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THIRD DIVISION

REPUBLIC OF THE G.R. No. 260261

PHILIPPINES,
Petitioner,
Present:

- versus - CAGUIOA, J., Chairperson,

INTING,*
GAERLAN,
DIMAAMPAO, and
SINGH,* JJ
ROBIEGIE CORPORATION,
Respondent. Promulgated :
October 3, 2022
~,~';)L\)~
x -------------- --------------------------------------------------- - -------------------------x

DECISION

GAERLAN, J.:

At bar is a case involving the interplay of two statutory powers vested

in the Commissioner of Internal Revenue (CIR): the power to reassign
revenue officers and employees, and the power to investigate taxpayers'
accounts.

Through the present petition I for review on certiorari, the Republic of

the Philippines (the Republic) challenges the December 2, 2021 Decision2 and
the April 8, 2022 Resolution3 of the Court of Tax Appeals (CTA) in CTA EB
No. 2339 (CTA OC No. 023), which is an action for collection of deficiency
taxes against Robiegie Corporation (Robiegie ).

On official business.
Rollo, pp. 12-39.
Id. at 41-58. Penned by Associate Justice Erlinda P. Uy, with Presiding Justice Roman G. Del Rosario
and Assoc iate Justices Juanito C. Castaneda, Jr. (now retired), Ma. Belen M . Ringpis-Liban, Catherine
T. Manahan , Jean Marie A. BacoJTo-Villena, Maria Rowena Modesto-San Pedro, and Marian Ivy
Reyes-Fajardo concuITing, and Associate Justice Lanee S. Cui-David (on leave).
Id. at 71 -76.
Decision 2 G.R. No. 260261

Robiegie Corporation is a Philippine corporation engaged in the

business of operating a drugstore, with business address at 1614 Rizal
Avenue, Sta. Cruz, Manila.4

On July 27, 2009, the Bureau of Internal Revenue (BIR) issued Letter
of Authority (LOA) No. 00037842 (July 2009 LOA), which authorized
Revenue Officer (RO) Jose Francisco David, Jr. (RO David), under Group
Supervisor (GS) Felix M. Roy, to examine Robiegie's books of accounts and
other accounting records for the taxable year of 2008. 5

On January 28, 2010, Memorandum Referral No. 031-0006-10 was

issued, reassigning the July 2009 LOA to RO Cecille D. Dy (RO Dy) under
GS Jessica 0. Bemales, with notice to Robiegie. Said LOA, together with the
First Notice for Presentation of Books of Accounts and other accounting
records, was served upon and duly received by Robiegie at its business
address. 6

On August 18, 2011, Regional Director Alfredo V. Misajon of the BIR

Revenue Region No. 6-Manila issued a Preliminary Assessment Notice
(PAN) to Robiegie, to inform the latter of the findings of the investigation
conducted by RO Dy pursuant to the July 2009 LOA. 7

On September 19, 2011, the BIR Revenue Region No. 6-Manila issued
a Formal Letter of Demand (FLD) and Final Assessment Notices (FANs),
assessing Robiegie with a total tax deficiency of Pl0,804,991.21 for the
taxable year 2008, comprised of the following amounts: P315,680.28 in
deficiency income tax; Pl 0,397, 181. 78 in deficiency value added tax (VAT);
P20,129.15 in deficiency expanded withholding tax (EWT); and P72,000.00
as compromise penalty. 8

On June 23, 2017, after failing to find any leviable or gamishable

property ofRobiegie, the Republic, through the BIR, filed a complaint before
the CTA to collect the claimed deficiency taxes. 9 The case proceeded to trial
and argumentation with the full participation of both parties. 10

4
Id . at 43 .
5
Id .
6
Id .
Id .
Id . at 43 -44.
9
Id . at 44 .
10
Id . at 44-45.
Decision 3 G.R. No. 260261

The CTA Division Ruling 11

On June 8, 2020, the Second Division of the CTA dismissed the

Republic's complaint on the ground that the assessments against Robiegie are
null and void for lack of authority of RO Dy to conduct an investigation into
Robiegie's accounts. The CTA Second Division ruled that RO Dy had no
authority to investigate Robiegie because such authority had been given to RO
David pursuant to the July 2009 LOA. The Republic's witness, BIR-Manila
Assessment Section Chief Edna A. Ortalla, admitted that RO David, to whom
the July 2009 LOA was issued, took no part in the investigation and review
ofRobiegie's accounts; and that said investigation and review was conducted
by BIR personnel who had not been issued an LOA for the purpose. 12

In its motion for reconsideration, the Republic argued that the CTA
Second Division's strict construction of LOAs will jeopardize the collection
of taxes. The Republic asseverated that BIR regulations allow the
reassignment of investigations to other revenue officers in cases of
resignation, transfer, or other separation from service of the duly authorized
RO prior to the conclusion of the investigation, and such reassignment is
effected through Memoranda of Assignment (MOA) or memorandum
referrals, since only one LOA per taxable year can be issued to a taxpayer. As
applied to the case at bar, RO Dy had authority to conduct the investigation
into Robiegie' s accounts since the investigation was properly reassigned to
her and she, therefore, derived her authority from the July 2009 LOA issued
to RO David. 13

In its August 26, 2020 Resolution, 14 the CTA Second Division rejected
the Republic's arguments. It upheld the rule that an RO must be authorized
through a validly issued LOA in order to conduct a valid investigation into a
taxpayer's accounts. Without an LOA, any investigation by an RO into a
taxpayer's accounts is null and void. While the tax court in division conceded
that the reassignment of investigations to other ROs is not prohibited, such
reassignment must still comply with the general principles on LOAs under
Section 6(A) of the NIRC in relation to Revenue Memorandum Order (RMO)
No. 43-90. Under said RMO, "the only BIR officials authorized to issue and

II Penned by Associate Justice Juanito C. Castaneda, Jr. (now retired), with Associate Justices Cielito N.
Mindaro-Grulla (now a member of the Judicial Integrity Board) and Jean Marie A. Baco1To-Villena
concurring. The rollo does not include a copy of the decision, but such copy is uploaded to the CT A
website .
12
CT A Second Division Decision , pp. 12-13. Accessed through the CT A on line case search system at
https ://cta.j udiciary .gov. ph/decres _ caseno.
13 CTA Second Division Resolution, pp. 2-3. Accessed through the CT A on line case search system at
https://cta.judiciary.gov. ph/decres _ caseno.
14 Penned by Associate Justice Justices Juanito C. Castaneda, Jr. (now retired), with Associate Justices
Cielito N. Mindaro-Grulla (now a member of the Judicial Integrity Board) and Jean Marie A. Baco1To-
Villena concurring. The rollo does not include a copy of the resolution, which is uploaded to the CTA
website.
Decision 4 G.R. No. 260261

sign [LO As] are the Regional Directors, the Deputy Commissioners and the
Commissioner. For the exigencies of the service, other officials may be
authorized to issue and sign Letters of Authority but only upon prior
authorization by the Commissioner himself." Thus, the reassignment of an RO
must also be made by a BIR official who is authorized to issue and sign an
LOA. However, in the case at bar, the Republic admitted that the transfer of
the Robiegie investigation to RO Dy through Memorandum Referral No. 031 -
0006- 10 was issued and signed only by the Revenue District Officer. 15

The Republic thus elevated the matter to the CTA en bane. 16

The CTA En Banc Ruling

The CTA en bane affirmed the ruling of its Second Division and upheld
the necessity of an LOA in order for an RO to conduct a valid investigation
into taxpayer accounts. Memorandum Referral No. 031 -0006- 10 is invalid, as
it was not issued and signed by a BIR official empowered by law or regulation
to issue LOAs or to authorize taxpayer examinations. 17 Likewise, RMO Nos.
8-2006, 62-2010, and 69-2010, which the Republic cites as bases for the
reassignment of ROs through memoranda, in lieu of LOAs, are mere
administrative issuances which cannot prevail over the clear import of
Sections 6(A) and 13 of the NIRC.

The Republic cannot rely on Section 17 of the NIRC to justify the

reassignment of investigating ROs without a corresponding LOA, as there is
nothing in the said provision to justify dispensing with the requirement of an
LOA. The rules applicable to the authority of ROs to conduct investigations
and assess tax liabilities remain rooted in Sections 6(A) and 13 of the NIRC.
The CIR's general power to reassign BIR employees is distinct and separate
from the CIR' s power to conduct tax investigations and to authorize BIR
officials for such purpose. 18

Contrary to the Republic's asseverations, the ruling in Commissioner

ofInternal Revenue v. Sony Philippines, Inc. 19 (Sony Philippines) is applicable
to the case at bar. Revenue officers are empowered to conduct taxpayer
investigations through an LOA. Thus, an assessment based on an investigation
by an RO without the proper LOA is null and void. 20

15
CT A Second Division Resolution, pp. 3-6.
16
Rollo, pp. 69-70.
17
Id. at 48 -52.
18
Id. at 53 -54.
19
649 Phil. 5 19 (2010) .
20
Rollo, pp. 55-56.
Decision 5 G.R. No. 260261

Associate Justice Ma. Belen M. Ringpis-Liban (Justice Ringpis-Liban)

concurred in the result on the basis of the finding that Memorandum Referral
No. 031 -0006-10 was issued and signed only by the Revenue District Officer.
Had the memorandum referral been signed by a BIR official who can be
authorized to issue an LOA under the NIRC, the same would have been valid
and RO Dy would have acquired the requisite authority to investigate
Robiegie. 21

Through the assailed resolution, the tax court denied the Republic's
motion for reconsideration; hence the present petition, where the Republic
reiterates that: 1) an investigation conducted by an RO pursuant to a
memorandum of assignment under an LOA issued in favor of another RO is
valid under RMO Nos. 8-2006, 62-2010, and 69-2010, and a ruling to the
contrary would unduly hamper the government's tax collection efforts,
considering that under BIR regulations, only one LOA can be issued to a
taxpayer within a taxable year; 22 2) an LOA is not an authorization in favor of
the ROs but a notification to the taxpayer that "any duly authorized [RO] may
now conduct audit not because of, but rather, 'pursuant' to such letter of
authority," 23 3) the RO's authority to investigate may or may not be included
in the LOA, and may be made in any other document issued by the CIR or his
duly authorized representative; 24 4) the NIRC does not require the
identification of a particular RO in an LOA; consequently, the authority in
such LOA may be validly reassigned to different ROs depending on the
exigencies of the service; 25 and 5) the CTA en bane erred in applying Sony
Philippines, which involved a defect in the temporal coverage of the LOA and
not a reassignment of the designated RO under the LOA. 26

In its comment, 27 Robiegie echoes the reasoning of the CTA en bane

and argues that ROs derive their investigatory powers from the CIR, and
therefore can only investigate taxpayers pursuant to a validly issued LOA.
ROs Dy and John Paul Leonardo (RO Leonardo), who conducted the
investigation, reviewed the findings, and issued the assessments against
Robiegie, did not have the requisite LOA to do so. 28

The Court's Ruling

The petition has no merit. The assessments issued against Robiegie are
invalid as they are based on an unauthorized investigation into its accounts.
21 Id. at 59-64. Penned by Ma. Be len Ringpis-Liban.
22
Id. at 17-24.
23 Id. at 23 .
24
Id . at 23 -24.
25
ld . at21 -23.
26
Id. at 28 -30.
27
Id. at 99-1 04.
28
Id .
Decision 6 G.R. No. 260261

LOA as the source of BIR revenue officers '

investigatory powers

The Republic's witnesses admitted during the trial that the investigation
into Robiegie's accounts was conducted by RO Dy and reviewed by RO
Leonardo, both of whom were not named in the original July 2009 LOA. The
Republic's witnesses further admitted that the reassignment of the
investigation to RO Dy and RO Leonardo was not made through an LOA but
through a memorandum referral only.

The necessity of a validly issued LOA for the valid conduct of a

taxpayer investigation by an RO is a well-settled doctrine embodied in our
statutory and case law. In Medicard Philippines, Inc. v. Commissioner of
Internal Revenue, 29 which involved a deficiency value-added tax assessment
in the context of the BIR's electronic "no-contact-audit approach," we
discussed the dual function of an LOA as the modality for the delegation of
the CIR's investigatory power and as a manifestation of due process:

An LOA is the authority given to the appropriate revenue officer assigned

to perfonn assessment functions. It empowers or enables said revenue
officer to examine the books of account and other accounting records of a
taxpayer for the purpose of collecting the correct amount of tax. 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. x x x

xxxx

Based on [Section 6(A) of the NIRC] , 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 unde1taken 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.

xxxx

Contrary to the ruling of the CTA en bane, an LOA cannot be dispensed

with just because none of the financial books or records being physically
kept by MEDICARD was examined. To begin with, Section 6 of the NIRC
requires an authority from the CIR or from his duly authorized
representatives before an examination "of a taxpayer" may be made. The
requirement of authorization is therefore not dependent on whether the

29
808 Phil. 528(2017).
Decision 7 G.R. No. 260261

taxpayer may be required to physically open his books and financial records
but only on whether a taxpayer is being subject to examination.

The BIR's RELIEF System has admittedly made the BIR' s assessment and
collection efforts much easier and faster. The ease by which the BIR's
revenue generating objectives is achieved is no excuse however for its non-
compliance with the statutory requirement under Section 6 and with its own
administrative issuance. 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 BIR'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. 30

Considering that an LOA clothes the appropriate revenue officer with

the authority to assess and examine the books of account and records of a
taxpayer, such power is necessarily subject to reasonable limitations. In
particular, Section C(5) of RMO NO. 43-90, specifically requires that any re-
assignment/transfer of cases to another RO shall require the issuance of a new
LOA:

C. Other policies for issuance of L/ As.

xxxx

5. Any re-assignment/transfer of cases to another RO(s), 64 and

revalidation of L/ As 65 which have already expired, shall require the
issuance of a new L/A, with the corresponding notation thereto,
including the previous LIA number and date of issue of said L/As.

Just last year, in Himlayang Pilipino Plans, Inc. v. Commissioner of

Internal Revenue, 31 which also involved the reassignment of a deficiency tax
investigation to another RO without the issuance of a new LOA, we nullified
the Formal Letter of Demand and Assessment Notice issued against the
taxpayer on the basis of such investigation, thus:

A perusal of the records of the case discloses that electronic LOA SN:
eLA201000017400 LOA-039-2010-00000072 issued against petitioner
specifically authorized revenue officer Cacdac and group supervisor
Andaya, to examine the books of accounts of petitioner for taxable year
2009[.] XX X

30 Id. at 539-540, 545-546. Citations omitted.

3I G.R. No. 241848, May 14, 2021.
Decision 8 G.R. No. 260261

xxxx

However, it appeared that Cacdac was not the revenue officer who actually
conducted the audit of petitioner's books of accounts. It was revenue officer
Bagauisan who audited petitioner by virtue of a memorandum of
assignment signed by revenue district officer Nacar[.] xx x

xxxx

The reassignment of the examination of petitioner's books of accounts

pursuant to electronic LOA SN: eLA201000017400 LOA-039-2010-
00000072 from revenue officer Cacdac to revenue officer Bagauisan
necessitates the issuance of a new LOA. This is clear under Revenue
Memorandum Order (RMO) No. 43-90 or "An Amendment of Revenue
Memorandum Order No. 37-90 Prescribing Revised Policy Guidelines for
Examination of Returns and Issuance of Letters of Authority to Audit," x x
X

xxxx

Here, there was no new LOA issued naming Bagauisan as the new revenue
officer who would conduct the examination of petitioner's books of
accounts. The authority of Bagauisan is anchored only upon the
memorandum of assignment signed by revenue district officer Nacar.

Section 13 of the NIRC requires that a revenue officer must be validly

authorized before conducting an audit of a taxpayer:

xxxx

In addition, under RMO No. 43 -90, only the following officers may validly
issue a LOA:

D. Preparation and issuance of L/ As.

xxxx

4. For the proper monitoring and coordination of the issuance of

Letter of Authority, the only BIR officials authorized to issue and
sign Letters of Authority are the Regional Directors, the Deputy
Commissioners and the Commissioner. For the exigencies of the
service, other officials may be authorized to issue and sign Letters
of Authority but only upon prior authorization by the Commissioner
himself. (Emphasis supplied)

Thus, revenue officer Bagauisan is not authorized by a new LOA to conduct

an audit of petitioner's books of accounts for taxable year 2009.

xxxx

Here, as comprehensively discussed, there was no new LOA issued by the

CIR or his duly authorized representative giving revenue officer Bagauisan
the power to conduct an audit on petitioner' s books of accounts for taxable
year 2009. The importance of the lack of the revenue officer's authority to
Decision 9 G.R. No. 260261

conduct an audit cannot be overemphasized because it goes into the validity

of the assessment. The lack of authority of the revenue officers is
tantamount to the absence of a LOA itself which results to a void
assessment. Being a void assessment, the same bears no fruit. 32

This Court was more emphatic in Commissioner ofInternal Revenue v.

McDonald's Philippines Realty Corp. 33 (McDonald 's), which opens with this
categorical declaration:

The practice of reassigning or transferring revenue officers originally

named in the Letter of Authority (LOA) and substituting or replacing them
with new revenue officers to continue the audit or investigation without a
separate or amended LOA (i) violates the taxpayer's right to due process in
tax audit or investigation; (ii) usurps the statutory power of the
Commissioner of Internal Revenue (CIR) or his duly authorized
representative to grant the power to examine the books of account of a
taxpayer; and (iii) does not comply with existing Bureau of Internal
Revenue (BIR) rules and regulations on the requirement of an LOA in the
grant of authority by the CIR or his duly authorized representative to
examine the taxpayer' s books of accounts. 34

In that case, the RO authorized to investigate the accounts of

McDonald's Philippines Realty Corporation through a validly issued LOA
was transferred to another assignment; and the investigation was reassigned
to another RO through a referral memorandum, without the issuance of a new
LOA. We likewise invalidated the resultant assessment and demand:

This case is an occasion for the Court to rule on a disturbing trend of tax
audits or investigations conducted by revenue officers who are not
specifically named or authorized in the LOA, under the pretext that the
original revenue officer authorized to conduct the audit or investigation has
been reassigned or transferred to another case or place of assignment, or has
retired, resigned or otherwise removed from handling the audit or
investigation.

This practice typically occurs as follows : (i) a valid LOA is issued to an

authorized revenue officer; (ii) the revenue officer named in the LOA is
reassigned or transferred to another office, case or place of assignment, or
retires, resigns, or is otherwise removed from handling the case covered by
the LOA; (iii) the revenue district officer or a subordinate official issues a
memorandum of assignment, referral memorandum, or such equivalent
document to a new revenue officer for the continuation of the audit or
investigation; and (iv) the new revenue officer continues the audit or
investigation, supposedly under the authority of the previously issued LOA.

32
Id.
33
G.R. No. 242670, May I 0, 202 1.
34
Id.
Decision 10 G.R. No. 260261

This practice of reassigning or transferring revenue officers, who are the

original authorized officers named in the LOA, and subsequently
substituting or replacing them with new revenue officers who do not have a
new or amended LOA issued in their name, has been the subject of several
CT A decisions x x x.

The Court hereby puts an end to this practice.

xxxx

[I]t is clear that Marcellano was not authorized under a new and separate,
or amended, LOA to contin ue the audit or investigation of the respondent' s
books of accounts for C.Y. 2006. The August 31 , 2007 LOA was originally
issued to revenue officers Eulema Demadura, Lover Loveres, Josa Gomez,
and Emalyn dela Cruz. The original revenue officer, Demadura, was
transferred to another assignment. Pursuant to a mere referral
memorandum, revenue officer Marcellano continued the audit of the
respondent's books of accounts. No new LOA was issued in the name of
Marcellano to conduct the audit of the respondent's books of accounts.
Moreover, the August 31 , 2007 LOA was not amended or modified to
include the name of Marcellano. Hence, the authority under which
Marcellano continued the audit or investigation was not pursuant to the
statutory power of the CIR or his duly authorized representative to grant the
authority to examine the taxpayer's books of accounts. 35

The above-quoted rulings find mooring in Sections 5, 6(A) and 13 of

the NIRC, 36 which vest tax compliance investigation powers in the CIR,
35
Id .
36
SEC. 5. Power of the Commissioner to Obtain Information , and to Summon, Examine, and Take
Testimony of Persons. - In ascertaining the correctness of any return, or in making a return when none
has been made, or in determining the liability of any person for any internal revenue tax, or in
co ll ecting any such liability, or in evaluating tax compliance, the Commissioner is authorized :
(A) To examine anv book, paper, record, or other data which mav be relevant or material to
such inquiry ;
(8) To obtain on a regular basis from any person other than the person whose internal revenue tax
liability is subject to audit or investigation , or from any office or officer of the national and local
governments, government agencies and instrumentalities, including the Bangko Sentral ng Pilipinas
and government-owned or -controlled corporations , any information such as, but not limited to,
costs and volume of production, receipts or sales and gross incomes of taxpayers, and the names,
addresses, and financial statements of corporations, mutual fund companies, insurance companies,
regional operating headquarters of multinational companies, joint accounts, associations, joint
ventures of consortia and registered partnerships, and their members x x x
(C) To summon the person liable for tax or required to file a return, or any officer or emp loyee
of such person, or any person having possess ion , custody, or care of the books of accounts and other
accounting records containing entries relating to the business of the person liab le for tax , or any other
person , to appear before the Commissioner or his duly authorized representative at a time and
place specified in the summons and to produce such books, papers, records, or other data, and
to give testimony;
(D) To take such testimony of the person concerned, under oath, as may be relevant or material
to such inquiry; and
(E) To cause revenue officers and employees to make a canvass from time to time of any revenue
district or region and inquire after and concerning all persons therein who may be liable to pay any
internal revenue tax, and all persons owning or having the care, management or possession of any
object with respect to which a tax is imposed.
xxxx
SEC. 6. Power of the Commissioner to Make Assessments and Prescribe Additional Requirements for
Tax Administration and Enforcement. -
Decision 11 G.R. No. 260261

subject to delegation to "duly authorized representatives" under Section 6(A).

Notably, such powers are invested in the CIR alone, 37 who may then delegate
such powers to his or her "duly authorized representatives" pursuant to law
and regulations. The Republic's asseveration that

an LOA is not an "authorization letter" of the revenue officers. It actually is

issued to taxpayers and not to the revenue officer. It is issued to inform the
taxpayer that audit of his person has been authorized by the Commissioner.
Once served, any duly authorized revenue officer may now conduct audit
not because of, but rather, "pursuant" to such letter of authority. Their
authority to conduct audit may be included in the letter or it may in any
other document issued by the Commissioner or his duly authorized
representative. No strict form or title is necessary as that would give an
illogical premium on form over substance - what is imp01iant is that audit
of the taxpayer must be sanctioned by an LOA which had been previously
issued. 38

is therefore erroneous. The Republic's construction of Section 13 of the NIRC

to mean that an LOA is not an authorization but a mere notice of investigation
to the taxpayer is blatantly contrary to the text of the law. First, the concept of
authorization is inherent in the very language of Sections 6(A) and 13 of the
NIRC, which speak of a "duly authorized representative" 39 and a "Letter of
Authority." 40 Second, the phrase "pursuant to" in Section 13 means "in the
course of carrying out, in conformance to or agreement with, [or] according
to." 41 Thus, an RO may only examine taxpayers, in the course of carrying out,
in conformance to or agreement with, or according to, a validly issued LOA.
Stated differently, under the NIRC, the investigatory powers of the ROs flow
from the LOA, which is the statutorily designated means by which the CIR
delegates its investigative powers to the BIR revenue officers.

(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,
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.
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 perfonned by the Revenue Regional Director himself.
37
See Jose N. Nolledo & Mercedita S. Nolledo , THE NATIONAL INTERNAL REVENUE CODE OF THE
PHILIPPINES ANNOTATED 60 ( 1996).
38
Rollo, p. 23.
39
NIRC, Sections 5(C) and 6(A) .
40
NIRC, Section 13 .
41
Philip Babcock Gove (ed .), WEBSTER 'S THIRD NEW INTERNATIONAL DICTIONARY OF THE ENGLISH
LANGUAGE, UNABR IDGED 1848 ( 1993).
Decision 12 G.R. No. 260261

The CIR 's reassignment powers cannot be

invoked to defeat the statutory LOA
requirement

To further justify its position that a valid LOA is not necessary for the
reassignment of tax investigations to other ROs, the Republic relies on Section
17 of the NIRC, which provides:

SEC. 17. Assignment of Internal Revenue Officers and Other Employees

to Other Duties. - The Commissioner may, subject to the provisions of
Section 16 and the laws on civil service, as well as the rules and regulations
to be prescribed by the Secretary of Finance upon the recommendation of
the Commissioner, assign or reassign internal revenue officers and
employees of the Bureau of Internal Revenue, without change in their
official rank and salary, to other or special duties connected with the
enforcement or administration of the revenue laws as the exigencies of
the service may require: Provided, That internal revenue officers assigned
to perform assessment or collection functions shall not remain in the same
assignment for more than three (3) years; Provided, further, That
assignment of internal revenue officers and employees of the Bureau to
special duties shall not exceed one (1) year. (Emphasis and underlining
supplied)

In Castro v. Hechanova, et al., 42 (Castro) then CIR Benjamin Tabios

(CIR Tabios) reassigned Revenue Regional Director Teodoro Castro (Castro)
of Revenue Region No. 7 to the BIR central office. When Castro questioned
the reassignment, CIR Tabios argued that it was justified under Section 12 of
the 1939 NIRC; and this Court, in partially sustaining CIR Tabios' position,
held that the reassignment is valid, but for only thi1iy days, unless a longer
duration is approved by the President, under the then prevailing rules on
reassignment of government personnel:

Under the law, respondents, as the administrative heads of the Bureau of

Internal Revenue, not only have administrative supervision and control over
the same, but are also specifically empowered to assign revenue personnel
to other duties, thus:

"SEC. 12. ASSIGNMENT OF INTERNAL REVENUE AGENTS

AND OTHER EMPLOYEES TO OTHER DUTIES. --The
Collector of Internal Revenue may, with the approval of the
Secretary of Finance, assign internal revenue agents and other
officers and employees of the Bureau of Internal Revenue without
change in their official character or salary to such special duties
connected with the administration of the revenue laws as the best
interest of the service may require. "

42
124 Phil. 540 ( 1966).
Decision 13 G.R. No. 260261

[Castro], however, contends that for the exercise of the foregoing authority
to be valid, the assignment of personnel should involve the performance of
some "special duties" and should not result in any change in the official
character of their positions and salaries. In assailing the validity of the travel
assignment order in question, petitioner claims that being a regional
director, to discharge the functions of Revenue Operations-head cannot be
considered as performance of a special duty.

The term "special duties" mentioned in the law, evidently is here being
equated by the petitioner with work requiring the use of some special talent
or knowledge. It may be pointed out, h01,11ever. that the title ofSection 12 of
the Revenue Law mentions the assignment ofrevenue employees to "o ther
duties ". and the body thereof refers to "such special duties connected with
the administration of the revenue law. " To our mind. the "special duties "
mentioned in the law refer not to a "special " or extraordinary or different
undertaking. but to functions or ·work other than. or not related to, those
regularly discharged by the employee concerned. In other words. to the
emplovee reassigned or detailed to another post. the performance o{work
other than those he was regularlv doing. constitutes the doing of "s pecial
duties". which supports the view that the designation is not permanent but
merely temporary. And, there is nothing wrong, legally or personnel-wise,
in the aforequoted provision, giving to the office administrator or
supervisor, the authority to formulate a personnel program designed to
improve the service and to carry out the same, utilizing approved techniques
or methods in personnel management, to the end that the abilities of the
employees may be harnessed to promote optimum public service. Of course,
it must be realized that the exercise of this authority may be abused or
carried out to serve some other purposes, as so charged in this case. But, as
it was once said, "the possibility of abuse is not an argument against the
concession of power, as there is no power that is not susceptible of abuse." 43
(Emphasis, italics and underlining supplied)

Section 17 of the current NIRC is the statutory descendant of Section 12 of

the 1939 NIRC. The current Section 17 retains the modifiers "other" and
"special" to describe the duties to which revenue officers may be reassigned.
However, the current provision departs from the old Section 12 in that: 1)
Section 17 incorporates the principle enunciated by this Court in the above-
quoted ruling, that such reassignments must be for a limited time only, i.e.,
one year; and 2) Section 17 explicitly states that "internal revenue officers
assigned to perform assessment or collection functions shall not remain in the
same assignment for more than three (3) years. " 44

In view of the foregoing, it becomes clear that Section 17 of the NIRC

contemplates three types of reassignments: 1) reassignments to other and
special duties, which shall not exceed one year, and, following the Castro
ruling, must pertain to functions not regularly performed by the reassigned

43
Id . at 543-545.
44 The time limitation on assignments of revenue officers is intended to maximize productivity and to
prevent fami liarization and fraternizing between taxpayers and revenue officers. Rodelio T. Dascil ,
NIRC OF THE PHILIPPINES A NNOTATED 38 (2020).
Decision 14 G.R. No . 260261

officer or employee; 2) reassignments of revenue officers involved in excise

tax functions under Section 16; and 3) reassignments of revenue officers
assigned to perform assessment or collection functions, which must be done
every three (3) years. However, the text of Section 17 is clearly limited to the
CIR' s power to reassign BIR officers and employees. While the CIR is
empowered and mandated to regularly reassign revenue officers who perfonn
assessment or collection functions, such mandate is distinct and separate from
the CIR's investigatory power, which is governed by other provisions of the
NIRC. As the CTA en bane correctly points out:

[There is] nothing in [Section 17 which] would justify dispensing with the
issuance of a valid LOA in favor of the Revenue Officer concerned.xx x

xxxx

[T]he statutory requirement of issuing a new LOA in no way prevents the

CIR from validly assigning or re-assigning the Revenue Officers and
employees of the BIR. It does not even require that audit must be completed
before such employee can be transferred. Rather, what is simply required
by the law is that in case of reassignment, a new LOA be issued to the
Revenue Officer to whom the case is transferred to. To rule otherwise and
dispense with the requirement of the issuance of an LOA runs counter to
both law and jurisprudence. 45

Requisite of new LOA for a valid

reassignment of tax investigation will not
hamper internal revenue operations

Contrary to the Republic's position, the issuance of a new LOA as a

requisite for the valid reassignment of a tax investigation to a different RO
will not necessarily impede the collection of taxes. The issuance of
reassignment LOAs need not overburden the CIR as he/she can delegate the
issuance thereof to his/her duly authorized representatives. Furthermore, such
requisite is not irreconcilable with the "one LOA per taxpayer" rule.

As discussed above, the CIR's investigatory powers are delegable to

the BIR's subordinate officials. Under Sections 5(C) and 6(A) of the NIRC,
the CIR or his duly authorized representative may authorize the examination
of a taxpayer after a return has been filed. Furthermore, Section 10(c) of the
same Code directly authorizes the BIR Revenue Regional Directors to
"[i]ssue Letters of authority for the examination of taxpayers within the
region," subject to regulation by the CIR; and Section 10(h) mandated
Revenue Regional Directors to "perform such other functions as may be

45
Rollo, pp . 54-55 .
Decision 15 G.R. No. 260261

provided by law and as may be delegated by the Commissioner." Item 4, Part

D of RMO No. 43 -90 operationalizes these provisions:

For the proper monitoring and coordination of the issuance of Letter of

Authority, the only BIR officials authorized to issue and sign Letters of
Authority are the Regional Directors, the Deputy Commissioners and the
Commissioner. For the exigencies of the service, other officials may be
authorized to issue and sign Letters of Authority but only upon prior
authorization by the Commissioner himself.

Contrary to the Republic's claims, the requirement of a new LOA for

the valid reassignment of a tax investigation can be reconciled with the "one
LOA per taxable year" rule under RMO Nos. 8-2006 and 43-90. Items 1 and
2 of Part IV.D. ofRMO No. 8-2006 provide:

1. Only one (1) [LOA] shall be issued to the same taxpayer, for the same
tax type and period, except where an [LOA] was issued for a specific tax
type only and subsequently, another [LOA] was issued to the same taxpayer
by the same or another office covering the investigation of all internal
revenue taxes (AIRT) for the same taxable period. The [LOA] issued for
AIRT purposes shall be allowed provided the coverage shall be limited to
AIRT except for the specific tax type and said coverage shall be clearly
stated on the face of the [LOA].

2. In case two or more [LOA]s are issued to the same taxpayer for the
same tax type and for the same period, the power to decide which
[LOA] shall prevail shall be under the exclusive jurisdiction of the
Commissioner (CIR). The LA prevailed upon shall be considered
cancelled. The concerned [Large Taxpayers Audit and Investigation
Division] I and II/[Large Taxpayers District Office ]/[Revenue District
Office ]/[National Investigation Division ]/[Special Investigation Division]/
[Task Force] shall indicate under Status Code "Cancelled" and select the
appropriate Action Code "LA Cancelled by Order of the CIR". Under the
Remarks column, indicate "Cancelled by LA No. _ issued by (name
office). (Emphasis and underlining supplied)

Clearly, the "one LOA per taxable year" rule is not as ironclad as the Republic
portrays it to be. Part IV.D., Item 2 ofRMO No. 8-2006 authorizes the issuance
of duplicate LOAs, subject to the CIR's discretion to determine which of the
two LOAs shall prevail. Obviously, when a tax investigation is reassigned to a
different RO pursuant to the mandatory "rotation" of assessment officers under
Section 17 of the NIRC, or for any other legally justified reason, the CIR or
his/her duly authorized representatives may issue a new LOA to the newly
assigned RO, and such LOA can be made to prevail over the LOA issued to the
previous investigating officer. Since the CIR's power to issue a LOA is
delegable, the concomitant power to uphold the validity of a subsequently
issued duplicate LOA is likewise delegable to the CIR's duly authorized
representatives, as enumerated in RMO No. 43-90. Stated differently, RMO
Decision 16 G.R. No. 260261

No. 8-2006 does not prohibit the issuance of a new LOA within the same
taxable period if such new LOA is necessitated by the reassignment, retirement,
or other inability of the incumbent RO to continue an investigation. The BIR
official who will issue the new LOA also has the power to make it prevail over
the old, previously issued LOA, subject of course to the control and regulation
of the CIR as the statutorily designated tax investigator. It must be noted that
Section 13 of the NIRC, in providing for the LOA as the mode of delegation of
the CIR's investigatory powers to the ROs, likewise gave the CIR the power to
regulate and define the parameters for the issuance of LOAs. The "one LOA
per taxable year" rule under RMO Nos. 8-2006 and 43-90 is an example of such
a regulation; and such regulation is only valid insofar as it is consistent with the
provisions of the NIRC.

However, in the case at bar, not only did the BIR fail to issue a new
LOA in favor of RO Dy to conduct the investigation into Robiegie's accounts,
the Memorandum Referral which effected the transfer of the investigation to
RO Dy was issued by a BIR official who did not have the requisite authority
to issue LOAs. Consequently, the CTA correctly held that RO Dy had no
authority to investigate Robiegie's accounts.

The Sony Philippines doctrine applies in the

present case

The Republic's intransigent attitude 46 to the applicability of the Sony

Philippines doctrine is misplaced. Sony Philippines contains a relatively early
statement of the nature and function ofLOAs:

Based on Section 13 of the Tax Code, a Letter of Authority or LOA is the

authority given to the appropriate revenue officer assigned to perfonn
assessment functions. It empowers or enables said revenue officer to
examine the books of account and other accounting records of a taxpayer
for the purpose of collecting the correct amount of tax. The very provision
of the Tax Code that the CIR relies on is unequivocal with regard to its
power to grant authority to examine and assess a taxpayer.

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 anv taxpayer and the assessment of
the correct amount of tax: Provided, however, That failure to file a

46
In McDonald 's, supra note 33 , the CIR also argued that Sony Philippines is not applicable to a case
involving the necessity of a LOA for the valid reassignment of a tax investigation.
Decision 17 G.R. No. 260261

return shall not prevent the Commissioner from authorizing the

examination of any taxpayer. x x x (Emphases supplied)

Clearly, there must be a grant of authority before any revenue officer can
conduct an examination or assessment. Equally important is that the revenue
officer so authorized must not go beyond the authority given. In the absence
of such an authority, the assessment or examination is a nullity. 47

Although Sony Philippines involves a different defect in a LOA, i.e.,

that the LOA's temporal coverage was overbroad as it included "unverified
prior years," 48 the aforequoted legal principle therein is a judicially binding
statement of the import of Sections 6(A) and 13 of the NIRC, which is
generally applicable to all situations involving the nature and function of a
LOA under the NIRC. The Supreme Court's interpretation of a statute
constitutes part of such statute from the date of its original enactment, as the
interpretation merely establishes the contemporaneous legislative intent
effectuated by such statute. 49

In conclusion, we reiterate that the power of a BIR revenue officer to

conduct taxpayer investigations flows from a validly issued LOA, which is
the statutorily defined modality for the delegation of the investigatory powers
vested in the CIR by law. Thus, the reassignment of a taxpayer investigation
to a different revenue officer must also be made pursuant to a LOA, the one-
LOA-per-taxpayer rule notwithstanding. When a taxpayer investigation is
transferred from one revenue officer to another, the responsible BIR official
with authority to issue LO As shall issue a new LOA to the new revenue officer
assigned to the investigation. The old LOA in favor of the reassigned revenue
officer shall be deemed cancelled, and the new LOA issued to the
subsequently designated revenue officer shall prevail, in accordance with the
provisions ofRMO No. 8-2006, issued on February 1, 2006.

WHEREFORE, the present petition is DENIED. The December 2,

2021 Decision and the April 8, 2022 Resolution of the Court of Tax Appeals
in CTA EB No. 2339 (CTA OC No. 023) are hereby AFFIRMED .

SO ORDERED.

~
SAMUELR.GAER AN
Associate Justice

47
Id.
48
Id.
49 Gubat Water District v. Commission on Audit, G .R. No. 222054, October I, 20 I 9, quoting
Metropolitan Naga Water District v. Comm ission on Audit, 782 Phil. 28 1 (20 16); Republic v. Remman
Enterprises, Inc., 727 Phil. 608 (2014); Senarillos v. Hermosisima, 100 Phil. 501 (1956).
Decision 18 G.R. No. 260261

WE CONCUR:

(On official business)

HENRI JEAN PAUL B. INTING
Associate Justice

(On official business)

MARIA FILOMENA D. SINGH
Associate Justice

ATTESTAT ION

I attest that the conclusions in the above Decision had been reached in
consultation before the case was a gned o the writer of the opinion of the
Court's Division.

S. CAGUIOA
Decision 19 G.R. No. 260261

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division
Chairperson's Attestation, I certify that the conclusions in the above Decision
had been reached in consultation before the case was assigned to the writer of
the opinion of the Court's Division.