Case Summary (G.R. No. 169940)
Petitioner, Respondent and Relief Sought
Petitioner sought nullification and cancellation of the Formal Letter of Demand (FLD), Final Assessment Notices (FAN) and related assessment notices issued by respondent for taxable year 2009, contesting assessments for deficiency income tax, VAT, expanded withholding tax, documentary stamp tax, and a compromise penalty, totaling PHP 11,793,573.91.
Key Dates and Procedural Posture
Significant administrative and procedural dates include: manual LOA dated June 24, 2010 (received July 9, 2010); electronic LOA SN: eLA201000017400 LOA-039-2010-00000072 dated September 29, 2010 (received October 12, 2010); PAN dated December 14, 2012 (contested December 28, 2012); FLD/FAN issued January 4/14, 2013 (protest filed February 14, 2013); petition to the CTA filed November 7, 2013; CTA Second Division decision dismissing for lack of jurisdiction dated July 1, 2016; CTA En Banc decision affirming on February 12, 2018; Supreme Court review resulting in the Court’s grant of the petition.
Applicable Law and Authorities
Constitutional basis: 1987 Philippine Constitution (applicable as the decision date is 1990 or later). Statutory and regulatory authorities invoked include Section 13 of the National Internal Revenue Code (NIRC) on the authority of a revenue officer; Revenue Memorandum Order (RMO) No. 43-90 (amending RMO No. 37-90) prescribing policies for issuance of Letters of Authority (LOAs), including the requirement for issuance of a new LOA upon reassignment/transfer of cases; Revenue Regulation No. 12-99 on the period for administrative protest of FAN/FLD; and Rule 45 of the Rules of Court (basis for the petition for certiorari). Controlling precedents relied upon in the analysis include Commissioner of Internal Revenue v. Sony Philippines, Inc. and Medicard Philippines, Inc. v. CIR.
Facts Relevant to Authority and Assignment of the Audit
An electronic LOA expressly authorized RO Ruby Cacdac and GS Bernardo Andaya to examine petitioner’s books for the calendar year 2009. Despite that authorization, the audit was actually conducted by RO Bernard Bagauisan pursuant to a memorandum of assignment signed by RDO Clavelina Nacar indicating that the case was reassigned to Bagauisan to continue the audit. Petitioner produced documents during the audit; the examining officers ultimately issued a PAN and, later, FAN/FLD with Details of Discrepancies asserting tax deficiencies.
Procedural History Before the CTA and the Jurisdictional Ruling
Petitioner administratively protested the FAN/FLD, but the CTA Second Division dismissed the petition for lack of jurisdiction, reasoning that petitioner’s administrative protest was filed beyond the 30-day period prescribed by the NIRC and Revenue Regulation No. 12-99, rendering the assessment final, executory and demandable and thus not a “disputed assessment” within the CTA’s exclusive appellate jurisdiction. The CTA En Banc affirmed the Second Division’s ruling on the same ground, although a presiding justice dissented on the ground that the assessments were void for lack of authority of the revenue officers who conducted the audit.
Dissent and Subsequent Raising of Authority Issue
A dissenting opinion by Presiding Justice Del Rosario observed that the revenue officers who performed the examination were not authorized by a valid LOA, rendering the FLD and assessment notices void. Petitioner later invoked this lack-of-authority argument before the Supreme Court, asserting that reassignment to Bagauisan required issuance of a new LOA and that absence of such LOA rendered the proceedings and resulting assessments void ab initio.
Legal Standard: Authority to Examine and Issuance of LOA
Section 13 of the NIRC conditions a revenue officer’s authority to examine taxpayers on issuance of a LOA by the Revenue Regional Director (or other duly authorized official). Under RMO No. 43-90, any reassignment or transfer of cases to another revenue officer requires issuance of a new LOA (noting the corresponding notation of prior LOA number and date), and only specified BIR officials (Regional Directors, Deputy Commissioners and the Commissioner, or others upon prior authorization by the Commissioner) may validly issue LOAs. A LOA is the foundational grant of authority empowering an RO to examine books and records for tax assessment purposes.
Application of Legal Standards to the Facts
The electronic LOA specifically named RO Ruby Cacdac and GS Bernardo Andaya as authorized examiners. The audit was continued by RO Bagauisan on the basis of an internal memorandum of assignment signed by RDO Nacar, but no new LOA naming Bagauisan was issued. Under RMO No. 43-90, reassignment to another RO mandates issuance of a new LOA. Because the formal statutory/regulatory mechanism for transferring authority (issuance of a new LOA by an authorized official) was not observed, Bagauisan lacked the statutory authority to perform the audit that yielded the PAN/FAN/FLD.
Precedents Supporting Nullification for Lack of Authority
The Court relied on the principles articulated in Commissioner of Internal Revenue v. Sony Philippines, Inc. (nullifying assessment where the officers acted beyond the period or scope authorized by the L
...continue readingCase Syllabus (G.R. No. 169940)
Case Caption and Procedural Posture
- G.R. No. 241848; Decision rendered May 14, 2021 by the Supreme Court, First Division (opinion by Justice Carandang).
- Petition for Review on Certiorari under Rule 45 of the Rules of Court seeks review of the Court of Tax Appeals (CTA) En Banc Decision dated February 12, 2018 and Resolution dated July 24, 2018 in EB Case No. 1513.
- The CTA En Banc had affirmed the CTA Second Division’s dismissal of petitioner Himlayang Pilipino Plans, Inc.’s petition to nullify and cancel a Formal Letter of Demand (FLD) and related assessment notices.
- The Supreme Court granted the Rule 45 petition, set aside the CTA En Banc Decision and Resolution, and declared the FLD and assessment notices unauthorized.
Subject of the Assessment and Amounts Assessed
- The challenged assessments pertained to taxable year 2009 and comprised:
- Deficiency income tax: ₱7,263,190.35
- Deficiency value-added tax (VAT): ₱4,179,258.23
- Deficiency expanded withholding tax (EWT): ₱231,150.35
- Deficiency documentary stamp tax (DST): ₱94,974.98
- Compromise penalty: ₱25,000.00
- Total assessed amount: ₱11,793,573.91
Essential Facts — Audit Initiation and Documents Received
- July 9, 2010: Petitioner received a manual Letter of Authority (LOA) No. 2009-00031349 dated June 24, 2010 with a First Notice for Presentation of Records — Checklist Requirements. (Record ref.)
- September 29, 2010: An electronic LOA SN: eLA201000017400 LGA-039-2010-00000072 was issued by Jonas Amora, Officer-In-Charge Regional Director of Quezon City, authorizing examination of petitioner’s books and records for all internal revenue taxes covering January 1, 2009 to December 31, 2009.
- October 12, 2010: Petitioner received the electronic LOA. (Record ref.)
- Revenue officers authorized by the electronic LOA were specifically identified as RO-Ruby Cacdac and Group Supervisor Barnardo Andaya.
- Petitioner submitted documents relevant to the examination on different dates; the examining revenue officers nonetheless concluded petitioner had deficiency taxes for 2009.
Notice and Administrative Protest Timeline
- December 14, 2012: Commissioner of Internal Revenue (CIR) issued a Preliminary Assessment Notice (PAN) with Details of Discrepancies; petitioner received same on that date.
- Petitioner contested the PAN on December 28, 2012.
- January 4, 2013 / January 14, 2013: A Formal Letter of Demand (FLD) dated January 4, 2013, and Final Assessment Notices (FAN) with Details of Discrepancies dated January 14, 2013 were issued; petitioner received them on January 14, 2013.
- February 14, 2013: Petitioner administratively protested the FAN (filed 31 days after receipt).
- April 12, 2013: Petitioner submitted documents in support of its administrative protest.
- November 7, 2013: Petitioner filed a Petition for Review with the CTA in Division, alleging inaction on its protest.
CTA Proceedings — Trial, Evidence, and Division Ruling
- December 16, 2013: CIR filed an Answer arguing the assessment had become final, executory, and demandable and contending that tax assessments by examiners are presumed correct and in good faith.
- The case proceeded through pre-trial and trial.
- April 10, 2014: Enrico T. Pizarro was commissioned by the Court as Independent Certified Public Accountant upon petitioner’s motion.
- Witnesses presented at trial:
- For petitioner: Leah Laxamana and Enrico T. Pizarro.
- For CIR: Bernard R. Bugauisan and Bacolor D. Yambing.
- July 20, 2015: Case declared submitted for decision after submission of memoranda.
- July 1, 2016: CTA Second Division rendered Decision dismissing petitioner’s petition for lack of jurisdiction on the ground that there was no “disputed assessment” because petitioner’s protest against the FAN and FLD was filed out of the 30-day period prescribed by the NIRC and Revenue Regulation No. 12-99; the Division concluded the assessments had become final, executory, and demandable.
- August 22, 2016: CTA Second Division denied petitioner’s motion for reconsideration; petitioner elevated the case to the CTA En Banc.
CTA En Banc Ruling and Reconsideration
- February 12, 2018: CTA En Banc issued a Decision affirming the CTA Second Division’s dismissal for lack of jurisdiction, holding that the tax court only has appellate jurisdiction in cases involving disputed assessments and petitioner failed to timely file the administrative protest, thus leaving no disputed assessment to be reviewed.
- Presiding Justice Roman G. Del Rosario authored a dissenting opinion, asserting that the FLD with Details of Discrepancies and assessment notices were void because the revenue officers who conducted the examination were not authorized by a valid LOA.
- Petitioner, taking cue from the dissent, moved for reconsideration before the CTA En Banc, raising for the first time that the FAN and FLD were null and void due to lack of authority of the revenue officers.
- July 24, 2018: CTA En Banc denied petitioner’s motion for reconsideration by Resolution, finding petitioner’s belated attempt to question the authority of the revenue officers fatal to its case.
Issue Presented to the Supreme Court
- Whether the assessment conducted against petitioner was null and void due to lack of authority of the revenue officer who actually conducted the audit (i.e., whether the audit and resulting assessment were authorized by a valid Letter of Authority).
Petitioner's Principal Argument Before the Supreme Court
- Petitioner contended the tax audit was initially authorized by electronic LOA SN: eLA201000017400 LOA-039-2010-00000072 dated September 29, 2010 and signed by Jonas Amora, which specifically authorized RO Ruby Cacdac and GS Bernardo Andaya to examine petitioner’s books for 2009.
- Contrary to the LOA, it was RO Bernard Bagauisan who actually examined petitioner’s books pursuant to BIR Memorandum of Assignment No. 039-1011-00340 dated October 28, 2011 and signed by Revenue District Officer Clavelina Nacar.
- Petitioner argued that any reassignment or transfer of cases to another revenue officer requires issuance of a new LOA; in the absence of a new LOA naming Bagauisan, the subsequent audit and the assessments based thereon were void ab initio.
- Petitioner maintained that while the audit