Invalidating Tax Assessment January 2024 2

01/18/2024
Invalidating Tax Assessments

Senen M. Quizon, Tax Principal (Deloitte Philippines)
Agenda
• General rules on tax assessment
- Legal basis of tax assessment
- Prescriptive period to assess
- Criteria for selection of taxpayers
- Types of audit notices
• Grounds for invalidating tax assessment

- Legal and factual bases at different
stages of tax assessment
- Notice of Discrepancy
- Preliminary Assessment Notice
- Final Assessment Notice
- Final Decision on Disputed
Assessment
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Legal basis of authority
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Power to examine taxpayers and assess correct amount of tax

Legal basis
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, notwithstanding any law requiring the prior authorization of any
government agency or instrumentality: Provided, however, That failure to
file a return shall not prevent the Commissioner from authorizing the
examination of any taxpayer.
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General rules on tax assessment
Basics of tax assessment

Statute of limitation on tax assessment
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Counted from the last day prescribed by law for the filing of the return, or
where the return is filed beyond the period, from the day the return was
actually filed (Section 203, Tax Code)
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EXCEPTION:
Applies in case of false or fraudulent return with intent to evade tax or of

failure to file a return. 10 years counted from the discovery of the falsity, fraud
or omission (Section 222, Tax Code)
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Reckoning of 10-year prescriptive period

False, fraudulent, and non-filing of tax return
A false return was filed on April 15, 1990, and the falsity was discovered
only on March 8, 1991. The assessment for the 1989 deficiency income
tax was issued on January 9, 1995.
The 10-year prescriptive period should be reckoned from 8 March 1991

(when it was discovered), not 15 April 1990 (when return was filed).
Commissioner of Internal Revenue v. Estate of Benigno P. Toda, GR

147188, 14 September 2004)
BIR tax assessment

False vs. Fraudulent return
1. False return implies deviation from truth, whether intentional or not while a
fraudulent return implies intentional or deceitful entry with intent to evade tax.
(Aznar vs. Court of Tax Appeals, G.R. No. L-20569, August 23, 1974, 58 SCRA 519; and
Estate of Fidel F. Reyes and Teresita R. Reyes v. CIR, CTA EB Case No. 189, March 31,
2007)
2. While the filing of a fraudulent return necessarily implies that the act of the taxpayer
was intentional and done with intent to evade the taxes due, the filing of a false return
can be intentional or due to honest mistake. (Commissioner of Internal Revenue v.
Philippine Daily Inquirer, Inc., G.R. No. 213943, 22 March 2017)
3. In order to render a return made by a taxpayer a "false return" within the meaning of
Section 222, of the Tax Code, there must appear, a design to mislead or deceive on
the part of the taxpayer, or at least culpable negligence. A mistake, not culpable in
respect of its value would not constitute a false return. (Commissioner of Internal
Revenue v. Ayala Hotels, Inc., CA-G.R. SP No. 70025, 19 April2004)
4. Entry of wrong information due to mistake, carelessness, or ignorance, without intent
to evade tax, does not constitute a false return [Commissioner of Internal Revenue v.
B.F. Goodrich Phils., Inc. (Goodrich), G.R. 104171, 24 February 1999]
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BIR tax assessment

False return, and failure to file return
False of fraudulent return Legal basis/Court Decision

Substantial underdeclaration, that is, failure to report Section 248(B), Tax Code/ Commissioner of Internal
sales, receipts or income and claim of deductons in an Revenue v. Asalus Corp., G.R. No. 221590, 02 February 22,
amount exceeding 30% (Section 248(B), Tax Code) 2017
The absence of income in the return (filing of deficient UCPB vs. CIR, CTA EB 567 re CTA Case No. 7259, 12 January
returns) is tantamount to an omission to file returns. 2011; and SCB vs. CIR, CTA Case No. 7253, 25 June 2010
Not considered a false or fraudulent return Legal basis/Court Decision

Failure to report as part of its income the improvements Commissioner of Internal Revenue v. Ayala Hotels, Inc., CA-
introduced by its lessees in its ITR. G.R. SP No. 70025, 19 April 2004
Hospital filed its return with the phrase "Tentative Exempt United Church of Christ in the Philippines v. Commissioner
Organization," when it is not a tax-exempt institution, and of Internal Revenue, C.T.A. Case No. EB 2346 re 9134, 02
subject to 10% preferential tax rate. August 2022
Section 248(B), Tax Code
“(B) In case of willful neglect to file the return within the period prescribed by this Code or by rules
and regulations, or in case a false or fraudulent return is willfully made, the penalty to be imposed
shall be fifty percent (50%) of the tax or of the deficiency tax, in case any payment has been made
on the basis of such return before the discovery of the falsity or fraud: Provided, That a substantial
underdeclaration of taxable sales, receipts or income, or a substantial overstatement of deductions,
as determined by the Commissioner pursuant to the rules and regulations to be promulgated by the
Secretary of Finance, shall constitute prima facie evidence of a false or fraudulent return: Provided,
further, That failure to report sales, receipts or income in an amount exceeding thirty percent
(30%) of that declared per return, and a claim of deductions in an amount exceeding thirty percent
(30%) of actual deductions, shall render the taxpayer liable for substantial underdeclaration of
sales, receipts or income or for overstatement of deductions, as mentioned herein.”
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BIR tax assessment

Reckoning of prescriptive period of assessment
1. Tax returns filed earlier than the last day of filing shall be counted from the last day prescribed for filing of the return.
Type of Return Prescribed filing deadline Actual date of filing Reckoning period
ITR (1702) April 15 April 12 April 15
2. Tax returns filed beyond the period prescribed by law shall be counted from the day the return was filed.
Type of Return Prescribed filing deadline Actual date of filing Reckoning period
ITR (1702) April 17 April 20 April 20
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BIR tax assessment

Reckoning date per type of tax return
Type of Return Date of filing
1. Income tax return (BIR Form 1702-RT, EX, MX) April 15 or 15th day of the fourth month following the close
of fiscal year
2. Withholding tax returns (BIR Form 0619E/1601EQ, Non-eFPS* – 10th day after the end of each month
0619F/1601FQ, 1601C, 1600) eFPS** – 11th - 15th depending on industry grouping
1601FQ/1601EQ - not later than the last day of the month
following the close of the quarter during which
withholding was made.
Note: Deadline of BIR Form 1600 is every 10th day after
end of each month.
3. Quarterly VAT Return (BIR Form 2550Q) 25th day following the close of each taxable quarter
* For December return, filing and remittance is every January 15.

** For December return, e-payment due is on January 20.
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Effect of filing an amended return
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Reckoning of prescriptive period of assessment

Effect of filing of an amended return
o The prescriptive period to assess commences from the filing of original return, if it is sufficiently complete to enable the
BIR to intelligently determine the proper amount to be assessed.
o The fact that amended returns were filed later neither start anew the running of the statute of limitations, nor extend its
period. (A.L Ammen Transportation, Co., Inc. v. CIR, CTA Case No. 540, 10 November 1965)
o If amended return is substantially different from the original return, the prescriptive period is counted from the filing of the
amended return. (Commissioner of Internal Revenue v. Phoenix Assurance Co., Ltd., No. L-19727 and L-19903, 20 May
1965, 14 SCRA 52)
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BIR tax assessment

When is the assessment deemed made?
An assessment is deemed made within the prescriptive period when the notice of assessment (final assessment
notice/final letter of demand) is released, mailed or sent to the taxpayer within the prescriptive period.
Notice of assessment = Final Assessment Notice (FAN)
Illustration:
Date of filing of tax return – 17 April 2013

Last day of 3-year prescriptive period – 17 April 2016
What was issued to the taxpayer as of 17 April 2016 Is the assessment already prescribed?
Preliminary Assessment Notice (PAN) Yes
Electronic Letter of Authority (eLA) Yes
Final Assessment Notice/Formal Letter of Demand No
(FAN/FLD)
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BIR tax assessment

When is the assessment made: Release or receipt
It is a settled rule in taxation that an assessment is deemed made for the purpose of giving effect thereto if it is made within the
prescribed period and is released, mailed, or sent to the taxpayer also within the same period. It is not required that the notice
be received by the taxpayer within the prescribed period. But the sending of the notice must be duly proven. (Basilan Estate,
Inc. vs. CIR, L-22429, Sept. 5, 1967)
3-year prescriptive period: August 31, 2012

Date of Service/Mailing: August 29, 2012
Date of Receipt: September 9, 2012
NOT PRESCRIBED
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Selection of tax return/taxpayer for

audit
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Selection of taxpayer for audit

BIR Audit Program
Under Revenue Memorandum Order (RMO) No. 06-2023, as amended by RMO 08-2023 and RMO 01-2024, all taxpayers are
considered possible candidates for audit, which shall include the following cases:
A. Mandatory cases B. Priority taxpayers/industries
1. Taxpayers with claim for refunds 1. Taxpayers electronically selected using
2. Taxpayers who consistently failed to remit/pay corresponding taxes due prescribed selection criteria.
reflected in the tax returns thru eFPS or who later amended tax returns 2. Audit cases handled by VAT audit selection,
a decrease or no tax due Office Audit Selection of the Assessment
3. Request for tax clearance of taxpayers due to retirement/cessation of Divisions, and Large Taxpayers Audit Unit.
business 3. Priority audit cases manually selected by
4. Request for tax clearance of taxpayers whose gross sales/receipts for Regional Directors/Associate Commissioner of
the immediately preceding year exceeds P3M or gross assets upon Large Taxpayers Service for approval of the
retirement exceeds P8 million Commissioner of Internal Revenue.
5. Cases referred to investigating office due to transfer of revenue officers
or transfer of business registration
6. Cases with discrepancy notices
7. Policy cases covered by written directive of the CIR.
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BIR VAT Audit Program
Under RMO 59-2016, cases for issue-based audit shall be selected based on the following criteria:
A. Priority cases
1. Taxpayers whose VAT compliance is below the established industry benchmarks
2. Taxpayers with zero-rated and/or exempt sales due to availment of tax incentives or exemptions
3. Taxpayers engaged in business where 80%, more or less, of their transactions are on a cash basis and whose purchases of
goods and services do not generate substantial amount of input tax, such as restaurants, remittance/payment centers, etc.
4. Taxpayers with VATable transactions which were subjected to expanded withholding tax but with no VAT remittance (Based
on BIR Form Nos. 2550Q and 1604)
5. Taxpayers who failed to remit/declare VAT due from purchase of services from non-resident aliens (Based on BIR Form Nos.
2550Q and 1600)
6. Taxpayers who fail to declare gross sales/receipts subjected to VAT withholding on purchases of goods/services with waiver
of privilege to claim input tax credit [creditable]; (Based on BIR Form Nos. 2550Q and 1600)
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BIR VAT Audit Program
A. Priority cases (cont.)

7. Taxpayers whose gross sales/receipts per income tax returns are greater than gross sales/receipts declared per VAT returns
8. Taxpayers filing percentage tax returns whose gross sales/receipts exceed the VAT threshold
B. Mandatory Case:
Taxpayers with VAT returns reflecting erroneous input tax carry-over
C. Exceptions:
1. Claims for issuance of Tax Credit Certificates/refunds; and

2. VAT returns selected for audit by the National Investigation Division under the Enforcement and Advocacy Service and by
the Regional Investigation Division of the Revenue Regional Offices
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BIR tax audit/assessment

Frequency of tax audit
Only once for a taxable year, except in the following cases under Section 235 of the Tax Code:
1. When the CIR determines that fraud, irregularities, or mistakes were committed by the taxpayer
2. When the taxpayer himself requests a re-investigation or re-examination of his books of accounts
3. When there is a need to verify a taxpayer’s compliance with withholding and other internal revenue taxes as
prescribed in a Revenue Memorandum Order issued by the CIR
4. When the taxpayer’s capital gains tax liabilities must be verified
5. When the CIR exercises his power to obtain information relative to the examination of other taxpayers (Secs. 5 and
235, NIRC).
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Issuance of another LOA for same TY

CTA Case No. 9676 (30 August 2023)
FACTS OF THE CASE:

The taxpayer received an LOA for taxable year 2007 which it was able to settle after it reached the FAN stage, that is,
after the examiners completed its reinvestigation and taxpayer agreed to pay deficiency assessed amount as a result
of reinvestigation using Agreement Form on 01 October 2012.
On 27 April 2017, the BIR, through the National Investigation Division, issued an LOA authorizing the examination of
the books of account of the taxpayer for taxable year 2007 pursuant to the Run After Tax Evaders (RATE) program.
The taxpayer contends that since its 2007 books of accounts were already subjected to full blown tax investigation
and was subsequently terminated after payment of deficiency taxes, it should no longer be assessed for the same
taxable year. Also, the taxpayer asserted that if there were findings of fraud, it should have been informed first of the
nature of fraud, otherwise, the LOA will be violative of constitutional right to due process. The taxpayer further
contends that the BIR failed to adduce any evidence that would warrant the application of 10-year prescriptive
period to assess.
BIR countered that per evaluation of the taxpayer’s records, it made a 56% underdeclaration of its sales which
constitutes a prima facie fraud under the Tax Code which would warrant the application of the 10-year prescriptive
period.
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Issuance of another LOA for same TY

CTA Case No. 9676 (30 August 2023)
CTA Decision:
The Tax Code does not absolutely bar the issuance of second LOA covering the same taxable year as provided under Section
235 of the Tax Code. The CTA also cited the case of Commissioner of Internal Revenue vs. Hon. Raul M. Gonzalez, et. al.
where the Supreme Court held that a prior terminated assessment cannot bar the issuance of a second LOA for the same
taxable year if there is a prima facie evidence of fraud.
Moreover, the CTA noted that the taxpayer alleges that the prior assessment is closed and terminated. However, it did not
present any termination letter or authority to cancel assessment (ATCA) which is required to be issued on tax assessments
on cases under reinvestigation or reconsideration where the final assessment was modified, amended or cancelled in its
entirety pursuant to Revenue Memorandum Order No. 23-06. Hence, absent the required document and expressed
stipulation in the Agreement Form that the assessment has been terminated, the assessment for taxable year 2007 is not
yet closed and terminated.
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Policy on three-year successive audit of taxpayers

Revenue Memorandum Order No. 64-2016
RULE:
In case a taxpayer has been audited for the last two (2) years and has been selected for audit on the current or 3rd year,
concerned BIR* office shall encode right away the requested audit of the subject taxpayer in electronic Letter of Authority
Monitoring System (eLAMs)/ electronic Tax Information System (eTIS)- Case Management System (CMS) which shall be approved
by the Regional Director/Assistant Commissioner who heads the investigating office.
DEFICIENCY PENALTY ASSESSMENT: Only 25% surcharge unless the under declaration of income or overstatement of
expenses/deductions reaches 30% or more which shall be imposed with a fifty percent (50%) surcharge.
* Revenue District Office (RDO)/Large Taxpayer Division (LTD)/Large Taxpayer Assistance Division (LTAD)
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BIR tax assessment

Types of audit notices
1. Electronic Letter of Authority (eLA) or

Letter of Authority (LOA)
2. Letter Notice (LN)
3. Tax Verification Notice (TVN)
4. Mission Orders (MO)
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BIR tax assessment

Letter of authority (LOA) or electronic Letter of Authority (eLA)
Letter of Authority (LOA)
o Authority given to the appropriate revenue officer assigned to perform

assessment or audit functions by examining the books of account and
other accounting records of a taxpayer
o 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. (Medicard Philippines,
Inc. vs. Commissioner of Internal Revenue, G.R. No. 222743, April 5,
2017).
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Letter of Authority or Electronic Letter of Authority (eLOA)

Scope & Coverage
SCOPE
1. Audit or investigation of all internal revenue taxes, including
withholding taxes.
2. Claims for tax refund/credit, audit of taxpayers retiring from business
or undergoing corporate reorganization and other cases where TVNs
were previously authorized for audit/verification of tax liabilities and
other audit-related activities.
COVERAGE
Only one taxable year (CY or FY) except:
• Tax fraud cases authorized by the Commissioner or Deputy
Commissioner
• Excise tax cases
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Grounds for invalidating a letter of

assessment
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Rule on issuance of LOAs

LOA with "unverified prior years"
1. AN LOA SHOULD COVER A TAXABLE PERIOD NOT EXCEEDING ONE

TAXABLE YEAR
Section C of Revenue Memorandum Order No. 43-90 (20 September

1990) provides:
"3. A Letter of Authority should cover a taxable period not exceeding one
taxable year. The practice of issuing L/As covering audit of "unverified
prior years" is hereby prohibited. If the audit of a taxpayer shall include
more than one taxable period, the other periods or years shall be
specifically indicated in the L/A." (Underscoring supplied)
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LOA with "unverified prior years"
What is my fiscal year?

A taxpayer’s fiscal year is the end year of a given 12-month period. A fiscal year from 01
April 2020 to 31 March 2021 would be FY 2021.
JURISPRUDENCE
a. When an LOA authorizes an examination for a taxable year and "unverified prior years,"
in contravention of RMO 43-90, it is not void in its entirety and shall be valid as to the
declared taxable year. (Commissioner of Internal Revenue v. Gaw, Jr., G.R. No. 248070,
01 October 2019)
b. LOA issued is for Fiscal Year Ending 2003 and Unverified Prior Years. The LOA does not
strictly comply with RMO 43-90 because it includes unverified prior years. This does not
mean, however, that the entire LOA is void. (Commissioner of Internal Revenue v. De La
Salle University, Inc., G.R. No. 196596, 09 November 2016)
c. LOA is for the taxable year 1998 and since the taxpayer adopted a fiscal year (FY), it
covers the period from 1 April 1997 to 31 March 1998. However, the deficiency income
tax assessment also covers 1 April 1998 to 31 March 1999, under FY 1999. Revenue
examiners exceeded their authority when they issued the assessment against the
taxpayer for FY 1999 and, consequently, declared the assessment covering FY 1999 to
be without force and effect. (Commissioner of Internal Revenue vs. Lancaster
Philippines, Inc., GR 183408, 12 July 2017)
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LOA coverage
Period covered by tax assessment: TY 2018

Taxpayer’s accounting period: Fiscal Year (01 April 2017 – 31 March 2018)
BIR Assessment: CY 2018 (January - December 2018)
VALID PERIOD:
01 January to 31 March 2018
NOT VALID
01 April – 31 December 2018
The period from 01 April – 31 December 2018 belongs to

FY 2019 (01 April 2018 – 31 March 2019, which is not covered by
the authority of the BIR to assess.
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Issuance of LOA
Requirement for new LOA in case of reassignment
2. ASSESSMENT IS VOID IF NO NEW LOA ON TRANSFER OF CASES TO REVENUE OFFICERS IS ISSUED
a. Any re-assignment/transfer of cases to another revenue officer(s), and revalidation of a LOA which
had already expired, shall require the issuance of a new LOA. In the absence of a new LOA issued in
favor of the revenue officers who recommended the issuance of the deficiency tax assessments
against respondent, the resulting assessments are void. (Commissioner of Internal Revenue v. Opulent
Landowners, Inc., G.R. Nos. 249883-84 (Notice), 27 January 2020)
b. Section C (1) and (5) of RMO No. 43-90 requires the issuance of a new LOA in cases of reassignment/
transfer of cases to another Revenue Officer (RO). Reliance upon the Memorandum Referral for the
authority to conduct audit and investigation violates the rules and established jurisprudence. (Linde
Philippines, Inc. v. Commissioner of Internal Revenue, CTA EB Case No. 2194 re: Case No. 8783, 01 July
2021)
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Issuance of LOA
LOA if not served within 30 days is still valid
a. Under RAMO 01-00, there is a 30-day expiration period for service for LOAs.
Upon expiration, the LOA becomes wholly unenforceable, inasmuch as it cannot be served
without revalidation upon the taxpayer who, in turn, has the right to refuse the same.
Presence of BIR personnel in a taxpayer's premises for tax audit without revalidated LOA
shall be illegitimate. (AFP General Insurance Corp. v. Commissioner of Internal Revenue,
G.R. No. 222133, 04 November 2020)
b. RMC 82-2022 (30 June 2022) clarified that RAMO 01-00 has been amended by RMO 01-
2020
30- day period to serve an LOA is no longer applicable. Under RAMO 1-2020, the entire
audit process must be completed within a period of 180 days for RDO cases 240 days for LT
cases from the date of issuance of eL,A. Non-observance on the timeline is gross neglect
of duty which will subject the revenue personnel to administrative sanction.
Starting the effectivity of RMC 82-2022, eLA which remains unserved upon the effectivity
of the circular or have been served beyond the 30-day period from the date of its issuance
shall still be considered valid and enforceable, provided that the 180-day/240-day period
to complete the audit process has not yet expired.
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Letter Notice (LN)
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Letter Notice
Nature, coverage and types
Nature and coverage
o Issued for under-declaration of sales and over-claimed purchases discovered under the
Reconciliation of Listing for Enforcement System (RELIEF) and TPM – BOC Data Program
o Covers only the tax indicated therein on a given particular period or quarter
o Similar to a notice of audit or investigation which has the effect of disqualifying taxpayers
from amending any return which is the subject of such audit or investigation (RMC 40-
03)
Types of LN
1. RELIEF-SLSP & Third Party Matching (TPM) –Bureau of Customs (BOC) LN –

computerized matching of information/data by third party (TP) sources against
declarations per VAT return (Relief -RMO 30-03, 42-03, 24-04, 32-05, 32-07, 36-08;
TPM-BOC – RMO 34-04, 46-04, 32-05, 32-07)
2. Taxpayer Reconciliation System (TRS) – LN - on information/data provided by
withholding agents/payors and payees/income recipients against taxpayers' declaration
per income /VAT/percentage/ withholding tax returns (RMO 28-07 as amended by RMO
04-08)
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Letter Notices
Guidelines on issuance of LN (RMO 13-2012)
• If eLA is issued prior to LN assignment, the Revenue Officer (RO) handling the eLA
shall also be assigned the LN.
• The LN shall not be considered closed but shall be consolidated with the eLA.
• The policy of non-closure of the eLA without the resolution of the LN shall be
strictly enforced.
• If an eLA is terminated before an LN is issued, the investigating office shall request
the tax docket from the assessment or administrative division, and shall ascertain
whether the discrepancies reflected in the LN are in the report of investigation.
• If discrepancies are not included, the RO shall pursue action on the LN. If the
discrepancies are considered, the RO shall recommend cancellation of the LN and
the tax docket shall contain the LN, photocopies of the Memorandum Audit Report,
Working Papers showing reconciliation undertaken, BIR Form 0500 Series and other
applicable documentary attachments.
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Letter Notices
Sources of Discrepancies
1. Sales reported by seller vs purchases reported

by the buyer (VAT and income tax) - SLSP
2. EWT remitted by buyer vs CWT claimed by
seller/supplier CWT) - MAP
3. Importations recorded by BOC vs
importations reported in the SLSP (VAT and
income tax)
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Grounds for invalidating letter of notice

(LN)
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Letter Notice
Letter Notice not a substitute for LOA
1. LN WITHOUT LOA IS NOT VALID (LN IS NOT A SUBSTITUTE FOR LOA)
In case no LOA but only LN was issued prior to the issuance of a PAN and FAN, the assessment shall not be valid. Unless authorized
by the CIR himself or by his duly authorized representative, through an LOA, an examination of the taxpayer cannot be undertaken.
The LN cannot be converted into the LOA required under the law even if the same was issued by the CIR himself.
LOA LN
LOA addressed to a revenue officer is specifically required under the An LN is not found in the NIRC and is only for the purpose
NIRC before an examination of a taxpayer may be had of notifying the taxpayer that a discrepancy is found based
on the BIR's RELIEF System
An LOA is valid only for 30 days from date of issue No limitation
An LOA gives the revenue officer only a period of 120 days from No limitation
receipt of LOA to conduct his examination of the taxpayer
(Medicard Philippines Inc. vs. Commissioner of Internal Revenue, G.R. 222743, 05 November 2017)
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Letter Notice
Unverified TPI under LN is not valid
RMC 075-18
o Mandates issuance of letter of authority on all tax

examination and assessment
o Any examiner or revenue officer initiating tax assessments
or performing assessment functions without an LOA shall be
subject to appropriate administrative sanctions.
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Letter Notice
Unverified TPI under LN is not valid
2. UNVERIFIED THIRD-PARTY INFORMATION RENDERS THE ASSESSMENT INVALID
BIR is required under RMO 04-2003 and 46-2004 to verify the amounts it obtained from its computerized/third-
party matching by securing confirmation or certification from the third-party information source, or from
externally sourced data.
Without certification, the data gathered from the computerized/third party matching are left unverified.
Unverified data cannot be considered as proper factual bases for the assessment against respondent. In order to
be valid, an assessment must be based on actual facts supported by credible evidence. (Commissioner of Internal
Revenue v. MCC Transport Singapore Pte. Ltd., G.R. No. 255382 (Notice), 28 June 28, 2021) and Commissioner of
Internal Revenue v. MCC Transport Singapore Pte. Ltd., C.T.A. EB Case No. 1961 14 July 2020)
WHAT TO DO:
Reconcile difference and secure certification from clients to prove that LN figures have no basis.
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Tax Verification Notice (TVN)
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Tax Verification Notice

Nature and coverage (RMO 48-18)
Nature
Tax Verification Notice (TVN) is issued for verification of estate tax cases and refund claims
Coverage
1. Verification of estate tax cases where the decedent has no other tax liabilities (RMO 69-2010)
2. Processing of VAT refund claims under Section 112 of the Tax Code, as amended
3. Claims arising from erroneous/double payment of taxes, including double payment of taxes due to system
error/glitch
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Assessment based on TVN

TVN is not an LOA
ASSESSMENT BASED ON TVN WITHOUT LOA IS NOT VALID
Without an LOA, a revenue examiner may not be considered armed with authority to conduct the examination of the
books of a taxpayer and hence, any assessment for deficiency taxes resulted therefrom is void.
(Rieckermann Philippines, Inc. v. Commissioner of Internal Revenue, C.T.A. Case No. 9613 , 22 July 2021; Jinzai Experts, Inc.
v. Commissioner of Internal Revenue, C.T.A. Case No. 9473 (Resolution), 18 February 2020; Makati Agro Trading, Inc. v.
Commissioner of Internal Revenue, C.T.A. Case No. 9735, 31 October 2019; and Missouri Square, Inc. v. Commissioner of
Internal Revenue, C.T.A. Case No. 8688, 26 March 2019)
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Mission Orders (MO)
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Types of assessment notices

Mission Orders (MO)
Coverage: All surveillance and stock-taking activities
Purpose:
To monitor taxpayers on non-compliance with
requirements on issuance of receipts, filing of returns,
declaration of taxable transactions, taxpayer
registration, and payment of correct amount of taxes.
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Mission orders
Types of surveillance and compliance verification drives
1. Covert Surveillance – surreptitious and undercover watch on the business operations of a person as well as
movement of goods or rendition of services.
2. Overt Surveillance – commences with the inventory-taking of the business documents followed by the actual
observation and close monitoring of the business activities of such person.
3. Short-Duration Surveillance (Tax Compliance Check) – business operations of the target taxpayer are observed for
purposes of detecting non-compliance with the Bureau's primary and secondary registration requirements.
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Validity of assessment based on extrapolation method

1. The taxpayer was assessed for deficiency tax based on its alleged unreported sales. The assessment was a
product of extrapolated data per monitoring/surveillance conducted by the BIR.
2. The taxpayer refuted the assessment for being speculative, hypothetical, and fictional, the same being based on
mere "extrapolation" unsupported by written testimony or report of a duly authorized personnel, who is
professionally competent to perform statistical computations.
CTA
1. Assessments issued based on extrapolation method are valid pursuant to and subject to compliance with the
provisions of Section 6(C) of the NIRC of 1997, as amended, and as implemented by Revenue Memorandum
Order (RMO) No. 003-09.
2. Under RMO 03-09, the BIR may conduct surveillance activities and extrapolate the gathered from the surveillance
using prescribed formula if there is reason to believe that taxpayer is not declaring his correct income, sales or
receipts for internal revenue tax purposes. The extrapolated data shall be compared with the recently filed
monthly/quarterly income tax returns to determine significant variations in sales/ revenues.
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Validity of assessment based on extrapolation method

3. Since there is sufficient reason to believe that the taxpayer had undeclared its sales and considering that no evidence
was presented to controvert the BIR findings, resort to surveillance and to extrapolation method in assessing the
taxpayer for undeclared sales are justified and in accordance with Section 6(C) of the NIRC of 1997, as amended.
Consequently, the sales amounts used by the BIR can be considered as prima facie valid and correct for purposes of
determining the internal revenue tax liabilities.
CTA Case No. 8556 (Heavenly Urban Chef v. CIR, August 9, 2016)
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Mode of service
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Mode of service (Notice of Assessment)

RR 12-99, as amended by RR 18-13, RMO 19-2015, RMO 40-2019 and RMC 110-20
1. Personal service – deliver personally the notice of assessment at the taxpayers’ registered or known address or wherever he
may be found. Known address - place other than the registered address where business activities of the party are conducted
or his place of residence.
2. Substituted service – if personal service is not practicable, that is, party is not present at the registered or known address
under the following circumstances:
a. The notice may be left at the party's registered address, with his clerk or with a person having charge thereof.
b. If the known address is a place where business activities of the party are conducted, the notice may be left with his clerk
or with a person having charge thereof.
c. If the known address is the place of residence, substituted service can be made by leaving the copy with a person of legal
age residing therein.
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Mode of service (Notice of Assessment)

RR 12-99, as amended by RR 18-13, RMO 19-2015, RMO 40-2019 and RMC 110-20
d. Should the party be found at his registered or known address or any other place but refuse to receive the notice, the
revenue officers concerned shall bring a barangay official and two (2) disinterested witnesses in the presence of the party
so that they may personally observe and attest to such act of refusal. The notice shall then be given to said barangay
official. Such facts shall be contained in the bottom portion of the notice, as well as the names, official position and
signatures of the witnesses.
"Disinterested witnesses" refers to persons of legal age other than employees of the Bureau of Internal Revenue.
3. Service by mail - sending ofcopy of the notice by registered mail to the registered or known address of the party with
instruction to the Postmaster to return the mail to the sender after ten (10) days, if undelivered. A copy of the notice may
also be sent through reputable professional courier service. If no registry or reputable professional courier service is available
in the locality of the addressee, service may be done by ordinary mail.
4. Service to the tax agent/practitioner - Sending of notice to appointed tax agents
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Mode of service (Warrant of Garnishment)

RR 11-2023 (14 September 2023)
o Prescribes the use of electronic e-mail and electronic signature as additional mode of service of warrant of garnishment.
o The Regional Director concerned, Assistant Commissioner-Collection Service (CS), Assistant Commissioner-Large Taxpayers
Service (LTS), and Chief, Large Taxpayers District Offices (LTDOs), shall issue and electronically sign the WGs issued against the
deposits of the delinquent taxpayer
o The Collection Division concerned, Accounts Receivable Monitoring Division (ARMD), LT-Collection Enforcement Division
(LTCED), and the LTDO concerned shall use the Office's official electronic mail address to transmit and serve the signed WGs
to the Bank Head Offices and Bank Branches within the locality of the registered taxpayer simultaneously, showing the details
of the tax liabilities of the taxpayers over which the corresponding WGs are based and issued;
o Bank Head Offices and Bank Branches are required to provide their official email address, if not yet available, to the
concerned BIR office where they are registered
o Service thru e-mail is complete at the time of such e-mail is made, or, when available, at the time that the electronic
notification of service of the WGs is sent. The Collection Division, ARMD, LTCED, and the LTDOs concerned, however, may
request for an acknowledgement receipt of the signed WGs from the authorized official of the concerned banks
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Invalidating tax assessment

Proof of service of tax assessment
When a mailed matter is sent by registered mail, there exists a presumption that it was received in the regular course of
mail.
A direct denial of the receipt of the assessment shifts the burden upon the BIR to prove that the mailed letter was
indeed received by the addressee. (Republic v. Court of Appeals, 149 SCRA 351)
Facts to raise the presumption that mail was received in the regular course of mail are:
(a) that the letter was properly addressed with postage prepaid; and
(b) that it was mailed.
(Barcelon, Roxas Securities, Inc. vs. CIR, G.R. No. 157064, 07 August 2006 citing Protector's Services, Inc. vs. Court of
Appeals, G.R. No. 386 Phil. 611, 623 (2000)]
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Invalidating tax assessment

Proof of service of assessment
Proof of mailing (CIR vs. Metro Star Superama, Inc. G.R. No. 185371, 08 December 2010).
1. Registry receipt issued by the Bureau of Posts
2. Registry return card (signed by taxpayer or authorized representative)
3. Certification issued by the Bureau of Posts and other documents executed with the intervention of Bureau
of Posts
BIR Transmittal Records – Insufficient to establish that taxpayer actually received the assessment notice. (People
of the Phils. v. AML Marine Industrial Corp., CTA Criminal Case No. 0-105, 09 August 2011, Barcelon, Roxas
Securities v. CIR, G.R. No. 157064, 07 August 2006)
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Submission of documents
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Sample List of Documents for Submission to BIR
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Retention period for books of accounts and accounting records

Republic Act No. 11976 or Ease of Paying Taxes (EOPT)
Period to preserve books of accounts and other accounting records reduced from 10 to five (5) years from the day following the
deadline in filing a return, or if filed after the deadline, from the date of the filing of the return, for the taxable year when the
last entry was made in the books of accounts.
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Issuance of Subpoena Duces Tecum

Guidelines and procedures on issuance of SDT (RMO 45-10 and RMO 10-13)
Issuance of First Request for issuance Legal service/division to Taxpayer submission

Notice (10 days of SDT (10 calendar evaluate/issue SDT on the 14th day
from receipt of days from receipt of within two days from from date of SDT
final notice Criminal
LOA receipt of request issuance Prosecution
LOA & Notice of Issuance of Legal service/division Revenue Officer to Taxpayer submission
Presentation/ Second and Final to issue SDT within 5 issue SDT within 3 on the 14th day
Submission of Notice (10 days days from receipt of days from SDT from date of SDT
Documents from receipt of request issuance issuance
(10 days) first notice
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Non-withdrawal of criminal complaint and applicable penalty

RMO 10-2013
o SDT shall be issued to the partner, president, general manager, branch manager, treasurer, registered officer-in-charge,
employee/s or other persons responsible for the custody of the books of accounts and other accounting record
o Once the Complaint-Affidavit has been filed for violation of Section 266 ("Failure to Obey Summons") of the NIRC, as
amended, no prosecuting officer of the Bureau shall cause the withdrawal or dismissal of the case, notwithstanding the
subsequent submission of documents indicated in the SDT.
o Failure to produce books of accounts and other records is punishable by a fine not less than P5,000 but not more than
P10,000 and suffer imprisonment of not less than one (1) Year but not more than two (2) years.
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SDT applies also to verification and monitoring of taxpayers’ compliance

RMO 33-2023
a. For registered taxpayers
o Payment of annual registration fee (no longer required under EOPT)

o Issuance of sales invoice or official receipts
o Keeping of books of accounts
o Withholding of tax
o Filing of information returns
o Other data relevant or material to the inquiry
b. For unregistered taxpayers – the concerned office shall notify taxpayers to register and pay voluntarily on any unpaid taxes
on past transactions. In case of failure to register and/or pay tax obligations, case to be endorsed for investigation under
RATE case and/or for other enforcement actions.
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Best evidence rule
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Assessment based on “best evidence obtainable rule”

Revenue Memorandum Circular No. 23-00)
Grounds on assessment based on “best evidence obtainable rule”

(1) the report or records requested from the taxpayer are not forthcoming, that is, the records are lost;
(2) the taxpayer refuses to submit such records; and
(3) the reports submitted are false, incomplete or erroneous.
Assessment based on “best evidence obtainable rule” shall only be issued after a criminal case has been instituted for failure to
obey summons.
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Best evidence obtainable rule

As ground for compromise (RMC 034-14)
• An assessment based on "Best Evidence Obtainable Rule“ will not be automatically considered as a doubtful assessment as
grounds for applying for compromise settlement under Section 204(A) of the Tax Code.
• Scrutiny as to the surrounding circumstances that led to the issuance of such an assessment shall be thoroughly evaluated by
the BIR.
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Stages of tax assesment
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LETTER OF
AUTHORITY
NOTICE OF
Stages of Tax Assessment: A quick review
DISCREPANCY
(5/30 days)
10 days 60 180
days 30
Request for days Submission of
FINAL days
15 ASSESSMENT Reinvestigation documents
PRELIMINARY
No Action Court of
days NOTICE (FAN)
ASSESSMENT / FINAL LETTER 30 Tax
NOTICE (PAN) OF DEMAND days Appeals
(15 days) (30 days) 180 days FDDA**
Request for
Reconsideration
Office of the
Commissioner 180** + 30 days (inaction)
• The decision of the CTA En Banc is appealable to the Supreme Court.
** The 180 days should be reckoned from submission of protest (request for reconsideration) or submission of required supporting or adverse decision + 30
days
documents in support of protest (request for reinvestigation). (Nueva Ecija II Electric Cooperative, Inc.-Area 2 v. Commissioner of
Internal Revenue, GR 258101, 19 April 2022)
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Notice of Discrepancy
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Nature of Notice of Discrepancy (NOD)

Notice of informal conference (NIC) to NOD
Notice of Discrepancy (NOD) - contains initial report of findings, not yet a deficiency tax assessment. Initial findings often
involve discrepancies as a result of matching of records.
Prior to 2013 2013 -2017 2018 February – 2020 October

(RR 12-99) (RR 18-2013) 2020 September and onwards
(RR 07-2018) (RR 22-2020)
NIC - 15 days within which RR 18-2013 removed the Reinstated the NIC – The Introduced the notice of
taxpayer should respond NIC. Taxpayers to receive informal conference shall in no discrepancy (NOD) – Taxpayer
from date of receipt of the immediately PAN after case extend beyond 30 days must present his/its side
notice for informal evaluation of documents from receipt of the notice for within five days from receipt
conference informal conference. of NOD and if more time is
needed, submit documents
after discussion within 30 days
from receipt of NOD.
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Notice of Discrepancy (NOD)

Prescribed NOD format (RMC 102-2020) and sample NOD findings
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Common tax audit findings on EWTs

Non-withholding of tax
1. Non-withholding/underwithholding of tax – failure to withhold on income payments subject to

expanded/creditable withholding tax
How does the BIR check or discover non- and under withholding during tax audit?
Comparison of expenses per AFS/TB and alphalist (BIR Form 1604E)

If expenses reported in AFS/TB are higher than in alphalist (BIR Form 1604E), the variance is considered income
payments not subject to withholding tax.
© 2017 Navarro Amper & Co. All rights reserved. Basics of expanded withholding tax 70
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Illustration
FS/TB Amount EWT Rate Tax Due
Purchases – goods 80,000 1% 800
Purchases –services 50,000 2% 1,000
Professional fees 100,000 15% 15,000
Income payment to 200,000 2% 4,000
contractors
Total 20,800
Less: withholding tax returns 16,800
Deficiency expanded withholding tax 4,000
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2. Undeclared Income/Revenue/Receipts/Sales
How does the BIR check or discover non- and under withholding during tax audit?
The undeclared income refers to the revenue/receipts/sales allegedly not reported in the taxpayer’s duly filed ITR.
Usually, in this finding, the BIR performs comparison of the following:
Revenue/Receipts/Sales per VAT returns (may be adjusted by the beginning and ending balances of receivables) vs.
Revenue/Receipts/Sales per ITR and/or AFS; or
Revenue/Receipts/Sales reported in the Summary List of Sales (“SLS”) vs. Revenue/Receipts/Sales per Certificate of
Creditable Tax Withheld at Source (“BIR Form No. 2307” or “SAWT”); or
Revenue/Receipts/Sales reported in the VAT returns/SLS vs. Revenue/Receipts/Sales per third party information.
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Unaccounted source of cash
2. Unaccounted source of cash – This stems from comparison of the amounts reported in the alphabetical list
(alphalist)/withholding tax return and financial statement/trial balance.
Comparison between Alphalist and FS
Income Payment Per Alphalist Per Financial Difference

(1604-E) Statement
Professional Fee 5,500,000 5,000,000 500,000
Commission Fee 3,600,000 3,000,000 600,000
1,100,000
BIR Findings: Income payments were not fully reported in the financial statements and are considered as unaccounted
source of cash leading to the inference that part of the income were not declared (Perez vs. CTA & CIR, L-10507, 30 May
1958)
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Unaccounted source of cash
Comparison between EWT returns and F/S
1. Talent fee per EWT return 288,000 To do: There is a need to provide reconciliation or satisfactory
Less: Talent fee per F/S 288,000 explanation for the discrepancy. A verification must be made
Difference 0 whether the discrepancy is a product of classification
error/reclassification, or other mistake.
2. Payment to contractors per EWT 550,000
Argument: BIR should present proof that the difference brought
Less: payment to contractors per F/S 500,000
about by the mathematical comparison was an actual source of
Difference 50,000
taxable income. Even assuming that there exists unaccounted
source of cash or undeclared income, there also exist payments or
expenses which were unreported. If this is the case, the
undeclared income will effectively be offset with the consideration
of the related expenses. (East Asia Power CTA Case No. 8182)
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What to do at the NOD stage
o Schedule a meeting with revenue/tax examiners on or before 5th day from receipt of NOD but may occur anytime
within the 30-day period
o Prepare reconciliation/explanation and supporting documents to account for discrepancies
- Provide explanation of discrepancy (timing issue, etc.) during discussion of discrepancy
- Objective is to substantially reduce potential deficiency tax assessment based on the NOD
o If more time needed to provide supporting documents, taxpayer may submit documents within 30 days from receipt of
NOD.
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Sample reply to NOD
o No prescribed format and requirement as to content of reply

o Provide explanation on discrepancy and attach supporting
documents
o Address the legal issues by citing provisions of Tax Code and
regulations against initial findings.
o Since it is only an initial finding, revenue officers may still include
other findings after submission of explanation and documents
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What happens after discussion of discrepancy
AGREE DISAGREE
Taxpayer agrees with the initial Taxpayer disputes initial findings in the
assessment findings of the BIR NOD report
The taxpayer pays deficiency taxes and applicable • Taxpayer disputes initial findings under NOD
penalties using the Payment Form for each tax type during discussion of discrepancy
(BIR Form 0605) signed by the RDO. • If it is found that the taxpayer is still liable for
deficiency tax after presenting his side, the
Risk of paying at the NOD stage investigating office shall endorse the case to
approving official in the Regional Office or
o BIR may still issue an assessment and claim that National Office for issuance of Preliminary
payment is for uncontested amount; ensure that Assessment Notice (PAN).
agreed amount covers all deficiency taxes • PAN to be issued within 10 days from conclusion
of discussion.
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Issuance of Preliminary Assessment

Notice (PAN)
2020 Navarro, Amper & Co. All Rights Reserved. Presentation title 78
[To edit, click View > Slide Master > Slide Master]
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Issuance of PAN
Procedures
• The PAN is the notice issued by the Assessment

Division informing the taxpayer of the BIR’s proposed
assessment during the tax investigation.
• The PAN includes the computational details of the
findings together with the facts and bases in law and
rules and regulations on how the BIR founded its
items of assessment.
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Exceptions to issuance of the PAN

Section 228, Tax Code
No PAN is required to be issued in any of the following cases:
a. When the finding for any deficiency tax is the result of mathematical error in the computation of the tax appearing on the face of the
tax return filed by the taxpayer; or
b. When a discrepancy has been determined between the tax withheld and the amount actually remitted by the withholding agent; or
c. When a taxpayer who opted to claim a refund or tax credit of excess creditable withholding tax for a taxable period was determined
to have carried over and automatically applied the same amount claimed against the estimated tax liabilities for the taxable quarter
or quarters of the succeeding taxable year; or
d. When the excise tax due on excisable articles has not been paid; or
e. When an article locally purchased or imported by an exempt person, such as, but not limited to vehicles, capital equipment,
machineries and spare parts, has been sold, traded, or transferred to non-exempt persons.
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Preliminary Assessment Notice (PAN)

What to do at PAN stage
Sample Reply
o Submit written reply within 15 days from receipt of PAN,

include explanation, reconciliation schedules and
supporting documents to its arguments
o Failure to reply to PAN will lead to issuance of FAN
o Formal letter of demand or final assessment notice (FAN)

shall be issued within 15 days from filing/submission of
reply to PAN
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Issuance of PAN
Reply to the PAN
AGREE DISAGREE
Taxpayer confirms BIR assessment Taxpayer replies to the PAN
• Taxpayer is given 15 days to reply on

The taxpayer pays deficiency taxes and
the findings in the PAN and provide
applicable penalties using the Payment
reconciliation schedules and supporting
Form for each tax type (BIR Form 0605)
documents to its arguments.
signed by the RDO.
• Failure to reply to the PAN will lead to
the issuance of FAN. FAN to be issued
within 15 days from reply to PAN
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Issuance of FAN/FLD
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Issuance of FAN/FLD
What is FAN/FLD?
• The FAN/FLD contains the final findings of the BIR.
• FAN/FLD is issued when the taxpayer fails to reply to the PAN or

when the taxpayer’s reply to the PAN is without merit.
• The FAN/FLD calls for the payment of the taxpayer's deficiency

tax or taxes and it shall state the facts, the law, rules and
regulations, or jurisprudence on which the assessment is based;
otherwise, the assessment shall be void
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Protesting the FAN/FLD

Content of protest to the FAN (RMC 15-2020)
1. The protest must be addressed to Assistant Commissioner/Regional Director or Authorized Higher Revenue Official and filed
with the office of the concerned Revenue Official (Office that issued the FLD/FAN)
2. The protest must indicate whether it is a request for reconsideration or reinvestigation.
3. The protest must state: (a) the date of the assessment notice; (b) nature of protest; (c) if reinvestigation, specify the newly
discovered or additional evidence you intend to present; and (d) applicable law, rules and regulations or jurisprudence on
which the protest is based.
Protest to the FAN/FLD without the above information shall be considered void and without force and effect. In case you fail to
file a valid protest against the FLD/FAN within the 30-day period, the deficiency tax assessment shall become final, executory and
demandable, and no request for reconsideration or reinvestigation shall be granted.
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Addressed to Assistant
Commissioner/Regional Director or
Authorized Higher Revenue Official and filed
with the office of the concerned Revenue
Official
Date of assessment notice
Indicate whether protest is a request for

reinvestigation or reconsideration
Discuss/present legal and factual basis for each

item of assessment
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Pro forma protest
Sample pro forma protest letter
Pro forma protest in nature is void and without force and effect. For filing a pro forma protest, the assessment becomes
final, executory, and demandable. There is no other recourse but to fulfill tax obligations to the State by satisfying the tax
deficiencies indicated in the Formal Letter of Demand. (Gaw, Jr. v. Commissioner of Internal Revenue, C.T.A. Case No. 8502,
02 September 2016)
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Issuance of FAN/FLD
Request for reconsideration vs reinvestigation
DIFFERENCE BETWEEN REQUEST FOR REINVESTIGATION AND RECONSIDERATION

1. Request for reconsideration — refers to a plea of re-evaluation of an assessment on the basis of existing records without
need of additional evidence. It may involve both a question of fact or of law or both.
2. Request for reinvestigation — refers to a plea of re-evaluation of an assessment on the basis of newly discovered or
additional evidence that a taxpayer intends to present in the reinvestigation. It may also involve a question of fact or of law
or both.
Request for reconsideration Request for reinvestigation
Re-evaluation based on existing records Re-evaluation based on new or additional evidence
No requirement to submit new or additional documents Required to submit all relevant supporting documents in support of his
protest within sixty (60) days from date of filing of his letter of protest
Filing of reconsideration will not stop the running of prescriptive period Toll or suspend the running of prescriptive period to collect
to collect
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The BIR has a period of five (5) years to effect collection of the tax assessed, reckoned from the date of the release, mailing or
sending by the BIR of the assessment notice to the taxpayer (Section 222, Tax Code). The date of receipt of the FLD and FAN
should be regarded as the date when the FLD and FAN were released, mailed or sent to the taxpayer.
EXAMPLE: In case FAN was received on 08 June 2021, the BIR will have until 08 June 2026 within which to collect the deficiency
taxes.
What is the impact of grant of request for reinvestigation on the five-year period to collect?
FAN 08 June
08 June
2021 2026
FAN 08 July
08 June 2027
2021
START Reinvestigation SUSPENDED FDDA RESUME
granted on on 08
08 July 2021 July
2022
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Protest to the FAN/FLD

When to file a request for reconsideration or reinvestigation
Request for reconsideration Request for reinvestigation

1. You are confident with your arguments, and supporting 1. If you require more time to prepare and present
documents are sufficient to dispute the tax assessment additional documents
2. If question is entirely legal, and taxpayer is ready to go to 2. Expectation of further reduction of assessed amount until
court settlement
3. No more new or additional evidence may be presented 3. Buy more time to prepare for judicial remedy
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Issuance of FAN/FLD
Replying to the FAN/FLD
AGREE DISAGREE
Taxpayer confirms assessment of Taxpayer protests the FAN/FLD

the BIR
• If denied, assessment division to issue
• The taxpayer pays deficiency taxes and FDDA.
applicable penalties, for fully or partially • If approved, approval letter will be
accepted items of assessment, using the issued and docket will be returned to
Payment Form for each tax type (BIR the appropriate BIR office (RDO or LT
Form 0605) signed by the RDO. office)
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Request for reinvestigation

Approval: Express or implied
Things to remember on request for reinvestigation

1. The act of requesting a reinvestigation alone does not suspend the period. The request should first be granted, in order to
effect suspension of period to collect (Bank of the Philippine Islands v. Commissioner of Internal Revenue, G.R. No. 174942, 07
March 2008)
2. The grant may be expressed in communications with the taxpayer or implied from the actions of the respondent BIR
Commissioner or his authorized BIR representatives in response to the request for reinvestigation. (Bank of the Philippine
Islands v. Commissioner of Internal Revenue, G.R. No. 139736, [17 October 2005], 510 PHIL 1-37)
IMPLIED
- After receiving the protest letters of taxpayer, BIR sent a tax examiner to conduct the reinvestigation; as a result of which,
the original assessment against was revised by permitting him to deduct reasonable depreciation. (Querol v. Collector of
Internal Revenue, G.R. No. L-16705, cited in BPI v CIR, G.R. No. 139736)
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Invalidating FAN/FLD
Common grounds/arguments
1. Income payments allegedly not subjected to expanded withholding tax
The BIR’s initial findings show that the Company is liable to deficiency withholding tax due allegedly to its failure to withhold
on its income payments. The alleged withholding tax deficiency was arrived at by the BIR after comparing the expenses
reported in the income tax return (ITR) and audited financial statement (AFS) with the amounts subjected to withholding tax
in the expanded withholding tax (EWT) returns.
We have reconciled the difference in the amounts in the AFS and ITR and would like to provide below explanation on the
discrepancies for the items of expenses identified by the BIR in its findings under the FAN/FLD.
xxx xxx xxx
With respect to the professional fees, please take note that some of the amounts appearing in the AFS which were allegedly
not subjected to withholding tax pertain to income payments made by the Company for services rendered by the following
general professional partnerships (GPPs) which are exempt from withholding tax pursuant to Section 2.57.5(B)(4) of RR No. 2-
98, as amended.
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2. Deficiency on withholding tax on compensation
The BIR assessed the Company for alleged non-withholding on salaries, wages and benefits Income payments allegedly not
subjected to expanded withholding tax. A careful examination of the Company’s records would reveal that the amount of
salaries, wages and benefits allegedly not subjected to withholding tax by the Company covers the following items of income
which are treated as exclusions from gross income and therefore exempt from tax under Section 32(B) of the Tax Code such as
employer contribution to Social Security System (SSS), PhilHealth, and Pag-ibig Fund, and 13th month pay and other bonuses.
In accordance with Section 32(B)(7)(f) of the Tax Code and Section 2.78.1(B) (12) of RR No. 2-98, amended, GSIS, SSS,
Medicare, and Pag-ibig contributions shall not be included in the gross income of individual employees and shall be exempt
from taxation. Considering that the payments allegedly not subjected to WTC are in the nature of payments to SSS, Philhealth,
and Pag-ibig, these expenses should be excluded from the comparison made by the BIR in its tax assessment.
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3. Payments to non-resident foreign entities for services rendered outside the Philippines
Under Section 28 (B) (1) of the Tax Code, income derived in the Philippines by a foreign corporation not engaged in trade or
business in the Philippines is subject to final withholding tax at a rate of 25% on its gross income from all sources within the
Philippines. Thus, as a nonresident foreign corporation, ABC Co, a tax resident of the US , shall only be taxable on their
income from sources within the Philippines.
In determining whether an income is sourced within or outside the Philippines, Section 42 of the Tax Code provides that in
case of services, the source of the income is the place where the services are rendered. Thus, considering that the services
rendered by ABC Co. were provided outside the Philippines, the income payments by ABC Co. for the services performed
were correctly not subjected to Philippine income tax/withholding tax by the Company.
NOTE: Consider Revenue Memorandum Circular No. 05-2024 which provides that services rendered outside the Philippines,
for example, in the case of consultancy may be considered sources within the Philippines that is subject to final tax and VAT if
results or output are used locally.
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4. Undeclared sales subject to VAT (Discrepancy between sales per ITR vs. VAT returns)
The BIR assumed that the income reflected in the ITR which is not reported in the VAT return is revenue that should be subject
to VAT. However, it should be noted that income per ITR is on accrual basis of accounting, while the VAT imposed on sale of
services accrues upon actual or constructive receipt of payments, as evidenced by the official receipts. The timing difference
for income (which follow the accrual basis) and VAT (which follow the cash basis method of accounting) is behind the
purported discrepancy in the amount of sales and that the Company allegedly did not fail to declare as sales.
NOTE: With the shift to gross sales of VAT system under EOPT, the disconnect between sales per VAT and ITR should be
eliminated.
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5. Unsupported zero rated- sales
In order that a transaction be treated as subject to the zero percent (0%) VAT under Section 108 (B) (2) of the NIRC of 1997,
as amended, the following should be satisfied:
1. the services must be performed in the Philippines by a VAT-registered taxpayer;

2. the services must be other than processing, manufacturing or repacking of goods;
3. the recipient of such services is doing business outside the Philippines; and
4. the consideration for the services is paid for in acceptable foreign currency accounted for in accordance with the Bangko
Sentral ng Pilipinas (BSP) rules and regulations.
The Company satisfied all the requisites in order for its transactions to be VAT zero-rated. It submitted: (1) a copy of the
Company’s BIR Form 2303 to prove that its VAT-registered taxpayer; (2) copy of contract/agreement as well as billing
statements to show that the services performed are other than processing, manufacturing or repacking of goods; (3) copy of
SEC certificate of nonregistration and articles of incorporation to prove that the nonresident foreign client is doing business
outside the Philippines; and (4) certificate of inward foreign remittance to prove that foreign currency is paid in accordance
with the BSP rules. As to invoicing requirements, a copy of official receipts indicating therein that the transaction is zero-
rated issued to the nonresident foreign client.
97
5. Payments to non-resident foreign entities for services rendered outside the Philippines
Under Section 28 (B) (1) of the Tax Code, income derived in the Philippines by a foreign corporation not engaged in trade or
business in the Philippines is subject to final withholding tax at a rate of 25% on its gross income from all sources within the
Philippines. Thus, as a nonresident foreign corporation, ABC Co, a tax resident of the US , shall only be taxable on their
income from sources within the Philippines.
In determining whether an income is sourced within or outside the Philippines, Section 42 of the Tax Code provides that in
case of services, the source of the income is the place where the services are rendered. Thus, considering that the services
rendered by ABC Co. were provided outside the Philippines, the income payments by ABC Co. for the services performed
were correctly not subjected to Philippine income tax/withholding tax by the Company.
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Invalidating the FAN

Issuance of FAN before the lapse of 15-day period to reply to PAN
RECALL:
Under RR 12-99, as amended by RR 18-13, if the taxpayer fails to respond within fifteen (15) days from date of receipt of the
PAN, he shall be considered in default, in which case, a Formal Letter of Demand and Final Assessment Notice (FLD/FAN)
shall be issued calling for payment of the taxpayer's deficiency tax liability, inclusive of the applicable penalties.
On the other hand, if the taxpayer, within fifteen (15) days from date of receipt of the PAN, responds that he/it disagrees
with the findings of deficiency tax or taxes, an FLD/FAN shall be issued within fifteen (15) days from filing/submission of the
taxpayer's response, calling for payment of the taxpayer's deficiency tax liability, inclusive of the applicable penalties.
99

FACTS OF THE CASE:
On January 10, 2011, the taxpayer received from BIR the Preliminary Assessment Notice (PAN) dated January 5, 2011,
finding respondent liable for deficiency income tax and VAT. Consequently, on January 25, 2011, the taxpayer filed with the
BIR, its position paper/reply to the PAN. On February 2, 2011, the taxpayer received from petitioner, the Final Assessment
Notice (FAN) and Final Letter of Demand (FLD), both dated January 24, 2011, a day before the deadline to submit the reply
to FAN and FLD.
IMPORTANT FACTS TO CONSIDER
10 January 2011 - Receipt of PAN

25 January 2011 - Deadline of filing of reply to the PAN
25 January 2011 - Reply to PAN was filed by the taxpayer
24 January 2011 - BIR issued the FAN

02 February 2011- Taxpayer received the FAN
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Taxpayer: BIR violated its right to due process when the FAN and FLD were issued even before the lapse of the
fifteen (15)-day period given to respondent to file its protest to the PAN.
BIR: Issuance of the FAN and FLD a day before the expiration of the period to respond to the PAN does not
deprive the taxpayer’s right to procedural due process. Under existing rules and regulations, a FAN shall be
issued after the taxpayer filed or failed to file a reply to the preliminary assessment notice within fifteen (15)
from receipt thereof.
101

CTA DECISION
BIR is duty bound to wait for the expiration of fifteen (15) days from the date of receipt of the PAN before issuing the FLD
and FAN. Such a process or procedure is part and parcel of the due process requirement in the issuance of a deficiency tax
assessment.
By prematurely issuing the FLD or FAN, without awaiting the lapse of the fifteen (15)-day period, the BIR wantonly
disregarded the mandatory due process requirement laid down under the afore-stated law and rules. As a consequence,
respondent was denied of its right to due process.
Commissioner of Internal Revenue vs. Pacific Bayview Properties [CTA EB No. 1677 (CTA Case No. 9070), 8 October 2018)
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FAN issued without consideration and evaluation of defenses constitutes a violation of
due process
FACTS OF THE CASE:

Taxpayer filed on 03 January 2017 its reply/protest to the Preliminary Assessment Notice (PAN). Two days after or on 05 January
2017, the BIR issued the Final Assessment Notice (FAN) which contained the very same issues and same of deficiency taxes stated
in the PAN. The taxpayer contended that the BIR violated due process when it merely reiterated the assessment in the PAN to the
FAN without considering and evaluating its reply/protest to the PAN
COURT OF TAX APPEALS:
1. BIR issued a FAN which is a complete replica of the PAN, without even stating and explaining the demerits of the taxpayer’s
contention. The taxpayer was left unaware on how the CIR appreciated the explanations or defenses raised in connection
with the assessments. Citing the Avon Case (GR 201398-99 and 201418-19, 03 October 2018) , the CIR’s inaction and
omission to give due consideration to the arguments and evidence submitted by a taxpayer are deplorable transgression of
the taxpayer’s right to due process. Thus, its failure to adhere to these requirements constitutes a denial of due process and
taints the administrative proceedings with invalidity.

2019
103

FAN issued without consideration and evaluation of defenses constitutes a violation of
due process
2. The right of the taxpayer to answer the PAN carries with it the correlative duty on the part of the CIR to consider the response
to the reply/protest to the PAN. Right to due process is the opportunity to be heard. However, such opportunity would be
wasted if the reply or protest to the assessment is not taken into consideration. As a consequence of such violation, the
deficiency tax assessments are considered void.
CTA Case EB Nos. 2516 and 2521 re CTA Case No. 9711, 01 August 2023

2019
104
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Defense of prescription:
Validity of waiver
105
Requirements for a valid waiver

RMO 14-2016
Revenue Memorandum Order (RM0) 20-90
1. Waiver must be in the prescribed form. There

GUIDELINES ON PROPER EXECUTION should be no deviation from the form.
OF WAIVERS 2. The waiver shall be signed by the taxpayer himself
or his duly authorized representative. In the case of
a corporation, the waiver must be signed by any of
RMO 14- RMC 14- its responsible officials.
RMO 20-90 3. Waiver must be signed by the authorized officials.
2016 2016 The date of acceptance should be indicated. Both
the date of execution by the taxpayer and date of
acceptance by the BIR should be before the
expiration of the period of prescription or before
the lapse of the period agreed upon in case a
subsequent agreement is executed.
© 2020 Navarro Amper & Co. All rights reserved. 106
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RMO 14-2016
1. The waiver may be, but not necessarily, in the prescribed form. Failure to follow the prescribed form does not invalidate the
executed waiver, for as long as the following are complied with:
a. The Waiver of the Statute of Limitations under Section 222 (b) and (d) shall be executed before the expiration of the
period to assess or to collect taxes. The date of execution shall be specifically indicated in the waiver;
b. The waiver shall be signed by the taxpayer himself or his duly authorized representative. In the case of a corporation,
the waiver must be signed by any of its responsible officials; and
c. The expiry date of the period agreed upon to assess/collect the tax after the regular three-year period of prescription
should be indicated.
2. Except for waiver of collection of taxes which shall indicate the particular taxes assessed, the waiver need not specify the
particular taxes to be assessed nor the amount thereof, and it may simply state "all internal revenue taxes" considering that
during the assessment stage, the Commissioner of Internal Revenue or her duly authorized representative is still in the
process of examining and determining the tax liability of the taxpayer.
3. Since the taxpayer is the applicant and the executor of the extension of the period of limitation for its benefit in order to
submit the required documents and accounting records, the taxpayer is charged with the burden of ensuring that the waivers
of statute of limitation are validly executed by its authorized representative. The authority of the taxpayer's representative
who participated in the conduct of audit or investigation shall not be thereafter contested to invalidate the waiver.
107

RMO 14-2016
4. The waiver may be notarized. However, it is sufficient that the waiver is in writing.
5. Considering that the waiver is a voluntary act of the taxpayer, the waiver shall take legal effect and be binding on the taxpayer
upon its execution.
6. It shall be the duty of the taxpayer to submit its duly executed waiver to the Commissioner of Internal Revenue or official/s
previously designated in existing issuances or the concerned revenue district officer or group supervisor as designated in the
Letter of Authority/Memorandum of Assignment who shall then indicate acceptance by signing the same. Such waiver shall
be executed and duly accepted prior to the expiration of the period to assess or to collect. The taxpayer shall have the duty to
retain a copy of the accepted waiver.
7. Note that there shall only be two (2) material dates that need to be present on the waiver:
a. The date of execution of the waiver by the taxpayer or its authorized representative; and
b. The expiry date of the period the taxpayer waives the statute of limitations.
8. Before the expiration of the period set on the previously executed waiver, the period earlier set may be extended by
subsequent written waiver.
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Clarifications on requirements for a valid waiver

RMC 141-2019
1. The waiver is a unilateral and voluntary undertaking which shall take legal effect and be binding on the taxpayer immediately
upon his execution of the waiver.
2. The waiver need not specify the type of taxes to be assessed nor the amount thereof.
3. It is no longer required that the delegation of authority to a representative be in writing and notarized.
4. The taxpayer cannot seek to invalidate his waiver by contesting the authority of his own representative.
5. It is the duty of the taxpayer to submit his Waiver to the officials listed in RMO 14-2016 prior to the expiration of the period
to assess or to collect as the case may be.
6. In addition to the previously authorized officials, the RDO or Group Supervisor as designated in the Letter of Authority or
Memorandum of Assignment can accept the waiver.
7. The date of acceptance by the BIR Officer is no longer required to be indicated for the waiver's validity.
8. The taxpayer shall have the duty to retain a copy of the submitted waiver.
9. Notarization of the Waiver is not a requirement for its validity.
10. The taxpayer is charged with the burden of ensuring that his Waiver is validly executed when submitted to the BIR. Thus, the
taxpayer must ensure that his waiver:
a. Is executed before the expiration of the period to assess or to collect taxes.
b. Indicates the expiry date of the extended period.
c. Indicates the type of tax (for waiver of the prescriptive period to collect).
d. Is signed by his authorized representative.
11. There is no strict format for the waiver. The taxpayer may utilize any form with no effect on its validity.
109

Defense of prescription: validity of waivers
COURT DECISIONS
1. The waiver is invalid because: (1) it did not specify the date within which the BIR may assess and collect revenue taxes,
such that the waiver became unlimited in time; (2) it was signed only by a revenue district officer, and not the CIR; (3)
there was no date of acceptance; and (4) the taxpayer was not furnished a copy of the waiver. (Philippine Journalists Inc.
vs. CIR, G.R. No. 162852, 16 December 2004)
2. Partial payment of the revised assessment as an implied admission of the validity of the waivers. If the taxpayer believed
that the waivers were invalid and that the assessments were issued beyond the prescriptive period, it should not have
paid the reduced amount of taxes in the revised assessment. (Rizal Commercial Banking Corporation vs. CIR, G.R. No.
170257, 07 September 2011)
3. The validity of the defective waivers were upheld based on a categorical finding that both parties are in pari delicto in
causing the deficiencies of the subject waivers. (CIR vs. Next Mobile Inc. (Next Mobile) (GR212825, 2015 December 2015)
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4. The CIR’s failure to provide the office accepting the first and second waivers with their
respective third copies violates RMO 20-90 and RDAO 05-01, and therefore did not
extend the three-year prescriptive period (CIR vs. Philippine Daily Inquirer, Inc., G.R. No.
213943, 22 March 2017)
5. Waivers were defective because: (1) signatory to the three waivers had no notarized
written authority from the corporation's board of directors and (2) waivers in this case
did not specify the kind of tax and the amount of tax due. (CIR vs. Systems Technology
Institute (STI), Inc., G.R. No. 220835, 26 July 2017)
6. If facts and circumstances that show an equal fault on the part of the taxpayer are
absent, which could have otherwise justified a finding of "in pari delicto.“, next mobile
case as an exception should not apply. [Commissioner of Internal Revenue v. Hoya Glass
Disk Philippines, Inc., C.T.A. EB Case Nos. 1473 & 1474 (C.T.A. Case No. 8115), 04 June
2018]
111

FACTS OF THE CASE:
The taxpayer executed, not one (1), but four (4) Waivers of the Defense of Prescription for it to be able to submit and/or
present the required books of accounts and other accounting records to facilitate the examination in connection with audit
and/or investigation of all its internal revenue taxes for taxable year 2009.
The taxpayer argued that the waivers it executed were invalid because (1) the waivers were not accompanied by a Board
Resolution authorizing the signatory to execute the waivers; and (2) the revenue officer who accepted the waiver was not
authorized to do so.
On the other hand, the BIR argued that an authority to sign the waiver is not needed when the waiver is signed by the
taxpayer itself thru its responsible official. The taxpayer relied on CIR v. Kudos Metal which according to the BIR is misplaced.
In the said case, the Supreme Court invalidated the waiver since it was signed by a mere accountant of the corporation - an
officer who cannot, without a Board Resolution, sign the waiver since the execution of the waiver is not in the ordinary course
of her functions.
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The BIR further contented that all waivers were signed by the duly designated revenue official authorized to sign and/or
accept waivers for tax cases pending investigation, contrary to the claim of the taxpayer that the signatory was a mere Officer-
In-Charge.
COURT OF TAX APPEALS
The waivers extending the prescriptive period of tax assessments must be compliant with RMO No. 20- 90 and must indicate
the nature and amount of the tax due. The waivers failed to indicate the specific tax involved and the exact amount of the tax
to be assessed or collected. These details are
material as there can be no true and valid agreement between the taxpayer and the CIR
absent these information. Clearly, the Waivers did not effectively extend the prescriptive period on account of their invalidity.
First Philippine Industrial Corporation v. Commissioner of Internal Revenue, CTA Case No. 9000, 24 February 2020
113
Invalidating the FAN/FLD

FAN/FLD does not contain a specific period for payment is void
FACTS OF THE CASE:
The FLD issued by the BIR to the taxpayer states that it

is requested to pay the deficiency surcharge and
interest through the duly authorized agent bank in
which it is enrolled, within the time shown in the
enclosed assessment notice.
However, the enclosed Details of Discrepancies failed to

indicate the specific period when the payment should
be made and the portion in the Audit Result/
Assessment Notice indicating the "DUE DATE" was left
blank. The BIR contends that April 15, 2004 should be
regarded as the actual due date per the assessment
notice.
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Developments on tax assessments

Assessment which does not contain a specific period for payment is void
CTA DECISION
In the case of Commissioner of Internal Revenue vs. Pascor Realty and Development Corporation (G.R. No. 128315, 29
June 1999), the SC held that: "An assessment contains not only a computation of tax liabilities, but also a demand for
payment within a prescribed period.”
The assessment is invalid:
1. It lacks the definite amount of tax liability for which the taxpayer is accountable. It does not purport to be a demand
for payment of tax due, which a final assessment notice should supposedly be.
Although the disputed notice provides for the computations of tax liability, the amount remains indefinite. It only
provides that the tax due is still subject to modification, depending on the date of payment.
115
Developments on tax assessments

Assessment which does not contain a specific period for payment is void
2. There are no due dates in the Final Assessment Notice. The last paragraph of the FAN states that the due dates for
payment were supposedly reflected in the attached assessment, and the enclosed assessment pertained to,
remained unaccomplished.
April 15, 2004 is the reckoning date of accrual of penalties and surcharges and not the due date for payment of tax
liabilities. The total amount depended upon when the taxpayer decides to pay. The notice, therefore, did not contain
a definite and actual demand to pay.
Commissioner of Internal Revenue v. Saturn Holdings Corporation, CTA EB Case No. 1747 re CTA Case No. 9085, 04
April 2019
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Issuance of FDDA
117
Issuance of FDDA
Revenue Memorandum Order No. 26-2016
What’s an FDDA?
• Final Decision on Disputed Assessment (FDDA) - decision on protest
to the FAN.
• After the issuance of a FDDA, a request for reinvestigation shall no
longer be available as a taxpayer remedy.
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FDDA
What’s next after the FDDA
Court of Tax
Final Decision 30 days Appeals
on Disputed
Assessment
(FDDA)
30 days
Office of the
Commissioner 180 + 30 days (inaction) or
adverse decision + 30 days
In case of appeal against the FDDA, the taxpayer should furnish a copy of the appeal to the Chief of Assessment Division for Regional Cases or
Concerned Head Revenue Executive Assistant in case of taxpayers under jurisdiction of Large Taxpayers Service or investigated by the National
Investigation Division under the Enforcement and Advocacy Service within five days from the date of filing with the Office of the Commissioner or
the Court of Tax Appeals – RMC 43-2023 and 39-2013.
119
Issuance of FDDA
Assessment not in the PAN/FAN but in the FDDA is void
FACTS OF THE CASE:
A Philippine Economic Zone Authority (PEZA)-registered company engaged in the manufacture of electronic circuits was
assessed by the BIR for deficiency income tax due to the disallowance of various costs and deductions included in its cost of
sales in computing its gross income subject to 5% tax. The BIR also disallowed its deductions for importations since they were
not supported by Import Entry Internal Revenue Declarations (IEIRD).
When the taxpayer received the Final Decision on Disputed Assessment (FDDA), it contained an adjustment to taxable income
for realized foreign exchange (forex) gain not subjected to tax. The assessment for “realized forex gain not subjected to tax”
does not appear in the Preliminary Assessment Notice (PAN) and Final Letter of Demand (FLD) issued by the BIR to the taxpayer.
The taxpayer argued that the assessment for realized forex gains is entirely new, appearing only for the first time on the FDDA
and was not covered by the PAN and FLD. According to the taxpayer, the assessment should be considered void for failure to
comply with the due process requirements.
On the other hand, the BIR countered that the issuance of the assessment complied with the requirements of RR 12-99, in that
the LOA, Notices, PAN, FAN and FLD, and FDDA were properly issued.
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Issuance of FDDA
Assessment not in the PAN/FAN but in the FDDA is void
CTA DECISION
The assessment item in the form of "Realized forex gain not subjected to tax" is entirely a new assessment included in the FDDA. This item of
assessment is void due to failure to failure to observe due process since the assessment was not contained in the FLD, but was only disclosed to
the taxpayer when the FDDA was issued.
Considering that the FDDA constitutes respondent's final decision on the assessment, the taxpayer was not given the chance to refute within the
administrative level the assessment for "realized forex gain not subjected to tax“, hence, the assessment was deemed void.
(First Sumiden Circuits, Inc. vs. Commissioner of Internal Revenue, CTA Case No. 8924, 3 January 2018 as upheld by the CTA En Banc in CTA EB
Case No. 1831, 07 September 2020)
121
Issuance of FDDA
PCL as FDDA
FACTS OF THE CASE
The taxpayer filed its protest to FLD/FAN on 15 January 2014 requesting

for reinvestigation on its alleged deficiency taxes. On 02 July 2014, the BIR
issued a preliminary collection notice (PCL) demanding from the taxpayer
the settlement of its deficiency taxes. The taxpayer submitted a letter
protesting the PCL stating that the request for reinvestigation has not yet
been acted upon by the BIR. The BIR then issued a Demand Letter on 10
May 2017.
The taxpayer treated the date when it received the Demand Letter as the
date when the 30-day period to file a PFR should start, hence, it had until
10 June 2017 to file appeal with the CTA. The taxpayer filed its appeal with
the CTA on 24 May 2017.
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Issuance of FDDA
PCL as FDDA
CTA Decision
The CTA held that the appeal should have been filed within 30 days from receipt of PCL on 02 July 2014 or until 01 August
2014 to file the appeal.
The CTA explained that the PCL constituted an FDDA considering that the language or tenor used in the PCL suggests a
character of finality. The PCL contains a warning that should the taxpayer fail to pay, the CIR would be constrained to resort to
administrative summary remedies to enforce collection of the deficiency taxes without further notice, certainly indicates that it
was the CIR's final action subject of an appeal to the CTA
(JTKC Land, Inc. vs. CIR, CTA Case No. 9597, 26 October 2020)
123
Reckoning of the 180 days to appeal to CTA in case FDDA is appealed to CIR
Supreme Court Decision (GR 258101, 19 April 2022)
ISSUE FOR RESOLUTION
In case of denial of protest by the Commissioner’s authorized representative through the issuance of final decision on
disputed assessment (FDDA) on request for reconsideration or request for reinvestigation, and taxpayer filed an appeal
with the Office of the Commissioner, when should the 180-day period should be counted for purposes of appeal to the
CTA.
Section 3.1.4 of Revenue Regulations No. 12-99 provides as follows:
“If the protest or administrative appeal is not acted upon by the Commissioner within one hundred eighty (180) days
counted from the date of filing of the protest, the taxpayer may either: (i) appeal to the CTA within thirty (30) days from
after the expiration of the one hundred eighty (180)-day period; or (ii) await the final decision of the Commissioner on the
disputed assessment and appeal such final decision to the CTA within thirty (30) days after the receipt of a copy of such
decision.”||
© 2022 Navarro Amper & Co. 124
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FACTS OF THE CASE
On July 22, 2016, the taxpayer filed its protest letter to the final assessment notice (FAN) with request for reinvestigation. On
September 19, 2016, the taxpayers submitted its documents in support of its protest to the FAN. On October 7, 2016, the
taxpayer received the Final Decision on Disputed Assessment (FDDA) signed by the authorized representative of the BIR, that is,
BIR Regional Director.
On November 4, 2016, taxpayer filed a request for reconsideration with the Office of the Commissioner of Internal Revenue (CIR).
Alleging inaction on the part of CIR, the taxpayer filed its petition for review with the CTA on June 2, 2017, or 30 days from the
lapse of the 180-day period reckoned from November 4, 2016 from date request for reconsideration is filed with the CIR.
Date MR with CIR was filed
November 04, 2016 - - - - - - - - - - - - - - - - - - 02 May 2017 - - - - - - - - - - - - - - 02 June 2017

180 days 30 days
125
SUPREME COURT DECISION
The appeal was filed beyond the reglementary period provided by law. The 180-day period should be reckoned from the
"submission of documents," which was on 19 September 2016, hence, the 180-day period lapsed on 18 March 2017, and 30 days
from such point, the taxpayer had 30 days or until 17 April 2017, to elevate the case to the CTA (the appeal was filed on June 2,
2017)
Nowhere in Section 228 of the Tax Code and RR 12-99, as amended which gives taxpayers a new or separate 180 days for the CIR
to decide on appealed decision of his authorized representative. The 180 days from date of filing of protest refers to the 180 days
from date of submission of documents in case of reinvestigation or date of filing of protest in case of reconsideration.
“If the protest is not acted upon by the Commissioner's duly authorized representative within one hundred eighty (180) days
counted from the date of filing of the protest in case of a request reconsideration; or from date of submission by the taxpayer of the
required documents within sixty (60) days from the date of filing of the protest in case of a request for reinvestigation, the taxpayer
may either: (i) appeal to the CTA within thirty (30) days after the expiration of the one hundred eighty (180)-day period; or (ii) await
the final decision of the Commissioner's duly authorized representative on the disputed assessment.”
Date additional docs was submitted

pursuant to request for reinvestigation
September 19, 2016 ------------------------------------- > 18 March 2017 -------------------------> 17 April 2017
180 days 30 days
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Reckoning of the 180 days to appeal to CTA in case of appeal of FDDA to CIR
In case the CIR's authorized representative denies the protest by issuing FDDA within 180 days and the taxpayer (instead of
appealing to the CTA) appeals to the CIR, the CIR has the remaining of the 180 days within which to act, failing which, the taxpayer
may either await the decision of the CIR or elevate the inaction to the CTA, within thirty (30) days from receipt of the CIR's decision
or from the lapse of the from submission of the required supporting documents in support of the protest.|||
Date of Last day of 180 Date FDDA issued by Due date of 30-day Remaining days Course of Action
submission of days from CIR’s authorized period to file appeal of 180 days for
documents submission of representative with CIR CIR’s action
(A) documents (C) (D) = (C) + 30 days (E) = (D)-(B)
(B)
09 January 2023 08 July 2023 09 April 2023 09 May 2023 60 days File an appeal to CTA due to
inaction 30 days from 08 July
2023 or wait for the decision of
CIR and appeal 30 days from
decision
09 January 2023 08 July 2023 15 June 2023 15 July 2023 0 days Since the 180- day period to act
has already lapsed, only
remedy for the taxpayer is to
wait for the CIR’s decision, and
appeal from 30 days from
unfavorable decision.
127
Issuance of collection letter while CIR appeal is pending is void

Supreme Court Decision (GR 231238, 20 June 2022)
FACTS OF THE CASE
On December 24, 2008, the Formal Assessment Notice (FAN) was issued by the Regional Director to the taxpayer which was
protested on January 7, 2009 by filing of request for reinvestigation. On April 1, 2011, the Regional Director issued the Final
Decision on Disputed Assessment (FDDA) denying the taxpayer’s protest to the Formal Assessment Notice.
On May 6, 2011, the taxpayer appealed to the Office of the Commissioner the FDDA. Pending resolution of the appeal to the
Commissioner, the Revenue District Officer issued a Preliminary Collection Letter on September 20, 2011. Moreover, on
September 30, 2011, the taxpayer informed the Regional Director that it had filed an appeal with the Commissioner. Still, on
November 23, 2011, the Revenue District Officer issued a Final Notice Before Seizure, giving the taxpayer 10 days from receipt
within which to settle its tax liabilities. On March 5, 2012, the Revenue District Officer issued a Warrant of Distraint and/or Levy.
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SUPREME COURT
Subsection 3.1.5 of RR 12-99 is clear that if the protest is elevated to the respondent Commissioner of Internal
Revenue, "the latter's decision shall not be considered final, executory and demandable, in which case, the protest
shall be decided by the Commissioner." Since the FDDA was timely elevated to the Commissioner, the assessment
never became final, executory, and demandable.
The Preliminary Collection Letter, the Final Notice Before Seizure, the Warrant of Distraint and/or Levy were not
final decisions on the appeal by the Commissioner of Internal Revenue. They remained tentative given the
pendency of the taxpayer’s appeal with the Office of the Commissioner. More importantly, all of these were issued
on the premise that "delinquent taxes" exist, an incorrect premise since the assessment was still pending appeal
with the Office of the Commissioner when these issuances were made.
129

When a final decision on disputed assessment is elevated to the Commissioner of Internal Revenue (CIR) within the allowed
period, it does not become final, executory and demandable. It does not emanate from demandable assessment and there is
no delinquent tax yet.
The issuance of collection letters, final notice before seizure, warrant of distraint and levy and any enforcement action,
pending the appeal before the CIR, are considered void. (Light Rail Transit Authority v. Bureau of Internal Revenue, G.R. No.
231238, 20 June 2022)
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When FDDA is appealable to the Office of the Commissioner

CTA Case No. EB 2608, 04 August 2023
FACTS OF THE CASE
On December 5, 2014, the taxpayer received the Final Decision on Disputed Assessment (FDDA) issued by the
Commissioner of Internal Revenue. On December 22, 2014, the taxpayer filed a request for reconsideration with the
CIR. On 20 August 2015, the CIR denied the taxpayer’s request for reconsideration of the FDDA. The taxpayer filed an
appeal with the CTA within 30 days from receipt of the denial of CIR of its request for consideration.
CTA Decision
1. The taxpayer availed of the wrong remedy when it filed an administrative appeal after receiving the FDDA denying
its protest.
2. The two options provided to taxpayers upon receipt of FDD is either to file an appeal with the CTA or to file an
appeal with the CIR through a request for reconsideration. The option to file an appeals with the CIR is available
only when the decision to the protest or the FDDA is issued by the Commissioner's duly authorized representative
and not by the CIR himself. In case the CIR himself issued the FDDA, the only option available to the taxpayer is to
file an appeal with the CTA within thirty (30) days from receipt of the CIR's decision
131
When the FDDA is already appealable to the CTA

CTA Case No. EB 2608, 04 August 2023
CTA DECISION
The Petition for Review was filed out of time, and thus, the assessment has attained finality.
o The FDDA signed by Commissioner Kim Henares on 30 June 2016 should be considered as decision appealable to the CTA.
o The filing of motion for reconsideration to appeal the FDDA only applies when the denial is made by the CIR’s duly authorized
representative, and not when it was made by the Commissioner of Internal Revenue himself or herself.
“If the protest is denied, in whole or in part, by the Commissioner's duly authorized representative, the taxpayer may either: (i)
appeal to the Court of Tax Appeals (CTA) within thirty (30) days from date of receipt of the said decision; or (ii) elevate his
protest through request for reconsideration to the Commissioner within thirty (30) days from date of receipt of the said
decision. No request for reinvestigation shall be allowed in administrative appeal and only issues raised in the decision of the
Commissioner's duly authorized representative shall be entertained by the Commissioner.”
CTA EB No. 2397, 10 August 2023
132
66
01/18/2024
FDDA not void even if RO was not authorized under an LOA

CTA EB 2502 re CTA Case No. 9644, 13 February 2023
FACTS OF THE CASE:
The Revenue Officer authorized in the Letter of Assessment (LOA) who

examined the books and accounts and recommended the issuance of
Preliminary Assessment Notice and Final Assessment Notice is different
from the person who conducted the reinvestigation and recommended
the Final Decision on Disputed Assessment.
The taxpayer argued that the assessment is void since the Revenue
Officer who conducted the reinvestigation was not duly authorized under
a valid LOA.
133
FDDA not void even if RO was not authorized under an LOA

CTA EB 2502 re CTA Case No. 9644, 13 February 2023
CTA DECISION
While the law explicitly requires an LOA to be given to the appropriate revenue office before an examination of a taxpayer
and the assessment of correct amount of tax may be had, the law does not explicitly require the same before
reinvestigation and for the purpose of recommending the issuance of FDDA.
The requirement for the issuance of an LOA pertain to stage where the Revenue Officer would conduct an examination or
continue tax audit investigation of the taxpayer’s books of account, and recommend the issuance of deficiency tax
assessment. It does not contemplate a situation where assessment notices, i.e., PAN, FLD/FAN had already been issued
and reinvestigation is being conducted to recommend the issuance of an FDDA that embodies the decision of the
Commissioner of Internal Revenue or duly authorized representative on the taxpayer’s administrative protest to the
FLD/FAN.
(CTA EB 2502 re CTA Case No. 9644, 13 February 2023)
134
67
01/18/2024
Questions?
135
68

Invalidating Tax Assessment January 2024 2

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Invalidating Tax Assessment January 2024 2

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01/18/2024

Invalidating Tax Assessments

• Grounds for invalidating tax assessment

© 2021 Navarro Amper & Co. CREATE in motion: 2

Legal basis of authority

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Power to examine taxpayers and assess correct amount of tax

SEC. 6. Power of the Commissioner to Make Assessments and Prescribe

(A) Examination of Returns and Determination of Tax Due. — After a return

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General rules on tax assessment

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Basics of tax assessment

Applies in case of false or fraudulent return with intent to evade tax or of

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Reckoning of 10-year prescriptive period

The 10-year prescriptive period should be reckoned from 8 March 1991

Commissioner of Internal Revenue v. Estate of Benigno P. Toda, GR

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BIR tax assessment

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BIR tax assessment

False of fraudulent return Legal basis/Court Decision

Not considered a false or fraudulent return Legal basis/Court Decision

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Section 248(B), Tax Code

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BIR tax assessment

ITR (1702) April 15 April 12 April 15

ITR (1702) April 17 April 20 April 20

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BIR tax assessment

Type of Return Date of filing

* For December return, filing and remittance is every January 15.

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Effect of filing an amended return

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Reckoning of prescriptive period of assessment

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BIR tax assessment

Notice of assessment = Final Assessment Notice (FAN)

Date of filing of tax return – 17 April 2013

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BIR tax assessment

3-year prescriptive period: August 31, 2012

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Selection of tax return/taxpayer for

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Selection of taxpayer for audit

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Selection of taxpayer for audit

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Selection of taxpayer for audit

A. Priority cases (cont.)

Taxpayers with VAT returns reflecting erroneous input tax carry-over

1. Claims for issuance of Tax Credit Certificates/refunds; and

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BIR tax audit/assessment

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Issuance of another LOA for same TY

FACTS OF THE CASE:

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Issuance of another LOA for same TY