Tridharma Marketing Corp. v. CTA

Doctrine: The CTA may order the suspension of the collection of taxes provided that the taxpayer either: (1) deposits the amount claimed; or (2) files a surety bond for not more than double the amount. 

Facts: Petitioner received a PAN from BIR assessing deficiency taxes on income tax, VAT, withholding tax on compensation, expanded withholding tax, and DST. A substantial portion of the deficiency income tax and VAT arose from the complete disallowance by the BIR of the petitioner’s purchases from Etheria Trading in 2010. Petitioner replied to the PAN. Petitioner received from BIR an FLD assessing it with deficiency taxes for TY 2010. It filed a protest. CIR required the petitioner to submit submit additional documents in support of its protest, and the petitioner complied.

Petitioner received a Final Disputed Assessment. It filed with the CIR a protest through a Request for Reconsideration but it was denied. 

Prior to the CIR’s decision, the petitioner paid the assessments corresponding to the WTC, DST and EWT deficiency assessments, inclusive of interest. It likewise reiterated its offer to compromise the alleged deficiency assessments on IT and VAT.

Petitioner appealed to the CTA via Petition for Review with Motion to Suspend Collection of Tax which was granted provided, however, that petitioner deposits with this Court an acceptable surety bond equivalent to 150% of the assessment.

The petitioner filed its Motion for Partial Reconsideration praying, among others, for the reduction of the bond to an amount it could obtain. CTA reduced the amount of the petitioner’s surety bond which was the equivalent of the BIR’s deficiency assessment for IT and VAT. 

Issue: Did the 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: Yes. Section 11 of R.A. No. 1125, amended by R.A. No. 9282 it is stated that: 

Sec. 11. Who may appeal; effect of appeal.—x x x 

xxx x

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. (Bold emphasis supplied) 

Clearly, the CTA may order the suspension of the collection of taxes provided that the taxpayer either: (1) deposits the amount claimed; or (2) files a surety bond for not more than double the amount. 

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. 

Moreover, Section 11 of R.A. No. 1125, as amended, indicates that the requirement of the bond as a condition precedent to suspension of the collection applies only in cases where the processes by which the collection sought to be made by means thereof are carried out in consonance with the law, not when the processes are in plain violation of the law that they have to be suspended for jeopardizing the interests of the taxpayer.