April 2016 - Philippine Supreme Court Decisions/Resolutions
Philippine Supreme Court Jurisprudence
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.
SECOND DIVISION
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.
D E C I S I O N
MENDOZA, J.:
Before this Court is a petition for review on certiorari1 under Rule 65 of the Rules of Court filed by petitioner spouses, now Congressman Emmanuel D. Pacquiao (Pacquiao) and Vice-Governor Jinkee J. Pacquiao (Jinkee), to set aside and annul the April 22, 2014 Resolution2 and the July 11, 2014 Resolution3 of the Court of Tax Appeals (CTA), First Division, in CTA Case No. 8683.
Through the assailed issuances, the CTA granted the petitioners' Urgent Motion to Lift Warrants of Distraint & Levy and Garnishment and for the Issuance of an Order to Suspend the Collection of Tax (with Prayer for the Issuance of a Temporary Restraining Order4[Urgent Motion], dated October 18, 2013, but required them, as a condition, to deposit a cash bond in the amount of P3,298,514,894.35-or post a bond of P4,947,772,341.53.
The Antecedents
The genesis of the foregoing controversy began a few years before the petitioners became elected officials in their own right. Prior to their election as public officers, the petitioners relied heavily on Pacquiao's claim to fame as a world-class professional boxer. Due to his success, Pacquiao was 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.5 It was subsequently amended to include his US-sourced income.6
The controversy began on March 25, 2010, when Pacquiao received a Letter of Authority7(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,8 which although reflecting his Philippines-sourced income, failed to include his income derived from his earnings in the US.9 He also failed to file his Value Added Tax (VAT) returns for the years 2008 and 2009.10
Finding the need to directly conduct the investigation and determine the tax liabilities of the petitioners, respondent Commissioner on Internal Revenue (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 2009.11 On September 21, 2010 and September 22, 2010, the CIR replaced the July LA by issuing to both Pacquiao12 and Jinkee13 separate electronic versions of the July LA pursuant to Revenue Memorandum Circular (RMC) No. 56-2010.14
Due to these developments, the petitioners, through counsel, wrote a letter15 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.
In its letter,16 dated December 13, 2010, 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 same letter also stated that:
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.17[Emphasis Supplied]
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 2007-2009.18 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.19 They added that even if they wanted to, they could no longer find copies of the documents because during those years, their accounting records were then managed by previous counsels, who had since passed away. Finally, the petitioners pointed out that their tax liabilities for the said years had already been fully settled with then CIR Jose Mario Bu