THIRD DIVISION

[C.T.A. CASE NO. 9644. November 11, 2020.]

TITANIUM CORPORATION , petitioner, vs. COMMISSIONER OF

INTERNAL REVENUE, respondent.

DECISION

RINGPIS-LIBAN, J : p

This Petition for Review prays that after due proceedings, judgment be
rendered ordering respondent Commissioner of Internal Revenue or his duly
authorized representative to cancel and set aside the Formal Letter of
Demand (FLD) dated December 17, 2014 and the Final Decision on Disputed
Assessment (FDDA) dated June 29, 2017, for deficiency income tax, value-
added tax (VAT), and withholding tax — expanded (EWT), for taxable year
ended December 31, 2011, for lack of legal and factual bases. 1

THE PARTIES

Petitioner Titanium Corporation is a domestic corporation duly

organized under Philippine laws, with principal office address at 733 Wood
Street Malibay, Pasay City. 2 It was registered with the Bureau of Internal
Revenue (BIR) since June 8, 1996, and was issued Tax Identification No. 000-
826-366-000. 3
On the other hand, Respondent is the duly appointed Commissioner of
Internal Revenue, vested by law to implement and enforce the provisions of
the National Internal Revenue Code (NIRC) and other tax laws. He may be
served with summons and other processes of this Court at the 5th Floor, BIR
National Office, Agham Road, Diliman, Quezon City. 4

THE FACTS

The Letter of Authority (LOA) dated November 16, 2012 with No. LOA-
051-2012-00000369/SH: eLA201100013570 was issued to Petitioner by the
BIR-Revenue District No. 51-Pasay City. Under the said LOA, Revenue Officer
(RO) Marilyn D. Guerzon and Group Supervisor (GS) Arnold Rase were
authorized to conduct a tax audit of Petitioner for possible deficiency internal
revenue tax liabilities for taxable year ended December 31, 2011. 5 aScITE

On November 28, 2014, Petitioner received from the BIR the

Preliminary Assessment Notice (PAN) dated November 24, 2014. Under the
PAN, Petitioner was assessed deficiency internal revenue taxes for taxable
year December 31, 2011. 6
On December 12, 2014, Petitioner filed with the BIR its Reply dated
CD Technologies Asia, Inc. © 2021 cdasiaonline.com
 December 12, 2014. 7

Petitioner received a copy of the Formal Assessment Notice (FAN)

dated December 17, 2014 on even date, which assessed Petitioner
deficiency internal revenue taxes for taxable year ended December 31,
2011, in the total aggregate amount of P7,801,037.24, including deficiency
interest. 8
On January 7, 2015, Petitioner filed its Protest Letter dated January 9,
2014. 9
On July 6, 2017, Petitioner received from the BIR the assailed FDDA
dated June 29, 2017, signed by BIR Regional Director Glen A. Geraldino of
Revenue Region No. 8-Makati, assessing Petitioner deficiency income tax,
VAT, and EWT, for tax year 2011, in the aggregate amount of P9,216,244.96,
10 broken down as follows:

Type Basic Interest Total

Income P2,223,054.60 P2,341,211.47 P4,564,266.07
tax
VAT 1,998,646.28 2,193,582.73 4,192,229.01
EWT 218,614.88 241,135.21 459,750.09
Total P9,216,245.17

On August 7, 2017, Petitioner filed the instant Petition for Review. 11

Respondent filed his Answer on October 13, 2017. 12 As part of his
special and affirmative defenses, he alleged that:
a) the right of the BIR to issue the FAN with attached Details
of Discrepancies has not yet prescribed, citing the case of Bank of the
Philippine Islands vs. Commissioner of Internal Revenue 13 where it
was held that the period between the request for investigation and
the revised assessment should be subtracted from the total
prescriptive period, hence once the assessment had been
reconsidered at the taxpayer's instance, the period for collection
should begin to run from the date of the reconsidered or modified
assessment;
b) the grant need not be express, but may be implied from
the acts of the BIR Commissioner or authorized BIR official in
response to the request for investigation;
c) Section 3.1.5, paragraph 4 of Revenue Regulations (RR)
No. 12-99 authorizes the suspension of the prescriptive period for
assessment or collections of taxes in the case of disputed
assessments;
d) Petitioner's declarations in its tax returns were deficient
and did not disclose the truth regarding the correct amount of income
and sales subject to withholding and VAT, rendering it within the
purview of "false returns" and meriting a ten (10)-year prescriptive
period from discovery of the falsity;
e) Due Process mandated under Section 228 of the NIRC, as
CD Technologies Asia, Inc. © 2021 cdasiaonline.com
 implemented by RR No. 12-99 was implemented in the issuance of
the PAN, FAN, and FDDA, and Petitioner was duly appraised of the
factual and legal basis thereof through the issuance of the Details of
Discrepancies attached to the PAN, FAN and FDDA which were issued
in accordance with existing law and regulations; HEITAD

f) The imposition of deficiency interest on all taxes is

authorized under the NIRC; and
g) Assessments are prima facie presumed correct and made
in good faith and the taxpayer has the duty of proving otherwise. In
the absence of proof of any irregularities in the performance of official
duties, an assessment will not be disturbed.
Respondent transmitted the BIR Records for the instant case on
November 9, 2017. 14
The pre-trial conference was scheduled and held on March 6, 2018. 15
Prior to such date, Respondent's Pre-Trial Brief and Petitioner's Pre-Trial Brief
were separately filed on March 1, 2018. 16
Thereafter, the parties submitted their Joint Stipulation of Facts and
Issues (JSFI) on March 21, 2018. 17 In the Pre-Trial Order dated April 17,
2018, 18 the said JSFI was, in effect, approved and adopted by this Court, and
Pre-Trial was deemed terminated.
During trial, Petitioner presented documentary and testimonial
evidence. As for its testimonial evidence, Petitioner offered the testimonies
of the following individuals, namely: (1) Mr. Melvin G. Ribot, 19 Petitioner's
Tax Specialist, and (2) Mr. Garry S. Pagaspas, 20 the Court-commissioned
Independent Certified Public Accountant (ICPA). 21
Notably, the ICPA Report was submitted on April 11, 2018. 22
On November 28, 2018, Petitioner filed its Formal Offer of Evidence. 23
However, no comment was filed thereon by Respondent. 24 In the Resolution
dated February 19, 2019, 25 the Court admitted Petitioner's Exhibits, except
for the following:
1) Exhibits "P-3" and "P-4-A", for failure to submit the originals for
comparison;
2) Exhibit "P-4-C", for not being found in the records of the case and
for failure to identify;
ATICcS

3) Exhibits "P-29", "P-41.6", "P-41.7", "P-41.8", "P-41.9", "P-41.10",

"P-41.11", and "P-41.14"; and ICPA Exhibits "P-53.3204", "P-
53.3205", "P-53.3207", "P-53.3252", "P-53.3535", "P-53.3536",
"P-53.3537", "P-53.3581", "P-53.3582", "P-53.3821", "P-53.3822",
"P-53.3823", "P-53.3824", "P-53.3827", "P-53.3830", "P53.3834",
"P-53.3835", "P-53.6116", "P-53.6117", "P-53.6118", "P-53.7250",
"P-53.8250", "P-53.8805", "P-53.9293", "P-53.9915", "P-53.9916",
"P-53.10100", "P-53.10249", "P-53.10754", "P-54.1", "P-54.2", "P-
54.3", "P-54.4", and "P-54.5", for not being found in the records of
the case.
In the same Resolution, the Court likewise directed the ICPA to submit
CD Technologies Asia, Inc. © 2021 cdasiaonline.com
 a soft copy of the ICPA Report and the corresponding annexes/schedules in
Microsoft Word and/or Excel format within five (5) days from receipt thereof.
In compliance therewith, Petitioner submitted, on March 7, 2019, one (1) CD
containing the following files: (1) ICPA Report in Microsoft Word; and (2) ICPA
Excel Computations (containing Tables 1 to 23 mentioned in the ICPA
Report). 26
On February 26, 2019, Petitioner filed a Motion for Partial
Reconsideration, 27 praying for the following:
"(1) ALLOW Petitioner one (1) commissioner's hearing for the
comparison of the denied documentary exhibits;
(2) ALLOW Petitioner until March 8, 2019 to submit the copies of
ICPA Exhibits 'P-53.3204', 'P-53.3205', 'P-53.3207', 'P-53.3252',
'P-53.3535', 'P-53.3536', 'P-53.3537', 'P-53.3581', 'P-53.3582,' 'P-
53.3821', 'P-53.3822', 'P-53.3823', 'P-53.3824', 'P-53.3827', 'P-
53.3830', 'P-53.3834', 'P-53.3835', 'P-53.6116', 'P-53.6117', 'P-
53.6118', 'P-53.7250', 'P-53.8250', 'P-53.8805', 'P-53.9293', 'P-
53.9915', 'P-53.9916', 'P-53.10100', 'P-53.10249', 'P-53.10754',
'P-54.1', 'P-54.2', 'P-54.3', 'P-54.4', and 'P-54.5', as certified and
examined by the ICPA;
(iii) ALLOW the ICPA, through undersigned counsel, until March 8,
2019 to submit a soft copy of the ICPA Report and the
corresponding annexes/schedules in Microsoft Word and/or excel
format; and thereafter,
(iv) Reconsider the denial of Exhibits 'P-3', 'P-4', Exhibits 'P-4-c', 'P-
29', 'P-41.6', 'P-41.7', 'P-41.8', 'P-41.9', 'P-41.10', 'P-41.14', and
ICPA Exhibits 'P-53.3204', 'P-53.3205', 'P-53.3207', 'P-53.3252',
'P-53.3535', 'P-53.3536', 'P-53.3537', 'P-53.3581', 'P-53.3582', 'P-
53.3821', 'P-53.3822', 'P-53.3823', 'P-53.3824', 'P-53.3827', 'P-
53.3830', 'P-53.3834', 'P-53.3835', 'P-53.6116', 'P-53.6117', 'P-
53.6118', 'P-53.7250', 'P-53.8250', 'P-53.8805', 'P-53.9293', 'P-
53.9915', 'P-53.9916', 'P-53.10100', 'P-53.10249', 'P-53.10754,
'P-54.1', 'P-54.2', 'P-54.3', 'P-54.4'."
In the Resolution dated June 13, 2019, 28 the Court, among others: (1)
partially granted Petitioner's Motion for Partial Reconsideration; and (2)
admitted the Exhibits subject of the said Motion, except for the following: (a)
Exhibit "P-3", for failure to submit the originals for comparison; (b) Exhibit "P-
4-C", for not being found in the records of the case; and (c) Exhibits "P-41.6"
and "P-41.7", for not being found in the records. TIADCc

On June 18, 2019, Petitioner filed a Tender of Excluded Evidence. 29

The Court granted Petitioner's Tender, in its Resolution dated September 13,
2019. 30
Respondent likewise presented documentary and testimonial evidence.
As for his testimonial evidence, Respondent offered the testimonies of the
following individuals, namely: (1) Ms. Marilyn D. Guerzon, 31 an RO of the
BIR; and (2) Ms. Milan S. Madarang, 32 also an RO of the BIR.
Meanwhile, Respondent filed his Formal Offer of Evidence on July 15,
2019. 33 Petitioner filed its Comment/Opposition (To Respondent's Formal
CD Technologies Asia, Inc. © 2021 cdasiaonline.com
 Offer of Evidence dated July 12, 2019) on August 1, 2019. 34 Thus, in the
Resolution dated October 24, 2019, 35 the Court admitted Respondent's
exhibits; and ordered both parties to submit their respective memorandum
within thirty (30) days from receipt of the said Resolution.
Petitioner filed its Memorandum on December 6, 2019. 36 Respondent,
however, failed to file his memorandum. 37
The instant case was deemed submitted for decision on December 26,
2019. 38

THE ISSUES

The issues submitted by the parties for resolution of this Court are as
follows: 39
"I. WHETHER OR NOT THE FORMAL ASSESSMENT NOTICE AND
FINAL DECISION ON DISPUTED ASSESSMENT ISSUED BY THE
RESPONDENT AGAINST PETITIONER FOR TAXABLE YEAR ENDED
DECEMBER 31, 2011 ARE VOID FOR HAVING BEEN ISSUED
BEYOND THE PRESCRIPTIVE PERIOD AND/OR FOR FAILURE TO
COMPLY WITH THE RULES ON THE CONDUCT OF TAX AUDIT
INVESTIGATIONS.
II. WHETHER OR NOT PETITIONER IS LIABLE FOR DEFICIENCY
INCOME TAX, VALUE-ADDED TAX, WITHHOLDING TAX —
EXPANDED AND RELATED DEFICIENCY INTEREST FOR TAXABLE
YEAR ENDED DECEMBER 31, 2011."AIDSTE

THE ARGUMENTS OF THE PARTIES

Petitioner argues that the PAN, FAN and FDDA are void, for having
been issued in violation of its due process right in the conduct of tax audit
investigations, and since the LOA was not properly served on Petitioner; that
Respondent failed to conduct the required Informal Conference before
issuing the PAN; that Respondent resolved to issue the FAN/FLD without
respecting the right of Petitioner to a valid preliminary assessment
proceeding; that FAN/FLD is void for having been issued pursuant to audit
examination conducted by persons other than the revenue officers identified
under the LOA; and that the FAN and FDDA are void for having been issued
beyond the prescriptive period allowed by law.
Moreover, Petitioner contends that it is not liable for deficiency income
tax and deficiency VAT on undeclared income from unaccounted expenses of
P2,667,418.00; that it is not liable for deficiency VAT on receipts not
subjected to VAT in the amount of P2,870,297.84; that it is not liable for
deficiency VAT on disallowed input tax allocated to exempt sales of
P1,334,120.37; and that it is not liable for deficiency income tax and EWT on
the P4,742,764.00 expenses not subjected to EWT.
On the other hand, Respondent mainly argues that his right to assess
Petitioner has not yet prescribed.
CD Technologies Asia, Inc. © 2021 cdasiaonline.com
 Respondent further claims that the declarations made by Petitioner in
its tax returns were deficient and did not disclose the truth regarding the
correct amount of income and sales subject to withholding and VAT, thereby
rendering the subject tax returns (i.e., EWT and VAT) as 'false' within the
contemplation of Section 222 of the 1997 NIRC. As such, it is Respondent's
position that he timely assessed Petitioner within ten (10) years from the
discovery of falsity or fraud.
Moreover, Respondent claims that he fully complied with the due
process requirement mandated under Section 228 of the NIRC of 1997, as
implemented by Revenue Regulations (RR) No. 12-99, as amended, when he
issued the subject PAN, FAN and FDDA to Petitioner.

THE RULING OF THE COURT

The instant Petition for Review is meritorious.

The subject PAN and FLD/FAN
are void, as a consequence of the
violation of Petitioner's right to
administrative due process.
Petitioner contends that Respondent resolved to issue the FAN/FLD
without respecting the right of Petitioner to a valid preliminary assessment
proceeding.
There is merit in Petitioner's contention. AaCTcI

Section 228 of the NIRC of 1997 provides, in part, as follows:

"SEC. 228. Protesting of Assessment. — When the
Commissioner or his duly authorized representative finds that proper
taxes should be assessed, he shall first notify the taxpayer of his
findings: x x x
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.
xxx xxx xxx." (Emphasis added)
Based on the foregoing provision, it is clear that the BIR is mandated to
inform taxpayers, in writing, of the law and the facts on which the
assessment is made; otherwise, the assessment shall be void.
In Commissioner of Internal Revenue vs. Avon Products Manufacturing,
Inc., et seq., 40 the Supreme Court said:
"Tax assessments issued in violation of the due process
rights of a taxpayer are 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
CD Technologies Asia, Inc. © 2021 cdasiaonline.com
 always with regard to the basic tenets of due process.
xxx xxx xxx
The Bureau of Internal Revenue is the primary agency tasked to
assess and collect proper taxes, and to administer and enforce the
Tax Code. To perform its functions of tax assessment and collection
properly, it is given ample powers under the Tax Code, such as the
power to examine tax returns and books of accounts, to issue a
subpoena, and to assess based on the best evidence obtainable,
among others. However, these powers must 'be exercised reasonably
and [under] the prescribed procedure.' The Commissioner and
revenue officers must strictly comply with the requirements
of the law, with the Bureau of Internal Revenue's own rules,
and with due regard to taxpayer's constitutional rights .
xxx xxx xxx
In carrying out these quasi-judicial functions, the Commissioner
is required to 'investigate facts or ascertain the existence of facts,
hold hearings, weigh evidence, and draw conclusions from
them as basis for their official action and exercise of discretion in a
judicial nature.' Tax investigation and assessment necessarily
demand the observance of due process because they affect
the proprietary rights of specific persons.
xxx xxx xxx
I n Ang Tibay v. The Court of Industrial Relations , 41 this Court
observed that although quasi-judicial agencies 'may be said to
be free from the rigidity of certain procedural requirements[,
it] does not mean that it can, in justiciable cases coming
before it, entirely ignore or disregard the fundamental and
essential requirements of due process in trials and
investigations of an administrative character.' It then
enumerated the fundamental requirements of due process
that must be respected in administrative proceedings:
(1) The party interested or affected must be able to present
his or her own case and submit evidence in support of it.
EcTCAD

(2) The administrative tribunal or body must consider

the evidence presented.
(3) There must be evidence supporting the tribunal's
decision.
(4) The evidence must be substantial or 'such relevant
evidence as a reasonable mind might accept as adequate
to support a conclusion.'
(5) The administrative tribunal's decision must be rendered
on the evidence presented, or at least contained in the
record and disclosed to the parties affected.
(6) The administrative tribunal's decision must be based on
the deciding authority's own independent consideration of
the law and facts governing the case.
(7) The administrative tribunal's decision is rendered
in a manner that the parties may know the various
CD Technologies Asia, Inc. © 2021 cdasiaonline.com
 issues involved and the reasons for the decision.
xxx xxx xxx
The second to the sixth requirements refer to the party's
'inviolable rights applicable at the deliberative stage. ' The
decision-maker must consider the totality of the evidence
presented as he or she decides the case.
The last requirement relating to the form and substance
of the decision is the decision-maker's 'duty to give reason' to
enable the affected person to understand how the rule of
fairness has been administered in his [or her] case, to expose
the reason to public scrutiny and criticism, and to ensure that
the decision will be thought through by the decision-maker.
xxx xxx xxx
'[A] fair and reasonable opportunity to explain one's
side' is one aspect of due process. Another aspect is the due
consideration given by the decision-maker to the arguments
and evidence submitted by the affected party.
xxx xxx xxx
I n Alliance for the Family Foundation Philippines, Inc. v. Garin ,
42 this Court held that the Food and Drug Administration failed to
observe the basic requirements of due process when it did not act on
or address the oppositions submitted by petitioner Alliance for the
Family Foundation, Philippines, Inc., but proceeded with the
registration, rectification, and distribution of the questioned
contraceptive drugs and devices. It ruled that [P]etitioner was
not afforded the genuine opportunity to be heard . HSAcaE

Administrative due process is anchored on fairness and

equity in procedure. It is satisfied if the party is properly
notified of the charge against it and is given a fair and
reasonable opportunity to explain or defend itself. Moreover,
it demands that the party's defenses be considered by the
administrative body in making its conclusions, and that the
party be sufficiently informed of the reasons for its
conclusions.
xxx xxx xxx
The facts demonstrate that Avon 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 Discrepancy
attached to the Preliminary Assessment Notice, as well as the
Formal Letter of Demand with Final Assessment Notices, did
not even comment or address the defenses and documents
submitted by Avon. 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
It is true that the Commissioner is not obliged to accept the
CD Technologies Asia, Inc. © 2021 cdasiaonline.com
 taxpayer's explanations, as explained by the Court of Tax Appeals.
However, when he or she rejects these explanations, he or
she must give some reason for doing so. He or she must give
the particular facts upon which his or her conclusion are
based, and those facts must appear in the record. " (Emphases
and underscoring added)
Based on the foregoing jurisprudential pronouncements, it is a long-
established principle that part of administrative due process are that, inter
alia, the administrative tribunal or body must consider the evidence
presented, and the decision thereof is rendered in a manner that the parties
may know the various issues involved and the reasons for the decision.
Furthermore, it is clear that tax assessments issued in violation of the due
process rights of a taxpayer are null and void.
In this case, it is clear that Respondent failed to consider Petitioner's
evidence, and arguments, and to give the particular facts upon which his
conclusions are based.
In the Memorandum dated July 28, 2014 issued by RO Marilyn D.
Guerzon, 43 the latter recommended the issuance of both the PAN and FAN
relative to her investigation of Petitioner's tax liabilities, to wit:
"In view hereof, this docket is respectfully forwarded with the
recommendation for the issuance of the necessary
assessment notices (Preliminary and Formal Assessment
Notices) for us to enforce collection of the taxes due." (Emphasis
and underscoring added)
Thereafter, adopting the said recommendation, the PAN dated
November 24, 2014 was issued finding deficiency internal revenue taxes due
from Petitioner, for taxable year December 31, 2011. 44 As indicated in the
said PAN, the following are the significant findings of the BIR, to wit: HESIcT

1) For the deficiency income tax:

a) Undeclared income from unaccounted expenses —
P2,667,418.00;
b) Disallowed expenses due to non-withholding —
P5,034,931.00;
c) Salaries and wages not subjected to withholding tax —
P1,393,335.89;
2) For the deficiency VAT:
a) Receipts not subjected VAT — P2,870,297.84;
b) Undeclared income from unaccounted expenses —
P2,667,418.00;
3) For the deficiency EWT: Basic Tax Due — P221,536.55;
4) For the deficiency withholding tax on compensation (WTC): Basic
Tax Due — P176,256.99; and
5) For the deficiency documentary stamp tax (DST): Basic Tax Due
— P189,006.00.
CD Technologies Asia, Inc. © 2021 cdasiaonline.com
 On December 12, 2014, Petitioner then filed with the BIR its Reply
dated December 12, 2014 to the same PAN, 45 giving explanations against
the above-stated findings and offering certain documents/schedules.
However, in the FAN dated December 17, 2014, which assessed
Petitioner with deficiency internal revenue taxes for taxable year ended
December 31, 2011, in the total aggregate amount of P7,801,037.24,
including deficiency interest, 46 the BIR merely reiterated the same findings
as stated in the said PAN, without giving any reason for rejecting the
explanations made by Petitioner in its Reply dated December 12, 2014. In
other words, the BIR did not give the particular facts upon which his or her
conclusion in the FAN are based. Consequently, Petitioner was left unaware
on how Respondent or the BIR appreciated the explanations or defenses
raised against the subject PAN, in clear violation of Petitioner's right to
administrative due process, thereby rendering the subject tax assessments
void.
In any event, this Court likewise finds the FDDA dated June 29, 2017 a
nullity.
The RO, who conducted the
reinvestigation of Petitioner's tax
liabilities, was not duly authorized to
examine the latter's books of
accounts and other records. Thus,
the assailed FDDA is void.
As previously stated, Petitioner posits that the subject assessments are
void for having been issued pursuant to audit examination conducted by
revenue officers other than those specifically named under the LOA.
The Court agrees with Petitioner.
Section 6 (A) of the NIRC of 1997 reads:
"SEC. 6. Power of the Commissioner to Make Assessments
and Prescribe Additional Requirements for Tax Administration and
Enforcement. —
(A) Examination 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 authorized
representative may authorize the examination 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."
(Emphasis and underscoring added) caITAC

Based on the foregoing provision, an authority emanating from

Respondent or his duly authorized representative is required before an
examination and an assessment may be made against a taxpayer.
Relative thereto, Sections 10 and 13 of the NIRC of 1997 provide that
the authority of an RO to examine or to recommend the assessment of any
deficiency tax due must be exercised pursuant to an LOA, to wit:
CD Technologies Asia, Inc. © 2021 cdasiaonline.com
 "SEC. 10. Revenue Regional Director . — Under rules and
regulations, policies and standards formulated by the Commissioner,
with the approval of the Secretary of Finance, the Revenue
Regional Director shall, within the region and district offices
under his jurisdiction, among others: x x x
xxx xxx xxx.
(c) Issue Letters of Authority for the examination of
taxpayer within the region;
xxx xxx xxx."
(Emphases and underscoring added)
"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." (Emphasis and underscoring
added)
Thus, a grant of authority, through an LOA issued by the Revenue
Regional Director, must be made assigning an RO, to perform tax
assessment functions, in order that such RO may examine taxpayers and
collect the correct amount of tax, or to recommend the assessment of any
deficiency tax due.
I n Medicard Philippines, Inc. vs. Commissioner of Internal Revenue, 47
the Supreme Court emphasized the importance and significance of an LOA in
examining the books of accounts and other accounting records of taxpayers
and in assessing internal revenue taxes, to wit:
"An LOA is the authority given to the appropriate revenue
officer assigned to perform assessment functions. It empowers 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. 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. Section 6 of the NIRC clearly
provides as follows:
SEC. 6. Power of the Commissioner to Make
Assessments and Prescribe Additional Requirements for
Tax Administration and Enforcement. —
(A) Examination of Return and Determination of
Tax Due. — After a return has been filed as required
under the provisions of this Code, the Commissioner or
his duly authorized representative may authorize
the examination of any taxpayer and the assessment
of the correct amount of tax: Provided, however, That
CD Technologies Asia, Inc. © 2021 cdasiaonline.com
 failure to file a return shall not prevent the Commissioner
from authorizing the examination of any taxpayer. ICHDca

xxx xxx xxx (Emphasis and underlining Ours)

Based on the afore-quoted provision, it is clear that unless
authorized by the CIR himself or by his duly authorized
representative, through an LOA, an examination of the
taxpayer cannot ordinarily be undertaken. The circumstances
contemplated under Section 6 where the taxpayer may be assessed
through best-evidence obtainable, inventory-taking, or surveillance
among others has nothing to do with the LOA. These are simply
methods of examining the taxpayer in order to arrive at the correct
amount of taxes. Hence, 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.
xxx xxx xxx
In the case of Commissioner of Internal Revenue v. Sony
Philippines, Inc., 48 the Court said that:
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. (Emphasis and underlining
ours)
xxx xxx xxx
Contrary to the ruling of the CTA en banc, an LOA cannot be
dispensed with just because none of the financial books or records
being physically kept by MEDICARD was examined. To begin with,
Section 6 of the NIRC requires an authority from the CIR or
from his duly authorized representatives before an
examination 'of a taxpayer' may be made. The requirement of
authorization is therefore not dependent on whether the
taxpayer may be required to physically open his books and
financial records but only on whether a taxpayer is being
subject to examination.
xxx xxx xxx
That the BIR officials herein were not shown to have acted
unreasonably is beside the point because the issue of their lack of
authority was only brought up during the trial of the case. What is
crucial is whether the proceedings that led to the issuance of
VAT deficiency assessment against MEDICARD had the prior
approval and authorization from the CIR or her duly
authorized representatives. Not having authority to examine
MEDICARD in the first place, the assessment issued by the
CIR is inescapably void." (Emphases and underscoring supplied)
Based on the foregoing doctrinal pronouncements, an RO must be
authorized, through an LOA, in order that the said officer may validly
examine the books of accounts and other accounting records of a taxpayer.
CD Technologies Asia, Inc. © 2021 cdasiaonline.com
 In the absence of an LOA, the tax assessments issued by the BIR against
such taxpayer shall be void.
Records show that the authority to conduct an examination and
assessment of Petitioner's books of accounts emanated from LOA No. LOA-
051-2012-00000369/eLA201100013570 dated November 16, 2012, 49 issued
by Regional Director Nestor S. Valeroso of Revenue Region 8-Makati City.
The said LOA authorized RO Marilyn D. Guerzon and GS Arnaldo Rase of
Revenue District No. 51-Pasay City, to examine Petitioner's books of
accounts and other accounting records for all internal revenue taxes for the
period from January 1, 2011 to December 31, 2011. As already observed, RO
Guerzon's Memorandum dated July 28, 2018 50 led to the issuance of the
subject PAN dated November 24, 2014 51 and FAN dated December 17,
2014. 52 Petitioner protested the FAN and requested for a reinvestigation in
its letter dated January 9, 2015. 53 Afterwhich, Petitioner received on July 24,
2015 an undated letter from the BIR informing it that the tax audit
investigation was re-assigned to RO Milan S. Madarang and GS Nerissa B. Ty.
54 TCAScE

The transfer of Petitioner's tax audit investigation was even confirmed

by RO Milan S. Madarang herself, when she was presented to this Court to
testify on direct examination by way of Judicial Affidavit, as to how she came
to know of Petitioner's internal revenue tax case for taxable year 2011, 55 to
wit:
"7.Q: How did you come to know the internal revenue tax case of
[P]etitioner for taxable year 2011?
A: I came to know the internal revenue tax case of
[P]etitioner for taxable year 2011, when I received a
Memorandum of Assignment No. MOA0512012LOA3422
dated March 2, 2015, authorizing myself to conduct a
reinvestigation/verification of certain records relative to
t h e Letter Protest dated 9 January 2014 of [P]etitioner
against the BIR Formal Assessment Notice (Part I and II)
dated 17 December 2014 with attached Details of
Discrepancies, involving its deficiency income tax, value-
added tax and expanded withholding tax assessments for
taxable year 2011.
8.Q: You mentioned about a Memorandum of Assignment No.
MOA0512012LOA3422 dated March 2, 2015, if shown to you a
copy thereof, will you be able to identify the same?
A: Yes, Atty.
9.Q: I am showing to you a document captioned as Memorandum of
Assignment, what relation, if any do this document have to your
previous statement?
A: This is the same Memorandum of Assignment No.
MOA0512012LOA3422 dated March 2, 2015, which I
referred to, duly marked as Exhibit 'R-10' for the [R]espondent
and found on page 487 of the BIR Records of this case.
10.Q: Going over this document, I noticed a signature above
CD Technologies Asia, Inc. © 2021 cdasiaonline.com
 the printed name, SHIRLEY O. CALAPATIA, Revenue
District Officer, RDO 51-Pasay City, do you know whose
signature this is?
A: Yes, Atty. This is the specimen signature of ma'am
SHIRLEY O. CALAPATIA, the then Revenue District Officer,
RDO 51-Pasay City, which was sub-marked as Exhibit 'R-
10-a' for the [R]espondent.
xxx xxx xxx
12.Q: Likewise, you mentioned about a BIR Formal Assessment
Notice (Part I and II) dated 17 December 2014 with Details of
Discrepancies, if shown to you copies thereof, will you be able to
identify the same?
A: Yes, Atty.
xxx xxx xxx
16.Q: Further, you mentioned about a Letter Protest dated 9
January 2014 of [P]etitioner against the said BIR Formal
Assessment Notice (Part I and II) dated 17 December 2004, if
shown to you a copy thereof, will you be able to identify the
same?
A: Yes, Atty.
xxx xxx xxx
19.Q: Would you know what action the BIR do next, if any, after it
received the said Letter Protest dated 9 January 2014 of
[P]etitioner?
A: Yes, Atty. Based on records, the BIR issued an Undated Letter
addressed to [P]etitioner, informing the latter about my authority
to conduct such a reinvestigation of its disputed deficiency taxes
for taxable year 2011. Likewise, it requested [P]etitioner to
submit relevant documents in support of its Letter Protest dated
9 January 2014 within 60 days from filing thereof, pursuant to
Revenue Regulations No. 12-99, as amended by Revenue
Regulations No. 18-2013." (Emphases and underscoring supplied)
RO Milan S. Madarang further testified that she proceeded with the
reinvestigation of Petitioner's tax case and, thereafter, prepared a
Memorandum Report showing her factual findings on the disputed deficiency
income tax, VAT and EWT for taxable year 2011. 56 Thereafter, Revenue
Regional Director Glen A. Geraldino issued the assailed FDDA dated June 29,
2017, 57 assessing Petitioner of deficiency income tax, VAT and EWT, and
cancelling the previously assessed deficiency WTC and DST. cTDaEH

Based on the foregoing testimony of RO Milan S. Madarang, her

authority to examine or conduct a reinvestigation of Petitioner's tax liabilities
for taxable year 2011 was based on the Memorandum of Assignment No.
MOA0512012LOA3422 dated March 2, 2015, 58 issued by Revenue District
Officer Shirley O. Calapatia, who has no power or authority to issue an LOA,
much less to effect any modification or amendment to the previously issued
No. LOA-051-2012-00000369/eLA201100013570 dated November 16, 2012,
issued by Regional Director Nestor S. Valeroso, authorizing other revenue
CD Technologies Asia, Inc. © 2021 cdasiaonline.com
 officers.
In the case of Commissioner of Internal Revenue v. San Miguel Foods,
Inc. , 59 the Court En Banc recognized that a written document which signifies
the intention of the CIR or his duly authorized representative to reassign a
taxpayer's audit and assessment to a new revenue officer may be
considered as an equivalent of an LOA, to wit:
This power to appoint a sub-agent necessarily includes the
power to revoke the same. Thus, the authority given to ROs Cletofel
Parungao, Myrna Ramirez, Ma. Salud Maddela, Zenaida Paz, Allan
Maniego, Joel Aguila, and GS Glorializa Samoy who were originally
named in the LOA may be revoked, transferred and reassigned to RO
Maria Gracielle Cecilia F. San Pedro and GS Juvy S. De la Peña for
continuance of audit.
Said document where such authority is transferred may
be equivalent to an LOA. Several reasons support this. First, the
only directive under Section 13 of the NIRC of 1997, as amended,
which requires that assessment be done by ROs pursuant to an LOA,
is that the grant of authority be done in writing. In fact, an "[a]gency
may be oral, unless the law requires a specific form."
Second, although the document may not be entitled
"Letter of Authority" but otherwise, it can contain all the
elements necessary to establish a contract of agency
between the CIR and the new Revenue Officer. The primary
consideration in determining the true nature of a contract is the
intention of the parties. If the words of a contract appear to
contravene the evident intention of the parties, the latter
shall prevail. Such intention is determined not only from the
express terms of their agreement, but also from the
contemporaneous and subsequent acts of the parties. The title of the
contract does not necessarily determine its true nature. In fact, this
Court has, time and again, declared certain documents emanating
from the CIR as his "Final Decision" on a Disputed Assessment based
on the tenor of the words therein despite the absence of the words
"Final Decision" in the title of the document.
In interpreting what a "Letter of Authority" is, as mentioned in
Section 13 of the NIRC of 1997, as amended, the laws on contracts
and agency embodied in the Civil Code simply cannot be ignored.
Every effort must be exerted to avoid a conflict between statutes; so
that if reasonable construction is possible, the laws must be
reconciled in that manner. Similarly, every new statute should be
construed in connection with those already existing and all should be
made to harmonize and stand together, if they can be done by any
fair and reasonable interpretation. Interpretare et concordare leges
legibus, est optimus interpretandi modus, which means that the best
method of interpretation is that which makes laws consistent with
other laws. Tax laws do not exist in a vacuum, and must be
appreciated and applied with other laws such as the Civil Code." 60
Hence, based on the aforementioned case, a document such as aMOA
may be construed as an equivalent of a new LOA, provided that it contains
all the elements necessary to establish a Contract of Agency between the
CD Technologies Asia, Inc. © 2021 cdasiaonline.com
 CIR or his duly authorized representative and the new revenue officer.
Included in these elements is the authority of the person issuing the MOA.
Section 10 (C) of the Tax Code grants the Revenue Regional
Director, as Petitioner's authorized representative, the authority to issue
LOAs, to wit:
"SEC. 10. Revenue Regional Director. — Under rules and
regulations, policies and standards formulated by the Commissioner,
with the approval of the Secretary of Finance, the Revenue Regional
director shall, within the region and district offices under his
jurisdiction, among others:
cSaATC

xxx xxx xxx

(c) Issue Letters of authority for the examination of the
taxpayers within the region;"
To reiterate, in order for the MOA to be considered as an equivalent of
an LOA, it must be signed by the CIR or his duly authorized representative.
However, in this case, it is clear from the aforementioned facts that the MOA
was only signed by Revenue District Officer Shirley O. Calapatia who is
neither the CIR nor a Revenue Regional Director.
Therefore, on this account, both RO Milan S. Madarang and GS Nerissa
B. Ty had no authority to continue Respondent's audit which is in all fours
with the Court En Banc's Decision in Commissioner of Internal Revenue
v. San Miguel Foods, Inc., 61 to wit:
"In the instant case, the Memorandum of Assignment
was only signed by Cesar D. Escalada, Chief, Regular LT Audit
Division 1. Therefore, RO Maria Gracielle Cecilia F. San Pedro
and GS Juvy S. De la Peña were without authority to continue
the audit." 62
Not having a valid authority to examine or reinvestigate the latter, the
subject deficiency tax assessments for taxable year 2011 issued by
Respondent against Petitioner via the FDDA dated June 29, 2017 is likewise
inescapably void. 63
In view of the finding that the subject tax assessments and the FDDA
dated June 29, 2017 are invalid, and thus, bear no valid fruit, 64 it becomes
unnecessary to address the other issues or matters raised by the parties.
WHEREFORE, in light of the foregoing considerations, the instant
Petition for Review is GRANTED. Accordingly, the FDDA dated June 29, 2017
i s WITHDRAWN and SET ASIDE. Moreover, the FLD/FAN dated December
17, 2014 is CANCELLED and SET ASIDE.
SO ORDERED.

(SGD.) MA. BELEN M. RINGPIS-LIBAN

Associate Justice
Erlinda P. Uy and Maria Rowena Modesto-San Pedro, JJ., concur.

CD Technologies Asia, Inc. © 2021 cdasiaonline.com

 Footnotes

1. Summary of the Case, Pre-Trial Order dated April 17, 2018, Docket — Vol. 2, p.
730.
2. Par. 1, Admitted Facts, Joint Stipulation of Facts and Issues (JSFI), Docket — Vol.
1, p. 251.

3. Par. 2, Admitted Facts, JSFI, Docket — Vol. 1, p. 251.

4. Par. 2, Petition for Review, vis-à-vis Par. 1, Answer, Docket — Vol. 1, pp. 11 and
214, respectively.

5. Par. 3, Admitted Facts, JSFI, Docket — Vol. 1, pp. 251 to 252; Exhibit "P-35",
Docket — Vol. 2, p. 393; Exhibit "R-2", BIR Records, p. 2.
6. Par. 6, Admitted Facts, JSFI, Docket — Vol. 1, p. 252; Exhibit "P-38", Docket —
Vol. 2, pp. 897 to 902.

7. Par. 7, Admitted Facts, JSFI, Docket — Vol. 1, p. 252; Exhibits "P-39" and "R-7",
BIR Records, pp. 463 to 467.
8. Par. 8, Admitted Facts, JSFI, Docket — Vol. 1, p. 252; Exhibits "P-40" and "R-8",
BIR Records, pp. 428 to 431.

9. Exhibits "P-41" and "R-9", BIR Records, pp. 468 to 472.

10. Par. 9, Admitted Facts, JSFI, Docket — Vol. 1, p. 252; Exhibit "P-43", Docket —
Vol. 1, pp. 32 to 38; Exhibit "R-14", BIR Records, pp. 529 to 533.

11. Docket — Vol. 1, pp. 10 to 31.

12. Docket — Vol. 1, pp. 214 to 225.

13. Id. citing G.R. No. 139736, October 17, 2005.

14. Docket — Vol. 1, p. 233.

15. Notice of Pre-Trial Conference dated October 24, 2017, Docket — Vol. 1, pp.
227 to 228; Minutes of the hearing held on, and Order dated, March 6,
2018, Docket — Vol. 1, pp. 294 and 249 to 250.

16. Docket — Vol. 1, pp. 246 to 248, and 266 to 275, respectively.
17. Docket — Vol. 1, pp. 251 to 257.

18. Docket — Vol. 2, pp. 730 to 736.

19. Exhibit "P-50", Docket — Vol. 2, pp. 753 to 767; Minutes of the hearing held
on, and Order dated, June 4, 2018, Docket — Vol. 3, pp. 944 to 945;
Exhibit "P-53", Docket — Vol. 3, pp. 1033 to 1038; Minutes of the hearing
held on, and Order dated, October 11, 2018, Docket — Vol. 3, pp. 1063 to
1065.
20. Exhibit "P-52", Docket — Vol. 3, pp. 953 to 967; Minutes of the hearing held
on, and Order dated, July 2, 2018, Docket — Vol. 3, pp. 1017 to 1018.

21. Oath of Commission dated March 6, 2018, Docket — Vol. 1, p. 295; Minutes of
the hearing held on, and Order dated, March 6, 2018, Docket — Vol. 1, pp.
294, and 249 to 250, respectively.
CD Technologies Asia, Inc. © 2021 cdasiaonline.com
 22. Docket — Vol. 1, pp. 263 to 310.
23. Docket — Vol. 3, pp. 1071 to 1444; Docket — Vol. 4, pp. 1445 to 1944; Docket
— Vol. 5, pp. 1945 to 2346.

24. Records Verification dated January 10, 2019 issued by the Judicial Records
Division of this Court, Docket — Vol. 5, p. 2353.
25. Docket — Vol. 6, pp. 2409 to 2452.

26. Transmittal Letter dated March 7, 2019, Docket — Vol. 6, p. 2471.

27. Docket — Vol. 6, pp. 2457 to 2461.

28. Docket — Vol. 6, pp. 2502 to 2506.

29. Docket — Vol. 6, pp. 2510 to 2514.

30. Docket — Vol. 4, pp. 2537 to 2538.

31. Exhibit "R-17", Docket — Vol. 5, pp. 2357 to 2365; Minutes of the hearing held
on, and Order dated, June 13, 2019, Docket — Vol. 6, pp. 2507 to 2509.
32. Exhibit "R-18", Docket — Vol. 5, pp. 2375 to 2386; Minutes of the hearing held
on, and Order dated, June 13, 2019, Docket — Vol. 6, pp. 2507 to 2509.

33. Docket — Vol. 6, pp. 2520 to 2528.

34. Docket — Vol. 6, pp. 2532 to 2535.

35. Docket — Vol. 6, pp. 2540 and 2541.

36. Docket — Vol. 6, pp. 2542 to 2581.

37. Records Verification dated December 17, 2019 issued by the Judicial Records
Division of this Court, Docket — Vol. 6, p. 2583.

38. Resolution dated December 26, 2019, Docket — Vol. 6, p. 2585.

39. Issues to be Resolved, JSFI, Docket — Vol. 1, p. 253.

40. G.R. Nos. 201398-99 and 201418-19, October 3, 2018.

41. 62 Phil. 635 (1940) [Per J. Laurel, En Banc].

42. G.R. Nos. 217872 & 221866, August 24, 2016.

43. Exhibit "R-6", BIR Records, pp. 399 to 400.

44. Exhibit "P-38", Docket — Vol. 2, pp. 897 to 902.

45. Par. 7, Admitted Facts, JSFI, Docket — Vol. 1, p. 252; Exhibits "P-39" and "R-
7", BIR Records, pp. 463 to 467.
46. Par. 8, Admitted Facts, JSFI, Docket — Vol. 1, p. 252; Exhibits "P-40" and "R-
8", BIR Records, pp. 428 to 431.

47. G.R. No. 222743, April 5, 2017.

48. 649 Phil. 519 (2010).

49. Par. 3, Admitted Facts, JSFI, Docket — Vol. 1, pp. 251 to 252; Exhibit "P-35",
CD Technologies Asia, Inc. © 2021 cdasiaonline.com
 Docket — Vol. 2, p. 893; Exhibit "R-2", BIR Records, p. 2.

50. Exhibit "R-6", BIR Records, pp. 399 to 400.

51. Exhibit "P-38", Docket — Vol. 2, pp. 897 to 902.

52. Par. 8, Admitted Facts, JSFI, Docket — Vol. 1, p. 252; Exhibit "P-46", Docket —
Vol. 2, pp. 936 to 937; Exhibit "R-8", BIR Records, pp. 428 to 431.
53. Q21 to Q22, Exhibit "P-50", Docket — Vol. 2, p. 759; Exhibit "P-41", Docket —
Vol. 2, pp. 925 to 928; Exhibit "R-9", BIR Records, pp. 469 to 470.

54. Q22, Exhibit "P-50", Docket — Vol. 2, p. 759; Docket — Vol. 2, p. 929; Exhibit
"R-11", BIR Records, p. 488.
55. Exhibit "R-18", Docket — Vol. 5, pp. 2376 to 2378.

56. Q26 to Q28, Exhibit "R-18", Docket — Vol. 5, p. 2379; Exhibit "R-12", BIR
Records, pp. 525 to 526.
57. Q44, Exhibit "R-18", Docket — Vol. 5, pp. 2382 to 2383; Exhibit "P-43", Docket
— Vol. 1, pp. 32 to 38; Exhibit "R-14", BIR Records, pp. 529 to 536.

58. Exhibit "R-10", BIR Records, p. 487; Exhibit "P-45", Docket — Vol. 2, p. 935.
59. CTA EB No. 1880, 6 August 2019.

60. Emphasis supplied.

61. CTA EB No. 1880, 6 August 2019.

62. Emphasis supplied.

63. Commissioner of Internal Revenue vs. Liquigaz Philippines Corporation, et

seq., G.R. Nos. 215534 and 215557, April 18, 2016.
64. Commissioner of Internal Revenue vs. Pilipinas Shell Petroleum Corporation,
G.R. Nos. 197945 and 204119-20, July 9, 2018, G.R. No. 197945 citing
Commissioner of Internal Revenue vs. Reyes , G.R. Nos. 159694 and
163581, January 27, 2006.

CD Technologies Asia, Inc. © 2021 cdasiaonline.com