RCL Feeders Phils., Inc. v. Commissioner of Internal Revenue

FIRST DIVISION [C.T.A. CASE NO. 9917. February 1, 2023.] RCL FEEDERS PHILS., INC. , petitioner , vs. COMMISSIONER OF INTERNAL REVENUE , respondent . DECISION MANAHAN , J p : This is a Petition for Review filed by petitioner RCL Feeders Phils., Inc. (RCLFPI) against respondent Commissioner of Internal Revenue (CIR) on August 31, 2018, praying that the assessment notices for deficiency income tax (IT), value-added tax (VAT), expanded withholding tax (EWT), withholding tax on compensation (WTC), and compromise penalty plus penalties and interests, for taxable year 2009, in the total amount of P6,691,793.38, be cancelled and set aside. 1 THE PARTIES Petitioner RCLFPI is a domestic corporation duly organized and registered under the laws of the Republic of the Philippines, with principal office address at Suite 10-A Ayala Life FGU Center, 6811 Ayala Avenue, Makati City, Philippines. 2 It is duly registered with the Securities and Exchange Commission (SEC) under Company Registration No. A20019276, 3 and with the Bureau of Internal Revenue (BIR), under Tax Identification Number (TIN) 208-902-096-000. 4 Respondent CIR is being sued in his official capacity as the duly appointed head of the Bureau of Internal Revenue (BIR), who is vested by law, among others, to decide disputed assessments and to enforce the provisions of the 1997 National Internal Revenue Code (NIRC), as amended, and other tax laws, with office address at BIR National Office Building, Diliman, Quezon City. 5 THE FACTS A Letter of Authority (LOA) dated May 13, 2010, with No. LOA 200900003898, was issued by the BIR, authorizing Revenue Officers (ROs) Jumaimah Bagul and Kadapi Manarondong/Group Supervisor (GS) Josephine Elarmo, to examine the books of accounts and other accounting records of petitioner for all internal revenue taxes, for the period from January 1, 2009 to December 31, 2009. 6 Subsequently, an electronic LOA dated September 22, 2010 (SN: eLA 201000003968/LOA-050-2010-00000101) was issued by the BIR, authorizing again RO Bagul and GS Elarmo, to examine the same books and records of petitioner for all internal revenue taxes, and for the same period. 7 On June 11, 2013, petitioner received the Preliminary Assessment Notice (PAN) issued by respondent on even date, and signed by then Regional Director (RD) Nestor S. Valeroso, finding petitioner liable for deficiency internal revenue taxes, as follows: IT amounting to P1,155,567.73, VAT amounting to P3,372,691.50, EWT amounting to P72,511.92, WTC amounting to P376,283.45, and compromise penalty amounting to P8,000.00, or for a total of P4,985,054.60, for taxable year (TY) 2009. 8 Thereafter, on June 25, 2013, petitioner, through its representative, Mr. Nolan F. Cabradilla, filed its Reply to the PAN, which was received on June 26, 2013 by respondent. 9 On June 27, 2013, petitioner received the Formal Assessment Notice (FAN), issued by respondent on even date, and signed again by RD Valeroso, finding petitioner liable for deficiency internal revenue taxes as follows: income tax amounting to P1,167,146.57, VAT amounting to P3,398,072.34, EWT amounting to P73,217.29, WTC amounting to P379,943.80, and compromise penalty amounting to P8,000.00, or for a total of P5,026,380.00, for TY 2009. 10 Subsequently, on July 22, 2013, petitioner filed a protest letter to the FAN, which was duly received by respondent on July 25, 2013. 11 Respondent sent a letter to petitioner on August 27, 2013, requiring the latter to submit necessary documents to support its claim/disagreement to Revenue District Office (RDO) No. 050-South Makati, within sixty (60) days from date of filing of protest pursuant to Section 3.1.5 of Revenue Regulations (RR) No. 12-99. 12 On October 20, 2016, petitioner received the Final Decision on Disputed Assessment (FDDA) dated October 11, 2016, which was signed by then RD Jonas DP. Amora, finding petitioner liable for deficiency internal revenue taxes as follows: income tax amounting to P1,633,773.62, VAT amounting to P4,420,920.40, EWT amounting to P101,643.66, WTC amounting to P527,455.70, and compromise penalty amounting to P8,000.00, or for a total of P6,691,793.38, for TY 2009. 13 On November 10, 2016, petitioner filed its Motion for Reconsideration to respondent, which was received by the latter on November 11, 2016, for the reconsideration of the assessment of the alleged deficiency internal revenue taxes for the year 2009. 14 On August 1, 2018, petitioner received the Decision rendered by then Commissioner Caesar R. Dulay, affirming the assessed deficiency internal revenue taxes for the year 2009. 15 On August 31, 2018, petitioner filed the instant Petition for Review . 16 Respondent's Answer was posted on November 12, 2018, 17 raising certain special and affirmative defenses, to wit: (1) the assessment is valid and has complied with the General Audit Procedures and Documentation; (2) the period to assess and collect petitioner's IT, EWT, WTC, and VAT liabilities has not yet prescribed; (3) the assessment is valid because the facts and the law are clearly stated in all the Assessment Notices issued by respondent; and (4) petitioner is liable for the deficiency IT, EWT, WTC, and VAT liabilities, and compromise penalties. In compliance with the Order dated October 18, 2018 of this Court, 18 respondent transmitted the entire BIR Records of this case, consisting of 1,407 pages contained in two (2) folders. 19 Meanwhile, pursuant to Section II of the Interim Guidelines for Implementing Mediation in the Court of Tax Appeals as approved by the Supreme Court on January 18, 2011, this case was referred to mediation in the Philippine Mediation Center-Court of Tax Appeals (PMC-CTA). 20 However, the parties decided not to have their case mediated by PMC-CTA. 21 Consequently, in the Resolution dated January 29, 2019, 22 the Pre-Trial Conference was set on March 21, 2019. However, pursuant to the Order dated March 18, 2019, 23 the Pre-Trial Conference was reset to, and held on, May 9, 2019. Prior thereto, the Pre-Trial Brief of petitioner was filed on March 18, 2019, 24 while Respondent's Pre-Trial Brief was filed on May 6, 2019. 25 Thereafter, the parties filed their Joint Stipulation of Facts and Issues (JSFI) on May 29, 2019. 26 In the Resolution dated June 13, 2019, 27 the Court approved the said JSFI, and deemed the termination of the Pre-Trial. The Pre-Trial Order dated August 5, 2019 was then issued. 28 During trial, petitioner presented its documentary and testimonial evidence. It offered the testimonies of the following individuals, namely: (1) Mr. Nolan F. Cabradilla, 29 petitioner's Finance Manager; and (2) Ms. Ma. Catherine C. Bachoco, 30 the Court-commissioned Independent Certified Public Accountant (ICPA). 31 On September 23, 2019, the said ICPA submitted her Report . 32 Subsequently, however, the ICPA submitted an Amended Report on November 7, 2019. 33 Petitioner's Formal Offer of Evidence was filed on December 26, 2019. 34 Respondent's Comment/Opposition (To Petitioner's Formal Offer of Evidence dated December 26, 2019) was posted on January 24, 2020. 35 In the Resolution dated June 3, 2020, 36 the Court admitted petitioner's offered exhibits, except for the following: 1. Exhibits "P-17-5", "P-17-6", and "P-17-7", for petitioner's failure to identify the same, 2. Exhibits "P-54", "P-57-1" to "P-57-5", "P-176", "P-401", "P-402", "P-403", "P-404", "P-490", "P-491", "P-493", "P-495", "P-496", "P-498", "P-499" "P-500", "P-501", "P-502", "P-504", "P-522", "P-549", "P-577", "P-606", "P-607", "P-608-1-1", "P-643-A", "P-645", "P-646", "P-648" to "P-687-1", "P-688" to "P-694", "P-695" to "P-703", and "P-717-1", for not being found in the records of the case, 3. Exhibit "P-62", for the document described in petitioner's Formal Offer of Evidence , and identified by petitioner's witness in her Amended Judicial Affidavit dated November 8, 2019 as "Order of RTC Branch 98, Quezon City, in Civil Case No. Q-09-64241 entitled Association of International Shipping Lines, Inc., APL Co. Pte., Ltd. and Maersk-Filipinas vs. Commissioner of Internal Revenue " is actually the Permit to Use Computerized Accounting System with Permit No. 050-CBA-024402-00021, and 4. Exhibits "P-704" to "P-715", "P-716", and "P-717", for the documents described in petitioner's Formal Offer of Evidence , and the documents identified by petitioner's witness during hearing do not correspond with the document duly-marked and submitted to this Court by the ICPA. Petitioner then filed on July 1, 2020 its Motion for Reconsideration , 37 to which a Comment/Opposition (To Petitioner's Motion for Reconsideration dated July 01, 2020) was posted by respondent on August 3, 2020. 38 Thus, in the Resolution dated October 14, 2020, 39 the Court resolved to partially grant petitioner's Motion for Reconsideration , and admitted Exhibits "P-54", "P-57-1" to "P-57-5", "P-62", "P-176", "P-401", "P-402", "P-403", "P-404", "P-490", "P-491", "P-493", "P-495", "P-496", "P-498", "P-499", "P-500", "P-501", "P-607", "P-608-1-1", "P-643-A", "P-645", "P-646", "P-648" to "P-687", "P-688" to "P-694", "P-695" to "P-703", "P-704" to "P-715", "P-716", "P-717", and "P-717-1"; but still denied Exhibits "P-687-1", "P-17-5", "P-17-6", and "P-17-7". Documentary and testimonial evidence were likewise presented by respondent during trial. The said testimonial evidence consist of those taken from ROs Raul M. Aquino, 40 and Amerodin D. Hamdag, Jr. 41 On September 29, 2021, respondent's Formal Offer of Evidence was filed, 42 to which petitioner posted its Comment (On Respondent's Formal Offer of Evidence dated September 29, 2021) on October 14, 2021. 43 In the Resolution dated December 16, 2021, 44 the Court admitted respondent's offered exhibits, except for the following: 1. Exhibits "R-8-2" and "R-8-3", for failure to submit the duly marked exhibits; 2. Exhibit "R-15", for failure to identify the marked document; and 3. Exhibit "R-15-1", for not being found in the records of the case. Petitioner filed its Memorandum on March 4, 2022, 45 while Respondent's Memorandum was posted on March 17, 2022. 46 On March 29, 2022, the case was submitted for decision. 47 ISSUES The parties stipulated the following issues for this Court's consideration and resolution, to wit: "(a) Whether or not petitioner is liable for deficiency Income Tax, Expanded Withholding Tax, Withholding Tax on Compensation and Value-Added Tax Liabilities and Compromise penalties. (b) Whether or not the period to collect petitioner's alleged deficiency tax liabilities has already prescribed." 48 Petitioner's Arguments 49 Petitioner argues that it is not liable for deficiency IT, EWT, WTC, and VAT liabilities, as well as compromise penalties, on the following grounds, to wit: (i) the assessment is void for lack of authority to conduct the same, (ii) the period to assess petitioner's alleged deficiency IT, EWT, WTC, and VAT liabilities, has already prescribed, (iii) the assessment is void for respondent's failure to conduct the investigation within the 120-day period, (iv) the assessment is void for respondent's violation of petitioner's right to administrative due process, (v) the assessment is void for being issued prematurely, (vi) there is no basis to hold petitioner liable for the alleged deficiency IT, VAT, EWT, WTC, and compromise penalties, and (vii) that the period to collect petitioner's alleged deficiency tax liabilities has already prescribed. Respondent's Arguments 50 Respondent contends that a valid LOA was issued by respondent authorizing the examination of petitioner's books of accounts and other accounting records for TY 2009; that the period to assess petitioner's deficiency IT, EWT, WTC, VAT, and compromise penalties, has not prescribed; that failure to revalidate petitioner's LOA did not affect its validity nor the assessment made pursuant to the same; that petitioner's protest letter dated July 22, 2013 was considered as a request for reinvestigation, which was granted by the respondent, and thus, tolled the running of the prescriptive period to collect; that petitioner is liable for the deficiency IT, EWT, WTC and VAT, and compromise penalties; and that the necessity of proving that the tax assessment is invalid lies with the party assailing the validity thereof. RULING OF THE COURT The present Petition for Review has merit. RO Raul M. Aquino was not authorized under an LOA to conduct a reinvestigation of petitioner. Thus, the resulting tax assessments are void. An LOA is the authority given to the appropriate RO assigned to perform assessment functions. It empowers or enables said RO to examine the books of account and other accounting records of a taxpayer for the purpose of collecting the correct amount of tax. 51 The LOA commences the audit process and informs the taxpayer that it is under audit for possible deficiency tax assessment. 52 There must be a grant of authority before any RO can conduct an examination or assessment. Equally important is that the RO so authorized must not go beyond the authority given. In the absence of such authority, the assessment or examination is a nullity. 53 The importance of the lack of the RO's authority to conduct an audit cannot be overemphasized because it goes into the validity of the assessment. The lack of authority of the ROs is tantamount to the absence of a LOA itself which results to a void assessment. Being a void assessment, the same bears no fruit. 54 In AFP General Insurance Corporation vs. Commissioner of Internal Revenue , 55 the Supreme Court held: "The power to assess necessarily includes the authority to examine any taxpayer for purposes of determining the correct amount of tax due from him. Verily the law vests the BIR with general powers in relation to the 'assessment and collection of all internal revenue taxes.' However, certainly, not all BIR personnel may motu proprio proceed to audit a taxpayer. Only 'the CIR or his duly authorized representative may authorize the examination of any taxpayer ' and issue an assessment against him . That a representative has in fact been authorized to audit a taxpayer is evidenced by the LOA, which 'empowers a designated [r]evenue [o]fficer to examine, verify and scrutinize a taxpayer's books and records in relation to his internal revenue tax liabilities for a particular period.' In cases where the BIR conducts an audit without a valid LOA, or in excess of the authority duly provided therefor, the resulting assessment shall be void and ineffectual . x x x" (Emphases and underscoring added) However, in this case, respondent argues as follows, to wit: ". . . perusal of the BIR records show that the re-assignment of the investigation of the tax deficiencies of petitioner to Revenue Officer Raul M. Aquino was made only on September 30, 2013, which is when the Memorandum of Assignment was issued for the conduct of the reinvestigation of petitioner's tax deficiencies pursuant to the latter's protest letter to the FAN . Otherwise stated, the Memorandum of Assignment dated September 30, 2013 was only issued after the issuance of the PAN and FAN or after the actual audit and investigation of petitioner's records for taxable year 2009." 56 From the foregoing argument, respondent is of the view that an LOA is no longer necessary after the issuance of the FAN, and a Memorandum of Assignment (MOA) 57 already suffices in that situation. We disagree with respondent. A reinvestigation, once granted by respondent, involves the re-evaluation of an assessment on the basis of newly discovered or additional evidence of the concerned taxpayer. 58 Thus, it is, in effect, a continuation of the examination and audit of the latter which necessitates the issuance of a new LOA, in case the RO, who would conduct such reinvestigation, is different from the one(s) named in the previously-issued LOA. In other words, the new RO would be acting as a substitute or replacement of those named in the said LOA. In Commissioner of Internal Revenue vs. McDonald's Philippines Realty Corp. , 59 the Supreme Court ruled as follows, to wit: " B. The Use of Memorandum of Assignment , Referral Memorandum, or Such Equivalent Document, Directing the Continuation of Audit or Investigation by an Unauthorized Revenue Officer Usurps the Functions of the LOA 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. " (Emphases and underscoring added) Based on the foregoing jurisprudence, it is clear that an LOA is not a general authority to any RO, but a special authority granted to a particular RO; that the practice of reassigning or transferring ROs, who are the original authorized officers named in the LOA, and subsequently substituting them with new ROs 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; and that the issuance of an MOA, 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 respondent or his duly authorized representatives. Simply put, an MOA cannot be given effect so as to give a new RO the authority to continue the audit and investigation of a taxpayer. Since an LOA is a special authority granted to a particular RO, a new LOA must be subsequently issued, in case the original ROs are being replaced by a new RO to continue the examination and investigation, and even re-investigation, of a taxpayer. Such being the case, considering that RO Raul M. Aquino was merely armed with an MOA, the reinvestigation conducted by him is tainted with illegality since no new LOA was issued in the said RO's favor. The latest ruling of the Supreme Court in the case of Republic of the Philippines v. Robiegie Corporation 60 reiterates the modality of the LOA to commence a tax investigation, to wit: "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 LOAs 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 of RMO No. 8-2006, issued on February 1, 2006." Consequently, the resulting tax assessments are void. The subject tax assessments are void, for violation of petitioner's right to administrative due process. There was indeed a violation of petitioner's right to administrative due process and thus, the subject tax assessments are void. Particularly, We agree with petitioner that the assessment is void for failure to state the facts and the law on which the assessment is made, as pointed out in the present Petition for Review . Section 228 of the NIRC of 1997 provides, in part, as follows: "SEC. 228. Protesting of Assessment . When the Commissioner or his duly authorized representative finds that proper taxes should be assessed, he shall first notify the taxpayer of his findings: x x x xxx xxx xxx The taxpayers shall be informed in writing of the law and the facts on which the assessment is made; otherwise, the assessment shall be void. xxx xxx xxx" (Emphasis added) Under the foregoing provision, it is explicitly required that the taxpayer be informed in writing of the law and of the facts on which the assessment is made; otherwise, the assessment shall be void. 61 The requirement that the taxpayer must be informed of the factual and legal bases of the assessment is mandatory. It cannot be presumed. As a requirement of due process, this rule allows the taxpayer to make an effective protest. 62 To be sure, the requirement set by law to state in writing the factual and legal bases for the assessment is not a hollow exhortation. The law imposes a substantive, not merely a formal, requirement. 63 Furthermore, it must be emphasized that failure to comply with Section 228 does not only render the assessment void, but also finds no validation in any provision in the Tax Code. 64 To implement the above-quoted Section 228, Section 3.1.3 of Revenue Regulations (RR) No. 12-99, 65 as amended by RR No. 18-2013, 66 provides as follows: "SECTION 3. Due Process Requirement in the Issuance of a Deficiency Tax Assessment . 3.1 Mode of procedure in the issuance of a deficiency tax assessment: 3.1.1 Preliminary Assessment Notice (PAN) . If after review and evaluation by the Commissioner or his duly authorized representative, as the case may be, it is determined that there exists sufficient basis to assess the taxpayer a Preliminary Assessment Notice (PAN) for the proposed assessment. It shall show in detail the facts and the law, rules and regulations, or jurisprudence on which the proposed assessment is based (see illustration in ANNEX 'A' hereof). xxx xxx xxx 3.1.3 Formal Letter of Demand and Final Assessment Notice (FLD/FAN) . The Formal Letter of Demand and Final Assessment Notice (FLD/FAN) shall be issued by the Commissioner or his duly authorized representative. The FLD/FAN calling for payment of the taxpayer's deficiency tax or taxes shall state the facts, the law , rules and regulations, or jurisprudence on which the assessment is based, otherwise, the assessment shall be void (see illustration in ANNEX 'B' hereof). xxx xxx xxx 3.1.5 Final Decision on a Disputed Assessment (FDDA) . The decision of the Commissioner or his duly authorized representative shall state the (i) facts, the applicable law , rules and regulations, or jurisprudence on which such decision is based, otherwise, the decision shall be void (see illustration in ANNEX 'C' hereof), and (ii) that the same is his final decision." (Emphases and underscoring added) The foregoing provision prescribes, as part of due process in the issuance of tax assessments , that the PAN, FLD/FAN and FDDA must, respectively, state, among others, the facts and the law on which the assessment is based; otherwise the FLD/FAN and/or FDDA shall be void . In Commissioner of Internal Revenue vs. Avon Products Manufacturing, Inc., et seq. (" Avon case"), 67 the Supreme Court said: " Tax assessments issued in violation of the due process rights of a taxpayer are null and void. While the government has an interest in the swift collection of taxes, the Bureau of Internal Revenue and its officers and agents cannot be overreaching in their efforts, but must perform their duties in accordance with law, with their own rules of procedure, and always with regard to the basic tenets of due process . xxx xxx xxx The Bureau of Internal Revenue is the primary agency tasked to assess and collect proper taxes, and to administer and enforce the Tax Code. To perform its functions of tax assessment and collection properly, it is given ample powers under the Tax Code, such as the power to examine tax returns and books of accounts, to issue a subpoena and to assess based on the best evidence obtainable, among others. However, these powers must 'be exercised reasonably and [under] the prescribed procedure.' The Commissioner and revenue officers must strictly comply with the requirements of the law, with the Bureau of Internal Revenue's own rules, and with due regard to taxpayer's constitutional rights. xxx xxx xxx In carrying out these quasi-judicial functions, the Commissioner is required to 'investigate facts or ascertain the existence of facts, hold hearings, weigh evidence, and draw conclusions from them as basis for their official action and exercise of discretion in a judicial nature.' Tax investigation and assessment necessarily demand the observance of due process because they affect the proprietary rights of specific persons . xxx xxx xxx In Ang Tibay v. The Court of Industrial Relations , 68 this Court observed that although quasi-judicial agencies 'may be said to be free from the rigidity of certain procedural requirements[, it] does not mean that it can, in justiciable cases coming before it, entirely ignore or disregard the fundamental and essential requirements of due process in trials and investigations of an administrative character.' It then enumerated the fundamental requirements of due process that must be respected in administrative proceedings: (1) The party interested or affected must be able to present his or her own case and submit evidence in support of it. (2) The administrative tribunal or body must consider the evidence presented. (3) There must be evidence supporting the tribunal's decision. (4) The evidence must be substantial or 'such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.' (5) The administrative tribunal's decision must be rendered on the evidence presented, or at least contained in the record and disclosed to the parties affected. (6) The administrative tribunal's decision must be based on the deciding authority's own independent consideration of the law and facts governing the case. (7) The administrative tribunal's decision is rendered in a manner that the parties may know the various issues involved and the reason for the decision . xxx xxx xxx The last requirement relating to the form and substance of the decision is the decision maker's ' duty to give reason ' to enable the affected person to understand how the rule of fairness has been administered in his [or her] case, to expose the reason to public scrutiny and criticism, and to ensure that the decision will be thought through by the decision maker . xxx xxx xxx Administrative due process is anchored on fairness and equity in procedure . It is satisfied if the party is properly notified of the charge against it and is given a fair and reasonable opportunity to explain or defend itself. Moreover, it demands that the party's defenses be considered by the administrative body in making its conclusions, and that the party be sufficiently informed of the reasons for its conclusions . xxx xxx xxx The importance of providing taxpayer with adequate written notice of his or her tax liability is undeniable. Under Section 228, it is explicitly required that the taxpayer be informed in writing of the law and of the facts on which the assessment is made; otherwise, the assessment shall be void. Section 3.1.2 69 of Revenue Regulations No. 12-99 requires the Preliminary Assessment Notice to show in detail the facts and law, rules and regulations, or jurisprudence on which the proposed assessment is based. Further, Section 3.1.4 70 requires the Final Letter of Demand must state the facts and law on which it is based; otherwise, the Final Letter of Demand and Final Assessment Notices themselves shall be void . Finally, Section 3.1.6 71 specifically requires that the decision of the Commissioner or of his or her duly authorized representative on a disputed assessment shall state the facts and law, rules and regulations, or jurisprudence on which the decision is based. Failure to do so would invalidate the Final Decision on Disputed Assessment . 'The use of the word 'shall' in Section 228 of the [National Internal Revenue Code] and in [Revenue Regulations] No. 12-99 indicates that the requirement of informing the taxpayer of the legal and factual bases of the assessment and the decision made against him [or her] is mandatory.' This is an essential requirement of due process and applies to the Preliminary Assessment Notice, Final Letter of Demand with the Final Assessment Notices, and the Final Decision on Disputed Assessment . xxx xxx xxx The facts demonstrate that Avon was deprived of due process. It was not fully apprised of the legal and factual bases of the assessments issued against it . The Details of Discrepancy attached to the Preliminary Assessment Notice, as well as the Formal Letter of Demand with Final Assessment Notices, did not even comment or address the defenses and documents submitted by Avon. Thus, Avon was left unaware on how the Commissioner or her authorized representatives appreciated the explanations or defenses raised in connection with the assessments . There was clear inaction of the Commissioner at every stage of the proceedings. xxx xxx xxx It is true that the Commissioner is not obliged to accept the taxpayer's explanations, as explained by the Court of Tax Appeals. However, when he or she rejects these explanations, he or she must give some reason for doing so. He or she must give the particular facts upon which his or her conclusion are based, and those facts must appear in the record . xxx xxx xxx The Commissioner's total disregard of due process rendered the identical Preliminary Assessment Notice, Final Assessment Notices , and Collection Letter null and void, and of no force and effect . This Court has, in several cases declared void any assessment that failed to strictly comply with the due process requirements set forth in Section 228 of the Tax Code and Revenue Regulations No. 12-99. xxx xxx xxx In Commissioner of Internal Revenue v. Reyes , 72 this Court ruled as void an assessment for deficiency estate tax issued by the Commissioner for failure to inform the taxpayer of the law and the facts on which the assessment was made, in violation of Section 228 of the Tax Code. xxx xxx xxx" (Emphases and underscoring added) Based on the foregoing, respondent or her duly authorized representative is mandated to perform assessment functions in accordance with, and strict adherence to, law with their own rules of procedure, and always with regard to the basic tenets of due process. In case respondent or his duly authorized representative fails to observe due process, it shall have the effect of rendering the deficiency tax assessment void, and of no force and effect. Moreover, a significant part of the due process requirement in the issuance of tax assessments is that the concerned taxpayer must be informed, in writing, of the law and of the facts on which the assessment is made. Such requirement must be embodied in the PAN, FLD/FAN, and FDDA. Specifically, respondent must give the particular facts and law upon which her conclusion are based, and those facts must appear in the record. As a corollary, the concerned taxpayer must not be left unaware on how the respondent or her duly authorized representatives appreciated the explanations or defenses raised in connection with the assessment. To stress, in case respondent or his duly authorized representative fails or effectively fails to observe the foregoing due process requirements, it shall have the effect of rendering the assessment and collection of the pertinent deficiency tax void. In this case, as stated in the PAN dated June 11, 2013, 73 the BIR found the following as due from petitioner for TY ending December 31, 2009, to wit: Basic Surcharge Interest Total Income Tax P704,379.13 - P451,188.60 P1,155,567.73 VAT 1,544,001.50 P772,000.75 1,056,689.25 3,372,691.50 EWT 42,909.94 - 29,601.98 72,511.92 WTC 222,670.98 - 153,612.47 376,283.45 Total P2,513,961.55 P772,000.75 P1,691,092.30 P4,977,054.60 In its Reply to the PAN, 74 petitioner made explanations regarding each of the said deficiency taxes. However, in the FAN dated June 27, 2013, 75 petitioner was still assessed of the following deficiency tax liabilities, to wit: Basic Surcharge Interest Total IT P704,379.13 - P462,767.44 P1,167,146.57 VAT 1,544,001.50 P772,000.75 1,082,070.09 3,398,072.34 EWT 42,909.94 - 30,307.35 73,217.29 WTC 222,670.98 - 157,272.82 379,943.80 Total P2,513,961.55 P772,000.75 P1,732,417.70 P5,018,380.00 While the total amount of taxes being assessed increased, a comparison of the figures stated in the PAN dated June 11, 2013, and the foregoing figures would reveal that the respective amounts of basic taxes, and surcharge due remain unchanged. In other words, the BIR merely adjusted the interests being imposed. Moreover, it is noteworthy that in the said FAN, the BIR did not address any of the explanations made by petitioner in its Reply to the PAN an indication that the BIR did not consider the same when it issued the subject FAN. Furthermore, it is noted that on July 22, 2013, petitioner filed a protest letter to the FAN, 76 again reiterating its explanations, 77 apparently because the same were not addressed in the same FAN. In response to petitioner's protest, the FDDA dated October 11, 2016 was issued by the BIR. 78 However, just like in the FAN dated June 27, 2013, the BIR merely adjusted the interests being imposed, and again failed to consider petitioner's explanations, viz. : Basic Surcharge Interest Total IT P704,379.13 - P929,394.49 P1,633,773.62 VAT 1,544,001.50 79 P772,000.74 80 2,104,918.18 4,420,920.40 EWT 42,909.94 - 58,733.72 101,643.66 WTC 222,670.98 - 304,784.72 527,455.70 Total P2,513,961.55 P772,000.74 P3,397,831.11 P6,683,793.38 To emphasize, pursuant to the Avon case, the concerned taxpayer must be fully apprised of the factual and legal bases of the assessments, and must not be left unaware on how respondent or her authorized representatives appreciated the explanations or defenses raised by petitioner in connection with the assessments. Correspondingly, as part of the due process requirement in the issuance of tax assessments, the respondent must give reason(s) for rejecting petitioner's explanations, and must give the particular facts upon which the conclusions for assessing petitioner are based, and those facts must appear on record. The respondent has obviously not observed such requirement in the issuance of the subject FAN, and the subject FDDA. Thus, the inevitable conclusion is that petitioner's right to due process, as recognized under Section 228 of the NIRC of 1997, Sections 3.1.3 and 3.1.5 of RR No. 12-99, as amended, and Avon ruling, was violated by respondent. As a consequence of such violation, the said deficiency tax assessments are rendered void. To reiterate, tax assessments issued in violation of the due process rights of a taxpayer are null and void. 81 Furthermore, a void assessment bears no valid fruit. 82 Such being the case, the subject tax assessments cannot be enforced against petitioner, and the BIR has no right to collect the same. In fine, in view of the finding that the subject tax assessments are void, there being no valid LOA issued in favor of RO Raul M. Aquino, and for violation of petitioner's right to administrative due process, it is no longer necessary to address the stipulated issues and other respective arguments raised by the parties. WHEREFORE , in light of the foregoing considerations, the present Petition for Review is GRANTED . The subject tax assessments issued against petitioner for deficiency IT, VAT, EWT, and WTC, and compromise penalty plus penalties and interests, for taxable year 2009, in the total amount of P6,691,793.38, are CANCELLED and SET ASIDE . Accordingly, the FAN dated June 27, 2013, the FDDA dated October 11, 2016, and the Decision dated July 23, 2018 rendered by then Commissioner Caesar R. Dulay, affirming the assessed deficiency internal revenue taxes for the year 2009, all issued against petitioner, are hereby WITHDRAWN . SO ORDERED. (SGD.) CATHERINE T. MANAHAN Associate Justice Roman G. del Rosario, P.J. , I concur solely on the ground that petitioner's right to due process was violated as elucidated on pages 13 to 21 of the ponencia . Marian Ivy F. Reyes-Fajardo, J. , I join PJ Concurring solely on the ground of violation of petitioner's right to due process. Footnotes 1. Docket, CTA Case No. 9917, Vol. I, Statement of the Case, Pre-Trial Order dated August 5, 2019, p. 370. 2. Id. , Vol. I, Par. 1, Summary of Admitted Facts, Joint Stipulation of Facts and Issues (JSFI), p. 338. 3. Docket, Vol. I, Par. 4, Summary of Admitted Facts, JSFI, p. 339. 4. Id. , Vol. I, Par. 6, Summary of Admitted Facts, JSFI, p. 339. 5. Id. , Vol. I, Par. 2, Summary of Admitted Facts, p. 338. 6. Id. , Vol. II, Exhibit "P-4", p. 860. 7. Id. , Vol. II, Exhibit "P-5", p. 861. 8. Id. , Vol. I, Par. 7, Summary of Admitted Facts, JSFI, p. 339; Docket, Vol. II, Exhibit "P-7", pp. 863 to 868. 9. Docket, Vol. I, Par. 8, Summary of Admitted Facts, JSFI, p. 339; Docket, Vol. II, Exhibit "P-8", pp. 869 to 870. 10. Id. , Vol. I, Par. 9, Summary of Admitted Facts, JSFI, p. 339; Docket, Vol. II, Exhibit "P-9", pp. 914 to 924. 11. Id. , Vol. I, Par. 10, Summary of Admitted Facts, JSFI, p. 340; Docket, Vol. II, Exhibit "P-10", pp. 925 to 926. 12. Id. , Vol. I, Par. 11, Summary of Admitted Facts, JSFI, p. 340; Docket, Vol. II, Exhibit "P-11", p. 927. 13. Id. , Vol. I, Par. 12, Summary of Admitted Facts, JSFI, p. 340; Docket, Vol. II, Exhibit "P-12", pp. 928 to 933; and BIR Records, Exhibit "R-10", pp. 1325 to 1329. 14. Docket, Vol. I, Par. 13, Summary of Admitted Facts, JSFI, p. 340; Docket, Vol. II, Exhibit "P-13", pp. 934 to 937. 15. Id. , Vol. I, Par. 15, Summary of Admitted Facts, JSFI, p. 340; Docket, Vol. II, Exhibit "P-14", pp. 938 to 948. 16. Id. , Vol. I, pp. 10 to 28. 17. Id. , Vol. I, pp. 106 to 115. 18. Id. , Vol. I, p. 104. 19. Id. , Vol. I, p. 121. 20. Id. , Vol. I, Resolution dated November 23, 2018, pp. 118 to 119. 21. Id. , Vol. I, No Agreement to Mediate dated January 9, 2019, p. 124. 22. Docket, Vol. I, p. 135. 23. Id. , Vol. I, p. 139. 24. Id. , Vol. I, pp. 141 to 148. 25. Id. , Vol. I, pp. 152 to 159. 26. Id. , Vol. I, pp. 338 to 345. 27. Id. , Vol. I, Resolution, p. 368. 28. Id. , Vol. I, pp. 370 to 380. 29. Id. , Vol. II, Exhibit "P-25", pp. 481 to 498; Docket, Vol. II, Minutes of the hearing held on, and Order dated, November 14, 2019, pp. 814 to 819. 30. Id. , Vol. II, Exhibit "P-49", pp. 701 to 712; Docket, Vol. II, Exhibit "P-36", pp. 801 to 812; Docket, Vol. II, Minutes of the hearing held on, and Order dated, November 14, 2019, pp. 814 to 819. 31. Id. , Vol. I, Oath of Commission dated August 22, 2019, p. 388; Docket, Vol. I, Minutes of the hearing held on, and Order dated, August 22, 2019, pp. 383 to 387, and 389 to 391. 32. Id. , Vol. I, pp. 421 to 472. 33. Id. , Vol. II, Exhibit "P-37", pp. 738 to 788. 34. Id. , Vol. II, pp. 835 to 847. 35. Id. , Vol. III, pp. 1134 to 1139. 36. Docket, Vol. III, pp. 1144 to 1146. 37. Id. , Vol. III, pp. 1147 to 1155. 38. Id. , Vol. III, pp. 1381 to 1384. 39. Id. , Vol. III, pp. 1394 to 1395. 40. Docket, Vol. I, Exhibit "R-16", pp. 189 to 196; Docket, Vol. III, Order dated January 28, 2021, pp. 1396 to 1397; Docket, Vol. III, Exhibit "R-19", pp. 1406 to 1410; Order dated September 16, 2021, Docket, Vol. III, pp. 1435 to 1436. 41. Id. , Vol. I, Exhibit "R-17", pp. 163 to 170; Docket, Vol. III, Order dated January 28, 2021, pp. 1396 to 1397. 42. Id. , Vol. III, pp. 1442 to 1452. 43. Id. , Vol. III, pp. 1442 to 1452. 44. Id. , Vol. III, pp. 1463 to 1464. 45. Id. , Vol. III, pp. 1465 to 1507. 46. Id. , Vol. III, pp. 1512 to 1528. 47. Docket , Vol. III, Resolution dated March 29, 2022, p. 1511. 48. Id. , Vol. I, Statement of the Issues, JSFI, p. 341 49. Supra , Note 45. 50. Supra , Note 46. 51. Himlayang Pilipino Plans, Inc. vs. Commissioner of Internal Revenue , G.R. No. 241828, May 14, 2021. 52. Commissioner of Internal Revenue vs. De La Salle University, Inc., et seq. , G.R. Nos. 196596, 198841, and 198941, November 9, 2016. 53. Commissioner of Internal Revenue vs. Sony Philippines, Inc. , G.R. No. 178697, November 17, 2010. 54. Himlayang Pilipino Plans, Inc. vs. Commissioner of Internal Revenue , supra . 55. G.R. No. 222133, November 4, 2020. 56. Docket, Vol. III, Par. 24, Respondent's Memorandum , pp. 1515 to 1516. 57. Docket, BIR Records, p. 1308. 58. Refer to Section 3.1.4 (ii) of Revenue Regulations (RR) No. 12-99, as amended by RR No. 18-2013. 59. G.R. No. 242670, May 10, 2021. 60. G.R. No. 260621, October 3, 2022. 61. Commissioner of Internal Revenue vs. Avon Products Manufacturing, Inc. et seq ., G.R. Nos. 201398-99 and 201418-19, October 3, 2018. 62. Commissioner of Internal Revenue vs. Spouses Remigio P. Magaan and Leticia L. Magaan , G.R. No. 232663, May 3, 2021. 63. Commissioner of Internal Revenue vs. Unioil Corporation , G.R. No. 204405, August 4, 2021. 64. Id. , citing Commissioner of Internal Revenue vs. Reyes , 516 Phil. 176, 189 (2006). 65. SUBJECT: Implementing the Provisions of the National Internal Revenue Code of 1997 Governing the Rules on Assessment of National Internal Revenue Taxes, Civil Penalties and Interest and the Extra-Judicial Settlement of a Taxpayers Criminal Violation of the Code through Payment of a Suggested Compromise Penalty. 66. SUBJECT: Amending Certain Sections of Revenue Regulations No. 12-99 Relative to the Due Process Requirement in the Issuance of a Deficiency Tax Assessment. 67. G.R. Nos. 201398-99 and 201418-19, October 3, 2018. 68. 62 Phil. 635 (1940) [Per J. Laurel, En Banc ]. 69. Now Section 3.1.1 of RR No. 12-99, as amended by RR No. 18-2013. 70. Now Section 3.1.3 of RR No. 12-99, as amended by RR No. 18-2013. 71. Now Section 3.1.5 of RR No. 12-99, as amended by RR No. 18-2013. 72. 516 Phil. 176 (2006) [Per C.J. Panganiban, First Division]. 73. Docket, Vol. II, Exhibit "P-7", pp. 863 to 868. Docket, Vol. I, Refer also to Par. 7, Summary of Admitted Facts, JSFI, p. 339. 74. Docket, Vol. II, Exhibit "P-8", pp. 869 to 870. 75. Id. , Vol. II, Exhibit "P-9", pp. 914 to 924. Docket Vol. I, Refer also to Par. 9, Summary of Admitted Facts, JSFI, p. 339 76. Id. , Vol. I, Par. 10, Summary of Admitted Facts, JSFI, p. 340. 77. Id. , Vol. II, Exhibit "P-10", pp. 925 to 926. 78. Id. , Vol. I, Par. 12, Summary of Admitted Facts, JSFI, p. 340; Docket Vol. II, Exhibit "P-12", pp. 928 to 933; and BIR Records, Exhibit "R-10", pp. 1325 to 1329. 79. Compared to the amount indicated in the subject PAN and FAN, this amount has been reduced by P0.02. 80. Compared to the amount indicated in the subject PAN and FAN, this amount has been reduced by P0.01. 81. Commissioner of Internal Revenue vs. Avon Products Manufacturing, Inc., et seq. , supra . 82. Samar-I Electric Cooperative vs. Commissioner of Internal Revenue , G.R. No. 193100, December 10, 2014.