Showing posts with label Inc. CTA EB NO. 2243. Show all posts
Showing posts with label Inc. CTA EB NO. 2243. Show all posts

CIR v. First Philippine Power Systems, Inc.

 

CIR v. First Philippine Power Systems, Inc.

CTA EB NO. 2243

February 3, 2022

Doctrine:

It is already well-established that the issuance of a valid LOA is a prerequisite to a valid assessment because it forms part of the due process rights of a taxpayer as clearly elucidated by the Supreme Court in the case of Medicard Philippines, Inc. vs. CIR, where it was ruled that the absence of an LOA violated Medicard's right to due process."


Facts:

Respondent counters that RMO 12-07 which is a later issuance than RMO 8-06 cited by petitioner, purportedly prohibits the practice of issuing mission orders, \ correspondences, referral memoranda and other similar orders for the purpose of audit examination and assessment of internal revenue taxes. Respondent invokes the Supreme Court decision in the case of Commissioner of Internal Revenue vs. Composite Materials, Inc. 4 (Composite case) where it was supposedly ruled that a Referral Memorandum issued by a Revenue District Officer (RDO) directing another RO to continue the audit investigation, is not equivalent to an LOA nor does it cure the RO's lack of authority. Respondent further cites the ruling in the case of Commissioner of Internal Revenue vs. Sony Philippines Inc.,s (Sony case) where the Supreme Court emphasized the importance of an LOA which empowers the ROs to examine the books of account and other accounting records of the taxpayer for the purpose of collecting the correct amount of tax. Respondent argues even further that only the revenue officers named in the LOA are allowed to conduct the examination of taxpayers and that an equivalent document that complies with the requisites in the issuance of an LOA may be considered valid only if such "substitute" document is issued and signed by the Commissioner of Internal Revenue or the Revenue Regional Director or the Assistant Commissioner /Head Revenue Examiner, as the case may be. Respondent also objects to the claim of petitioner that the waivers effectively extended his right to assess deficiency taxes for TY 2009 on the ground that said waivers were defective for lack of proper authorization of the signatory (Mr. Ariel Ong) to sign on its behalf. Moreover, respondent claims that with respect to the second and fourth waivers, copies of the same indicating the acceptance of petitioner could not be found in petitioner's records. Respondent avers that the acceptance by the BIR together with the date of acceptance is an indispensable requirement, the absence of which would invalidate said waivers.

Issue:

Whether or not the MOA issued clothed the ROs with the authority to conduct the audit of respondent’s accounting records.

Held: 

No. It is already well-established that the issuance of a valid LOA is a prerequisite to a valid assessment because it forms part of the due process rights of a taxpayer as clearly elucidated by the Supreme Court in the case of Medicard Philippines, Inc. us. CIR, where it was ruled that the absence of an LOA violated Medicard's right to due process." As provided by law, an LOA is the authority given to the appropriate RO assigned to perform assessment functions. It empowers or enables said RO to examine the books of accounts and other accounting records of a taxpayer for the purpose of collecting the correct amount of tax. The LOA commences the

audit process and informs the taxpayer that it is under audit for

possible deficiency tax assessment. Therefore, there must be a grant of authority before any RO can conduct an examination or assessment. An LOA is premised on the fact that the examination of a taxpayer who has already filed his tax returns is a power that statutorily belongs only to respondent himself or his duly authorized representatives.