cta_decision CTA Case No. EB CRIM-89EB CRIM-89 2023-10-03

CTA Case No. EB CRIM-89 (Decision)

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY ENBANC PEOPLE OF THE CTA EB CRIM. NO. 089 PHILIPPINES, (CTA Crim Case Nos. 0-690 & 0-691) Petitioner, -versus- RONNEL LAMPA DE CTA EB CRIM. NO. 092 GUZMAN (LUCKY SEA (CTA Cr im Case Nos. 0-690 TRADING) , & 0-691) Respondent. Present: x----------------------------------x RONNEL LAMPA DE GUZMAN (LUCKY SEA TRADING), Petitioner, -versus- DEL ROSARIO, P.J., RINGPIS-LIBAN , MANAHAN, BACORRO-VILLENA, MODESTO-SAN PEDRO, REYES-FAJARDO , CUI-DAVID, FERRER-FLORES, and ANGELES, JJ. PEOPLE OF THE Promulgated: PHILIPPINES, OCT 0 3 202 Respondent. X- - -- - - - - - - - - - - - - - - - - - - - - - -- - - - _,_ - - - - - - - - - DECISION CUI-DAVID, J .: Before the Court En Bane are Petitions for Review filed by the People of the Philippines, 1 represented by the Bureau of 1 Docket, CTA En Bane (EB) Crim No. 089, pp. 1-21 . v

DECISION CTA EB Crim. Nos. 089 & 092 (CTA Crim. Case Nos. 0-690 & 0-691) People of the Philippines v. Ronnel Lampa De Guzman (Lucky Sea Trading) / Ronnel Lampa De Guzman (Lucky Sea Trading) v. People of the Philippines x------------------------------------------------------------------------------------------x Internal Revenue (BIR), and Ronnel Lampa De Guzman 2 assailing the Decision dated June 9, 2021,3 and the Resolution dated February 21, 2022, 4 rendered by this Court's First Division (Court in Division) in CTA Crim. Case Nos. 0-690 and 0-691, entitled "People of the Philippines v. Ronnel Lampa De Guzman (Lucky Sea Trading), et seq.", for violation of Section 255 of the National Internal Revenue Code (NIRC) of 1997, as amended, the dispositive portions of which read: Assailed Decision dated June 9, 2021: WHEREFORE, premises considered, the Court rules as follows: 1. In CTA Crim. Case No. 0-690, accused RONNEL LAMPA DE GUZMAN is hereby found GUILTY BEYOND REASONABLE DOUBT of violating Section 255 of the NIRC of 1997, as amended, for taxable year 2012 and is hereby SENTENCED to suffer an indeterminate penalty of imprisonment of one (1) year as minimum, to ten (10) years as maximum, and ORDERED to pay a fine in the amount of Php10,000.00, with subsidiary imprisonment, in case accused has no property with which to meet such fine, pursuant to Section 280 of the 1997 NIRC, as amended. 2. In CTA Crim. Case No. 0-691, accused RONNEL LAMPA DE GUZMAN is hereby found GUILTY BEYOND REASONABLE DOUBT of violating Section 255 of the 1997 NIRC, as amended, for taxable year 2013 and is hereby SENTENCED to suffer an indeterminate penalty of imprisonment of one (1) year as minimum, to ten (10) years as maximum, and ORDERED to pay a fine in the amount of Php10,000.00, with subsidiary imprisonment, in case accused has no property with which to meet such fine, pursuant to Section 280 of the 1997 NIRC, as amended. SO ORDERED. Assailed Resolution dated February 21, 2022: WHEREFORE, premises considered, plaintiff's Motion for Partial Reconsideration (of the Decision Promulgated on June 9, 2021) and accused's Motion for Reconsideration are hereby DENIED. Accordingly, the Assailed Decision dated June 9, 2021 is hereby AFFIRMED. SO ORDERED. ~ 2 Docket. CTA EB Crim No. 092, pp. 21-34. 3 Docket, CTA EB Crim No. 089, pp. 24-51; Docket. CTA EB Crim No. 092, pp. 43-70. 4 Docket, CTA EB Crim No. 089, pp. 65-70; Docket. CTA EB Crim No. 092, pp. 36-41.

DECISION CTA EB Crim. Nos. 089 & 092 (CTA Crim. Case Nos. 0-690 & 0-691) People of the Philippines v. Ronnel Lampa De Guzman (Lucky Sea Trading) f Ronnel Lampa De Guzman (Lucky Sea Trading) v. People of the Philippines Page 6 of25 x------------------------------------------------------------------------------------------x The prosecutor filed its Pre-Trial Brief on September 5, 2019 while the accused filed his Pre-Trial Brief on October 1, 2019. The parties filed their Joint Stipulations on October 19, 2019. Thus, on January 16, 2020, the Pre-Trial Order of the case was issued. On September 1, 2020, after its presentation of evidence, the prosecutor filed its Formal Offer of Evidence[.] ... Except for Exhibit P-1 7 which was not admitted because the document described in the Formal Offer of Evidence and the document identified by prosecution's witness do not correspond with the document duly marked and submitted to the Court, all other exhibits were admitted. On the other hand, accused De Guzman did not offer any documentary evidence but only his bare testimony with the Court. Accused de Guzman mainly denied that the business entity, Lucky Sea Trading, was his and alleged that the registration of said business was made by another person as contained in his Judicial affidavit, to wit: On December 16, 2020, the prosecution filed Memorandum while accused De Guzman filed his Memorandum on December 17, 2020. Thus, on January 14, 2020, the case was submitted for decision. On June 9, 2021, the Court in Division promulgated the assailed Decision.s On July 6, 2021, De Guzman filed his Motion for Reconsideration,9 with the People's Comment (to the Motion for Reconsideration of Accused Ronnel Lampa De Guzman dated June 27, 2021)1� filed through electronic mail on October 11, 2021, and was personally served to the Court on October 20, 2021. ~ 7 Complaint-Affidavit dated Febmary 4, 2016 of Angela Marie Simpit-De Leon, Mahley B. Matanog, and Arlene F. Grageda, Division Docket, CTA Crim. No. 0-690, p. 36. 8 Supra, note 2. 9 Division Docket, CTA Crim. Case 0-690, pp. 609-619. 10 !d., pp. 643-650.

DECISION CTA EB Crim. Nos. 089 & 092 (CTA Crim. Case Nos. 0-690 & 0-691) People of the Philippines v. Ronnel Lampa De Guzman (Lucky Sea Trading) 1 Ronnel Lampa De Guzman (Lucky Sea Trading) v. People of the Philippines X------------------------------------------------------------------------------------------X THE COURT EN BANe'S RULING We deny both Petitions. The instant petitions were timely filed. Before delving into the merits of the consolidated cases, the Court En Bane shall first determine the timeliness of the filing of the present petitions. Section 9(b), Rule 9 of the Revised Rules of the Court of Tax Appeals (RRCTA) states: SEC. 9. Appeal; period to appeal.- ... (b) An appeal to the Court en bane in criminal cases decided by the Court in Division shall be taken by filing a petition for review as provided in Rule 43 of the Rules of Court within fifteen days from receipt of a copy of the decision or resolution appealed from. The Court may, for good cause, extend the time for filing of the petition for review for an additional period not exceeding fifteen days. (Emphasis supplied) Records show that the People received the assailed Resolution on February 28, 2022,26 while De Guzman received the same on March 9, 2022. 27 Thus, the People and De Guzman had fifteen (15) days from said dates, or until March 15, 2022, and March 24, 2022, respectively, to file their petitions for review before the Court En Bane. On March 15, 2022, the People filed its Petition for Review;2B hence, timely filed. Meanwhile, De Guzman filed a Motion for Extension (To File Verified Petition for Review under Rule 43 ofthe Revised Rules of Court), 29 asking for an additional fifteen (15) days from March 24, 2022, or until AprilS, 2022, to file a petition for review. Said motion was granted in the Minute Resolution30 dated March 30, 2022. ~ 2ti Division Docket, CTA Crim. Case No. 0-690, p. 659. " /d., p. 659-a. 28 Supra, note 1. 29 Docket, CTA EB Crim No. 092, pp. 1-4. lO /d.' p. 20.

DECISION CTA EB Crim. Nos. 089 & 092 (CTA Crim. Case Nos. 0-690 & 0-691) People of the Philippines v. Ronnel Lampa De Guzman (Lucky Sea Trading) I Ronnel Lampa De Guzman (Lucky Sea Trading) v. People of the Philippines x------------------------------------------------------------------------------------------x (2) The taxpayer failed to do so; and (3) Such failure is willful. De Guzman insists that he was not required to make and file an ITR and that he did not willfully fail to file a return. We disagree. As discussed by the Court in Division in the assailed Decision, the prosecution was able to establish and prove the above-enumerated elements to the satisfaction of the Court. As to the first element, it was established from the DTI Certification, the BIR Certificate of Registration, and the BIR ITS Print-Out that De Guzman is a sole proprietor duly registered and operating under the trade name "Lucky Sea Trading". De Guzman failed to rebut the existence and authenticity of the said certificates and registration record showing his business details when they were formally offered as evidence by the BIR.33 A taxpayer's duty to file an annual income tax return is rooted in Sections 51 34 and 74 35 of the NIRC of 1997, as ~ 33 Comment/Opposition dated September II, 2019, filed on September 14,2020, Docket, CTA Crim No. 0�690, pp. 512- 513. 34 SEC. 51. Individual Return. - (A) Requirements.- (I) Except as provided in paragraph (2) of this Subsection, the following individuals are required to file an income tax return: (a) Every Filipino citizen residing in the Philippines; XXX XXX XXX (4) The income tax return shall be filed in duplicate by the following persons: (a) A resident citizen- on his income from all sources; XXX XXX XXX (8) Where to File. ~Except in cases where the Commissioner otherwise pennits, the return shall be tiled with an authorized agent bank, Revenue District Officer, Collection Agent or duly authorized Treasurer of the city or municipality in which such person has his legal residence or principal place of business in the Philippines, or if there be no legal residence or place of business in the Philippines, with the Office of the Commissioner. (C) When to File.- ( 1) The return of any individual specified above shall be filed on or before the fifteenth (15th) day of April of each year covering income for the preceding taxable year. XXX XXX XXX 35 SEC. 74. Declaration ofIncome Tax for Individuals.~ (A) In General.- Except as otherwise provided in this Section, every individual subject to income tax under Sections 24 and 25 (A) of this Title, who is receiving self-employment income, whether it constitutes the sole source of his income or in combination with salaries, wages and other fixed or determinable income, shall make and file a declaration of his estimated income for the current taxable year on or before April 15 of the same taxable year. In general, 'self- employment income' consists of the earnings derived by the individual from the practice of profession or conduct of trade or business carried on by him as a sole proprietor or by a partnership of which he is a member. Nonresident Filipino citizens, with respect to income from without the Philippines, and nonresident aliens not engaged in trade or business in the Philippines, are not required to render a declaration of estimated income tax. The declaration shall contain such pertinent information as the Secretary of Finance, upon recommendation of the Commissioner, may, by rules and regulations prescribe. An individual may make amendments of a declaration filed during the taxable year under the rules and regulations prescribed by the Secretary of Finance, upon recommendation of the Commissioner."

DECISION CTA EB Crim. Nos. 089 & 092 (CTA Crim. Case Nos. 0-690 & 0-691) People of the Philippines v. Ronnel Lampa De Guzman (Lucky Sea Trading) / Ronnel Lampa De Guzman (Lucky Sea Trading) v. People of the Philippines x------------------------------------------------------------------------------------------x amended. Thus, the Court in Division correctly found that De Guzman was mandated by law to file his ITRs for TYs 2012 and 20 13, whether he obtained an income or not as a sole proprietor, citing Sections 51 and 74 of the NIRC of 1997, as amended. Anent the second element, it was established from the Certification signed by Carmelita C. Glorioso, then Chief of Collection Section of Revenue District Office (RDO) No. 33 - Intramuros, Manila which has jurisdiction over the business of De Guzman, that based on the RDO's records and the BIR ITS Print-Out, De Guzman, who was operating under the business name Lucky Sea Trading, had no record of Annual ITRs, Quarterly ITRs, Monthly and Quarterly VAT Returns and Monthly Withholding Tax Returns filed for TYs 2012 and 2013. In stark contrast to the evidence presented by the prosecution, De Guzman did not dispute the Certification. He also did not submit any proof of filing of ITRs for TYs 2012 and 2013. As found by the Court in Division, De Guzman did not offer any documentary evidence but only his bare testimony denying ownership of the business Lucky Sea Trading. Finally, as regards the third element, De Guzman negated the presence of willfulness by invoking only negligence in not taking affirmative action to clear his name before the DTI, BIR, and BOC, and not checking all his statutory obligations, which includes the filing of an ITR for a business he allegedly knows nothing about.36 Contrariwise, De Guzman's failure to take affirmative action to inform the BIR and DTI about his lack of knowledge or participation in the registration of Lucky Sea Trading with the said agencies immediately upon learning of the tax assessment notices against him37 convinces the Court to lend no credence to De Guzman's defense of negligence. As such, being the sole proprietor of Lucky Sea Trading, De Guzman is aware of his duty to file tax returns and pay taxes, if any. Curiously, to refute his ownership of Lucky Sea Trading, De Guzman claimed that he was only receiving five hundred pesos as his weekly salary for five years. This admission was found to be incredulous by the Court in Division, which the Court agreed with. It is peculiar that De Guzman accepted a 36 Par. 34, Petition for Review, Docket, CTA EB Crim No. 092, p. 31 ~ "TSN, Hearing dated November 18. 2020, pp. 9-10.

DECISION CTA EB Crim. Nos. 089 & 092 (CTA Crim. Case Nos. 0-690 & 0-691) People of the Philippines v. Ronnel Lampa De Guzman (Lucky Sea Trading) ( Ronnel Lampa De Guzman (Lucky Sea Trading) v. People of the Philippines x------------------------------------------------------------------------------------------x lower than the daily minimum wage for five years despite being a college graduate. Thus, We are one with the Court in Division in finding that De Guzman's failure to file the ITRs forTY 2012 and 2013 was willful, viz.: In People of the Philippines v. Sixta Lee Go, "willfulness was also defined as follows: "'Willfulness' in tax crimes has been simply defined as: "Willful in the tax crime statutes means a voluntary, intentional violation of a known legal duty and bad faith or bad purpose need not be shown." Further, it is also stated that "willfulness" is a state of mind that may be inferred from the circumstances of the case. Thus, proof of willfulness may be, and usually is, shown by circumstantial evidence alone. During the trial, the accused merely denied that he owns Lucky Sea Trading and that it was another person, Ms. Ana Beloria, his employer, who was the one who caused his BIR registration as well as the business name registration in the DTI. No corroborative evidence other than his testimony was presented by the accused. Such denial by the accused without a corroborative evidence is considered an alibi, which has long been considered weak and unreliable as held in People of the Philippines v. King Rex A. Ambatang: "As against these, accused-appellant offered denial and alibi as defenses, which jurisprudence has long considered weak and unreliable ..." After taking a second hard look at the arguments of the parties, and the documentary and testimonial evidence presented before, and admitted by, the Court in Division, the Court En Bane finds that the prosecution had established the guilt of the accused beyond reasonable doubt of the crime charged in the instant consolidated cases. Accordingly, We affirm petitioner's conviction for violation of Section 255 of the NIRC of 1997, as amended. ~

DECISION CTA EB Crim. Nos. 089 & 092 (CTA Crim. Case Nos. 0-690 & 0-691) People of the Philippines v. Ronnel Lampa De Guzman (Lucky Sea Trading) I Ronnel Lampa De Guzman (Lucky Sea Trading) v. People of the Philippines X------------------------------------------------------------------------------------------X ... [W]hile section 73 of the National Internal Revenue Code has provided the imposition of the penalty of imprisonment or fine, or both, for refusal or neglect to pay income tax or to make a return thereof, it failed to provide the collection of said tax in criminal proceedings. The only civil remedies provided, for the collection of income tax, in Chapters I and II, Title IX of the Code and section 316 thereof, are distraint of goods, chattels, etc., or by judicial action, which remedies are generally exclusive in the absence of a contrary intent from the legislator. (People vs. Arnault, G.R. No. L-4288, November 20, 1952; People vs. Tierra, G.R. Nos. L-17177-17180, December 28, 1964) When Patanao, a 1967 case, speaks of "under the tax law," the tax law referred to therein was Commonwealth Act No. 466, enacted on June 15, 1939, or the NIRC of 1939. As to the jurisdiction of the CTA, the applicable law then was Republic Act (RA) No. 1125, enacted on June 16, 1954. The NIRC of 1939 has provided the imposition of the penalty of imprisonment or fine, or both, for refusal or neglect to pay income tax or to make a return but failed to provide the collection of said tax in criminal proceedings. 39 On the other hand, RA No. 1125 failed to provide the inclusion of the civil action for the recovery of taxes and penalties in the criminal action. 40 However, the present tax law is different. In particular, Section 205 of the NIRC of 1997, as amended, now provides that the judgment in the criminal case shall not only impose the tyt/ penalty but shall also order payment of the taxes subject of the criminal case as finally decided by the Commissioner.41 39 SECTION 316. Civil Remedies for the Collection of Delinquent Taxes.~ The civil remedies for the collection of internal-revenue taxes, fees, or charges, and any increment thereto resulting from delinquency shall be (a) by distraint of goods, chattels, or effects, and other personal property of whatever character, including stocks and other securities, debts, credits, bank accounts, and interest in and rights to personal property, and by levy upon real property and interest in or rights to real property; and (b) by judicial action. Either of these remedies or both simultaneously may be pursued in the discretion of the authorities charged with the collection of such taxes. No exemption shall be allowed against the internal~revenue taxes in any case. 40 Section 7. Jurisdiction.~ The Court of Tax Appeals shall exercise exclusive appellate jurisdiction to review by appeal, as herein provided. (I) Decisions of the Collector of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties imposed in relation thereto, or other matters arising under the National Internal Revenue Code or other law or part of law administered by the Bureau of Internal Revenue; (2) Decisions of the Commissioner of Customs in cases involving liability for customs duties, fees or other money charges; seizure, detention or release of property affected fines, forfeitures or other penalties imposed in relation thereto; or other matters arising under the Customs Law or other law or part of law administered by the Bureau of Customs; and (3) Decisions of provincial or city Boards of Assessment Appeals in cases involving the assessment and taxation of real property or other matters arising under the Assessment Law, including rules and regulations relative thereto. 41 The pertinent provision of the NIRC of 1939 as applied in Gaw (citing Patanao) and the present Section 205 of the NIRC of 1997, as amended, may be compared as follows:

DECISION CTA EB Crim. Nos. 089 & 092 (CTA Crim. Case Nos. 0-690 & 0-691) People of the Philippines v. Ronnel Lampa De Guzman (Lucky Sea Trading) I Ronnel Lampa De Guzman (Lucky Sea Trading) v. People of the Philippines x------------------------------------------------------------------------------------------x In the matter of the jurisdiction of the CTA to impose civil liability for taxes and penalties in the criminal case, Section 7 of the RA No. 1125, as amended by RA No. 9282,42 provides: SEC. 7. Jurisdiction. -The CTA shall exercise: a. Exclusive appellate jurisdiction to review by appeal, as herein provided: b. Jurisdiction over cases involving criminal offenses as herein provided: 1. Exclusive original jurisdiction over all criminal offenses arising from violations of the National Internal Revenue Code ... and other laws administered by the Bureau of Internal Revenue .... Any provision of law or the Rules of Court to the contrary notwithstanding, the criminal action and the corresponding civil action for the recovery of civil liability for taxes and penalties shall at all times be simultaneously instituted with, and jointly determined in the same proceeding by the CTA, the filing of the criminal action being deemed to necessarily carry with it the filing of the civil action, and no right to reserve the filing of such civil action separately from the criminal action will be recognized." (Emphasis supplied) ~ CA No. 466 INIRC of 1939) 1997 NIRC, as amended CHAPTER II SEC. 316. Civil Remedies for the Collection of Delinquent Taxes.- The civil remedies for the collection CIVIL REMEDIES FOR COLLECTION OF of internal-revenue taxes, fees, or charges, and any TAXES increment thereto resulting from delinquency shall be (a) by distraint of goods, chattels, or effects, and other SEC. 205. Remedies for the Collection of Delinquent personal property of whatever character, including stocks Taxes.- The civil remedies for the collection of internal and other securities, debts, credits, bank accounts, and revenue taxes, fees or charges, and any increment thereto interest in and rights to personal property, and by levy resulting from delinquency shall be: upon real property and interest in or rights to real property; and (b) by judicial action. Either of these {a) By distraint of goods, chattels, or effects, and other remedies or both simultaneously may be pursued in the personal property of whatever character, including stocks discretion of the authorities charged with the collection and other securities, debts, credits, bank accounts and of such taxes. interest in and rights to personal property, and by levy upon real property and interest in rights to real property; No exemption shall be allowed against the internal- and revenue taxes in any case. (b) By civil or criminal action. Either of these remedies or both simultaneously may be pursued in the discretion of the authorities charged with the collection of such taxes: Provided, however, That the remedies of distraint and levy shall not be availed of where the amount of tax involve is not more than one hundred pesos (PIOO). The judgment in the criminal case shall not only impose the penalty but shall also order payment ofthe taxes subject of the criminal case as finally decided by the Commissioner. . . . (Emphasis supplied) 42 An Act Expanding the Jurisdiction of the Court of Tax Appeals (CTA), enacted on April23, 2004.

DECISION CTA EB Crim. Nos. 089 & 092 (CTA Crim. Case Nos. 0-690 & 0-691) People of the Philippines v. Ronnel Lampa De Guzman (Lucky Sea Trading) / Ronnel Lampa De Guzman (Lucky Sea Trading) v. People of the Philippines x------------------------------------------------------------------------------------------x Similarly, Section 11, Rule 9 of the RRCTA provides: SEC. 11. Inclusion of civil action in criminal action. - In cases within the jurisdiction of the Court, the criminal action and the corresponding civil action for the recovery of civil liability for taxes and penalties shall be deemed jointly instituted in the same proceeding. The filing of the criminal action shall necessarily carry with it the filing of the civil action. No right to reserve the filing of such civil action separately from the criminal action shall be allowed or recognized. (Emphasis supplied) Clearly, the filing of the criminal case before the CTA also implies the filing of the civil action for the recovery of civil liability for taxes and penalties. Correspondingly, an accused who is convicted of a criminal charge, like De Guzman, could be held civilly liable in the same case when the facts established by the evidence warrant.43 Moreover, the Information filed against De Guzman need not allege that there was a final assessment notice issued against him that has become final and executory so that civil liability may be imposed against him. It is well-settled that an assessment is not necessary before a criminal charge can be filed. Section 222 of the NIRC of 1997, as amended,44 explicitly provides that in case of failure to file a return, proceedings in court may be commenced without an assessment. 45 To allege the existence of a final assessment in the Information would greatly curtail the statutory power of the CIR to file criminal tax cases even without an assessment. However, Section 205 of the NIRC of 1997, as amended, requires that there must be a final determination of such liability by the Commissioner. This determination of civil liability for the payment of taxes by the V' Commissioner refers to a formal assessment or Final Assessment Notice.46 43 People v. Este/ita Delos Angeles, CTA Crim. Case No. 0-027, November 25, 2009. 44 SEC. 222. Exceptions as to Period ofLimitation ofAssessment and Collection ofTaxes. (a) In the case of a false or fraudulent return with intent to evade tax or of failure to file a return, the tax may be assessed, or a proceeding in court for the collection of such tax may be filed without assessment, at any time within ten ( 10) years after the discovery of the falsity, fraud or omission: Provided, That in a fraud assessment which has become final and executory, the fact of fraud shall be judicially taken cognizance of in the civil or criminal action for the collection thereof. (Emphasis supplied) 45 Adamson v. Court ofAppeals, G.R. No. 120935, May 21, 2009. 46 Commissioner of Internal Revenue v. Spouses Magaan, G.R. No. 232663, May 3, 2021, citing Commissioner of Internal Revenue v. Transitions Optical Philippines, Inc., G.R. No. 227544, November 22,2017. See also Ungab v. Cusi, G.R. No. L-41919-24 May 30, 1980, where the Supreme Court ruled that there was no need for precise computation and fonnal assessment in order for criminal complaints to be filed against accused.

DECISION CTA EB Crim. Nos. 089 & 092 (CTA Crim. Case Nos. 0-690 & 0-691) People of the Philippines v. Ronnel Lampa De Guzman (Lucky Sea Trading) I Ronnel Lampa De Guzman (Lucky Sea Trading) v. People of the Philippines Page 21 of25 x------------------------------------------------------------------------------------------x Moreover, as observed by the Court in Division, the BIR failed to serve the pertinent LOA to De Guzman. Such failure is akin to a tax audit or investigation without proper authorization which could invalidate the investigation and the PAN. 53 Proper service of an LOA is a due process requirement in tax assessments. The need to properly serve the LOA to the taxpayer is recognized by the BIR in Revenue Audit Memorandum Order No. 1-00, 54 Revenue Memorandum Order No. 19-2015,55 and recently in Revenue Memorandum Circular (RMC) No. 110-2020.56 The subject LOAS7 was not proven to have been served to De Guzman as the lower portion thereof was not signed by him nor his authorized representative. Hence, it is doubtful that De Guzman received the same. For failure to serve the LOA to De Guzman, it is as if no LOA was issued, which renders the assessment null and void, as ruled by the Supreme Court in Medicard Philippines v. Commissioner ofInternal Revenue (Medicard). ss Medicard was recognized by the BIR in RMC No. 75-2018, to wit: 59 ~ 53 Docket, CTA EB Crim No. 089, pp. 44-45. 54 Updated Handbook on Audit Procedures and Techniques Volume I (Revision -Year 2000), March 17,2000. Item Vlll (C)(2) provides: 2. Serving of Letter ofAuthority 2.1 On the first opportunity of the Revenue Officer to have personal contact with the taxpayer, he should present the Letter of Authority (LA) together with a copy of the Taxpayer's Bill of Rights. The LA should be served by the Revenue Officer assigned to the case and no one else. He should have the proper identification card and should be in proper attire. 2.2 A Letter of Authority authorizes or empowers a designated Revenue Officer to examine, verity and scrutinize a taxpayer's books and records in relation to his internal revenue tax liabilities for a particular period. 2.3 A Letter of Authority must be served or presented to the taxpayer within 30 days from its date of issue; otherwise, it becomes null and void unless revalidated. The taxpayer has all the right to refuse its service if presented beyond the 30�day period depending on the policy set by top management. Revalidation is done by issuing a new Letter of Authority or by just simply stamping the words "Revalidated on "on the face of the copy of the Letter of Authority issued. 55 BIR Audit Program, September 15, 20!5. Item Ill (23) provides: 23. The RO assigned to the case shall present or serve the eLA to the taxpayer or his representative in accordance with Section 3.1.6 ofRR No. 12�99 as amended by RR No. 18-2013. 56 Clarifications on the Proper Modes of Service of an Electronic Letter of Authority, September 24, 2020. Items 1 and 2 provide: 1. The eLA shall be served to the taxpayer through personal service by delivering personally a copy of the eLA at his registered or known address or wherever he may be found. A known address shall mean a place other than the registered address where business activities of the party are conducted or his place of residence. Personal or substituted service of the eLA shall be effected by the RO assigned to the case. However, such service may also be made by any BIR employee duly authorized for the purpose. 2. In case personal service is not possible, the eLA shall be served either by substituted service or by mail. However, substituted service can only be resorted to when the party is not present at the registered or known address.... 57 Exhibit "P�8", Docket, CTA Crim. Case No. 0�690, p. 54. 58 G.R. No. 222743, AprilS, 2017. 59 The Mandatory Statutory Requirement and Function of a Letter of Authority, September 5, 2018.

DECISION CTA EB Crim. Nos. 089 & 092 (CTA Crim. Case Nos. 0-690 & 0-691) People of the Philippines v. Ronnel Lampa De Guzman (Lucky Sea Trading) j Ronnel Lampa De Guzman (Lucky Sea Trading) v. People of the Philippines x------------------------------------------------------------------------------------------x This Circular is being issued to highlight the doctrinal rule enunciated by the Supreme Court in the case of "Medicard Philippines, Inc. vs. Commissioner of Internal Revenue" (G.R. No. 222743, 05 April 20 17) on the mandatory statutory requirement of a Letter of Authority (LOA), for the guidance of all concerned, particularly internal revenue officers tasked with assessment and collection functions and review of disputed assessments. The judicial ruling, invoking a specific statutory mandate, states that no assessments can be issued or no assessment functions or proceedings can be done without the prior approval and authorization of the Commissioner of Internal Revenue (CIR) or his duly authorized representative, through an LOA. The concept of an LOA is therefore clear and unequivocal. Any tax assessment issued without an LOA is a violation of the taxpayer's right to due process and is therefore "inescapably void." (Emphasis supplied) For failing to observe the prescribed procedure in serving the LOA, De Guzman was denied his right to due process rendering the assessment null and void. In Commissioner of Internal Revenue v. BASF Coating + Inks Phils., Inc., 60 the Supreme Court ruled that taxes cannot be collected without complying with due process, to wit: It is an elementary rule enshrined in the 1987 Constitution that no person shall be deprived of property without due process of law. In balancing the scales between the power of the State to tax and its inherent right to prosecute perceived transgressors of the law on one side, and the constitutional rights of a citizen to due process of law and the equal protection of the laws on the other, the scales must tilt in favor of the individual, for a citizen's right is amply protected by the Bill of Rights under the Constitution. (Emphasis supplied) The importance of the revenue officer's authority to conduct an audit cannot be overemphasized because it goes into the validity of the assessment. The absence of a LOA itself results in a void assessment. Being a void assessment, the same bears no fruit.6' ~ 60 G.R. No. 198677, November 26,2014. 61 See Himlayang Filipino Plans, Inc. v. Commissioner ofInternal Revenue, G.R. No. 241848, May 14, 2021.

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