Power to obtain an ITAD ruling with respect to its transactions with Fortis-Netherlands. CTA En
Banc affirmed said decision.

ISSUE:

Whether or not the BIR may add a requirement– prior application for an ITAD ruling – that is not found in
the income tax treaties signed by the Philippines before a taxpayer can avail of preferential tax rates under
said treaties.

HELD:

NO. The Court held that the obligation to comply with a tax treaty must take precedence over the
objective of RMO No. 1-2000. Bearing in mind the rationale of tax treaties, the period of application for
the availment of tax treaty relief as required by RMO No. 1-2000 should not operate to divest entitlement
to the relief as it would constitute a violation of the duty required by good faith in complying with a tax
treaty. The denial of the availment of tax relief for the failure of a taxpayer to apply within the prescribed
period under the administrative issuance would impair the value of the tax treaty. At most, the application
for a tax treaty relief from the BIR should merely operate to confirm the entitlement of the taxpayer to
the relief. Logically, noncompliance with tax treaties has negative implications on international relations,
and unduly discourages foreign investors. While the consequences sought to be prevented by RMO No.
1-2000 involve an administrative procedure, these may be remedied through other system management
processes, e.g., the imposition of a fine or penalty. But we cannot totally deprive those who are entitled
to the benefit of a treaty for failure to strictly comply with an administrative issuance requiring prior
application for tax treaty relief.

SG | 4
CIR V. NAGASE PHIL CORP

EB 1048

Facts:

On Sept 12, 2007, Nagase received from CIR a FAN stating a deficiency in Income tax of P36,433,548.87,
inclusive of 50% surcharge and interest for taxable year 2003. On Oct 11, 2007, CIR received a protest to
the FAN stating that such deficiency had no legal and factual basis. On May 6, 2008, Nagase filed a Petition
for review before the court which decided in favor of Nagase. Contending that the Right to assess has
already prescribed. Aggrieved, CIR filed to the SC a Petition for Review alleging that the assessment made
was not beyond the allowed time by the law because Nagase requested for a reinvestigation dated March
28,2007 in response to a pre-assessment notice dated March 22, 2007.

Issue:

W/O The assessment was void by prescription?

Held:

No, RR No. 12-85 Sec. 6 discussed the difference between a reconsideration and a reinvestigation. The
latter, when availed and granted, the running of the prescriptive period for assessment is suspended until
reinvestigation has been resolved.

However, CIR failed to show proof regarding the Request and approval of reinvestigation and such
allegation must be of no merit according to Sec 1, Rule 131 of the Rules of Court (evidence).

Wherefore, premises considered, the Petition for Review is hereby Denied.

SG | 5
GJM PHIL MFG INC V. CIR

GR 202695

FACTS:

On April 12, 2000, GJM filed its Annual Income Tax Return for the year 1999. Thereafter, its parent
company, Warnaco (HK) Ltd., underwent bankruptcy proceedings, resulting in the transfer of ownership
over GJM and its global affiliates to Luen Thai Overseas Limited. GJM informed the Revenue District Officer
of Trece Martirez, through a letter, that on April 29, 2002, it would be canceling its registered address in
Makati and transferring to Rosario, Cavite. GJM's request for transfer of its tax registration was confirmed.
On October 18, 2002, the Bureau of Internal Revenue (BIR) sent a letter of informal conference informing
GJM that the report of investigation on its income and business tax liabilities for 1999 had been submitted.
The report disclosed that GJM was still liable for an income tax deficiency and the corresponding 20%
interest, as well as for the compromise penalty in the total amount of P1,192,541.51. On February 12,
2003, the Bureau of Internal Revenue (BIR) issued a Pre-Assessment Notice and Details of Discrepancies
against GJM. On April 14, 2003, it issued an undated Assessment Notice, indicating a deficiency income
tax assessment in the amount of P1,480,099.29. On July 25, 2003, the BIR issued a Preliminary Collection
Letter requesting GJM to pay said income tax deficiency for the taxable year 1999. Said letter was
addressed to GJM's former address in Pio del Pilar, Makati. On August 18, 2003, although the BIR sent a
Final Notice Before Seizure to GJM's address in Cavite, the latter claimed that it did not receive the same.
On December 8, 2003, GJM received a Warrant of Distraint and/or Levy. The company then filed its Letter
Protest on January 7, 2004, which the BIR denied on January 15, 2004. Hence, GJM filed a Petition for
Review before the CTA. On January 26, 2010, the CTA First Division rendered a Decision in favor of GJM.

ISSUE:

1. Whether or not the formal assessment notice for deficiency income tax issued to GJM for taxable
year 1999 was released, mailed, and sent within the 3 yr prescriptive period
2. Whether or Not the BIR right to asses GJM for deficiency tax for taxable year 1999 has already
prescribed

HELD:

The BIR's failure to prove GJM's receipt of the assessment leads to no other conclusion but that no
assessment was issued. Consequently, the government's right to issue an assessment for the said period
has already prescribed. The CIR offered in evidence Transmittal Letter No. 282 dated April 14, 2003
prepared and signed by one Ma. Nieva A. Guerrero, as Chief of the Assessment Division of BIR Revenue
Region No. 8-Makati, to show that the FAN was actually served upon GJM. However, it never presented
Guerrero to testify on said letter, considering that GJM vehemently denied receiving the subject FAN and
the Details of Discrepancies. Also, the CIR presented the Certification signed by the Postmaster of Rosario,
Cavite, Nicarter Looc, which supposedly proves the fact of mailing of the FAN and Details of Discrepancy.
It also adduced evidence of mail envelopes stamped February 17, 2003 and April 14, 2003, which were
meant to prove that, on said dates, the Preliminary Assessment Notice (PAN) and the FAN were delivered,
respectively. Said envelopes also indicate that they were posted from the Makati Central Post Office.
However, according to the Postmaster's Certification, of all the mail matters addressed to GJM which were
received by the Cavite Post Office from February 12, 2003 to September 9, 2003, only two (2) came from

SG | 6
the Makati Central Post Office. These two (2) were received by the Cavite Post Office on February 12, 2003
and May 13, 2003. But the registered mail could not have been the PAN since the latter was mailed only
on February 17, 2003, and the FAN, although mailed on April 14, 2003, was not proven to be the mail
received on May 13, 2003. The CIR likewise failed to show that said mail matters received indeed came
from it. It could have simply presented the registry receipt or the registry return card accompanying the
envelope purportedly containing the assessment notice, but it offered no explanation why it failed to do
so. Hence, the CTA aptly ruled that the CIR failed to discharge its duty to present any evidence to show
that GJM indeed received the FAN sent through registered mail on April 14, 2003.

SG | 7
CIR V. FABTECH EXPORT IND INC

Facts:

On September 11, 2008, the BIR issued Letter of Authorit/ (LOA) for the examination of FEI' s books of
accounts for calendar year 2007. On February 18, 2011, FEI received a Final Assessment Notice (FAN)
dated January 24, 2011 for deficiency VAT, in the amount of P16,732,142.72 and for deficiency income
tax, in the amount ofP266,921.85. On March 3, 2011 , FEI filed its formal protest pursuant to Section 228
of the 1997 NIRC. On May 11 , 2011 , petitioner sent a letter to FEI informing the withdrawal and
cancellation of the FAN, dated January 24,2011. Despite the cancellation of the FAN, petitioner, through
BIR, issued thesubject Formal Letter of Demand (FLD). On June 9, 2011, FEI filed its formal protest. The
CIR failed to act on FEI's protest within the 180-day period from August 2, 2011, the date when FEI
submitted documents in support of its Protest. Hence, on February 28, 2012, FEI filed a Petition for Review
before the Court in Division. FEI insists that it did not receive a Notice of Informal Conference, PAN and
FAN in connection with LOA. The nonissuance of the Notice of Informal Conference, PAN and FAN prior
to the issuance of the FLD violated respondent's right to due process. On February 18, 2014, the Court in
Division issued the assailed Decision granting FEI's Petition for Review. Aggrieved, on March 6, 2014, the
CIR filed a Motion for Reconsideration, which was denied for lack of merit.

Issue:

W/O Due Process for Assessment was executed.

Held:

In connection with LOA, respondent, however, vehemently denies receipt of the corresponding PAN. On
the other hand, petitioner insists that the PAN dated February 25, 20 11 was sent to petitioner by
registered mail. Under the afore-quoted Section ofRR No. 12-99, service of the PAN to the taxpayer may
be made by at least registered mail. The facts to be proven in order to give rise to aforestated disputable
presumption are: (a) that the letter was properly addressed with postage prepaid; and, (b) that it was
mailed. Once these facts are established, the presumption is that the letter was received by the addressee
as soon as it could have been transmitted to him in the ordinary course of the mail. Records reveal that
petitioner merely alleged that the PAN dated February 25, 2011 was sent to respondent by registered
mail. Petitioner, however, failed to present independent evidence, such as the Registry Receipt or a
certification from the Bureau of Posts, which could have easily been obtained. It is basic in the rule of
evidence that bare allegations, unsubstantiated by evidence, are not equivalent to proof. Furthermore,
the Court cannot give probative value to the photocopy of the alleged PAN and alleged mailing envelope
attached to the instant Petition for Review considering that the same were not formally offered during
trial, in violation of Section 34, Rule 132 of the Revised Rules of Court.

SG | 8
PILIPINAS SHELL PETROLEUM CORP

GR 180402

FACTS:

Pilipinas Shell filed two separate claims for the refund or credit of the excise taxes paid on the foregoing
sales, totaling P49,058,733.09. Due to the inaction of the Bureau of Internal Revenue (BIR) on its claims,
Pilipinas Shell decided to file a petition for review with the CTA which rendered its Decision granting
Pilipinas Shell's claim but at a reduced amount of P39,305,419.49. The claim for refund/credit of the excise
taxes from the sales and deliveries coming from the portion sourced from Petron was disallowed by the
CTA on the ground that Pilipinas Shell is not the proper party to claim the same. The CIR filed a motion for
reconsideration of the CTA decision but it was denied by the CTA. Hence, it filed a petition for review
before the CTA en banc. The CTA en banc rendered the assailed decision dismissing the BIR's petition for
lack of merit and affirming the assailed CTA decision and resolution. Its motion for reconsideration having
been denied. The CIR now comes to this Court on petition for review. The arguments raised by the CIR are
basically the same as those raised before the CTA Second Division and en banc, that is, Pilipinas Shell is
not entitled to a refund/credit of the excise taxes paid on its sales and deliveries to international carriers.

ISSUE:

Whether or not Pilipinas Shell is not entitlked to refund/credit of excise taxes paid on its sales and
deliveries to international carriers

HELD:

Under the doctrine of stare decisis, 19 the Court must adhere to the principle of law laid down in Pilipinas
Shell and apply the same in the present case, especially since the facts, issues, and even the parties
involved are exactly identical. Thus, the Court hereby holds that Pilipinas Shell's claim for refund/tax credit
must be granted pursuant to Pilipinas Shell, as its petroleum products sold to international carriers for the
period of November 2000 to March 2001 are exempt from excise tax, these international carriers being
exempt from payment of excise tax under Section 135 (a) of the NIRC. In view of the foregoing reasons,
we find merit in respondent's motion for reconsideration. We therefore hold that respondent, as the
statutory taxpayer who is directly liable to pay the excise tax on its petroleum products, is entitled to a
refund or credit of the excise taxes it paid for petroleum products sold to international carriers, the latter
having been granted exemption from the payment of said excise tax under Sec. 135 (a) of the NIRC. For
one, Pilipinas Shell already ruled that petroleum products sold by local manufacturers/sellers to
international carriers are exempt from the imposition of excise taxes as these international carriers enjoy
exemption from payment of excise taxes under Section 135 (a) of the NIRC. For another, the CIR failed to
state with specificity the tenor of these issuances, except that these relate to the BIR's alleged grant of
excise tax exemption on petroleum products, without even making an effort to present an official copy of
these issuances, much less its contents.

SG | 9
RAYMUNDO V. DE JOYA

101 SCRA 495

FACTS:

Rafael Cavanna, to escape the payment of duties and taxes on the car he bought in 1959, registered the
same in his name at the Motor Vehicles Office by using an import entry showing payment thereof but
which actually pertained to another importation. In 1963, after discovery of the fraud, he executed a deed
of sale in favor of his wife, paying the taxes thereon in the amount much less than what should have been
collected in 1959. As there was some anomaly in the informal entry number for such car, a warrant of
seizure and detention was subsequently issued. The Collector of Customs ordered the payment of
deficiency taxes due the government. During the pendency of the case, Paz Alcantara sold the car to
petitioner-appellant Renato G. Raymundo who filed with the Court of Tax Appeals a petition for review of
the order for the payment of deficiency taxes. Failing to get relief, he filed this present action.

ISSUE:

Whether or not the finding of facts of the tax court not be disturbed on appeal

HELD:

Time and again, the Supreme Court had made clear in categorical language that the findings of facts of
the Court of Tax Appeals is entitled to the highest respect. So it has been since. The allegation of denial of
due process on the ground that the Commissioner of Customs as well as the Court of Tax Appeals could
not reverse what it considered to be a finding of the then Collector of Customs lacks persuasiveness as
the very concept of an appeal implies that the authority to which the matter is elevated could by an
exercise of independent judgment reach the conclusion it did. The mere fact that there was a difference
of point of view between subordinate and the official of a higher category who can properly entertain
such an appeal does not suffice to warrant a disregard of what under the law is impressed with a decisive
effect. The findings of facts by the Court of Tax Appeals is not to be disturbed. Only by a showing that
there was no substantial evidence could a due process question be raised which element is not present in
the case at bar.

SG | 10
STEMIKO COMMERCIAL V. CIR

Facts:

Respondent received a Preliminary Collection Letter dated October 12, 2010 for the collection of his
alleged unpaid tax liability in the amount of P28,657,353.87, inclusive of twenty-five percent (25%)
surcharge and twenty percent (20%) interest. On November 18, 2010, petitioner issued a Warrant of
Distraint and/or Levy. On May 25, 2011, respondent filed a Letter-Protest which petitioner failed to act
within the 180-day period. Hence a Petition for Review was filed. Respondent denies receiving the PAN,
Amended PAN and FAN. According to respondent, the PAN was served to a certain Roselyn Olaera, who
was, per the payroll and list of employees of the company, neither connected with the businessof, nor
employed by respondent. As already stated, the Court in Division granted the Petition for Review in the
assailed Decision. Through appeal, Petitioner argues that respondent's right to due process was not
violated when the assessment notices were issued. According to petitioner, the PAN dated July 29, 2009
was properly received by respondent's employee, Roselyn Olaera, as evidenced by the signature
appearing on the first page of the said PAN; while the
Amended PAN dated January 18, 2010 and the FAN dated January 28, 2010, sent through registered mail,
were received by respondent

Issue:

W/O There was proper delivery to assert due process.

Held:

We are not swayed. Basic is the rule in evidence that the burden of proof lies upon him who asserts it, not
upon him who denies, since, by the nature of things, he who denies a fact cannot produce any proof of it.
To prove that respondent received the subject PAN petitioner presented (1) the name and signature of
Roselyn Olaera dated November 6, 2009 and the (2) testimony of Rebecca Mallorca ,the revenue
examiner who personally served the said PAN. However, a cursory perusal of the foregoing evidence
reveals nothing about the identity and authority of Ms. Olaera to receive the subject PAN on behalf of
respondent. While the name and signature appearing on the subject PAN shows that a certain Roselyn
Olaera received said assessment notice on November 6, 2009, it does not in any way prove that Ms. Olaera
is respondent's employee or authorized representative. Due process requires that it must be served on
and received by the taxpayer.

SG | 11
TRIDHARMA MARKETING CORP V. CTA

215590

FACTS:

On August 16, 2013, the petitioner received a Preliminary Assessment Notice (PAN) from the Bureau of
Internal Revenue (BIR) assessing it with various deficiency taxes — income tax (IT), value-added tax (VAT),
withholding tax on compensation (WTC), expanded withholding tax (EWT) and documentary stamp tax
(DST) — totalling P4,640,394,039.97, inclusive of surcharge and interest. On September 23, 2013, the
petitioner received from the BIR a Formal Letter of Demand assessing it with deficiency taxes for the
taxable year ending December 31, 2010 amounting to P4,697,696,275.25, inclusive of surcharge and
interest. It filed a protest against the formal letter of demand. Respondent Commissioner of Internal
Revenue (CIR) required the petitioner to submit additional documents in support of its protest, and the
petitioner complied. The petitioner filed with the CIR a protest through a Request for Reconsideration.
However, the CIR rendered a decision dated May 26, 2014 denying the request for reconsideration. Prior
to the CIR's decision, the petitioner paid the assessments and likewise reiterated its offer to compromise
the alleged deficiency. The petitioner appealed the CIR's decision to the CTA via its so-called Petition for
Review with Motion to Suspend Collection of Tax which was granted. The petitioner filed its Motion for
Partial Reconsideration praying, among others, for the reduction of the bond to an amount it could obtain.
The CTA in Division issued its second assailed resolution reducing the amount of the petitioner's surety
bond to P4,467,391,881.76, which was the equivalent of the BIR's deficiency assessment for IT and VAT.
Hence petitioner commenced action for certiorari

ISSUE:

Whether or not CTA in Division commit grave abuse of discretion in requiring the petitioner to file a surety
bond despite the supposedly patent illegality of the assessment that was beyond the petitioner's net
worth but equivalent to the deficiency assessment for IT and VAT?

HELD:

The petition for certiorari is meritorious. Section 11 of Republic Act No. 1125 (R.A. No. 1125), as amended,
No appeal taken to the Court of Tax Appeals from the decision of the Collector of Internal Revenue or the
Collector of Customs 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 Bureau of Internal Revenue or the Commissioner of Customs
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 holds, however,
that the CTA in Division gravely abused its discretion under Section 11 because it fixed the amount of the
bond at nearly five times the net worth of the petitioner without conducting a preliminary hearing to
ascertain whether there were grounds to suspend the collection of the deficiency assessment on the
ground that such collection would jeopardize the interests of the taxpayer.

SG | 12