FACTS:

Congressman Emmanuel D. Pacquiao and Vice-Governor Jinkee J. Pacquiao filed a petition for review with the Court of Tax Appeals (CTA) after being found liable for deficiency income tax and value-added tax (VAT) by the Bureau of Internal Revenue (BIR) for taxable years 2008 and 2009. The BIR issued various notices and demands for payment, and the Pacquiaos sought suspension of the warrants of distraint, levy, and garnishment. The CTA granted their motion but required them to deposit a cash bond or post a surety bond. The Pacquiaos sought a reduction of the bond amount or an extension of time to pay.

The petitioners argued that the CTA acted with grave abuse of discretion by requiring a bond without evidentiary support and imposing an impossible bond requirement that would prevent them from continuing their appeal. They asked the court to direct the CTA to dispense with the bond requirement and suspend the collection of the deficiency taxes.

The Commissioner of Internal Revenue (CIR) insisted that the petitioners should post a cash deposit or surety bond to suspend the collection of the taxes. The CIR argued that the law does not provide exceptions and requires the taxpayer to deposit the claimed amount or file a surety bond. The petitioners relied on previous Supreme Court rulings that stated posting a bond may be dispensed with if the CIR's collection methods were found to be null and void and prejudicial to the taxpayer. The CIR asserted that the alleged illegality of its collection methods were not clearly null and void and could only be determined after a full-blown trial. The CIR also argued that the question of whether the tax assessment and collection were proper is a question of fact not applicable in a petition for certiorari.

ISSUES:

1. Whether the CTA's requirement for the petitioners to post a bond was valid, given the alleged procedural errors by the BIR in its assessment and collection processes.

2. Whether the CTA erred in not dispensing with the bond requirement under Section 11 of R.A. No. 1125 despite the petitioners' claim that they were denied due process by the BIR.

RULING:

1. The Court found that there was insufficient basis in the records to determine whether the dispensation of the required cash deposit or bond was appropriate. It remanded the case to the CTA to conduct a preliminary hearing to determine if the methods employed by the CIR in the collection of tax were in patent violation of the law and if the bond requirement could be reduced or dispensed with.

2. The Court held that the CTA should properly determine whether the CIR complied with the law and pertinent BIR issuances in their assessment of the tax liability and efforts to collect the same. Pending this determination, the implementation of the CTA resolutions requiring the petitioners to deposit a cash bond or post a bond was enjoined.

PRINCIPLES:

1. Due Process in Tax Assessments: Tax assessments must be based on facts and provide detailed information regarding the law and basis on which the assessment is made. Arbitrary assessments and procedural lapses can invalidate a tax assessment.

2. Injunction Against Tax Collection: A court may issue an injunctive writ to restrain the collection of taxes and even dispense with bond requirements if the collection methods employed by the tax authority are in patent violation of the law.

3. Requirement of a Bond under R.A. No. 1125: While Section 11 of R.A. No. 1125 generally requires the posting of a bond to stay tax collection, courts can dispense with this requirement if the tax collection methods are found to be unlawful.

4. Preliminary Hearing for Bond Determination: Before requiring a bond, courts should conduct preliminary hearings to ascertain the legality of the tax assessment and collection processes and determine the necessity and amount of any bond.