G.R. No.

215534, April 18, 2016  As reflected in the FDDA, the CIR still found Liquigaz liable for deficiency
withholding tax liabilities, inclusive of interest, in the aggregate amount of
COMMISSIONER OF INTERNAL REVENUE, Petitioner, v. LIQUIGAZ PHILIPPINES P22,380,025.19, which may be broken down as follows:
CORPORATION, Respondent.
Expanded Withholding Tax (EWT) P 3,479,426.75
G.R. NO. 215557

LIQUIGAZ PHILIPPINES CORPORATION, Petitioner, v. COMMISSIONER OF INTERNAL Withholding Tax on Compensation (WTC) P 4,508,025.93
REVENUE, Respondent.

Fringe Benefits Tax (FBT) P14,392,572.51

FACTS:

 Liquigaz Philippines Corporation (Liquigaz) is a corporation duly organized and existing

under Philippine laws.

 On July 29, 2010, Liquigaz filed its Petition for Review before the CTA Division assailing
 On July 11, 2006, it received a copy of Letter of Authority (LOA) No. the validity of the FDDA issued by the CIR
00067824, dated July 4, 2006, issued by the CIR, authorizing the
investigation of all internal revenue taxes for taxable year 2005

 On April 9, 2008, it received an undated letter purporting to be a Notice of CTA DIVISION RULING: partially granted Liquigaz's petition cancelling the EWT and FBT
Informal Conference (NIC), as well as the detailed computation of its assessments but affirmed with modification the WTC assessment.
supposed tax liability

 On May 28, 2008, it received a copy of the Preliminary Assessment

Notice (PAN), dated May 20, 2008, together with the attached details of
discrepancies for the calendar year ending December 31, 2005
 Upon investigation, Liquigaz was initially assessed with deficiency withholding tax
liabilities, inclusive of interest, in the aggregate amount of P23,931,708.72
 Invalidated EWT and FBT assessment because the FDDA did not provide for the facts
on which the assessment was made pursuant to Section 228 of the NIRC 1997
and RR No. 12-99, but sustained WTC assessment on the ground that that the
factual bases used in the FLD and FDDA with regard thereto were the same as the
difference in the amount merely resulted from the use of a different tax rate.

 on June 25, 2008, it received a Formal Letter of Demand (FLD)/Formal CTA EN BANC RULING: affirmed the assailed decision of the CTA Division
Assessment Notice (FAN), together with its attached details of
discrepancies, for the calendar year ending December 31, 2005, with total
deficiency withholding tax liabilities of P24,332,347.20
Both parties filed their respective petitions for review

 On July 25, 2008, Liquigaz filed its PROTEST against the FLD/FAN and subsequently
ARGUMENT OF BOTH PARTIES:
submitted its supporting documents on September 23, 2008

Liquigaz - that WTC assessment should have also been invalidated because FDDA did not
 on July 1, 2010, it received a copy of the Final Decision on Disputed Assessment
provide for the facts on which the assessment was based. It argues that it was deprived of due
(FDDA) covering the tax audit under LOA No. 00067824
process in not stating the factual basis of the assessment, the CIR did not consider the defenses
and supporting documents it presented
 A VOID FDDA will lead to a void assessment because the FDDA ultimately
determines the final tax liability of a taxpayer.
CIR - that EWT and FBT liability should be upheld because the FDDA must be taken together
with the PAN and FAN, where details of the assessment were attached.
 That even if the FDDA would be declared VOID, it should NOT result in the automatic
abatement of tax liability especially because RR No. 12-99 merely states that a void
decision of the CIR or representative shall not be considered a decision of
the assessment
ISSUES:
1. Whether or not failure of the FDDA to state the facts ad law on which it is based renders the
decision VOID
2. What would be the effect of a void FDDA
HELD:
1. YES, but it does not extend to the nullification of the entire ASSESSMENT. The
assessment on deficiency Withholding Tax in Compensation is upheld
2. It is tantamount to a denial by inaction by the CIR
RATIO:
 The requirement of providing the taxpayer with written notice of the factual
and legal bases applies both to the FLD/FAN and the FDDA.
Section 228 of NIRC and RR No. 12-99 lay out the procedure to be followed on tax
assessment
 A taxpayer SHALL be informed in writing of the law and the facts on which it is made,
otherwise, the assessment shall be VOID.
 The use of the word “SHALL” indicates that such requirement is MANDATORY.
 The written notice requirement for both the FLD and FAN is in observance of DUE
PROCESS - to afford the taxpayer adequate opportunity to file a protest on the
assessment and thereafter file an appeal in case of adverse decision
 Section 228 is, however, silent as with regards to a decision on a disputed assessment by
the CIR. This void is filled by RR No. 12-99 where it is stated that failure of the
FDDA to reflect the facts and law on which it is based will make the decision
void. It, however, does not extend to the nullification of the entire assessment
A VOID FDDA does not ipso facto render the assessment VOID
 A decision of the CIR on a disputed assessment DIFFERS from the assessment itself.
 What is appealable to the CTA is the “decision” of the CIR on disputed assessment
and not the assessment itself.
 An assessment becomes a disputed assessment after the taxpayer has filed its
protest to the assessment in the administrative level. CIR, then, either issues a
decision on the disputed assessment or fails to act on it, and is therefore
considered denied. The taxpayer then appeal the decision on the disputed
assessment or the inaction of the CIR
 Clearly, the FDDA is not the only means that the final tax liability of a taxpayer
is fixed, which may then be appealed by the taxpayer
  Under the law, inaction on the part of the CIR may likewise result in the finality
of a taxpayer’s tax liability as it is deemed a denial of the protest filed by the
latter, which may also be appealed before the CTA

It is undisputed that the FDDA merely showed Liquigaz’ tax liabilities without any
details on the specific transactions which gave rise to its supposed tax deficiencies

 While it provided for the LEGAL bases of the assessment, it fell short of informing Liquigaz
of the FACTUAL bases thereof

 Moreover, the amounts in the FAN and FDDA were DIFFERENT. Hence, it is even more
imperative that the FDDA contain details of the discrepancy.

 However, Liquigaz was effectively informed in writing of the factual bases of its
assessment for WTC because the basis for the FDDA, with regards to the WTC, was
identical with the FAN - which had a detail of discrepancy to it.

The CTA erred, however, in concluding that the assessment on EWT and FBT
deficiency was void because the FDDA covering the same was void.

 The assessment REMAIN VALID notwithstanding the nullity of the FDDA because the
assessment itself differs from a decision on the disputed assessment

EFFECTS OF A VOID FDDA

 As established, an FDDA that does not inform the taxpayer in writing of the facts and the
law on which it is based renders the decision void. Therefore, IT IS AS IF THERE WAS
NO DECISION RENDERED BY THE CIR. It is tantamount too a denial by inaction by
the CIR, which may still be appealed before the CTA and the assessment evaluated on the
basis of the available evidence and documents.

THE CASE IS REMANDED TO THE COURT OF TAX APPEALS FOR THE ASSESSMENT ON
DEFICIENCY EXPANDED WITHHOLDING TAX AND FRINGE BENEFITS TAX
 G.R. No. 213394, April 06, 2016
SPOUSES EMMANUEL D. PACQUIAO AND JINKEE J. PACQUIAO, Petitioners, v. THE
COURT OF TAX APPEALS - FIRST DIVISION AND THE COMMISSION OF INTERNAL
REVENUE, Respondents.
FACTS:
 On April 15, 2009, Pacquiao filed his 2008 ITR reporting his Philippine-sourced income. It
was subsequently amended to include his US-sourced income
 On March 25, 2010, he received a Letter of Authority (March LA) from RDO No.
43 (RDO) of the 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 ITR, 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 VAT returns for the years 2008 and 2009.
 CIR issued another Letter of Authority, dated July 27, 2010 (July LA), authorizing
the BIR's National Investigation Division (NID) to examine the books of accounts and
other accounting records of both Pacquiao and Jinkee for the last 15 years, from
1995 to 2009.
 Then, it replaced the July LA by issuing to both Pacquiao and Jinkee separate
electronic versions of the July LA pursuant to RMC No. 56-2010
 Petitioners, through counsel, wrote a letter questioning the propriety of the CIR
investigation.
 That 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.
 The 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
 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.
 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.
 CIR issued a subpoena duces tecum, requiring the petitioners to submit additional income
tax and VAT related documents for the year 1995-2009.
 After conducting its own investigation, CIR made its INITIAL ASSESSMENT finding that
the petitioners were unable to fully settle their initial liabilities.
 It issued a Notice of Initial Assessment - Informal Conference (NIC) directly
addressed to the petitioners 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.
 On February 20, 2012, it issued the Preliminary Assessment Notice (PAN),
informing the petitioners that based on third party information allowed in NIRC, they
found the petitioners liable not only for the deficiency income taxes but also their
non-payment of their VAT liabilities (P4,104,360.01 for 2008 and P24,901,276.77
for 2009)
 Petitioners filed their protest against the PAN which the BIR denied
 BIR issued its Formal Letter of Demand (FLD) finding the petitioners liable for
deficiency income tax and VAT amounting to P766,899,530.62 for 2008 and
P1,433,421,214.61 for 2009. Petitioner question such findings.
 BIR issued its Final Decision on Disputed Assessment (FDDA) addressed to Pacquiao
only, informing him that he is liable for deficiency income tax and VAT for 2008 and 2009
amounting to P2,261,217,439.92.
 Seeking to collect the total outstanding tax liabilities of the petitioners, BIR issued:
- Preliminary Collection Letter (PCL)
- Final Notice Before Seizure (FNBS)
  Petitioners requested that they be allowed to pay the same in four quarterly
installments. They had paid a total P32,196,534.40. Aggrieved, they filed a petition
for review with the CTA
Petitioner’s contention:
 that the assessment of the CIR was defective because it was predicated on its mere
allegation that they were guilty of fraud
1. CTA erred when it required them to make a cash deposit or post a bond. They insist that the
fraud assessment by the CIR could not be served as a basis for security
2. BIR failed to accord them procedural due process when it initiated summary collection
remedies even before the expiration of period allowed for them to pay the assessed deficiency
taxes
3. The BIR only served the FDDA to Pacquiao, no similar notice to Jinkee
4. The amount assessed as deficiency taxes had already paid, albeit in installments

 That Jinkee was denied due process, as all previous communications and notices from the 5. The posting of their required security is effectively an impossible condition given that their
CIR were addressed to both petitioners, the FDDA was void because it was only addressed undisputed net worth is only P1,185,984,697.00
to Pacquiao. Thus, considering that the PCL and FNBS were based on the FDDA, the same
should likewise be void

 That the CIR assessment which was not based on actual transactions but simply on “best ISSUE:
possible sources” was not sanctioned by the Tax Code.

 That the assessment failed to considered the taxes paid by Pacquiao to the US authorities
Whether or not petitioners are required to post cash deposit or bond as a condition too suspend
and also the deductions claimed by him from his expenses
the collection of deficiency taxes

Pending appeal, petitioners sought the suspension of the issuance of warrants of distraint and/or
HELD:
levy and warrants of garnishment
yes, as a general rule, but such requirement can be reduced or dispensed with when
 In a letter, BIR denied their request to defer the collection enforcement action for lack of
the collection may jeopardize the interest of the Government and/or taxpayer as
legal basis, with a warrant of distraint and/or levy against the petitioner included
when there is patently violation of the law

Aggrieved, petitioner filed Urgent Motion for the CTA to lift the warrants of distraint, levy and
 The case is REMANDED to the CTA which is ordered to conduct a preliminary hearing
garnishment and to enjoin CIR from collecting the assessed deficiency taxes
whether the dispensation of or reduction of the required cash deposit or bond is proper to
restrain the collection of deficiency taxes against the petitioner (since the issue calls for a
question of fact)
CTA Ruling:

It granted petitioner’s urgent motion

 It noted that the amount sought to be collected was way beyond the petitioner’s net worth
which based on Pacquiao’s SALN, only amounted to P1,185,984,697.00 RATIO:

 However, petitioners were required to deposit the amount of P3,298,514,894.35 or

post a bond in the amount of P4,947,772,341.53.
Appeal will not suspend the collection of tax; exception

Procedural and Substantive errors raised by the petitioners:

 General Rule: 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
(Sec 11 of RA 1125)
 Exception: When, in view of the CTA, the collection may jeopardize the interest of
the Government and/or taxpayer, it MAY SUSPEND the said collection and require
the taxpayer either to deposit the amount claimed or to file a surety bond.
 Court’s Ruling in Avelino - “the courts were clothed with authority to DISPENSE with
the requirement (cash deposit or bond) if the method employed by the CIR in the
collection of tax is not sanctioned by law”
 Thus, the Court still holds that the CTA has ample authority to issue injuctive 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 jeopardizes the interests of a taxpayer for being patently in
violation of the law.
 It is not simply confined to cases where prescription has set in
The determination of whether the petitioner’s case falls within the exception
provided under Sec 11, RA no. 1125 CANNOT BE DETERMINED AT THIS POINT
 It is still behooved upon the CTA to properly determine, at least preliminary, whether
the CIR, in its assessment of the tax liability of the petitioners, and its effort to collect 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 could be reduced or dispensed with pendente lite
The Court CANNOT make a PRELIMINARY DETERMINATION on whether the CIR
used methods sanctioned by law
 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 Sec 11 of RA 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 the evidence which would
serve as basis
 The CTA is in better position to initiate this given time and resources
 The remand of the case to the CTA on this question is therefore more sensible and
proper
Petition to be remanded to the CTA; CTA to conduct preliminary hearing
 The CTA must take into account, among other, the following:
1. Whether the requirement of a Notice of Informal Conference was complied
with
 A NIC be first accorded to the taxpayer
2. Whether the 15 year period subject of the CIR’s investigation is arbitrary
and excessive
 Tax Code provides a 3yr limit for the assessment of internal revenue taxes; it
may be extended to 10yrs in cases where there is false or fraudulent or
non-filing of a tax return
3. Whether fraud was duly established
 A preliminary investigation must first be conducted before a LA was issued
4. Whether the FLD issued against the petitioners was irregular
 The FLD allegedly stated the amounts therein were “estimates based on best
possible sources”. A taxpayer should be informed in writing of the law and the
facts on which the assessment is made, otherwise, the assessment is void.
5. Whether the FDDA, the PCL, the FNBS, and the warrants of Distraint and/or
Levy were validly issued
 The CTA must also determine if the following allegations of the petitioners
have merit:
 a. The FDDA and PCL were issued against Pacquiao only; the warrant of
distraint and/or levy were made against the assets of both petitioners;

b. The warrants of garnishment had been served on banks of both petitioners

even before the petitioners received the FDDA and PCL;

c. The Warrant of distraint and/or levy against the petitioners was allegedly
made prior to the expiration of the period allowed for the petitioners to pay the
assessed deficiency taxes

d. That the deficiency VAT was already paid in full;

e. Petitioners were not given a copy of the Warrants

 IN CASE, the petitioner SHOULD PROVIDE the necessary security, 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 phrase “amount claimed” should be construed to refer to the principal
amount of the deficiency taxes, excluding penalties, interests and charges

 In view of the foregoing, the Resolutions of the CTA, in so far as it required the
petitioners to deposit first a cash bond or post a bond SHOULD BE FURTHER
ENJOINED until the issues aforementioned are settled in a preliminary hearing to be
conducted by it.