RACAL MOTORSALES CORPORATION v. BUREAU OF INTERNAL REVENUE TROUGH MYRNA S. LEONIDA IN HER CAPACITY AS THE OIC-REGIONAL DIRECTOR, REVENUE REGION NO. 5, CALOOCAN CITY

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY SPECIAL THIRD DIVISION RACAL MOTORSALES CTA CASE NO. 9737 CORPORATION, Petitioner, -versus- Members: RINGPIS-LIBAN, UY, Chairperson, and MODE STO-SAN PEDRO ,]]. BU REAU O F INTERNAL REVENUE through MYRNA S. LE ONIDA in her capacity as the OIC-Region al Director, Revenue Promulgated: Region N o. 5, Caloocan City, Respondent. -S='-E""..P.__1_.___4_.___..21J23_~::------ X------------------------------------------------------c--:-;-.-.-.-.-.-_-_------3--;-~--~-I-f--#-�---.-.--.----------X DECISION RINGPIS-LIBAN,J: THE CASE The Petition fo r Review filed on December 20, 201 7 and the Amended Petition fo r Review filed on April 10, 201 81 both pray that the Final Decision issued by respondent against petitioner for its alleged deficiency value-added tax (VAT), for the period January 1, 201 7 to June 30, 201 7, in the amount of P54,462,094.49, inclusive of surcharges, interest and penalties, be recalled and that the disputed assessment be declared without legal and factual base? / 1 Docket - Vol. I, pp. 157 to 174. 2 Refer to t he Summary of t he Case, Pre-Trial Order dated August 20, 2018 (Docket - Vol. I, p. 335). The amount stated in the Summary of the Case is only P25,287,704.47, which represents only the basic deficiency VAT. T hus, t he amount of " P54,462,094.49", which is inclusive of t he surcharge and interest, was stated in the descript ion of this case. Refer also to par. 4, Stipu lation of Facts, Joint Stipulation of Facts and Issues (JSFI), Docket - Vol. I, p. 311.

DECISION CTA Case No. 9737 THE PARTIES Petitioner Racal Motorsales Corporation is a domestic corporation duly registered with the Securities and Exchange Commission (SEC), with principal place of business at Km. 39 Aguinaldo Highway, Barangay Biga II, Silang Cavite.3 It is established primarily to conduct and carry on the business of selling, distributing, marketing at a wholesale or retail in so far as may be permitted by law all kinds of goods, commodities, wares and merchandise of every kind and description such as but not limited to motorcycles, parts and accessories; to enter into all kinds of contracts for the export, import purchase, acquisition, sale at wholesale or retail and other dispositions for its own account as principal or representative capacity as manufacturing, representatives, merchandise broker, inventor, commission merchant, factors or agents upon consignment of all kinds of good[s], wares, merchandise or product whether natural or artificial.4 Petitioner is also registered with the Bureau of Internal Revenue (BIR), under Tax Identification Number 007-571-214.5 As a duly registered business entity in the Philippines, peuuoner generates VATable sales arising from its cash and installment sales of motorcycles, parts and accessories within its area of operation, which is within the National Capital Region and within North Luzon.6 On the other hand, respondent is the Commissioner of the Bureau of Internal Revenue (BIR), who holds office at the 5'h Floor, BIR National Office Building, Agham Road, Diliman, Quezon City.7 He is vested with the power to decide tax cases, including disputed assessments, pursuant to Section 4 of the 1997 National Internal Revenue Code (NIRC), as amended.8 ANTECEDENTS (ADMINISTRATIVE LEVEL) On April 25, 2014, the taxpayer Racal Motorsales Corporation filed its VAT Quarterly Return for the months of January, February and March 2014.9 Thereafter, on July 25, 2014, it also filed its VAT Quarterly Return for the months of April, May and June 2014.'Y 3 Par. 1, Stipulation of Facts, JSFI, Docket- Vol. I, p. 310. 4 Par. 6, Stipulation of Facts, JSFI, Docket- Vol. I, p. 311. 5 Par. 5, Stipulation of Facts, JSFI, Docket- Vol. I, p. 311. 6 Par. 7, Stipulation of Facts, JSFI, Docket- Vol. I, p. 311. 7 Par. 2, Stipulation of Facts, JSFI, Docket- Vol. I, p. 310. 8 Par. 3, Stipulation of Facts, JSFI, Docket- Vol. I, p. 310. 9 BIR Form 2550Q, Exhibit P-4, Docket- Vol. II, p. 624. 10 BIR Form 2550Q, Exhibit P-5, Docket- Vol. II, p. 625.

DECISION CTA Case No. 9737 The following year, the BIR issued a Letter ofAuthon!J (LOA) dated May 4, 2015, with No. LOA-V05-2015-00000, authorizing Revenue Officer (RO) Jeffrey Butial (Burial) / Group Supervisor (GS) Bryan Dela Cruz (Cruz), to examine the books of accounts and other accounting records of petitioner for VAT, for the period from January 1, 2014 to June 30, 2014. 11 Based on the LOA, the audit of the taxpayer commenced. 12 Specifically, RO Burial sent several requests for presentation of records to the taxpayer such as: � Request for Presentation of Records/Books of Accounts; � First Notice dated May 18, 2015; and, � Final Notice for Presentation of Records Before Issuance of Subpoena Duces Tecum dated June 1, 2015. 13 For failure of the taxpayer to comply with the Subpoena Duces Tecum, the Legal Division instructed that the taxpayer be assessed based on the Best Evidence Obtainable Rule. 14 For this purpose, RO Burial requested the Assessment Division for an Access Letter to be sent to the Land Transportation Office (LTO) IT provider, Stradcom Corporation, to allow the BIR to access its records and gather the information necessary pertaining to all motor vehicles sold through the taxpayer as a dealer.15 After acquiring data gathered from the LTO / Stradcom Corporation and other third-party information, RO Burial discovered that there was deficiency in the declared VAT sales for the taxable period in question. 16 Accordingly, in the Preliminary Assessment Notice (PAN) dated November 7, 2016, with attached Details of Discrepanry, the BIR ascertained that petitioner had deficiency VAT for the 1" and 2"d quarters of 2014, amounting to 1'79,411,132.65 inclusive of surcharge, interest and compromise penalty.17 The taxpayer filed a protest to the PAN. 18 Subsequently, in a Memorandum of Assignment (MOA) No. MOA2015LOA24188 dated March 9, 2017, a new RO Paul Simon A. Francisco (Francisco) but still under the same GS Cruz were tasked to condu~ 11 Par. 8.1, Stipulation of Facts, JSFI, vis-a-vis copies of the LOA No. LOA-V05-2015-00000130 dated May 4, 2015, Docket- Vol. I, pp. 311, 26, and 91, respectively. Refer also to par. 7 (a), Statement of Facts, Amended Petition for Review, vis-a-vis par. 7, Answer with Special and Affirmative Defenses, Docket- Vol. I, pp. 159 and 65, respectively. 12 Judicial Affidavit of Revenue Examiner Jeffrey M. Butial, Docket- Vol. I, p. 117. 13 Id., Docket- Vol. I, p. 118. 14 Id., Docket- Vol. I, p. 120. 15 !d. 16 Jd., Docket- Vol. I, p. 121. 17 Par. 8.2, Stipulation of Facts, JSFI, vis-a-vis copies of the PAN dated November 7, 2016, Docket - Vol. I, pp. 311, 27 to 32, and 92 to 96, respectively. Refer also to par. 7 (b), Statement of Facts, Amended Petition for Review, vis-a-vis par. 8, Answer with Special and Affirmative Defenses, Docket- Vol. I, pp. 159 and 66, respectively. 18 Judicial Affidavit of Revenue Examiner Jeffrey M. Butial, Docket- Vol. I, p. 122.

DECISION CTA Case No. 9737 the reinvestigation in relation to the previous grant of request in favor of the taxpayer. 19 Pursuant to the MOA, RO Franciso from VAT Audit Section, Assessment Division of BIR Revenue Region No. 5 conducted the reinvestigation. During the reinvestigation, RO Franciso required the taxpayer to present all the necessary documents / records. He cross-checked their validity and completeness upon submission, which resulted in the reduction of the deficiency VAT assessment. 20 On January 10, 2017, the BIR issued a Final Assessment Notice (FAN) I Formal Letter of Demand (FLD) Nos. 35947 and 21565 covering the taxpayer's deficiency VAT assessment for the for the 1"' and 2nd quarters of 2014. 21 The FAN and FLD were served by RO Burial to the taxpayer on January 12,201722 The taxpayer through its President, Mr. Jose Earl B. Racal, ftled a formal letter of protest dated January 25, 2017, which requested for a reconsideration and/or reinvestigation and which was then granted by the Regional Director Myrna S. Leonida. 23 Since the request for reconsideration and / or reinvestigation was granted, the docket was again forwarded to the VAT Audit Section, Assessment Division of BIR Revenue Region No. 5 for the reception of all documents in support of the letter of protest within sixty (60) days from the filing of the same.24 Finally, on November 22, 2017, petitioner received from BIR Revenue Region No. 5 - Caloocan City, the Final Decision on Disputed Assessment (FDDA) dated October 13, 2017, and Revised Formal Letter Demand (RFLD), with Assessment Notice No. 22117 dated November 21, 2017, 25 wherein the BIR demanded from petitioner the payment of deficiency VAT, in the aggregate amount of P54,462,094.49, inclusive of surcharge and interest.26 The FDDA and FFLD were served by RO Franscisco./ 19 Exhibit R-14, Docket- Vol. I, p. 226; Formal Offer of Evidence, Docket- Vol. II, p. 831; BIR Records, p. 528. 20 Judicial Affidavit of Revenue Examiner Paul Simon Francisco, Docket- Vol. I, pp. 131-132. 21 Judicial Affidavit of Revenue Examiner Jeffrey M. Butial, Docket- Vol. I, p. 122. 22 !d., Docket- Vol. I, pp. 123-124. 23 Jd., Docket- Vol. I, p. 124. 24 !d. 25 Pars. 8.3 and 9, Stipulation of Facts, JSFI, Docket- Vol. I, p. 311; Exhibits "P-21", Docket- Vol. II, p. 653. 26 Exhibits "P-16" to "P-20", Docket- Vol. II, pp. 646 to 652; Par. 8, Answer with Special and Affirmative Defenses, Docket- Vol. I, p. 66. 27 Judicial Affidavit of Revenue Examiner Paul Simon Francisco, Docket- Vol. I, p. 133.

DECISION CfA case No. 9737 PROCEEDINGS BEFORE THIS COURT Petitioner and taxpayer filed the present Petition for Review on December 20, 2017.28 This case was originally raffled to this Court's Second Division.29 On February 22, 2018, respondent f!led his Answer With Special and Affirmative Defenses 30 where he admitted the following allegations of the petitioner: � Personal circumstances of the petitioner; � Personal circumstances of the respondent, but clarified that Regional Director Myrna S. Leonida had already retired from service and that then current Regional Director was Manuel V. Mapoy; � Jurisdiction of the Court; � Issuance of the LOA dated May 4, 2015; � Issuance of the FDDA, revised FAN and the revised FLD for deficiency VAT and Compromise Penalty.31 Respondent also interposed the following special and affirmative defenses: � "The filing of this instant Petition for Review by the Petitioner was filed out of time, as such, this Honorable Court has no jurisdiction over the subject matter of this case; pursuant to Section 7 of R.A. No. 1125 as amended by R.A. No. 9282, in relation to Section 228 of the NIRC as implemented by RR18-2013 pertaining to the due process requirement in tax assessments."32 � "The disputed assessment issued by the Bureau of Internal Revenue has factual and legal bases, which are duly explained in detail in the Final Assessment Notice and Formal Letter of Demand."33 � "The declarations under oath of Racal Vis-Min Motorsales Corporation and Racal South Motorsales Corporation are self- serving.'f; 34 28 Docket- Vol. I, pp. 10 to 23. 29 Par. 10, Stipulation of Facts, JSFI, Docket- Vol. I, p. 312. 3o Docket- Vol. I, pp. 64 to 74. 31 Answer With Special and Affirmative Defenses, Docket- Vol. I, p. 65. 32 Id, Docket- Vol. I, pp. 66 to 68. 33 Id, Docket- Vol. I, pp. 68 to 69. 34 Id, Docket- Vol. I, pp. 69 to 70.

DECISION erA case No. 9737 � ''The list of sales returns for repossessed motor vehicles were not presented during audit."35 � "The undeclared sales of Racal Motorsales Corporation based on entirely different from the undeclared data gathered from LTO are Motorsales Corporation, and the local purchases of Racal both is NOT tantamount to double simultaneous imposition of taxation."36 � "Pursuant to IUv10 16-2007, any input tax evidenced by a vat invoice and a cleared check issued in accordance with Sec. 113 of the same Code shall be creditable against the output tax."37 On February 28, 2018, respondent transmitted the entire BIR Records of this case, consisting of 787 pages filed in one (1) folder. 38 Respondent's Pre-Trial Bn'ejwas filed on April6, 2018.39 On April 10, 2018, petitioner filed Motions: [1} Motion for Leave to File and [2] Motion to Admit Attached Amended Petition for Amended Petition for Review; Review [3} Urgent Motion to Reset of Pre-Tn'al Conference, 40 attaching therewith its Amended Petition for Review. 41 Respondent filed his Comment/ Opposition (Re: Motion for Leave to File Amended Petition for Review) on April19, 2018.42 The Pre-Trial Conference was initially scheduled on April12, 2018.43 In its Resolution dated May 7, 2018,44 the Court granted the petitioner's Motions, and reset the Pre-Trial Conference on june 7, 2018.45 Respondent then filed his Supplemental Answer (Re: Amended Petition for May 21, 2018,46 stating that he denies petitioner's allegation with Review) on the ground of prescription and the lack of the requisite factual and respect to of the assessment.47 The Supplemental Answer (Re: Amended Petition for legal basis Review) also discussed the following arguments/ 35 Id., Docket- Vol. I, pp. 70 to 71. 36 Id., Docket- Vol. I, p. 71. Id, Docket- Vol. I, pp. 72 to 73. 37 Compliance dated February 28, 2018, Docket- Vol. I, pp. 104 to 105. 38 39 Docket- Vol. I, pp. 145 to 151. 40 Docket- Vol. I, pp. 152 to 156. 4' Docket- Vol. I, pp. 157 to 174. Docket- Vol. I, pp. 238 to 241. 42 Notice ofPre-Trial Conference dated March 1, 2018, Docket- Vol. I, pp. 106 to 107. 43 44 Docket- Vol. I, pp. 244 to 247. May 8, 2018, Docket - Vol. I, pp. 248 to Refer also to the Notice of Pre- Trial Conference dated 45 249. Docket- Vol. I, pp. 250 to 255. 46 Supplemental Answer (Re: Amended Petition for Review}, Docket- Vol. I, pp. 250 to 251. 47

DECISION CTA Case No. 9737 � "The assessments issued against the Petitioner in the amount of P54,462,094.49 and P4,000 as deficiency Value-Added Tax, and Compromise Penalty respectively, CLEARLY state the factual and legal bases thereof."48 � "The right of the BIR to assess Racal Motor Sales Corp., has not prescribed pursuant to Section 203 of the Tax Code."49 On June 4, 2018, petltloner filed an Urgent Motion to Reset Pre-Trial Conference, 5� which the Court granted at the hearing held on June 7, 2018,51 thereby resetting of the Pre-Trial Conference to July 19,2018. Petitioner's Pre- Trial Briefwas filed on July 13, 201852 while respondent, on June 4, 2018, ftled a Manifestation, stating that he intends to adopt the Pre-Trial Brief previously filed, notwithstanding petitioner's Amended Petition for Review. Thereafter, on August 3, 2018, the parties ftled their Joint Stipulation of Facts and Issues,53 which was approved and adopted by the Court in the Pre- Trial Order dated August 20, 2018,54 thereby deeming the termination of the pre-trial. Trial then ensued, with both parties presenting and offering their respective documentary and testimonial evidence. Petitioner offered the testimonies of the following individuals, namely: (1) Ms. Jingle A. Francia,55 petitioner's Credit and Collections Manager; (2) Mr. Marlon Riego,56 Operations Manager of petitioner (North Area); and (3) Ms. Fe A. Suyat-Bullecer, 57 the Court-commissioned Independent Certified Public Accountant (ICPA). 58 The Reporl of the ICPA was submitted on March 16, 2020.59 / 48 Jet., Docket - Vol. I, pp. 250 to 251. 49 Id., Docket- Vol. I, pp. 252 to 254. 50 Docket- Vol. I, pp. 259 to 261. 51 Minutes of the hearing held on, and Order dated, June 7, 2018, Docket - Vol. I, pp. 266 to 267. 52 Docket- Vol. I, pp. 268 to 276. 53 Docket- Vol. I, pp. 310 to 313. 54 Docket- Vol. I, pp. 335 to 348. 55 Exhibit "P-24", Docket - Vol. I, pp. 403 to 418; Minutes of the hearing held on, and Order dated, February 6, 2019, Docket- Vol. I, pp. 419 to 420. 56 Exhibit "P-6260", Docket - Vol. II, pp. 542 to 554; Minutes of the hearing held on, and Order dated, March 2 2020, Docket- Vol. II, pp. 555 to 557. 57 Exhibit "P-6259", Docket - Vol. II, pp. 522 to 529; Minutes of the hearing held on, and Order dated, November 27, 2019, Docket- Vol. II, pp. 533 to 535. 58 Oath of Commission dated September 26, 2019, Docket - Vol. II, p. 504; Minutes of the hearing held on, and Order dated, September 26, 2019, Docket- Vol. II, pp. 505 to 507. 59 Exhibits "P-6257", "P-6257-a", "P-6257-b", "P-6257-c", "P-6257-d".

DECISION CTA Case No. 9737 On March 16, 2020, petitioner filed a Motion to Admit Formal Offer of Evidence, 60 attaching therewith its Formal Offer of Evidence With Manifestation. 61 Respondent then flied his Comment/Opposition on Formal Offer of Evidence (With Motion to Admit) on June 23, 2020.62 In the Resolution dated December 11, 2020,63 the Court granted the Motion to Admit and admitted petitioner's offered Exhibits, except for certain and numerous Exhibits which were denied for not being found in the records, for failure to pre-mark the exhibits, for being unreadable I illegible I blurred I improperly scanned, for failure to present originals for comparison, for failure to submit duly marked exhibits and for failure of the exhibits formally offered and identified to correspond with the document actually marked. Petitioner flied, via email, a Manifestation with Motion for Extension to File Motion for Partial Reconsideration (On Resolution dated December 11, 2020) on January 13, 2021,64 and a Second Motion for Extension to File Motion for Partial Reconsideration (On the Resolution dated December 11, 2020) on January 29, 2021. 65 In the Resolution dated February 17, 2021,66 the Court, inter alia, granted the Motions, and directed petitioner to flie its Motion for Partial Reconsideration. In compliance thereto, petitioner posted its Motion to Admit "Motion for Partial Reconsideration" (with attached Motion for Partial Reconsideration Dated February 12, 2021) on February 18,2021.67 In the Resolution dated September 30, 2021, 68 the Court granted petitioner's Motion to Admit, and partially granted its Motion for Partial Reconsideration, thereby admitting Exhibit "P-23-NNNNN", but still denied the admission of Exhibits "P-6" to "P-11 ". For his part, respondent offered the testimony of RO Paul Simon A. Francisco. 69 On April 5, 2022, respondent's Formal Offer of Evidence was filed, 70 to which petitioner flied its Comment (To Respondent's Formal Offer of Evidence) o / 6o Docket- Vol. II, pp. 571 to 574. 61 Docket- Vol. II, pp. 575 to 604. 62 Docket- Vol. II, pp. 663 to 665. 63 Docket- Vol. II, pp. 669 to 746. 64 Docket- Vol. II, pp. 750 to 753. 65 Docket- Vol. II, pp. 765 to 768. 66 Docket- Vol. II, pp. 787 to 790. 67 Docket - Vol. II, pp. 791 to 800. 68 Docket- Vol. II, pp. 809 to 814. 69 Exhibit "R-17", Docket- Vol. I, pp. 130 to 135; Minutes of the hearing held on, and Order dated, February 1, 2021, Docket - Vol. II, pp. 769 to 770; Minutes of the hearing held on, and Order dated, February 1, 2021 and March 23, 2022, Docket- Vol. II, pp. pp. 825 to 827. 70 Docket- Vol. II, pp. 829 to 832.

DECISION CTA Case No. 9737 April 22, 2022.71 In the Resolution dated June 22, 2022,72 the Court admitted respondent's offered exhibits, except for Exhibits "R-1", "R-1-A", "R-2", "R-2- A""RR"--' 19"3-RA-A-"' 3' ''","Rfo"-rR1' 0f-a3"i-luA"rRe"' -t1o"0R-idA-' 4e"n"' t"if"RyR-t1-' h41e-"Asa""m' Re-"1.R1-' -5A""' ""RR--51' -2A""' "R"R-1-' 26-"A""' R"-R7-"1' ' 3""R-a' 9n"d In the Order dated June 30, 2022,73 the case was transferred from the Second Division to the Third Division pursuant to CTA Administrative Circular No. 01-2022 dated June 21, 2022, which reorganized the Second and Third Divisions of the Court. On July 12, 20122, respondent filed his Memorandum/4 while petitioner filed its Memorandum (For the Petitioner) on September 27, 2022.75 The case was submitted for decision on October 3, 2022.76 THE ISSUES STIPULATED BY THE PARTIES The parties stipulated that the issues to be resolved in this instant Petition are as follows: "11.1 Whether or not the Final Letter Demand and Assessment Notice for Deficiency VAT for the first and second quarters oftaxable year 2014 amounting to P54,462,094.49 is deemed void for failure to state the filctual and legal basis of the assessment as required by Section 228 ofthe Tax Code; and 11.2 Whether or not there is no basis to presume that Petitioner's sales were notproperly supported; 11.3 Whether or not petitioner is liable for the deficiency VAT for first and second quarters of the taxable year 2014 in the amount ofP54,462,094.49 plus surcharge, deficiency interest and delinquency interest as providedin the NIRC of1997.")' 71 Docket- Vol. II, pp. 833 to 837. 72 Docket- Vol. II, pp. 840 to 842. 7' Docket- Vol. II, p. 843. 74 Docket- Vol. II, pp. 845 to 848. 75 Docket- Vol. II, pp. 855 to 867. 76 Resolution dated October 3, 2022, Docket- Vol. II, p. 871. 77 Stipulation of Issues, JSFI, Docket- Vol. I, p. 312.

DECISION CfA Case No. 9737 Petitioner's arguments: Petitioner argues that it is not liable for deficiency VAT for the 1" and 2"d quarters of taxable year 2014, in the amount of P54,462,094.49 plus surcharge, deficiency interest and delinquency interest; that respondent was not able to prove that the person who conducted the investigation/ audit of correctness of petitioner's declaration in its VAT returns for the taxable period from January 1 to June 30, 2014 has the authority to do so; that the right of respondent to investigate and assess deficiency tax has prescribed; and that the disputed assessment lacks factual and legal basis. Respondent's counter-arguments: Respondent contends that the disputed assessment cannot be considered void, since petitioner was given opportunity to refute the VAT assessment by filing a protest and request for reinvestigation/ reconsideration with supporting documents which was considered and granted by the BIR; that RFA/FLD issued against petitioner was the result of actual audit, wherein RO Francisco considered all documents submitted by petitioner resulting into a reduced assessment; and that while the Court denied the admission of respondent's Exhibits "R-1" to "R-13", which were identified by RO Francisco during the continuance of the direct examination, the admission by petitioner of the existence and proper receipt of the LOA, PAN, RFA/FLD and FDDA by its duly authorized representative rendered the offer of said documentary exhibits unnecessary. THE COURT'S RULING The petition has merit. The VAT assessment is not barred by prescription. At the outset, the period for the respondent CIR to assess and collect an internal revenue tax is limited only to three years by Section 203 of the National Internal Revenue Code of 1997 (1997 NIRC), as amended, quoted thus: SEC. 203. Period of Limitation Upon Assessment and Collection. - Except as provided in Section 222, internal revenue taxes shall be assessed within three years after the last day prescribed by law for the filing of the return, and no proceeding in court without assessment for the collection of such taxes shall be begun after the expiration of such period: PrmJided, That in a case where a return is flled beyond the period ;/

DECISION erA case No. 9737 prescribed by law. the three (3)-year period shall be counted from the day the return was ftled. For purposes of this Section, a return ftled before the last day prescribed by law for the filing thereof shall be considered as flied on such last day. (Emphasis supplied) This mandate governs the question of prescription of the respondent's right to assess internal revenue taxes primarily to safeguard the interests of taxpayers from unreasonable investigation by not indefinitely extending the period of assessment and depriving the taxpayer of the assurance that it will no longer be subjected to further investigation for taxes after the expiration of reasonable period of time.78 Thus, in the present case, respondent only had three years, counted from the date of actual filing of the return or from the last date prescribed by law for the filing of such return, whichever comes later, to assess a national internal revenue tax or to begin a court proceeding for the collection thereof without an assessment. The taxpayer flied its VAT Quarterly Return for the months of January, February and March 2014 on April 25, 2014.79 Thereafter, on Ju!J 25, 2014, it also ftled its VAT Quarterly Return for the months of April, May and June 2014.8�Counting three years from both April 25, 2014 and July 25, 2014, the respondent had until Aprzl 25, 2017 and Ju!J 25, 2017 to issue an assessment against the taxpayer. Since the respondent issued a FAN / FLD on January 10, 2017 covering the taxpayer's deficiency VAT assessment for the for the 1st and 2nd quarters of 2014,81 the same is not barred by prescription. The reassignment of a taxpayer's examination to a new RO must be made pursuant to a LOA. In the absence of an LOA giving the new RO an authority to conduct the examination, the resulting assessment is void. An LOA is the authority given to the appropriate RO assigned to perform assessment functions. It empowers or enables said RO to examine the books of account and other accounting records of a taxpayer for the purpose of collecting the correct amount of tax.~ "Commissioner of Internal Revenue v. Standard Chartered Bank, G.R. No. 192173, July 29, 2015. 79 BIR Form 2550Q, Exhibit P-4, Docket- Vol. II, p. 624. 80 BIR Form 25SOQ, Exhibit P-5, Docket- Vol. II, p. 625. 81 Judicial Affidavit of Revenue Examiner Jeffrey M. Butial, Docket- Vol. I, p. 122. 82 Himlayang Pilipino Plans, Inc. v. Commissioner ofInternal Revenue, G.R. No. 241828, May 21, 2021.

DECISION erA Case No. 9737 ameotasxfusxaespmsatasuiynmnteSoharetitonnigtrochtoinetaoytbrtoiheetriyesxiosaaLnsmuiOsdnneidnAdstiashesmterpcioeoeaannnmuustdit.mashibtEoaelfrneqnoicuturyealbplsligelotyyiftsvho.se8ieri4mneb.alpeuIoadndnrietyttafhipncertRioeaiOcnsbecssyteshcntaaaactnxnedtahossefftsoaesrrRsumtsOcmahclelosyanonutid,tn8hau3fuocottrhtrhiiemtnoygrgs,irzttaheahndenet In AFP General Insurance Corporation v. Commissioner of Internal Revenue,85 the Supreme Court held: Oen'htaaxiosnmxastple.myaasylis'lntVem"hraBTeeetrnfhIiiolRoCteyrna,IppnpRootdeuhwrfreocasperooolrnlahnslytweeoincstseatavidlsxooesupsmnfetlassydoasyeyfteanthaeruemelr'lctmaheoiBnsnoitsIntdruaReiirrnizpinsglweraysdoluitithprenhreerceavilgpuocenerdonnepaeruesrssrereeosantcteclhattseeaxpsaeteoamimdswvu.'eotetehnourHomstnraotaiaituwngyyodaeftrivaioetnteulasraaetx,ttxhitcahoodaemniruxrmieiptznta.aoeeifynrtaoetlhhnymreey., is ehevixsiadimenTntienchreena,dat vlaberyrerievftyphe,rneeausLneedOntatAsaxct,irlviuwaetbhinihiliciazthsieesi'aenmftofaparxcoaptwapbyeaeerresrt'inscauabdluoaetrohskpiogsernrizaaioetnedddd.'tro[erc]aeouvrddenistuiaen taxpayer to [o]fficer to relation aaodsrdseeidns)smeIxnecnectsasssheaoslfwl bthheeerveoatuihdtehaoBnrIdiRtyincedofunfldeycutcuptarsol.avnixdxaexud.d"itt(hEwemriepthfhoaosreu,st a valid LOA, the resulting and understoring Therqore, the importance RO 's authority to conduct an audit cannot be overemphasized because it goes into lack of authori ty of the ROs is tantamount to the validity ofthe assessment. The a void assessment. Being a void the absence of a LOA itself, which results to assessment, the same bears no fruit. 86 sdcaoulunvafedeifmircnpsitoe,rhItontencthRleeycOtsrhosevin.fseB8ods7uctruseraIci,staRtelt,hOoawpaifttphFrewotrehaaiarnenwssvcatieRasstsxhcOtopioagratiaFwygtrreiiiaenorthnsanwplcltaioyhpssneucadorasasefsuufuniotganthrnndodeitesredirtdtoyottaohftMdeomtthOhcsieoeanAnmiBtsionetdIrpuRaaeiGttneitSavihdoueendCaMaiurtn.tuadhdzriRtac,ptahewrnsoadp9hc,ooecMn2dotd0uOone1roAna7dklt, u / 83 Commissioner of Internal Revenue v. De La Salle University, Inc., et seq., G.R. Nos. 196596, 84 198841, and 198941, November 9, 2016. G.R. No. 178697, November 17, Commissioner of Internal Revenue 2010. v. Sony Philippines, Inc., 8s G.R. No. 222133, November 4, 2020. 86 Himlayang Pilipino Plans, Inc. v. Commissioner 2021. o f In t e rn al Revenue, G.R. No. 241828, May 21, 87 Par 1, Discussion/Arguments, respondent's Memorandum filed on July 12, 2022, Docket - Vol. II, pp. 846 to 847; Exhibit "R-14", Docket- Vol. I, p. 226.

DECISION CTA Case No. 9737 a reinvestigation and that, furthermore, an LOA is no longer necessary before the issuance of the FAN. We disagree with respondent. MhRexiOmOamAFtri.oanBnaTcitanihissovoeeen.dspWtieinogrhntataithnetete.whnFeNatesepbtioietrshrsusettuairiomrewyndoa,s1nst,oyoth2fec0ohl2iLfos1tORhteheAOsetatiharmFiemnoregnann,nedywcenaidosrRceonoreOqwmuhwLooidmtOiietfhidsAeedablwufteotlahodsiownucrir:ilsiutnsyduge,ewdthhaieasslnlooacnmrwoleyisnsoag-f "ATI'Y. SAMPAGA: For purposes of reinvestigation, no new Letter of Authority (LOA) was issued by the Revenue Region? WITNESS: For that case, there is a Memorandum of Assignment. ATI'Y. SAMPAGA: Are you saying, there is no Letter of Authority (LOA) issued allowing you to investigate? WITNESS: Yes, attomey." 88 apcacocrouofetdnnivanidcnitgoeuwruacaAnssshtesliyaedcrs-eshusisisutcnmanshbvuxeesepecntsdearittteysiuLgsioentiarnOetv.ta8ieAott9oehsrn.steir,IgtenIbohanpanetlseicoaoifisectsfnheesogcuemrftiarsa,ennwnnciettdtoeweiordiflosdyffbfseat,dyraheitocsrnhncesoeeteosnwpnvtnfioeerLnarwonmuOemddaReeAtdnioO,ottrih,innnaaeinsdotcshvdafioeoigsntletnivsehoea(etendsihsd)aeewltLxhReonaeOvuaOmiArmlddeiwe.n-eenmadhvctoeiaeorilwenunolaoyftauttibhnholeddeen ToMmtarhxicegeDpmianSooyanurelaTparlRrdhne'beOdsmeuf,ofePmrawehcCaitltssoihdpeuenposriiontisfg,steustntahahamniuRtsceseeed,ancloavdrosfyaeeitddhCeenmdooeFrrtiwhprLme.rDoaoR(rs.dMsOeitHfshcisoDoemtsdwooeennettoacvianloendinrnd'C,stci)oltrn.uhmuu9del0meeediLIstnsthOaihoseeAnMfne,rcaeoDmxwolaofhelmnIinacooitlhnedfwra'tsn~cht,aioeolvannReeerrvoweeedffneRurtteOrhhaeve.l. 88 2TR0re1af3ne.rsctoripSt eocftiSotnen3o.1g.r4a(pihi)icoNf oRteevsetnaukeenRdeugurilnagtiotnhse hearing held on February 1, 2021, p. 11. 89 (RR) No. 12-99, as amended by RR No. 18- 90 G.R. No. 242670, May 10, 2021.

DECISION CTA Case No. 9737 "The Facts pDaoBsefiItlRtilahtm,imeowanesniaenT,tihrddQhehetuodhofe,elCfzdiaicoIsnRuenctouhlCfu(nofpiditdrceyiienett.iyrgtiattohtotnehtecehNrae)r,aprtByoiisoIwoRntueahtrlNetIhatndotetiueolfrdynuneanaclacliptdROipoeefonfvisidenc,intesedupdueButiutCCeeisdlooddmaienanmgsdos,iefrsAses1ssig9mop9hnoe7anenmrs(tiNsbo.RIiflRoiTtCatihhed)ese,, SolcifoacflreicpcneoesderoadatMdVitodioclrnlDeadsogosoreng,aaabMltnudias'1zskien7adetthPisashCnFiilidtlinyop.eoptxrihi,nseetCisPnightiRibulieanpandplkteiynrCetshCeneotthrlearprowourBsgauothiiflodinDtisneglb(,arrweaPsnaaprcsoehe,nodUoefSdnfeAitc),e,R,aonwixsdaitsihsa, ldtpeoeuavrspeeGdlooostpleodRmoeMeenfsncpptGuoArnoercodfchrehagnneseetsiwnFegsoDtaMoaendbvcdsleDi,slleIoohnanepcsdam.ilndeigt'nssbt abrcreCkasonttarcwpuhooraroenafxttfiiioscstneiitn,eigsn,aMntwhdcehDicotPohnhaillweidpno'pgsuialRngdeeesstthafieonunrrattnbhhteees ibdENneoutoloeal.reknmsC0a0arlou0Orfz0De.n6vae7ecTmA1nch7ouaueuedgnu(utLAtarssaOxtuegaA3s(un1Dsfd,aeot 2umro30tJtah10ahd,o7neur,u2riraz0atahre0)cy,de7cL1oBtL,houI2OevnR0teA0isrLn6a)gaLidtrtoogroveerDceetovrTheereeacsdnxe,supmfJoeaooblylsfoeoearfwrtfsh3iGicen1Seog,err2mrse0vrseei0tpczvo6oe,e.nneaidusxnseeadunmetoEidfnfmfoeiLcarOeltyrhaAslnel: tD0h0ee0m3a9ua.dduidOtrioarnefcattDhneeddecreaepsnmupdbrosendurdeasen2ingt.tn'sta2ot0be0odR8oe.kRfseotrhonreaaflaMBcMcIaoRerucmnetoltrlsraa.annnsodfeu(rMmreadrNceothl.lean1o2a)s2s-tiLogOncmAoe-n1nt2itn0u8oe-f AMtchoueangrpdc!!eeuslnctldatN3ni1nooo.g.f2naT0aeu0uhwd7deiitLLtroeOOoffeAAfDrretwawhmlaeasmasdrienesumssorupatoeoaprdnamudnirenedsnnuutdtahm'esnedtsnbtotoaoarmtoetmkhseesootdAhofiauffMtige!aMad!crsccattooer3clu1leinan.lntlc2saol0.nu0otdMo7ewoLctiorhOlelenoAtcvni.oneanurm.teienttuhhoeeef On !anuar_y 25. 2011. the petitioner issued a Formal Letter of Demand (FLD) dated !anuar_y 11. 2011 to the respondent. The FLD demands payment of deficiency income tax and VAT liabilities for C.Y. 2006 in the gggregate amount of P17.486.224.38 inclusive of interest. On February 23, 2011, the respondent flied a protest letter with the petitioner, requesting the cancellation and withdrawal of the deficiency income tax and VAT assessments for C.Y. 2006. darDeneiqfdsiucpei(uiesit)ntecOdfryoenriVAtecAsArasanTpetcersiefdslolmlrta1ehtC8nieo,.tYnp2.(eoF0t2if1D0t3id0Do,e6nAfetiinch)r.i'esethnTdpecheeytemtoiittnaiaFocnlDondameDmrfeoAoriutsanspx(uita)eyaodsgmfsrPeeaths1nnse6ttme,o2deF2fni9nttt,hsha5ele0fo6Drrr.ee8essC3cpp..iYoosnni.odd2nee0nn0ott6''nss, On May 20, 2013, the respondent filed a petition for review with the CTA Division. The CTA Division declared the C.Y. 2006 assessment void on the ground that Marcellano was not authorized by way of an LOA to /

DECISION CTA Case No. 9737 investigate the books of accounts othfethCeTrAespDonivdiesniotn. .TThehepeCtiTtiAoneDr ifvtliesdiona motion for reconsideration with denied the motion. the On November 7, 2016, tBhaenepdeetintiieodnetrheftlpeedtiatiopnetiftoironlacfokrorfevmieewrit.with CTA En Bane. The CTA En XXX XXX XXX B. The Use of Memorandum of Assignment, Referral Memorandum, or Such Equivalent Document, Continuation Directing the of Audit or Investigation by an Unauthorized Revenue OflJcer Usutps Functions oftheLOA the tirhmraaehsoHnreeisexenovsevipofsasteemeepirwidsmnrgfonuuuryoeunuaoirtlervnelmhpeyfadteaiIomhnooenrtatbesf,idnfgeuiefooysmut;ittnfn,tchhotmtfaoorehiorexfupatcrre,eripraeernfcieaoeanorezrdexuty.arderoheietrsuvadaofshaarsmetntlsofiernygstoor,menthueinThffpoceteesemyereqhrsmtsedtuhmeeetshsfooieuironaeseevvfcrctnteniaharatmcftaxiltanaueecenaoocetxdtitntdmoitsfhmiuvhtofsortieemoadfotrnrearfenfaiorafei,ntceonacocsyorocqaenstrsuepheurfridoamtteygiehsaoauvfrrnsexneoraomitomnplgyhtffoepfhtaneaetneuciymhintnaqsmaroseeutigepsuurnnfrent.eo'ibathsmotsvsesnsoutrabTeoatodanrbiliorsinhfseatoaotsoudsltnreynfirrkeuttgBddavevsmentdnuiIertednRmomsoooasenafnrtfcbmueetdisouyaenrrnecfoofcemegtoctoroocrp,ahunafefuofslefmfndnasoupiicicdcrucCtenfgoaeieeucninatnsIfrsmstctmlmeRes.art.smnfesehrooaeIonoanaeirstnrlttytsf., oirmBisesfsIsfveuRiumeceenedodurcr.eLaianTnnOIodthtfAhfueitiseh.mcpeeane,nrBtass,oimpturiwetoetshchsnuraioecoaonrhulfmwgaLecahauqeOynutrthtAiastavohiatnrehilminseternyeeaCntrvgceoedotrnotuauumcrnanetuetdmtegmooedfeerofbnnitretctoeah,leirneearradsovlg,pueteaaamanttruehesttaiurthcaotbhluofoeolrnaraiwdauctrsiyetonhsrriaeaoktgtnvorneiaetLmsynaosOenfuifongyeAitcfn,oimraahfelarfevveisnocaeftfbeelnsirredtur.hoelaeynefl osisHaoetTnthsweurruqhrueavahebthuhennobvhekesiiocstsoesvssesfheterametqi,deaitqalagrzoueruetrueatsTnuoemleshdeteeyttufnhienxopoobtrtaeiertcranehoneluairyrvy,retupscntpaedeshirsipdrtrsnisesueneoonauouuseaiarcarmewbeLnlinittanazgesiOecsotecetidaproefofineAdtoftfoffiaaoiuecfvcwroliocfiuteaeecsfiptfemrsiptnasasshrsrursuul,geirou,eeugntenteiopsahsthndcatdCehfnpmaeohstndeyrltisIoreotanmpRiifabnmnzgnfiScttetoente,itaewholiavdthcilomnerlnutrieesyiingetigtshoorohgfhg.snBieftrn"nosishfrsoangeIirareRnrcndeae(dimE6etlewxdfuyo,tmdruceuldrsrmlynp,armilbutOirehcneyisoensaavst(msscisciaueuftvoteo)ihomecintesenfnnherrdoulagaearsoyenearninnbdrfenotsddydtiftoivsgohzfenuufeiiteectnfumng1hnthidtdr3heeunceee,raeeermtvreCshLroeotameudsCIehepsfrOnRisrnsesrIwiuuniAtettRsLgorgh,erhusian,pOreceaochumasatdonhhAiinddtNdfitoenmisefa,idnoofodcIittfsdctR)nteiiaenuehvcioCntoirlleoeoesyrtfs.drrr.ft, ~

DECISION CTA Case No. 9737 rMfcoowotgsseuaotprhfeshhOnkinepnogtecoecthAeoriritintienrwfnod,oaaiusvodcilnslBeelsateetsyehaenalarnlku,etotsytoauthsteithhuCtsefdLnoetshotoIhaturOaroRahaymoiiveuneutnAreyxodpedgitztdLiroiahettteaow.tOhnedhstoiMdTheeAsaafriperntohnad,OrayreioneunrewwAtifalgRvphnayathotereeusOhaiaasiatcnneLctuhL,nhiigdttogOsdbiOChcsraipusoAusIieAtdurttRireyooobi,ondaiznnessotofaesehsosrntdirpuqiesuesdenheup,nracoedieeeislcsttxaiipnrshemnliemcidrtnemagrleouiyncuinetstvletietfehyithsneudnfseneeoerustgdatirsciabroui.not,ttotsyht,fnginiIhtrvotawlgtiaoyeitsmtirnturihssreasia.teaiznticcnsa,osnentlhsuteiedgaotsfbdaeebttsrtprihmrenheetrportlopqiepohoesnerumtnearaofegemgtfsfptneRsoewaBaioctntnlrOetiItfyttsteRxiaahLscuadct,auuipOulvsnluewtpsassheAesxiulrihi.nowgaavrRocrnmnipSesieetOaltRtiwyyadtnn.ttOiteohehoettIrttosroeednoens,a ctdiChnaeoesvsreeipBgsortnerIiaaRagStdtaiieosegtdno:xnraiymfmi(cRepiaanoonnebwtsrlisyee,gr,bsiayeinn)odwf9thn1htoihectefthrhorReemrecOseasSpnmuotfpenlorcrdeaweesMmnefteOroodAmfeC.leRotgePuhaperetuterbLtsliiOncfhueAiornstf,thitpewnhreovhreiPtscichtholiiagnliriapssitfpiioitvenhfedeestphsvoett.hawtRaRuetootrbbosiieretighgtlioiyeee owRiSctANattnofaohtuhOfu.Iaxuai'ctRitcthpsrtcohTeseCaohnoadehfryrn,frlsiueooit"zo.tdrLswhwxrayfimexOt.ihfisc'axffioaAanecCr.SnnbrohrTrceIRelimyiasRechnsisOtontaepntiltngndoneoyhRmdtaeh,tleoo,ekylaeauepruyLrtntgueohcan,OonbaoegafdintltnAnurieealeptcityrrsn,hec'has'moowderrttiancryxuhhtehissoflaezenyeoinmtatciovrstnNhmwiaei'tnpvorurtIiaeuiuhyenttRsnhchrestlsbct.toCataiuiehutxroongea,itepgnrzaxtnaoauetttatsoyhiadctmvoeofgeatceroreeSfrtosue'ri.aeroptenptdcghiioofrvnnitrenenirweeSoosigtesSellenhetamyticenetrwicot1cstgeidea.3.tcoaniettonoaoittFoosvuosnfiwivferrrgita6ss'ytnih1lnhe(ttivAh3,aedeape,onl)ttysoNBdhmfe[taoweidiIcIegnrsaRaR]easadcmrnurCtroa'isLesy1roecnde3itencacnoov'tonieLgotfnterempsoOfdnortteitbuthtuAnhhhaooyetege.nee.ff XXX XXX XXX iatitvtcsaonhneosxveosunpatetedsehastduLatyeictearOguti.IrtannAotttanhrii.cxioeentlophywntvnraeheecdytesolseeuCLtprfiosaiIOogniinRonnadeAenvtdsii,feiboLfbmswyenttOloioeregeAdlariBanaest-twlitpihIiot.tRreeentyerrrs-aTvaofttoneanffehrfl>nesouitwfquctwhseh,iea.lasreatrloryedfttwfeehrdehfvorleiieeecmtgrhpfenuraorruoaaltewmeieumoavetnsuhanroslsoooiooiftdgrtffnflwiianyttecalhymiesiBteorshtersIoiesnRnbuatvivteeasserdensesnmsoduvitLugifeaiegeOnnndaLagueAetooOed.,prftAoyWfauwiftxspcrfohhisepociseurcwaehnthayrhaetnertleoaioslsrt 91 G.R. No. 260261, October 3, 2022. /

DECISION CTA Case No. 9737 investigation. The old LOA in favor of the reassigned revenue officer shall be deemed cancelled, and the new LOA issued to the subsequently designated revenue officer shall prevail, in accordance with the provisions of RMO No. 8-2006, issued on February I, 2006." (Emphases and underscoring added) Based on the foregoing discussion, the reassignment of a taxpayer's ScaitnhuainventhceneosMotritiagOtnsyauAtLitpoopOnwleaAaxtnosatmisatnhionadeetisLfapfiOesetsrcaAueixanepladtasaRyiufetOotrhcr'saomnrtbhiunoteysoottkgpabsruleasornopgftoieabvsdceeecnotmooeuafnfafdtesvecp,etapistrttutoiiirsncsagunuuloatauthnrspotuRortfinoOfziec,atitheahLeneOnt.ennAAwee.wwMLSRiOORnOcAAOe. must subsequently be issued, in the event the original a new RO to continue the examination and ROs is being replaced by investigation, and even reinvestigation, of a taxpayer. Considering that RO Francisco was merely armed with a MOA, the reinvestigation conducted by him suffers from a fatal defect since no new LOA was subsequently issued to clothe him with authority. In the absence of an LOA giving him an authority to continue the audit, the resulting VAT assessment is void. aofrgfuaiaitn. 9ts3atxTppSoeautyricetehiirotenbarreeaerit,neng,auntlatdlhxaetnhadsecsaveBosisedIs,.Rm92thheeanFstussnruitosbhsjerueriecgmdthottirantexo,vcaiaoosvlslaleoetsiicsdotmntahesoensftesstsahsmcemaeden.unnetobtperbaoercseesnnsoforivrgachleitdds cboeminpgelWnlionitghvaretlihadesoLfnoOrteoAgdoeiisnlsvgueefodinnditnihnegfsaovttohhreartomsfuaRbttjOeercstFrtraaaixsnecadisssbceyos,sthmteheenptasCrtoiaeurser. t vofiidn,dsthenroe WHEREFORE, in light of the foregoing considerations, the present Petition for Review is GRANTED. Accordingly, the subject VAT assessment issued against petitioner for deficiency VAT for the period January 1, 2014 to June 30, 2014 in the total SET ASIDE. amount of P54,462,094.49 is CANCELLED and AssessmFeuntrtNhoetrimceorNe,o.th2e21F1D7 DdAateddaNteodveOmctboebrer211, 32, 021071, 7b, oatnhdisRsuFeLdDa,gawinitsht petitioner are hereby WITHDRAWN/ 92 Commissioner ofInternal Revenue vs. Avon Products Manufacturing, Inc., etseq., supra. 93 Samar-! Electric Cooperative vs. Commissioner of Internal Revenue, G.R. No. 193100, December 10, 2014.

DECISION ~. ~ ,....y\._ CTA Case No. 9737 Page 18 of 18 MA. BELEN M. RINGPIS-LIBAN SO ORDERED. Associate Justice I CONCUR: ATTESTATION I attest 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's Division. Q&... ~ .-7 '-- MA. BELEN M. RINGPIS-LIBAN Associate Justice Chairperson CERTIFICATION Pursuant to Article VIII, Section 13 of the Constitution and the Division Chairperson's Attestation, 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