EXECUTIVE INTERNATIONAL MOVERS, INC. v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY SPECIAL SECOND DIVISION EXECUTIVE CTA CASE NO. 9953 INTERNATIONAL MOVERS, INC., Members: Petitioner, BACORRO-VILLENA, Acting Chairperson, CUI-DAVID, JJ. -versus- COMMISSIONER OF Promulgated: tv jo: ~/11( INTERNAL REVENUE, JUL 1 9 2012 Respondent. ){- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -){ RESOLUTION For this Court's resolution is respondent's Motion for Reconsideration [Decision dated March 14, 2022] (Motion) filed on April 1, 2022, 1 without petitioner's comment as p er Records Verification Report dated May 31, 2022. In his Motion, respondent submits that the Court erred in granting the Petition for Review citing Sections 6(A),2 7,3 10(c) 1 The Motion is filed via registered mail and recei ved by the Court on April 19, 2022. 2 SEC. 6. Power of the Commissioner to Make assessments and Prescribe additional Requirements for Tax Administralion and Enforcement. - (A) �mmination of Returns and Delemunation ofTa.x 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 CJ\am inat ion of any taxpayer and the assessment of the correct amount of tax: Provided. however; That failure to file a return shall not prevent the Commissioner from authorizing the exami nation of any taxpayer.... 3 SEC. 7. Authority ofthe Commissioner to Delegate Power.- The Commissioner may delegate the powers vested in him under the pertinent provisions of this Code to any or such JJbordinate officials with the rank equivalent to a division chief or higher, subject to such limitations and restrictions as may be imposed under rul es and regulations to be promulgated by the Secretary of finance, upon recommendation of the Com missioner: Provided, However. That the following powers of the Commiss ioner shall not be delegated: (a) The power to recommend the promulgation of rules and regulations by the Secretary of Finance; (b) The power to issue rulings of first impression or to reverse, revoke or modify any existing ruling of the Bureau; (c) The power to compromise or abate, under Sec. 204 (A) and (B) of this Code, any tax liability: Provided, however, That assessments issued by the regional offices involving basic deficiency taxes of Five hundred thousand pesos (P500,000) or less. and minor criminal violations, as may be determi ned by rules and regulations to be promulgated by the Secretary of finance, upon recommendation of the Comm issioner, discovered by regional and district officials. may be compromised by a regional evaluation board wh ich shall be composed of the Regional Director as Chairman, the Assistant Regional Director, the heads of the Legal. Assessment and Collection Div isions and the Revenue District Officer having jurisdiction over the taxpayer, as members; and

RESOLUTION CTA Case No. 9953 Executive International Movers, Inc. v. Commissioner of Internal Revenue X---------------------------------------------------------------------------------------X and (h),4 and 135 of the National Internal Revenue Code (NIRC) of 1997, as amended. Respondent argues that the issuance of a Letter of Authority (LOA) is a delegable power that the Commissioner may pass on to his authorized representatives, such as the Revenue Regional Director (RRD). Respondent adds that based on the afore-cited provisions of the NIRC, a duly authorized r evenue officer (RO) m ay conduct the audit assessment not "because of' but "pursuant to" an LOA. Hen ce, respondent avers that the reliance on (1) M edicard6 and (2) Revenue Memorandum Order (RMO) No. 43-90 is untenable as the former involves a total absence of an LOA, while in this cas e, there is a validly issued LOA albeit reassignment to another ROs occurred; and that RMO No. 43-90 is an old RMO replaced by RMO No. 69-20107 providing for the issuance of a Memorandum of Assignment (MOA) in case of reassignment for the continuation of the audit/investigation of a case to another RO due to transfer of the original RO. Respondent stresses that the ROs who continued the audit investigation are still under the supervision and control of the RRD , as evid enced by the PAN a nd FAN, which h e both signed. Lastly, respondent avers that the taxes are the lifeblood of the government and must be collected without unnecessary hindrance; and so, the RO's assessment should be given full weight and credit, and the government cannot be barred from collecting petitioner's tax deficiencies. After a careful evaluation of respondent's Motion without petitioner's comment, it is noted that the arguments raised therein are mere r eiteration s of m atters which have already (d) The power to assign or reassign internal reven ue officers to establishments where articles subject to excise tax are produced or kept. 4 SEC. I 0. Revenue Regional Director. - Under ru les and regu lations. pol icies and standards formul ated by the Commissioner, w ith the approval of the Secretary of Finance, the Revenue Regional director shal l, within the region and district offices under his jurisdict ion. among others: (c) Issue Letters of authority for the examination of taxpayers within the region; (h) Perform such other functions as may be provided by law and as may be delegated by the Commissioner. 5 SEC. 13. Authority of a Revenue Offices. - subject to the rules and regu lations 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 correc amount of tax, or to recommend the assessment of any deficiency tax due in the same manner that the said acts could have been performed by the Revenue Regional Director himself. 6 G. R. No. 222743. Apri l 5, 20 17. 7 Prescribes the guidelines on the issuance of electronic Letters of Authority, Tax Verification Notices and Memoranda of Assignment, August II. 20 I0.

RESOLUTION CTA Case No. 9953 Executive International Movers, Inc. v. Commissioner of Internal Revenue x---------------------------------------------------------------------------------------x b een considered and resolved by the Court in the assailed Decision. Contrary to respondent's allegation, an LOA serves as a notice to the taxpayer that it is under investigation for possible deficiency tax assessment. It authorizes or empowers a designated revenue officer to examine, verify, and scrutinize a taxpayer's books and records, in relation to internal revenue tax liabilities for a particular period.BHence, an RO must be authorized, through a d uly issued LOA, to examine the books of accounts and other accounting records of a taxpayer.9 Without an LOA, the tax assessments issued against such taxpayer shall be void.1o Anent the applicability of the M edicard since the absence of an LOA was the subject in that case, while in this case, there is an LOA and a MOA, We quote the pertinent portion of our ruling in the assailed Decision,11 viz.: In Commissioner of Internal Revenue vs. Composite Materials, Inc. (Composite), the Supreme Court emphasized that an RO may only examine the taxpayer's books of accounts pursuant to a LOA; and that a Referral Memorandum issued by the RDO is not equivalent to a LOA and, ther efore , does n ot cure the RO 's lack of authority, viz.: ".. . a Revenue Officer may only examine the taxpayer's books pursuant to a Letter of Authority (LOA) issued by the Regional Director. This was reiterated by the court in Medicard Philippines, Inc. v. Commissioner of Internal Revenue, ruling that in the absence of an LOA, the assessment or examination is a nullity. Here , the CTA en bane found that the LOA issued in relation to the examination of CMI's book of accounts does not specifically mention the name of RO Cruz. Thus, the examination conducted by RO Cruz and the assessment issued against CMI was correctly declared null and void. 8 Commissioner ofInternal Revenue v. Lancaster Philippines, Inc., G. R. No. 183408, July 12. 201 7; Commissioner ofInternal Revenue v. Sony Philippines, Inc.. G. R. No. 178697, November 17, 201 0. 9 Commissioner ofInternal Revenue v. Watsons Personal Care Stores (Philippines), Inc.� CTA EB Case No. 239 1, May 13, 2022; Commissioner of Internal Revenue v. Sunnyphil, Inc., CTA EB Case No. 2278, April 8, 2022; Comm issioner of Internal Revenue v. Manta/ban Methane Power Corp.. CTA �8 C ase No. 2 170, March 30. 20 22: Commissioner of Internal Revenue v. PGA Sompo Insurance Corp.. CTA �8 Case No. 2203. March 17. 2022: Commissioner ofInternal Revenue v. Hobbies ofAsia. Inc.. CTA �8 Case No. 2302, March 9. 2022. �1 Commissioner ofInternal Revenue v McDonald 's Pluhppmes Realty Corp.. G. R. No. 242670, May I0, 202 1. 11 Pages 19 to 20

RESOLUTION CTA Case No. 9953 Executive Intemational Movers, Inc. v. Commissioner of Internal Revenue x---------------------------------------------------------------------------------------x Moreover, the Court agrees with the CTA en bane that the Referral Memorandum issued by a Revenue District Officer directing RO Cruz to continue with the examination of CMI's records is not equivalent to an LOA nor does it cure RO Cruz's lack of authority . .. ." (Emphasis on the originan Indeed, the CIR himself, through the issuance of Revenue Memorandum Circular (RMC) No. 75-2018, 12 recognized the ruling in Medicard, viz.: The judicial ruling, invoking a specific statutory mandate, states that no assessments can be issued or no assessment functions or proceedings can be done without the prior approval and authollzation of the Commissioner of Internal Revenue (CIR) or his duly authorized re presentative, through an LOA. The concept of an LOA is therefore clear and unequivocal. Any tax assessment issued without an LOA is a violation of the taxpayer's right to due process and is, therefore, 'inescapably void.' ... (Emphasis supplied) It is clear from the foregoing that any tax assessment issued without an LOA violates the taxpayer's right to due process and is, therefore, void. To reiterate, the issues raised herein are not new. Thus, the Court shall not belabor to discuss respondent's other arguments. Accordingly, the Court finds no cogent reason to disturb its Decision promulgated on March 14, 2022. WHEREFORE, premises considered, respondent's Motion for Reconsideration filed on April 1, 2022, is DENIED for lack of merit. SO ORDERED. ~tunA I CONCUR: ~ LANEE S. CUI-DAVID Associate Justice ' 0 -VILLENA JEAN MA 12 The Mandatory Statutory Req uirement and Function of a Letter of Authority, September 5, 2018.