NATIONWIDE HEALTH SYSTEMS BAGUIO, INC. v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY SPECIAL THIRD DIVISION NATIONWIDE HEALTH CTA Case No.10686 SYSTEMS BAGUIO, INC., Members: Petitioner, REYES-FAJARDO, Acting Chairperson, -versus- and ANGELES, 1L COMMISSIONER OF Promulgated: INTERNAL REVENUE, MAR 1 7 2026 Respondent. z jJ : .)."10 ?' � - � X-------- - ---------------- ------- - --------- --------- X RESOLUTION REYES-FAJARDO, J.: For the Court's resolution is respondent's Motion for Reconsideration (Re: Decision promulgated on 07 November 2025),1 seeking the reversal of the Court's Decision,2 which set aside and cancelled respondent's Final Decision,3 Formal Letter of Demand/ Final Assessment Notice (FLD/FAN),4 and Final Decision on Disputed Assessment (FDDA ),5 issued against petitioner for taxable year (TY) 2013. The dispositive portion reads:6 Docket - Vol. 2, pp. 954 to 974; Personally filed on November 26, 2025 and electronically filed on Novembe r 27, 2025. 2 Decis ion promulgated on Novembe r 7, 2025, Docket - Vol. 2, pp. 940 to 952. 3 Dated October 6, 2021, Docket- Vol. 1, p . 668; Exhibits "P-10" and "R-11," BIR Records- Folder 1 of 3 (Exhibit " R-21" ), pp. 324 to 333. 4 Dated July 25, 2016, Docket - Vol. 1, p. 668; Exhibit " P-5" and " R-4" to " R-4-1," BIR Records- Folder 1 of 3 (Exhibit "R-21" ), pp. 176 to 186. 5 Dated M arch 2, 2017, Docket - Vol. 1, p. 668; Exhibits "P-8" and "R-9," BIR Records - Folde r 1 of 3 (Exhibit "R-21"), pp. 230 to 234. 6 Docket - Vol. 2, pp. 951 to 952.

RESOLUTION CTA Case N o. 10686 WHEREFORE, in light of the foregoing considerations, the present Petition for Review is GRANTED. Accordingly, the Final Decision dated October 6, 2021 of respondent is WITHDRAWN and SET ASIDE. Moreover, the FLD/FAN d ated July 25, 2016, assessing p etitioner the aggregate amount of !'>9,520,935.20, and the FDDA da ted March 2, 2017, declaring petitioner still liable to pay deficiency taxes totaling f>6A93,872.28, for TY 2013, are CANCELLED and SET ASIDE. Respondent and the BIR are hereby ENJOINED to collect the said am ount from petitioner. SO ORDERED. In so ruling, the Court found that the audit and examination of petitioner's books were conducted by Revenue Officers (ROs) who w ere not authorized under the Letter of Authority (LOA) issued for TY 2013, and that no new LOA w as issued in their names; hence, the resulting assessm ents were v oid and cannot be enforced. Unfazed, respondent moves for reconsideration and argues that: 1) the Court erred in ruling on the validity of the LOA despite the issue not having been raised at the administrative level; 2) the Court misapplied prevailing jurisprudence and administrative issuances, particularly in relation to Revenue Memorandum Order (RMO) No. 43-90 and the reassignment of ROs; 3) petition er w as accorded due process in the administrative proceedings; and 4) the assessment should be upheld, the Decision reversed , and petitioner ordered to pay the assessed deficiency taxes, penalties, and surcharges. In its Comment (to Respondent's Motion for Reconsideration dated 26 November 2025),7 petitioner maintains that: 1) the Court is not strictly bound by the issues framed by the parties and m ay resolve related matters necessary for the proper disposition of the case; 2) jurisprudence holds that assessments are void where the examination was conducted without a valid LOA, and the Court correctly applied these rulings; 3) respondent's reliance on Commissioner of Internal Revenue v. PGA Sompo Insurance Corp. (" PGA Sompo")Bis misplaced and misleading, as the cited case in fact affirms the necessity of a 7 Docke t - Vol. 2, pp. 981 to 1000; Filed through registered ma il on Ja nuary 12, 2026, received by the Court on Janua ry 19, 2026 and electron ically fi led on Janua ry 12, 2026, 8 C.T.A. EB Case No. 2203 (C.T.A. Case No. 9394), Sep tembe r 15, 2021 .

RESOLUTIO N CTA Case No. 10686 duly issu ed LOA for a valid audit and assessment; and 4) respondent's Motion for Reconsideration merely reiterates arguments already resolved in the assailed Decision, thus warranting denial. The Motion for Reconsideration is devoid of merit. First. Respondent's principal submission - that the Court should not have ruled on the validity of the LOA because the issue was not raised at the administrative level- does not p ersuade. Section 89 of Republic Act (RA) No. 1125,10 as am ended,11 decrees that proceedings before the Court of Tax Appeals (CTA) shall not be strictly bound by technical rules of evidence. Relatedly, Section 1, Rule 14 of the 2005 Revised Rules of the CTA (RRCTA)12clearly provides: RULE 14 JUDGMENT, ITS ENTRY AND EXECUTION SECTION 1.- Rendition of judgment- In deciding a case, the Court may not limit itself to the issues stipulated by the parties but may also rule upon related iss ues necessary to achieve an orderly disposition of the case.13 Guided by the foregoin g prov1s10n, the Supreme Court in Commissioner of Internal Revenue v. Lancaster Philippines, Inc.,14 affirmed the a uthority of the CTA to rule on issues n ot raised by the parties to arrive at orderly disposition of the case: [Section 1, Rule 14 of the Revised Rules of the CTA] is clearly worded. On the basis thereot the CTA Division was, therefore, well 9 SECTION 8. Court of record; seal; proceedings. - The Court of Tax Appeals shall be a court of record and shall have a seal which shall be judicially noticed. It shall prescribe the fo rm of its writs and other p rocesses . It shall have the power to promulgate rules a nd regulations for the conduct of the business of the Court, and as may be needful for the uniformity of decisions within its jurisdiction as confe rred by law, but s uch proceedings shall not be governed strictly by technical rules of evid ence. 10 An Act Creating the Court of Tax Appeals, Republic Act No. 1125, June 16, 1954. II An Act Ex pa nding the Jurisdiction of the Court of Tax Ap peals, Republic Act No. 9282, March 30, 2004. 12 A.M. No . 05-11-07-CTA, November 22,2005. 13 Emphasis supp lied . 14 G.R. No. 183408, July 12, 2017.

RESOLUTION CTA Case No. 10686 within its authority to consider in its decision the question on the scope of authority of the revenue officers who were named in the LOA even though the parties had not raised the same in their pleadings or memoranda. The CTA En Bane was likewise correct in sustaining the CTA Division's view concerning such matter.1s In fact, in the recent case of Commissioner of Internal Revenue v. Marily Development Corp.,16 the Supreme Court, citing Prime Steel Mill, Inc. v . Commissioner of Internal Revenue,17 reiterated two (2) conditions by which the CTA En Bane, or even a Division thereof, may consider arguments raised for the first time on appeal or on motion for reconsideration - one, the issue is necessary to achieve an orderly disposition of the case, and two, its resolution would not require the presentation of additional evidence and must rely solely on factual bases that are already matters of record in the case. Both conditions are present here. First, the issue on the violation of petitioner's right to due process on the ground of absence of a new LOA is inextricably linked to the validity of the assessment. A resolution on this apparent violation of petitioner's right to due process is indispensable for an orderly and comprehensive disposition of this case.1s Second, the Court's ruling on the lack of authority of RO Riza S. Liwan and RO Justine Ivana P. Estillore was based on the LOA dated February 20, 2015 (SN: eLA201200004224),19 Undated Memorandum of Assignment (MOA) No. 008-LA-15-056,20 Memoranda,21 and Assessment Notices, which are all found in the case records. Thus, the Court's exercise of its authority to pass upon this issue is justified. Moreover, Himlayang Filipino Plans, Inc. v . Commissioner of Internal Revenue22 categorically held that failure of taxpayer to raise the issue of an RO's lack of authority does not preclude the Court from considering the same as said issue goes into the intrinsic validity of the assessment itself. 15 Emphasis supplied . 16 G.R. No. 263794, April 2, 2025. 17 Prime Steel Mill, Inc. v. Co111missioner of In ternal Revenue, G.R. No. 249153, Sep tember 12, 2022. 18 G.R. No. 249153, September 12, 2022. 19 Exhibits "P-2" and " R-1", BIR Records- Folder 1 of 3 (Exhibit "R-21"), p. 2. 20 BIR Records- Folder 1 of 3 (Exhibit "R-21"), p. 120. 21 Specifically: Memorandum da ted September 17, 2015, Exhibit "R-2", BIR Records - Folder 1 of 3, pp. 129 to 149; and Memorand um dated January 18, 2016, Exhibit " R-5", BIR Records- Folder 1 of 3 (Exhibit " R-21 "), pp. 172 to 173 and 190 to 191. 22 G.R. No. 241848, May 14, 2021.

RESOLUTION CTA Case No. 10686 Here, since the validity of the subject tax assessments are anchored on the legality of the examination conducted by the Bureau of Internal Revenue against p etitioner, the Court correctly addressed the propriety thereof.23 Second. Respondent's position that RMO No . 43-9024 is no longer controlling in d etermining the authority of ROs to conduct the audit, in light of the subsequent issuance of RMO N o. 8-2006,25 and RMO N o. 44-2010,26 is bereft of m erit. In Commissioner of Internal Revenue v. McDonald's Philippines Realty Corp.,27 wh ich involves an assessment pertaining to taxable year 2006, the Supreme Court categorically held that RMO No. 43-90 - expressly and sp ecifically requiring the issuance of a new LOA in cases of reassignment or transfer of revenue officer - remains applicable as it is not inconsistent with the provisions of the National Inten1al Revenue Code (N IRC) of 1997, as am ended, notwithstanding the latter's subsequent enactment, to w it: C. Revenue Memorandum Order No. 43-90 dated September 20, 1990 Expressly and Specifically Requires the Issuance of a New LOA if Revenue Officers are Reassigned or Transferred Section D (5) of RMO No. 43-90 d ated September 20, 1990 p rovides: Any re-assignmen t/ transfer of cases to an oth er RO(s), [64] and revalida tion of L/ As w h ich have already expired, shall require th e issu a nce of a new L/ A, w ith th e corresp onding notation th ereto, includin g th e previous L/ A number and d a te of issue of said L/ As. 23 Connnissioller of llltemnl Revenue v. Geniogrnphics, lncorpornted, G.R. N o. 264572, July 26, 2023; NntioHnl Pawer Corp. v. Province of Pn111pnngn, G.R. No. 230648, October 6, 2021; Com111issio11er of lnternnl Revenue v . Yu 111ex Pl1 ilippines Corp., G.R. No. 222476, May 5, 2021; Co111missioner of lntemnl Revenue v. Lnncnster Philippi11es, Inc., G.R. N o. 183408, July 12, 2017. 24 Re: Amendment of Revenue Memorandum Order No. 37-90 Prescribing Revised Policy Guidelin es for Examination of Returns and Issuan ce of Letters of Authori ty to Audi t, , September 20, 1990. 25 SUBJECT: Prescribing Guidelines a nd Procedures in the Imp lementation of the Letter of Authority Monitoring System (LAMS), February 1, 2006. 26 SUBJECT: Elech�onic Issuance of Letters of Authority, May 12, 2010. 27 G.R. No. 242670, May 10, 2021 .

RESOLUTION CTA Case No. 10686 The above provision expressly and specifically requires the issuance of a new LOA if revenue officers are reassigned or transferred to other cases. The petitioner claims that RMO No. 43-90 dated September 20, 1990 is not the implementing rule for Section 13 of the NIRC. RMO No. 43-90 was promulgated on September 20, 1990, which is seven years prior to the law it supposedly implemented. Because of this, the petitioner implies that RMO No. 43-90 dated September 20, 1990 is not a valid legal basis in the position that a reassignment and transfer of cases requires the issuance of a new and separate LOA for the substitute revenue officer. The petitioner is mistaken. Section 291 of the N IRC states: SECTION 291. In General. - All laws, decrees, executive orders, rules and regulations or parts thereof w hich are contrary to or inconsistent w ith this Code are hereby repealed, am ended or m odified accord ingly. Section D (5) of RMO No. 43-90 dated September 20, 1990 is not contrary to or inconsistent with the NIRC. In fact, the NIRC codifies the LOA requirement in RMO No. 43-90. While RMO No. 43-90 was issued under the old tax code, nothing in Section D (5) of RMO No. 43-90 is repugnant to Sections 6 (A), 10 and 13 of the NIRC. Hence, pursuant to Section 291 of the NIRC, RMO No. 43- 90 remains effectiv e and applicable.28 Consequently, the Court cannot sustain respondent's theory that a MOA or similar internal document m ay substitute for the issuance of a new LOA. Aptly, People v. E & 0 Parts Supply, Inc. 29 emphasized that an LOA, a special authority granted to a particular officer, cannot be supplanted by a m ere MOA or an equivalent document, viz.: Records show that LOA No. 2007 00000616 was issued toE & D's authorized Revenue Officer (RO) Dominga G. Madula to audit E & D's books of accounts for taxable year 2006. E & D's case was subsequently reassigned to RO Reinhard Dale A. Anaban (RO Anaban). However, no new LOA was issued in RO Anaban's name to continue the audit of E & D's books of accou nts. H is authority was merely anchored upon a Memorandum of Agreement signed 28 Emphasis supplied. 29 G.R. No. 259284, January 24, 2024.

RESOLUTION CfA Case No. 10686 by Revenue District Officer Teodoro A. Huelva of Revenue District No.34. Absent a LOA issued by the CIR or its duly authorized representatives, RO Anaban did not possess any authority to audit E & D's books of accounts. The importance of the revenue officer' s authority to conduct an audit cannot be overemphasized because it goes into the validity of the assessment. The lack of authority of the revenue officer is equivalent to the absence of a LOA itself which results in a void assessment. Being a void assessment, the same b ears no fruit,30 Third. Equally u navailin g is respondent's argu ment that only one (1) LOA per taxable year can be issued to a taxpayer pursuant to RMO No. 8-2006. The Suprem e Cour t already clarified in Republic v. Robiegie Corp.31 that RMO No. 8-2006 does not prohibit the issuance of a new LOA in cases of reassignmen t or transfer of revenue officers, to w it: Clearly, the "one LOA p er taxable year" rule is n ot as ironclad as the Republic portrays it to be. Part IV.D., Item 2 of RMO No. 8-2006 authorizes the issuance of duplicate LOAs, subject to the CIR' s discretion to determine w hich of the two LOAs shall prevail. Obviously, when a tax investigation is reassigned to a different RO pursuant to the mandatory "rotation" of assessment officers under Section 17 of the NIRC, or for any other legally justified reason, the CIR or hisjher duly a utho rized representatives may issue a new LOA to the newly assigned RO, and such LOA can be made to prevail over the LOA issu ed to the previous investigating officer. Since the CIR's power to issue a LOA is delegable, the concomitant power to uphold the validity of a subsequently issued duplicate LOA is likew ise delegable to the CIR's duly authorized representatives, as enumerated in RMO No. 43-90. Stated differently, RMO No. 8-2006 does not prohibit the issuance of a n ew LOA within the same taxable p eriod if such new LOA is necessitated by the reassig nment, retirement, or other inability of the incumbent RO to continue an investigation.32 Fourth. Respon dent's reliance on the Cou rt En Bane's Resolution in PGA Sompo33 is likewise misplaced. Con trary to respon dent's posture, PGA Sompo does not sanction the continuation 30 Emphasis supplied . 31 G.R. No. 260261, October 3, 2022. 32 Emphasis supplied. 33 C.T.A. EB Case No. 2203 (C.T.A. Case No. 9394), September 15, 2021.

RESOLUTION CTA Case No. 10686 of an audit by ROs not named in the LOA nor the substitution of such authority by internal memoranda. Respondent's reliance thereon appears to proceed from an overly broad reading of the ruling, detached from its factual anchors and legal context. The Court thus finds no cogent reason to disturb its findings and conclusions in the assailed Decision. WHEREFORE, premises considered, respondent's Motion for Reconsideration (Re: Decision promulgated on 07 November 2025) is DENIED for lack of merit. Accordingly, the Decision promulgated on November 7, 2025 is SUSTAINED. SO ORDERED. I CONCUR: ~ ~ f. ~ ~ FrJj'r;,ckJ MARIAN. I~ F. RE4ES-FAJARDO Associate Justice ~ HENRY fNGELES Associate Justice