Whether a Revenue District Officer has Authority to Issue a Letter of Authority for a Particular Taxable Year

January 16, 1995 BIR RULING NO. 010-95 232 000-00 010-95 Flour Daniel/AG & P, Inc. 9th Floor, Pacific Star Bldg. Makati Ave., Makati Metro Manila Attention: Mr . Fidelino J . de Guzman Sr . Accounting Manager and Ms . Lylyn A . Clavecillas Accounting Director Gentlemen : This refers to your letter dated July 7, 1994 requesting in effect for a ruling as to whether or not a Revenue District Officer has the authority to issue a Letter of Authority for a particular taxable year despite the existence of an unqualified Certificate of Tax Compliance (CTC) issued to a taxpayer for the same year. LLjur It is represented that the above query is being asked in line with the provision of Section 4 of Revenue Regulations No. 3-90 issued on May 31, 1990, which states, " Priority in Investigation . Subject to certain exceptions as determined by the Commissioner of Internal Revenue, taxpayer's return accompanied by an independent CPA's Certification as required under these Regulations shall be given last priority in audit of tax returns." that emphasis on this Section was further made under Section 2.9 of Revenue Memorandum Circular No. 30-91 dated February 18, 1991, which was issued to clarify gray areas of the said RR No. 3-90, which states, "The privilege of last priority attaches only when the taxpayer files a final tax return together with an unqualified CTC. . . . only the Commissioner of the Internal Revenue and his Deputy Commissioners are hereby authorized to issue letters of authority to examine said taxpayers". that you are seeking clarification on this issue as you have been issued Letters of Authority twice for your fiscal year 1991, i.e., Letter of Authority (LA) No. 0546483 RR issued on February 19, 1993 and LA No. 0040717 B on issued on March 16, 1994; and that pending the resolution of this Office of the issue on this matter, you want to hold in abeyance the investigation on your said case. It is noted that for your fiscal year ending October 31, 1991, you have availed of the benefits of Revenue Regulations No. 3-90 (last priority in the audit of tax returns) by filing together with your final tax return an unqualified CTC. It is likewise noted that LA No. 0546483 RR which was issued against you on February 19, 1993 covering your fiscal year ending October 31, 1991 was subsequently cancelled when it was determined that Revenue District Office No. 50 (South Makati) has jurisdiction over you. Thereafter, LA No. 0040711 B was also issued against you on March 16, 1994 by the Assistant Regional Director of Revenue Region No. 8 covering your fiscal year ending October 31, 1991, authorizing the examination of your books of accounts and other accounting records for income and business taxes. In reply, please be informed that under Section 2, paragraph 2.9 of RMC No. 30-91 clarifying certain gray areas of doubtful provisions of RR No. 3-90 (Priority in Investigation) and RR No. 6-90 (requiring the submission of engagement letters), the privilege of last priority attaches only when the taxpayer files a final tax return together with an unqualified CTC. And in order to protect the interest of taxpayers who submitted unqualified CTC's with their tax returns, only the Commissioner of Internal Revenue and his Deputy Commissioners are authorized to issue LA to examine said taxpayers. In this connection, Section 2, paragraph 2.2 of RMC No. 30-91 provides that "the privilege of last priority is limited to taxes certified to the CPA, namely: income tax, including withholding tax, and value-added tax ((VAT)." Thus, other national internal revenue taxes like transfer taxes under Title III, other percentage taxes under Title V, excise taxes under Title VI, and documentary stamp taxes under Title VII, all of the Tax Code, may still be audited by the BIR even if the taxpayer submitted CTCs covering its income tax, withholding tax, and VAT liabilities. Such being the case, and since you have availed of the benefits of RR No. 3-90 by filing together with your final tax return on unqualified CTC, this Office is of the opinion as it hereby holds, that the Revenue District Officer, the Regional Director, and the Assistant Regional Director having jurisdiction over you are not authorized to issue the aforesaid LAs against you covering your fiscal year ending October 31, 1991 relative to your income tax, withholding tax and VAT liabilities. The authority to issue such LAs rests only upon the Commissioner of Internal Revenue or his Deputy Commissioners . However, the Assistant Regional Director has the authority to issue LA No. 0040717 B dated March 16, 1994 against you insofar as your other internal revenue tax liabilities imposed under the Tax Code covering your fiscal year ending October 31, 1991 are concerned. Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue