Commissioner of Internal Revenue v. Center for Training and Development, Inc.

EN BANC [C.T.A. EB CASE NO. 1595. August 1, 2018.] (C.T.A. Case No. 8742) COMMISSIONER OF INTERNAL REVENUE , petitioner , vs .CENTER FOR TRAINING AND DEVELOPMENT, INC. , respondent . DECISION CASTAEDA, JR. , J p : Before the Court En Banc is a Petition for Review 1 filed via registered mail on February 7, 2017 by the Commissioner of Internal Revenue (CIR), as petitioner, against the Center for Training and Development, Inc., as respondent, praying for the partial modification of the Decision dated March 8, 2016 2 (assailed Decision) and Resolution dated January 17, 2017, 3 (assailed Resolution) both rendered by the Third Division of this Court (Court in Division) in CTA Case No. 8742, entitled "Center for Training and Development, Inc. v. Commissioner of Internal Revenue," wherein the Court in Division ordered the respondent to pay deficiency value-added tax (VAT) for the 4th quarter of taxable year 2006, inclusive of surcharge and interests. The respective dispositive portions of the assailed Decision and Resolution are quoted hereunder: Assailed Decision: " WHEREFORE ,premises considered, the instant Petition for Review is hereby PARTIALLY GRANTED .The deficiency income tax assessment issued by respondent against petitioner for taxable 2006 in the amount of P2,536,904.33 is CANCELLED AND SET ASIDE .However, the deficiency VAT assessment for taxable year 2006 is UPHELD IN PART .Accordingly, petitioner is ORDERED TO PAY respondent the amount of EIGHT THOUSAND TEN PESOS AND EIGHTY-SIX CENTAVOS (P8,010.86) representing deficiency VAT for the fourth quarter of taxable year 2006, inclusive of the twenty-five percent (25%) surcharge imposed under Section 248 (A)(3) of the NIRC of 1997, computed as follows: Basic VAT Due P6,408.69 25% Surcharge P1,602.17 Total Amount Due P8,010.86 In addition, petitioner is ORDERED TO PAY : (a) Deficiency interest at the rate of twenty percent (20%) per annum on the basic deficiency VAT of P6,408.69 computed from January 25, 2007 until payment thereof pursuant to Section 249(B) of the NIRC of 1997, as amended; and (b) Delinquency interest at the rate of 20% per annum on the total amount of P8,010.86 and on the 20% deficiency interest which have accrued as afore-stated in (a), computed from December 4, 2013 until full payment thereof pursuant to Section 249(C) of the NIRC of 1997, as amended. SO ORDERED ." Assailed Resolution: " WHEREFORE , finding no compelling reason to reverse the ruling of the Court in the assailed Decision, respondent's Motion for Partial Reconsideration is hereby DENIED for lack of merit. SO ORDERED ." THE FACTS As found by the Court in Division in its Decision dated March 8, 2016, the facts of the present case are as follows: 4 "Petitioner Center for Training and Development, Inc. 5 is a domestic corporation duly organized and existing under and by virtue of the laws of the Republic of the Philippines, with principal office at Unit 2207-2208 Cityland 10 Tower 1, 6815 H.V. Dela Costa, Ayala Avenue, Makati City. It is primarily engaged in providing, rendering, and conducting training, development and management education, corporate communication and research, research and development studies, business and management advisory services and other related activities. Petitioner is duly registered with the Bureau of Internal Revenue (BIR) Revenue District Office (RDO) No. 50 of Revenue Region No. 8-South Makati City, Philippines. On the other hand, respondent is the duly appointed Commissioner of the Bureau of Internal Revenue 6 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 cancel and abate tax liabilities, pursuant to the provisions of the National Internal Revenue Code (NIRC) of 1997 and other tax laws, rules and regulations. Respondent is being represented in this case by the legal officers of the Legal Division of Revenue Region No. 8-Makati City, with office address at the 2/F Legal Division, BIR Bldg., No. 313 Sen. Gil Puyat Ave., Makati City. On August 30, 2007, respondent, through the Revenue Region No. 8, issued Tax Verification Notice (TVN) No. 00050279, authorizing Revenue Officers of RDO No. 50 to examine or audit petitioner's internal revenue taxes covering taxable year 2006. Revenue District Officer Florante R. Aninag issued a Notice of Informal Conference with attached computation of tax deficiencies dated September 1, 2009. Petitioner then submitted its position paper to the preliminary findings in the form of a protest letter dated September 25, 2009. Notwithstanding the series of informal discussions and the submission of the position paper, respondent issued a Preliminary Assessment Notice (PAN) dated December 29, 2009 for alleged deficiency taxes, inclusive of interest and compromise penalties, in the total amount of P1,757,907.13, broken down as follows: TAX TYPE AMOUNT Income Tax P1,705,805.64 Value-added Tax (VAT) 50,963.12 EWT 1,138.37 TOTAL P1,757,907.13 Subsequently, respondent issued Assessment Notices for income tax (IT TVN 50279-06-10-0116),VAT (VT TVN 50279-06-10-0116) and expanded withholding tax (WE TVN 50279-06-10-0116),as well as the Formal Assessment Notice (FAN) with the corresponding Details of Discrepancy, all dated January 14, 2010; which was received by petitioner on the same date, reiterating the alleged deficiency taxes contained in the PAN as follows: TAX TYPE ASSESSMENT NO. AMOUNT Income Tax (IT TVN 50279-06-10-0116) P1,729,933.02 VAT (VT TVN 50279-06-10-0116) 51,644.13 Expanded Withholding Tax (WE TVN 50279-06-10-0116) 1,153.98 TOTAL P1,782,751.13 Petitioner filed a protest letter against the FAN and paid the assessed expanded withholding tax for taxable year 2006 on February 9, 2010. On August 8, 2011, Revenue District Officer Ricardo B. Espiritu issued a Second and Final Notice to petitioner, informing the latter to submit documentary evidence to support its arguments in the protest letter. On November 8, 2013, petitioner received an Amended Assessment Notice (IT-TVN 50279/TVN149101-06-13-0410) and Final Decision on Disputed Assessment (FDDA),both dated November 4, 2013, with the following deficiency tax assessments: CAIHTE I. INCOME TAX Taxable Income (Loss) per ITR P(273,032.00) Add: Adjustments/Disallowance Undeclared Income (Schedule 1) P1,212,181.14 Unsupported Expenses (Schedule 2) 1,818,134.70 3,030,315.84 Taxable Income (Loss) per Audit P2,757,283.84 Add: Net Operating Loss Carry Over (NOLCO) 273,032.00 Adjusted Taxable Income P3,030,315.84 Basic Income Tax Due (35%) P1,060,610.54 Less: Tax Credit/Paid per return Prior year's Excess Credits P830,824.59 Creditable tax withheld 391,845.41 Total P1,222,670.00 Less: MCIT Carry Over P47,070.31 Amount Carried Over to Succeeding year 1,175,599.69 Unsupported Creditable Tax Withheld 27,741.69 1,250,411.69 (27,741.69) Basic deficiency income tax P1,088,352.23 Add: Interest (04.16.07 to 12.09.13) 1,448,552.10 TOTAL AMOUNT DUE P2,536,904.33 II. VALUE-ADDED TAX Taxable Receipts per VAT Returns P8,759,946.36 Output Tax Due per Returns (Schedule 4) P1,046,633.56 Less: Creditable Tax Payments Creditable Input tax P284,205.67 Less: Disallowed Input Tax (Schedule 5) 12,297.49 Input Tax Allocable to Exempt Sales 1,636.45 13,933.94 270,271.73 VAT payable P776,361.83 Less: Payment 744,378.44 Basic deficiency VAT P31,983.39 Add: Interest (1.26.07 to 12.09.13) 43,970.59 TOTAL AMOUNT DUE P75,953.98 On December 5, 2013, petitioner filed the present Petition for Review before the Court of Tax Appeals. Respondent filed her Answer on January 30, 2014, interposing the defense that during the administrative investigation, petitioner failed to substantiate or submit supporting evidence against the BIR findings specified in the Details of Discrepancies attached to the PAN, the FAN and the FDDA of the following amounts: I. Income Tax 1. Undeclared Income P1,212,181.14 2. Unsupported Expenses 1,818,134.70 3. NOLCO 273,032.00 4. MCIT 47,070.31 5. Amount Carried Over to the Succeeding Year 1,175,599.69 6. Unsupported Creditable Taxes Withheld 27,741.69 II. VAT 1. Total Output Tax Due P1,046,633.56 2. Disallowed Input Tax 12,297.49 3. Input Tax Allocable as Exempt Sales 1,636.45 Respondent also claimed that petitioner duly executed a Waiver of Defense of Prescription under the Statute of Limitations of the National Internal Revenue Code, thereby making Section 222 (b) of the NIRC applicable. The case was then set for a pre-trial conference on March 27, 2014. After both parties filed their Pre-Trial Briefs on March 20, 2014, they entered into a Joint Stipulation of Facts and Simplification of Issues. The Court then issued the Pre-Trial Order, which terminated the pre-trial and set the initial presentation of petitioner's evidence on June 9, 2014. Petitioner presented Mr. Enrico T. Pizarro, the Court-commissioned Independent Certified Public Accountant (ICPA),as its lone witness, who by way of Judicial Affidavit testified on the procedures undertaken such as checking, verifying and examining the pertinent documents relative to these assessments. Thereafter, petitioner submitted its Formal Offer of Evidence on June 27, 2014. The Court admitted all the formally offered exhibits of petitioner in the Resolution issued on July 23, 2014. On the other hand, respondent presented Revenue Officer Ofelia L. Metrillo and Revenue Officer Carlomar L. Frilles. Respondent filed her Formal Offer of Evidence on December 18, 2014. The Court admitted all the formally offered evidence of respondent via Resolution dated January 14, 2015. The case was declared submitted for decision on March 10, 2015, after petitioner filed its Memorandum, sans a memorandum from respondent." On March 8, 2016, the Court in Division rendered the assailed Decision partially granting respondent's Petition for Review. In the assailed Decision, the Court in Division cancelled and set aside the deficiency income tax assessment, but partly upheld the deficiency VAT assessment. Unsatisfied, petitioner filed its Motion for Partial Reconsideration on March 23, 2016, which the Court in Division subsequently denied in a Resolution dated January 17, 2017. On February 7, 2017, petitioner filed the present Petition for Review via registered mail. Within the extended period granted by the Court En Banc ,respondent filed its Comment/Opposition 7 on April 21, 2017. In a Resolution dated May 12, 2017, the Court En Banc gave due course to the present Petition for Review. 8 Accordingly, the Court En Banc granted the parties a period of thirty (30) days from notice within which to file their Memoranda. Within the extended period granted by the Court En Banc , 9 respondent filed its Memorandum 10 on July 12, 2017. Petitioner, on the other hand, failed to file his Memorandum as per the Records Verification Report dated July 13, 2017. 11 Accordingly, present case was submitted for decision through the Court En Banc 's Resolution dated August 1, 2017. 12 THE ISSUES As can be gathered from the discussions made by petitioner in his Petition for Review ,the following are the issues for this Court's resolution: 1. Whether or not the Court in Division erred in ruling that respondent is not liable for deficiency income tax for taxable year 2006; 2. Whether or not the Court in Division erred in ruling that respondent is not liable for deficiency VAT for the 1st, 2nd, and 3rd quarters of taxable year 2006; 3. Whether or not the Court in Division erred in ruling that petitioner's right to assess deficiency VAT for the 1st, 2nd and 3rd quarter of taxable year 2006 had already prescribed. THE COURT EN BANC 'S RULING The present Petition for Review shall be denied. After careful evaluation of the case records, more particularly of the evidence duly presented by the parties, the Court En Banc finds the deficiency tax assessments issued by petitioner against respondent to be intrinsically void and thus, shall be cancelled and set aside. The invalidity of such deficiency tax assessments springs from the absence of authority on the part of the revenue officer who conducted the examination of respondent's supporting documents and/or pertinent records. Records disclose that the disputed assessment arose from the Tax Verification Notice (TVN) 200300050279 dated August 30, 2007 13 issued by Revenue District Officer Roberto A. Baquiran (RDO Baquiran) of RDO No. 50 South Makati, who authorized Revenue Officer Ofelia Metrillo (RO Metrillo) to verify the supporting documents and/or pertinent records of respondent covering the taxable period 2006 and relative to its "RCS/OPEN CASES/ALL INTERNAL REVENUE TAXES." Thereafter, RO Metrillo recommended the issuance of the Preliminary Assessment Notice (PAN) against respondent in her Memorandum dated October 21, 2009 14 which was noted by Group Supervisor Medina C. Lopez and recommended for approval by Revenue District Officer Florante R. Aninag. Subsequently, a PAN was issued against respondent on December 29, 2009 15 and Assessment Notices on January 14, 2010. 16 In essence, the purported authority of RO Metrillo to audit respondent's supporting documents and/or pertinent records for taxable year 2006 emanated, not from a Letter of Authority (LOA) issued by petitioner or the concerned Revenue Regional Director, but only from the TVN issued by RDO Baquiran. While the lack of authority of the revenue officer to conduct the audit was not specifically raised as an issue, this Court is not precluded from considering the same given that a void assessment bears no fruit. 17 In Commissioner of Internal Revenue v. Lancaster Philippines, Inc. , 18 the Supreme Court also emphatically ruled that the Court of Tax Appeals can resolve an issue which was not raised by the parties. The Supreme Court said: "On whether the CTA can resolve an issue which was not raised by the parties, we rule in the affirmative. Under Section 1, Rule 14 of A.M. No. 05-11-07-CTA, or the Revised Rules of the Court of Tax Appeals, the CTA is not bound by the issues specifically raised by the parties but may also rule upon related issues necessary to achieve an orderly disposition of the case .The text of the provision reads: SECTION 1. Rendition of judgment . x x x In deciding the case, the Court may not limit itself to the issues stipulated by the parties but may also rule upon related issues necessary to achieve an orderly disposition of the case. The above section is clearly worded. On the basis thereof, the CTA Division was, therefore, well within its authority to consider in its decision the question on the scope of authority of the revenue officers who were named in the LOA even though the parties had not raised the same in their pleadings or memoranda. The CTA En Banc was likewise correct in sustaining the CTA Division's view concerning such matter." (Emphasis supplied and citation omitted) One of the powers granted to the CIR under the National Internal Revenue Code of 1997, as amended (1997 NIRC) is the power to assess deficiency tax. Section 6 (A) of the 1997 NIRC is explicit on the matter, to wit: "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. The tax or any deficiency tax so assessed shall be paid upon notice and demand from the Commissioner or from his duly authorized representative. x x x" (Emphasis supplied) In the exercise of his assessment powers, the CIR is also empowered to conduct by himself the examination of any taxpayer, or he may authorize other tax officers to conduct such examination. Section 6 (A) of the 1997 NIRC likewise vested the CIR's duly authorized representatives the power to authorize the examination of any taxpayer for the purpose of collecting the correct amount of tax. The term "duly authorized representative" under Section 6 (A) of the 1997 NIRC who may authorize examination of taxpayers refers to a Revenue Regional Director, in accordance with Sections 10 and 13 of the 1997 NIRC. The term likewise refers to other tax officials with the rank equivalent to a division chief or higher, pursuant to the CIR's authority to delegate powers vested in him under Section 7 of the 1997 NIRC. Remarkably, the issuance of LOAs for the examination of taxpayers is not one of those enumerated powers which the CIR cannot delegate. Section 7 of the 1997 NIRC reads as follows: "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: (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; DETACa (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." (Emphasis supplied) Section 10 of the 1997 NIRC, in enumerating the powers of a Revenue Regional Director include, among others, the power to issue letters of authority for the examination of taxpayers within the region under his/her jurisdiction. The said provision, in part, reads: "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: 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." (Emphasis supplied) On the other hand, Section 13 of the 1997 NIRC, in defining the authority of a revenue officer to conduct the examination of taxpayers for purposes of an assessment, provides as follows: "SEC. 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) Notably, Revenue Memorandum Order (RMO) No. 12-2007, 19 which covers the audit/investigation of 2006 internal revenue tax returns the taxable year subject of the present case specifies the policies and procedures in the issuance of LOAs to audit. Under such revenue issuance, only the Regional Director, aside from the CIR, may issue an LOA, viz .: IV. Policies and Procedures xxx xxx xxx 4. For taxpayers to be audited falling under mandatory category enumerated under paragraph III.A.1 hereof , 20 the concerned Revenue District Officer shall submit a request for issuance of LAs to the RD indicating therein the name of the taxpayer, TIN, Selection Code, ROs to be assigned to audit and Group Supervisor. 5. All LAs/ANs shall be prepared, approved and signed by the RD for 2006 tax returns, unless otherwise directed by the Commissioner. x x x (Boldfacing and underscoring supplied) In the present case, the crux of the controversy revolves around the question of whether respondent may be held liable for deficiency income tax and value added tax (VAT) subject of the Assessment Notices issued by petitioner. The issue regarding the revenue officer's authority to conduct the audit necessarily relates thereto as the absence thereof renders the assessment null and void. The Supreme Court's pronouncement in Medicard Philippines, Inc. v. Commissioner of Internal Revenue 21 declaring that an LOA as indispensable to the validity of an assessment is illuminating, viz .: "The absence of an LOA violated MEDICARD's right to due process An LOA is the authority given to the appropriate revenue officer assigned to perform assessment functions. It empowers or enables said revenue officer to examine the books of account and other accounting records of a taxpayer for the purpose of collecting the correct amount of tax. An LOA is premised on the fact that the examination of a taxpayer who has already filed his tax returns is a power that statutorily belongs only to the CIR himself or his duly authorized representatives. Section 6 of the NIRC clearly provides as follows: xxx xxx xxx Based on the afore-quoted provision, it is clear that unless authorized by the CIR himself or by his duly authorized representative, through an LOA, an examination of the taxpayer cannot ordinarily be undertaken. The circumstances contemplated under Section 6 where the taxpayer may be assessed through best-evidence obtainable, inventory taking, or surveillance among others has nothing to do with the LOA. These are simply methods of examining the taxpayer in order to arrive at the correct amount of taxes. Hence, unless undertaken by the CIR himself or his duly authorized representatives, other tax agents may not validly conduct any of these kinds of examinations without prior authority. xxx xxx xxx In this case, there is no dispute that no LOA was issued prior to the issuance of a PAN and FAN against MEDICARD. Therefore no LOA was also served on MEDICARD. The LN that was issued earlier was also not converted into an LOA contrary to the above quoted provision. x x x. In the case of Commissioner of Internal Revenue vs. Sony Philippines, Inc. ,the Court said that: Clearly, there must be a grant of authority before any revenue officer can conduct an examination or assessment. Equally important is that the revenue officer so authorized must not go beyond the authority given. In the absence of such an authority, the assessment or examination is a nullity. (Emphasis and underscoring ours) xxx xxx xxx x x x. In fact, apart from being a statutory requirement, an LOA is equally needed even under the BIR's RELIEF System because the rationale of requirement is the same whether or not the CIR conducts a physical examination of the taxpayer's records: to prevent undue harassment of a taxpayer and level the playing field between the government's vast resources for tax assessment, collection and enforcement, on one hand, and the solitary taxpayer's dual need to prosecute its business while at the same time responding to the BIR exercise of its statutory powers. The balance between these is achieved by ensuring that any examination of the taxpayer by the BIR's revenue officers is properly authorized in the first place by those to whom the discretion to exercise the power of examination is given by the statute. 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; citations omitted) To reiterate, the valid issuance of an LOA prior to the conduct of an examination of a taxpayer's books and other accounting records by any revenue officer is indispensable to the validity of an assessment. In the absence of such an authority, the assessment is a nullity. 22 In the present case, it is undisputed that RO Metrillo was not issued an LOA. In fact, RO Metrillo admitted in her Judicial Affidavit 23 that she conducted an audit of respondent's books for taxable year 2006 pursuant to a mere TVN, to wit: 6. Q: How did you came to know the petitioner in this case? A: I came to know the petitioner in this case when I received a Tax Verification Notice (TVN) No. 00050279 dated August 30, 2007, duly issued by the respondent authorizing me to conduct an investigation/audit relative to the petitioner's all internal revenue taxes for taxable year 2006. xxx xxx xxx 8. Q: After the issuance and service of the TVN, what transpired next, if any? A: I immediately collated and examined all the documents/requirements submitted by the petitioner. xxx xxx xxx 13. Q: What happened next, if any? A: I made a Memorandum Report dated October 21, 2009, recommending the issuance of a Preliminary Assessment Notice to enforce the collection of the deficiency taxes of petitioner. xxx xxx xxx 20. Q: What happened next after you made a Memorandum Report dated October 21, 2009? A: A Preliminary Assessment Notice with attached Details of Discrepancy was issued on December 29, 2009, by then regional Director Alfredo V. Misajon, informing the petitioner that after investigation, there has been due from them, deficiency income tax, value added tax and expanded withholding tax for taxable year 2006. xxx xxx xxx 22. Q: After the Preliminary Assessment Notice was issued and served, what happened next, if any? A: Assessment Notices together with the Formal Assessment Notice with its corresponding Details of Discrepancies all dated January 14, 2010 were issued by the BIR. 24. Q: What happened next after the BIR issued and served the Assessment Notices together with the Formal Assessment Notice with its corresponding Details of Discrepancies all dated January 14, 2010? A: Petitioner filed a Protest Letter against the Formal Assessment Notice and paid the assessed expanded withholding tax for taxable year 2006 on February 09, 2010. 25. Q: What happened next after the petitioner filed its Protest Letter against the Formal Assessment Notice? A: On April 07, 2010, the case was reassigned to Revenue Officer Carlomar Frilles for reinvestigation. xxx xxx xxx (Emphasis supplied) Even assuming that the TVN may be treated as an LOA, the same remains a nullity because it was issued by a mere Revenue District Officer and not by a Regional Director. Section 13 of the 1997 NIRC is categorical in stating that a revenue officer must be duly authorized under an LOA issued by a Regional Director before it may conduct an examination of a taxpayer. Section 13 of the 1997 NIRC is clear. There is no need for its interpretation. In the language of Nippon Express (Philippines) Corporation v. Commissioner of Internal Revenue , 24 citing Rizal Commercial Banking Corporation v. Intermediate Appellate Court and BF Homes, Inc. : 25 "It bears stressing that the first and fundamental duty of the Court is to apply the law. When the law is clear and free from any doubt or ambiguity, there is no room for construction or interpretation. As has been our consistent ruling, where the law speaks in clear and categorical language, there is no occasion for interpretation; there is only room for application ( Cebu Portland Cement Co. vs. Municipality of Naga ,24 SCRA 708 [1968])." (Emphasis supplied) The general rule of requiring adherence to the letter in construing statutes applies with particular strictness to tax laws and provisions of a taxing act are not to be extended by implication. 26 The issuance of LOAs is not simply a ministerial act but one that calls for the exercise of discretion by the Regional Director. The authority to issue LOAs cannot be further delegated to a Revenue District Officer. While it is true that under Section 11 of the 1997 NIRC, 27 a Revenue District Officer has the duty "to ensure that all laws, and rules and regulations affecting national internal revenue are faithfully executed and complied with," it does not follow that it may exercise functions which the law has expressly granted to other tax officials such as the CIR and the Revenue Regional Director. Indeed, unlike the CIR, there is nothing in the law which empowers the Regional Director to further delegate his power and duty of issuing LOAs or to substitute another in his place. On this point, the pronouncement in NPC Drivers and Mechanics Association, (NPC DAMA) v. The National Power Corporation 28 is instructive, viz .: "We agree with petitioners. In enumerating under Section 48 those who shall compose the National Power Board of Directors, the legislature has vested upon these persons the power to exercise their judgment and discretion in running the affairs of the NPC. x x x. It is to be presumed that in naming the respective department heads as members of the board of directors, the legislature chose these secretaries of the various executive departments on the basis of their personal qualifications and acumen which made them eligible to occupy their present positions as department heads. Thus, the department secretaries cannot delegate their duties as members of the NPB, much less their power to vote and approve board resolutions, because it is their personal judgment that must be exercised in the fulfillment of such responsibility . x x x, the rule enunciated in the case of Binamira v. Garrucho is relevant to the present controversy, to wit: An officer to whom a discretion is entrusted cannot delegate it to another, the presumption being that he was chosen because he was deemed fit and competent to exercise that judgment and discretion, and unless the power to substitute another in his place has been given to him, he cannot delegate his duties to another. x x x." (Emphasis supplied and citations omitted) WHEREFORE ,the present Petition for Review is DENIED for lack of merit. Accordingly, the assailed Decision dated March 8, 2016 and Resolution dated January 17, 2017 rendered by the Court in Division are REVERSED and SET ASIDE .The deficiency tax assessment issued by petitioner against respondent for taxable year 2006 is CANCELLED and SET ASIDE for being null and void. aDSIHc SO ORDERED. (SGD.) JUANITO C. CASTAEDA, JR. Associate Justice Roman G. del Rosario, P.J.,Erlinda P. Uy, Caesar A. Casanova, Esperanza R. Fabon-Victorino, Cielito N. Mindaro-Grulla and Catherine T. Manahan, JJ. ,concur. Lovell R. Bautista and Ma. Belen M. Ringpis-Liban, JJ. ,are on leave. Footnotes 1. Court En Banc Docket, pp. 1 to 11. 2. Decision dated March 8, 2016 in CTA Case No. 8742 penned by Associate Justice Ma. Belen Ringpis-Liban, concurred by Associate Justice Lovell R. Bautista and Associate Justice Esperanza R. Fabon-Victorino, Court En Banc Docket, pp. 13 to 32. 3. Resolution dated January 17, 2017 in CTA Case No. 8742, Court En Banc Docket, pp. 34 to 39. 4. Court En Banc's Docket, pp. 13-18. (Citations omitted). 5. Respondent herein. 6. Petitioner herein. 7. Court En Banc Docket, pp. 54-61. 8. Id. ,pp. 63-64. 9. Id. ,p. 67. 10. Id. ,pp. 68-84. 11. Id. ,p. 85. 12. Id. ,p. 87. 13. Exhibit "R-1",BIR Records, p. 2. 14. Exhibit "R-4",BIR Records, pp. 560-563. 15. Exhibit "R-5",BIR Records, pp. 577-581. 16. Exhibit "R-6",BIR Records, pp. 587-589. 17. Commissioner of Internal Revenue v. Azucena T. Reyes ,G.R. Nos. 159694 & 163581, January 27, 2006, 516 Phil. 176, 189-190; Commissioner of Internal Revenue v. Metro Star Superama, Inc. ,G.R. No. 185371, December 8, 2010, 637 SCRA 633; Commissioner of Internal Revenue v. BASF Coating + Inks Phils., Inc. , G.R. No. 198677, November 26, 2014, 743 SCRA 113; Samar-I Electric Cooperative v. Commissioner of Internal Revenue ,G.R. No. 193100, December 10, 2014, 744 SCRA 459; Commissioner of Internal Revenue v. Fitness By Design, Inc. , G.R. No. 215957, November 9, 2016, 808 SCRA 422. 18. G.R. No. 183408, July 12, 2017. 19. 2007 Audit Program for Revenue District Offices dated July 3, 2007. 20. A reading of respondent's 2006 Annual Income Tax Return shows carry-over of excess withholding tax or income tax payments in the amount of P1,175,599.69 which above the threshold amount of P100,000.00 set in paragraph III.A.1.1 of RMO 12-2007. (Exhibit "P-17", CTA Case No. 8742 Docket, Vol. I, pp. 264-266). 21. G.R. No. 222743, April 5, 2017. 22. Commissioner of Internal Revenue v. Sony Philippines, Inc. , G.R. No. 178697, November 17, 2010, 635 SCRA 234. 23. Exhibit "R-11",CTA Case No. 8742 Docket, Vol. I, pp. 88-93. 24. G.R. No. 196907, March 13, 2013, 693 SCRA 456, 464. 25. G.R. No. 74851, December 9, 1999, 320 SCRA 279. 26. Commissioner of Internal Revenue v. Julieta Ariete , G.R. No. 164152, January 21, 2010, 610 SCRA 464. 27. Section 11 of the 1997 NIRC states: "SEC. 11. Duties of Revenue District Officers and Other Internal Revenue Officers . It shall be the duty of every Revenue District Officer or other internal revenue officers and employees to ensure that all laws, and rules and regulations affecting national internal revenue are faithfully executed and complied with, and to aid in the prevention, detection and punishment of frauds or delinquencies in connection therewith. It shall be the duty of every Revenue District Officer to examine the efficiency of all officers and employees of the Bureau of Internal Revenue under his supervision, and to report in writing to the Commissioner, through the Regional Director, any neglect of duty, incompetency, delinquency, or malfeasance in office of any internal revenue officer of which he may obtain knowledge, with a statement of all the facts and any evidence sustaining each case." 28. G.R. No. 156208, September 26, 2006, 503 SCRA 138, 148.