Procedure in the Issuance of Letters of Authority in the Investigation Division and Investigation Branches

August 3, 1964 REVENUE MEMORANDUM CIRCULAR NO. 30-64 SUBJECT : Procedure in the Issuance of Letters of Authority in the Investigation Division and Investigation Branches TO : All Internal Revenue Officers, Employees and Other Concerned In order to improve BIR-Taxpayer relationship through the avoidance of charges of harassment as a result of frequent investigations and to maintain closer supervision in the investigation of taxpayers which was discovered to have been indiscriminately resorted to in the past, the following procedure relative to the issuance of authority to investigate for fieldmen in the Investigation Division and Investigation Branches as well as the processing of the field audit reports submitted thereon is hereby promulgated for compliance of all concerned: 1. All leads, confidential information, newspaper clippings and other data concerning tax evasion or fraud by taxpayers should not be made the basis for the immediate issuance of a letter of authority. The Chief of the Investigation Division in the National Office or the Chief of the Investigation Branch in Regional Offices should assign the leads, data and information to the fieldmen of the Branch if there is no grouping in the said Branch or to the Group Supervisor in the case of the Investigation Division or any Investigation Branch where there is grouping of fieldmen, for preliminary investigation. This type of investigation does not need an authority to investigate. The examiner concerned who may be assigned to the case by the Chief of the Investigation Branch or by the Group Supervisor should be instructed that in conducting the preliminary investigation, direct contact with the taxpayer should be avoided as mush as possible and that the preliminary investigation should be conducted indirectly. Letters to other taxpayers, government agencies and other sources from which verification of the data on tax evasion may be obtained indirectly can be prepared in the Regional Office for signature by the Regional Director or in the National Office for signature of the Commissioner of Internal Revenue or by any other official who is delegated to sign such letters. If direct contact with the taxpayer cannot be avoided, contract should not be made unless permission must first be secured from the Regional Director in the case of those cases in the regional office or the Commissioner of Internal Revenue in the case of cases in the National Office. In conducting the preliminary investigation, all sources of data and information such as government and private offices should be thoroughly explored and utilized in order that the nature of the tax evasion may be correspondingly determined. The dockets of the investigated case of the taxpayer subject to the preliminary investigation should be requisitioned from the Administrative Branch of the Regional Office or from the Records Control Section of the National Office as the case may be and used as guide or basis in the preliminary investigation. Any information for reward filed under Republic Act No. 2238 shall, before being assigned for preliminary investigation be duly registered first with the Record Control Section in the National Office or with the Administrative Branch in the Regional office. 2. After the termination of the preliminary investigation a report should be submitted attaching thereto all papers gathered during the investigation including the dockets of the investigated cases of the taxpayer. The report should contain a discussion of the findings, the basis of the tax evasion discovered and such other information which the examiner believes will prove the case of tax evasion. The preliminary investigation report and other attachments thereto shall be prepared in duplicate and submitted to the Chief of the Branch or Chief of the Investigation Division for evaluation. 3. Upon receipt of the preliminary investigation report by the Chief of the Investigation Branch or the Chief of the Investigation Division, a study should be made of the report to determine whether there is a clear indication of fraud, and therefore, needs to be thoroughly investigated by the Branch or Division or whether there is no tax evasion and may, therefore, be referred to the Revenue District Office for ordinary investigation or incorporation with the report of the case for the period or year concerned, if the examination has already been terminated. The findings on the study of the investigation report should be in the form of a memorandum report and should be submitted to the Regional Director of the Revenue Operations Head (Assessment) as the case may be who must approve the recommendation. 4. After study by the Regional Director or the Revenue Operations Head (Assessment) of the recommendations of the Chief of branch or division, the former should signify his approval or disapproval of the recommendation, after which the papers should be returned to the latter. If the approval is for an investigation for tax evasion the corresponding letter of authority should be prepared by the Chief of the Investigation Branch or the Chief of the Investigation Division using the prescribed forms (Annexes A-1 and A-2). On the other hand, if the approved recommendation is to transmit the case to the Revenue District Office for ordinary investigation, the docket should be forwarded to the Income & Business Tax Branch in the regional office for appropriate action and reference to the revenue district concerned. Cases of the Investigation Division should be referred to the regional office concerned by the Revenue Operations Head (Assessment). 5. The authority to investigate must be carefully prepared and erasures should be avoided as much as possible particularly the name and address of the taxpayer to be investigated. A new one should be prepared if it becomes necessary to make erasures in the authority. The period to be covered by the authority to investigate should be definite and phrases "last five years", "1959 and up" or "1962 and previous years" should be avoided in order that confusion in the examination may be eliminated. The kind of tax to be investigated as shown in the preliminary investigation report should likewise be definite and should not be stated as income and other taxes or business and other taxes but should be definite as to the kind of tax to be investigated. To avoid confusion and to give a chance to the examiner in revenue district offices to conduct the ordinary examination, the current year should not be included in the investigation unless there is very clear and convincing proof that fraud was actually committed and that any delayed investigation would prejudice the interests of the government. If the investigation of the current year or period has already been terminated by the revenue district office, the same may be included in the investigation subject to the condition that there is tax evasion in the said period. Current period is to be understood as the latest income tax year in the case of income tax or the latest semester in the case of business and other taxes; thus, the income tax return for 1963 is the one referred to for income tax purposes and the first semester of 1964 is the one referred to for business tax purposes. 6. In preparing the letter of authority the names of those authorized to investigate should be correctly shown in the authority and no fieldman is allowed to accompany any examiner authorized to investigate a certain taxpayer unless his name appears in the letter of authority. No date should be placed in the authority to investigate during its preparation. The date will be placed after signature by the Commissioner of Internal Revenue or the Regional Director. In order to insure an effective control of all authority to investigate, all copies of the cancelled authorities should be forwarded to the Revenue Operations Head (Assessment) for file. The cancelled authorities must likewise be recorded in the authority register kept in the regional office and in the national office. cdti 7. After the authority to investigate has been signed by the Commissioner of Internal Revenue or the Regional Director as the case may be, the following procedure should be followed in the recording, distribution and assignment thereof: National Office (a) The authority to investigate after being signed by the Commissioner of Internal Revenue should be forwarded to the Assessment Department where it will be dated. (b) The copy of the authority for the Assessment Department should be detached together with a copy of the preliminary report of investigation and filed with the said office. (c) Entries should then be made in the authority register kept in the said office in accordance with the enclosed form (Annex B). (d) The authority together with the other papers attached to the case should then be forwarded to the Chief, Investigation Division. Upon receipt of the signed authority to investigate, it should be recorded in the authority register kept in the office. The examination record card (Annex C) should likewise be prepared by the Chief, Investigation Division before transmitted of the papers to the examiner. (e) The authority to investigate and the examination record card-should then be forwarded to the Group Supervisor concerned and the latter should immediately transmit the papers to the examiner to whom the case has been assigned. Regional Offices (a) The authority to investigate after being signed by the Regional Director should be forwarded to the Investigation Branch where it will be dated. (b) The copy of the authority for the National Office should be detached together with the copy of the preliminary report of investigation and forwarded to the Revenue Operations Head (Assessment). (c) Entries should be made in the authority register keep in the said office in accordance with the enclosed form (Annex B). The examination record card should likewise be prepared by the Chief, Investigation Branch in accordance with the enclosed form (Annex C). (d) The authority together with the examination record card and other papers attached to the case should then be transmitted to the examiner. If there are group supervisors in the Branch it should be forwarded to the group supervisor and latter should in turn forward the papers to the examiner concerned. 8. The examiner should proceed with the investigation and he is required to serve the authority to investigate within thirty (30) days from the date thereof and to submit his report of investigation within 120 days from the date of the authority to investigate. In case the period to submit the report is almost due and the examiner believes that he will not be able to submit the report within the required period, he should prepare a memorandum requesting for revalidation of the authority giving the reasons for his inability to submit the report on time. 9. Upon termination of the investigation in the Regional Office or Investigation Division the said report should be processed and reviewed in the said offices and appropriate entries should be made in the authority register and in the examination record card. The report, irrespective of the results of the investigation, should be forwarded to the National Office for approval by the Commissioner of Internal Revenue and release of the demand letter if a deficiency tax is recommended: All such reports should be forwarded to the Revenue Operations Head (Assessment) who should conduct a review of the case before forwarding it to the Commissioner of Internal Revenue for approval: As soon as the Commissioner has approved the report, it should be processed in the following manner: (a) If there is no discrepancy, the docket should be filed in the National Office if it is a case originating from the Investigation Division or filed in the Regional Office if it is a case originating from the Investigation Branch. Before the case is permanently filed, the docket should be coursed through the Assessment Department for any information that may be taken from the docket for purposes of completing the information required in the authority register and in the examination record card. LLphil (b) If there is a deficiency assessment recommended, the docket should be forwarded to the Division concerned in the Assessment Department for preparation of the letter of demand. As the docket is coursed through the Assessment Department the information needed in the authority register and examination record card should be completed by picking out the necessary data and statistics from the report. 10. To serve as guide in the processing and approval of the authority to investigate from the regional offices or from the investigation division, the said offices are hereby required to submit not later than August 31, 1964 a summary of all investigations conducted in their respective offices from 1958 to the present. Said list should contain the following information. a. Authority No.; b. Name of examiner; c. Name of taxpayer; d. Address of taxpayer; e. Kind of tax; f. period covered; g. Other miscellaneous information which may be needed in the compilation of statistics. Strict compliance of the provisions of this Revenue Memorandum Circular is hereby enjoined. (SGD.) BENJAMIN N. TABIOS Acting Commissioner of Internal Revenue APPROVED: (SGD.) RUFINO G. HECHANOVA Secretary of Finance INSTRUCTIONS FOR THE USE OF EXAMINATION RECORD CARD BY THE INVESTIGATION DIVISION AND INVESTIGATION BRANCH 1. The examination record card should be prepared in quadruplicate distributed as follows: A Original Permanent File Copy B. Duplicate Investigation Division/Branch copy C. Triplicate Data Processing Center's copy D. Quadruplicate to be attached to the docket 2. Upon receipt of the signed authority to investigate, the Investigation Division or the Investigation Branch, as the case may be, should accomplish a set of the examination record card by filling up applicable data of Item Nos. 1 to 15. Before transmitting the authority and the papers thereto, the "B" card should be detached and retained in the division or branch. The "B" card should be filed alphabetically under "Assigned Cases" and should serve as basis in determining the cases assigned and pending report. cdpr 3. A. Procedure in the Investigation Division and Investigation Branches where there are Group Supervisors in the latter. (1) Upon receipt by the Group Supervisor of the authority to investigate and the attached papers thereto, he should detach the "C" card for his use for control purposes. These cards should be filed alphabetically under each examiner's name to enable the Group Supervisor to determine immediately the number of and pending cases of any examiner in his group at any given time. (2) Upon completion of the investigation and the preparation of the field audit report the examining officer should fill up Item Nos. 16, 17 and 19 of the "A" and "D" cards, after which the report should be forwarded to the Group Supervisor. After processing by the Group Supervisor, he should pull out the "C" card from his file and fill up Item Nos. 16, 17 and 19 using the "A" and "C" cards as basis, after which the "C" card should be attached to the docket and forwarded to the Chief of the Investigation Division or the Chief of the Investigation Branch as the case may be. B. Procedure in the Investigation Branch where there are no Group Supervisors. (1) Upon receipt by the examiner of the authority to investigate and the attached papers thereto, the examiner should immediately proceed with the investigation. As soon as he has completed the examination and prepared the field audit report he should fill up Item Nos. 16, 17 and 19 of the "A", "O" and "D" cards and the whole docket with the cards should then be forwarded to the Chief of the Investigation Branch. 4. The Investigation Division or the Investigation Branch, as the case may be, should complete the entries in the "B" card using as basis the data in the "A" and "D" or "A", "C" and "D" cards attached to the docket, as the case may be. For their own purposes, the Chief of the Investigation Division or the Chief of the Investigation Branch may fill up Item Nos. 20 and 21 based on the reports submitted. The filled up "B" card should be retained in the division or branch, as the case may be, and filed under "Reported Cases". 5. The dockets (after it shall have been coursed through the Regional Director and posted in the authority register in cases originating from the Investigation Branch) with the "A", "C" and "D" cards attached thereto should then be forwarded to the Assessment Department, National Office, Manila. The "C" cards should be detached in the Assessment Department and filed under "Pending Review Cases", while the docket should be forwarded to the division handling the review. After review by the division concerned, Item No. 18 of the corresponding "A" and "D" cards attached to the docket should be filled up by the reviewer and the docket forwarded to the Assessment Department. After processing in the Assessment Department, the "C" cards should be pulled out from the pending review cases and Item No. 18 should be filled up. The whole docket, together with the "A", "C" and "D" cards, should be forwarded to the Commissioner of Internal Revenue for approval of the field audit report. prcd 6. After approval by the Commissioner of Internal Revenue of the reports of investigation, the docket should be returned to the Assessment Department, who in turn should forward it to the division concerned for preparation of corresponding letter of demand, if there is a deficiency tax. In no discrepancy cases, the "A", "C" and "D" cards should be completed and the dockets coursed likewise through the Assessment Department. 7. When the letter of demand has been signed, posting in the authority register which are maintained separately for each region in the Assessment Department shall have been completed, the "A", "C" and "D" cards should be disposed of as follows: (1) "A" cards should be forwarded to the Investigation Division or Investigation Branch to replace the "B" cards and maintained as permanent file for future use. (2) "C" cards should be forwarded to the Data Processing Center for statistical reporting. (3) "D" cards should remain attached to the docket. ANNEX A-1 Republic of the Philippines Department of Finance BUREAU OF INTERNAL REVENUE Manila AUTHORITY NO. 0001 ______________, 196___ ____________________ ____________________ ____________________ Sir/Madam/Gentlemen : The bearer(s) hereof, Revenue Examiner(s) ____________________________ of this Office, whose signature(s) appears hereunder, is/are authorized to examine your books of accounts and other accounting records for __________________________ tax purposes for the year(s)/period(s) _______________________ . The examiner(s) is/are provided with an identification card issued by this Office, which shall be presented to you upon request. It is requested that all facilities be afforded the examiner(s) in order that the examination can be expedited. cdtech A letter of confirmation on the result of the investigation made hereon will be sent to you within thirty (30) days upon termination of the investigation instead of your books of accounts and/or other records being signed by the investigating examiner. Should you fail to receive such confirmation, you are requested to inform this Office in writing immediately. Very truly yours, ______________________________ Commissioner of Internal Revenue Recommending Approval: __________________________________ ___________________________ Revenue Operations Head (Assessment) Examiner & Code No. _____ IMPORTANT: In any communication relative to this subject matter, please address it to the Revenue Operations Head (Assessment), or call up Tel. 3-08-91 or 3-03-87. ANNEX A-2 AUTHORITY NO. 00001 ________________, 196___ ____________________ ____________________ ____________________ Sir/Madam/Gentlemen : The bearer(s) hereof, Revenue Examiner(s) ____________________________ of this Office, whose signature(s) appears hereunder, is/are authorized to examine your books of accounts and other accounting records for __________________________ tax purposes for the year(s)/period(s) _______________________ . The examiner(s) is/are provided with an identification card issued by this Office, which shall be presented to you upon request. It is requested that all facilities be afforded the examiner(s) in order that the examination can be expedited. aisadc A letter of confirmation on the result of the investigation made hereon will be sent to you within thirty (30) days upon termination of the investigation, instead of your books of accounts and/or other records being signed by the investigating examiner. Should you fail to receive such confirmation, you are requested to inform this Office in writing immediately. Very truly yours, __________________________ Recommending Approval: ________________________________ ___________________________ Chief, Investigation Branch Examiner & Code No. _____ IMPORTANT: In any communication relative to this subject matter, please address it to the Regional Director or call up Tel. ______________. ANNEX D-1 LETTER OF CONFIRMATION NO. ____ _____________________, 196 ____ _____________________ _____________________ Sir/Madam/Gentlemen : With reference to our letter of authority No. _______ dated ________________, please be informed that the results of the investigation thereof has been terminated and the corresponding report by Revenue Examiner ___________________ for the taxable year ending ___________________________ has been submitted to this Office. The findings as reported are subject to review and final approval by the proper officials of this Bureau and final decision thereon will be communicated to you. Very truly yours, _____________________ Chief Investigation Division IMPORTANT: This letter of confirmation should be posted on the inside cover of the ledger for the year(s) investigated. ANNEX D-2 LETTER OF CONFIRMATION No. ____ _________________________, 196 ____ _____________________ _____________________ Sir/Madam/Gentlemen : With reference to our letter of authority No. ______ dated ________________, please be informed that the results of the investigation thereof has been terminated and the corresponding report by Revenue Examiner ___________________ for the taxable year ending ___________________________ has been submitted to this Office. The findings as reported are subject to review and final approval by the proper officials of this Bureau and final decision thereon will be communicated to you. cdta Very truly yours, _____________________ Regional Director IMPORTANT: This letter of confirmation should be posted on the inside cover of the ledger for the year(s) investigated.