SPOUSES PACQUIAO vs.

COURT OF TAX APPEALS CASE BRIEF

G.R. No. 213394 April 6, 2016

FACTS: The case is a petition for review on certiorari of the resolutions of the Court of Tax
Appeals (CTA). In 2010, Pacquiao failed to include his US earnings in his 2009 income tax
return as well as the filling of his VAT for 2008 – 2009. The Commissioner of Internal Revenue
(CIR) then authorized the Bureau of Internal Revenue’s (BIR) to examine the tax documents of
the petitioners from 1995 – 2009. Despite the petitioners’ complaints, the investigation was
justified as a “fraud investigation” under the “Run After Tax Evaders” program. After its
investigation, the CIR found the petitioners liable for deficiency in income tax and non-payment
of VAT liabilities. The BIR then issued the Final Decision on Disputed Assessment (FDDA) and
eventually the Preliminary Collection Letter (PCL) demanding the payment of
P2,261,217,439.92.

A petition for review was filed with the Court of Tax Appeals (CTA) arguing against CIR’s
allegations that the petitioners were guilty of fraud, collection of deficiency tax from Jinkee, and
CIR’s assessment based on the “best possible source” instead of actual transaction documents. In
its resolution, the CTA desisted the collection of tax payment but instead opined that the
petitioners were still required to deposit a payment of P3,298,514, 894.35 or post a bond of
P4,917,772,341.53.The petitioners then asked for partial reconsideration for the reduction of the
amount to be paid which the CTA denied hence, this petition.

ISSUE: Whether or not the exception to Section11, RA No. 1125 is appropriate to this case?

RATIONALE: No. Despite the petitioners claim that CTA committed a grave abuse of discretion
for not applying the exception to Section 11 of RA No. 1125, the Court found that it was not
appropriate to the current case.

Section 11 of RA No. 1125 justifies that an appeal to the CTA from the decision of the CIR will
not suspend the collection of payment for the sanction of one’s tax liability. But, when the CTA
sees that the collection may jeopardize the interest of the Government and/or taxpayer, it may
suspend the said collection and require either to deposit the amount claimed or file a surety bond.
Citing the cases of Avelino and Zuleta, the petitioners believe that CTA has ample authority to
issue injunctive writ to restrain the collection of tax and more importantly dispense with the
deposit of the amount claimed or the filing of the required bond, whenever the method
employed by the CIR in collection of tax jeopardizes the interests of the taxpayers for being
patently in violation of the law.

In relation to the current case, the Court found no sufficient basis to determine whether the
dispensation of the required cash deposit or bond is appropriate. The alleged illegality of the
methods used by the CTA is not clearly evident in the current case. Though it may be true, the
determination whether the petitioners’ case falls within the exception of Section 11, RA No.
1125 cannot be determined at this point. The CTA should have conducted a preliminary hearing
and received evidence, which it did not, so it could have properly determined if the dispensation
of the required cash deposit or bond is appropriate to this case.