BIR Ruling [DA-121-01]

July 18, 2001 BIR RULING [DA-121-01] Sec. 6 000-00 Industrial Inspection (Int'l . ), Inc . Second Floor, MJL Building 1175 Chino Roces Avenue Makati City Attention: Mr . Vicente G . Ramos President & Gen. Manager Gentlemen : This refers to your letter dated November 15, 2000 (Ref. # 264/00/OP) requesting for a ruling on whether or not the examination of your 1997 books of accounts may still be pursued after the lapse of 120 days from its receipt by the revenue officer assigned and failure of revalidation within the same period. It is stated in your letter that last October 30, 1998, Revenue Region No. 8 issued Letter of Authority No. 000015124 authorizing Revenue Officers Emerita Tan and Socrates Regala to examine your books of accounts for the verification of your internal revenue taxes for the year ended December 31, 1997; that you have submitted to RO Tan the schedules she requested on January 15, 1999; that from that date up to September 15, 2000, ROs Tan & Regala have not done any examination nor have they presented to you a revalidated LOA (within 120 days); that last September 15, 2000 you received a Second Request for the Presentation of Records; that you immediately replied by sending a letter to the Office of the Regional Director on September 25, 2000 informing that office that you have already sent to RO Tan all the requested schedules; that on September 26, 2000, RO Tan called up to say that the letter that should have been sent was the Notice of Start of Examination and not the Second Request for Presentation of Records and, thus, she asked you if she could start her audit on October 2, 2000; that you requested her to reschedule her visit to October 10, 2000; that in the meantime last October 5, 2000 your Finance Manager attended a tax seminar wherein he learned that an examiner is given 120 days within which to complete the examination and if it cannot be completed within the said period, a revalidated LOA should be served; that when RO Tan came to your office on October 13, 2000 you told her that the LOA is no longer valid because she failed to complete her examination within 120 days and failed to present a revalidated LOA; that RO Tan told you that she has a revalidated LOA which you did not receive on the ground that the 120 days have lapsed; that on November 10, 2000, RO Tan came and presented a Final Notice and informed you that according to RDO Rosemarie Ramos-Ragasa, the LOA is still valid; that you in turn asked her to present a written instruction that the LOA is still valid. Hence, this request. In reply, please be informed that Revenue Memorandum Order No. 12-98, implementing the Audit Work Plan for the taxable years 1996 and 1997, provides that the reports of investigation shall be submitted within 120 days from the date of receipt of the LOA by the examiner (Sec. III [B] 3). No LOA shall be revalidated without an attached progress report from the Revenue Officer/s conducting the audit duly noted by the Group Supervisors. Only one time revalidation of LOAs shall be allowed (Sec. III [B] 4). It will be noted that nowhere from said RMO, or other internal revenue issuances on audit programs and policies, is it mentioned that the lapse of 120 days from the date the revenue examiner received the LOA and the failure of the said examiner to secure a revalidation within the said 120-day period will give rise to taxpayer's immunity from audit for that particular period. The requirement is merely directory and is intended to enhance efficiency while at the same time ensure quality audit. It does not in any way affect the right of the government to issue assessment notices for deficiency taxes within the period/s set by law. Thus, at any time within the regular three-year prescriptive period for issuing assessment notices under Section 203 of the Tax Code, the Commissioner or his duly authorized representative, in this case the Regional Director, may still issue an order revalidating LOA No. 000015124. Very truly yours, (SGD.) REN G. BAEZ Commissioner of Internal Revenue