NCR CORPORATION PHILIPPINES, v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY ENBANC CTA E B NO. 2967 (CTA CASE NO. 10498) COMMISSIONE R OF INTE RNAL REVEN UE, Petitioner, Members: -versus- Present: Ringpis-Lib an, P.J., Bacorro-Villen a , Modesto-San Ped ro, Reyes-Fajardo , Cui-David, Fcrrer-Flores, and Angeles, ]]. NCR CORPORAT ION PHILIPPINES, Respondent X------------------------------------------------------------------------------------- ---------X DECISION RINGPIS-LIBAN, Pj.: Before tllis Court is the Petition for Review filed by petitioner witllin the extended period on A ugust 29, 20241 assailing the D ecision dated May 10, 20242 and June 26, 2024,3 promulgated by First Division of tllis Court in CTA Case No. 10498 entitled CR C01poration Philippines vs. Commissioner ofI11temal Revemte. The dispositive portion of the D ecision reads: "WHEREFORE, prenlises considered, the Petition for Review flied on fay 17, 2021 by CR Corporation Philippines is GRANTED~ I Rollo, c r.\ lm 'o. 2967. pp. 7--19. with .\nncxc~. 2 Ibid., pp. 55-72. ' lbiu., pp. 7-l-79.

DECISIO'( CL\ EB C-:0. 2%- (CL\ Ca>e C:o. 101~8) _-\ccordingly, the Formal Letter of Demand with Details of Discrepancv and c\ssessment Notices, all dated September 13, 2017, the Final Decision on Disputed ,-\ssessment with Details of Discreprencies rend .\udit Results/.�\ssessment Notices, rei! dmed February 8, 2021 assessing petitioner in the adJusted amount of P425,585,430.45 representing the alleged income tax, value-added tax, withholding tax on compensation, expanded withholding tax, final withholding tax, final withholding YXT, documentary stamp tax, and compromise penalt}', inclusive of interest and surcharges for taxable year 2014, arc CANCELLED and SET ASIDE for being void ab initio. The Commissioner of Internal Revenue, his representatives, agents or any person acting on his behalf arc hereby ENJOINED from enforcing the collection of the disputed alleged deficiency tax assessments subject of the Formal I.etter of Demand with Details of Discrepancy and Assessment Notices, all dated September 13, 2017, and the Final Decision on Disputed ,\ssessmcnt with Details of Discrepancies and .-\udit Results/ Assessment Notices, all dated February 8, 2021, assessing petitioner" of income tax, value-added tax, withholding tax on compensation, expanded withholding tax, final withholding tax, final withholding \',\T, documentary stamp tax, and compromise penalty in the aggregate amount of P425,585,430.45, for taxable year 2014. This order of suspension is IMMEDIATELY EXECUTORY consistent with Section 4, Rule 39 of the Rules of Court. SO ORDERED." The dispositive portion of the Resolution dated July 26, 2024 reads: "WI-IEREFORE, prenuses considered, respondent's' Motion for Reconsideration (of the Decision dated May 10, 2024) is hereby DENIED for lack of merit. SO ORDERED." THE PARTIES Petitioner is the duly appointed Commissioner of Internal Revenue (CIR) vested under the appropriate laws with the authority to carry out the functions, duties and responsibilities of said office, including inter alia, the power to decide disputed assessments, grant tax refunds and issue tax credit certificates, pursua~ 1 J{cS)lllllJcnt hncin. 'i 1\titi<Hwr hnl�in

DF:CISTO'\ CL\ EB '\0. 2%- (CL\ Ca>e '\o. 111198) to the provisions of the National Internal Revenue Code (NIRC) of 1997, as amended, other tax laws, rules and regulations. Court processes and pleadings may be served to petitioner's counsel at Litigation Division, Room 703 BIR National Office Building, RTR Road [now Sen, :\Iiriam P. Defensor-Santiago ~\venue], Diliman, Quezon City(' Respondent NCR Corporation Philippines is a corporation duly rer,>istered with the Securities and Exchange Commission (SEC) with office address located at 17'h Floor, 6788 Building, c\yala c\venue, J\Iakati City. Respondent is registered with the Bureau of Internal Revenue (BIR) with Tax Identification No. (TIN) 000-166-605-00000 7 THE FACTS The facts of the case as found by the Court in Division are as follows: "On December 9, 2015, [respondent! received Letter of ,\uthority (LCL\) No. NJD\150/005027 /2015 SN: eL\201200042171 dated November 10, 2015, issued by the BIR Large Taxpayers Service (LTS), authorizing Revenue Officers (ROs) Rosario ~\rriola and Sheila Samaniego and Croup Supervisor (C3S) Rolando Balbido to examine [respondent's! books of accounts and other accounting records covering all internal revenue taxes for the period January 1, 2014 to December 31, 2014, signed lJ\' LTS Assistant Commissioner Nestor S. Valcroso. On February 13,2017, Jpetitionerj issued a ,\lemorandum of c\ssignment (.'110~\) No. LOc\-116-2017-0097, signed by :\Is. Shirln .\. C:apalatia, the Chief of the Regular J;l' ,\udit Division T, assigning RO .-\bigail N. Cayabyab to continue the audit of Jrc;pondentj due to the designation of RO ,\rriola as GS. On i\Iarch 22,2017, [respondent], through its Treasurer, :\Is. Emerita Zornosa, executed a Waiver of the Defenses of Prescription under the Stawte of Limitations of the NIRC extending the period to assess until September 30, 2017. Tlus was accepted by the CIR through its representative, OIC-ACIR of the LTS, 0Is. Teresita J\I. Angeles, on l\Iarch 29, 2017. On ;\ugust 24, 2017, Jrespondentl received a Prelinunary Assessment ]'.ioticc (P,\N) with Details of Discrepancy dated "\NY ,\ugust 23, 2017 from the BIR LTS assessing petitioner for alleged deficiency IT, YXT, \VTC, E\'</T, !~\\iT, F\'</VAT, DST (, \)cci~ion. P- 2. -l)cci~i()tl, pp. 1-2.

DEC!SJO~ CL\ EB )'..�0. 29CJ- (CL\ C:tc;c ~o. 10-198) C:ompromi:;e Penalty, inclu:;ive of intere:<t and :<urcharge for TY 2014, in the following amounts: Kind ofTax Amount (P) .. � � � - - � - - - - - � -f-------=-:=-::c:;-::-~L - - + - - - -_ ~57,?_5~,691.95 IT \'.\1____ 1----76,444,793 70 \\'TC: ... - - 2,305,347.59 -----�--� . -�--� - - - - - - �-�- EWI' ____1_,046,261 86_ FWT --j_ _ _ _ __:_::78,41_Z~_1_2.71 -- �- ��----� ��---�� 31,366,885.08 l�\VV "'-.T DST . ___2,360,721.82 27Q,Q()O.O_Q_ - - -P-4-49-,-96-4,914.71 On September 7, 2017, [respondent[ filed a Protest to the P.\N of even date. On September 25, 2017, [respondent] received the l'ormal Leacr of Demand (I'LD) with Details of Discrepancy and .\ssessment Notices, all dated September 13, 2017, covering the alleged deficiency IT, \'AT, WTC:, EWT, FWT, FWVAT, DST and Compromise Penalty, inclusive of interest and surcharges in the aggregate amount of 1'449,964,914.71 forTY 2014 broken down as follows: ---------------- ---~- ----------- Ki!ld_ofTax Amou_nt_{P) IT 257,753,691.95 _\_'XJ_'_ __ ---�--- �-- �-----�---�--�- �-��----- WTC: _______1_ _ _ _ _ _?6,444,793.70 - + - - ____2=-',305,347.59 E\VT___ __ ___:1,046,261.86 78,417,212.71 �-�- ---------- . ��---�- 31 ,366,885.08 -- .. . . - �---�- ------- -- __ _2,)60,7_21.82 C_:::mpromise Penalty 270,000.00 TQTAL_____________ _____!_'1_4~,~�j,914.71 On October 25, 2017, [respondent[ filed a Protest Letter dated October 25, 2017 against the FLD and :\ssessment Notices. On December 22, 2017, [respondent[ filed a Letter of even date submitting the relevant documents in support of its protest. On February 26, 2021, [respondent[ received the l'inal Dcci:;ion on Di:<putcd .-\sscssmcnt (FDD.\) signed by CIR Caesar H.. Dulay with Details of Discrepancies and Audit Result:;/.\ssessments Notices, all dated February 8, 2021, assessi~

P<1ge 5 of 18 DECJSIO:\ CL\ EB ::--\0. 296...., (CT.\ Ca:->e ~o. liJ-198) [respondent] In the adjusted amount of P425,585,431J.45 representing the alleged deficiency IT, YAT, WTC, E\VT, F\'\T, R\'\iY"-\T, DST and Compromise Penalty, inclusive of interest and surcharges forTY 2014 broken down as follows: -- - . --- . - --------- ~EJ~�n~d~o~f-~T~a~x~-------~___ Arnoun~t-~(P_),_____ 1 IT 229,758,128.56 ----- -- - � - ----------------~-- ... - --�����-�-----�----�- 53,_:182,20~.4_4 WTC::::.=-------------I-------=2-'-=,8'-'-1-"'6,'-'4-=-01:..:.�.:__91=--! E\\'T 1,324,843.50 F\'</T 96,382,9 51.74 ---- ------- - -- ----- 1<\\/YXr 38,553,180.69 DST --- -- ---- -- ----- ---- 2,917,719.62 (~OID�~J!-rll_se_Penaltv - ---------------- TOTAL --~?Q,O_OIJcOO ---- ------- --- ---- ---- P425,5_85,430.46 Thus, on May 17, 2021, [respondent[ filed the present Petition for Review assailing the aforesaid FDDc\. On July 29, 2021, within the extended period, [petitioner] filed his _\nswer, raising Special ami _\ffirmative Defenses which in a nutshell, state that the assessments issued against [respondent[ are valid for having been issued in accordance with laws and regulations; and that [respondent] failed to overcome the presumption of validity and correctness of said assessments."8 In the i\linute Resoh1tion" dated .\ugust 22, 2023, the case was deemed submitted for Decision. On i\Iav 10, 2024, the Court in Division promulgated the assailed Decision. On i\la,- 29, 2024, petitioner flied a "i\Iotion for Reconsideration (of the Decision dated ,\Jay 10, 21J24)," 111 seeking the reversal and setting aside of the Decision dated i\Iay 10, 2024 and praying that a new one be rendered ordering respondent to pay the alleged deficiency taxes inclusive of surcharges and interests for taxable year 2014. On Juh� 26, 2024, the Court in Division issued the assailed Resolution 202Ji denpng for lack of merit the petitioner's "i\Iotion for Reconsideration (of the Decision dated i\Iay 10, ~ l )cci~i( 111. pp. :::---1-. '! DuckL�t. Cl".\ t:a:':'C '\o. l(J--l-98. P- 1539 IO 11Jid.,pp.1"J8(J-I(l]--l-

DECISIO" CL-\ EI3 :'\0. 296- (CL\ Cas~ ~o. 1(1-!lJS) On August 14, 2024, petitioner filed by registered mail a "l\Iotion for Extemion of Time to File Petition for Review," 11 stating that petitioner has until ~August 16, 2024 within which to file the Petition for Review. Petitioner prays for an extension of fifteen (15) days from ,\ugust 16, 2024, or until ,\ugust 31, 2024. within which to file the Petition for Review. On .\ugust 15, 2024, the Court issued a l\Iinute Resolution 1" granting petitioner's "i\Iotion for Extension of Time to hie Petition for Review." On. \ugust 29, 2024, petitioner filed the instant Petition for Reviewu On November 19, 2024, the Court En Bant issued a l\Iinute Resolution 14 ordering respondent to file Comment on the Petition for Review within ten (1 0) days from notice. On December 5, 2024, respondent filed a "C:omment." 10 On January 6, 2025, the Court En Bant issued a l\Iinute Resolution'" which noted respondent's "Comment" and referred the case to the Philippine Mediation Center- Court of'J'ax .\ppeals (Pi\!C-CL\) for mediation pursuant to Section II of the Interil7l G11idelimx jor Implementing 1\Iediation i11 the Com1 of Tax� Appea!r. On Februar\' 26, 2025, the Court En Bane received "P,\IC.CL\ Form 6- No Agreement to l\Iediate"'~i stating that the parties decided not to have their case mediated by Philippine Mediation Center lJnit-CT,\. On :\larch 24, 2025, the Court En Bane issued a J\Iinutc Resolution 18 which noted the "Pl\IC:-C'L\ Form 6-""o .\greemcnt to ,\Icdiate" and ordered the imtant case submitted for decision. THE ISSUE "Whether or not the Court in Division erred in cancelling the AssesHment Notices for being void ab initio( 11 Rollo. pp. 1--L I~ Ibid.. p. 6. 1' Ibid .. pp. ---1-lJ, with \nm�xL�:' II Ibid., P� Sl "I hill., pp. ti5-<J2. 1" Ihid, p. 93. 1- Ibid, p. ()-1-. 1�' Ihid, p. ()5

DEC!SIO'.: CL-\ EB 0-.:C:L 206-:" (C"L-\ Ctsc :\"o. Hll98) THE ARGUMENTS Petitioner claims that the issue on the authority of Revenue Officer (RO) ,'\bigail Cayalwab to continue the audit, as well as the issue on lack of definite amount of deficiency tax liability was never raised by respondent in the administrative level. Thus, respondent can no longer raise such issues on the ground of laches. Petitioner states that the conduct of the audit investigation and the resulting assessments arc valid as the same were in accordance with law and rules. ,\ LO.\ is not a re<]uirement when the audit investigation is conducted by the Office of the Commissioner of Internal Revenue (OCIR). The LOA in this case was issued by the OIC-"'l.ssistant Commissioner for J"arge Taxpayers Service (l "TS). In the organizational chart for the BIR, the LTS is under Office of the Commissioner of Internal Revenue. Considering the audit investigation was conducted by LTS under the OCIR, the issuance of the LOc\ is not a statutory requirement. The LOA is merely for administrative purposes to allow keeping track of ongoing assessments. Petitioner maintains that assuming the LO,\ is required, the examination of respondent's books of account and other accounting records was conducted pursuant to a valid LOA. The issuance of a 1\.Iemorandum of Assignment (lviO,\) was issued assigning RO ,\bigail Cayabyab to continue the investigation of all internal revenue tax liabilities for taxable year .January 1, 2014 to December 31, 2014 of respondent pursuant to the earlier LOA issued. Thus, the reassignment of the LO :\ does not result in lack of authority of the RO and invalidity of the asscssn1cnt. Petitioner insists that there was no violation of respondent's right to due process. The mere reiteration of the contents of the Preliminary :\ssessment 1\:oticc (P ,-\N) to the Formal Letter of Demand (FLD) docs not indicate that petitioner did not con;;ider rc;;pondcnt's rcplie;; and relevant documents it submitted. Respondent was apprised of and was able to avail of the remedies provided by law to refute the tax assessment against it when it filed the protest to Pc\N and FLD. The remedies given to respondent is a clear opportunity to be heard and to refute the findings of respondent's deficiency taxes. Since procedural due process was satisfied, the assessments subject of this case was validly issued. Lastly, the Court in Division erred in enjoining the collection of taxes smce the instant case has not yet attained finality. Furthermore, there was no 1\Iotion to Smpend Collection of Taxes that was filed by respondent, and that was granted by the Court in this easy

DECISIO'\ CL\ Ell '\0. 2%~ (CL\ Case '\o. IIJI98) Conversely, respondent submits that Court in Division can resolve an issue not raised at the administrative level. The Court in Division is not precluded from deciding issues on matters whose consideration are necessary in arriving at a just decision and complete resolution of the case. Respondent states that the Supreme Court cases cited by petitioner to substantiate its claims are inapplicable to the present case. Respondent claims that only the ROs named in the LO"\ has the authority to audit and assess a taxpayer. The absence of a valid LOA nanling RO Abigail Cayabyab conferring authority upon her to conduct the audit examination of respondent's books of accounts for taxable \Tar 2014, renders the present assessment void. Moreover, the Court in Division did not err in holding that the present assessment was issued in violation of the taxpayer's right to due process in light of the Supreme Court decision in the case of Comminioner of f11temal RetJetttte vx. ALJOll Prodml.r i\Jatm(actmi11g fllt. (CJR !IX. At;o;t). 19 THE RULING OF THE COURT ENBANC Timeliness ofthe Petition for Review On i\Iay 14, 2024, the petitioner received the Decision of the Court in Division. On i\Iay 29, 2024, petitioner filed a !\lotion for Reconsideration of the said Decision. On July 26, 2024, the Court in Division issued the assailed Resolution denying petitioner's motion. Said Resolution was received by petitioner through its counsel on ,-\ugust 1, 2024. From receipt of the said Resolution on .\.ugust 1, 2024, petitioner had until .\ ugust 16, 2024 within which to file the Petition for Review before the Court En Bant. On ~-\ugust 14, 2024, petitioner filed a "J\Iotion for Extension of Time to File Petition for Review," praying that petitioner be given an additional period of fifteen (15) days from .\ugust 16,2024, or until_\ugust 31,2024 within which to file his Petition for Review. The !\lotion was granted in the J\Iinute Resolution dated "\ugust 15, 2024. The "Petition for Review" was filed on Augmt 29, 2024. Hence, this Petition for Review was timely filer I'J (; l\ \.o~. 211139t\-9Sl cbtnl t )l�tl J]Jl'r 3. 20 IS, :1nd (; ]{ '\.o~. 2(11-1-1801!), ( ktolwr 3, 20 IH.

DECISIO~ CL\ EB '-iO. 2%- (CL\ Ca>e "io. llq'JR) The assessments issued to respondent arc void [or lack o[ authority o[the ROs who conducted the audit, and [or violation o[ respondent's right to due process o[ law. ,\ftcr due consideration of the facts, issues and arguments raised by the parties, the Court E11 Ba11c finds no reason to reverse the assailed Decision and Resolution of the Court in Division. The Court E" Balle notes that the arguments presented herein arc a mere rehash of the arguments offered by petitioner in his Motion for Reconsideration before the Court in Division. Nonetheless, the Court E11 Batte shall pass upon petitioners' arguments. This Court E" Ba!lc agrees with the findings of the Court in Division that it can consider the issues and arguments raised by the parties in the Petition for Review and :\nswer, even if they were not raised before the administrative level since the said issues delve into the intrinsic validity of the assessment itself. Hence, the Court in Division correctly discussed the validity of the LO.-\ in this' ' case. Tbe RO 1vbo ad11al{y to11d11ded tbe a!!ditlitflleJtigatioll baJ 110 cl!ltbO!itJ' dm to abJence oftbe JJa/id LOA. -\ review of the records of the case discloses that LO"\ No . .-\UDi\150/005027/2015 SN:eL-\201200042171 dated November 10, 2015"" specifically authorized ROs Rosario ,\rriula and Sheila Samaniego, and Croup Supervisor (C;S) Rolando Balbido to examine respondent's books of accounts and other accounting records covering all internal revenue taxes for the period January 1, 2014 to December 31,2014. However, in a i\1emoralldl!l77 of AJxig11mwP dated l�'ebruary 13, 2017 the continuation of the investigation/ audit of respondent was transferred to RO Abigail N. Cayabyab to continue the audit of respondent due to the designation of RO "-\rriola as CS. Thus, it appears that ROs Rosario Arriola and Sheila Samaniego were not the revenue examiners who actually conducted the audit but RO C:ayabyab, by \'irtue of this i\lemoral/dum ofAJ.rig11ment. The rcaso;ignment or respondent's examination to a new RO necessitates the issuance of a new LO \. This is clear under Revenue \Iemorandum Order (R.\10) No. 43-90 or ".\n ~\mendment of Revenue .\Icmorandum Order l'\u, !/' 2'' I �:xhilm ��Jz-:::--. Cl l�:xhibit "R-1"

DECTSIO~ CL\ EB ~0. 29(,- (CLI C.sc ~o. 111198) 37-90 Prescribing Revised Policy Guidelines for Examination of Returns and Issuance of Letters of ,\uthority to _\udit," which provides that: "C:. Other pohcies for issuance of L/,\s. XXX 5. ~\ny re--assig-nment/transfer of cases to another RO(s), and rcYaliclation of L(\s \\�hich ha\�e already expired, shall rcc1uirc the i::;suance of a new L/.:\, ,,�ith the corresponding notation thereto, including the pre\�ious L/"\ number and elate of issue of said L/c\s." (Cndet:ra)fil(~ .rnpjJ!ier0 In this case, no new LO_\ was issued by the BIR nanling RO Cayabyab as the new examiner. Their authority was anchored only on the i\lemorcl!ldllm of AJJigllmwt signed by l\Is. Shirley "\. Calapatia, Chief of the Regular LT ,\uclit Division I. Section 13 of the NIRC requires that a revenue officer must be validly authorized before conducting an audit of a taxpayer: "Sec. 13. .�1n//l()n/y o/11 Ra'i'lllli' OtJiee~: - Subject to the rules and regulations to be prescribed bY the Sccretar\� of Finance, upon rccornn1cnc.h.tion of the Con1nUssioncr, n Re\�enue ()fficcr nssigned to perfon11 nsscssn1ent functions in any district n1ay. pursuant to a Letter of Authority issued by the Rc\Tnue Regional Director. cxnn1ine taxpayers within the jurisdiction of the district in order to collect the correct an1ount of tax, or to recon1tncnd the nsscssn1e111 of any deficiencY tnx due in the san1c n1anner that thc said acts could ha,-c been performed by the Re\�enuc Regional Director hin1self." (L 'JJdrT\mri;<g .mjl)llier~ In addition, under Ri\IO No. 43-90, only the following officers mav validly issue a LO,\: '"'D. Preparation and issuance of L/.\s. 4. For the proper 111onitoring and coordination of the issuance of Letter of .\uthority, the only BTR officials authorized to issue and sio-n Letters of ,\uthority arc the Regional Directors. the Deputy Con1nUssioncrs and the Con1nUssioncr. For the exigencies of the setTice, other officials tnay be authorized to issue and sign 1.etters of ~-\uthority but only upon pnor authorization by the CotnnUssioncr hin1self." (L:nde;JaJring .mpplicr0 Clearly, the new RO was not authorized by a new L0/1 to conduct an audit of respondent's books of accounts for taxable year 201~

DECISIO=' CL \ E13 ='0. 2%" (CL\ Ca>c :\o. l<J-198) In I-Jim!ayang Pi!ipino Plans, llh: IJ. CommLr.rioner of Intemal Reveflm,'" the Supreme Court invaLidated a CY 2009 BTR assessment for lack of an LO.\ authorizing the RO, thus: "The lack ofa vaHd LOA authorizing Revenue Officer Bagauisan to conduct an audit on oetitioner makes the assessment"void "'\n LO:-\ is the authority given to the appropriate revenue officer assigned to perform assessment function:;. It empower:; 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. In Col71177ir.riomr ofllltema! ReJie//!Je ''� Soll)' P/;i!ippim.r, lm: the Court nullified the deficiency \'XI' ac;scssment made against Sony PhiLippines because the rc1�enue officers went beyond their authority when they based the assessment on records from January to ;\Iarch 1998 or using the fiscal vear which ended in l\Iarch 31, 1998 when the LCJ.-\ covered only 'the period 1997 and unverified prior 1-cars.' .-\ccording to the Court: Clearly, there must be a grant of authority before any revenue officer can conduct an examination or assessment. Equally important is that 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. (Empbmis .wppliec0 In i\ieditard Pbilippim.r, Inc. JJ. CIR, the Court nulLified the deficiency \'.-\T assessment against ;\Icdicard PhiLippines because there was noLO.\ issued by the em. prior to the issuance ofP"�\N and FAN. The Letter of Notice earlier sent to l\Icdicard PhiLippines was not vaLidly converted into a LOA. According to the Court in !Vfedimrd P!Ji!ippines: \'\!Jut is crucial is whether the proceedings that led to the issuance of VAT deficiency assessment against 1\IEDIC\RD had the prior approval and authorization from the CIR or her duly authorized repre:;entatives. Not having authority to examine MEDICARD in the first place, the assessme?

DEC!Slll:\ CL\ EB "0. :'')(,- (C:TI C,c :\o. 1111~0) issued by the CIR is inescapably void. (Emphasis mppliedJ Here m~ comprehen~ively di~cussed, thctc was no new LO"\ issued by the CIR or his duly authorized representative giving revenue officer Bagauisan the power to conduct an audit on petitioner's books of accounts for taxable vear 2009. The importance of the lack of the revenue officer's authorit:v to conduct an audit cannot be overemphasized because it goes into the validit-y of the assessment. The lack of authority of the revenue officers is tantamount to the absence of a LOc\ itself which results to a void assessment. Being a void assessment. the same bears no fruit. Lastly, as stated in Presiding justice Del Rosario's dissenting opinion on the C:T\ En Bane's decision, the failure of petitioner to raise at the earliest opportunity, the lack of the revenue officer's authority, docs not precluded the Court from considering the same because the said issue goes into the intrinsic validity of the assessment itself. WHEREFORE, the Petition for Review on Certiorari is hereby GRANTED. The Decision dated February 12, 2018 and the Resolution dated July 24, 2018 rendered by the Court of Tax "\ppeals En Bane in EB Case l\o. 1513 are SET ASIDE. The Formal Letter of Demand with Details of Discrepancies and c-\ssessment Notices issued against petitioner Himlayang Pilipino Plans, Inc. are hereby DECLARED UNAUTHORIZED for having been i,;sucu without a Lcrtcr of ,\uthority by the C:omrnissioner of Internal Revenue or his duly authorized representative." (U11rlenwri11g JlljJplied and dtatio!IJ omitted) In Co!l11llinjomr of I11temal Rellenm tJ. i\icDona!d'J Realty Phi!ippineJ Cotp. (!\IcDonald's)/3 the Supreme Court held that the "practice of reassigning or transferring revenue officers originally named in the Letter of .�\uthority (LOA) and substituting or replacing them with new revenue officers to continue the audit or inyestigation without a separate or amended LOA (i) violateo the taxpayer's right to due process in tax audit or investigation; (ii) u:mrpo the statutory power of the Commissioner of Intemal Revenue (CIR) or his duly authorized representative to grant the power to examine the books of account of a taxpayer; and (iii) docs not comply with existing Bureau of Internal Revenue (BIK) rules and regulations on the requirement of an LOA in the grant of authority lw the em. or his duh� authorized representative to examine the taxpayer's books of accounts." Thus, the Supreme Court in i\ltDo11afd's affirmed the CL-\ in imufidati11g the CY 2006 asscssmenf

DECISJO); CL\ LB );0. :'%~ (CL\ Ca'c !'-io. IIJ!lJH) Tbe jigpreJ and u;ordingJ in tbe PAN are e.-,._mt{y tbe Jame aJ tbat o[ tbe FLD. Section 228 of the NIRC of 1997, as amended, reads, in part, as follows: "SEC:. 228. ProteJting ol A.ueJ.rmenl \'</hen the Commissioner or his duly authorized representative finds that proper taxes should be assessed, he shall first notify the taxpayer of his findings: xxx XXX XXX XXX The taxpayers shall be informed in writing of the law and the facts on which the assessment is made; otherwise, the assessment shall be void."'" Under the foregoing provision, it is explicitly rec]uirecl that the taxpayer be informed in writing of the law and of the facts on which the assessment is made; otherwise, the assessment shall be void." The requirement that the taxpayer must be informed of the factual and legal bases of the assessment is manclaton�. It cannot be presumed. As a requirement of clue process, this rule allows the taxpayer to make an effecti,�e protest26 To be sure, the requirement set by law to state in writing the factual and legal bases for the assessment is not a hollow exhortation. The law imposes a substantive, not merely a formal, requirement. ' 7 Furthermore, it must be emphasized that failure to comply with Section 228 docs not only render the assessment void, but also finds no validation in any provision in the Tax C:ode.'H To implement the above-quoted Section 228, Section 3 of Revenue Regulations ("RR") i':o. 12-99'0, as amended by RR No. 18-2013 1" and renumbered by RR No. 7~2018 11 , provides, in part, as follows: "SECTION 3. Due Process Requirement in the Issuance ofa Deficiency Tax Assessment~ 2-1 LJ;;p/la,~"i' .Ot)il/ied 2' Com;;;J.(_riona t!f ln!emd! Ret('!!I{(' I'. rlro11 PIYirilldJ i.\Iillll({tldllrli� ]!/(., ct Jcq., ( ~ .JZ. '..: (J~. 20 1398-{}() and 201418-19, ( )crobcr 03. 2018. 2t, Co;;;;lli.oio11er ofllllcmilf Rc!'t'l//lr' !'. SJ!il!f.L"I'.,. Ro!!!.-~io P. �\Ir:~!lt/11 and L:tia�t! I-� Jft!~tltl!l, (; .!C 1'\ ll. 232663 . .\by 03. 2021. ~~ Co!llllli.,.Jiollcr o/flllcmi!l 1\i'l'('!!lf(' r. U11ioil Co!pomlion, (;.II.. '\o. 20-[.-[.05 .. \ugu~t 0-L 2021. :'K !d.. cirin).! Co!IJIIJi.,..o�oll,'l"l!/fll!.'mal F..i'l"t'!!/1<' t'.\. R~'J"I'.f, :'> 16 llhil. I:6, 189 (2006) ~" ~l."Hjl:.(:�l�: lmpkmL�nring the [lnJYi~itJn:; cJf dw 0;atl<Jll:ll lntnn:d l{nT!lllL" (:IJLk 11f 199- (;IJ\"erning the Rule~ <Jil \:;~L�~~mt:nr tJf ~ati1Jn:d Intnn:d Rc\"L"llliL" "!"axe~. ( :i\"il l\�1~;dtic~ :md Intcrc~t and the l�:xrr:t-.J udici:d Settlement 1,f :1 "! :lxpa;.�n~ <:rimin:ll \"icJLttitJn cJfrlll" <:tllk "J"hn,ugh J>:l;.�mL�nt 11f :1 Suggc~tcd <:c,mpnllni~c llcn:dty. \" Sl 'B_]I�:( :T: \n1e�ndini-'- ( :u�uin SL�<..:ri"n~ <>f HL"'>L"ll\Ll" lk;.;ui.Hion>- :--.:o. I:!-99 1\dati\�c t" thL� DuL� l'rocc~~ 1\cL]Uiro...�mull i11 illl" h~u:mcc IJf :1 Ddicicnc;.� T:lX .\:->:->c~~mcm. 11 Sl.'l).Jl�:<:"J"- .\mending <:nt:1in Sccrion~ oi�-Rcn�nuc lkgubtion~ "0:11. 12-99, <l~ .\mL�nded b;.� i{L"\"Cnuc lkgulatiiJn~ '\o I.S- 13. lh�lari\�l� tcJ the J)uc J>nJCc~~ 1\cL]Uin�nll"nt in the 1~:->mntx IJf :1 I)L�tlcicncy �1�:1x .\:;~c~~mcnt.

DECISIO:\ CL\ EI3 "0- 296" (CL\ C:a"� :\o. lln98) 3.1 \lode of procedure in the issuance of a deficiency tax assessn1cnt: XXX XXX XXX 3.1.2 Prelimi!ICI!J' .AJJeJJJJJe!lt Notice (P/!1\'). - If after review and evaluation by the Commissioner or his duly authorized representative, as the case may be, it is determined that there exists sufficient basis to assess the taxpayer a Preliminary c\ssessment Notice (PAN) for the proposed assessment. It shall show in detail the facts and the law, rules and regulations, or jurisprudence on which the proposed assessment is based (sec illustration in .c\NNEX 'N herco0. XXX XXX XXX 3.1.4 For/l/al Letter of Dema11d and r!naf Anenment Notice (FLD/PAJ'\). - The Formal Letter of Demand and Final Assessment Notice (FLD /F,-\N) shall be issued by the Commissioner or his duly authorized representative. The FLD /FAN calling for payment of the taxpayer's deficiency tax or taxes shall state the facts, the law, rules and regulations, or jurisprudence on which the assessment is based, otherwise, the assessment shall be void (sec illustration in .�\NNEX 'B' hereof). XXX XXX XXX 3.1.6 Final Decirion Oil a Disp11ted /hreJsment (}'uDA). -The decision of the Commissioner or his duly authorized representative shall state the (i) facts. the applicable law, rules and regulations, or Jurisprudence on which such decision is based, ot!JenviJe, t!Je de,isio!l s!Ja!l be tJOid (see illustration in c-\NNEX 'C hereof), and (ii) that the same is his final decision. "3�' The foregoing provision prescribes, as part of due process in the issuance of tax assessments, that the P,\N, FLD and Final Decision on a Disputed Assessment ("FDD.\") must, respectively, state, among others, the facts and the law on which the assessment is based; otherwise, the FLD/E-\N and/or FDD.-\ shall be void. ln C7R 1'. /11'011, the Supreme Court declared as void the tax assessment because of the total disregard by the CIR of the taxpayer's due process rights as mandated by Section 228 of the NIRC of 1997, as amended and jV'

DECJSJO'; CL\ EB ';0. :>%" (CL\ Case ';o. 11119~) RR No. 12-99, as amended. The Supreme Court held that the CIR failed to fully apprise the taxpayer of the legal and factual bases of the assessment issued agmnst lt. The relevant portions of the said decision arc quoted below: "Tax assessments issued in violation of the due process rights of a taxpayer arc null and void. While the government has an interest in the swift collection of taxes, the Bureau of Internal Revenue and its officers and agents cannot be overreaching in their efforts, but must perform their duties in accordance with law. with their own rules of procedure. and alwavs with regard to the basic tenets of due process. XXX XXX XXX The importance of providing taxpayer with adequate written notice of his or her tax liability is undeniable. Under Section 228, it is explicitly required that the taxpayer be informed in writing of the law and of the facts on which the assessment is made; otherwise, the assessment shall be void. Section 3.1.2 of Revenue Regulation l\i o. 12"99 requires the Preliminary .�\ssessment Notice to show in detail the facts and law, rules and regulations, or jurisprudence on which the proposed assessment is based. Further, Section 3.1.4 requires the Final Letter of Demand must state the facts and law on which it is based; otherwise, the Final Letter of Demand and Final Assessment Notices themselves shall be void. Finally, Section 3.1.6 specifically requires that the decision of the Commissioner or of his or her duly authorized representative on a disputed assessment shall state the facts and law, rules and regulations, or jurisprudence on which the decision is based. Failure to do so would invalidate the !'ina! Decision on Disputed J\ssessment. 'The usc of the word 'shall' in Section 228 of the [National Internal Revenue Code] and m [Revenue Regulations] No. 12-99 indicates that the requirement of informing the taxpayer of the legal and factual bases of the assessment and the decision made against him [or her] is mandatory.' This is an essential requirement of due process and applies to the Preliminary Assessment Notice, Final Letter of Demand with the Final Assessment Notices, and the Final Decision on Disputed "\sscssment. XXX XXX

P:1ge 16 of 18 DECISIOc; CL\ Ell :-;o_ 2'!6- (CL\ C:ase );o. i11198) The facts demonstrate that ,\von was deprived of due process. It was not fully apprised of the legal and factual bases of the assessments issued against it. The Details of Discrepancv attached to the Preliminary, \ssessment Noticc:, as well as the Formal Letter of Demand with Final Assessment Notices, did not even comment or address the defenses and documents submitted by ~-\von. Thus, Avon was left unaware on how the Commissioner or her authorized representatives appreciated the explanations or defenses raised in connection with the assessments. There was clear inaction of the Commissioner at every stage of the proceedings. XXX XXX XXX In CommiJJioner of!!lfemal Reven/le v. RryeJ, this Court ruled as void an assessment for deficiency estate tax issued by the Comm.issioner for failure to inform the taxpayer of the law and the facts on which the assessment was made, in violation of Section 228 of the Tax Code."33 Based on the foregoing, petitioner or his duly authorized representative is mandated to perform assessment functions in accordance with, and strict adherence to, law, with their own rules of procedure, and always with regard to the basic tenets of due process. "-\nd due process requires petitioner and/ or the l3IR to consider the defenses and evidence submitted by the taxpayer and to render a decision based on these submissions. Moreover, in case petitioner or his duly authorized representative fails to observe due process, it shall have the effect of rendering the deficiency tax assessment \'Oid, and of no force and effect. 1\ significant part of the due process requirement in the issuance of tax assessments is that the concerned taxpayer must be informed, in writing, of the law and of the facts on which the assessment is made. Such requirement must be embodied in the P"\N, 1-LD/FAN, and FDDA Notably, when petitioner rejects the taxpayer's explanations, he must give some reason for doing so and the particular facts and law upon which his conclusion arc based, and those facts must appear in the record. Thus, the concerned taxpayer must not be left unaware on how the petitioner or his duly authorized representatives appreciated the explanations or defenses raised in connection with the assessment. In the case at bar, as stated in the P,\N with attached DetaiLr ofDiJcrcpamieJ dated ~-\ugust 23, 2017, 14 the BIR found due from respondent deficiency IT, \'"\T, \\TC, E\'\'T, F\VT, 1-WYXl', DST and compromise penalties for calendar year 2014, in the amount of P449,964,914.71~ " E111jJht.l!:, ti!id tmrle1:'m'i'(~ .mppllcd i-J l�:xhibit ''P--"

DEC!SJO" CL\ LB ::\0.:96- (CT_\ Ca:;(;' l\o. 10-ltJi3) Records show rhat respondent filed its Protest to the PAN elated September 7, 2017. 10 Petitloner issued the J�.~N/FLD with attached Detat!J ofDiscrepallciex on September 13, 2017;16 respondent was still assessed the same exact basic deficiency IT, \'"-\T, WTC, EWT, F\\/T, F\VVA.T, DST and compromise penalties, in the total amount of P449,964,914.71, In fact, the Details of DiHrepamiex attached to the FLD merely reiterated or copied /Jerbatim what are indicated in the Details ofDistrepancies attached to the P,\N. In other words, the petitioner merely reiterated the same findings as stated in the said I) \N, without giving am� reason for rejecting the explanations made by respondent in its ReplY to the PAN - an indication that petitioner did not consider the same when he issued the subject liLD. Consequently, respondent \vas left unaware on how petitioner or the BIR appreciated the explanations or defenses respondent raised against the subject P.-\N, in clear violation of respondent's right to administrative due process. Tax assessments issued in \�iolation of the due process rights of a taxpayer are null and void 37 Therefore, the subject tax assessment cannot be enforced against respondent, and petitioner has no right to collect the same. In view of the foregoing, the Court E11 Bane finds that petitioner has not sufficiently established his case. ACCORDINGLY, the Petition for Review is DENIED for lack of merit. SO ORDERED. ~.~;- MA. BELEN M. RINGPIS-LIBAN Presiding Justice WE CONCUR: A. BACORRO-VILLENA - :sociate Justice '' l�:;..hihlt ��p-s�� ,,, E.'.N/Ji1 "P-'J": ;- Crmm;i�.1iomr i;(Intemtli I\r'/"1'11111' n�.. �ll'o!l Pmdl!d.i _\Ir/111(/;,dlll"il!g. [//(.. ,,! w~r.. (; .1{. "\,�, J~ . .?.0 1398-99 ,md 20 1-l-18-19, ( krobcr 0.1. 2018.

DECISION CL\ Ell NO. 296' (CL\ Case No. \Oj98) ~ ~ f. ~ -fqjlt..~ MARIAN IVY~ REYES-FAJARDO Associate Justice /huntbn~ LANEE S. CUI-DAVID Associate Justice Associate Justice CERTIFICATION Pursuant to I\rticle 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 MA. BELEN M. RINGPIS-LIBAN Presiding Justice