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CTA Fonn No. 8 21-000146-0057

REPUBLIC OF THE PHILIPPINES

COURT OF TAX APPEALS
QUEZON CITY

FIRST DIVISION
CTA CASE N0.10498

NCR CORPORATION
PHILIPPINES,
Petitioner,

- versus - NOTICE OF DECISION

COMMISSIONER OF INTERNAL
REVENUE,
Respondent.

To:

OFFICE OF THE SOLIC ITOR GENERAL

134 Amorsolo Street, Legazpi Vi llage
Makati City

ATTY. FELIX PA UL R. VELASCO

ATTY. SYLVIA R. ALMA JOSE
ATTY. A YESHA HAN IA B. GUlLING-MAT ANOG
ATTY. NIK I BERYL B. DELACRUZ
Bureau of Internal Revenue
Room 703, Li tigation Division, BIR ational Office Building
Sen. Miriam P. Defensor-Santiago Aven ue
Diliman, Quezon City

AGAN MONTENEGRO MALASAGA & CO.

7th Floor, Electra House Building
11 5-11 7 Esteban Street, Legazpi Vi llage
Makari City

GREETINGS:

You are hereby notified by these presents that on May 10, 2024,
Decision was rendered in the above-entitled case, copy of which is
attached hereto.

Quezon City, Philippines, May 10, 2024.

Atty. Ma
Executi

Page I of 1
 REPUBLIC OF THE PHILIPPINES
Court of Tax Appeals
QUEZON CITY

FIRST DIVISION

NCR CORPORATION CTA Case No. 10498

PHILIPPINES,
Petitioner, Members:

DEL ROSARIO , P.J. , Chairperson,

- versus - BACORRO-VILLENA, and
CUI-DAVID, JJ.

COMMISSIONER OF Promulgated:
INTERNAL REVENUE,
R e span dent. ____:cM .:. :. ~
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x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

DECISION

DEL ROSARIO, P.J.:

This is a Petition for Review 1 filed on May 17, 2021 by petitioner

NCR Corporation Philippines praying for the cancellation and
withdrawal of the assessments issued by respondent Commissioner of
_j
Internal Revenue (CIR) against petitioner for its alleged deficiency
income tax (IT), value-added tax (VAT), withholding tax on
compensation (WTC), expanded withholding tax (EWT), final
withholding tax (FWT), final withholding VAT (FWVAT), documentary
stamp tax (DST), and compromise penalty in the aggregate amount of
~425 , 585,430.45 , for taxable year (TY) 2014.2

THE PARTIES

Petitioner NCR Corporation Philippines is a corporation duly

registered with the Securities and Exchange Commission (SEC) with
office address located at 17th Floor, 6788 Building, Ayala Avenue,

1
CTA Docket Vol. I, pp. 8-26.
2
Summary of the Case, Pre-Trial Order, CTA Docket Vol. I, p. 454.~
DECISION
NCR Corporation Philippines vs. CIR
CTA Case No. 10498
Page 2 of 18

Makati City. 3 Petitioner is registered with the Bureau of Internal

Revenue (BIR) with Tax Identification No. (TIN) 000-166-605-00000.4

Respondent, on the other hand, is the duly appointed CIR vested

under the appropriate laws with the authority to carry out the functions ,
duties and responsibilities of said office, including inter alia, the power
to decide disputed assessments, grant tax refunds and issue tax credit
certificates, pursuant to the provisions of the National Internal Revenue
Code (NIRC) of 1997, as amended , other tax laws, rules and
regulations. Court processes and pleadings may be served to
respondent's counsel at Litigation Division , Room 703 BIR National
Office Building , BIR Road [now Sen. Miriam P. Defensor-Santiago
Avenue] , Diliman, Quezon City. 5

THE FACTS

On December 9, 2015, petitioner received Letter of Authority

(LOA) No. AUDM50/005027/2015 SN:eLA201200042171 dated
November 10, 2015,6 issued by the BIR Large Taxpayers Service
(LTS), authorizing Revenue Officers (ROs) Rosario Arriola and Sheila
Samaniego and Group Supervisor (GS) Rolando Balbido to examine
petitioner's books of accounts and other accounting records covering
all internal revenue taxes for the period January 1, 2014 to December
31 , 2014, signed by LTS Assistant Commissioner Nestor S. Valeroso .

On February 13, 2017, respondent issued a Memorandum of

Assignment? (MOA) No . LOA-116-2017-0097, signed by Ms. Shirley
A . Calapatia, the Chief of the Regular LT Audit Division I, assigning RO
Abigail N. Cayabyab to continue the audit of petitioner due to the
designation of RO Arriola as GS.

On March 22, 2017, petitioner, through its Treasurer, Ms.

Emerita Zornosa , executed a Waiver of the Defense of Prescription
under the Statute of Limitations of the NIRC8 extending the period to
assess until September 30, 2017. This was accepted by the CIR
through its representative, OIC-ACIR of the LTS , Ms. Teresita M.
Angeles, on March 29, 2017.

3
Exhibits "P-2" and "P-2-1 ", CTA Docket Vol. II , pp. 699-708.
4
Exhibit "P-1 ", CTA Docket Vol. II , pp. 696-698.
5
Par. 1, Facts Admitted , Joint Stipulation of Facts and Issues (JSFI), CTA Docket Vol. I,
p. 439.
6
Exhibit "R-2", BIR Records , p. 3.
7
Exhibit "R-1", BIR Records , p. 230.
' Exhibit "R-6", BIR Records , p. 268(/j
DECISION
NCR Corporation Philippines vs. CIR
CTA Case No. 10498
Page 3 of 18

On August 24, 2017, petitioner received a Preliminary

Assessment Notice (PAN) with Details of Discrepancy dated August
23, 20179 from the BIR LTS assessing petitioner for alleged deficiency
IT, VAT, WTC , EWT, FWT, FWVAT, DST and Compromise Penalty,
inclusive of interest and surcharge for TY 2014, in the following
amounts:

Kind of Tax Amount (P)

IT 257,753,691 .95
VAT 76,444,793.70
WTC 2,305,347.59
EWT 1,046,261 .86
FWT 78,417,212.71
FWVAT 31 ,366,885.08
DST 2,360,721 .82
Compromise Penalty 270,000.00
TOTAL P449,964,914. 71

On September 7, 2017, petitioner filed a Protest to the PAN of

even date.10

On September 25, 2017, petitioner received the Formal Letter of

Demand (FLD) 11 with Details of Discrepancy 12 and Assessment
Notices,13 all dated September 13, 2017, covering the alleged
deficiency IT, VAT, WTC , EWT, FWT, FWVAT, DST and Compromise
Penalty, inclusive of interest and surcharges in the aggregate amount
of ~449 , 964 , 914 . 71 forTY 2014 broken down as follows:

Kind of Tax Amount (P)

IT 257,753,691 .95
VAT 76,444,793.70
WTC 2,305,347.59
EWT 1,046,261.86
FWT 78,417,212.71
FWVAT 31,366,885.08
DST 2,360,721 .82
Compromise Penalty 270,000 .00
TOTAL P449,964,914. 71

9 Exhibit "P-7" , CTA Docket Vol. II , pp. 812-831 ; Exhibits "R-8" and "R-9", BIR Records,
pp. 299-314 and 298.
10
Exhibit "P-8", CTA Docket Vol. II , pp. 832-834.
11 Exhibit "P-9", CTA Docket Vol. II , pp. 835-839; Exhibits "R-11 " and "R-11-1 ", BIR

Records, pp. 389-393 .

12 Exhibit "P-9-1 ", CTA Docket Vol. II , pp. 840-853; Exhibits "R-11-2", BIR Records, pp.

366-380 .
13 Exhibits "P-10", "P-10-1 ", "P-10-2", "P-10-3", "P- 10-4", "P-10-5", "P-10-6" and "P-10-7" ,

CTA Docket Vol. II , pp. 854-861 ; Exhibits "R-11-3", SIR Records , pp. 381-388.

~
DECISION
NCR Corporation Philippines vs. CIR
CTA Case No. 10498
Page 4 of 18

On October 25, 2017 , petitioner filed a Protest Letter14 dated

October 25 , 2017 against the FLO and Assessment Notices. On
December 22 , 2017, petitioner filed a Letter15 of even date subm itting
the relevant documents in support of its protest.

On February 26, 2021 , petitioner received the Final Decision on

Disputed Assessment (FDDA) signed by CIR Caesar R. Dulay 16 w ith
Details of Discrepancies 17 and Audit Results/Assessment Notices,18 all
dated February 8, 2021 , assessing petit ioner in the adjusted amount
ofP425,585,430.45 representing the alleged deficiency IT , VAT, WTC ,
EWT, FWT, FWVAT, DST and Compromise Penalty , inclusive of
interest and surcharges fo r TY 2014 broken down as fol lows:

Kind of Tax Amount (P)

IT 229,738 ,128.56
VAT 53 ,582 ,204.44
WTC 2,816,401 .91
EWT 1,324 ,843.50
FWT 96 ,382 ,951 .74
FWVAT 38 ,553 ,180.69
DST 2 ,917 ,719.62
Compromise Penalty 270,000.00
TOTAL P425,585,430.46

Thus, on May 17, 2021 petitioner filed the present Petition for
Review 19 assail ing the aforesaid FDDA.

On July 29, 2021 , within the extended period ,20 respondent filed
his Answer,21 raising Special and Affirmative Defenses, which in a
nut shell, state that the assessments issued against petiti oner are valid
for having been issued in accordance with laws and regulations; and
that petitioner failed to overcome the presumption of validity and
correctness of said assessments.

14
Exhibit "P-11", CTA Docket Vol. II; pp. 862-890.
15
Exhi bit "P-12", CTA Docket Vol. II , pp. 891-903.
16 Exhibit "P-13", CTA Docket Vol. II, pp. 904-907 ; Exhibit "R-13", BI R Record s, pp. 559-

562 .
17
Exhibit "R-1 3- 1", BIR Records , pp. 552-558 .
18 Exhibit "R-13-2", BIR Records, p p. 544-551 .
19
CTA Docket Vol. I, pp. 8-26.
20
Order dated June 30 , 2021 , CTA Docket Vol. I, p. 353.
21
CTA Docket Vol. I, pp. 354-390.
(11
DECISION
NCR Corporation Philippines vs. CIR
CTA Case No. 10498
Page 5 of 18

Respondent's Pre-Trial Brief 2 was filed on October 21 , 2021 ,

while Petitioner's Pre-Trial Brief3 was filed on October 24, 2021. The
Pre-Trial Conference was held on February 23 , 2022.24

On March 10, 2022, the parties filed their Joint Stipulation of

Facts and lssues.25 Thereafter, the Court issued the Pre-Trial Order on
March 18, 2022.26

Upon motion27 of petitioner, the Court commissioned Atty. Adan

T. Delamide as Independent Certified Public Accountant (ICPA) on
April 6, 2022.28

During trial , petitioner presented testimonial and documentary

evidence. It presented the following witnesses: Ms. Marietta B.
Ticagan ,29 petitioner's Tax Accountant; and , Ms. Mary Josephine D.
Tesalona ,30 the Court-commissioned ICPA.

On September 2, 2022, petitioner filed its Formal Offer of

Evidence.31 In the Resolution dated November 11 , 2022,32 the Court
admitted all of petitioner's exhibits, except: (i) Exhibits "P-14-16" and
"P-14-17'' as the same were not accompanied with a translation into
English or Filipino, as required by Section 33, Rule 132 of the Rules of
Court; (ii) Exhibit "P-14-17" for being merely provisionally marked; and,
(iii) Exhibit "P-17 -1 " for not having been officially marked.

Thereafter, respondent presented his lone witness , RO Abigail

Cayabyab. 33

22
CTA Docket Vol. I, pp. 410-414.
23
CTA Docket Vol. I, pp. 422-428.
24
CTA Docket Vol. I, pp. 436 and 438.
25
CTA Docket Vol. I, pp. 439-445.
26
CTA Docket Vol. I, pp. 454-459.
27
CTA Docket Vol. I, pp. 446-447.
28
CTA Docket Vol. II , pp. 481-483.
29
Exhibit "P-18-2", Amended Judicial Affidavit (Ms. Marietta B. Ticagan answering
questions propounded by Atty. J. Carlito Montenegro), CTA Docket Vol. Ill, pp. 1348-1363;
and, Minutes of Hearing dated April 6, 2022 and July 18, 2022, CTA Docket Vol. II , pp.
481 and 631 .
30
Exhibit "P-20", Judicial Affidavit (Atty. Adan Delamide answering questions propounded
by Atty . J. Carlito Montenegro at 7th Floor, Electra House Building, Esteban St. , Legaspi
Village, Makati City), CTA Docket Vol II, pp. 61 0-628; and, Minutes of Hearing dated
August 3, 2022, CTA Docket Vol. II , p. 638.
3 1 CTA Docket Vol. II , pp. 654-695.
32
CTA Docket Vol. Ill , pp. 1428-1431 .
33
Exhibit "R-16", Judicial Affidavit of Revenue Officer Abigail Cayabyab, CTA Docket Vol.
I, pp. 392-404, and Minutes of Hearing dated March 2, 2023, CTA Docket Vol. Ill , p. 1432.

\lj
DECISION
NCR Corporation Philippines vs. CIR
CTA Case No. 10498
Page 6 of 18

On April 24, 2023, Respondent's Formal Offer of Evidence was

34
filed . In the Resolution dated July 4, 2023,35 the Court admitted all of
respondent's formally offered evidence.

Respondent's Memorandum36 was filed on August 11 , 2023,

while the Memorandum (For the Petitioner)37 was filed on August 15,
2023. Thereafter, the case was submitted for decision on August 22 ,
2023. 38

ISSUE

The parties stipulated on the following issue for the Court's

resolution :39

Whether petitioner is liable for the payment of

deficiency IT, VAT, WTC , EWT, FWT, FWVAT, OST, and
compromise penalty, interests and surcharges for TY
2014, in the aggregate amount of P425,585 ,430.45.

PARTIES' ARGUMENTS

Petitioner argues that:

(i) The CTA has jurisdiction over the present case;

(ii) The absence of an LOA issued to RO Abigai l Cayabyab to

conduct the audit of petitioner renders the present
assessments void ;

(iii) The assessments against petitioner for TY 2014 were

issued in violation of its right to due process as the FLO
dated September 13, 2017 is strikingly identical to the PAN
dated August 23, 2017;

(iv) The FLO dated September 13, 2017 did not set and fix the
tax liability, as it is still subject to modification or
adjustment;

34
CTA Docket Vol. Ill , pp. 1444-1 451 .
35
CTA Docket Vol. Ill, pp. 1462-1463.
36
CTA Docket Vol. Ill, pp. 1464-1503.
37
CTA Docket Vol. Ill , pp. 1506-1558.
38
Minute Resolution dated August 22, 2022, CTA Docket Vol. Ill , p. 1559.
39
Issues, JSFI, CTA Docket Vol. I, p. 44(f;
DECISION
NCR Corporation Philippines vs. CIR
CTA Case No. 10498
Page 7 of 18

(v) The present assessments for EWT and WTC are already
barred by prescription; and ,

(vi) The period to collect alleged deficiency taxes has already

lapsed .40

On the other hand, respondent counter-argues that:

(i) The issues on the absence of validly issued LOA, and lack
of definite amount of deficiency tax liability in the FLO were
never ra ised by petitioner in the administrative level. Thus,
petitioner can no longer raise said issues on the ground of
laches;

(ii ) The conduct of the audit/investigation and the resulting

assessments are valid as the same were in accordance
with law and rules ;

(iii) An LOA is not a requirement when the aud it investigation

is conducted by the Office of the CIR;

(iv) Assuming arguendo that an LOA is requ ired , the

examination of petitioner's books of accounts and other
accounting records was conducted pursuant to a valid
LOA· J

(v) There was no violation of petitioner's right to due process;

(vi ) The FLO issued by respondent is valid and in order;

(vii ) The Court decisions on the invalidity of the FLO should not
be applied in the instant case;

(viii ) Petitioner executed a valid waiver and thus, the period to

assess was effectively extended;

(ix) Petitioner is liable to pay the assessed deficiency IT, VAT,

WTC, EWT, FWT, FWVAT, OST for TY 2014 plus
compromise penalties, surcharges and interest, in the
aggregate amount of P425,585,430.45; and ,

(x) Petitioner failed to overcome the presumption of validity

and correctness of the assessments.41

40Memorandum (For the Petitioner), CTA Docket Vol. Ill, pp. 1506-1558.
()f)
" Memorand um. CTA Docket Vol. Ill , pp. 1464-1 503.
DECISION
NCR Corporation Philippines vs. CIR
CTA Case No. 10498
Page 8 of 18

THE COURT'S RULING

Th is Court finds the Petition for Review meritorious.

The Petition for Review was

timely filed; hence, the Court has
jurisdiction over the case

The Court shall first determine the timeliness of the filing of the
present Petition for Review.

This Court is vested with authority to review respondent's FDDA

pu rsuant to Section 7(a)(1) of Republic Act (RA) No. 1125, as
amended by RA No. 9282,42 in relation to Section 3(a)(1 ), Rule 4 of
Revised Rules of the Court of Tax Appeals (RRCTA), as amended.43

Under Section 228 of the NIRC of 1997, as amended, a taxpayer

adversely affected by a decision of the CIR on the disputed
assessment is given a remedy to appeal with the Co urt within thirty
(30 ) days from receipt of the assa iled decision, viz.:

"SEC. 228. Protesting of Assessment. -xxx

Such assessm ent may be protested administratively by filing

a req uest for reconsideration or reinvestigation within th irty (30) days
from receipt of the asse ss ment in such fo rm and manner as may be
prescribed by implementing rules and regulations. Wit hin sixty (60)
days from filing of the protest, all relevant supporting documents shall
have been submitted; otherwise, the assessment shall become final.

If the protest is denied in w hole or in part, or is not acted upon

within one hundred eighty (180) days from submission of documents,
the taxpayer adversely affected by the decision or inaction may
appeal to the Court of Tax Appeals within thirty (30) days from
receipt of the said decision, or from the lapse of one hundred

42
SEC. 7. Jurisdiction. - The CTA shall exercise:
a. Exclusive appellate jurisdiction to review by appeal, as herein provided:
1. Decisions of the Commissioner of Internal Revenue in cases involving disputed
assessments, refunds of internal revenue taxes, fees or other charges, penalties in
relation thereto, or other matters arising under the National Internal Revenue Code or
other laws administered by the Bureau of Internal Revenue; xxx .
43
SEC. 3. Cases within the j urisdiction of the Court in Divisions. -The Court in Divisions
shall exercise:
(a) Exclusive original or appellate jurisdiction to review by appeal the following :
(1) Decisions of the Commissioner of Internal Revenue in cases involving disputed
assessm ents, refunds of internal revenue taxes, fees or other charges, penalties in
relation thereto, or other matters arising under the National Internal Revenue Code or
other laws administered by the Bureau of Internal Revenue; xxxcf)
DECISION
NCR Corporation Philippines vs. CIR
CTA Case No. 10498
Page 9 of 18

eighty (180)-day period ; otherwise, the decision shall become final ,

executory and demandable. " (Boldfacing supplied)

On the other hand , under Section 11 of RA No. 1125,44 as

amended, in relation to Section 3(a), Rule 8 of the RRCTA,45 a party
adversely affected by a decision, ruling or inaction of the CIR may
appeal to the CTA by way of a petition for review within thirty (30) days
after receipt of the copy of such decision or ruling or within thirty (30)
days after the expiration of the specific period of action.

Prescinding from the foregoing, th is Court has exclusive

appellate jurisdiction to review on appeal decisions of respondent
involving disputed assessments. The taxpayer adversely affected by
respondent's decision may file an appeal with th is Court within thirty
(30) days after receipt of such decision.

Considering that petitioner received respondent's FDDA dated

February 8, 202 146 on February 26, 202 1, petitioner had thirty (30)
days therefrom , or until March 28, 2021 within which to file its appeal
before the Court. Since March 28, 2021 fell on a Sunday, petitioner
had until March 29, 2021 within which to file its appeal.

The Court, however, was physically closed from March 25, 2021
to May 14, 2021 due to the various issuances of the Supreme Court
that addressed the rising cases of COVID-19 at that time. 4 7

44
Section 11 . Who May Appeal; Mode of Appeal; Effect of Appeal. -Any party adversely
affected by a decision, ruling or inaction of the Commissioner of Internal Revenue xxx may
file an appeal with the CTA within thirty (30) days after the receipt of such decision or
ruling or after the expiration of the period fixed by law for actions as referred to in Section
7(a)(2) herein. xxx
45
Sec. 3. Who may appeal; period to file petition. -
(a) A party adversely affected by a decision, ruling or inaction of the Commissioner of
Internal Revenue on disputed assessments or claims for refund of internal revenue taxes ,
or by a decision or ruling of the Commissioner of Customs, the Secretary of Finance, the
Secretary of Trade and Industry, the Secretary of Agriculture, or a Regiona l Tria l Court in
the exercise of its original jurisdiction may appeal to the Court by petition for review filed
within thirty days after receipt of the copy of such decision or ruling, or expiration of the
period fixed by law for the Commissioner of Internal Revenue to act on disputed
assessments. In case of inaction of the Commissioner of Internal Revenue on claims for
refu nd of internal revenue taxes erroneously or illegally collected, the taxpayer must file a
petition for review within the two-year period prescribed by law from payment or collection
of taxes.
46 Exhibit "P-13", CTA Docket Vol. II, pp. 904-907; Exhibit "R-13", BIR Records, pp. 559-

562.
47
Announcement dated March 25, 2021 Re: Physical Closure of NCJR Courts, Nearby
Provinces on March 25-26, 2021 ; Announcement dated March 27, 2021 Re: Physical
closure of courts in the National Capital Judicial Region and nearby provinces from March
29-31, 2021 and throughout the Holy Week; Administrative Circular (AC) No. 14-21 dated
March 28, 2021 Re: Extension of Filing Periods for Pleadings/Court Submissions fo'rf}
DECISION
NCR Corporation Philippines vs. CIR
CTA Case No. 10498
Page 10 of 18

The Court physically reopened on May 17, 2021 .48 Under

Supreme Court Administrative Circular (AC) No. 33-2021 , the period
for filing and service of motions, pleadings, and other court
submissions shall resume seven (7) calendar days from May 17, 2021 ,
or on May 24, 2021 .

The present Petition for Review was timely filed on May 17,
49
2021 . Thus, the Court acquired jurisdiction over the present case.

The Court has the power to rule

on the issue anent the absence
of a validly issued LOA even
though the same was not raised
in the administrative level

Petitioner's failure to raise the issue on the absence of a valid

LOA before the administrative level is not fatal to its case.

Truth to tell , this Court can consider issues and arguments raised
by the parties in the petition and answer, albeit the same were not
ra ised before the administrative level. On this note, the pronouncement
in Commissioner of Internal Revenue vs. Geniographics lncorporatecP0
is instructive, viz.:

"Anent the alleged error of the CTA in deciding an issue not

raised before the administrative level , suffice it to state that
respondent's failure to raise the absence of a valid LOA at the
earliest opportunity does not preclude the CTA from
considering the same because said issue delves into the
intrinsic validity of the assessment itself. Besides, the CTA, in
deciding a case, may not limit itself to the issues stipulated by
the parties but may also rule upon related issues necessary to
achieve an orderly disposition of the case." (Emphasis supplied)

Courts in the National Capital Judicial Region and Nearby Provinces Placed Under
Enhance Community Quarantine from March 29 to April 4, 2021; AC No. 15-2021 dated
April 3, 202 1 Re: Extension of the Physica l Closure of Courts and the Filing Periods for
Plead ings and Other Cou rt Submissions in Light of the Further Extension of the Enhanced
Community Quarantine from April 5 to April 11 , 2021 ; AC No. 21 -2021 dated April 10,
2021 Re: Extension of Physical Closure of Courts ; AC No. 22-2021 Re : Physical Clos ure
of Courts in Enhanced Commu nity Quarantine and Modified Enhanced Community
Quaranti ne Areas; and , AC No. 29-2021 April 30, 2021 Re : Work A rrangements in Courts
on 3-14 May 2021 .
48 AC No. 33-2021 dated May 14, 2021 Re: Court Operations Starting May 17, 2021 .
49
CTA Docket Vol. I, pp. 8-26.
50
G.R. No. 264572, July 26, 2023. ~
DECISION
NCR Corporation Philippines vs. CIR
CTA Case No. 10498
Page 11 of 18

Without doubt, the Court has the power to rule on the issue anent
the absence of a validly issued LOA in this case even though the same
was not raised by petitioner at the administrative level.

The FLO was issued in violation

of petitioner's right to due
process; hence, the same is void
ab initio

(i) RO Cayabyab is not authorized

to continue the audit/
investigation of petitioner

Sections 651 and 1352 of the NIRC of 1997, as amended , is clear

and categorical in requiring a specific authority from the CIR or from
his/her duly authorized representatives before an examination of a
taxpayer may be made. An officer of the BIR cannot simply subject a
taxpayer to audit without a valid LOA issued for that purpose.

In Commissioner of Internal Revenue vs. Sony Philippines, Inc.53

and in Medicard Philippines, Inc. vs. Commissioner of Internal
Revenue ,54 the Supreme Court held that the issuance of an LOA prior
to the conduct of an examination of a taxpayer's books and other
accounting records by any RO is indispensable to the validity of an
assessment.

Moreover, Revenue Memorandum Order (RMO) No. 43-90 is

explicit in requiring the issuance of a new LOA when an audit is
continued by an RO other than the officer named in a previous LOA,
V IZ .:

51
SEC. 6. Power of the Commissioner to Make Assessments and Prescribe Additional
Requirements for Tax Administration and Enforcement. -

(A) Examination of Return and Determination of Tax Due. After a return has been filed as
required under the provisions of this Code, the Commissioner or his duly authorized
representative may authorize the examination of any taxpayer and the assessment of the
correct amount of tax: Provided, however, That failure to file a return shall not prevent the
Commissioner from authorizing the examination of any taxpayer.
52
SEC. 13. Authority of a Revenue Officer. - Subject to the rules and regu lations to be
prescribed by the Secretary of Finance, upon recommendation of the Comm issioner, a
Revenue Officer assigned to perform assessment functions in any district may, pursuant
to a Letter of Authority issued by the Revenue Regional Director, examine taxpayers within
the jurisdiction of the district in order to collect the correct amount of tax, or to recommend
the assessment of any deficiency tax due in the same manner that the said acts could
have been performed by the Revenue Regional Director himself.
53 G.R. No. 178697, November 17, 2010.
54
G.R No. 222743, April 5, 2017!1'1
DECISION
NCR Corporation Philippines vs. CJR
CTA Case No. 10498
Page12of18

"C. Other policies for issuance of LIAs.

1. All audits/investigations, whether field or office audit,

should be conducted under a Letter of Authority .

XXX XXX XXX

5. Any re-assignment/transfer of cases to another RO(s) ,

and reval idation of LIAs which have already expired, shall require
the issuance of a new LIA, with the corresponding notation
thereto, including the previous LIA number and date of issue of
said LIAs." (Boldfacing and underlining supplied)

In Commissioner of Internal Revenue vs. McDonald's Philippines

Realty Corp., 55 the Supreme Court held that the practice of reassigning
or transferring ROs originally named in the LOA and substituting or
replacing them with new ROs to continue the audit or investigation
without a separate or amended LOA (i) violates the taxpayer's right to
due process in tax aud it or investigation ; (ii) usurps the statutory power
of the CIR or his[/her] duly authorized representative to grant the power
to examine the books of account of a taxpayer; and (iii) does not
comply with existing BIR rules and regulations on the requirement of
an LOA in the grant of authority by the CIR or his[/her] duly authorized
representative to exam ine the taxpayer's books of accounts.

A perusal of the records shows that there was no new LOA

issued to RO Cayabyab in relation to the audit of petitioner's tax
liabilities for TY 2014. While MOA No. LOA-116-2017-0097 dated
February 13, 201756 was issued by the Ch ief of the Regular LT Aud it
Division I, the same cannot be regarded as a valid LOA with in the
context of the law as the MOA was not signed by the CIR or his duly
authorized representative.

An LOA can only be issued either by the CIR or his duly

authorized representative, as identified in Section 10 (C) of the NIRC
of 1997, as amended , to be the Revenue Reg iona l Director, to wit:

"SEC. 10. Revenue Regional Director. - Under rules and

regulations , policies and standards formulated by the Commissioner,
with the approval of the Secretary of Finance, th e Revenue Regional
director shall, with in the region and distri ct offices under his
jurisdiction , am ong others :

XXX XXX XXX

55 G.R. No. 242670, May 10, 202 1.

56
Exhibit "R-1 ", BIR Records, p. 230 .~
DECISION
NCR Corporation Philippines vs. CIR
CTA Case No. 10498
Page 13 of 18

(c) Issue Letters of authority for the examination of taxpayers

within the region ;"

The position equivalent to a Revenue Regional Director for the

Large Taxpayers Service is the Assistant Commissioner/Head
Revenue Executive Assistants. RMO No. 29-0757 provides:

"II. AUDIT POLICIES AND GUIDELINES

1. The Chief, Large Taxpayers Audit & Investigation

Divisions/LTDOs shall draw a list of taxpayers selected for audit
under its current selection criteria. The list shall state the name of
taxpayer selected for audit, the nature of business, the amount of
gross sales/receipts, the selection code, the PSIC code, and the
corresponding amount of tax paid for the period . The said list shall
be submitted to the Assistant Commissioner/Head Revenue
Executive Assistant, Large Taxpayers Service for approval , copy
furnished the Commissioner of Internal Revenue.

2. All Letters of Authority (LOAs) shall be issued and

approved by the Assistant Commissioner/Head Revenue
Executive Assistants. " (Boldfacing supplied)

In the present case , the MOA was signed and issued by Ms.
Shirley A. Calapatia, Chief of the Regular LT Audit Division 1. 58 She is
neither the CIR, Revenue Regional Director, nor an Assistant
Commissioner/Head Revenue Executive Assistant of the LTS. She
had no authority to issue the MOA which could have authorized RO
Cayabyab to continue the audit/investigation of petitioner.

In fine, neither LOA No. AUDM50/005027/2015

SN :eLA201200042171 dated November 10, 2015 nor MOA No. LOA-
116-2017 -0097 dated February 13, 2017 validly authorized RO
Cayabyab to continue the audiUinvestigation of petitioner.

Since the conduct of the audit of petitioner was legally flawed ,

the assessments issued against it are inescapably void . Needless to
say, a void assessment bears no fruit 59 and must be slain at sight.

57 Prescribing the Audit Policies , Guidelines and Standards at the Large Taxpayers
Services, September 26, 2007.
58 Exhibit "R-1", BIR Records, p. 230.
59 Commissioner of Internal Revenue vs. Metro Star Superama, Inc., G.R. No. 185371 ,

December 8, 201O.( )f]

DECISION
NCR Corporation Philippines vs. CIR
CTA Case No. 10498
Page 14 of 18

(ii) The FLO dated September 13,

2017 is an exact replica of the
PAN dated August 23, 2017

Even assuming that RO Cayabyab was authorized to continue

the audit/investigation on petitioner, the assessments issued against
petitioner are still void .

Commissioner of Internal Revenue vs. Avon Products

Manufacturing, Inc., and Avon Products Manufacturing, Inc. vs.
Commissioner of Internal Revenue 60 (Avon) stresses the significance
of the CIR's duty to apprise the taxpayer of the leg al and factual bases
of the assessments issued against it, to consider the explanations or
defenses raised by the taxpayer in connection with the assessments,
and to communicate to the taxpayer the reason for the rejection of such
explanations or defenses, lest the assessment be deemed void :

"The importance of providing the taxpayer with adequate

written notice of his or her tax liability is undeniable. Under
Section 228, it is explicitly required that the taxpayer be
informed in writing of the law and of the facts on which the
assessment is made; otherwise, the assessment shall be
void. Section 3.1.2 of Revenue Regulations No. 12-99 requires the
Preliminary Assessment Notice to show in detail the facts and law,
rules and regu lations, or jurisprudence on which the proposed
assessment is based . Further, Section 3.1.4 requires that the Final
Letter of Demand must state the facts and law on wh ich it is
based ; otherwise, the Final Letter of Demand and Final
Assessment Notices themselves shall be void . Finally, Section
3.1.6 specifically requires that the decision of the Commissioner or
of his or her duly authorized representative on a disputed
assessment shall state the facts and law, ru les and regulations , or
jurisprudence on which the decision is based . Failure to do so
would invalidate the Final Decision on Disputed Assessment.

XXX XXX XXX

On the other hand , the taxpayer is explicitly given the

opportunity to explain or present his or her side throughout the
process, from tax investigation through tax assessment. xxx

XXX XXX XXX

The facts demonstrate that Avon was deprived of due

process. It was not fully apprised of the legal and factua l bases of
the assessments issued against it. The Details of Discrepancy
attached to the Preliminary Assessment Notice, as well as the
Formal Letter of Demand with the Final Assessment Notices, did not
even comment or address the defenses and documents
submitted by Avon. Thus, Avon was left unaware on how the

60
G.R. Nos. 201398-99 and 201418-19, October 3, 2018.c1}
DECISION
NCR Corporation Philippines vs. CIR
CTA Case No. 10498
Page 15 of 18

Commissioner or her authorized representatives appreciated

the explanations or defenses raised in connection with the
assessments. There was clear inaction of the Commissioner at
every stage of th e proceedings.

First, despite Avon's submission of its Reply, together

with supporting documents, to the revenue examiners' initial
audit findings, and its explanation during the informal
conference, the Preliminary Assessment Notice was
issued. The Preliminary Assessment Notice reiterated the same
audit findings, except for the alleged under-declared sales
which ballooned in amount from P15, 700,000.00 to
P62,900,000.00, without any discussion or explanation on the
merits of Avon's explanations.

Upon receipt of the Preliminary Assessment Notice, Avon

submitted its protest letter and supporting documents, and
even met with revenue examiners to explain . Nonetheless, the
Bureau of Internal Revenue issued the Final Letter of Demand
and Final Assessment Notices, merely reiterating the
assessments in the Preliminary Assessment Notice. There was
no comment whatsoever on the matters ra ised by Avon, or
discussion of the Bureau of Internal Revenue's findings in a
manner that Avon may know the various issues involved and
the reasons for the assessments.

XXX XXX XXX

It is true that the Commissioner is not obliged to accept

the taxpayer's explanations, as explained by the Court of Tax
Appeals. However, when he or she rejects these explanations,
he or she must give some reason for doing so. He or she must
give the particular facts upon which his or her conclusions are
based, and those facts must appear in the record.

Indeed. the Commissioner's inaction and omission to

give due consideration to the arguments and evidence
submitted before her by Avon are deplorable transgressions of
Avon's right to due process. The right to be heard, which
includes the right to present evidence, is meaningless if the
Commissioner can simply ignore the evidence without reason.

XXX XXX XXX

The Commissioner's total disregard of due process

rendered the identical Preliminary Assessment Notice, Final
Assessment Notices, and Collection Letter null and void , and of
no force and effect.

This Court has, in several cases, declared void any

assessment that failed to strictly comply with the due process
requirements set forth in Section 228 of the Tax Code and
Revenue Regulations No. 12-99." (Boldfacing and underscoring
supplied)

C1l
DECISION
NCR Corporation Philippines vs. CIR
CTA Case No. 10498
Page 16 of 18

A careful perusal of the PAN dated August 23, 201761 and

FLO dated September 13, 201762 issued against petitioner
disclosed that the FLO is a verbatim reproduction of the wordings
of the PAN, not even differing in the computation of the interest.
Likewise, the Details of Discrepancies63 attached to the FLO is a
verbatim reproduction of the Details of Discrepancies64 attached
to the PAN.

Moreover, the FLO neither referred to petitioner's Protest to the

PAN dated September 7, 201765 nor addressed the arguments therein.
There is also nothing on record which would show that respondent
informed petitioner of the reasons for respondent's apparent rejection
of its arguments in the Protest to the PAN .

Consistent with Avon, respondent's om ission to give due

consideration to the arguments raised by petitioner in its Protest to the
PAN and to communicate to petitioner his reasons for rejecting its
arguments amounts to a deplorable transgression of petitioner's right
to due process.

It is well settled that any assessment that failed to strictly comply

with due process requirements are intrinsically void.

All told , the assessments issued against petitioner in the present

case are void for: (1) having been issued sans a valid LOA on the part
of the RO who conducted petitioner's audit/investigation; and , (2) for
respondent's omission to give due consideration to petitioner's
arguments in its Protest to the PAN and to communicate to petitioner
his reasons for rejecting its arguments - - an omission that effectively
deprived petitioner of its right to due process of law.

In light of the foregoing , the Court need not belabor the other
issues raised by the parties.

WHEREFORE, premises considered , the Petition for Review

filed on May 17, 2021 by NCR Corporation Philippines is GRANTED.

61
Exhibit "P-7", CTA Docket Vol. II, pp. 812-831 ; Exhibits "R-8" and "R-9", BIR Records,
pp. 299-314 and 298.
62
Exhibit "P-9", CTA Docket Vol. II , pp. 835-839; Exhibits "R-11 " and "R-11-1 ", BIR
Records , pp. 389-393.
63
Exhibit "P-9-1 ", CTA Docket Vol. II, pp. 840-853; Exh ibits "R-11-2", BIR Records , pp.
366-380.
64
Exhibit "P-7", CTA Docket Vol. II , pp. 820-831 ; Exhibits "R-8-1 ", BIR Records, pp. 299-
310.
65
Exhibit "P-8", CTA Docket Vol. II, pp. 832-834.l 1/
DECISION
NCR Corporation Philippines vs. CIR
CTA Case No. 10498
Page 17 of 18

Accordingly , the Formal Letter of Demand with Details of Discrepancy

and Assessment Notices, all dated September 13, 2017, the Final
Decision on Disputed Assessment with Details of Discrepancies and
Audit Results/Assessment Notices, all dated February 8, 2021
assessing petitioner in the adjusted amount of P425,585,430.45
representing the alleged income tax, value-added tax, withholding tax
on compensation , expanded withholding tax, final withholding tax, final
withholding VAT, documentary stamp tax, and compromise penalty,
inclusive of interest and surcharges for taxable year 2014, are
CANCELLED and SET ASIDE for being void ab initio.

The Commissioner of Internal Revenue , his representatives,

agents or any person acting on his behalf are hereby ENJOINED from
enforcing the collection of the disputed alleged deficiency tax
assessments subject of the Formal Letter of Demand with Details of
Discrepancy and Assessment Notices, all dated September 13, 2017,
and the Final Decision on Disputed Assessment with Details of
Discrepancies and Audit Results/Assessment Notices, all dated
February 8, 2021 , assessing petitioner of income tax, value-added tax,
withholding tax on compensation , expanded withholding tax, final
withholding tax, final withholding VAT, documentary stamp tax , and
compromise penalty in the aggregate amount of P425,585,430.45, for
taxable year 2014. This order of suspension is IMMEDIATELY
EXECUTORY consistent with Section 4 , Rule 39 of the Rules of Court.

SO ORDERED.

Presiding Justice

WE CONCUR:

A~ LENA

~{tnt{
LANEE S. CUI-DAVID
Associate Justice
DECISION
NCR Corporation Philippines vs. CIR
CTA Case No. 1 0498
Page 18 of 18

CERTIFICATION

Pursuant to Article VIII , Section 13 of the Constitution, it is hereby

certified that the conclusions in the above Decision were reached in
consultation before the case was assigned to the writer of the opinion
of the Court.

Presiding Justice