POWERS OF THE COMMISSIONER:
- If Assessment is to be made for more than 1
1. Power of the Commissioner to Obtain
Information, and to Summon,
Examine, and Take Testimony of
Persons (Sec. 5)
- solely vested to the CIR
- May be delegated to duly authorized officials/
representatives
- Currently delegated to the revenue regional
director
- Books of accounts of taxpayer may be
subject to audit BUT requires a
LETTER OF AUTHORITY (LoA)
Official document which authorizes the
revenue officer to examine the books of
accounts of a taxpayer/ those transacting
with the taxpayer to determine deficiency
taxes
Must be served within 30days from the
date of issuance
Without LoA, any assessment made shall
be considered void (medicard: letter of notice
is not a valid substitute for LoA)
If not served within 30 days from the date
of issuance, taxpayer may refuse audit on the
ground that the LoA is no longer valid
Recourse of revenue officers, ask for
another LoA
What if taxpayer allowed audit after lapse
of 30 day period, can taxpayer question the
validity of LoA? NO, since taxpayer already
allowed the audit, there is already consent,
regardless if the LoA has already lapsed the
30 day period.
Case of Sony Philippines
A LoA was issued to a team of BIR examiners to audit the
taxpayer Sony for “the period 1997 and unverified prior years”.
It appears, however, that Sony was using the fiscal year, in
that it reported its tax liabilities for the period “April 1, 1997 to
March 31, 1998.” Deficiency taxes were discovered by the
team of examiners covering the period Jan 1 1998- March 31
1998. Ths was contested by Sony as the same was not
covered by the LoA. BIR argued that the contested period is
part of the taxable year of Sony.
- A 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.
- PURPOSE OF LoA: To extend authority to
examine the book of accounts to the revenue
officers who will examine the book of
accounts
- Why is LoA issued? It is issued because the
Revenue Officers are not vested with such
power under the law. Hence, the power is
delegated through the issuance of a LoA
- No LoA = void assessment
period, specific period must be indicated in
the LoA
- Did the BIR act properly in assessing Sony
for taxes covering the periof Jan 1 – mar 31?
=No. The BIR team of examiners went beyond the scope
of its authority because the deficiency tax assessment
was based on records from Jan to Mar 1998 or using the
fiscal year which ended in Mar 31, 1998. The CIR knew
which period should be covered by the investigation. If
the CIR wanted to or intended the investigation to include
the year 1998, it should have done so by amending the
LoA to include the said period, or by issuing another LoA.
Moreover, the statement in the LoA “and unverified prior
years,” violated the rule that LoA should cover a taxable
period not exceeding 1 taxable yr.
Pwede bang 2 periods? Pwede basta
specifically nakalagay
*In bar exam, do not assume irregularity, always assume
regularity. If no info, assume that there is a letter of
authority
THIRD PARTY VERIFICATION RULE
- scheme/ system whereby the revenue officer
would inquire from parties transacting with
taxpayer to determine deficiency taxes incurred
by taxpayer
- may involve cross-reference transactions
with other government agencies/ other
taxpayer
- i.e.: client, nagpapaupa ng LED screen.
Revenue officers would check records of SM
for the rent exam
- requires LoA, unless if they would check
their own records
INQUIRY INTO BANK DEPOSITS (Sec.6F)
GR: CIR cannot inquire to the bank deposits of taxpayer,
unless taxpayer voluntarily executes a waiver of the bank
secrecy law
E:
1. Decedent to determine gross estate
- taxpayer, executor/ administrator, is required to submit a
certificate of the outstanding balance of the estate of decedent
2. Any taxpayer who has filed an application for
compromise of his tax liability under Sec.
204(A)(2) of this Code by reason of financial
incapacity to pay his tax liability.
- 2 grounds for compromise
1. Reasonable doubt as to the validity of the assessment
- Waiver is not mandatory
2. Financial incapability to pay tax liability
- Waiver is mandatory
3. A specific taxpayer or taxpayers subject of a
request for the supply of tax information from a
foreign tax authority pursuant to an international
convention or agreement on tax matters to which
the Philippines is a signatory or a party of:
Provided, that the information obtained from the
banks and other financial institutions may be
 used by the BIR for tax assessment, verification,
audit, and enforcement purposes
- Ang nagiinvestigate, foreign tax authority. Like, IRS of
USA. So si IRS pwede syang magtanong. “Itong
taxpayer ban a to, magkano ang nirereflect nyang
income sa inyo?” Ganon. So magsusupply tayo ng info
sa IRS. Pero kailangan ng Treaty, at the present time,
meron.
- Foreign tax authority- tax authority or tax
admin of the requesting state under the tax
treaty or convention to which the Philippines
is a signatory or party thereof.
SUMMON PERSONS AND TAKE TESTIMONY
Can taxpayer object to an audit based on the
information supplied by its former accountant?
Fitness by design case
Without the consent of a taxpayer subject of an audit, its
former accountant was able to surreptitiously secure the
taxpayer’s books of accounts and submitted them to the
BIR which eventually became the basis of establishing the
tax liability of the taxpayer. The taxpayer complained on
the ground that the documents should not be used in
evidence as the same was illegally obtained. Decide.
The lack of consent of the taxpayer to the submission
of the books of accounts and various documents does
not warrant the non-use of the said documents.
Establishment of the tax liability of a taxpayer partakes the
nature of administrative proceedings which are not
governed by technical rules of evidence. Moreover,
the BIR is vested with ample powers to secure all relevant
documents in connection with the establishment of tax
liabilities, even without the consent of taxpayers.
Verifiable. It must be established that the books are
indeed the books of accounts of the taxpayer
What is the doctrine of willful blindness? (Bar 2012)
deliberate avoidance of knowledge of a crime,
especially by failing to make a reasonable inquiry about a
suspected wrongdoing despite being aware that it is
highly probable
About a networking business for a case of tax evasion. Ang ginamit
nyang defense ay “hindi ko alam. Kasi ang accountant ko lang ang
nakaka-alam nyan. Nagrerely lng ako sa kanya” But according to the
SC, you should still be held liable because you have the obligation to
check. In the first place, owners/ corporate officers are required to sign
statement of management’s responsibility wherein they are required to
check all the data indicated in the FS and ITR. Dito, ang tawag sa
defense eh doctrine of willful blindness because quite obviously, the
owner of this business failed to make an inquiry of the suspected
wrongdoing, the under declaration of the correct amount of sales/
receipts which results to tax evasion
Can the BIR commence tax investigation
notwithstanding the issuance of a commencement
order by rehabilitation court?
Pag meron ng commencement order, stop lahat kasi
irerehabilitate na ung corporation that had requested
rehab. Tax investigation should also be suspended/ tolled
because all assessment notices/ notice of informal
conference must be coursed through the rehab court.
- BIR cannot commence tax investigation if
there is an issuance of commencement order
by rehabilitation court. Such acts were held
as a direct contempt of court
- What the revenue officer should have done is
to submit the notice of informal conference to
the rehab court
2. Power of the Commissioner to Make
Assessments and Prescribe
Additional Requirements for Tax
Administration and Enforcement
*Assessment with no return: Best Evidence
Obtainable Rule
Best Evidence Obtainable Rule
- An Assessment can be based on the best
evidence obtainable through the exercise of
this functions: examining taxpayer’s books,
3rd party verification rule, inquiry into bank
deposits, & summon persons and take
testimony
- Applicable in a scenario where taxpayer did
not submit any return. CIR may prepare a
return based on the best evidence obtainable.
- Hindi pwedeng gagawa si CIR ng
assessment plucked out of thin air. The
assessment should always be based on the
best evidence obtainable. Assessments/
Returns cannot be made based on
conjectures or assumptions.
- If no evidence is obtained, you call that a
NAKED ASSESSMENT, an assessment not
supported by facts/ evidence, such is VOID
CIR v. Hantex
- Taxpayer was subject of an assessment issued by
CIR. Assessment was based on an notarized sworn
information from an informant & the photocopies of
documents issued by Hantex. Hantex questioned the
assessment, alleging it is void because it is a Naked
assessment. Such is based on conjectures,
speculations & assumptions
- Is the argument correct? SC held that arguments is
meritorious. It is a naked assessment. Hearsay
evidence can be used as basis, but it must be
verifiable/ verified by documents. Information by
informant may be used, but there must be supporting
documents. The photocopies do not have probative
value, hence cannot be used to support the
assessment. Kung ung information ng informant na lng
ung natitira, hindi mo pwedeng sabihin na yun na ln
gang basis nung assessment kasi walang document to
support it eh. Verified information does not pertain to a
notarized document, but rather to information verified/
corroborated by documents. Assessment is thus void
 CIR v. Embroidery Garments
- Revenue officers did not examine the books of
accounts, but used the information supplied by the
former manager of embroidery Garments
- CIR issued an assessment based on the sworn
statement of the general manager
- SC held it is a naked assessment. Hence, void
- Must be based on a verified information, not based
on speculations/ conjectures. Must be based on
supporting documents.
*Bakit ang daming informants? Under the NIRC, informants will earn
10% of the total amounts collected. Will it be subject to withholding
taxes? Yes it’s an income. Subject to income tax, consequently
withholding taxes.
* Inventory taking, Surveillance and to Prescribe
Presumptive Gross Sales and Receipts.
Mission order:
- Inventory taking can only be done when there is a
reason to believe that the taxpayer is not reflecting the
correct amount of gross receipts/ sales
- Surveillance ung magpapadala sila ng officer sa
business establishment ng taxpayer tapos magbabantay
sila dun for an entire day/ business hrs & based on that
they will compute the estimated gross sales/ gross
receipts, but there is a CTA decision wherein the amount
assessed as deficiency taxes through surveillance
should always be covered by an assessment. So hindi
pwedeng may mission order tapos mangongolekta lang
sila based on the mission order. That will be a violation
of the due process clause.
- Prescribing presumptive gross sales/ gross receipts
will only be allowed if the taxpayer did not keep books/
do not issue receipts. Applicable yan sa jeepney
operators
*Termination of taxable period
- 2 types of taxable period: calendar & fiscal
- In order to assess, always complete taxable period.
Kailangan tapusin bago assessment.
-Instances where CIR can terminate tax period: (Sec. 6)
HIRRO
1. taxpayer hides his/ its properties
2. taxpayer has intention to leave Philippines
3. taxpayer removes his property from his business premises
4. taxpayer retires from his business (closure, cessation)
5. taxpayer obstructs to the proceedings to the collection of taxes
- Within 30 days from cessation business,
magfile na sya ng tax return. Hence,
terminated na ung taxable period
- Individual taxpayers only have calendar year
- Corporate taxpayers ln gang pwede magfiscal
period
AMENDMENT OF RETURNS
- Any return, statement of declaration filed in any office
authorized to receive the same shall not be
withdrawn: Provided, that within 3 years from the
date of such filing, the same may be modified,
changed, or amended: Provided, further, that no
notice for audit or investigation of such return,
statement or declaration has in the meantime been
actually served upon the taxpayer.
- STEPS
1. Letter of Authority, magssubmit si client
ng documents
2. Audit findings
3. Notice of informal conference
4. Preliminary assessment notice
Pag alam naming madaming violations si client, we suggest to
“compromise the liability” by requesting the revenue officers to
reconsider the computations made. Of course, we do not advise
underhanded methods
Taxpayer’s 2017 books were subject to audit. Suggest na pwede pang
i-amend ung 2019 & 2018 kasi hindi pa na-auudit. Hindi na pwedeng i-
amend ung 2017 kasi meron ng notice for aufit.
SEC. 71. Disposition of Income Tax Returns,
Publication of Lists of Taxpayers and Filers. - After the
assessment shall have been made, the returns, together
with any corrections thereof which may have been made
by the Commissioner, shall be filed in the Office of the
Commissioner and shall constitute public records and be
open to inspection as such upon the order of the
President of the Philippines, under rules and
regulations to be presented by the Secretary of Finance,
upon recommendation of the Commissioner.
- Applies as well when there is a foreign tax authority
requesting
"SEC. 270. Unlawful Divulgence of Information. -
Except as provided in Sections 6(F) and 71 of this Code
and Section 26 of Republic Act No. 6388, any officer or
employee of the Bureau of Internal Revenue who
divulges to any person or makes known in any other
manner than may be provided by law information
regarding the business, income, or estate of any taxpayer,
the secrets, operation, style or work, or apparatus of any
manufacturer or producer, or confidential information
regarding the business of any taxpayer, knowledge of
which was acquired by him in the discharge of his
official duties, shall, upon conviction for each act or
omission, be punished by a fine of not less than Fifty
thousand pesos (P50,000) but not more than One
hundred thousand pesos (P100,000), or suffer
imprisonment of not less than two (2) years but not more
than five (5) years, or both.
- May janitor na nakarinig sa naguusap na revenue officers about a
taxpayer. Tas chinika nya. Pwede bang sabihin na liable si janitor
under Sec. 270? Hindi dahil hindi in relation to the discharge of his
duty
- Pano kung narinig ng revenue officer ung info about a taxpayer, pero
hindi nmn na-assign sa kanya yun? Narinig nya lang during lunch.
Covered ba yun? Hindi. Kasi the information has not been acquired
by him in the discharge of his official duties
"Any officer or employee of the Bureau of Internal
Revenue who divulges or makes known in any other
manner to any person other than the requesting foreign
tax authority information obtained from banks and
financial institutions pursuant to Section 6(F),
knowledge or information acquired by him in the
discharge of his official duties, shall, upon conviction, be
punished by a fine of not less than Fifty thousand pesos
(P50,000) but not more than One hundred thousand
 pesos (P100,000), or suffer imprisonment of not less than 4. Adjustment must be published in a
two (2) years but not more than five (5) years, or both." newspaper of general circulation and posted
- Revenue officer handles a case of taxpayer. Taxpayer
executed a waiver under bank secrecy law. BIR
in the provincial capitol, city or municipal hall
employee discovers marami palang millions si and two other conspicuous public place
taxpayer, tapos chinika nya. Pwede ba yun? Hindi 5. That the basis of any valuation, including the
under 270 records of consultation done, shall be public
records open to the inquiry of any taxpayer
SEC 12: Any officer or employee of an authorized agent
bank assigned to receive internal revenue tax payments
and transmit tax returns or documents to the Bureau of 4. Power to Delegate
Internal Revenue shall be subject to the same sanctions - All functions in the tax code except
and penalties prescribed in Sections 269 and 270 of this RICA
Code.
- Assuming nakita ni cashier na ang laki ng tax
na binabayaran ni taxpayer. Can she be held
Non-delegable powers of CIR (RICA)
criminally liable? Yes. Covered ng 270 1. Recommend the issuance of revenue
regulations
237-A : All pertinent provisions of the Data Privacy Act
shall likewise be applicable in the data processing of
revenue regulation officers

ACCREDIT TAX
PROCEDURAL
REQUIREMENTS
AGENTS
AND
AND PRESCRIBE
DOCUMENTARY
R 2.
-revenue regulations are issued by the
secretary of finance, but only the
commissioner can recommend the
issuance of the revenue regulations

2.1 Issue of ruling of first impression

E-Filing
Substituted Filing
- Employee will no longer file annual ITR, because
the return filed by the employer will be considered
as a substitute for ITR of the employee
- Applies only when purely compensation income
I -issuance of ruling is delegable punction,
unless if ruling of first impression, one
involving a new/ novel issue, wherein
commissioner has not yet discussed
such.
2.2 Revoking, revising and modifying a
earner, whose compensation income is earned
previously issued ruling

C
from 1 employer only whose taxes have been
correctly withheld 3.
Net Worth Method 3.1 Power to Compromise
- Administrative issuance 3.2 Power to Abate
- Method used to determine deficiency taxes Compromising tax Abatement of tax
- If there is an increase of net worth, to the
exclusion of non-taxable items, then the
increase will be treated as an undeclared (1) A reasonable (1) The tax or any
revenue doubt as to the portion thereof
- Provided under revenue regulations as a
basis for computing deficiency taxes
validity of the appears to be
applicable only in certain instances claim against the unjustly or
taxpayer exists excessively
Doctrine of legislative approval by reenactment (40%); or assessed, or
AS TO GROUNDS

-congress adopted the concept of CIR (2) The financial (2) The
position of the administration and
3. Power to Prescribe Real Property Value
taxpayer collection costs
- Commissioner has power to prescribe real
demonstrates a involved do not
property value (ZONAL VALUE)
clear inability to justify the
pay the assessed collection of the
Requirements in prescribing assessed values:
tax (10%) amount due
1. Mandatory consultation with competent
appraisers both from private and public
sectors
2. Prior notice to affected taxpayers
3. Automatic adjustment once every three
years
 Difference in 1st Ground May legal basis pero No legal basis at
doubtful. May legal all
basis pero di sure
kung tama ang
pagkaka-apply
* In compromise, if the ground is reasonable
doubt, the settlement offer must not be less than
40% of the basic tax due. If the ground is
financial position, settlement offer must not be
less than 10% of the basic tax due, does not
include interest, surcharge, & compromise
penalty.
* If it goes below the settlement rates, the
application for compromise shall be subject to
the approval of the national evaluation board,
comprising of the commissioner & the 4
deputy commissioner
Where the basic tax involved exceeds P1million,
or where the settlement offered is less than the
prescribed minimum rates, the compromise
shall be subject to the approval of the Evaluation
board
INSTANCES WHERE REGIONAL
EVALUATION BAORD MAY ACT FOR
APPLICATIONS OF COMPROMISE
-REB can recommend approval/ disapproval of
compromise, subject to approval of the
commissioner
1. The assessment was issued by the regional office of the BIR;
2. The amount involved a basic deficiency tax of P500K or less,
or those involving minor criminal violations;
3. The same was discovered by the regional and district officials
All tax cases, even criminal cases, may be
subject of a compromise, for as long as
sufficient ground exist, except the following:
1. Those involving fraud; or
2. Criminal violations of the NIRC that are
already filed in courts.
Give specific examples of tax cases that may
not be compromised
1. Withholding tax cases, unless the
applicant-taxpayer invokes provisions of
law that cast doubt on the taxpayer’s
obligation to withhold. – Tax withholding
cases cannot normally be compromised
because they involve fraud.
2. Criminal tax fraud cases confirmed as
such by the CIR or his duly authorized
representative
3. Criminal violations already filed in
court
4. Delinquent accounts with duly
approved schedule of installment
payments. – there is neither doubt nor a
possibility of financial inability on the part
of the taxpayer as he was the one who
proposed or has agreed to the schedule
of installment payments.
Does the CA have power to review
compromise agreements forged by
the CIR and taxpayer? (2010 Bar)
No, the CA does not possess such authority:
1. The power to compromise is a sole
prerogative of the CIR. It is a
discretionary power and courts have no
authority, as a general rule, to compel
him to exercise such discretion one way
or another.
2. If the CIR commits grave abuse of his
discretion by not following the
parameters set by law, the CTA, not the
CA, may correct such abuse if the matter
is appealed to it. The exercise of the
power to compromise may fall within the
parameters of “other matters” that the
CIR is empowered to perform under the
NIRC
WHEN DOES CIR ABATE?
- Ground 2: When the cost of collecting
is more than the amount to be
collected. Kung P60 lng nmn
makokolekta ng BIR, wag na lng
PP v. Tan
There was a compromise agreement. CIR and
SMB entered into an agreement where SMB will
no longer pay 300M worth of liability & will only
pay 10M. Eh nagbayad na si Tan ng 10M.
Kinuwestyon yan, sabi graft & corrupt practices
yan. Kinasuhan si Tan, the current
commissioner. Meron nga bang act na
naviolate?
SC held that Tan did not violate any tax
provision. There was a tax pyramiding in this
case. Umabot ng P300M kasi ung tax na-
impose-an ng tax. Since there is no legal basis
for tax pyramiding, the tax is unjustly/
excessively assessed. Although, the agreement
is denominated as a compromise agreement, it
is not a compromise agreement because
erroneous taxes cannot be compromised. Kung
walang basis at all, hindi yan pwedeng i-
compromise dahil only valid taxes can be
compromised. Abatement ang tamang action.
The entire wrong assessment can be removed.
Walang prescribed rates.
Example:
Revenue regulations requiring taxpayers to
secure confirmatory rulings first before the
application of a tax exemption. That is
considered as void. For purposes of
administration, pwede yan. Pero for purposes of
revoking the exemption, hind pwede. Bakit?
Because the law grants the tax exemption.
Kunware sa exemption of non-stock non-profit,
walang requirement don na dapat kukuha muna
ng confirmatory ruling for it to be exempt, hindi
pwedeng mag issue si secretary of finance,
stating that it will be an additional requirement,
that is not allowed under the law.

Defense nung nagfile ng kaso kay Tan, ung 10M

daw less than 10% or 40% of the basic tax
liability which is 300M. Pero sabi ni SC, those
prescribed rates will not be applicable because
this is not a case for compromise, but rather a
case for abatement. So in fact, even the amount
of tax due may be removed.

A
4. Power to assign/ reassign employees
designated in establishments subject to
excise tax
- Maximum period that an officer can
stay in an establishment is 2 YRS

RULE MAKING AUTHORITY OF THE

SECRETARY OF FINANCE
(can the SoF issue rules & regulations?)
The secretary of finance is granted, under Sec.
244 of the NIRC, the authority to promulgate the
necessary rules and regulations for the effective
enforcement of the provisions of the law. Such
rules and regulations, as well as administrative
opinions and rulings, ordinarily deserve to be
given weight and respect by the courts. Such
authority, however, is subject to the limitation
that the rules and regulations must not
override, but must remain consistent and in
harmony with, the law they seek to apply and
implement. It is well-settled that an
administrative agency cannot amend an act of
Congress.

Thus, when a provision of law grants tax

incentives, such incentives cannot be withdrawn
by Secretary of Finance in the guise of enacting
a regulation, as he cannot arrogate upon himself
a power reserved exclusively to Congress.