82. HEMISPHERE – LEO BURNETT, INC. v.
COMMISSIONER OF INTERNAL REVENUE
CTA EB No. 2371 | Uy, J. | 11 April 2022
Prescriptive Period for Issuance of a LOA
DOCTRINE: A cursory reading of Sections 203 and 222 of the NIRC of 1997, as amended,
reveals that what is being contemplated therein is the issuance of a tax assessment or the filing
of an action in court without an assessment for the collection of taxes, and not the issuance of
an LOA.
FACTS
In December 2017, petitioner received the assailed Letter of Authority (LOA) which authorized
BIR Revenue Officer Arthur Ramos and Group Supervisor Teodore Maroket to examine the
books of accounts and other accounting records of petitioner for all internal revenue taxes for
the period January 1, 2012 to December 31, 2012. Thereafter, petitioner filed a Petition for
Prohibition and Injunction under Rule 65 of the Revised Rules of Court with Prayer for the
Issuance of a Temporary Restraining Order (TRO) and Writ of Preliminary Injunction (WPI)
before the CTA.
Meanwhile, in December 2018, the CIR filed a Motion to Dismiss petitioner’s complaint, alleging
that the Court has no jurisdiction over the case. Petitioner opposed the motion, arguing, among
others, that the subject LOA is null and void ab initio for having been issued beyond the 3-year
prescriptive period. The Court in Division denied respondent's Motion to Dismiss, ruling that
since petitioner assails the validity of the subject LOA, the same may be considered as covered
by the terms "other matters" under Section 7 of RA No. 1125, as amended by RA No. 9292, and
therefore, is well within the Court's jurisdiction.
Thereafter, the Court in Division rendered the assailed decision denying petitioner's Petition for
Prohibition and Injunction under Rule 65 of the Revised Rules of Court with Prayer for the
Issuance of a TRO and WPI for lack of merit. Hence, this petition wherein petitioner contends
that the issuance of an LOA is governed by the prescriptive periods under Sections 203 and 222
of the NIRC of 1997, as amended.
ISSUE
Whether or not the issuance of the LOA is subject to the prescriptive periods under Sections
203 and 222 of the NIRC of 1997, as amended. – NO.
RULING
A cursory reading of Sections 203 and 222 od the NIRC of 1997, as amended, reveals that what
is being contemplated therein is the issuance of a tax assessment or the filing of an action in
court without an assessment for the collection of taxes, and not the issuance of an LOA. The SC
categorically ruled that the "assessment" referred to under the said provisions is the service of
the Final Assessment Notice (FAN). A FAN, as distinguished from a PAN, contains not only a
computation of tax liabilities but also a demand for payment within a prescribed period; and that
as soon as the FAN is served, an obligation arises on the part of the taxpayer concerned to pay
the amount assessed and demanded. It also signals the time when penalties and interests
begin to accrue against the taxpayer. Thus, what is required to be issued within the 3-year or
the extended period provided in Sections 203 and 222 of the NIRC of 1997, as amended, is the
FAN. Considering that the SC emphatically rejected the argument that the PAN is the
assessment referred to under the said provisions, there is greater reason to dismiss petitioner's
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argument that the prescriptive periods therein stated apply to an LOA, which is a mere notice for
possible assessment and not an actual assessment. Hence, the subject LOA was validly issued.
3F A.Y. 2022-2023 | Taxation Law 1
