Examination of the Books of Accounts of Taxpayers

February 9, 1959 BIR RULING NO. 087-59 Mr. Godofredo F. Bautista A. Mabini Street Dongalo, Paraaque Rizal S i r : In answer to the queries contained in your letter dated October 27, 1958, I have the honor to inform you as follows: cdt 1. The books of accounts which retail merchants should keep and use are the journal and the ledger. However, if their gross quarterly sales, receipts, or earnings do not exceed P5,000 they may keep and use the simplified set of bookkeeping records duly authorized by the Secretary of Finance. (Section 334, Tax Code.) 2. For purposes of internal revenue tax, only duly authorized agents or examiners of this Bureau can examine the books of accounts of taxpayers. The Commissioner of Internal Revenue, Deputy Commissioner of Internal Revenue or the Chief, Investigation Division may order the examination of books of accounts in any place within the Philippines. In Manila, the Regional Director, City Revenue Officer, the Chief, Manila Examiners and the Chief, Manila Agents may authorize said examination; whereas, in the provinces and other cities, the Regional Director and Provincial Revenue Officers may issue the authority to examine said books within their respective districts or provinces. (Field Circular Nos. V-33 and V-70.) 3. Fieldmen of this Bureau are provided with BIR identification cards. Before conducting an examination or investigation said fieldmen are required to show their identification cards to the taxpayer concerned in order to give the latter an opportunity to take note or copy, if he so desires, the name, designation, and identification number of the investigating agent. Should an agent or examiner refuse to show his BIR identification card, the taxpayer has the right to refuse examination. (Field Circulars Nos. V-48 and 70.) 4. The examination or investigation of taxpayers undertaken by virtue of the authority issued by the officers mentioned in paragraph 2 hereof is confined within the scope of said authority. (Field Circular No. V-89) 5. No fixed number of examiners are assigned in a given community or to a particular store. Agents or examiners may examine any store, or business establishment with their respective districts when so ordered. 6. Internal revenue officers may examine the books of accounts of taxpayers in or outside the latter's place of business. But, when said officers take the books of accounts of taxpayer for purposes of examination outside the latter's place of business, they should issue a receipt on the required internal revenue form (BIR Form No. 19.14). As a general rule, books of accounts of taxpayers should not be retained by internal revenue officers for more than 60 days except (1) when the books, records or papers constitute the evidence of this Office in an unsettled case; (2) in case such records and papers pertain to a case pending in court; (3) in all cases where fraud is evident and the records and papers must accompany the fieldman's report for evaluation purposes; and (4) in all cases where the records and papers have been seized by virtue of a search warrant and the Court has not ordered their return to the taxpayer. (Section 20, Revenue Regulations No. V-1; Field Circular No. V-88) 7. The taxpayers' proof that their books of accounts have been examined by internal revenue officers is the certification or notation to that effect made by said officers on the inner side of either cover of the book examined. (Sec. 20, Rev. Regs. No. V-1). 8. Offenses committed by internal revenue officers falling within the provisions of Section 345 of the Tax Code should be reported immediately to the Commissioner of Internal Revenue. In this connection, it is further stated that as a matter of policy, this Office undertakes the examination of the books of accounts of taxpayers, covering a particular period, only once. However, there is no prohibition on the re-examination of said books. Accordingly, books of accounts which were previously examined may be examined for the second time or more, if and when the subsequent examinations are duly authorized and the circumstances surrounding the case so warrant. cdta Very truly yours, (SGD.) JOSE ARAAS Commissioner of Internal Revenue