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TAXATION – Special Lectures
Additional
Jurisprudence in Tax
Remedies
BIR vs. Spouses Antonio Manly and

Ruby Manly, GR No. 197590
When is there grave abuse of discretion?
-There is grave abuse of discretion when the
determination of probable cause is exercised in an
arbitrary or despotic manner, due to passion or
personal hostility, so patent and gross as to
amount to an evasion of a positive duty or a
virtual refusal to perform a duty enjoined by law.
BIR vs. Spouses Antonio Manly and Ruby

Manly, GR No. 197590
Google “Despot”

Facts:
•Antonio Manly – Stockholder and EVP of Standard
Realty Corporation (family-owned corp.), also engaged
In rental businesses
•Ruby Manly – housewife
•On April 27, 2005, BIR issued LA to investigate Manlys
for taxable year 2003 and prior years.
Facts:
•On June 6, 2005, CIR sent a letter to the Manlys requiring
them to submit evidence to substantiate the source of
their cash in purchasing a 256sq.m. cabin in Tagaytay worth
P17.5M+. The Manlys failed to comply.
Facts:
•On June 23, 2005, revenue officers executed an affidavit
on the declared annual income of the Manlys for 1998-2003
Year Total Income (From Tax Due / Paid Cash
Compensation and Rent)
1998 325,447.46 55,834.00 269,613.46
1999 403,512.28 79,254.00 324,258.28
2000 355,190.67 64,757.21 290,433.46
2001 384,896.62 73,669.00 311,227.62
2002 334,606.62 58,581.00 276,025.62
2003 300,917.93 48,729.00 252,188.93
TOTAL P 2,104,571.58 P 380,824.21 P 1,723,747.37
Facts:
•Revenue Officers further alleged that, despite his meager
Income, respondent purchased in cash the following:
•Tagaytay Log Cabin – P17.5million

•Purchased in Oct. 24, 2000
•Toyota Rav 4 – P1.35million
•Purchased in June 28, 2001
•Toyota Prado – P2 million
•Purchased in July 9, 2003
Facts:
•Because of the unexplained source of cash, Revenue Officers (ROs)

concluded that Manly’s ITR for 2000, 2001 and 2002 were
underdeclared.
•Because the underdeclarations exceeded 30% of declared income,
the ROs considered it as prima facie evidence of fraud with intent
to evade the payment of proper taxes due to the government.
•The ROs recommended the filing of criminal charges against the
respondent spouses for failing to provide the correct information.
Facts:
•The Spouses Manly (Manlys) denied the accusations against them

and claimed that they used their accumulated savings from the past
24 years to purchase the properties.
•The Manlys also contended that the criminal charges should be

dismissed because there was no deficiency assessment issued against
them.
Facts:
•Ruling of the State Prosecutor – recommended the
filing of criminal charges
•Ruling of the SoJ – reversed the recommendation of the

State Prosecutor based on the following:
•No willful failure to pay or attempt to evade the tax
•BIR failed to specify the amount of tax due and
the likely source of income
•BIR failed to issue an assessment which is a
prerequisite to the filing of a criminal case
for tax evasion.
Facts:
•Ruling of the Court of Appeals:
•BIR filed a petition for certiorari against the SoJ
Imputing grave abuse of discretion.
•CA dismissed the petition:

•no probable cause to charge respondent spouses as
BIR allegedly failed to state their exact tax
liability and to show sufficient proof of their likely
source of income
Facts:
•BIR filed petition for certiorari questioning the ruling of
The Court of Appeals
Issue:
•Whether or not CA committed a grave abuse of discretion
in sustaining the SoJ:
•Specific Tax Due
•Likely Source of Income
Petitioner’s (BIR’s) Arguments:
•BIR contends that in filing a criminal case for tax
evasion, a prior computation or assessment of tax is not
required because the crime is complete when the violator
knowingly and willfully filed a fraudulent return with intent
to evade a part or all of the tax.
• BIR contends that their analysis of the income and
expenditure is sufficient.
•BIR used the expenditure method of reconstructing
income, a method used to determine a taxpayer’s income
tax liability when his records are inadequate or inaccurate.
Spouses Manly’s Arguments: (ignore procedural aspect)
• No grave abuse of discretion because BIR failed to prove

That a tax is actually due.
•BIR failed to show the source of the alleged unreported
or undeclared income as required by Revenue
Memorandum Order No. 15-95, Guidelines and
Investigative Procedures in the Development of Tax Fraud
Cases for Internal Revenue Officers.
•BIR disregarded the savings of the spouses and only
analyzed 1998-2003.
COURT’S RULING:
•BIR’s petition is meritorious
•SC cited Ungab vs. Cusi
•Tax evasion is deemed complete when the violator has
knowingly and willfully filed a fraudulent return with
intent to evade and defeat a part or all of the tax.
•Corollarily, an assessment of the tax deficiency is not
required in a criminal prosecution for tax evasion.
•However, in Commissioner of Internal Revenue v. CA,
we clarified that although a deficiency assessment is
not necessary, the fact that a tax is due must
first be proved before one can be prosecuted for
tax evasion.
COURT’S RULING:
•BIR’s petition is meritorious
•SC cited Ungab vs. Cusi
•Tax evasion is deemed complete when the violator has
knowingly and willfully filed a fraudulent return with
intent to evade and defeat a part or all of the tax.
•Corollarily, an assessment of the tax deficiency is not
required in a criminal prosecution for tax evasion.
•However, in Commissioner of Internal Revenue v. CA,
we clarified that although a deficiency assessment is
not necessary, the fact that a tax is due must
first be proved before one can be prosecuted for
tax evasion.
COURT’S RULING:
•The government is allowed to resort to all evidence or

resources available to determine a taxpayer’s income and
to use methods to reconstruct his income.
• EXPENDITURE METHOD - a method of reconstructing a
taxpayer’s income by deducting the aggregate yearly
expenditures from the declared yearly income.
•Theory – if the source of the money is unexplained, it
may be inferred that the expenditures represent
Unreported or undeclared income.
COURT’S RULING:
•Percentage of underdeclaration (using expenditure method)

•Yr. 2000 – 957.27%
•Yr. 2001 – 88.14%
•Yr. 2003 – 133.24%
•Take note of Sec. 248 (B) – underdeclarations exceeding 30%
• prima facie evidence of a false or fraudulent return
COURT’S RULING:
•Reversing the Manlys arguments, the SC held that:

• The tax due was specifically alleged by the BIR in the
Complaint-Affidavit. The method of computation was
also clearly explained.
• The likely source of income was also explained by the

Revenue Officers in their Reply-Affidavit – stating that
the likely source was the rental income of the husband.
COURT’S RULING:
•What about the defense of the savings?

•SC held that it was merely self-serving since the
Spouses have not yet presented evidence to support it.
Note, for emphasis:

It is a basic concept in taxation that income denotes a flow of
wealth during a definite period of time, while capital is a fund
or property existing at one distinct point in time.
COURT’S RULING:
•Other factors that supported the SC’s ruling:

•Huge Disparity between Manlys income and expenditures
• In sum, SC held that there is PROBABLE CAUSE to indict respondent

spouses for tax evasion as petitioner was able to show that a tax is due
from them.
• CA committed grave abuse of discretion in disregarding the evidence
Presented by the BIR.
Spouses Emmanuel Paquiao and Jinkee Paquiao vs.
The CTA and the CIR, GR No. 213394, April 2016
Facts:
• Paquiao, as a professional boxer, earns income
From within and without the PH.
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.
Facts:
• Paquiao filed his 2008 ITR on April 15, 2009.
It was subsequently amended to include his US
Income.
• On March 25, 2010, Paquiao received a Letter

Of Authority (LA) for the examination of books
And accounting records covering Jan-Dec 2008.
Facts:
• On April 15, 2010, Pacman filed his 2009 ITR.
•It did NOT include his income from the US.
•Pacman also failed to file VAT returns for 2008

And 2009.
Facts:
• The CIR issued another LA transferring Pacman and
Jinkee’s case to the NID (Natl. Investigation Division)
and examining the books of accounts and accounting
Records of the spouses for the last 15 years. (‘95 – ’09)
• Pacman’s counsel wrote a letter to the CIR

Questioning the propriety of the investigations.
Facts:
• The CIR informed the spouses that the investigation
Was justified because the assessment was pursuant to
A “fraud investigation.”
• Pacman spouses submitted various documents for

2007-2009 but were not able to submit for the years
1995-2006.
Facts:
• The CIR, after its own investigation, came up with an
Initial assessment and issued a Notice of Initial
Assessment-Informal Conference (NIC)
•Based on best evidence obtainable:
•Deficiency Income Tax (inclusive of interests and surcharges)
•P714 million – 2008
•P1.4 billion – 2009
Facts:
• On Feb. 2012, CIR issued a PAN:
•Based on third-party information, they found additional
Tax liabilities (VAT):
• P 4 million – 2008
• P 24.9 million – 2009
•Pacman spouses protested.
•CIR denied the protest.
•CIR issued FLD (Formal Letter of Demand) –
•Note: equivalent to FAN
•Pacman spouses protested again.
Facts:
• On May 14 2013 (note: one year after the FLD), the BIR
Issued the Final Decision on Disputed Assessment (FDDA)
Addressed to Manny Paquiao only.
•Total tax liabilities (Income Tax and VAT 2008-2009)
•P2.2 billion inclusive of interests and surcharges
•On July 19, 2013, BIR sent Preliminary Collection Letter

•On Aug. 7, 2013, BIR sent spouses Final Notice before Seizure
• Paquiao spouses paid the VAT Assessment in installments.
Facts:
Proceeding before the CTA
• Spouses Paquiao filed a petition for review questioning the
Deficiency Income Tax Liabilities.
• Grounds:
•Assessment was defective because it was predicated on a
mere allegation of fraud.
•FDDA was void because it was only addressed to Pacman.
•PCL and FNBS should also be void because FDDA is void.
Facts:
• Grounds:
•Assessment was based on best possible sources.
•Assessment failed to consider taxes paid in the US and expenses.
Facts:
•Also sought the suspension of the issuance of warrants of
distraint and/or levy and warrants of garnishment.
• Grounds:
•Assessment was based on best possible sources.
•Assessment failed to consider taxes paid in the US and expenses.
Facts:
Meanwhile…. (note: Pending Proceeding in CTA)
• On Oct. 14, 2013, BIR issued a warrant of distraint and/or
Levy against Manny and Jinkee.
Facts:
Facts:
•Spouses filed an 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.
• Spouses question the necessity of the Cash deposit and

bond required under Section 11 of R.A.1125 arguing that the
assessments were highly questionable.
Facts:
Ruling of the CTA:
• On April 22, 2014, CTA granted the Paquiaos motion
ordering the CIR to desist.
•CTA noted that the amount to be collected far
exceeded the Paquiaos SALN (prejudicial)
• CTA still required them to deposit P3.2 billion OR post

a bond of P 4.9 billion.
Main Issue for discussion:
Whether or not the Paquiaos are exempt from the

Deposit or Cash Bond for the suspension of the
action to collect taxes required under Section 11
of RA 1125.
What about the other issues?

• Grave abuse of discretion of CTA
•BIR initiated action to collect even before the deadline for
payment
•BIR only served FDDA to Pacman (not Jinkee)
•Paquiaos already paid VAT assessment for 2008-2009
SC said:
• Remand to the CTA.
Remand to the CTA. Still pending until today.

Main Issue for discussion:
Whether or not the Paquiaos are exempt from the

Deposit or Cash Bond for the suspension of the
action to collect taxes required under Section 11
of RA 1125.
Relevant Jurisprudence cited:
Collector of Internal Revenue v. Avelino (Avelino)

and Collector of Internal Revenue v. Zulueta, (Zulueta)
Gist of Avelino and Zulueta:

it was ruled that the requirement of posting a bond to
suspend the collection of taxes could be dispensed
with only if the methods employed by the CIR in the
tax collection were clearly null and void and prejudicial
to the taxpayer.
SC’s ruling:
• Appeal will not suspend the collection of tax;
Exception
•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.
SC’s ruling:
• Appeal will not suspend the collection of tax;
Exception
•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.
SC’s ruling:
• SC, citing Avelino:
•Courts were clothed with the Authority to dispense with the
Requirement of a cash deposit or bond “if the method employed by
the Collector of Internal Revenue in the collection of tax is not
sanctioned by law.“
•Note: In Avelino, the action to collect was done after the

Prescriptive period.
SC’s ruling:
• SC, citing Zulueta:
•the requirement of the bond as a condition precedent to the
issuance of a writ of injunction applies only in cases where the
processes by which the collection sought to be made by means
thereof are carried out in consonance with law for such cases
provided and not when said processes are obviously in violation of
the law to the extreme that they have to be SUSPENDED for
jeopardizing the interests of the taxpayer.
SC’s ruling:
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.
SC’s ruling:
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."
SC’s ruling:
So, does Paquiao’s case fall under the exceptions under Avelino
and Zulueta?
The Supreme Court cannot say.
The CTA should have preliminarily determined whether the CIR

complied with the law and the pertinent issuances of the BIR itself.
The CTA should have conducted a preliminary hearing.
This is a question of fact that calls for the reception of evidence.

SC’s ruling:
So, the case will be remanded to the CTA. What should the CTA take
into account according to the SC?
• Whether the requirement of a Notice of Informal Conference (NIC)
was complied with
• Assessment void if there was no NIC issued. Violation of due process
• Whether the 15-year period subject of the CIR's investigation is

arbitrary and excessive.
• the fraud contemplated by law must be actual. It must be
intentional, consisting of deception willfully and deliberately
done or resorted to in order to induce another to give up
some right.
SC’s ruling:
into account according to the SC? (cont…)
• Whether fraud was duly established.
• Under Revenue Memorandum Order (RMO) No. 27-10, it is
required that a preliminary investigation must first be conducted
before a LA is issued.
• Whether the FLD issued against the petitioners was irregular.

• A taxpayer should be informed in writing of the law and the facts on
which the assessment is made, otherwise, the assessment is void.
An assessment, in order to stand judicial scrutiny, must be based on
facts. The presumption of the correctness of an assessment, being a
mere presumption, cannot be made to rest on another presumption.
SC’s ruling:
into account according to the SC? (cont…)
•Whether the FDDA, the PCL, the FNBS, and the Warrants of Distraint
and/or Levy were validly issued.
•Sections 207[ and 208 of the Tax Code require the Warrant of
Distraint and/or Levy/Garnishment be served upon the taxpayer.
SC’s ruling:
Additional Factors:
• The security deposit and/or bond must be based on the principal

amount of the deficiency taxes EXCLUDING penalties, surcharges, and
interests.
• If there is a conflict between the inherent power of the State to tax and prosecute
and the Constitutional rights of petitioners to due process and equal protection,
Which one will prevail?
•Taxpayer. for a citizen's right to due process and equal protection of
the law is amply protected by the Bill of Rights under
the Constitution.
SC’s ruling:
• Petition partially granted.
• Case remanded to the CTA.
• Writ of Injunction issued to stop the

Requirement of a deposit/bond.
Commissioner of Internal Revenue vs. Hantex Trading
GR No. 136975, March 31, 2005
•Facts:
•HANTEX is a domestic corporation, engaged in the
sale of plastic products, it imports synthetic resin
and other chemicals for the manufacture of its
products. For this purpose, it is required to file an
Import Entry and Internal Revenue Declaration
(Consumption Entry) with the Bureau of Customs
under Section 1301 of the Tariff and Customs Code.
GR No. 136975, March 31, 2005
•Facts:
•Sometime in Oct. 1989, the Chief of the Counter-Intelligence division

received confidential information that HANTEX imported P115 Million
worth of plastic but only declared P45 Million.
• According to the informer, based on photocopies of 77 Consumption

Entries furnished by another informer, the 1987 importations of the
respondent were understated in its accounting records
• HANTEX was then subsequently investigated by the Internal Inquiry

and Prosecution Office (IIPO) of the Economic Intelligence and
Investigation Bureau (EIIB).
GR No. 136975, March 31, 2005
•Facts:
• The EIIB issued a subpoena duces tecum against

HANTEX but it was not complied.
•The IIPO secured certified copies of the Financial
Statements for 1987 filed by HANTEX with the S.E.C.
However, the IIPO failed to secure certified copies of
the HANTEX’s 1987 Consumption Entries from the
Bureau of Customs since, according to the custodian ,
the original copies had been eaten by termites.
GR No. 136975, March 31, 2005
•Facts:
• The IIPO tried to have the photocopies of the informer

Authenticated by the Bureau of Customs but they were
Not authenticated because the BoC did not have the original
Records and some of them were consumed by termites.
GR No. 136975, March 31, 2005
•Facts:
•The EIIB, based on its investigation, found that HANTEX had

Unreported sales of P63 million and an income tax liability of
P41 million inclusive of surcharges and interest.
•The EIIB transmitted the entire record to the BIR and

Recommended the collection of Tax from HANTEX.
•The BIR then conducted its own investigation using the

Report and documents of the EIIB.
GR No. 136975, March 31, 2005
•Facts:
•Based on the EIIB’s documents and report, the BIR

found a prima facie case of fraud against the
respondent in filing its 1987 Consumption Entry
reports with the Bureau of Customs.
• An assessment was then issued against HANTEX.

•HANTEX protested.
GR No. 136975, March 31, 2005
•Facts:
•HANTEX questioned the assessment on the ground

That the EIIB failed to present:
•the original, or authenticated, or duly certified copies of the Consumption and
Import Entry Accounts, or
•excerpts thereof if the original copies were not readily available; or,
•if the originals were in the official custody of a public officer, certified copies
thereof as provided for in Section 12, Chapter 3, Book VII, Administrative
Procedure, Administrative Order of 1987.
GR No. 136975, March 31, 2005
•Facts:
•HANTEX questioned the assessment on the ground

That the EIIB failed to present:
•the original, or authenticated, or duly certified copies of the Consumption and
Import Entry Accounts, or
•excerpts thereof if the original copies were not readily available; or,
•if the originals were in the official custody of a public officer, certified copies
thereof as provided for in Section 12, Chapter 3, Book VII, Administrative
Procedure, Administrative Order of 1987.
•CIR denied the protest.

GR No. 136975, March 31, 2005
•Facts:
•HANTEX appealed to CTA but was denied.

•The CTA ruled that the respondent was burdened
to prove not only that the assessment was
erroneous, but also to adduce the correct taxes
to be paid by it.
GR No. 136975, March 31, 2005
•Facts:
•HANTEX appealed the decision of the CTA to the CA

•CA reversed the CTA’s decision.
•The CA held that the income and sales tax deficiency assessments
issued by the petitioner were unlawful and baselesssince the copies
of the import entries relied upon in computing the deficiency tax of
the respondent were not duly authenticated by the public officer
charged with their custody, nor verified under oath by the EIIB and
the BIR investigators. The CA also noted that the public officer charged
with the custody of the import entries was never presented in court
to lend credence to the alleged loss of the originals.
GR No. 136975, March 31, 2005
•ISSUE:
•WHETHER OR NOT the assessment made by the BIR

was based on competent evidence and the law.
GR No. 136975, March 31, 2005
•ISSUE:
•WHETHER OR NOT the assessment made by the BIR

was based on competent evidence and the law.
GR No. 136975, March 31, 2005
•CIR’s argument:
•HANTEX refused to cooperate so they had to resort
to the best evidence obtainable:
•Photocopies from the informer
•Financial statements from SEC
•CIR maintained that the “best evidence obtainable
rule” is different from the “best evidence rule” and
that the CTA is not bound by technical rules since it
only requires substantial evidence.
GR No. 136975, March 31, 2005
•CIR’s argument: (cont..)

•CIR avers that HANTEX has the burden of proof to
show the correct assessments; otherwise, the
presumption in favor of the correctness of the
assessments made by it stands.
GR No. 136975, March 31, 2005
•HANTEX’s arguments:
•Resort to “best evidence obtainable” was illegal.
•HANTEX need not comply with EIIB’s demands
because they were not authorized to examine
accounting records.
•Assessment is not the remedy for failure to present
accounting records but to punish the taxpayer
according to the tax code.
•In any case, photocopies of import entries cannot be
used in making an assessment because they were not
Authenticated.
GR No. 136975, March 31, 2005
Ruling
•The CIR is authorized under Sec. 7 of the NIRC to make an

Assessment based on “best evidence obtainable.”
•Examples of “Best Evidence”
•Corporate and Accounting Records of the taxpayer
•Accounting Records of other taxpayers in the same line
of business
•data, record, paper, document or any evidence gathered
by internal revenue officers from other taxpayers who
had transactions with the taxpayer
GR No. 136975, March 31, 2005
Ruling
•Examples of “Best Evidence” (cont….)

•Record, data, document and information secured from
Govt. offices or agencies, such as the SEC, the Central Bank
Of the Philippines, or the Bureau of Customs.
•Computer tapes of the records prepared by the taxpayer
In the course of business.
GR No. 136975, March 31, 2005
Ruling
The law allows the BIR access to all relevant or material records
and data in the person of the taxpayer. It places no limit or condition
on the type or form of the medium by which the record subject to the
order of the BIR is kept. The purpose of the law is to enable the BIR to
get at the taxpayer’s records in whatever form they may be kept. Such
records include computer tapes of the said records prepared by the
taxpayer in the course of business. In this era of developing
information-storage technology, there is no valid reason to immunize
companies with computer-based, record-keeping capabilities from BIR
scrutiny. The standard is not the form of the record but where it might
shed light on the accuracy of the taxpayer’s return.
GR No. 136975, March 31, 2005
Ruling
The best evidence obtainable may consist of hearsay evidence, such as

the testimony of third parties or accounts or other records of other
taxpayers similarly circumstanced as the taxpayer subject of the
investigation, hence, inadmissible in a regular proceeding in the
regular courts. Moreover, the general rule is that administrative
agencies such as the BIR are not bound by the technical rules of
evidence. It can accept documents which cannot be admitted in
a judicial proceeding where the Rules of Court are strictly observed.
It can choose to give weight or disregard such evidence,
depending on its trustworthiness.
GR No. 136975, March 31, 2005
Ruling
HOWEVER, the best evidence obtainable under

Section 16 of the 1977 NIRC, as amended,
does not include mere photocopies of
records/documents.
GR No. 136975, March 31, 2005
Ruling
•Mere photocopies of the Consumption Entries have no

probative weight if offered as proof of the contents thereof.
The reason for this is that such copies are mere scraps of
paper and are of no probative value as basis for any
deficiency income or business taxes against a taxpayer.
•where the accuracy of a taxpayer’s return is being checked,

the government is entitled to use the original records
rather than be forced to accept purported copies which
present the risk of error or tampering.
GR No. 136975, March 31, 2005
Ruling
•The assessment must be based on actual facts.
•The BIR and the EIIB could have secured certified copies from
The Tariff and Customs Commission or from the National
Statistics Office which also had copies thereof.
• The BIR itself is supposed to have copies of the Consumption

Entries. Instead, they relied on the photocopy of the informer
who secured it from another informer.
GR No. 136975, March 31, 2005
Ruling
•The CIR acted arbitrarily and capriciously in relying on

and giving weight to the machine copies of the Consumption
Entries in fixing the tax deficiency assessments against Hantex.
GR No. 136975, March 31, 2005
Ruling
•The rule is that in the absence of the accounting records of

a taxpayer, his tax liability may be determined by estimation.
The petitioner is not required to compute such tax liabilities
with mathematical exactness. Approximation in the calculation
of the taxes due is justified. To hold otherwise would be
tantamount to holding that skillful concealment is an invincible
barrier to proof. However, the rule does not apply where
the estimation is arrived at arbitrarily and capriciously.
GR No. 136975, March 31, 2005
Ruling
•GR: Tax assessments are presumed correct and made in good

faith.
•All presumptions are in favor of the correctness of a tax
assessment. It is to be presumed, however, that such
assessment was based on sufficient evidence.
•EX: However, the prima facie correctness of a tax assessment

does not apply upon proof that an assessment is utterly
without foundation, meaning it is arbitrary and capricious.
GR No. 136975, March 31, 2005
Ruling
Definition of “naked assessment”:
An assessment made without any foundation character. The

determination of the tax due is without rational basis.
GR No. 136975, March 31, 2005
Ruling
The petitioner cannot rely on the presumption that she and

the other employees of the BIR had regularly performed their
duties. As the Court held in Collector of Internal Revenue v.
Benipayo, in order to stand judicial scrutiny, the
assessment must be based on facts. The presumption of
the correctness of an assessment, being a mere presumption,
cannot be made to rest on another presumption.
GR No. 136975, March 31, 2005
Ruling
SC’s ruling:
REMANDED TO THE CTA

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TAXATION – Special Lectures

BIR vs. Spouses Antonio Manly and

BIR vs. Spouses Antonio Manly and Ruby

BIR vs. Spouses Antonio Manly and Ruby

•Tagaytay Log Cabin – P17.5million

•Because of the unexplained source of cash, Revenue Officers (ROs)

•The Spouses Manly (Manlys) denied the accusations against them

•The Manlys also contended that the criminal charges should be

•Ruling of the SoJ – reversed the recommendation of the

•CA dismissed the petition:

• No grave abuse of discretion because BIR failed to prove

•The government is allowed to resort to all evidence or

•Percentage of underdeclaration (using expenditure method)

•Reversing the Manlys arguments, the SC held that:

• The likely source of income was also explained by the

•What about the defense of the savings?

Note, for emphasis:

•Other factors that supported the SC’s ruling:

• In sum, SC held that there is PROBABLE CAUSE to indict respondent

• On March 25, 2010, Paquiao received a Letter

•Pacman also failed to file VAT returns for 2008

• Pacman’s counsel wrote a letter to the CIR

• Pacman spouses submitted various documents for

•On July 19, 2013, BIR sent Preliminary Collection Letter

• Spouses question the necessity of the Cash deposit and

• CTA still required them to deposit P3.2 billion OR post

Main Issue for discussion:

Whether or not the Paquiaos are exempt from the

What about the other issues?

Remand to the CTA. Still pending until today.

Main Issue for discussion:

Whether or not the Paquiaos are exempt from the

Relevant Jurisprudence cited:

Collector of Internal Revenue v. Avelino (Avelino)

Gist of Avelino and Zulueta:

•Note: In Avelino, the action to collect was done after the

The Supreme Court cannot say.

The CTA should have preliminarily determined whether the CIR

The CTA should have conducted a preliminary hearing.

This is a question of fact that calls for the reception of evidence.

• Whether the 15-year period subject of the CIR's investigation is

• Whether the FLD issued against the petitioners was irregular.

• The security deposit and/or bond must be based on the principal

• Petition partially granted.

• Case remanded to the CTA.

• Writ of Injunction issued to stop the

•Sometime in Oct. 1989, the Chief of the Counter-Intelligence division

• According to the informer, based on photocopies of 77 Consumption

• HANTEX was then subsequently investigated by the Internal Inquiry

• The EIIB issued a subpoena duces tecum against

• The IIPO tried to have the photocopies of the informer

•The EIIB, based on its investigation, found that HANTEX had

•The EIIB transmitted the entire record to the BIR and

•The BIR then conducted its own investigation using the

•Based on the EIIB’s documents and report, the BIR

• An assessment was then issued against HANTEX.

•HANTEX questioned the assessment on the ground

•HANTEX questioned the assessment on the ground

•CIR denied the protest.

•HANTEX appealed to CTA but was denied.

•HANTEX appealed the decision of the CTA to the CA

•WHETHER OR NOT the assessment made by the BIR

•WHETHER OR NOT the assessment made by the BIR