Unauthorized letters of authority
THE - tion into a tax case is the issuance of a valid Letter of Authority (LOA) duly signed by the Revenue Regional Director to the taxpayer under Revenue Memorandum Order (RMO) No. 4390. The LOA should be furnished to the taxpayer 30 days from the date of its issuance. Otherwise, the examination and resulting assessment may be considered ineffective [ Saga Casting and Productions vs Commissioner of Internal Revenue (CIR), CTA Case No. 8484, dated May 28, 2015].
The LOA empowers a Revenue
Supervisor ( GS), to perform assessment functions and to examine a taxpayer’s books of accounts and accounting records in order to collect the correct amount of tax.
In one instance, an investigation was rendered invalid when a Letter of Notice (LN) was issued, instead of an LOA. In this case, the taxpayer was informed through an LN that a computerized matching conducted by the BIR via its RELIEF system revealed discrepancies in the information/ data provided by third- party sources against the taxpayer’s value-added tax (VAT) declarations. Consequently, Assessment Notices were issued by the BIR against the taxpayer in reference to the LN.
The taxpayer argued that the BIR violated its right to due process, insisting that no LOA was issued against the taxpayer and that no physical examination of books was performed as a basis for the Assessment Notice.
In the instant case, it was clari-
Considering that the original examiners were not transferred to another RR nor resigned/retired,
tax assessment, which resulted from an audit examination conducted without authority. The CTA further emphasized that a referral memorandum for the purposes of audit examination is prohibited according to RMO 1207 dated July 3, 2007, in contrast to RMO 08-06. The CTA cited the case of CIR vs Sony Philippines, Inc., wherein the Supreme Court referred to Section 13 of the Tax Code, which states that an LOA
the appropriate RO assigned to perform assessment functions. Thus, in the absence of such an authority, the assessment or examination is a nullity.
It should be emphasized that, even if the required LOA was issued, the examining RO should also be covered by the LOA. In a CTA case entitled CIR vs Metro Star Superama, Inc., the SC ruled that at all times, the taxpayer shall be informed in writing of the law and the facts on which the assessment was made.
Lastly, the case of CIR vs University of Santo Tomas Hospital, Inc., CTA EB No. 1328 re: CTA Case No. 8298, dated November 28, 2016, cited that while the Director was empowered to issue an LOA for the investigation of the taxpayers within the RR and corresponding revenue district