EXPEDITORS PHILIPPINES, INC. v. HON. KIM S. JACINTO-HENARES ? IN HER CAPACITY AS THE COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY SPECIAL FIRST DIVISION EXPEDITORS PHILIPPINES, CTA Case No. 9257 INC., Petitioner, Members: -versus- DEL ROSARIO, P.J., Chairperson} MANAHAN, and HON. KIM S. JACINTO- REYES-FAJARDO, JJ. HENARES - IN HER CAPACITY AS THE Promulgated: COMMISSIONER OF INTERNAL REVENUE, Respondent. DECISI MANAHAN,J.: The Petition for Review prays that the Court reverse and set aside the Final Decision on Disputed Assessment (FDDA) rendered by respondent Commissioner of Internal Revenue, for complete and utter lack of merit, and, in lieu thereof, render judgment ordering the cancellation and withdrawal of deficiency income tax, value-added tax (VAT), withholding tax on compensation (WTC), expanded withholding taxes (EWT), final withholding taxes (FWT), final withholding value-added tax (FWVAT), and documentary stamp tax (DST) assessments, for taxable year ended December 31, 2009, in the total amount of P435,347,248.15, inclusive of interest and compromise penalties.l . THE FACTS Petitioner Expeditors Philippines, Inc. is a domestic corporation duly organized and validly existing under the laws of the Philippines, with principal office at the Pascor Bldg., 111 1 Summary of the Case, Pre-Trial Order dated December 7, 2016, Docket- Vol. I, p. 469. ~

DECISION CTA Case No. 9257 Expeditors Philippines, Inc. vs. Hon. Kim S. Jacinto-Henares - in her capacity as the Commissioner ofInternal Revenue Pascor Drive , Sto. Nino , Paraiiaque City .2 It is engaged primarily in the business of logistics and freight forwarding. 3 Respondent is the duly appointed Commissioner of Internal Revenue empowered to perform the duties of said office , including, among others, the power to cancel disputed assessments. 4 Petitioner r eceived from the Bureau of Internal Revenue (BIR) the Lette r of Authority (LOA) No. LOA-122-20 10- 00000107 dated September 20, 2010 ,5 authorizing Revenue Officers Ricardo Calma and Ma. Teresa Espino, and Group Supervisor Monica Zamora, to conduct an examination of the books of accounts and other accounting records of petitioner for all internal r evenue taxes for the period January 1, 2009 to December 31 , 2009.6 On June 14, 2012, petitioner executed a Waiver of the Defense of Prescription under the Statute of Limitation of the National Internal Revenue Code, which respondent accepted through Mr. Alfredo V. Misajon, OIC, Assistant Commissioner Large Taxpayer Service on June 20, 2012.7 Thereafter, on March 25, 2013, petitioner received the letter dated January 15 , 20 13 (notice of informal conference) with Details of Discrepancy. s Subseque ntly , p e titioner e x e cute d two (2) more Waive rs of the Defense of Prescrip tion under the Statute of Limitation of the National Internal Revenue Code,9 as follows : Date executed Date accepted by Accepted through: April 12 , 2 01 3 respondent Mr. Alfredo V. Misaj on , OIC, Assis ta nt Commissioner La rge Taxpayer Service April 19 , 20 13 2 Par. I, St ipul ated Facts, Joint St ipulation of Facts and Issues (JSF I), Docket - Vo l. I, p.46 1. 3 Par. 2, Stipul ated Facts, JSF I, Docket - Vo l. I, p. 46 1. 4 Par. 3, Stipulated Facts, JSF I, Docket - Vo l. I, p. 46 1. 5 Annex A, Petition /or Review, Docket - Vo l. 1, p. 29 . 6 Par. 4, St ipul ated Facts, JSFI, Docket - Vo l. I, pp. 46 1 to 462. 7 Ex hi bits " P-9" and " P-9-1 ", Docket - Vo l. 3, p. 990 ; Ex hi bit " R-2", BIR Reco rds, p. 606. 8 Ex hi bits " R-3" and " R-3-A", BIR Reco rds, pp . 708 to 7 15. 9 Exhibi ts " P-1 0", " P- 10- 1", " P-11 " , and " P-11-1 ", Docket - Vo l. 3, p. 992 to 995 ; Exhib its " R-4" and " R- 5", BIR Records, pp. 724 to 725 , and 727 to 728 , res pe cti v e l y ~

'' DECISION CTA Case No. 9257 Expeditors Phtlippines, Inc. vs. Han. Kim S. Jacinto-Henares - in her capacity as the Commissioner ofInternal Revenue November 20, 2013 November 27, 2013 Mr. Alfredo V. Misajon, OIC, Assistant Commissioner Larcre Tax a er Service On April 21, 2014, petitioner received from respondent the Preliminary Assessment Notice (PAN) dated April 14, 2014, with Details of Discrepancies, 10 for deficiency income tax, improperly accumulated earnings tax (IAET), WTC, EWT, VAT, FWT, FWVAT and DST, allegedly due for taxable year 2009. Subsequently, respondent issued the Formal Letter of Demand (FLD) with Details of Discrepancies and Audit Results/Assessment Notices, all dated May 30, 2014, which petitioner received on June 2, 2014, 11 assessing the latter for deficiency income tax, IAET, WTC, EWT, VAT, FWT, FWVAT and DST in the amount of P288,508,185.13, P23,717,518.08, P2,708,071.51, P21, 137,249.02, P28,928,391.64, P25,173,653.19, P9,169,964.80, and P109,974.59, respectively, inclusive of increments, for taxable year 2009. On July 1, 2014, petitioner, through counsel, filed its protest letter. 12 Petitioner also filed its position paper (further explaining its protest) on September 1, 2014. 13 Respondent then issued the assailed FDDA dated January 12, 2016, which was received by petitioner on January 15, 2016, 14 denying the protest of petitioner, and requesting the latter to pay for deficiency income tax, WTC, EWT, VAT, FWT, FWVAT, and DST, in the amounts of P333,439,317.00, P3, 164,848.23, P24,685,526.16, P33,823,806.27, P29,400,317.59, P10,706,933.67, and P126,499.23, respectively. Petitioner filed the present Petition for Review (Re: Final Disputed Decision on Disputed Assessment) on February 12, 10 Exhibits " P-2" and " P-2-1 ", Docket - Vol. 3, pp. 955 to 963 ; Ex hibits " R-6" and " R-6-A", BIR Records, pp. 779 to 787. 11 Ex hibits " P-3", " P-3-1 ", " P-4", " P-4-1 ", " P-4-2", " P-4-3", " P-4-4", " P-4-5", " P-4-6", and " P-4-7", Doc ket - Vol. 3, pp. 964 to 980 ; Exhibits " R-8" and " R-8-A , BIR Record s, pp. 809 to 825. 12 Ex hibits " P-5" and " R-1 0", BIR Reco rd s, pp. 829 to 832. 13 Exh ibit " P-6", Docket- Vo l. 3, pp. 98 1 to 989. 14 Exhibits " P-7", " R-1 2", " R-1 2-A", " P-8", " P-8", " P-8-1 ", " P-8-2", " P-8 -3 ", " P-8-4", " P-8-5", and " P-8- 6", BIR Records, pp. 940 to 954 . ()?---

DECISION CTA Case No. 9257 Expeditors Phtlippines, Inc. vs. Hon. Kim S. Jacinto-Henares - in her capacity as the Commissioner ofInternal Revenue 2016. 15 This case was initially raffled to this Court's Third Division. On April 28, 2016, respondent posted his Answer. 16 Petitioner filed its Reply on May 10, 2016.17 Thereafter, respondent transmitted to the Court the BIR Records on the assessment case of petitioner, consisting of 967 pages. 1s The Pre-Trial Conference was initially set on August 9, 2016. 19 On June 24, 2016, respondent posted a Motion to Reset Pre-Trial Conference, 20 which the Court granted in its Resolution dated July 19, 2016. 21 Thus, the Pre-Trial Conference was reset to and held on October 18, 2016. 22 Prior thereto, Respondent's Pre-Trial Brief was filed on October 11, 20 16,23 while Pre-Trial Brief (for the Petitioner) was filed on October 13, 2016. 24 Subsequently, on November 7, 2016, the parties submitted their Joint Stipulation of Facts and Issues. 25 The Court then issued the Pre-Trial Order dated December 7, 2016. 26 Trial ensued. During trial, the parties respectively presented their documentary and testimonial evidence. 15 Docket - Vol. I, pp . I0 to 28. 16 Docket - Vol. I, pp. 204 to 207. 17 Docket - VoI. I, pp . 2 18 to 22 I. 18 Compliance, Docket - Vol. I, p. 227. 19 Notice of Pre-T ri a l Co nfe rence dated April 29, 2016, Docket - Vol. I, pp . 2 12 to 213. 20 Docket- Vol. I, pp . 234 to 236. 21 Docket - Vol. I, p. 239 . 22 /d. ; Minutes of the hearin g he ld on , and Order dated, October 18, 20 16, Docket - Vol. I, pp. 454, and 456 to 457, respective ly. 23 Docket- Vol. I, pp . 240 to 242. 24 Docket- Vol. I, pp. 243 to 250. 25 Docket - Vol. I, pp. 46 1 to 465. 26 Docket - Vo l. I, pp . 469 to 475.~

'. DECISION GA Case No. 9257 Expeditors Philippines, Inc. vs. Hon. Kim S. Jacinto-Henares - in her capacity as the Commissioner ofInternal Revenue Petitioner offered the testimonies of the following individuals, namely: (1) Ms. Ria P. Abanto,27 the Court- commissioned Independent Certified Public Accountant (ICPA);2s (2) Mr. Rommel Ramirez,29 petitioner's Information Services Manager; and (3) Ms. Aileen Dela Cruz,3� Accounting Manager of petitioner. The ICPA Report and Consolidated Report were submitted on April20 , 2017 and May 3, 2017, respectively. 31 Petitioner's Formal Offer of Exhibits was filed on May 17, 2018. 32 Respondent posted his Comment (To Petitioner's Formal Offer of Evidence) on May 22, 2018. 33 In the Order dated September 20, 2018,34 the present case was transferred to this Court's First Division. In the Resolution dated February 21, 2019 ,35 the Court admitted petitioner's offered exhibits, except for the following: 1. Exhibits "P-46.2.34", "P-55.2.237" to "P-55.2. 239", "P- 55.2.475" to "P-55.2.479", "P-55.2.826", "P-55.2.1327", "P-55. 2 .1 947" to "P-55.2.1949", "P-55. 2.2 074", "P- 55.2.2086" to "P-55 .2.2144", "P-55 .2.2477" to "P- 55.2.2478", "P-55.2 .2492", "P-55.2 .3440" to "P- 55 .2 .3 449", "P-55.2.4160" to "P-55 .2 .4169" , "P- 55.2.4333", "P-55.2.5194", "P-56.2.228", "P-56.2.681" to "P-56.2.689", "P-56.2.897" to "P-56.2.922", "P-56.2 .990" to "P-56.2.998", "P-56.2.1122", "P-57.2.211", "P- 57.2.442" to "P-57.2.443", "P-57.2.646", "P-57.2.1100" to "P-57.2.1999", "P-57.2.2120" to "P-57.2 .2219", "P- 57.2.2333", "P-57.2.2362" to "P-57.2 .2363", "P-58.2.546", "P-58.2 .571" to "P-58. 2 .579", "P-64.3 .755", "P- 27 Exhibit " P-71 ", Docket - Vol. 2, pp. 769 to 789 ; Minutes of the hearin g he ld on, and Order dated, Jul y 3, 2017 , Docket - Vol. 2, pp. 852 to 854 . 28 Oath a_( Commission dated February 6, 20 17, Docket - Vol. 2, p. 500-A ; Minutes of the hearing held on, and Order dated , Febru ary 6, 20 17, Docket - Vol. I , p. 500, and Docket - Vol. 2, p. 50 I , respectively. 29 Ex hibit " P-39", Docket - Vol. 2, pp. 524 to 528 ; Minutes of the hearing he ld on, and Order dated, April 3, 2017 , Docket - Vol. 2, p. 704 to 705. 30 Exhibit " P-37", " P-38", and " P-72", Docket - Vol. 2, pp . 53 1 to 561 , 699 to 703 , and 875 to 880, respect ive ly; Minutes of the hearing he ld on, and Order dated, April 3, 20 17, Docket- Vol. 2, p. 704 to 705 ; Minutes of the hearin g he ld on, and Order dated, February 5, 20 18, Docket - Vo l. 2, p. 885 to 886. 31 Exhibits " P-41 " and " P-41-2" , Docket- Vol. 2, pp. 7 1I to 735 , and 738 to 763 , respecti ve ly. 32 Docket- Vol. 3, pp. 928 to 954. 33 Docket- Vol. 3, pp. 1083 to 1085 . 34 Docket - Vo l. 3, p. 1103 . 35 Docket- Vo l. 3, pp. I I 16 to I 120. f7'1h-

DECISION CTA Case No. 9257 Expeditors Phtlippines, Inc. vs. Hon. Kim 5. Jacinto-Henares - in her capacity as the Commissioner ofInternal Revenue 64.3 .1111 ", and "P-64.3.1176", for not being found in the records of the case; and 2. Exhibits "P-73" to "P-82.3", for failure to present the originals for comparison, and Exhibits "P-79 .3628", are not in the records. Petitioner then filed its Urgent Omnibus Motion 1. To Order the !CPA to Submit Documentary Exhibits; 2. To Allow the Remarking of Documents and Set Commissioner's Hearing for the Purpose; 3. To Approve Petitioner's Tender of excluded Evidence on April 1, 2019. 36 However, respondent failed to file his comment thereto. 37 In its Resolution dated January 27, 2020,38 the Court: (1) denied the Motion To Order the !CPA to Submit Documentary Exhibits; (2) set two (2) commissioner's hearings for the purpose of correcting the markings in exhibits; a n d (3) noted petitioner's tender of excluded evidence, namely, Exhibits "P- 73" to "P-82.3". For his part, respondent offered the testimony of Ms. Asela E. Sese, Group Supervisor of the BIR.39 The Court received respondent's Formal Offer of Evidence on February 9, 2021.40 Petitioner, however, failed to file its comment thereto.41 In the Resolution dated March 18, 2022,42 the Court admitted all of respondent's offered exhibits. On May 4, 2022, petitioner filed a Motion for Extension to File Memorandum.4 3 In the Resolution dated May 30, 2022,44 the said Motion for Extension was expunged from the records, for being a prohibited motion. 36 Docket - Vo l. 2, pp. 11 26 to 11 33. 37 Record s Verification dated May 3 I , 20 19 issued by the Judicial Records Division of thi s Co urt, Docket - Vol. 3, p. 1140. 38 Docket - Vol. 3, pp. 11 44 to 1147. 39 Exhibit " R-13 ", Docket - Vol. 3, pp. 11 72 to 11 83 ; Order dated November 26, 202 0, Docket - Vol. 3, pp. 1237to 1238. 40 Docket- Vol. 3, pp. 125 1 to 1256. 41 Record s Verification dated December 3, 202 1 iss ued by the Judicia l Records Division of this Court, Docket- Vol. 3, p. 1275. 42 Docket - Vol. 3, pp. 128 1 to 1282. 43 Docket - Vol. 3, pp. 1283 to 1284. 44 Docket - Vol. 3, p. 1288. ~

'' DECISION ITA Case No. 9257 Expeditors Philippines, Inc. vs. Hon. Kim 5. Jacinto-Henares - in her capacity as the Commissioner ofInternal Revenue Respondent likewise failed to file his memorandum. 45 The present case was submitted for decision on May 30, 2022, sans the parties' memoranda.46 THE ISSUE The parties stipulated the following issue for this Court's consideration, viz.: "Whether Petitioner can be held liable for the deficiency income tax in the total amount of Three Hundred Thirty Three Million, Four Hundred Thirty Nine Thousand Three Hundred Seventeen Pesos (Php333,439,317); deficiency Value-added tax in the total amount of Thirty Three Million Eight Hundred Twenty Three Thousand Eight Hundred Six and Twenty Seven Centavos (Php33,823,806.27); deficiency withholding tax on compensation in the total amount of Three Million One Hundred Sixty Four Thousand Eight Hundred Forty Eight Pesos and Twenty Three Centavos (Php3,164,848.23); deficiency expanded withholding tax in the total amount of Twenty Four Million Six Hundred Eighty Five Thousand Five Hundred Twenty Six pesos and Sixteen centavos (Php24,685,526.16); deficiency final withholding tax in the total amount of Twenty- Nine Million Four Hundred Thousand Three Hundred Seventeen Pesos and Fifty Nine centavos (Php29,400,317.59); deficiency final withholding VAT in the total amount of Ten Million Seven Hundred Six Thousand Nine Hundred Thirty Three Pesos and Sixty Seven Centavos (Php10,706,933.67) and deficiency documentary stamp tax in the amount of One Hundred Twenty-Six Thousand Four Hundred Ninety Nine Pesos and Twenty Three Centavos (Php126,499.23) for taxable year 2009."47 45 Records Verification dated May 12, 2022 issued by th e Judicial Record s Divi sion of thi s Court, Docket - Vol. 3, p. 1286. 46 Resolution dated May 30,2022, Docket - Vol. 3, p. 1288. 47 Stipu lated Issue, JSFI , Docket - Vol. I, p. 462. ~

DECISION CTA Case No. 9257 Expedttors Phtlippines1 Inc. vs. Hon. Kim 5. Jacinto-Henares - in her capacity as the Commissioner ofInternal Revenue Notwithstanding the foregoing issue raised by the parties herein, this Court raises the following issue, which shall be primarily resolved, to wit: "Whether petitioner was denied due process in the issuance of the subject tax assessments." Petitioner's arguments: Petitioner argues that respondent's right to assess the 1 st quarter VAT, withholding taxes (expanded , compensation and final), and withholding VAT for January to June 2009, has already prescribed; and that there exist legal and factual defenses to the items raised in the details of the discrepancies warranting cancelation and withdrawal of the deficiency. Respondent's counter-arguments: Respondent avers that the assessment for the 1 st quarter VAT has not yet prescribed for having filed false VAT returns due to substantial underdeclaration of sales; that the deficiency assessments for withholding taxes (expanded, compensation and final) for the months of January to May of taxable year 2009 have not yet prescribed, even if the waiver of the statute of limitations was issued beyond the three-year prescriptive period which is on June 14, 2012 , for having filed false withholding tax returns, considering that certain income payments were not subjected to corresponding withholding tax; that in this case, the applicable period of limitation within which to assess petitioner is ten (10) years; that assessments are prima facie presumed correct and made in good faith; that the taxpayer has the duty of proving otherwise; that in the absence of proof of any irregularities in the performance of official duties, an assessment will not be disturbed; and that petitioner should be reminded that taxes are important because it is the lifeblood of the government and so should be calculated without unnecessary hindrance. THE COURT'S RULING The present Petition for Review is granted. ----

DECISION CTA Case No. 9257 Expeditors Philippines, Inc. vs. Hon. Kim 5. Jacinto-Henares - in her capacity as the Commissioner ofInternal Revenue Legal bases to resolve an issue not raised by the parties. Section 1, Rule 14 of the 2005 Revised Rules of the Court of Tax Appeals reads as follows: "RULE 14 JUDGMENT, ITS ENTRY AND EXECUTION SECTION 1. - Rendition ofjudgment- xxx In deciding a case, the Court may not limit itself to the issues stipulated by the parties but may also rule upon related issues necessary to achieve an orderly disposition of the case ." (Emphasis added) Based on the foregoing provision, this Court is not bound by the issues specifically raised by the parties but may also rule upon related issues necessary to achieve an orderly disposition of the case.48 Such authority of this Court is confirmed and recognized by the Supreme Court in Commissioner of Internal Revenue us. Lancaster Philippines, Inc. ,49 viz: "On wh eth er t h e CTA can resolve a n is sue whic h was not raised by th e pa rties, we rule in the affirmative. Un d er Section 1, Rule 14 of A.M . No. 05-11 -07-CTA, or t h e Revis ed Rules of t h e Court of Tax Appeals, t h e CTA is no t b ound by t h e issu es s p ecifically ra is ed by the p a rties but may also rule upon related issues necessary to achieve an orderly disposition of the case. The text of th e provision read s : SECTION 1. Rendition ofjudgment. - xxx In deciding the case, the Court may not limit itself to the issues stipulated by the parties but may also rule upon related issues necessary to achieve an orderly disposition of the case. 48 Comm issioner of Internal Revenue vs. Lancaster Philipp ines, Inc., G. R. No. 183408, July 12, 20 17. 49 G. R. No . 183408, July 12, 20 17. ~

DECISION CTA Case No. 9257 Exped1tors Philippines, Inc. vs. Han. Kim 5. Jacinto-Henares - in her capacity as the Commissioner ofInternal Revenue The above section is clearly worded. xxx." (Emphases added) The Supreme Court has applied the foregoing prov1s1on in Commissioner of Internal Revenue us. Yumex Philippines Corporation, so wherein it held the following: "As the CTA En Bane held, the CTA Division was justified in ruling on the issue that respondent was denied due process even though it was not expressly raised by respondent in its petition for review. xxx." (Emphasis and underscoring added) Furthermore, in Comilang us. Burcena, et al.,s1 the Supreme Court held: "Once a court acquires jurisdiction over a case, it has wide discretion to look upon matters which, although not raised as an issue, would give life and meaning to the law. Indeed, the Rules of Court recognize the broad discretionary power of an appellate court to consider errors not assigned. XXX XXX XXX Thus, an appellate court is clothed with ample opportunity to review rulings even if they are not assigned as errors in the appeal in these instances : (a) grounds not assigned as errors but affecting jurisdiction over the subject matter; (b) matters not assigned as errors on appeal but are evidently plain or clerical errors within contemplation of law; (c) matters not assigned as errors on appeal but consideration of which is necessary in arriving at a just decision and complete resolution of the case or to serve the interests of justice or to avoid dispensing piecemeal justice ; (d) matters not specifically assigned as errors on appeal but raised in the trial court and are matters of record having some bearing on the issue submitted which the parties failed to raise or which the lower court ignored; (e) matters not assigned as errors on appeal but closely related to an error assigned; and (f) matters not assigned as errors on appeal but upon which the determination of a question properly assigned, is dependent. "52 (Emphases added) 50 G.R. No. 222476, May 5, 202 1. 5 1 G.R. No. 146853, February 13, 2006. 52 Cited also in MI V '"Don Martin Voy 04 7 and its Cargoes of6,500 Sacks of Imported Rice, el a/. vs. Hon. Secretat y ol Finance, et a/. (G.R. No. 160206, July I5, 20 I5), where in the Supreme Court recognizes this Court' s jurisdiction to determine an issue not raised by the parties. ~

DECISION CTA Case No. 9257 Expeditors Philippines, Inc. vs. Han. Kim S. Jacinto-Henares - in her capacity as the Commissioner ofInternal Revenue On the basis of the foregoing jurisprudential pronouncements, it is clear that this Court, as an appellate court, is clothed with ample opportunity to review rulings even if they are not assigned as errors in the appeal in certain instances. To be sure, although the issue of whether petitioner was denied due process in the issuance of the subject tax assessments was not specifically raised or assigned as an error in the present case, the consideration thereof is necessary in arriving at a just decision and complete resolution of the case. Furthermore, it must be emphasized that the issue on the violation of petitioner's right to due process is inextricably linked to the validity of the assessment. It is primal that the BIR's right to collect deficiency taxes must flow from a valid assessment. This, in turn, proceeds from the basic truism that a void assessment bears no valid fruit. Moreover, a resolution on the apparent violation of petitioner's right to due process for an orderly and comprehensive disposition of this case.53 Thus, We see no legal obstacle to resolve the above-stated issue raised by this Court. The revenue officer and group supervisor who continued the audit of petitioner were not authorized by a valid LOA The Revenue Officer (RO) assigned to examine a taxpayer's books must be authorized by an LOA. Section 6(A) of the 1997 National Internal Revenue Code (NIRC), as amended, states: Sec . 6 . Power of the Commissioner to Make Assessments and Prescribe Additional Requirements for Tax Administration and Enforcement. - (A) Ex amination of Returns and Determination of Tax Due. - After a return has been filed as required under the provisions of this Code, the Commissioner or his duly au th orized representative m ay authorize the examination 53 Prime Steel Mill, In corporated vs. Comm issioner of" Internal Revenue, G.R. No . 249 153 , September 12, 2022.~

DECISION ITA Case No. 9257 Expeditors Philippines, Inc. vs. Hon. Kim 5. Jacinto-Henares - in her capacity as the Commissioner ofInternal Revenue 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 examination of any taxpayer. Section 13, of the same 1997 NIRC, as amended, also states: Sec. 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 correct 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. Based on the foregoing, a revenue officer needs to be authorized through a validly issued LOA before conducting an examination of a taxpayer's accounts. In Commissioner of Internal Revenue v. McDonald's Philippines Realty Corp.,54 the Supreme Court also explained the necessity for a new LOA for the substitution or replacement of ROs to continue the audit or investigation of a taxpayer's books of accounts. The Supreme Court stated: The practice of reassigning or transferring revenue officers originally named in the Letter of Authority (LOA) and substituting or replacing them with new revenue officers to continue the audit or investigation without separate or amended LOA (i) violates the taxpayer's right to due process in tax audit or investigation; (ii) usurps the statutory power of the Commissioner of Internal Revenue (CIR) or his duly authorized representative to grant the power to examine the books of account of a taxpayer; and (iii) does not comply with existing Bureau of Internal Revenue (BIR) rules and regulations on the requirement of an LOA in the grant of authority by the CIR or his duly authorized representative to examine the taxpayer's books of accounts. XXX XXX XXX 54 G .R. No. 242670, May I0, 202 1. ~

DECISION CTA Case No. 9257 Expeditors Phtlippines, Inc. vs. Hon. Kim S. Jacinto-Henares - in her capacity as the Commissioner ofInternal Revenue An LOA is the authority given to the appropria te 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. XXX XXX XXX 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 a ny revenue officer can conduct any of these kinds of 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. XXX XXX XXX The issuance of an LOA pnor to examination and assessment is a requirement of due process. It is not a mere formality or technicality. xxx The result of the absence of a LOA is the nullity of the examination and assessment based on the violation of the taxpayer's right to due process. 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. xxx 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 a valid assessment. XXX XXX XXX~

DECISION CTA Case No. 9257 Exped1tors Philippines, Inc. vs. Han. Kim 5. Jacinto-Henares - in her capacity as the Commissioner ofInternal Revenue 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, 10(c) and 13 of the NIRC . xxx XXX XXX XXX It is true that the service of a copy of a memorandum of assignment, referral memorandum, or such other equiva lent internal BIR document may notify the taxpayer of reassignment and transfer of cases. However, notice of the fact of reassignment and transfer of cases is one thing; proof of the existence of authority to conduct an examination a nd 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 h as 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 th em 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, 1s m effect, Dk--..

DECISION CTA Case No. 9257 Expeditors Philippines, Inc. vs. Han. Kim S. Jacinto-Henares - in her capacity as the Commissioner ofInternal Revenue 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 added) We now review the authorities of the ROs who examined petitioner's books of accounts and other accounting records. To recall, petitioner received from the Bureau of Internal Revenue (BIR) the Letter of Authority (LOA) No. LOA-122-2010- 00000107 dated September 20, 2010,55 authorizing ROs Ricardo Calma and Ma. Teresa Espino, and GS Monica Zamora, of the LT District Office-Makati, to conduct an examination of the books of accounts and other accounting records of petitioner for all internal revenue taxes for the period January 1, 2009 to December 31, 2009. 56 The said LOA was signed by Zenaida G. Garcia, Assistant Commissioner, Large Taxpayers Service Excise. Respondent presented in evidence a Memorandum Report, 57 dated April 15, 2014, to prove the factual and legal bases of the assessment. Said Memorandum Report contained the recommendation for the issuance of the PAN, submitted by ROs Jesus DS. Reyes, Ma. Theresa V. Carillo, and Daisy C. Dajao. It also stated: This docket previously referred to Revenue Officer Ricardo B. Calma was reassigned to the herein Revenue Officer pursuant to Memorandum of Assignment No. 122- REA-13-00290 dated March 7, 2013. Based on the foregoing, it is apparent that the investigation of petitioner's books of accounts was reassigned pursuant to a mere Memorandum of Assignment (MOA). 58 However, there is nothing in the records which show that a new LOA was issued authorizing ROs Jesus DS. Reyes, Ma. Theresa V. Carillo, and Daisy C. Dajao, to continue the audit and investigation of petitioner's books of accounts. Pursuant to the McDonald's case, quoted above, the MOA No. 122-REA-13-00290, dated March 7, 2013, did not clothe 55 Annex A, Petition fo r Review, Docket - Vol. I, p. 29. 56 Par. 4 , Stipulated Facts, JSFI , Docket - Vol. I, pp. 461 to 462. 57 Exhibit " R-1 ", Bl R Record s, pp . 751-764. 58 See BIR Records, p. 700 . ~

.. DECISION CTA Case No. 9257 Expeditors Philippines, Inc. vs. Hon. Kim 5. Jacinto-Henares - in her capacity as the Commissioner ofInternal Revenue ROs Jesus DS. Reyes, Ma. Theresa V. Carillo, and Daisy C. Dajao, with the requisite authority to continue the examination of petitioner's books of accounts and other accounting records for taxable year 2009. If the ROs who conducted the examination of the taxpayer are not duly authorized to do so, the assessment is inescapably void. A void assessment bears no fruit. WHEREFORE, the Petition for Review is GRANTED. The FLD with Details of Discrepancies and Audit Results I Assessment Notices, all dated May 30, 2014, for deficiency income tax, IAET, WTC , EWT, VAT, FWT, FWVAT and DST; and, the FDDA dated January 12, 2016, all for taxable year 2009, are CANCELLED and SET ASIDE. The Commissioner of Internal Revenue, his representatives, agents, or any person acting on his behalf are hereby ENJOINED from enforcing the collection of the foregoing assessments. This order of suspension is IMMEDIATELY EXECUTORY consistent with Section 4, Rule 39 of the Rules of Court, as amended. SO ORDERED. ~�;:~ CATHERINE T. MANAHAN Associate Justice WE CONCUR: Presiding Justice ~ ~ F ~ -Ftf! o~ MARIAN 1# F. REYES-FAJARDO Associate Justice

� ! DECISION CfA Case No. 9257 Expeditors Philippines, Inc. vs. Hon. Kim 5. Jacinto-Henares - in her capacity as the Commissioner ofInternal Revenue 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