by: Atty. Gregorio B. Austral, CPA
Denying a meaningful opportunity
In certain instances, there are remedies available to a person in court but come with an extremely high cost which is beyond his means to pay.
A case in point is Tridharma Marketing Corporation vs. Court of Tax Appeals, Second Division, and the Commissioner of Internal Revenue, G.R. No. 215950, June 20, 2016.
Tridharma was assessed by the Bureau of Internal Revenue (BIR) for deficiency taxes in the total amount of P4.4 billion for taxable year ending December 31, 2010. Since the BIR has initiated collection proceedings, Tridharma asked the Court of Tax Appeals (CTA) to suspend the collection of the P4.4 billion deficiency taxes. The CTA granted Tridharma’s motion to suspend the collection of the tax, but required the company to post a bond in the amount equivalent to the tax assessed of P4.4 billion.
Claiming impossibility to comply with the bond requirement, Tridharma asked the Supreme Court to enjoin the CTA from imposing the P4.4 billion bond requirement and to stop the BIR from collecting the tax while the case is pending.
Tridharma argued that the surety bond greatly exceeds its net worth and makes it legally impossible to procure the bond from bonding companies that are limited in their risk assumptions. As shown in its audited financial statements for the year ending December 31, 2013, its net worth only amounted to P916,768,767.00,18 making the amount of P4.4 billion fixed for the bond nearly five times greater than such net worth.
The Supreme Court agreed with Tridharma. The CTA in Division gravely abused its discretion 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.
Although the amount of P4.4 billion was itself the amount of the assessment, it behooved the CTA in Division to consider other factors recognized by the law itself towards suspending the collection of the assessment, like whether or not the assessment would jeopardize the interest of the taxpayer, or whether the means adopted by the CIR in determining the liability of the taxpayer was legal and valid. Simply prescribing such high amount of the bond like the initial 150% of the deficiency assessment, or later on even reducing the amount of the bond to equal the deficiency assessment would practically deny to the petitioner the meaningful opportunity to contest the validity of the assessments, and would likely even impoverish it as to force it out of business.