COMMISSIONER OF INTERNAL REVENUE v. MEDICAL CENTER TRADING CORPORATION

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY ENBANC COMMISSIONER OF CTA EB NO. 2473 INTERNAL REVENUE, (CTA Case No. 9412) Petitioner, Members: -versus- DEL ROSARIO , PJ, UY, RINGPIS-LIBAN , MANAHAN, BACORRO-VILLENA, MODESTO-SAN PEDRO, REYES-FAJARDO, CUI-DAVID, and FERRER-FLORES, JJ. MEDICAL CENTER TRADING Promulgated: CORPORATION, FEB 2 .. ...."'.,.. 1 Respondent. }{- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -}{ DECISION CUI-DAVID, J. : Before the Court En Bane is a Petition for Review filed by the Commissioner of Internal Revenuel ("Petitioner" or "CIR"), under Section 3(b), Rule 8,2 in relation to Section 2 (a)(l), Rule 1 Dated 2 June 2021, received by the Court on 9 June 202 1; En Bane (EB) Docket, pp. 1-28. ~ 2 Section 3. Who May Appeal; Period to File Petition. - (a) x x (b) A party adversely affected by a decision or resolution of a Division of the Court on a motion for reconsideration or new trial may appeal to the Court by filing before it a petition for review within fifteen days from receipt of a copy of the questioned decision or resolution. Upon proper motion and the payment of the full amount of the docket and other lawful fees and deposit for costs before the expiration of the reglementary period herein fi xed, the Court may grant an additional period not exceeding fifteen days from the expiration of the origi nal period within which to file the petition for review.

DECISION CTA EB No. 2473 (CTA Case No. 9412) Commissioner of Internal Revenue vs. Medical Center Trading Corporation x------------------------------------------------------------------------------------------x 43 of the Revised Rules of the Court of Tax Appeals4 ("RRCTA"), assailing the Decision dated 23 September 2020 5 ("assailed Decision") and Resolution dated 22 March 2021 6 ("assailed Resolution") of the Third Division ("Court in Division") in CTA Case No. 9412 entitled Medical Center Trading Corporation v. Commissioner ofInternal Revenue. THE PARTIES Petitioner is the Commissioner of the Bureau of Internal Revenue ("BIR"), the government agency in charge of, among others, the assessment and collection of all national internal revenue taxes, fees, and charges.7 Respondent Medical Center Trading Corporation ("MCTC") is a domestic corporation duly organized under Philippine laws, with principal office at Pioneer Street corner Shaw Boulevard, Pasig City.8 Respondent is engaged in the business of general wholesale and retail; manufacture, buy, sell, import, trade, and deal in all kinds of drugs, medicines, druggists sundries, chemicals, metals, extracts, tinctures, pomades, ointments, liniments, toilet articles, perfumeries, surgical apparatus, physician and hospital equipment, instruments and supplies, oils, DIY-stuffs, and such other articles as may be carried in a general wholesale and retail business; to establish and maintain research laboratories; and acting as manufacturer's agent or representative of the corporation.9 Respondent is registered with the BIR under Certificate of Registration No. OCN-8RC0000049332 dated 14 June 1994, with Tax Identification Number ("TIN") 000-280-681. 10 ,/ 3 Section 2. Cases Within the Jurisdiction ofthe Court En Bane. -The Court en bane shall exercise exclusive appellate jurisdiction to review by appeal the following: (a) Decisions or resolutions on motions for reconsideration or new trial of the Court in Divisions in the exercise of its exclusive appellate jurisdiction over: (I) Cases arising from administrative agencies- Bureau of Internal Revenue, Bureau of Customs, Department of Finance, Department of Trade and Industry, Department of Agriculture. 4 A.M. No. 05-11�07�CTA. 5 EB Docket, pp. 37-49; penned by Associate Justice Juanito C. Castaii.eda, with Associate Justice Cielito N. Mindaro- Grulla and Associate Justice Jean Marie A. Bacorro -Villena, concurring. 6 /d., pp. 51-145. 7 Petition for Review. En Bane Docket, p. 2. 8 Comment, EB Docket, p. 68. 9 /d. �1 Comment, EB Docket, p. 68; Annex ''D", Division Docket- Vol. I, p. 77.

DECISION CTA EB No. 2473 (CTA Case No. 9412) Commissioner of Internal Revenue vs. Medical Center Trading Corporation x------------------------------------------------------------------------------------------x THE FACTS The following are the undisputed facts as narrated in the assailed Decision in CTA Case No. 9412, to wit: 11 On May 25, 2010, [respondent] received from (petitioner] the Letter of Authority (LOA) No. LOA-116-2010-00000069 dated May 14, 2010, authorizing the examination of [respondent]'s books of accounts and other accounting records for taxable year ended December 31, 2009. During the course of audit, four (4) Waivers of the Defense of Prescription under the Statute of Limitations of the National Internal Revenue Code were executed by [respondent], through its President, Mr. Sulpicio A. Batilaran, and accepted by [petitioner], through Mr. Alfredo V. Misajon, OIC Assistant Commissioner for Large Taxpayer Service, to wit: 1st Waiver Date of Execution Stated Period of Extension 2nd Waiver Julv 17, 2012 Until June 30, 2013 3rd Waiver April 2, 2013 Until December 31, 2013 4th Waiver September 3, 2013 Until June 30 2014 March 27, 2014 Until December 31, 2014 Thereafter, [respondent] received from the BIR a Preliminary Assessment Notice (PAN), wherein [respondent] was assessed deficiency income tax (IT), value-added tax (VAT), withholding tax- expanded (EWT), withholding tax- compensation (WTC), documentary stamp tax (DST), plus interest and compromise penalties, for taxable year 2009 in the aggregate amount of P1,000,782,684.57. On August 4, 2014, [respondent] received a Formal Letter of Demand (FLD) with Details of Discrepancies, and attached undated Audit Result/ Assessment Notices (FANs) from [petitioner], containing assessments for deficiency income tax, VAT, EWT, WTC, and DST for taxable year 2009, in the aggregate amount of P1,009,814,663.69, inclusive of surcharge, interests and compromise penalties, broken down as follows: TaxTvpe Amount ~ Income Tax I' 667,916,886.27 VAT EWT 325,667,994.36 WTC 14,248,326.32 DST 1,612,937.06 Total 368,519.68 11 Annex ''A'', Petition for Review, pp. 18 to 27. I' 1,009,814,663.69

DECISION CTA EB No. 2473 (CTA Case No. 9412) Commissioner of Internal Revenue vs. Medical Center Trading Corporation X------------------------------------------------------------------------------------------X On September 2, 2014, [respondent] filed with the BIR its protest letter dated August 26, 2014, requesting for a reinvestigation of the findings in the FLO. Thereafter, on July 4, 2016, [respondent] received the assailed undated FDDA with Details of Discrepancies, and attached undated FANs from [petitioner], demanding payment in the total reduced amount of P347,498,651.38, broken down as follows: Tax Type Amount Income Tax I' 277,588,175.00 VAT EWT 55,266,522.71 WTC 12,641,062.97 DST 1,951,116.61 51.774.09 Total I' 347,498,651.38 PROCEEDINGS BEFORE THE COURT IN DIVISION Respondent filed a Petition for Review12 before the Court's First Division on 3 August 2016. Petitioner filed his Answer13 on 14 November 2016, against which a Reply14 was filed by respondent on 28 November 2016. Petitioner transmitted to the Court the BIR Records for the case on 12January2017.15 Respondent filed its Pre-Trial Brief on 3 March 2017, 16 while petitioner's Pre-Trial Briefwas submitted on 6 July 2017,17 The Pre-Trial Conference was held on 13 July 2017. 18 The parties filed their Joint Stipulation of Facts & Issues ("JSFI") on 28 July 2017.19 The said JSFiwas approved by the Court's First Division in its Resolution dated 10 August 2017.20 The Pre-Trial Order dated 19 September 2017 was then issued.21 ~ 12 Division Docket- Vol. I, pp. 10-50. 13 Division Docket- Vol. I, pp. 294-3 I I. 14 Division Docket- Vol. I, pp. 319-335. 15 Division Docket~ Vol. I, pp. 337-339. 16 Division Docket- Vol. I, pp. 348-358. 17 Division Docket- Vol. II, pp. 717-721. 18 Order dated 27 April2017, Division Docket- Vol. I, p. 397; Minutes of the hearing held on, and Order dated, 13 July 2017, Division Docket- Vol. II, pp. 725 to 729, and 732 to 734, respectively. 19 Division Docket- Vol. II, pp. 752-759. 20 Division Docket- Vol. II, pp. 767-768. 21 Divisi0n Docket- Vol. IT. pp. RR7-914.

DECISION CTA EB No. 2473 (CTA Case No. 9412) Commissioner of Internal Revenue vs. Medical Center Trading Corporation Page 5 of37 x------------------------------------------------------------------------------------------x Trial proceeded. The report of the Independent Certified Public Accountant ("ICPA") was submitted to the Court on 11 August 2017.22 Respondent filed its Formal Offer of Evidence ("FOE") on 5 March 2018,23 to which petitioner failed to file his comment.24 The Court admitted respondent's exhibits with a few exclusions in a Resolution dated 11 September 2018.25 The case was then transferred from the First Division to the Third Division in an Order dated 26 September 2018.26 After respondent filed a Motion for Reconsideration27 and Amended FOE, 28 the Court admitted certain exhibits of respondent but still explicitly denied some.29 Respondent filed its Tender of Excluded Evidence on 20 May 2019,30 which the Court in Division noted.31 Petitioner filed his FOE on 4 June 20 19, 32 to which respondent filed its comment. 33 Petitioner's evidence was admitted by the Court in Division on 30 July 2019.34 On 4 September 2019, petitioner submitted his Memorandum; 35 respondent filed its Memorandum on 13 September 201936 and its Reply Memorandum on 20 September 2 0 1 9 . 37 The case before the Court in Division was deemed submitted for decision on 26 September 20 19.38 ~ 22 Division Docket- Vol. II, p. 769. 23 Division Docket- Vol. III, pp. 932-2116. 24 Division Docket- Vol. IV, p. 2119. 25 Division Docket- Vol. IV, pp. 2127-2189. 26 Division Docket- Vol. IV, p. 2190. 27 Division Docket- Vol. IV, p. 2192-2209, dated I0 October 2018. 28 Division Docket- Vol. IV, p. 2343 to Vol. VI, p. 3508., dated 26 February 2019. 29 Division Docket- Vol. VI, pp. 3512-3517; Resolution dated 15 Apri12019. 30 Division Docket- Vol. VI, pp. 3518-3521. 31 Division Docket- Vol. VI, pp. 3523-3524; Order dated 21 May 2019. 32 Division Docket- Vol. VI, pp. 3525-3533. 33 Division Docket- Vol. VI, pp. 3536-3539. 34 Division Docket- Vol. VI, pp. 3550-3551. 35 Division Docket- Vol. VI, pp. 3558-3579. 36 Division Docket- Vol. VI, pp. 3581-3636. 37 Division Docket- Vol. VII, pp. 3643-3658. 38 Divisinn Docket- V0l. VII. pp.16tl0-3661; Resolutirm chned 26 Septemher 2019.

DECISION CTA EB No. 2473 (CTA Case No. 9412) Commissioner of Internal Revenue vs. Medical Center Trading Corporation x------------------------------------------------------------------------------------------x On 23 September 2020, the Court in Division ruled m favor of respondent.39 The dispositive portion reads: WHEREFORE, in light of the foregoing considerations, the instant Petition for Review is GRANTED. Accordingly, the subject assessments issued against petitioner under the FDDA for taxable year ended December 31, 2009 for deficiency income tax, VAT, EWT, WTC, and DST, inclusive of increments and compromise penalties in the aggregate amount of P347,498,651.37 are CANCELLED and SET ASIDE. SO ORDERED. On 16 October 2020, petitioner filed his Motion for Reconsideration (Re: Decision promulgated 23 September 2020). 40 Respondent filed its Comment/ Opposition (To [Petitioner's] Motion for Reconsideration dated October 13, 2020) on 23 December 2020.41 On 22 March 2021, the Court in Division promulgated its Resolution 42 with the following dispositive portion: WHEREFORE, premises considered, respondent's Motion for Reconsideration (Re: Decision promulgated 23 September 2020) is DENIED for lack of merit. SO ORDERED. PROCEEDINGS BEFORE THE COURT EN BANC b e f o On 9 June 2021, pet it io ner filed a Petition for Review43 re th e Court En Bane. I n a Resolution dated 16 Jul y 2021,44 the Court ordered respondent to file its comment. Respondent filed its Comment on 25 October 2021.45 In a Resolution dated 16 February 2022,46 the case was referred for mediation to the Philippine Mediation Center - Court of Tax Appeals ("PMC-CTA"). The Philippine Mediation 39 Division Docket- Vol. VII, pp. 3671�3691. ~ 40 Division Docket- Vol. VII, pp. 3692-3718. 41 Division Docket- Vol. VII, pp. 3723-3758. 42 Division Docket- Vol. VII, pp. 3761-3768. 43 EB Docket, pp. 1-63. 44 EB Docket, pp. 65-66. 45 EB Docket, pp. 67-116. 40 f.B Docket, pp. 502-503.

DECISION CTA EB No. 2473 (CTA Case No. 9412) Commissioner of Internal Revenue vs. Medical Center Trading Corporation x------------------------------------------------------------------------------------------x Center Unit issued a" No Agreement to Mediate," stating that the parties "decide not to have their case mediated. "47 Thus, on 8 April 2022, this Court issued a Resolution submitting the Petition for decision. 48 Hence, this Decision. ISSUES Petitioner raises the following grounds for his Petition for Review with the Court En Bane: I. WITH ALL DUE RESPECT, THE HONORABLE COURT IN DIVISION ERRED IN RULING THAT THE ASSESSMENTS WERE ISSUED BEYOND THE PERIOD TO ASSESS. II. THE HONORABLE COURT IN DIVISION ERRED IN RULING THAT THE ABSENCE OF AN ELOA IN THE PRESENT CASE INVALIDATES THE SUBJECT TAX ASSESSMENTS. III. THE HONORABLE COURT IN DIVISION ERRED IN RULING THAT THE ASSESSMENTS ARE VOID DUE TO THE ALLEGED ABSENCE OF A DEFINITE TAX LIABILITY AND DUE DATE IN THE FLO AND FAN. PETITIONER'S ARGUMENTS Petitioner claims that the Court in Division erred in ruling that the period to assess respondent has already prescribed. According to petitioner, considering that respondent has filed no DST return, the 10-year prescriptive period should apply. 49 Further, considering that there is a substantial difference between the reported amounts and the findings after the audit, the returns filed are false or fraudulent. However, even if the returns are not false or fraudulent and that the 10-year prescriptive period does not apply, the waivers of the statute of limitation should have effectively extended the prescribed period. /- 50~ 47 EB Docket, p. 48 EB Docket, pp. 510-511. 49 Petition for Review, pp. 4-6.

DECISION CTA EB No. 2473 (CTA Case No. 9412) Commissioner of Internal Revenue vs. Medical Center Trading Corporation x------------------------------------------------------------------------------------------x Petitioner avers that the failure to indicate the nature and the amount of the tax due is not fatal to the waiver's validity. 50 Accordingly, respondent should not be the first person to impugn the waiver's validity as respondent benefited from such waiver. 51 For petitioner, respondent is estopped. It even participated in the investigation by submitting evidence to the BIR.52 Even if the waiver is defective, both are in pari delicto. 53 Regarding the alleged lack of authority, petitioner asserts that the Court in Division erred in ruling that the absence of an eLOA invalidates the tax assessment. Petitioner posits that a valid LOA was issued; thus, an eLOA does not invalidate the assessment. 54 Petitioner likewise avers that the Court in Division erred in ruling that the assessments are void due to the alleged absence of a definite tax liability and due date in the FLD /FAN. According to petitioner, what is essential is that the taxpayer was informed in writing of petitioner's findings and stated the facts and laws on which the assessment is based.55 Petitioner posits that a due date is not required, even alleging that the Supreme Court engaged in judicial legislation in Fitness by Design and misapplied Menguito. 56 Finally, petitioner also adds that the FLD/FAN he has issued contains a definite amount, notwithstanding the statement, "please note that the interest will have to be adjusted if paid beyond the dated specified therein." Accordingly, the interest will depend on when the respondent will pay its alleged tax liabilities. 57 ~ 50 Petition for Review, pp. 6-8. 51 Petition for Review, pp. 8-11. 52 Petition for Review, p. 12. 53 Petition for Review, pp. 12-13. 54 Petition for Revie\v, pp. 14-16. 55 Petition for Review, pp. 17-19. 56 Petition for Review, p. 17. 57 Petition for Review, pp. 21-25.

DECISION CTA EB No. 2473 (CTA Case No. 9412) Commissioner of Internal Revenue vs. Medical Center Trading Corporation X------------------------------------------------------------------------------------------X RESPONDENT'S ARGUMENTS Respondent argues that petitioner's right to assess has already prescribed. Respondent points out that the FLD and the FDDA did not allege fraud against it; thus, the 10-year prescriptive period should not apply. 58 According to respondent, fraud must be proved and not merely alleged. 59 In relation to the waivers, respondent argues against their validity. According to respondent, the nature and kind of tax should be indicated in the waiver for its validity. 60 Further, respondent states that petitioner failed to furnish it with a copy of the waiver as accepted by the BIR. 61 The BIR allegedly accepted another waiver beyond the three-year prescriptive period.62 Respondent adds that the Court in Division is correct in nullifying the FLD and the FDDA, considering that the BIR admitted that no new eLOA was issued. 63 Respondent cites Revenue Memorandum Order ("RMO") No. 69-2010, which required the replacement of LOAs with eLOAs. 64 It is respondent's position that the BIR is estopped from assailing such. 65 Respondent also avers that the due date is required for the validity of the FLD and FDDA, contrary to petitioner's supposition.66 Respondent points out the failure of petitioner to conduct a NIC.67 Enumerating other alleged defects, respondent states that the BIR failed to complete its audit within the allegedly required 60-day period,68 and the BIR failed to issue a new LOA on the reassignment of the 2009 audit to a new audit team. 69 All told, respondent alleges that the FAN, FLD, and FDDA are void. vi 58 Comment, p. II, par. 51. 59 Comment, p. II, par. 53. �6 Comment, pp. 13-14, pars. 54-56. 61 Comment, pp. 14-15, par. 58(i). 62 Comment, pp. 15-16, par. 58(ii). 63 Comment, pp. 18-19, par. 61. 64 Comment, pp. 19-20, par. 64. 65 Comment, pp. 21-22, par. 68. " Comment, pp. 23-24, pars. 72-73. 67 Comment, pp. 28-30, pars. 78-81. 68 Comment, pp. 32-39, pars. 84-91. 69 Comment, pp. 39-48, pars. 92-99.

DECISION CTA EB No. 2473 (CTA Case No. 9412) Commissioner of Internal Revenue vs. Medical Center Trading Corporation Page 10 of37 x------------------------------------------------------------------------------------------x RULING OF THE COURT EN BANC The Petition is not impressed with merit. The Court En Bane has jurisdiction over the instant Petition. Before We proceed to the merits of the case, We shall first determine whether the Court En Bane has jurisdiction over the instant Petition. On 23 September 2020, the Court in Division promulgated a Decision granting respondent's Petition for Review.7� On 16 October 2020, respondent filed a Motion for Reconsideration71 against the Decision of the Court in Division within the period provided under Section 3(b), Rule 8 72 of RRCTA. On 22 March 2021, the said Motion for Reconsideration was denied by the Court in Division through a Resolution,73 a copy of which was received by petitioner on 26 May 2021. As provided under Section 3(b), Rule 8 74 of RRCTA, petitioner had fifteen (15) days from his receipt of the assailed Resolution, or until 10 June 2021 to file his Petition for Review before the CTA En Bane. Within the reglementary period, on 9 June 2021, petitioner filed the instant Petition. 75 i 70 Supra at note 39. 71 Supra at note 40. 72 Section 3. Who May Appeal; Period to File Petition.- (a) x x (b) A party adversely affected by a decision or resolution of a Division of the Court on a motion for reconsideration or new trial may appeal to the Court by filing before it a petition for review within fifteen days from receipt of a copy of the questioned decision or resolution. Upon proper motion and the payment of the full amount of the docket and other lawful fees and deposit for costs before the expiration of the reglementary period herein fixed, the Court may grant an additional period not exceeding fifteen days from the expiration of the original period within which to file the petition for review. 73 Supra at note 42. 7~ Supru at note 72. 75 Supra at note 43

DECISION CTA EB No. 2473 (CTA Case No. 9412) Commissioner of Internal Revenue vs. Medical Center Trading Corporation X------------------------------------------------------------------------------------------X Having settled that the Petition was timely filed, We likewise rule that the CTA En Bane has jurisdiction to take cognizance of this Petition pursuant to Section 2(a)(l), Rule 476 ofRRCTA. We now discuss the merits. At the first instance, We note that petitioner's arguments in his Petition for Review before this Court are mere reiterations of his arguments in the Motion for Reconsideration before the Court in Division. We shall nevertheless discuss petitioner's contentions. Petitioner's right to assess respondent of deficiency internal revenue taxes for the taxable year 2009 has partially prescribed. Petitioner contends that the Court in Division erred in ruling that the assessments were issued beyond the period to assess. He claims that there are exceptions to the three-year prescriptive period within which the BIR may assess a taxpayer under Section 222 of the NIRC, as amended, namely: if there is filing of a false or fraudulent return or failure to file a return; or if the CIR and the taxpayer agreed in writing before the expiration that the assessment would be made after such time. He submits that both circumstances are present in this case, i.e., respondent filed no DST return for 2009, and the returns filed are false or fraudulent. Since respondent has filed no DST return, the 10-year prescriptive period should apply. 77 He further contends that, even if the returns are not false or fraudulent, it is his position that the parties signed valid waivers. As such, the assessment was validly made even if beyond the three-year prescriptive period.7B ~ 76 Section 2. Cases Within the Jurisdiction ofthe Court En Bane.- The Court en bane shall exercise exclusive appellate jurisdiction to review by appeal the following: (a) Decisions or resolutions on motions for reconsideration or new trial of the Court in Divisions in the exercise of its exclusive appellate jurisdiction over: ( 1) Cases arising from administrative agencies- Bureau of Internal Revenue, Bureau of Customs, Department of Finance. Department nf Trade and Jndustry. Department nf Agriculture. 77 Supra at note 49. 78 Petition for Review, p. 3.

DECISION CTA EB No. 2473 (CTA Case No. 9412) Commissioner of Internal Revenue vs. Medical Center Trading Corporation Page 12 of37 x------------------------------------------------------------------------------------------x Respondent counters that prescription had already set in. It claims that the 2009 PAN, FLD, and FDDA did not allege fraud against it during the administrative stage of the tax audit process. It was only after the issuance of the assailed Decision and Resolution that petitioner alleged the existence of fraud. 79 Further, the existence of fraud must be proved and not merely alleged.80 Without fraud, the 10-year prescriptive period should not apply.B 1 Respondent likewise argues that the waiver must specify the kind and amount of tax to be valid. The BIR admits its failure to do so. Thus, the Court in Division was correct in ruling that the subject waivers are invalid.B2 Section 203 of the NIRC of 1997, as amended, states: Section 203. Period of Limitation Upon Assessment and Collection. - Except as provided in Section 222, internal revenue taxes shall be assessed within three 131 years after the last day prescribed by law for the filing of the return, and no proceeding in court without assessment for the collection of such taxes shall be begun after the expiration of such period: Provided, That in a case where a return is filed beyond the period prescribed by law, the three 131-year period shall be counted from the day the return was filed. For purposes of this Section, a return filed before the last day prescribed by law for the filing thereof shall be considered as filed on such last day. [Emphasis and underscoring supplied.] Based on the foregoing, internal revenue taxes shall be assessed within three (3) years counted from the last day prescribed by law for filing the return or from the day the return was filed, whichever is later. Thus, assessments issued after the expiration of such period are no longer valid and effective. However, Section 222 of the same law provides exceptions to the said three-year period of limitation. Accordingly: Section 222. Exceptions as to Period of Limitation of Assessment and Collection of Taxes.- (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 1101 Y"~ aft" the diKO~'V of the falalty, fmud o~ 7"' Comment, p. II, par. 52. 80 Supra at note 59. 81 Supra at note 58. 82 Comment, p. 13, par. 56.

DECISION CTA EB No. 2473 (CTA Case No. 9412) Commissioner of Internal Revenue vs. Medical Center Trading Corporation x------------------------------------------------------------------------------------------x 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. (b) If before the expiration of the time prescribed in Section 203 for the assessment of the tax, both the Commissioner and the taxpayer have agreed in writing to its assessment after such time, the tax may be assessed within the period agreed upon. The period so agreed upon may be extended by subsequent written agreement made before the expiration of the period previously agreed upon. [Emphasis and underscoring supplied.] Section 222(a) provides that in case of a false or fraudulent return with the intent to evade tax, or in case of failure to file a return, the extraordinary prescriptive period of ten (1 0) years shall apply. On the other hand, Section 222(b) provides that if, before the expiration of the time prescribed in Section 203 for the assessment of the tax, the CIR and the taxpayer agreed in writing to the assessment after such time, the tax may be assessed within the period agreed upon. The period so agreed upon may be extended by subsequent written agreement made before the expiration of the period previously agreed upon. The oft-cited case of Aznar vs. Court of Tax AppealsB3 discusses the nature of fraud that merits the application of the 10-year prescriptive period. The fraud contemplated by law is actual and not constructive. It must be intentional fraud, consisting of deception willfully and deliberately done or resorted to in order to induce another to give up some legal right. Negligence, whether slight or gross, is not equivalent to the fraud with intent to evade the tax contemplated by the law. It must amount to intentional wrong doing [sic] with the sole object of avoiding the tax. It necessarily follows that a mere mistake cannot be considered as fraudulent intent, and if both petitioner and respondent Commissioner of Internal Revenue committed mistakes in making entries in the returns and in the assessment, respectively, under the inventory method of determining tax liability, it would be unfair to treat the mistakes of the petitioner as tainted with fraud and those of y the respondent as made in good faith. 83 G.R. No. L-20569, 23 August 1974, 157 SCRA 510-536.

DECISION CTA EB No. 2473 (CTA Case No. 9412) Commissioner of Internal Revenue vs. Medical Center Trading Corporation x------------------------------------------------------------------------------------------x In determining whether the return filed is false or fraudulent, jurisprudence has consistently held that fraud is a question of fact that should be alleged and duly proven. 84 Fraud cannot be presumed.BS Fraud is never imputed and the courts never sustain findings of fraud upon circumstances, which, at most, create only suspicion and the mere understatement of a tax is not itself proof of fraud for the purpose of tax evasion.B6 The taxpayer's resort to minimize taxes must be in the context of fraud, which must be proven by clear and convincing evidence and cannot be based on mere speculation.B7 A cursory reading of the PAN88 and FLD with Details of DiscrepanciesB9 reveals that these did not contain any factual allegation of fraud. Petitioner neither states nor points to any other detail establishing actual fraud committed by respondent. Indeed, petitioner failed to overcome the burden of evidence required to establish fraud. As such, We are one with the Court in Division in ruling that, except for the DST assessment, the 3-year prescriptive period should apply. For the DST assessment, since respondent failed to prove the filing of the DST return, the 10-year prescriptive period applies. As regards the issue on the validity of the Waiver of the Defense of Prescription under the Statute of Limitations, petitioner argues that it is not always required to state the exact amount in the waiver considering that there is no assessment yet, and the final amount is not yet available at the time of its execution. 90 Petitioner also posits that, by respondent's acts or representation, and after benefitting from the effects of the waivers, the latter should not be the first person to impugn their validity. 9! For petitioner, respondent is estopped considering that it did not only execute one, but four Waivers. After executing the waivers, it even participated in the investigation ~ by submitting evidence to the BIR. 92 Even if the waivers are Ayala Secunt1es Corp., G.R. No. L-29485, 31 March 1976, 162 SCRA 287- 298. 85 Commissioner ofInternal Revenue vs. Air India, G.R. No. 72443, 29 January 1988, 241 SCRA 689-702. 86 Commissioner ofInternal Revenue vs. Javier, Jr., G.R. No. 78953, 31 July 1991,276 SCRA 914-923. 87 Commissioner ofInternal Revenue vs. The Hongkong Shanghai Banking Corp. Limited-Philippine Branch, G.R. No. 227121,9 December 2020. 88 Division Docket- Vol. II, pp. 14 and 294. 89 Exhibit "P-52", Division Docket- Vol. II, pp. 641-654; Exhibit "R-12", BIR Records, pp. 508-516. 90 Petition fnr Review. pp. 6-R. 91 Petition for Review, pp. 8-1 I. 92 Petition for Review, p. 12.

DECISION CTA EB No. 2473 (CTA Case No. 9412) Commissioner of Internal Revenue vs. Medical Center Trading Corporation Page 15 of37 x------------------------------------------------------------------------------------------x defective, the subsequent acts of respondent puts it in estoppel to question the said waivers.93 On the other hand, respondent counter-argues against the validity of the subject waivers. It maintains that the waiver must specify the kind and amount of taxes subject thereof to be valid.94 It claims that a waiver is a bilateral agreement between the taxpayer and the BIR to extend the period to assess or collect deficiency taxes on a certain date. Logically, there can be no agreement if the nature and amount of the taxes to be assessed or collected are not indicated. Indeed, specific information in the waiver is necessary for its validity.95 Further, respondent states that petitioner failed to furnish respondent with a copy of the waiver as accepted by the BIR.96 Another waiver was allegedly accepted by the BIR beyond the three-year prescriptive period.97 We discuss. In Philippine Journalists, Inc. us. Commissioner of Internal Revenue (Philippine Journalists case) 98 the Supreme Court explained the requirement to furnish the taxpayer with a copy of the waiver, viz.: Finally, the records show that petitioner was not furnished a copy of the waiver. Under RMO No. 20-90, the waiver must be executed in three copies with the second copy for the taxpayer. The Court of Appeals did not think this was important because the petitioner need not have a copy of the document it knowingly executed. It stated that the reason copies are furnished is for a party to be notified of the existence of a document, event or proceeding. The flaw in the appellate court's reasoning stems from its assumption that the waiver is a unilateral act of the taxpayer when it is in fact and in law an agreement between the taxpayer and the BIR. When the petitioner's comptroller signed the waiver on September 22, 1997, it was not yet complete and final because the BIR had not assented. There is compliance with the provision of RMO No. 20-90 only after the taxpayer received a copy of the waiver accepted by the BIR. The requirement to furnish the taxpayer with a copy . _/ 93 Petition for Review, pp. 12-13. til 94 Comment, pp. I3- I4, pars. 54-56. 95 Respondent cited Philippine Journalists, Inc. vs. Commissioner ofInternal Revenue, G.R. No. 162852, December 16, 2004. 96 Comment, pp. 14-15, par. 58(i). 97 Comment, pp. 15-16, par. 58(ii). 98 G.R. No. 162852, 16 December 2004,488 SCRA 218-235.

DECISION CTA EB No. 2473 (CTA Case No. 9412) Commissioner of Internal Revenue vs. Medical Center Trading Corporation X------------------------------------------------------------------------------------------X of the waiver is not only to give notice of the existence of the document but of the acceptance by the BIR and the perfection of the agreement. [Emphasis and underscoring supplied.] However, petitioner posits that respondent is in estoppel, and thus, cannot assail the validity of the waivers. It is at this point that We find for petitioner. In Commissioner of Internal Revenue vs. Kudos Metal Corporation (Kudos Metal casej,99 the Supreme Court ruled on BIR's invocation of estoppel. We quote: Moreover, the BIR cannot hide behind the doctrine of estoppel to cover its failure to comply with RMO 20-90 and RDAO 05-01, which the BIR itself issued. As stated earlier, the BIR failed to verify whether a notarized written authority was given by the respondent to its accountant, and to indicate the date of acceptance and the receipt by the respondent of the waivers. Having caused the defects in the waivers, the BIR must bear the consequence. It cannot shift the blame to the taxpayer. To stress, a waiver of the statute of limitations, being a derogation of the taxpayer's right to security against prolonged and unscrupulous investigations, must be carefully and strictly construed. [Emphasis and underscoring supplied.] In Kudos Metal case, the Supreme Court laid down the guidelines for the execution of a valid waiver in accordance with RMO No. 20-90 10� issued on 4 April 1990, and Revenue Delegation Authority Order ("RDAO") No. 05-01 issued on 2 August 2001, to wit: ... RMO 20-90 issued on April4, 1990 and RDAO 05- 01 issued on August 2, 2001 lay down the procedure for the proper execution of the waiver, to wit: 1. The waiver must be in the proper form prescribed by RMO 20-90. The phrase "but not after _ 19 _," which indicates the expiry date of the period agreed upon to assess/collect the tax after the regular three-year period of prescription, should be filled up. 2. The waiver must be signed by the taxpayer himself or his duly authorized representative. In the case of a corporation, the waiver must be signed by any of its responsible officials. In case the authority is delegated by 99 G.R. No. 178087,5 May 2010,634 SCRA 314-330. ~ 100 Proper Execution of Waiver of Statute of Limitations Under the NIRC

DECISION CTA EB No. 2473 (CTA Case No. 9412) Commissioner of Internal Revenue vs. Medical Center Trading Corporation x------------------------------------------------------------------------------------------x the taxpayer to a representative, such delegation should be in writing and duly notarized. 3. The waiver should be duly notarized. 4. The CIR or the revenue official authorized by him must sign the waiver indicating that the BIR has accepted and agreed to the waiver. The date of such acceptance by the BIR should be indicated. However, before signing the waiver, the CIR or the revenue official authorized by him must make sure that the waiver is in the prescribed form duly notarized, and executed by the taxpayer or his duly authorized representative. 5. Both the date of execution by the taxpayer and date of acceptance by the Bureau should be before the expiration of the period of prescription or before the lapse of the period agreed upon in case a subsequent agreement is executed. 6. The waiver must be executed in three copies, the original copy to be attached to the docket of the case, the second copy for the taxpayer and the third copy for the Office accepting the waiver. The fact of receipt by the taxpayer of his/ her file copy must be indicated in the original copy to show that the taxpayer was notified of the acceptance of the BIR and the perfection of the agreement. However, in Commissioner of Internal Revenue vs. Next Mobile, Inc. (Next Mobile case),lOl the Supreme Court recognized that when both parties are at fault, the waivers shall be upheld. We quote: To be sure, both parties in this case are at fault. Here, respondent, through Sarmiento, executed five Waivers in favor of petitioner. However, her authority to sign these Waivers was not presented upon their submission to the BIR. In fact, later on, her authority to sign was questioned by respondent itself, the very same entity that caused her to sign such in the first place. Thus, it is clear that respondent violated RMO No. 20-90 which states that in case of a corporate taxpayer, the waiver must be signed by its responsible officials and RDAO 05-01 which requires the presentation of a written and notarized authority to the BIR. ~ 101 G.R. No. 212825.7 December 2015.

DECISION CTA EB No. 2473 (CTA Case No. 9412) Commissioner of Internal Revenue vs. Medical Center Trading Corporation Page 18 of37 x------------------------------------------------------------------------------------------x Similarly, the BIR violated its own rules and was careless in performing its functions with respect to these Waivers. It is very clear that under RDAO 05-01 it is the duty of the authorized revenue official to ensure that the waiver is duly accomplished and signed by the taxpayer or his authorized representative before affixing his signature to signify acceptance of the same. It also instructs that in case the authority is delegated by the taxpayer to a representative, the concerned revenue official shall see to it that such delegation is in writing and duly notarized. Furthermore, it mandates that the waiver should not be accepted by the concerned BIR office and official unless duly notarized. Vis-a-vis the five Waivers it received from respondent, the BIR has failed, for five times, to perform its duties in relation thereto: to verify Ms. Sarmiento's authority to execute there, demand the presentation of a notarized document evidencing the same, refuse acceptance of the Waivers when no such document was presented, affix the dates of its acceptance on each waiver, and indicate on the Second Waiver the date of respondent's receipt thereof. Both parties knew the infirmities of the Waivers yet they continued dealing with each other on the strength of these documents without bothering to rectify these infirmities. In fact, in its Letter Protest to the BIR, respondent did not even question the validity of the Waivers or call attention to their alleged defects. [Emphasis and underscoring supplied.] In the Next Mobile case, 102 the Supreme Court etched an exception to the general rule that when a waiver does not comply with the requisites for its validity specified under RMO No. 20-90103 and RDAO No. 05-01,104 it is invalid and ineffective to extend the prescriptive period to assess taxes. According to the Supreme Court, if the parties are in pari delicto or "in equal fault," the validity of the waivers should be upheld. In Commissioner ofInternal Revenue us. Transitions Optical Philippines, Inc. (Transitions Optical case),Ios the Supreme Court ruled that the taxpayer is in estoppel for only raising the issue of the waivers' validity in its Petition for Review filed with the ~ CTA. 102 Supra at note 10 I. 103 Supra at note 100. 104 DelegAtinn of Auth0rity t0 Sign find Accept Waiver 0f Defense nf Prescripticm l lnder Statute of I,imitations, 2 August 2001. ' 05 G.R. No. 227544. 22 November 2017.

DECISION CTA EB No. 2473 (CTA Case No. 9412) Commissioner of Internal Revenue vs. Medical Center Trading Corporation X------------------------------------------------------------------------------------------X In Asian Transmission Corp. vs. Commissioner of Internal Revenue (Asian Transmission case),106 the Supreme Court had the opportunity to tackle a case with a similar factual milieu to the instant Petition, to wit: Verily, both parties in those cases contributed flaws to the waivers. However, the Court upheld the waivers as effective because, although both parties caused separate defects, the taxpayer contested the waivers' validity only on appeal. A more circumspect appreciation of the relevant jurisprudence reveals that the taxpayer's contributory fault or negligence coupled with estoppel will render effective an otherwise flawed waiver, regardless of the physical number of mistakes attributable to a party. In other words, while a waiver may have been deficient in formalities, the taxpayer's belated action on questioning its validity tilts the scales in favor of the tax authorities. In the present case, the Court considers the following: First, it is no longer disputed that the subject defects were the result of both parties failure to observe diligence in performing what is incumbent upon them, respectively, relative to the execution of a valid waiver, particularly the requirements outlined in applicable BIR issuances. That the defects attributable to one party had been greater in number cannot diminish the seriousness of the counter-party's fault or negligence. Second, ATC issued eight successive Waivers over the course of four years (2004-2008). The Waivers had always been marred by defects and, yet, ATC continued to correspond with the tax authorities and allowed them to proceed with their investigation, as extended by the Waivers in question. Third, when the CIR issued the FLO, ATC did not question the Waivers' validity. It raised this argument for the first time in its appeal to the CTA, after obtaining an unfavorable CIR decision on their administrative protest. That ATC acquiesced to the SIR's extended investigation and failed to assail the Waivers' validity at the earliest opportunity gives rise to estoppel. Moreover, ATC's belated i attempt to cast doubt over the Waivers' validity could only be interpreted as a mere afterthought to resist possible tax liability. 100 G.R. No. 230861 (Resolution), 14 February 2022.

DECISION CTA EB No. 2473 (CTA Case No. 9412) Commissioner of Internal Revenue vs. Medical Center Trading Corporation Page 20 of37 x------------------------------------------------------------------------------------------x Verily, it has been held that the doctrine of estoppel, as a bar to the statute of limitations protecting a taxpayer from prolonged investigations, must be applied sparingly. [Emphasis and underscoring supplied.] We find the exception to the general rule applicable to the instant Petition. Similar to the Next Mobile 107 and Asian Transmission!OB cases, a series of waivers was issued in favor of respondent, and similar to the Transitions Optical109 and Asian Transmission110 cases, despite petitioner noting the waivers in the FAN/FLD issued against respondent, respondent did not tackle its alleged invalidity in the protest. It is only in its Petition for Review before the Court in Division that it first raised the issue of invalidity of the waivers. Verily, by continuing on executing the waivers, respondent allowed petitioner to rely on them and did not raise any objection against their validity until petitioner assessed taxes and penalties against it.''' Parties who do not come to court with clean hands cannot be allowed to benefit from their own wrongdoing.112 As such, despite the defects in the executed waivers, We rule against the invalidity of such. Moreover, the subject waivers are valid even if they failed to indicate the nature and the amount of tax due against respondent. Here, the four waivers were executed as follows: 1st Waiver113 Date of Execution 2nd Waiver114 July 17, 2012 3rct WaiverllS Apri12, 2013 4th Waiver116 September 3, 2013 March 27, 2014 wl 107 Supra at note 101. 108 Supra at note I06. 109 Supra at note 105. 110 Supra at note 106. 111 Commissioner ofInternal Revenue vs. Next Mobile, Inc., supra at note 101. 112 Department ofPublic Works and Highways vs. Quiwa, G.R. No. 183444 (Resolution), 8 February 2012, 681 SCRA 485-492. 113 Exhibit "R-5", BIR Records, p. 321. 114 Exhibit "R-6", BIR Records, p. 324. 11 ' Exhibit "R-T, lllR Roourds, p. 326. 116 Exhibit ''R-8", BIR Records, p. 329.

DECISION CTA EB No. 2473 (CTA Case No. 9412) Commissioner of Internal Revenue vs. Medical Center Trading Corporation x------------------------------------------------------------------------------------------x On 4 August 2014, or 130 days after the execution of the fourth waiver, respondent received the FLD with Details of Discrepancies and the undated Audit Results/Assessment Notices. Since the waivers were executed prior to the issuance of the FLD/FANs, respondent could not be expected to indicate the specific type and amount of tax at the time it executed the waiver since the said information were not yet available. Nonetheless, the waiver form provided under RMO No. 20-90, which requires the type and amount of tax, has been revised and abandoned. As stated in Revenue Memorandum Circular ("RMC") No. 029-12 issued on June 29, 2012, the Waiver format in RMO No. 20-90 should not be used anymore as the same has been revised per RDAO No. 05-01, viz.: "The provisions of RMO No. 20-90 should be strictly complied with in order for a Waiver to be valid. However, the Waiver form prescribed in RMO No. 20-90 should no longer be used as the same has been revised per RDAO No. 05-01. A copy of the Waiver form prescribed under RDAO No. 05-01 is hereto attached as Annex "A" for reference. [Emphasis supplied] The waiver format prescribed under RDAO No. 05-01, which is the format applicable to respondent, does not require the taxpayer to indicate the specific type and amount of tax. Having established the validity of the waivers, We shall now determine whether the waivers have been timely executed so as to extend the prescriptive period, and if in the affirmative, whether the assessments have been issued within the extended prescriptive period. First, We consider the deadline for the filing of the VAT returns on the 25th day following the close of each taxable quarter,l17 and the filing of expanded withholding tax ("EWT") and withholding tax on compensation ("WTC") remittance v returns ten (10) days after the end of each month, except for the month of December, which shall be filed on or before January 15 of the following year.118 117 Section 114(A), N1RC of 1997, as amended. 118 Section 2.58(A)(2)(a), RR No. 2-1998, as amended.

DECISION CTA EB No. 2473 (CTA Case No. 9412) Commissioner of Internal Revenue vs. Medical Center Trading Corporation x------------------------------------------------------------------------------------------x Second, as previously quoted, the reckoning of the 3-year period is the date of actual filing or the deadline, whichever is later.tt9 Return Actual date of Reckoning of Prescriptive period fillng��o three-rear 2eriod Income Tax, 2009 April 15, 2013 VAT 1Q, 2009 April 12,2010 April 15, 2010 April 25, 2012 VAT 2Q, 2009 April 17, 2009 April 25, 2009 July 25, 2012 VAT 3Q, 2009 July 17, 2009 July 25, 2009 October 25, 2012 VAT 4Q, 2009 October 19, 2009 October 25, 2009 January 25, 2013 EWT, January 2009 January 19, 2010 January 25, 2010 February 10, 2012 EWT, February 2009 February 09, 2009 February 10, 2009 March 10, 2012 EWT, March 2009 March 09, 2009 March 10, 2009 April 10, 2012 EWT, April2009 April 07, 2009 April 10, 2009 May 10, 2012 EWT, May 2009 May 07,2009 May 10, 2009 June 10, 2012 EWT, June 2009 June 08, 2009 June 10, 2009 July 10, 2012 EWT, July 2009 July 06, 2009 July 10, 2009 August 10, 2012 EWT, August 2009 August 07, 2009 August 10, 2009 September 10, 2012 EWT, September 2009 September 08, 2009 September 10, 2009 October 10, 2012 EWT, October 2009 October 06, 2009 October 10, 2009 November 10, 2012 EWT, November 2009 November 05, 2009 November 10, 2009 December 10, 2012 EWT, December 2009 December 07, 2009 December 10, 2009 January 15, 2013 WTC, January 2009 January 09, 2010 January 15, 2010 February 10, 2012 WTC, February 2009 February 09, 2009 February 10, 2009 March 10, 2012 WTC, March 2009 March 09, 2009 March 10, 2009 April 10, 2012 WTC, April 2009 April 07, 2009 April 10, 2009 May 10, 2012 WTC, May 2009 May 07,2009 May 10, 2009 June 10, 2012 WTC, June 2009 June 08, 2009 June 10, 2009 July 10, 2012 WTC, July 2009 July 06, 2009 July 10, 2009 August 10, 2012 WTC, August 2009 August 07, 2009 August 10, 2009 September 10, 2012 WTC, September 2009 September 08, 2009 September 10, 2009 October 10, 2012 WTC, October 2009 October 06, 2009 October 10, 2009 November 10, 2012 WTC, November 2009 November 05, 2009 November 10, 2009 December 10, 2012 WTC, December 2009 December 07, 2009 December 10, 2009 January 15, 2013 January 09, 2010 January 15, 2010 Next, We note the following dates of execution and stated periods of extension of the waivers: Date of Execution Stated Period of Extension July 17, 2012 1st Waiverl21 April 2, 2013 Until June 30, 2013 2nd Waiver122 September 3, 2013 3rd Waiver123 March 27, 2014 Until December 31, 2013 4th Waiver124 Until June 30, 2014 Until December 31, 2014 v 119 Section 203, NIRC of 1997, as amended. 120 Division Docket- Vol. II, pp. 466-583. 121 Exhibit "R-5", BIR Records, p. 321. "' Exhibit "R-6", lllR Records, p. 324. 123 Exhibit "R-7". BIR Records, p. 326. 124 Exhibit "R-8", BIR Records, p. 329.

DECISION CTA EB No. 2473 (CTA Case No. 9412) Commissioner of Internal Revenue vs. Medical Center Trading Corporation x------------------------------------------------------------------------------------------x Considering that the first waiver was executed on 17 July 2012, We note that the period to assess the following returns has prescribed: Return Prescriptive period EWT, January 2009 February 10, 2012 WTC, January 2009 February 10, 2012 EWT, February 2009 WTC, February 2009 March 10, 2012 EWT, March 2009 March 10, 2012 WTC, March 2009 April10, 2012 VAT 1Q, 2009 April 10, 2012 EWT, April2009 April25,2012 WTC, April 2009 EWT, May 2009 May 10, 2012 WTC, May 2009 May 10, 2012 EWT, June 2009 June 10, 2012 WTC, June 2009 June 10, 2012 July 10, 2012 July 10, 2012 The following returns remained: Return Prescriptive period Income Tax, 2009 April 15,2013 VAT 2Q, 2009 July 25, 2012 VAT 3Q, 2009 October 25, 2012 VAT 4Q, 2009 January 25, 2013 EWT, July 2009 August 10, 2012 EWT, August 2009 September 10, 2012 EWT, September 2009 October 10, 2012 EWT, October 2009 November 10, 2012 EWT, November 2009 December 10, 2012 EWT, December 2009 January 15, 2013 WTC, July 2009 August 10, 2012 WTC, August 2009 September 10, 2012 WTC, September 2009 October 10, 2012 WTC, October 2009 November 10, 2012 WTC, November 2009 December 10, 2012 WTC, December 2009 January 15, 2013 The absence of an electronic Letter of Authority does not invalidate the assessment. ~

DECISION CTA EB No. 2473 (CTA Case No. 9412) Commissioner of Internal Revenue vs. Medical Center Trading Corporation Page 24 of37 X------------------------------------------------------------------------------------------X The assessment cannot be invalidated on the ground that the revenue officers conducting the audit lack authority. Petitioner asserts that the Court in Division erred in ruling that the absence of an eLOA invalidates the tax assessment. Petitioner posits that a valid LOA was issued, and thus, an eLOA does not invalidate the assessment.125 On the other hand, respondent contends that the Court in Division is correct in nullifying the FLD and the FDDA, cons idering tha t it was admi was issued. 126 Re spondent tted b y the BIR t hat no new eLOA cites RMO No. 69-2010, which required the replacement of LOAs with eLOAs. 127 It is respondent's position such. 12s that the BIR is estopped from assailing We find for petitioner. An LOA is the authority given to the appropriate revenue officer assigned to perform assessment functions. It empowers or enables said revenue officer to examine the books of account and other accounting records of a taxpayer for the purpose of collecting the correct amount of tax.l29 The issuance of 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 the CIR himself or his duly authorized representatives.13o Section 13 of NIRC of 1997, as amended, is instructive, to wit: Section 13. Authority of a Revenue Officer. - Subject to the rules and regulations to be prescribed by the Secretary of Finance, upon recommendation of the Commissioner, a Revenue Officer assigned to perform assessment functions in any district may, pursuant to a Letter of Authority issued by the Revenue Regional Director, examine taxpayers within the jurisdiction of the district in order to collect the eo=ot amount of tax, octo e<eommond tho "'""mont of any~ 127 Comment, pp. 19-20, par. 64. 128 Comment, pp. 21�22, par. 68. 129 Commissioner 519-537). ofInternal Revenue vs. Sony Philippines, Inc., G.R. No. 178697, 17 November 2010, 649 SCRA �13 Commissioner ofInternal Revenue vs. McDonald's Philippines Realty Corp., G.R. No. 242670, I0 May 2021.

DECISION CTA EB No. 2473 (CTA Case No. 9412) Commissioner of Internal Revenue vs. Medical Center Trading Corporation x------------------------------------------------------------------------------------------x deficiency tax due in the same manner that the said acts could have been performed by the Revenue Regional Director himself. [Emphasis and underscoring supplied.] Correlatively, Section 6 (A) of NIRC of 1997, as amended provides: Section 6. Power of the Commissioner to Make Assessments and Prescribe Additional Requirements for Tax Administration and Enforcement. - (A) Examination of Return and Determination of Tax Due. After a return has been filed as required under the provisions of this Code, the Commissioner or his duly authorized representative may authorize the examination of any taxpayer and the assessment of the correct amount of tax, notwithstanding any law requiring the prior authorization of any government agency or instrumentality: Provided, however, That failure to file a return shall not prevent the Commissioner from authorizing the examination of any taxpayer. ... [Emphasis and underscoring supplied.] Additionally, Section D(4) of RMO No. 43-199013 1 provides: For the proper monitoring and coordination of the issuance of Letter of Authority, the only BIR officials authorized to issue and sign Letters of Authority are the Regional Directors, the Deputy Commissioners and the Commissioner. For the exigencies of the service, other officials may be authorized to issue and sign Letters of Authority but only upon prior authorization by the Commissioner himself. [Emphasis and underscoring supplied.] Based on the afore-quoted provisions, it is clear that unless authorized by the CIR himself or by his duly authorized representative through an LOA, an examination of the taxpayer cannot ordinarily be undertaken. The circumstances contemplated under Section 6 where the taxpayer may be assessed through the best evidence obtainable, inventory- taking, or surveillance among others have nothing to do with the LOA. These are simply methods of examining the taxpayer in order to arrive at the correct amount of taxes. Hence, unless undertaken by the CIR himself or his duly authorized V representatives, other tax agents may not validly conduct any of these kinds of examinations without prior authority. 132 131 Amendment of Revenue Memorandum Order No. 37-90 Prescribing Revised Policy Guidelines fOr Examination of Returns and Issuance of Letters of Authority to Audit, 20 September 1990. 132 Medicard Philippines. Inc. vs. Commissioner ofInternal Revenue, G.R. No. 222743, 5 April 2017, 808 SCRA 528� 556 '~

DECISION CTA EB No. 2473 (CTA Case No. 9412) Commissioner of Internal Revenue vs. Medical Center Trading Corporation Page 26 of37 x------------------------------------------------------------------------------------------x The issuance of an LOA prior to examination and assessment is a requirement of due process. It is not a mere formality or technicality. 133 The Supreme Court elucidates in Commissioner of Internal Revenue v. McDonald's Philippines Realty Corp. (McDonalds case),I34 the important relation of the receipt of LOA by the taxpayer to the due process requirement, VlZ.: To comply with due process in the audit or investigation by the BIR, the taxpayer needs to be informed that the revenue officer knocking at his or her door has the proper authority to examine his books of accounts. The only way for the taxpayer to verify the existence of that authority is when, upon reading the LOA, there is a link between the said LOA and the revenue officer who will conduct the examination and assessment; and the only way to make that link is by looking at the names of the revenue officers who are authorized in the said LOA. If any revenue officer other than those named in the LOA conducted the examination and assessment, taxpayers would be in a situation where they cannot verify the existence of the authority of the revenue officer to conduct the examination and assessment. Due process requires that taxpayers must have the right to know that the revenue officers are duly authorized to conduct the examination and assessment, and this requires that the LOAs must contain the names of the authorized revenue officers. In other words, identifying the authorized revenue officers in the LOA is a jurisdictional requirement of a valid audit or investigation by the BIR, and therefore of a valid assessment. [Emphasis and underscoring supplied.] Accordingly, the purpose of an LOA is to comply with due process: that the taxpayer needs to be informed that the revenue officer knocking at the taxpayer's door has the proper authority to examine the latter's books of accounts. Respondent cites RMO No. 69-2010,135 wherein the BIR mandates the replacement of existing LOAs with eLAs. According to the said RMO, "all LAs, whether manual or electronic, issued from March 1, 2010 covering cases for 2009 and other taxable years, as well as LAs issued by the Commissioner pursuant to RMC No. 61-2010, shall be retrieved and replaced with the new eLA form (BIR Form No. 1966)."136 i m Supra at note 130. " 4 G.R. No. 242670, 10 May 2021. 135 Guidelines on the Issuance of Electronic Letters of Authority, Tax Verification Notices, and Memoranda of Assignment, II August 20 I0. " 6 Part Ill. Item 6, RMO No. 69-2010.

DECISION CTA EB No. 2473 (CTA Case No. 9412) Commissioner of Internal Revenue vs. Medical Center Trading Corporation Page 27 of37 x------------------------------------------------------------------------------------------x Respondent does not deny receipt of the manual LOA. In fact, respondent received from petitioner LOA No. LOA-116- 2010-00000069 dated 14 May 2010 on 25 May 2010.137 What is being assailed herein is the fact that the manual LOA was not replaced by an eLA. To this Court's mind, this is merely a matter of form of the LOA and shall not affect petitioner's right to due process. In line with the digitization of the government and for expediency of the audit process, an LOA shall be replaced by an eLA as provided under RMO No. 69-2010. However, RMO No. 69- 2010 does not state that the conduct of the audit would be invalidated in the event that a new eLA is not issued. Neither does it provide a blanket revocation of the manual LOA if the said manual LOA is not replaced with an eLA. The fact that an LOA was issued already satisfies the reasoning of the Supreme Court in the McDonalds case138 --that the taxpayer needs to be informed that the revenue officer knocking at his or her door has the proper authority to examine his or her books of accounts. Thus, We rule that the non-issuance of the eLA, when an LOA has been issued, does not violate respondent's right to due process. Respondent additionally contends that the BIR failed to issue a new LOA on the reassignment of the 2009 audit to a new audit team. 139 We likewise rule in favor of petitioner. The LOA received by respondent names Revenue Officers ("RO") Wilfredo Reyes, Miguel Sulit, William Sundiang, Alpha Betty Tanguilig, and Fenalon Chan and Group Supervisor ("GS") Joriz Saldajeno. 140 However, in the Memorandum Reports,141 only ROs Miguel Sulit and William Sundiang were named as ROs, while the GS was changed to Wilfredo Reyes. Upon a perusal of the records and based on the confirmation of GS Reyes, 142 no new LOA was issued to reflect this change. 137 Exhibit "R�I", BIR Records, p. 251. ~ 138 Supra at note 134. 1l 9 Comment, pp. 39-48, pars. 92-99. 140 Supra at note 137. 141 Exhibits ''R-9" and ''R-11''. 142 Transcript of Stenographic Notes, 21 May 2019 hearing, pp. 12-14.

DECISION CTA EB No. 2473 (CTA Case No. 9412) Commissioner Page 28 of 37 of Internal Revenue vs. Medical Center Trading Corporation X------------------------------------------------------------------------------------------X Part C, Item V of RMO No. 43-1990143 provides: ornaefnoqitdsuastiriruoeeAevnnatoyhtlfhiedseraaeriiet-sditasoosuLn,sa/iinoAgncfcnse.lmLu o/deAfinnstag/ twrtnhaheneiwcspfhreLerh/vAaoi ov,f uewcsaaiLstlher/esAat htdnoeyu macenoxborpertirherseeapdrno,dRnsOddhia(anst)leg,l It is clear under said RMO that a new LOA is required dthaetresabteisafyrienagstshigenrmeqeunitroemr teranntssfoefrdoufecapsreosc.eTssh:ist,haagtatihne, should is aime taxpayer needs to be informed that the revenue officer knocking at his or her door has the proper authority to examine his or her books of accounts. However, what was received by respondent is a Notice of Change ofAudit Jurisdiction dated 14 May 2010.144 ct hl eeaer xTaanhcidtsi ncNagot ertiegcqoeuroiicsfaiCtlehi naonftghdeiuseomfpAaruot tcdeeirts: sJ.urTishdeicMticoDn odnoaelsdsncoatssea1t4i5s fiys ebrpomoocToHriaexnefouyrfsfhvefoaatsnricaeeemwsitamcpdanngrhseueoonmusuiniyrevtgsnraeIemc.heeetaenlsetCrmoqeinmdBio,sIaranusdTiRoIefinsnttRiutrto,hnrtvvyoaraumoenteariedxtnxerceelis,poodaetcfatthctaefonemuinhmhourynirtdmarsiftmieoeganftdhnarimfldgectoae'nuothste;numrotcypfhreaitlbuprseooyenaaeumoormsmnnssqenorboaffsareouadoakuestivyonrghcfntriutsiavtittchonnedmhtnoaeoioufmooedslaftrrftotreifueesfhaeinfnYmzsvnrsocceoateeeeutcaof,tdtsea,nbcodsrhsaoxsoueouoremrsripsareenprcesidystfgeesuttpraesoieuspnnooomnrrxif.necflfmotreapfa:ehcIaisfataintccenereelosyemeenomintfemosravmotttertehienffaiehnsaefamsenaootimnutesnrciufunt,ovuittdheoetateorheehhleraqxtdroterraonuiforefresionrdoibfavtfisftvfrirtdhauyneseeitayccrmuiunynstlttnetrfhehhmeuctrteganodooseeeeeorl.,.tff purpose of reassignment and officers. transfer of cases of revenue J The peti LOA has been a subordinate memorandum tioner wants the Court to believe that once an issued in the names of certain revenue officers, official of the BIR can then, through a mere of assignment, referral memorandum, or such equivalent document, rotate the work assignm officers who may then act under the general ents of revenue ' authority of a )'V R1144e34tEAurxmnhseibnaidntmd''PeIns-4stu9o"afn, RcDeeivvoeifsniLuoenettMDeroescmokofertAaVnudtohulo.mrIitIOy-rtpdo.erA63Nu1do.i.t,3270-9S0ePptreemscbreibrin1g99R0e. vised Policy Guidelines for Examination of 145 Supra at note 134.

DECISION CTA EB No. 2473 (CTA Case No. 9412) Commissioner of Internal Revenue vs. Medical Center Trading Corporation x------------------------------------------------------------------------------------------x validly issued LOA. But an LOA is not a general authority to any revenue officer. It is a special authority granted to a particular revenue officer. The practice of reassigning or transferring revenue officers, who are the original authorized officers named in the LOA, and subsequently substituting them with new revenue officers who do not have a separate LOA issued in their name, is in effect a usurpation of the statutory power of the CIR or his duly authorized representative. The memorandum of assignment, referral memorandum, or such other equivalent internal document of the BIR directing the reassignment or transfer of revenue officers, is typically signed by the revenue district officer or other subordinate official, and not signed or issued by the CIR or his duly authorized representative under Sections 6, 10 (c) and 13 of the NIRC. Hence, the issuance of such memorandum of assignment, and its subsequent use as a proof of authority to continue the audit or investigation, is in effect supplanting the functions of the LOA, since it seeks to exercise a power that belongs exclusively to the CIR himself or his duly authorized representatives. [Emphasis and underscoring supplied.] A perusal of the LOA in the instant case reveals that the revenue officers named therein are the same persons who recommended the issuance of the PAN and FLD against respondent. We quote the pertinent portion of RO Wilfredo Reyes' direct testimony in his Judicial Affidavit, viz.: 146 30. Q: After petitioner executed a fourth Waiver of the Defense of Prescription, what happened next if any? A: Result of the conduct of our audit investigation 31. Q: revealed that petitioner is liable for deficiency taxes, thus on 19 May 2014, we recommended A: through a Memorandum that the Preliminary Assessment Notice (PAN) be issued. You mentioned of a Memorandum recommending the issuance of the Preliminary Assessment Notice (PAN), if this Memorandum will be shown to you, will you be able to identify the same? Yes. ~ 146 Exhibit "R-18", Division Docket, Vol. 2. pp. 701-715.

DECISION CTA EB No. 2473 (CTA Case No. 9412) Commissioner Page 30 of 37 of Internal Revenue vs. Medical Center Trading Corporation x------------------------------------------------------------------------------------------x 36. Q: After the Preliminary Assessment Notice (PAN) was issued, what happened next if any? A: Petitioner was not able to refute our audit findings contained in the Preliminary Assessment Notice (PAN). Thus, on 18 June 2014, we recommended through a Memorandum that the Formal Letter of Demand be issued. [Emphasis and underscoring supplied.] This was even admitted by respondent in its Memorandum before the Court in Division. 147 The pertinent portion is reproduced below: toWtsaoftxfagiilateclebiteashlrmes6etr3hayS.uaewuttTahinrthtohhdeereiniGaLzdRmeeredoetd,tvuetADeopr nloecpuScfoheueAnapmOdueBbuftrhfeceviortctitsre3tyiohrt1sryeT, WJas(2onEp0irgelx0fiuchzr9ieiial.bdSi.lgia.ata.lRua"dPndea-yidj4tee8nosF",of)ePMnfaeoaritrlgeiotutinhteohlinsCeSehcruBaalfIisonRter,, WSutAr9hen'u)scied,psloleeeismrasriwssgmvm6cmhni4oseiir.eocnninHhSrndgtgueoRwdNwbsrdeuoaeetvpvitcshiaepeocemrnlemR,iuieOasumdesnn.[euJOddsnWaiedfcnMfr]eici,ldctfeehremeerowdsoftBhhorwtIaiehRleneeRr'dseeiuFMsymRtosehrueOsmema(.E.nMaoxclra.ihea.Lgp.inbuepdiet[orttulEeofm"SrmvRuiop-P(nl1fEhrig1teaxD"lsha)ieiimnGsmbwdiirahtnoaRniau"ncRdrODdhy,- wLSOuelAriet.,TCaahllrneueadsar,dlSyry,eusnngpodivoiueannnndagetunhwtteh'isotaharuioutzudhetiodtrtmhipteeyarysntoobeneeddccoooonnsfdtoaiunucunnteeeddwdebrtLhyOteRhAeaO,usoadrRsiitge.tyihneeasy,l tNcsCoioohnnitacintcenviengFewuoesoitefrtoiChgwpfahuAoitatreruhpndweogtimheistteeJhaosuniofnroAuaivfsttueedcidssitoct,inifttgRrifJooaeOunmtrrirsioiistsnnRdhg,iaeecayatmoseiuorstetin,hhgr.oSeeinrussialtuoilytpuL,,erOatrchAnfeleduoaisfSntuytdubhnajenedtiocrittathanfiNursgotohpmtcioocoreituinhtlotyed,f Hence, the assessment was conducted with the necessary authority. J_ Given the foregoing, We rule that the assessment cannot ed on the ground of lack of authority of the revenue be invalidat officers. 147 Division Docket:VoJ. tl, p. JltlU.

DECISION CTA EB No. 2473 (CTA Case No. 9412) Commissioner Page 31 of 37 of Internal Revenue vs. Medical Center Trading Corporation x------------------------------------------------------------------------------------------x The assessment is void for failure to indicate a due date. Petitioner avers that the Court in Division erred in ruling that the assessments are void due to the alleged absence of a definite tax liability and due date in the FLD/FAN. According to petitioner, what is essential is that the taxpayer was informed in writing of the findings of the petitioner and stating therein the facts and laws on which Petitioner posits that a due date the assessment is based. 148 is not required, even alleging that the Supreme Court engaged in judicial legislation in Fitness by Design and misapplied Menguito.149 the Respondent counter-avers that the due date is required for validity of the FLD and FDDA.lso Petitioner's arguments do not convince. The issuance of a valid formal assessment is a substantive prerequisite for the collection of taxes.1s1 An assessment does not only include a computation of tax liabilities; it also includes a demand for payment within a period prescribed. 152 In Commissioner of Internal Revenue v. Pascor Realty an d Development Corporation, et al.,ls3 the Sup reme Court held: An assessment contains not only a computation of tax liabilities, but also a demand for payment within a prescribed period. It also signals the time when penalties and interests begin to accrue against the taxpayer. To enable the taxpayer to determine his remedies thereon, due process requires that it must be served on and received by the taxpayer.... [Emphasis and underscoring supplied.] Re v e Fur the r, the S upreme Co urt, in Commiss ioner o f Internal nue vs. Fitness by Design, Inc. (Fitness by Design case), 154 is unambiguous: ~ 148 Petition for Review, pp. 17-19. 149 Petition for Review, p. 17. 150 Comment, pp. 23-24, pars. 72-73. 151 152 Commissioner of Internal Revenue vs. Menguito. G.R. No. 167560. 17 Septemher 2008.587 SCRA 234-257. 153 Tupaz vs. Ulep, G.R. No. 127777, I October 1999, 374 SCRA 474-488. G.R. No. 128315,29 June 1999. 154 G.R. No. 215957,9 November 2016,799 SCRA 391-420.

DECISION CTA EB No. 2473 (CTA Case No. 9412) Commissioner of Internal Revenue vs. Medical Center Trading Corporation Page 32 of37 x------------------------------------------------------------------------------------------x A final assessment notice provides for the amount of tax due with a demand for payment. ... The issuance of a valid formal assessment is a substantive prerequisite for collection of taxes. Neither the National Internal Revenue Code nor the revenue regulations provide for a "specific definition or form of an assessment." However, the National Internal Revenue Code defines its explicit functions and effects. An assessment does not only include a computation of tax liabilities; it also includes a demand for payment within a period prescribed. Its main purpose is to determine the amount that a taxpayer is liable to pay. A final assessment is a notice "to the effect that the amount therein stated is due as tax and a demand for payment thereof." This demand for payment signals the time "when penalties and interests begin to accrue against the taxpayer and enabling the latter to determine his remedies[.]" Thus, it must be "sent to and received by the taxpayer, and must demand payment of the taxes described therein within a specific period." The disputed Final Assessment Notice is not a valid assessment. First, it lacks the definite amount of tax liability for which respondent is accountable. It does not purport to be a demand for payment of tax due, which a final assessment notice should supposedly be. An assessment, in the context of the National Internal Revenue Code, is a "written notice and demand made by the [Bureau of Internal Revenue] on the taxpayer for the settlement of a due tax liability that is there definitely set and fixed." Although the disputed notice provides for the computations of respondent's tax liability, the amount remains indefinite. It only provides that the tax due is still subject to modification, depending on the date of payment. Thus: The complete details covering the aforementioned discrepancies established during the investigation of this case are shown in the accompanying Annex 1 of this Notice. The 50% surcharge and 20% interest have been imposed pursuant to Sections 248 and 249 (B) of the [National Internal Revenue Code], as amended. Please note, however, that the interest and the total amount due will have to be adjusted if prior or beyond April 15, 2004. v

DECISION CTA EB No. 2473 (CTA Case No. 9412) Commissioner of Internal Revenue vs. Medical Center Trading Corporation X------------------------------------------------------------------------------------------X Contrary to petitioner's view, April 15, 2004 was the reckoning date of accrual of penalties and surcharges and not the due date for payment of tax liabilities. The total amount depended upon when respondent decides to pay. The notice, therefore, did not contain a definite and actual demand to pay. [Emphasis and underscoring supplied; citations omitted] Following the Fitness by Design case, the Supreme Court has then consistently nullified assessment which does not contain a definite due date, such as in Republic v. First Gas Power Corp. 155 and Commissioner of Internal Revenue v. T Shuttle Services, Inc.156 In fact, reference to the due date in an assessment is found in Section 249(C) of the NIRC of 1997, as amended. We quote: Section 249- Interest. (C) Delinquency Interest. - In case of failure to pay: (3) A deficiency tax, or any surcharge or interest thereon on the due date appearing in the notice and demand of the Commissioner, there shall be assessed and collected on the unpaid amount, interest at the rate prescribed in Subsection (A) hereof until the amount is fully paid, which interest shall form part of the tax. [Emphasis and underscoring supplied.] Accordingly, indicating the due date in an assessment is directly related to the requirement of indicating the definite amount that is assessed. The delinquency interest may not be properly computed if a due date does not appear in the FAN/FLD as in this case. It bears stressing that an assessment, in the context of the NIRC, is a "written notice and demand made by the BIR on the taxpayer for the settlement of a due tax liability that is there definitely set and fixed. "157 v 155 G.R. No. 214933, 15 February 2022. 156 G.R. No. 240729 (Resolution), 24 August 2020. 157 Adamson vs. Court ofAppeals, G.R. Nos. 120935 & 124557, 21 May 2009,606 SCRA 10-35.

DECISION CTA EB No. 2473 (CTA Case No. 9412) Commissioner of Internal Revenue vs. Medical Center Trading Corporation Page 34 of37 x------------------------------------------------------------------------------------------x In the instant case, the Assessment Notices attached to the FLD 158 and FDDA 159 do not have due dates. One of the Assessment Notices is reproduced below: 16� ::..N00401 Rl t P' t . H.IPNINAAN PI OCN 1-REVIllO: JIRw. 1'196 UAW KA'f�ANIJ _ INT\1:NA8 I ��� . ..... ...... .~ ~-~~:;r.:........, .. :..:: ?.:(;\�;�.:.........._ 24.1.,114Af U,OIO,IOII.U IMPOIUAJtT 'LI!MI! ltfl'fllATTKliACK OP'njiJ~ f'Oit I'VIn'HI8 INITIWCTIONI COMIIiiSS&IEif ~\)\NfE ,_ ::..No.0401 ...... KA.GAW OCN REVISED: s-. 1996 ~ KAWAN ' INTJ,RNAS {TO U 'LLI..t:O UP 8'( BIR) 0 ltWE OIIAGR:!I! TO THE A80YE FltONGS (8UBWT lEnER C*' PROTEST) 'WIPAYER'IIIONAfuRE 6V@A PRIN'fti5 NIJii' POiiriONI'flfLE Further, the interest in the FDDA is computed until 30 June 2016, but the FDDA was served on or after 4 July 2016. Similarly, the interest in the FLD is computed until 30 June 2014, but the FLD was only served to respondent on or after 4 August 2014. As such, respondent and this Court v cannot '"Division Docket, Vol. 1., pp. 268-272. 159 !d., pp. 58-62. 160 Encircling ours.

DECISION CTA EB No. 2473 (CTA Case No. 9412) Commissioner of Internal Revenue vs. Medical Center Trading Corporation Page 35 of37 x------------------------------------------------------------------------------------------x construe the abovementioned dates from which petitioner computed interest as the due dates, for such dates precede the receipt of the taxpayer of the FLD and FDDA, respectively. As such, for failure to indicate the due date, it negates petitioner's demand for payment. 161 We see no reason to depart from Fitness by Design case for judicial decisions applying or interpreting the laws or the Constitution shall form part of the legal system of the Philippines I62 and the principle of stare decisis enjoins adherence by lower courts to doctrinal rules established by this Court in its final decisions.l63 All told, we rule against petitioner on the grounds of prescription and invalidity of the assessment for failure to indicate a due date. It is axiomatic that tax collection should be premised on a valid assessment, which would allow the taxpayer to present his or her case and produce evidence for substantiation. 164 Due process is the very essence of justice itself.165 While "taxes are the lifeblood of the government," the power to tax has its limits, in spite of all its plenitude.166 Even as we concede the inevitability and indispensability of taxation, it is a requirement in all democratic regimes that it be exercised reasonably and in accordance with the prescribed procedure.167 WHEREFORE, in light of the foregoing, the instant Petition for Review is DENIED. Accordingly, the Assailed Decision dated 23 September 2020 and the Assailed Resolution dated 22 March 2021 in CTA Case No. 9412 are AFFIRMED. SO ORDERED. tf4unM1L LANEE CUI-DAVID Associate Justice 161 !d. 162 Article 8, Civil Code of the Philippines. 163 Ting vs. Velez-Ting, G.R. No. 166562,31 March 2009, 601 SCRA 676-694. 164 Commissioner ofInternal Revenue vs. BASF Coating+ Inks Phils., Inc., G.R. No. 198677, 26 November 2014, 748 SCRA 7~0-771. 165 Macias vs. Macias, G.R. No. 149617, 3 September 2003,457 SCRA 463-471. 166 Commissioner ofInternal Revenue vs. Metro Star Superama, Inc., G.R. No. 185371, 8 December 2010, 652 SCRA 172-188. 167 Commissioner ofInternal Revenue vs. Algue, Inc., G.R. No. L-28896, 17 February 1988, 241 SCRA 829-836.

DECISION CTA EB No. 2473 (CTA Case No. 9412) Commissioner of Internal Revenue vs. Medical Center Trading Corporation Page 36 of37 X------------------------------------------------------------------------------------------X WE CONCUR: Presiding Justice ON LEAVE ERLINDA P. UY Associate Justice ~. ~ -t 1....__ MA. BELEN M. RINGPIS-LIBAN Associate Justice t~�7-~ CATHERINE T. MANAHAN Associate Justice ' r,~Micumng and Dissenting Opinion) DESTO-SAN PEDRO Associate Justice ~~f.~-~ MARIAN r(,}y F. i&YES-FAJARDO Associate Justice c~ 11.-'FE~IVFL~)"RES Associate JuStice / ~

DECISION CTA EB No. 2473 (CTA Case No. 9412) Commissioner of Internal Revenue vs. Medical Center Trading Corporation x------------------------------------------------------------------------------------------x CERTIFICATION Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court. Presiding Justice tr"'

REPUBLIC OF THE PHILIPPINES Court of Tax Appeals QUEZON CITY En Bane COMMISSIONER OF INTERNAL CTA EB NO. 2473 REVENUE, (CTA Case No. 9412) Petitioner, Present: DEL ROSARIO, P.J., UY, RINGPIS-LIBAN, -versus- MANAHAN, BACORRO-VILLENA, MODESTO-SAN PEDRO, REYES-FAJARDO, CUI-DAVID, and FERRER-FLORES, JJ MEDICAL CENTER TRADING CORPORATION, Promulgated: Respondent. x ------------------------------------------------------------------1----------------------x CONCURRING AND DISSENTING OPINION MODESTO-SAN PEDRO, J.: I concur with the ponencia 's denial of the Petition for Review filed by Commissioner of Internal Revenue ("CIR"). I also concur with the greater part of the decision which found: (1) petitioner's right to assess deficiency internal revenue taxes for taxable year 2009 has partially prescribed; and (2) the assessment void for failure to indicate a due date. With due respect, however, I dissent from the finding that 'the assessment cannot be invalidated on the ground that the revenue officers conducting the audit lack authority'. In reaching this conclusion, the ponencia explained that Revenue Officers ("ROs") Reyes, Sulit, and Sundiang could continue the audit as their authority to investigate emanates from the original LOA and the authority of the new Group Supervisor ("GS"), Wilfredo Reyes, emanating from the Notice of Change of Audit Jurisdiction is a mere .Y' superfluity. The decision explained the matter as follows:

CONCURRING AND DISSENTING OPINION CTA EB NO. 2473 (CTA CASE NO. 9412) Page2of6 "The LOA received by respondent names Revenue Officers ("RO") Wilfredo Reyes, Miguel Sulit, William Sundiang, Alpha Betty Tanguilig, and Fernalon Chan and Group Supervisor ("GS") Joriz Saldajeno. However, in the Memorandum Reports, only ROs Miguel Sulit and William Sundiang were named as ROs, while the GS was changed to Wilfredo Reyes. Upon [perusal of the records and based on the confirmation of GS Reyes, no new LOA was issued to reflect this change. It is clear under said RMO that a new LOA is required should there be a reassignment or transfer of cases. This, again, is aimed at satisfying the requirements of due process: that the taxpayer needs to be informed that the revenue officer knocking at his or her door has the proper authority to examine his or her books. However, what was received by respondent is a Notice of Change ofAudit dated 14 May 2010. This Notice of Change of Audit Jurisdiction does not satisfy the exacting requisite of due process. The McDonalds case is clear and categorical in this matter: A perusal of the LOA in the instant case reveals that the revenue officers named therein are the same persons who recommended the issuance of the PAN and FLD against respondent. Thus, respondent's audit may be continued by ROs Reyes, Sulit, and Sundiang without the need of a new LOA, as they were already given the authority to do so under the original LOA. Clearly, no unauthorized person conducted the audit. For purposes of conferring authority, the subject Notice ofChange of Audit Jurisdiction is a mere superfluity at this point, since with or without it, ROs Reyes, Sulit, and Sundiang could continue with the investigation, as the source of their authority to investigate emanates from the original LOA and not from the Notice ofChange ofAudit Jurisdiction. Hence, the assessment was conducted with the necessary authority. Given the foregoing, We rule that the assessment cannot be invalidated on the ground of lack of authority of the revenue officers." (Emphasis supplied; citations omitted.) Essentially, the ponencia concluded that the authority conducted on respondent headed by GS Reyes, whose authority emanated from a Notice of Change of Audit and not from a LOA, does not invalidate the audit because the ROs were properly authorized through the original LOA. I respectfully disagree. Upon a second hard look at the facts of the present case, and with the recent pronouncements of the Supreme Court in Commissioner of Internal Revenue v. McDonald's Philippines Realty Corp. ("McDonald's Case") 1 and Republic ofthe Philippines v. Robiegie Corporation ("Robiegie Case"),ZU 1 G.R. No. 242670, 10 May 2021. 2 G.R. No. 260261, 14 November2022.

CONCURRING AND DISSENTING OPINION CTA EB NO. 2473 (CTACASE NO. 9412) I take the view that the deficiency tax assessments against respondent should be cancelled for Jack of authority of GS Reyes. Pertinently, the McDonald's Case admonished the practice of reassigning revenue officers through a memorandum of assignment, referral memorandum, or any other equivalent documents for the reason that these documents are typically issued by subordinate officials and not by the CIR or his duly authorized representatives: "It is true that the service ofa copy ofa memorandum ofassignment, referral memorandum, or such other equivalent internal BIR document may notify the taxpayer of the fact of reassignment and transfer of cases of revenue officers. However, notice of the fact of reassignment and transfer of cases is one thing; proof of the existence of authority to conduct an examination and assessment is another thing. The memorandum of assignment, referral memorandum, or any equivalent document is not a proof of the existence of authority of the substitute or replacement revenue officer. The memorandum of assignment, referral memorandum, or any equivalent document is not issued by the CIR or his duly authorized representative for the purpose of vesting upon the revenue officer authority to examine a taxpayer's books of accounts. It is issued by the revenue district officer or other subordinate official for the purpose of reassignment and transfer of cases of revenue officers. The petitioner wants the Court to believe that once an LOA has been issued in the names of certain revenue officers, a subordinate official of the BIR can then, through a mere memorandum of assignment, referral memorandum, or such equivalent document, rotate the work assignments of revenue officers who may then act under the general authority of a validly issued LOA. But an LOA is not a general authority to any revenue officer. It is a special authority granted to a particular revenue officer. The practice of reassigning or transferring revenue officers, who are the original authorized officers named in the LOA, and subsequently substituting them with new revenue officers who do not have a separate LOA issued in their name, is in effect a usurpation of the statutory power of the CIR or his duly authorized representative. The memorandum of assignment, referral memorandum, or such other equivalent internal document of the BIR directing the reassignment or transfer of revenue officers, is typically signed by the revenue district officer or other subordinate official, and not signed or issued by the CIR or his duly authorized representative under Sections 6, 10 (c) and 13 of the NIRC. Hence, the issuance of such memorandum ofassignment, and its subsequent use as a proof of authority to continue the audit or investigation, is in effect supplanting the functions of the LOA, since it seeks to exercise a power that belongs exclusively to the CIR himself or his duly authorized representatives." (Emphasis supplied.) The McDonald's Case also instructs that due process requires that the taxpayers are made aware of the tax agents who will conduct the examination and assessment as follows:.Y

CONC!IRRING AND DISSENTING OPINION CTA EB NO. 2473 (CTA CASE NO. 9412) Page4of6 "I. The Reassignment or Transfer ofa Revenue Officer Requires the Issuance of a New or Amended LOA for the Substitute or Replacement Revenue Officer to Continue the Audit or Investigation An LOA is the authority given to the appropriate revenue officer assigned to perform assessment functions. It empowers and enables said revenue officer to examine the books of accounts and other accounting records of a taxpayer for the purpose of collecting the correct amount of tax. The issuance of 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 the CIR himself or his duly authorized representatives. Section 6 of the NIRC provides: Section I0 (c) of the NIRC provides: Section 13 of the NIRC provides: Section D (4) of RMO No. 43-90 dated September 20, 1990 provides: Pursuant to the above provisions, only the CIR and his duly authorized representatives may issue the LOA. The authorized representatives include the Deputy Commissioners, the Revenue Regional Directors, and such other officials as may be authorized by the CIR. Unless authorized by the CIR himself or by his duly authorized representative, an examination of the taxpayer cannot be undertaken. Unless undertaken by the CIR himself or his duly authorized representatives, other tax agents may not validly conduct any of these kinds of examinations without prior authority. There must be a grant of authority, in the form of a LOA, before any revenue officer can conduct an examination or assessment. The revenue officer so authorized must not go beyond the authority given. In the absence of such an authority, the assessment or examination is a nullity. A. Due Process Requires Ident{fication of Revenue Officers Authorized to Continue the Tax Audit or Investigation The issuance of an LOA prior to examination and assessment is a requirement of due process. It is not a mere formality or technicality. In Medicard Philippines, Inc. v. Commissioner ofInternal Revenue, We have ruled that the issuance of a Letter Notice to a taxpayer was not sufficient if no corresponding LOA was issued. In that case, We have stated that "[d]ue process demands x x x that after [a Letter Notice] has serve its purpose, the revenue officer should have properly secured an LOA before proceeding with the further examination and assessment of the petitioner. Unfortunately, this was not done in this case." The result of the absence of a LOA is the nullity of the examination and a;;sessment based on the violation of the taxpayer's right to due process..)./'

CONCURRING AND DISSENTING OPINION CfA EB NO. 2473 (CTA CASE NO. 9412) Page5of6 To comply with due process in the audit or investigation by the BIR, the taxpayer needs to be informed that the revenue officer knocking at his or her door has the proper authority to examine his books of accounts. The only way for the taxpayer to verify the existence of that authority is when, upon reading the LOA, there is a link between the said LOA and the revenue officer who will conduct the examination and assessment; and the only way to make that link is by looking at the names of the revenue officers who are authorized in the said LOA. If any revenue officer other than those named in the LOA conducted the examination and assessment, taxpayers would be in a situation where they cannot verify the existence of the authority of the revenue officer to conduct the examination and assessment. Due process requires that taxpayers must have the right to know that the revenue officers are duly authorized to conduct the examination and assessment, and this requires that the LOAs must contain the names of the authorized revenue officers. In other words, identifying the authorized revenue officers in the LOA is a jurisdictional requirement of a valid audit or investigation by the BIR, and therefore of a valid assessment. We do not agree with the petitioner's statement that the LOA is not issued to the revenue officer and that the same is rather issued to the taxpayer. The petitioner uses this argument to claim that once the LOA is issued to the taxpayer, "any" revenue officer may then act under such validly issued LOA. The LOA is the concrete manifestation of the grant of authority bestowed by the CIR or his authorized representatives to the revenue officers, pursuant to Sections 6, I0 (c) and 13 of the NIRC. Naturally, this grant of authority is issued or bestowed upon an agent of the BIR, i.e., a revenue officer. Hence, petitioner is mistaken to characterize the LOA as a document "issued" to the taxpayer, and that once so issued, "any" revenue officer may then act pursuant to such authority." (Citations omitted; Emphasis supplied.) The same ruling was upheld in the more recent Robiegie Case. To my mind, the term "revenue officers" referred to in these cases pertains to the positions of ROs and GS collectively. Both ROs and GS are part of the audit team who are authorized to conduct the examination of a taxpayer's books of accounts through an LOA. The GS performs supervisory functions over the ROs, particularly on how the audit is conducted as well as the items of deficiency assessment based on the examination of the taxpayer's books of accounts. Typically, an LOA would identify the ROs and GS as revenue officers authorized to conduct an examination of petitioner's books of accounts. The LOA in the present case similarly names and authorizes the following ROs and GS to conduct the audit examination: "SIR/MADAM/GENTLEMEN:/

CONClJRRING AND DISSENTING OPINION CTA EB NO. 2473 (CTA CASE NO. 9412) The bearer(s) hereof, RO- WILFREDO REYES, MIGUEL SUL!T, WILLIAM SUNDIAM, ALPHA BETTY TANGUILIG, FENALON CHAN/ GS-JORIZ SALDAJENO ofLT REGULAR AUDIT DIVISION l is/are authorized to examine your books of accounts and other accounting records for ALL INTERNAL REVENUE TAXES for the period from January I, 2009 to December 31, 2009 pursuant to REVENUE MEMORANDUM ORDER NO. 36-2010 (CONGLOMERATE AUDIT PROGRAM). The Revenue Officer(s) identified herein are provided with the necessary identification card(s) which shall be presented to you upon request." Considering the foregoing, if due process demands that a new LOA should be issued when an RO is replaced, then there is more reason to require a new LOA to be issued if the GS is replaced. Essentially, the requirement of naming the revenue officers in the LOA is a safeguard against abuses that may be perpetrated by revenue officers against taxpayers.3 An LOA guarantees a taxpayer that only persons named therein are allowed to examine its books of accounts and other accounting records.4 Hence, it has a right to deny other revenue officers not so named from auditing it for potential deficiency tax assessments.5 Thus, the replacement of GS from GS Saldajeno to GS Reyes without an LOA renders the assessment void. All told, I VOTE to DENY the instant Petition for Review and AFFIRM the Assailed Decision dated 23 September 2020 and Assailed Resolution dated 22 March 2021 in CTA Case No. 9412. MARIA -SAN PEDRO 3 Huey Commercial, Inc. v. Commissioner of Internal Revenue, C.T.A. Case No. 8985,30 September 2021. 4 Ibid 5 Ibid