My Solid Technologies & Devices Corp. v. Commissioner of Internal Revenue

THIRD DIVISION [C.T.A. CASE NO. 9839. February 21, 2022.] MY SOLID TECHNOLOGIES & DEVICES CORPORATION , petitioner , vs. COMMISSIONER OF INTERNAL REVENUE , respondent . DECISION UY , J p : Before this Court is a Petition for Review 1 filed on May 18, 2018 by petitioner My Solid Technologies & Devices Corporation, against respondent Commissioner of Internal Revenue (CIR), praying for the cancellation of the assessments for deficiency income tax, value-added tax (VAT), withholding tax on compensation (WTC), expanded withholding tax (EWT), documentary stamp tax (DST), and compromise penalty for calendar year (CY) 2011 in the aggregate amount of P45,689,240.03, inclusive of interests and surcharges. THE PARTIES Petitioner is a corporation duly organized and existing under the laws of the Republic of the Philippines, with registered address at 3rd Floor, Green Sun Building, 2285 Don Chino Roces Avenue Extension, Makati City. It may be served orders, notices, resolutions, and other processes of this Court through its counsel, Salvador Llanillo & Bernardo, with office address at 8/F, Tower One & Exchange Plaza, Ayala Triangle, Ayala Avenue, 1226 Makati City. 2 On the other hand, respondent is the duly appointed CIR vested under the appropriate laws with the authority to carry out the functions, duties, and responsibilities of said office including, inter alia , the power to decide disputed assessments and to cancel and abate tax liabilities, pursuant to the provisions of the National Internal Revenue Code (NIRC) of 1997, as amended, and other tax laws, rules and regulations. 3 THE FACTS Petitioner is a registered taxpayer of the Bureau of Internal Revenue (BIR), Revenue Region No. 8, Revenue District Office (RDO) No. 52, as shown by its Certificate of Registration dated May 18, 2009, with Taxpayer's Identification Number (TIN) No. 007-283-114-000. 4 CScTED On October 30, 2012, petitioner received a copy of respondent's Letter of Authority (LOA) No. LOA-052-2012-00000376 5 dated October 29, 2012, authorizing Revenue Officer (RO) Arnulfo Bilason (Bilason) and Group Supervisor (GS) Pablo Amanse (Amanse) to examine petitioner's books of accounts for all internal revenue taxes for the period of January 1, 2011 to December 31, 2011. 6 On December 18, 2014, petitioner received a copy of respondent's Preliminary Assessment Notice (PAN) with attached Details of Discrepancies , 7 indicating the assessment for deficiency income tax, VAT, WTC, EWT, DST for CY 2011 in the aggregate amount of P31,802,870.26. 8 On January 21, 2015, petitioner received the Formal Assessment Notice 9 (FAN) with attached Details of Discrepancies , assessing petitioner for deficiency income tax, VAT, WTC, EWT, and DST for CY 2011 in the total amount of P32,418,139.28 inclusive of interest and compromise penalty. 10 On February 20, 2015, petitioner filed a Request for Reinvestigation , 11 praying for the cancellation and withdrawal of respondent's deficiency tax assessments for CY 2011. 12 On April 18, 2018, petitioner received the Final Decision on Disputed Assessment (FDDA) 13 dated April 10, 2018, denying petitioner's Request for Reinvestigation and reiterating its demand for payment of deficiency income tax, VAT, WTC, EWT, DST, and compromise penalty for CY 2011 in the aggregate amount of P45,689,240.03. Details are as follows: 14 Kind of Tax Basic Interest 15 Total Income Tax P15,572,810.93 P18,951,897.58 P34,524,708.51 VAT 3,949,805.19 4,982,165.23 8,931,970.42 WTC 151,264.29 191,629.06 342,893.35 EWT 328,590.44 416,274.57 744,865.01 DST 495,000.00 629,802.74 1,124,802.74 Compromise Penalty 20,000.00 Sub-Total P20,497,470.85 P25,171,769.18 P45,689,240.03 Aggrieved, petitioner filed the instant Petition for Review 16 on May 18, 2018 before the Court of Tax Appeals (CTA) which was docketed as CTA Case No. 9839 entitled " My Solid Technologies & Devices Corporation v. Commissioner of Internal Revenue ." Within the extension period granted by the Court until August 16, 2018, respondent filed his Answer 17 on August 15, 2018, interposing special and affirmative defenses, which include, among others, the following: 1) That during the administrative investigation by the BIR, petitioner failed to substantiate or submit supporting evidence against the BIR findings shown under the Details of Discrepancies attached to the PAN, FAN and FDDA; 2) That petitioner failed to file the Inventory List on time, as required by Section 255 of the NIRC of 1997, as amended by Republic Act (RA) No. 8424; cDCEIA 3) That allegations of prescription must be clearly shown; 4) That the assessment issued against petitioner for deficiency income tax, VAT, WTC, EWT, DST, and compromise penalty for taxable year (TY) 2011 were made in accordance with law and regulations; and 5) That assessments are prima facie presumed correct and made in good faith and the taxpayer has the duty of proving otherwise. During the Pre-Trial Conference on November 13, 2018, the parties' counsels agreed to submit their Joint Stipulation of Facts and Issues , within twenty (20) days, or until December 3, 2018. 18 Thereafter, the parties submitted their Joint Stipulation of Facts and Issues 19 within the extension period granted by the Court on December 13, 2018. The same was admitted and approved by the Court in the Resolution 20 dated December 19, 2018. Subsequently, the Court issued the Pre-Trial Order 21 on January 16, 2019. During trial, petitioner presented the following witnesses: 1) Jessa B. Quemada, 22 petitioner's Accountant under the Finance and Accounting Department; and 2) Neil U. Sison, 23 the Court-commissioned ICPA. They testified as follows: Jessa B. Quemada testified on direct examination by way of Sworn Statement : 24 1) that respondent's right to assess deficiency VAT, WTC, and EWT had already expired; 2) that petitioner filed its administrative and judicial protests against respondent's deficiency tax assessments for CY 2011 within the reglementary periods provided under Section 228 of the NIRC of 1997, as amended; and 3) that respondent had no legal and factual bases to assess petitioner for alleged deficiency income tax, VAT, WTC, EWT, DST, and compromise penalty. She also testified on the authenticity and due execution of petitioner's documentary evidence. After her cross-examination, her testimony was deemed terminated. 25 ICPA Neil U. Sison testified on direct examination by way of Sworn Statement : 26 1) that he examined petitioner's supporting documents and summarized his findings in the ICPA Report ; 2) that respondent's assessment against petitioner for alleged deficiency income tax, VAT, WTC, EWT, and DST for CY 2011 lacks factual and legal basis; and 3) that he authenticated the due execution of his ICPA Report and the faithful reproductions of the supporting documents that he examined and verified. After his cross-examination and re-direct examination, his testimony was deemed terminated. The submission of the Judicial Affidavit 27 of GS Bernadette M. Redimano (Redimano) was also noted. 28 On October 1, 2019, petitioner filed its Formal Offer of Evidence . 29 In the Resolution 30 dated November 21, 2019, the Court admitted petitioner's exhibits except for Exhibits "P-10-A", "P-10-B", "P-10-C", "P-10-D", "P-10-F", "P-10-G", "P-10-H", "P-10-I", "P-18", for failure of the documents to correspond with the documents marked by the ICPA; Exhibits "P-10-K" and "P-21" for not being found in the records; and Exhibits "P-26" and "P-30" for failure to present the original for comparison. On December 13, 2019, petitioner filed a Motion for Reconsideration (Re: Resolution Dated November 21, 2019) , 31 praying that the Court admit Exhibits "P-10-A", "P-10-B", "P-10-C", "P-10-D", "P-10-F", "P-10-G", "P-10-H", "P-10-I", and "P-18"; allow petitioner to submit the attached CD containing scanned copies of the schedules; and admit Exhibit "P-30" either as an original or as secondary evidence. In the Resolution dated June 8, 2020 , 32 the Court granted petitioner's request to submit the CD containing the scanned copies of the schedules; and held in abeyance the resolution of petitioner's Motion for Reconsideration (Re: Resolution Dated November 21, 2019) . DHESca Petitioner filed its Submission and Compliance 33 via electronic mail on June 22, 2020, and through personal service on June 24, 2020. 34 Of even date, petitioner filed its Manifestation . 35 In the Resolution 36 dated July 7, 2020, the Court noted the said Submission and Compliance , and Manifestation . On September 1, 2020, the Court issued the Resolution 37 granting petitioner's Motion for Reconsideration (Re: Resolution Dated November 21, 2019) , and admitting Exhibits "P-10-A", "P-10-B", "P-10-C", "P-10-D", "P-10-F", "P-10-G", "P-10-H", "P-10-I", "P-10-K", "P-18", and "P-30". On the other hand, the Court received respondent's Manifestation 38 on January 15, 2021, stating that he would no longer be presenting any witness since all of the documentary evidence to be presented and identified by respondent's witness were already identified by petitioner's witness. In the Resolution 39 dated January 19, 2021, the Court noted respondent's Manifestation ; and directed the parties to file their respective memoranda, within thirty (30) days from notice. Considering the filing of respondent's Memorandum 40 on March 1, 2021; and petitioner's Memorandum 41 posted on March 1, 2021 and received by the Court on March 10, 2021, the instant case was submitted for decision on March 16, 2021. 42 Hence, this Decision . THE ISSUES The parties presented the following issues 43 for the Court's resolution, to wit : (a) Whether or not respondent's right to assess petitioner's alleged deficiency VAT for the first three (3) quarters of CY 2011, and deficiency WTC and EWT for the period January to November 2011, had already prescribed in view of the lapse of the three-year prescriptive period provided under Section 203, of the NIRC of 1997, as amended. (b) Whether or not petitioner is liable to pay deficiency income tax, VAT, WTC, EWT, DST, and compromise penalty in the aggregate amount of P45,689,240.03, inclusive of interest, for TY 2011. Petitioner's arguments: Petitioner argues that the assessments for deficiency VAT for the 1st to 3rd quarters of CY 2011, and deficiency WTC and EWT for the period January to November 2011, are null and void because the same were issued beyond the three (3)-year prescriptive period provided under Section 203 of the NIRC of 1997, as amended. Petitioner further contends that the FAN did not make a definite and final demand for payment against petitioner to settle the assessed tax deficiencies. Allegedly, the FAN merely requested petitioner to pay its tax liabilities; and that such request is not compliant with the due process requirement under the NIRC of 1997, as amended, and Revenue Regulations (RR) No. 12-99, as amended by RR Nos. 18-2013 and 7-2018, which require the inclusion of a demand for payment. Moreover, petitioner claims that the reinvestigation of its protest was conducted by GS Redimano, an officer not duly authorized by a valid LOA. Petitioner points out that the LOA authorized only RO Bilason and GS Amanse to conduct the audit. Thus, considering that GS Redimano did not have authority to conduct the audit, the assessment is void ab initio . TEHIaD As regards the deficiency income tax, WTC, and EWT, petitioner claims that the discrepancy between the amounts reported in the Audited Financial Statements (AFS)/Income Tax Return (ITR) and the Alphalist is due to the fact that there are items in the AFS that are not subject to WTC; hence, the same are not included in the Alphalist; that it has properly withheld the applicable EWT on all of its income payments to contractors/subcontractors and brokers for CY 2011, in accordance with RR No. 2-98, as amended; and that there is no factual and legal bases in respondent's conclusion that petitioner has undeclared income. Petitioner likewise asserts that all of the creditable withholding taxes claimed in its ITR for CY 2011 are duly supported by BIR Form No. 2307, which the ICPA found as valid certificates that may be claimed by petitioner as tax credits for CY 2011; and that it has the right to carry over its excess and unutilized income tax credits to the succeeding period. With respect to the deficiency VAT, petitioner maintains that there is no basis in respondent's finding that petitioner had unaccounted source of cash or undeclared income. According to petitioner, VAT can only be imposed when a taxpayer received an amount of money or its equivalent from sale, barter or exchange of goods or properties, or from sale or exchange of services. In addition, petitioner avers that it has paid the DST due on its Advances from Related Parties for CY 2011. Allegedly, the outstanding balance of Advances from Related Parties reported in its AFS for CY 2011 includes advances received in prior years and thus not subject to DST in CY 2011. Finally, petitioner claims that there is no basis for the compromise penalty as the same was imposed without petitioner's conformity. Respondent's counter-arguments: Respondent counter-argues that petitioner was assessed for deficiency income tax, VAT, WTC, EWT, DST and compromise penalty for CY 2011 because it failed to substantiate or submit supporting evidence against the BIR findings shown under the Details of Discrepancy attached to the PAN, FAN and FDDA, during the administrative investigation. Respondent also insists that while the prescriptive period for assessment is three (3) years as prescribed under Section 203 of the NIRC of 1997, as amended, Section 222 of the NIRC of 1997, as amended, provided for exceptions to the period of limitation of assessment and collection of taxes. In the instant case, respondent claims that petitioner's income tax returns, VAT returns and withholding tax returns are false returns for failure to disclose the correct taxes due, and that petitioner failed to file the DST return. Thus, the applicable prescriptive period is ten (10) years from the discovery of falsity/non-filing or omission. THE COURT'S RULING To facilitate the orderly disposition of the instant case, the Court deems it proper to first resolve the second issue on whether petitioner is liable to pay the alleged deficiency taxes. Thus, it is crucial to first determine whether the assessment was done in compliance with the due process requirements under the NIRC of 1997, as amended, and the pertinent revenue regulations. DETACa The revenue officers were not authorized to conduct the reinvestigation on petitioner. Petitioner claims that the assessment is void due to lack of authority of the revenue officer to conduct the reinvestigation of petitioner's tax liabilities for CY 2011. Petitioner's argument is meritorious. Section 6 (A) of the NIRC of 1997, as amended, lays down the power of the CIR or his duly authorized representative to authorize the examination of any taxpayer and the assessment of the correct amount of tax, to wit : "SECTION 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 , 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." (Emphasis supplied) Relative thereto is Section 13 of the NIRC of 1997, as amended, which provides that the authority of a revenue officer to examine taxpayers or to recommend the assessment of any deficiency tax due must be exercised pursuant to an LOA, to wit : "SECTION 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." (Emphasis supplied) In Medicard Philippines, Inc. v. Commissioner of Internal Revenue , 44 ( Medicard case) the Supreme Court emphasized the importance of an LOA, which grants authority to BIR officials to examine taxpayers, or to recommend the assessment of any deficiency tax due, to wit : "Contrary to the ruling of the CTA en banc , 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 taxpayer may be required to physically open his books and financial records but only on whether a taxpayer is being subject to examination. TaDCEc xxx xxx xxx 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 case. 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 ." (Emphasis and underscoring supplied) Furthermore, respondent, through the issuance of Revenue Memorandum Circular (RMC) No. 75-2018, 45 recognized the ruling in the Medicard case, in this wise: "The judicial ruling, invoking a specific statutory mandate, states that no assessments can be issued or no assessment functions or proceedings can be done without the prior approval and authorization of the Commissioner of Internal Revenue (CIR) or his duly authorized representative, through an LOA . The concept of an LOA is therefore clear and unequivocal. Any tax assessment issued without an LOA is a violation of the taxpayer's right to due process and is therefore 'inescapably void .' xxx xxx xxx To help forestall any unnecessary controversy and to encourage due observance of the judicial pronouncements, any examiner or revenue officer initiating tax assessments or performing assessment functions without an LOA shall be subject to appropriate administrative sanctions." (Emphasis and underscoring supplied) Clearly, there must be a grant of authority, through an LOA, before any revenue officer can conduct an examination or assessment. In the absence of such an authority, the assessment or examination is a nullity. 46 In the instant case, records reveal that pursuant to LOA No. LOA-052-2012-00000376, 47 only RO Bilason and GS Amanse were authorized to examine petitioner's books of accounts for all internal revenue taxes for the period of January 1, 2011 to December 31, 2011. On April 6, 2015, Memorandum of Assignment (MOA) No. 052-1519-2015-MOA-REIN 48 was issued by Rosita Ung-Meniano (Meniano), OIC Revenue District Officer, referring the case to RO Jocelyn C. Quevedo (Quevedo) and GS Redimano for the reinvestigation of petitioner. Notably, it was RO Quevedo and GS Redimano who recommended the issuance of the FDDA through a Memorandum 49 dated May 13, 2015. Evidently, the supposed authority of RO Quevedo and GS Redimano to conduct the reinvestigation of petitioner for CY 2011 was merely based on an MOA and not an LOA. As a corollary, it bears noting that there is no showing that a new LOA was issued specifically authorizing the said ROs to continue the audit investigation of petitioner. The failure of respondent to issue a new LOA runs counter to Revenue Memorandum Order (RMO) No. 43-90 dated September 20, 1990, which lays down the guideline for the audit/investigation and issuance of LOA, pertinent portions of which states, to wit : cDEHIC "C. Other policies for issuance of L/As. 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 L/As which have already expired, shall require the issuance of a new L/A , with the corresponding notation thereto, including the previous L/A number and date of issue of said L/As." (Emphasis and underscoring supplied) It is clear from the foregoing that all audit investigations must be conducted by a duly designated revenue officer authorized to perform the audit and examination of the taxpayer's books and accounting records, pursuant to an LOA. In case of re-assignment or transfer of cases to another revenue officer, it is mandatory that a new LOA shall be issued with the corresponding notation thereto. In the absence of such an authority, the assessment or examination is a nullity. 50 In the present case, it is undisputed that no new LOA was issued and that the only basis for the revenue officers' authority was the MOA. In the recent case of Commissioner of Internal Revenue v. McDonald's Philippines Realty Corp. , 51 the Supreme Court clarified that an MOA is not proof of the existence of authority of the substitute or replacement revenue officer, to wit : "It is true that the service of a copy of a memorandum of assignment, referral memorandum, or such other equivalent internal BIR document may notify the taxpayer of the fact of reassignment and transfer of cases of revenue officers. However, notice of the fact of reassignment and transfer of cases is one thing; proof of the existence of authority to conduct an examination and assessment is another thing. The memorandum of assignment , referral memorandum, or any equivalent document is not a proof of the existence of authority of the substitute or replacement revenue officer. The memorandum of assignment , referral memorandum, or any equivalent document is not issued by the CIR or his duly authorized representative for the purpose of vesting upon the revenue officer authority to examine a taxpayer's books of accounts . It is issued by the revenue district officer or other subordinate official for the purpose of reassignment and transfer of cases of revenue officers. xxx xxx xxx The practice of reassigning or transferring revenue officers, who are the original authorized officers named in the LOA, and subsequently substituting them with new revenue officers who do not have a separate LOA issued in their name, is in effect a usurpation of the statutory power of the CIR or his duly authorized representative. The memorandum of assignment , referral memorandum, or such other equivalent internal document of the BIR directing the reassignment or transfer of revenue officers, is typically signed by the revenue district officer or other subordinate official, and not signed or issued by the CIR or his duly authorized representative under Sections 6, 10(c) and 13 of the NIRC. Hence, the issuance of such memorandum of assignment , investigation, is in effect supplanting the functions of the LOA, since it seeks to exercise a power that belongs exclusively to the CIR himself or his duly authorized representatives ." xxx xxx xxx In summary, We rule that the practice of reassigning or transferring revenue officers originally named in the LOA and substituting 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 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 BIR rules and regulations; particularly RMO No. 43-90 dated September 20, 1990." (Emphasis and underscoring supplied) Applying the foregoing pronouncement, it is evident that RO Quevedo and GS Redimano were not duly authorized to conduct the reinvestigation of petitioner. The MOA is insufficient to clothe them with authority to conduct the reinvestigation of petitioner. Hence, both RO Quevedo and GS Redimano had no authority to conduct the reinvestigation of petitioner's tax liabilities. Accordingly, the subject tax assessments and the FDDA dated April 10, 2018 are inescapably void, and thus, bear no valid fruit. A void assessment bears no valid fruit. 52 With the foregoing, it becomes unnecessary to address the remaining arguments raised by the parties in this case. WHEREFORE , in light of the foregoing considerations, the instant Petition for Review is hereby GRANTED . Accordingly, the Formal Assessment Notice dated January 14, 2015, assessing petitioner My Solid Technologies & Devices Corporation for deficiency income tax, VAT, WTC, EWT, DST, and compromise penalty for CY 2011 in the aggregate amount of P32,418,139.28, inclusive of interest, as well as the Final Decision on Disputed Assessment dated April 10, 2018, holding petitioner liable for deficiency income tax, VAT, WTC, EWT, DST, and compromise penalty for CY 2011 in the aggregate amount of P45,689,240.03, inclusive of interest, are CANCELLED and SET ASIDE . TaCEHA SO ORDERED. (SGD.) ERLINDA P. UY Associate Justice Maria Rowena Modesto-San Pedro, J. , concurs. Ma. Belen M. Ringpis-Liban, J. , with separate concurring opinion. Separate Opinions RINGPIS-LIBAN , J. , separate concurring opinion : I concur in the ponencia in granting the Petition for Review. Revenue Officer ("RO") Jocelyn C. Quevedo and Group Supervisor ("GS") Bernadette M. Redimano were without any authority when they continued the examination or audit of Petitioner. However, I am of the firm belief that notwithstanding the absence of a new Letter of Authority ("LOA") issued in their favor, RO Quevedo and GS Redimano may be given the authority to continue the audit and examination of Petitioner's books of accounts and other accounting records by way of a Revalidation Notice or Memorandum of Reassignment or any letter in this case, by the Regional Director, upon the replacement of RO Arnulfo Bilason and GS Pablo Amanse who were originally named in the LOA. I submit that this could be validly done under the National Internal Revenue Code of 1997 ("NIRC of 1997"), as amended, and the laws on agency under the Civil Code. The power of the Commissioner of Internal Revenue ("CIR") to conduct assessments is granted to him by virtue of Section 6 of the NIRC of 1997, as amended: "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." 1 Section 7 of the NIRC of 1997, as amended, likewise sets limits on which powers of the CIR may be delegated by him and which powers are to be exercised exclusively by him. The issuance of an LOA is not one of the non-delegable powers of the CIR, viz. : "SEC. 7. Authority of the Commissioner to Delegate Power . The Commissioner may delegate the powers vested in him under the pertinent provisions of this Code to any or such subordinate officials with the rank equivalent to a division chief or higher, subject to such limitations and restrictions as may be imposed under rules and regulations to be promulgated by the Secretary of Finance, upon recommendation of the Commissioner: Provided, however, That the following powers of the Commissioner shall not be delegated: acHTIC (a) The power to recommend the promulgation of rules and regulations by the Secretary of Finance; (b) The power to issue rulings of first impression or to reverse, revoke or modify any existing ruling of the Bureau; (c) The power to compromise or abate, under Sec. 204 (A) and (B) of this Code, any tax liability: Provided, however, That assessments issued by the regional offices involving basic deficiency taxes of Five hundred thousand pesos (P500,000) or less, and minor criminal violations, as may be determined by rules and regulations to be promulgated by the Secretary of finance, upon recommendation of the Commissioner, discovered by regional and district officials, may be compromised by a regional evaluation board which shall be composed of the Regional Director as Chairman, the Assistant Regional Director, the heads of the Legal, Assessment and Collection Divisions and the Revenue District Officer having jurisdiction over the taxpayer, as members; and (d) The power to assign or reassign internal revenue officers to establishments where articles subject to excise tax are produced or kept." On the contrary, issuing LOAs is a delegable power which the CIR may devolve to Revenue Regional Directors, as expounded on in Section 10 of the NIRC of 1997, as amended: "SEC. 10. Revenue Regional Director . Under rules and regulations, policies and standards formulated by the Commissioner, with the approval of the Secretary of Finance, the Revenue Regional director shall, within the region and district offices under his jurisdiction, among others: ADCIca xxx xxx xxx (c) Issue Letters of authority for the examination of taxpayers within the region ; xxx xxx xxx (h) Perform such other functions as may be provided by law and as may be delegated by the Commissioner ." 2 To implement said provision, Revenue Memorandum Order ("RMO") No. 36-99 3 was issued, entitled as "Guidelines and Procedures in the Issuance of Letters of Authority, Approval of Audit Reports and Issuance of Assessment Notices and Amending Certain Provisions of Revenue Memorandum Order (RMO) Nos. 26-94, 37-94 and 23-97." The RMO clearly emphasized that it is the Revenue Regional Directors who have the authority to issue LOAs for all audit cases within their regional jurisdiction, viz. : "I. OBJECTIVES 1. To delineate the power to issue Letters of Authority (LAs) to the Revenue Regional Directors pursuant to Sec. 10 (c) of the Tax Code . 2. To prescribe the revised guidelines and procedures in the issuance of LAs, approval of audit reports and issuance of assessment notices. II. GUIDELINES AND PROCEDURES 1. Section E of RMO No. 26-94 is hereby amended to read as follows: The Revenue Regional Director shall approve and sign LAs for all audit cases within his regional jurisdiction . . . xxx xxx xxx 2. Section C.2.2.1 of RMO No. 23-97 is hereby amended to read as follows: The Regional Director shall issue the corresponding Letter of Authority if indications of fraud have been established, and the same has been confirmed by the Regional Tax Fraud Committee (RTFC), composed of the following: a. Regional Director Chairman b. Assistant Regional Director Vice-Chairman c. Chief, SID Member d. Chief, Assessment Division Member e. Chief, Legal Division Member xxx xxx xxx 6. The following additional guidelines on the issuance of LAs shall be observed: 6.1 All LA forms for use by the Revenue District Offices and Special Investigation Divisions shall be requisitioned by the Regional Director from the Accountable Forms Divisions in the National Office. xxx xxx xxx 6.6 The Regional Director shall maintain an LA Register for all LAs issued by him . All issuances, revalidations, cancellations, case closures, assessments and other matters in relation to LAs should be entered in the LA Register. Entries in the LA Register must be complete and updated." 4 In fact, this is what happens in reality. The Regional Director is the one who issues and signs an LOA, and not the CIR. An LOA is, in essence, a contract of agency. Article 1868 of the Civil Code defines agency as a contract where "a person binds himself to render some service or to do something in representation or on behalf of another, with the consent or authority of the latter." In the case of Spouses Fernando and Lourdes Viloria v. Continental Airlines, Inc. , 5 the Supreme Court had the occasion to expound on the elements of agency, to wit: "The elements of agency are: (1) consent, express or implied, of the parties to establish the relationship; (2) the object is the execution of a juridical act in relation to a third person; (3) the agent acts as a representative and not for him/herself; and (4) the agent acts within the scope of his/her authority. As the basis of agency is representation, there must be, on the part of the principal, an actual intention to appoint, an intention naturally inferable from the principal's words or actions. In the same manner, there must be an intention on the part of the agent to accept the appointment and act upon it . Absent such mutual intent, there is generally no agency. It is likewise a settled rule that persons dealing with an assumed agent are bound at their peril, if they would hold the principal liable, to ascertain not only the fact of agency but also the nature and extent of authority, and in case either is controverted, the burden of proof is upon them to establish it." 6 TIEHDC In an LOA, the CIR is the principal as he is the one mandated by the law to make assessments and the Regional Director, his agent. Now, may the Regional Director, the CIR's agent, appoint a sub-agent, in this case, the RO named in the LOA? Article 1892 of the Civil Code says that he can. The said provision states: "Art. 1892. The agent may appoint a substitute if the principal has not prohibited him from doing so ; but he shall be responsible for the acts of the substitute: (1) When he was not given the power to appoint one; (2) When he was given such power, but without designating the person, and the person appointed was notoriously incompetent or insolvent. All acts of the substitute appointed against the prohibition of the principal shall be void. (1721)" 7 This power to appoint a sub-agent necessarily includes the power to revoke the same. Thus, the authority given to RO Bilason and GS Amanse who were originally named in the LOA may be revoked, transferred and reassigned to RO Quevedo and GS Redimano, for continuance of audit. Said document where such authority is transferred may be equivalent to an LOA. Several reasons support this. First , the only directive under Section 13 of the NIRC of 1997, as amended, 8 which requires that assessment be done by ROs pursuant to an LOA, is that the grant of authority be done in writing . In fact, an "[a]gency may be oral, unless the law requires a specific form." 9 Second , although the document may not be entitled "Letter of Authority" but otherwise, it can contain all the elements necessary to establish a contract of agency between the CIR and the new RO. The primary consideration in determining the true nature of a contract is the intention of the parties. If the words of a contract appear to contravene the evident intention of the parties, the latter shall prevail. Such intention is determined not only from the express terms of their agreement, but also from the contemporaneous and subsequent acts of the parties. 10 The title of the contract does not necessarily determine its true nature. 11 In fact, this Court has, time and again, declared certain documents emanating from the CIR as his "Final Decision" on a Disputed Assessment based on the tenor of the words therein despite the absence of the words "Final Decision" in the title of the document. In interpreting what a "Letter of Authority" is, as mentioned in Section 13 of the NIRC of 1997, as amended, the laws on contracts and agency embodied in the Civil Code simply cannot be ignored. Every effort must be exerted to avoid a conflict between statutes; so that if reasonable construction is possible, the laws must be reconciled in that manner. 12 Similarly, every new statute should be construed in connection with those already existing and all should be made to harmonize and stand together, if they can be done by any fair and reasonable interpretation. Interpretare et concordare leges legibus, est optimus interpretandi modus , which means that the best method of interpretation is that which makes laws consistent with other laws. Tax laws do not exist in a vacuum, and must be appreciated and applied with other laws such as the Civil Code. 13 I am not unaware of RMO No. 43-90 14 which states that "[a]ny re-assignment/transfer of cases to another RO(s) . . . shall require the issuance of a new L/A" However, I humbly stress and emphasize that an administrative issuance must conform, not contradict, the provisions of the enabling law. Any rule that is not consistent with the law is null and void. 15 I am also of the firm belief that the ruling of the Supreme Court in Commissioner of Internal Revenue v. McDonald's Philippines Realty Corp. 16 ("Mcdonald's") should not be haphazardly applied in cases regarding the validity or invalidity of an RO's authority. A perusal of the case discloses that Mcdonald's invalidated the practice of reassigning ROs through a Revalidation Notice or Memorandum of Reassignment or any equivalent letter, only because it was presumed that these documents are issued by a subordinate official and not by the CIR or his duly authorized representative, to wit: ACcaET "It is true that the service of a copy of a memorandum of assignment, referral memorandum, or such other equivalent internal BIR document may notify the taxpayer of the fact of reassignment and transfer of cases of revenue officers. However, notice of the fact of reassignment and transfer of cases is one thing; proof of the existence of authority to conduct an examination and assessment is another thing. The memorandum of assignment, referral memorandum, or any equivalent document is not a proof of the existence of authority of the substitute or replacement revenue officer. The memorandum of assignment, referral memorandum, or any equivalent document is not issued by the CIR or his duly authorized representative for the purpose of vesting upon the revenue officer authority to examine a taxpayer's books of accounts. It is issued by the revenue district officer or other subordinate official for the purpose of reassignment and transfer of cases of revenue officers. The petitioner wants the Court to believe that once an LOA has been issued in the names of certain revenue officers, a subordinate official of the BIR can then, through a mere memorandum of assignment, referral memorandum, or such equivalent document, rotate the work assignments of revenue officers who may then act under the general authority of a validly issued LOA. But an LOA is not a general authority to any revenue officer. It is a special authority granted to a particular revenue officer. The practice of reassigning or transferring revenue officers, who are the original authorized officers named in the LOA, and subsequently substituting them with new revenue officers who do not have a separate LOA issued in their name, is in effect a usurpation of the statutory power of the CIR or his duly authorized representative. The memorandum of assignment, referral memorandum, or such other equivalent internal document of the BIR directing the reassignment or transfer of revenue officers, is typically signed by the revenue district officer or other subordinate official, and not signed or issued by the CIR or his duly authorized representative under Sections 6, 10 (c) and 13 of the NIRC . Hence, the issuance of such memorandum of assignment, and its subsequent use as a proof of authority to continue the audit or investigation, is in effect supplanting the functions of the LOA, since it seeks to exercise a power that belongs exclusively to the CIR himself or his duly authorized representatives . 17 The Supreme Court in the said case did not consider instances where the Revalidation Notice or Memorandum of Reassignment or any equivalent letter is issued by the CIR himself or his duly authorized representative. Thus, it seems that the assumptions from which Mcdonald's derived the conclusion that there should be issuance of a new LOA if a RO is reassigned or transferred, is incomplete and as such should not be applied. It is for the reasons above that, in my opinion, RO Quevedo and GS Redimano who conducted the examination of Petitioner's records may be deemed authorized to do so without need for a new LOA, only if said letter or notice or memorandum was signed by the Regional Director. In the instant case however, the Memorandum of Assignment was only signed by OIC Revenue District Officer Rosita Ung-Meniano. Therefore, RO Quevedo and GS Redimano were without authority to continue the audit. From all the foregoing, I vote for the GRANT of the Petition for Review filed by Petitioner. SaIEcA Footnotes 1. Docket Vol. 1, pp. 10 to 34. 2. Joint Stipulation of Facts and Issues (JSFI) , Stipulation of Facts, par. 1, Docket Vol. 1, p. 392. 3. JSFI , Stipulation of Facts, par. 3, Docket Vol. 1, p. 392. 4. JSFI , Stipulation of Facts, par. 2, Docket Vol. 1, p. 392. 5. Exhibit "P-2", Independent Certified Public Accountant (ICPA) CD; BIR Records, p. 346. 6. JSFI , Stipulation of Facts, par. 4, Docket Vol. 1, p. 392. 7. Exhibit "P-27", Docket Vol. 2, pp. 576 to 583; BIR Records; pp. 420 to 431. 8. JSFI , Stipulation of Facts, par. 5, Docket Vol. 1, p. 392. 9. Exhibit "P-2-B", ICPA CD; Exhibit "P-28", Docket Vol. 2, pp. 584 to 596; BIR Records, pp. 434 to 439. 10. JSFI , Stipulation of Facts, par. 6, Docket Vol. 1, p. 392. 11. Exhibit "P-29", Docket Vol. 2, pp. 597 to 610; BIR Records, pp. 533 to 546. 12. JSFI , Stipulation of Facts, par. 7, Docket Vol. 1, p. 392. 13. Exhibit "P-31", Docket Vol. 2, pp. 613 to 618; BIR Records, pp. 695 to 699. 14. JSFI , Stipulation of Facts, par. 8, Docket Vol. 1, p, 393. 15. Interest computed up to May 15, 2018. 16. Docket Vol. 1, pp. 10 to 34. 17. Docket Vol. 1, pp. 139 to 144. 18. Minutes of the Hearing dated November 13, 2018, Docket Vol. 1, p. 367; Order dated November 13, 2018, Docket Vol. 1, pp. 369 to 371. 19. Docket Vol. 1, pp. 391 to 406. 20. Docket Vol. 1, p. 425. 21. Docket Vol. 1, pp. 427 to 439. 22. Exhibit "P-38", Docket Vol. 1, pp. 178 to 192. 23. Exhibit "P-23", Docket Vol. 1, pp. 500 to 516. 24. Exhibit "P-38", Docket Vol. 1, pp. 178 to 192. 25. Minutes of the Hearing dated May 21, 2019, Docket Vol. 1, p. 448; Order dated May 21, 2019, Docket Vol. 1, pp. 449 to 450. 26. Exhibit "P-23", Docket Vol. 1, pp. 500 to 516. 27. Docket Vol. 1, pp. 355 to 358. 28. Minutes of the Hearing dated September 4, 2019, Docket Vol. 2, p. 525; Order dated September 4, 2019, Docket Vol. 2, pp. 526 to 527. 29. Docket Vol. 2, pp. 536 to 559. 30. Docket Vol. 2, pp. 749 to 753. 31. Docket Vol. 2, pp. 754 to 762. 32. Docket Vol. 2, pp. 771 to 772. 33. Docket Vol. 2, pp. 773 to 776. 34. Docket Vol. 2, pp. 783 to 786. 35. Docket Vol. 2, pp. 778 to 779. 36. Docket Vol. 2, p. 789. 37. Docket Vol. 2, pp. 791 to 793. 38. Docket Vol. 2, pp. 794 to 795. 39. Docket Vol. 2, pp. 799 to 800. 40. Docket Vol. 2, pp. 801 to 813. 41. Docket Vol. 2, pp. 817 to 859. 42. Resolution dated March 16, 2021, Docket Vol. 2, p. 863. 43. JSFI , Issues, Docket Vol. 1, p. 399. 44. G.R. No. 222743, April 5, 2017. 45. SUBJECT: The Mandatory Statutory Requirement and Function of a Letter of Authority. 46. Commissioner of Internal Revenue v. Sony Philippines, Inc. , G.R. No. 178697, November 17, 2010. 47. Exhibit "P-2", ICPA CD; BIR Records, p. 346. 48. BIR Records, p. 552. 49. BIR Records, p. 558. 50. Commissioner of Internal Revenue v. Sony Philippines, Inc. , G.R. No. 178697, November 17, 2010. 51. G.R. No. 242670, May 10, 2021. 52. Commissioner of Internal Revenue v. Azucena T. Reyes , G.R. No. 159694, January 27, 2006. RINGPIS-LIBAN, J, separate concurring opinion: 1. Emphasis and underscoring supplied . 2. Emphasis and underscoring supplied . 3. February 09, 1999. 4. Emphasis and underscoring supplied . 5. G.R. No. 188288, January 16, 2012. 6. Emphasis supplied . 7. Emphasis supplied . 8. SEC. 13. Authority of a Revenue Officers. 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." (Emphasis supplied) . 9. Civil Code of the Philippines, Article 1869. 10. Heirs of Dr. Mario S. Intac and Angelina Mendoza Intac v. Court of Appeals and Spouses Marcelo Roy, Jr. and Josefina Mendoza-Roy and Spouses Dominador Lozada and Martina Mendoza-Lozada , G.R. No. 173211, October 11, 2012 citing Spouses Villaceran v. De Guzman , G.R. No. 169055, February 22, 2012; Ramos v. Heirs of Honorio Ramos, Sr. , G.R. No. 140848, April 25, 2002, 381 SCRA 594, 601; Heirs of Policronio M. Ureta, Sr. vs. Heirs of Liberato M. Ureta , G.R. Nos. 165748 & 165930, September 14, 2011 citing Lopez v. Lopez , G.R. No. 161925, November 25, 2009, 605 SCRA 358, 36. 11. Adelfa Properties, Inc. v. Court of Appeals , G.R. No. 111238, January 25, 1995. 12. Philippine Amusement and Gaming Corporation (PAGCOR) v. The Bureau of Internal Revenue, represented by Jose Mario Bunag, in his capacity as Commissioner of the Bureau of Internal Revenue, and John Doe and Jane Doe, who are persons acting for, in behalf or under the authority of Respondent , G.R. No. 215427, December 10, 2014, citing Lopez v. The Civil Service Commission , 273 Phil. 147, 152 (1991). 13. Philippine International Trading Corporation v. Commission on Audit , G.R. No. 183517, June 22, 2010. 14. Issued September 20, 1990. 15. Fort Bonifacio Development Corporation v. Commissioner of Internal Revenue , G.R. Nos. 175707, 180035 & 181092, November 19, 2014. 16. G.R. No. 242670, May 10, 2021. 17. Emphasis and underscoring supplied .