REPUBLIC OF THE PHILIPPINES

COURT OF TAX APPEALS

QUEZON CITY

FIRST DIVISION

JED MARKETING CTA CASE NO. 9709

CORPORATION,
Petitioner, Members:

DEL ROSARIO, P.J., Chairperson,

-versus- FASON-VICTORINO, and
MANAHAN, JJ.

COMMISSIONER OF Promulgated :
INTERNAL REVENUE, _
Respondent. JUl 0 9 2020. 2; )2tJ""
~- - - - - - - ,- - - - - - -X
X- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - ~

DECISION

DEL ROSARIO, P.J.:

Before the Court is the Petition for Review 1 filed on November 6,

2017 by Jed Marketing Corporation (petitioner) against the
Commissioner of Internal Revenue (respondent), praying that the
assessments issued against petitioner for income tax, value-added tax,
withholding tax on compensation , documentary stamp taxes and
compromise penalty for taxable year (TY) 2013 in the total amount of
P94,755,465.46 be cancelled and withdrawn .

THE PARTIES

Petitioner is a corporation duly organized and existing under and

by virtue of the laws of the Republic of the Philippines, with office
address located at 91-A, Bagsakan Road , FTI Complex, Taguig City.2

Respondent 3 is the duly appointed Commissioner of Internal

Revenue (CIR), vested under appropriate laws with the authority to
carry out the functions, duties and responsibilities of said office,

1 Docket, pp. 10-76.

2
Paragraph II(A)(1 ), Pre-Trial Order (PTO), Docket, p. 158.
3 The incumbent CIR is Han. Caesar R. Dulay.(){]
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CTA Case No. 9709
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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) and other tax laws, rules
and regulations. 4

THE FACTS

On December 4, 2015, a Letter of Authority (LOA)

(AUDM35/005558/2015) with SN: eLA2012000365235 was issued by
Regional Director Jonas DP Amora authorizing Revenue Officer (RO)
Rio Virgo Cruz and Group Supervisor (GS) Frederico Pilarca to
examine petitioner's books of accounts and other accounting records
for all internal revenue taxes for the period from January 1, 2013 to
December 31, 2013.

On April 12, 2016, Memorandum of Assignment (MOA) No.

MOA0442015LOA-00002306 was issued by Revenue District Officer
Florante R. Aninag referring to RO Gene G. Etorma and GS Elizabeth
C. Arias petitioner's case/docket for continuation of the
audit/investigation to replace the previously assigned Revenue Officer
who transferred to another district office.

In the Letter dated April 19, 2016, 7 Revenue District Officer

Aninag informed petitioner that due to the transfer of RO Cruz to
another district office, RO Etorma and GS Arias were assigned to
continue the audit and investigation of petitioner for taxable year (TY)
2013.

On December 23, 2016, petitioner received a Preliminary

Assessment Notice dated December 22, 2016 (PAN), representing
alleged deficiency income tax (IT), value-added tax (VAT), withholding
tax on compensation (WTC) and documentary stamp tax (DST) forTY
2013. 8

On January 6, 2017, petitioner filed a Protest Letter dated

January 5, 2017 against the PAN. 9

4 Paragraph II(A)(2), PTO, Docket, p. 158.

s BIR Records, p. 3.
6 BIR Records, p. 655.
7
BIR Records, p. 656.
8 Paragraph II(A)(3), PTO, Docket, p. 158.
9
Paragraph II(A)(4), PTO, Docket, p. 158. ~
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On January 16, 2017, petitioner received Assessment Notices

dated January 12, 2017 10 with Formal Assessment Notice Part I and
Part II (FAN) 11 for alleged deficiency IT, VAT, WTC, DST and
Compromise Penalty forTY 2013, viz.:

Kind of Tax Assessment Number Amount

IT IT-ELA36523-13-17-176 p, 89,137,787.73
VAT VT-ELA-36523-13-17-176 89,170.19
wrc WC-ELA36523-13-17 -176 3,858,810.02
DST DS-ELA36523-13-17 -176 1,634,697.52
Compromise Penalty MC-ELA36523-13-17-176 35,000.00
TOTAL p 94.755.465.46

On February 10, 2017, petitioner filed a Protest Letter dated

February 9, 2017 against the FAN. 12

On April 11, 2017, petitioner submitted relevant documents in

support of its Protest Letter dated February 9, 2017. 13

Due to respondent's inaction, petitioner filed the present petition

on November 6, 2017.

On January 22, 2018, respondent posted his Answer14 raising as

his special and affirmative defenses that: 1) petitioner was afforded
due process because it was able to reply and/or file its protest to the
PAN and FAN; 2) the assessed amount are based on pertinent
provisions of the National Internal Revenue Code (NIRC) of 1997, as
amended, and relevant revenue regulations; 3) petitioner's allegation
of prescription must be clearly shown being a special affirmative
defense; 4) assessments are prima facie presumed correct and made
in good faith, thus, taxpayers have the duty to prove otherwise; and 5)
petitioner should be reminded that taxes are the lifeblood of the
government so it should be calculated without unnecessary hindrance.

10 Paragraph II(A)(5), PTO, Docket, p. 158; Exhibits "P-35" to "P-40", Docket, pp.
635-639.
11 Exhibits "P-40" to "P-40-a", Docket, pp. 640-644.
12 Paragraph II(A)(6), PTO, Docket, p. 158.
13 Exhibit "P-42", Docket, pp. 657-658.
14
Docket, pp. 86-93C11
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The Pre-Trial Conference was conducted on March 22, 2018 15

and the Pre-Trial Order16 was issued on May 23, 2018.

During trial, petitioner presented two (2) witnesses, Rosalie

Tanguanco 17 and Mae Cristina M. Galanza, 18 the Court-commissioned
Independent Certified Public Accountant (ICPA).

On February 7, 2019, petitioner filed its Formal Offer of

Evidence. 19 After considering respondent's Comment to (Petitioner's
Formal Offer of Evidence), 20 the Court admitted in evidence all of
petitioner's offered exhibits in the Resolutions dated May 3, 2019 21 and
August 6, 2019. 22

Respondent, on the other hand, presented as his sole witness,

RO Etorma. 23

On October 17, 2019, Respondent's Formal Offer of Exhibits24

was filed. After considering petitioner's Comment to Respondent's
Formal Offer of Evidence, 25 the Court admitted in evidence all of
respondent's offered exhibits in the Resolution dated November 8,
2019. 26

On January 15, 2020, 27 the Court submitted the case for decision
after noting the filing of the Memorandum (For the Petitioner) 28 on
November 28, 2019 and posting of the Memorandum for Respondent
on December 16, 2019. 29

15 Order dated March 22, 2018, Docket, pp. 140-142.

16 Docket, pp. 157-169.
17 Exhibit "P-46" (Judicial Affidavit of Rosalie Tanguanco), Docket, pp. 705-715;
Order dated June 14, 2018, Docket, pp. 188-190.
18 Exhibits "P-128" and "P-131" (Judicial Affidavits of Mae Cristina M. Galanza),

Docket, pp. 363-369, 732-737; Order dated September 4, 2018, Docket, pp. 371-
372; Order dated January 29, 2019, Docket, pp. 413-414.
19 Docket, pp. 418-435.

2o Docket, pp. 744-745.

2 1 Docket, pp. 750-751.
22
Docket, pp. 809-810.
23 Exhibit "R-3" (Judicial Affidavit of RO Gene G. Etorma), Docket, pp. 107-113;

Order dated October 8, 2019, Docket, pp. 812-813.

24 Docket, pp. 815-817.

2 5 Docket, pp. 819-820.

26 Docket, pp. 824-825.
27 Resolution dated January 15, 2020, Docket, p. 882
2
8 Docket, pp. 828-865.
29 Docket, pp. 866-879~
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THE ISSUES

The parties stipulated the following issues:

1. Whether the present assessment is null and void for

violating petitioner's right to be heard with regard to its position or
arguments against the PAN, in violation of due process requirements
mandated under Section 228 of the NIRC of 1997, as amended, and
Revenue Regulations (RR) No. 12-99, as amended by RR No. 18-
2013;

2.
Whether petitioner is liable to pay the aggregate amount of
~94,755,465.46 representing the alleged deficiency IT, VAT, WTC,
DST and Compromise Penalty forTY 2013;

3. Whether the applicable prescriptive period on the part of

respondent to assess petitioner's deficiency VAT and WTC forTY 2013
is ten (10) years; and,

4. Whether the FAN dated January 5, 2017 issued against

petitioner representing alleged tax deficiencies for TY 2013 and the
right of the Government through the Bureau of Internal Revenue to
collect such alleged deficiency taxes had prescribed pursuant to
Sections 203 and 22 of the NIRC of 1997, as amended. 30

THE ARGUMENTS

Petitioner's arguments

Petitioner asserts that respondent injudiciously ignored its

Protest dated January 5, 2013 having issued the FAN after only four
(4) working days from its submission of its protest. He claims that
considering the substantial amount involved in the present
assessment, a more reasonable and logical period to consider all the
arguments raised in the protest is necessitated. Such failure to provide
a reasonable period to evaluate petitioner's protest is tantamount to a
denial of due process.

30 Paragraph 11(8), PTO, Docket, pp. 161-162.C'IJ

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Petitioner also contends that the absence of a validly issued LOA

to RO Etorma to audit it renders the present assessment void. He
submits that the MOA signed by the Revenue District Officer is not
sufficient to clothe RO Etorma with authority to audit petitioner. Further,
respondent did not offer in evidence the LOA referred to in the said
MOA.

Further, it claims that the Court has the power to resolve the
issue on the validity of the authority of revenue examiners to conduct
the audit leading to the present assessment. its purported failure to
raise the issue of lack of authority of the examining revenue officer in
the administrative level does not preclude its subsequent insistence
that the assessment is intrinsically void for want of a valid LOA.

Petitioner also submits that the assessments for VAT and WTC
for TY 2013 are already barred by prescription having been issued
beyond the three (3) -year period to assess.

Lastly, petitioner posits that the FAN is also invalid as it did not
contain a fixed and definite amount of tax to be paid, citing
Commissioner of Internal Revenue vs. Fitness by Design, Inc. 31

Respondent's counter-arguments

Respondent refutes petitioner's claim that it was deprived of its

right to due process. He asserts that petitioner was afforded due
process because it was able to reply and/or file its protest to the notices
that were issued or sent to it.

He maintains that the assessment of petitioner's deficiency tax

liability was issued within the period allowed by law. It is incumbent
upon petitioner to positively establish when the prescriptive period
started to run. Allegedly a close scrutiny of petitioner's VAT returns
revealed that petitioner's declarations therein were substantially
deficient in amount and did not disclose the truth regarding the correct
amount of sales subject to tax. Moreover, petitioner failed to withhold
and remit the corresponding withholding tax on salaries and wages.
Hence, the FAN was made within the extraordinary period of ten (10)
years counted from the discovery of said falsity pursuant to Section
222(A) of the NIRC of 1997, as amended.

31
G.R. No. 215957, November 9, 2016.{j)
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He emphasizes that assessments are prima facie presumed

correct and made in good faith and the taxpayer has the duty of proving
otherwise.

Lastly, he posits that taxes are important because they are the
lifeblood of the government and, as such, should be collected without
unnecessary hindrance.

THE RULING

The Petition for Review was timely

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

The Court of Tax Appeals (CTA) is a court of special jurisdiction.

It can only take cognizance of such matters as are clearly within its
jurisdiction. 32 Section 7 of Republic Act (RA) No. 1125, 33 as amended,
defines the jurisdiction of the CTA, viz.:

"SEC. 7. Jurisdiction. -The Court of Tax Appeals 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 imposed in relation thereto,
or other matters arising under the National Internal Revenue Code
or other laws or part of law administered by the Bureau of Internal
Revenue; xxx" (Boldfacing supplied)

On the other hand, under Section 11 of RA No. 1125, 34 as

amended, in relation to Section 3(a), Rule 8 of the Revised Rules of

32
Commissioner of Internal Revenue vs. Silicon Philippines, Inc. (formerly Intel
Philippines Manufacturing, Inc., G.R. No. 169778, March 12, 2014.
33 An Act Creating the Court of Tax Appeals.
34
RA No. 1125, 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, the Commissioner of Customs, the Secretary
of Finance, the Secretary of Trade and Industry or the Secretary of Agriculture or
the Central Board of Assessment Appeals or the Regional Trial Courts 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 action as referred to in
Section 7(a)(2) herein. Xxx.~
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CTA Case No. 9709
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the Court of Tax Appeals (RRCTA), 35 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 from receipt of the copy
of such decision or ruling or within thirty (30) days after the expiration
of the specific period of action.

In the case at bar, petitioner received the FAN on January 16,

2017 and filed its protest thereon on February 10, 2017. On April11,
2017, within the sixty (60)- day period granted under Section 228 of
the NIRC of 1997, as amended, for submission of relevant supporting
documents, petitioner submitted documents in support of its protest.
Pursuant to the law and rules, respondent had until October 8, 2017 to
decide petitioner's Protest Letter dated February 9, 2017.

Despite the lapse of the period to decide, respondent did not

issue any decision thereon. Consequently, petitioner had until
November 7, 2017 within which to appeal respondent's inaction. Since
the Petition for Review was timely filed on November 6, 2017, the Court
has acquired jurisdiction to take cognizance of the case.

The RO and GS who continued the

audit of petitioner were not authorized
by a valid LOA; hence, the
assessments issued pursuant to said
audit are void ab initio

While the issue of the authority of the ROs to conduct audit of

petitioner was not included in the parties' stipulated issues, and was
raised by petitioner only during trial 36 and in its memoranda, the Court
is nonetheless vested with sufficient authority to consider the same,
pursuant to Section 1, Rule 14 of the RRCT A which provides that "in

35 RRCTA, Rule 8, Section 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 Regional Trial 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 refund 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.
36
Transcript of the Stenographic Notes of the October 8, 2019 Hearing, p.10. CJi)
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deciding cases, the Court may not limit itselt to the issues stipulated by
the parties but may also rule upon related issues necessary to achieve
an orderly disposition of the case." The authority of ROs who audited
petitioner is relevant in determining the validity of the disputed
assessments.

In Commissioner of Internal Revenue vs. Lancaster Philippines,

37
Inc., the Supreme Court clarified that the CT A can indeed resolve the
issue involving the authority of the ROs to conduct the audit, albeit the
same was not raised by the parties in their pleadings or memoranda.

In the case at bar, RO Etorma and GS Arias trace their authority

to carry out the investigation of petitioner, relative to its tax liability for
TY 2013, to MOA No. MOA0442015LOA-0000230 dated April 12,
2016, 38 which was issued by Revenue District Officer Aninag.

Perusal of the BIR Records would show that LOA with SN:
eLA201200036523 39 issued by Regional Director Amora authorized
RO Cruz and GS Pilarca to examine petitioner's books of accounts and
other accounting records forTY 2013. The issuance of the PAN and
FAN, however, was made upon the recommendation 40 of RO Etorma
and GS Arias, who were not named in the said LOA. As afore-
mentioned, RO Etorma and GS Aria's authority to continue petitioner's
audit investigation was pursuant to a mere MOA No.
MOA0442015LOA-0000230 dated April 12, 2016, issued by Revenue
District Officer Aninag.

Notably, respondent failed to present a new LOA issued to RO

Etorma and GS Arias in relation to the audit of petitioner's tax liability
forTY 2013.

The NIRC of 1997, as amended, is clear and categorical in

requiring a specific authority from the CIR or from his duly authorized
representatives before an examination of a taxpayer may be made. 41
Section 6 thereof provides:

7
3 G.R. No. 183408, July 12, 2017.
38 BIR Records, p. 655.
39 BIR Records, p. 3.
40 Exhibit "R-1", BIR Records, pp. 806-808.
41 Medicard Philippines, Inc. vs. Commissioner of lntemal Revenue, G.R. No.

222743, April 5, 2017 ~

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CTA Case No. 9709
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"SEC. 6. Power of the Commissioner to Make Assessments

and Prescribe Additional Requirements for Tax Administration and
Enforcement. -

(A) Examination of Returns and Determination of Tax Due -

After a return has been filed as required under the provisions of this
Code, the Commissioner or his duly authorized representative
may authorize the examination of any taxpayer and the assessment
of the correct amount of tax: Provided, however; That failure to file a
return shall not prevent the Commissioner from authorizing the
examination of any taxpayer. xxx" (Boldfacing and underscoring
supplied)

An officer of the Bureau of Internal Revenue (BIR) cannot simply

subject a taxpayer to audit without valid a LOA issued for that
purpose. Section 13 of the NIRC of 1997, as amended, states:

"SEC. 13. Authority of a Revenue Officer.- Subject to the rules

and regulations to be prescribed by the Secretary of Finance, upon
recommendation of the Commissioner, a Revenue Officer
assigned to perform assessment functions in any district may,
pursuant to a Letter of Authority issued by the Revenue Regional
Director, examine taxpayers within the jurisdiction of the district in
order to collect the correct amount of tax, or to recommend the
assessment of any deficiency tax due in the same manner that
the said acts could have been performed by the Revenue Regional
Director himself." (Boldfacing and underscoring supplied)

More importantly, the "authorized representative" contemplated under

Section 6 of the NIRC of 1997, as amended, who is vested with the
power to issue an LOA is no other than a Revenue Regional Director
pursuant to Section 13 thereof. And such power to issue an LOA may
not be delegated by the Revenue Regional Director to any other officer
- - much less to a Revenue District Officer. On this point, the
pronouncement in NPC Drivers and Mechanics Association, (NPC
DAMA) eta/. vs. The National Power Corporation et a/. 42 is instructive,
VIZ.:

"We agree with petitioners. In enumerating under Section 48

those who shall compose the National Power Board of Directors, the
legislature has vested upon these persons the power to exercise
their judgment and discretion in running the affairs of the NPC. xxx
xxx xxx. It is to be presumed that in naming the respective
department heads as members of the board of directors, the
legislature chose these secretaries of the various executive
departments on the basis of their personal qualifications and acumen

42
G.R. No. 156208, September 26, 2006.~
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CTA Case No. 9709
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which made them eligible to occupy their present positions as

department heads. Thus, the department secretaries cannot
delegate their duties as members of the NPB, much less their power
to vote and approve board resolutions, because it is their personal
judgment that must be exercised in the fulfillment of such
responsibility.

xxx [T]he rule enunciated in the case of Binamira v. Garrucho

is relevant in the present controversy, to wit:

An officer to whom a discretion is entrusted cannot

delegate it to another, the presumption being that he was
chosen because he was deemed fit and competent to
exercise that judgment and discretion, and unless the
power to substitute another in his place has been given
to him, he cannot delegate his duties to another."
(Boldfacing supplied)

Revenue Memorandum Order (RMO) No. 43-90 specifies the

policy guidelines in the issuance of LOAs to audit. It is explicit that the
continuation of audit by a revenue officer other than the officer named
in a previous LOA, requires the issuance of a~ LOA:

"C. Other policies for issuance of UAs.

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 revalidation of UAs 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 supplied and underlining supplied)

The Supreme Court's pronouncement in Medicard Philippines

Inc. vs. Commissioner of Internal Revenue 43 on the significance of a
valid authority of ROs to conduct an audit and examination of the
taxpayer is very instructive, viz.:

"The absence of an LOA

violated MEDICARD's right to
due process

An LOA is the authority given to the appropriate revenue

officer assigned to perform assessment functions. It empowers

4
3 G.R. No. 222743, April 5, 2017.tl1
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or enables said revenue officer to examine the books of account and

other accounting records of a taxpayer for the purpose of collecting
the correct amount of tax. An LOA is premised on the fact that the
examination of a taxpayer who has already filed his tax returns
is a power that statutorily belongs only to the CIR himself or his
duly authorized representatives. Section 6 of the NIRC clearly
provides as follows:

XXX XXX XXX

Based on the afore-quoted provision, it is clear that

unless authorized by the CIR himself or by his duly authorized
representative, through an LOA, an examination of the taxpayer
cannot ordinarily be undertaken. The circumstances
contemplated under Section 6 where the taxpayer may be assessed
through best-evidence obtainable, inventory taking, or surveillance
among others has nothing to do with the LOA These are simply
methods of examining the taxpayer in order to arrive at the correct
amount of taxes. Hence, unless undertaken by the CIR himself or
his duly authorized representatives, other tax agents may not
validly conduct any of these kinds of examinations without prior
authority.

XXX XXX XXX

In the case of Commissioner of Internal Revenue vs. Sony

Philippines, Inc., the Court said that:

"Clearly, there must be a grant of authority before any

revenue officer can conduct an examination or assessment.
xxx. In the absence of such an authority, the assessment
or examination is a nullity."

XXX XXX XXX

xxx In fact, apart from being a statutory requirement, an LOA

is equally needed even under the BIR's RELIEF System because the
rationale of requirement is the same whether or not the CIR conducts
a physical examination of the taxpayer's records: to prevent undue
harassment of a taxpayer and level the playing field between the
government's vast resources for tax assessment, collection and
enforcement, on one hand, and the solitary taxpayer's dual need
to prosecute its business while at the same time responding to
the BIR exercise of its statutory powers. The balance between
these is achieved by ensuring that any examination of the
taxpayer by the SIR's revenue officers is properly authorized in
the first place by those to whom the discretion to exercise the
power of examination is given by the statute.

That the BIR officials herein were not shown to have

acted unreasonably is beside the point because the issue of
their lack of authority was only brought up during the trial of the ciJ
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~· What is crucial is whether the proceedings that led to the

issuance of VAT deficiency assessment against MEDICARD had
the prior approval and authorization from the CIR or her duly
authorized representatives. Not having authority to examine
MEDICARD in the first place, the assessment issued by the CIR
is inescapably void." (Boldfacing and underlining supplied)

In Medicard, the Supreme Court declared as void the disputed

assessment for lack of an LOA authorizing the ROs to examine the
taxpayer's books of account and other accounting records.

Further, Commissioner of Internal Revenue vs. Composite

Materials, Inc. 44 is categorical in holding that an RO may only examine
the taxpayer's books pursuant to an LOA issued by the Revenue
Regional Director, further emphasizing that the Referral Memorandum
issued by the Revenue District Officer directing another RO to continue
with the examination of Composite Materials, Inc.'s records is not
equivalent to an LOA nor does it cure the RO's lack of authority, is
apropos, viz.:

"As regards the issue on Revenue Officer Mary Anne P.

Cruz's (RO Cruz) authority to examine CMI's records, the
provisions of the National Internal Revenue Code of 1997, as
amended, are clear that a Revenue Officer may only examine the
taxpayer's books pursuant to a Letter of Authority (LOA) issued
by the Regional Director. This was reiterated by the Court in
Medicard Philippines, Inc. v. Commissioner of Internal Revenue,
ruling that in the absence of an LOA, the assessment or examination
is a nullity.

Here, the CTA en bane found that the LOA issued in relation
to the examination of CMI's book of accounts does not specifically
mention the name of RO Cruz. Thus, the examination conducted by
RO Cruz and the assessment issued against CMI was correctly
declared null and void.

Moreover, the Court agrees with the CTA en bane that the
Referral Memorandum issued by a Revenue District Officer
directing RO Cruz to continue with the examination of CMI's
records is not equivalent to an LOA nor does it cure RO Cruz's
lack of authority. To be sure, Revenue Memorandum Order No. 43-
90, which specified the guidelines in the issuance of LOAs states that
any reassignment or transfer of cases to another RO or
revalidation of an expired LOA shall require the issuance of a
new LOA." (Boldfacing supplied)

44
G.R. No. 238352, September 12, 2018.(i/

I
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The necessity of a valid LOA in audit investigations is not merely

an administrative requirement but a statutory requirement which is vital
to the validity of an audit of a taxpayer, and necessarily, to the validity
of the FAN, that may be issued after said audit.

In the present case, MOA No. MOA0442015LOA-0000230 dated

April 12, 2016, cannot be treated as an LOA as precisely, any re-
assignment of cases requires the issuance of a new LOA. The said
MOA's fatal infirmity is further highlighted by the fact that it was signed
and issued by a Revenue District Officer only and not by a Revenue
Regional Director. Otherwise stated, the said MOA cannot be regarded
as a valid LOA within the context of the law and regulations. It is clear
in the language of RMO No. 43-90 that "any re-assignment/transfer of
cases to another RO(s) ... shall require the issuance of a new UA. "The
phrase emphasizes the mandatory nature of the said requirement.

It is trite that the BIR has the duty of exacting compliance with
pertinent rules and regulations as it has the burden of ensuring that the
right of the government to assess and collect tax deficiencies would
not be defeated by its failure to comply with its own rules.

Without a new LOA issued to RO Etorma and GS Arias in relation

to the audit of petitioner's tax liability forTY 2013, the conduct of the
audit of petitioner is legally flawed. The absence of an LOA authorizing
the RO to audit petitioner rendered the PAN and FAN issued against
petitioner void. Needless to say, a void assessment bears no fruit' 5
and must be slain at sight.

Considering the Court's declaration that the assessments are

void, it need not belabor the other issues raised by the parties.

WHEREFORE, from the foregoing discussion, the Petition for

Review filed on November 6, 2017 by Jed Marketing Corporation is
hereby GRANTED. Assessment Nos. IT-ELA36523-13-17-176, VT-
ELA36523-13-17-176, WC-ELA-36523-13-17 -176, DS-ELA36523-13-
17-176, and MC-ELA36523-13-17-176 with Formal Assessment
Notice (Part I and Part II), all dated January 12, 2017, are hereby
CANCELLED and WITHDRAWN.

45Commissioner of Internal Revenue vs. Metro Star Superama, Inc., G.R. No.
185371, December 8, 2010.CJ'l
Decision
Jed Marketing Corporation vs. Commissioner of Internal Revenue
CTA Case No. 9709
Page 15 of 15

SO ORDERED.

Presiding Justice

WE CONCUR:

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CATHERINE T. MANAHAN
ciate Justice Associate Justice

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