Amendment to Field Circular No. V-157 as amended by Revenue Memorandum Circular No. 22-64 and Revenue Memorandum Order No. 30-65

March 6, 1967 REVENUE MEMORANDUM ORDER NO. 02-67 SUBJECT : Amendment to Field Circular No. V-157 as amended by Revenue Memorandum Circular No. 22-64 and Revenue Memorandum Order No. 30-65 TO : All Internal Revenue Officers and Others Concerned After observing the procedure for issuance of letters of authority and replenishment of cases assigned to examiners, under Field Circular No. V-157, as amended by Revenue Memorandum Circular No. 22-64 dated June 27, 1964 and Revenue Memorandum Order No. 30-65, it has been ascertained that the procedure outlined in the said circular is no longer responsive to the desired quantity and quality of work sought to be achieved. Furthermore, with the issuance of the Handbook on Audit Techniques and Procedures, the necessity for revising the procedures outlined in said Circulars and Order become apparent. cdt In view thereof, the present procedure of raffling returns for assignment to fieldmen is hereby discontinued and in lieu thereof, the following procedure is hereby promulgated for compliance of all concerned: 1. Release of Returns for Investigation Before the current year's income tax returns are released for investigation in Revenue Regional Offices, the Revenue Director concerned must first submit to the Commissioner of Internal Revenue the following: (a) The report on the number of income tax returns filed and processed as of June 30 of the succeeding year or earlier as the case may be, detailed as follows: INDIVIDUAL Taxable without tax credit ___ Taxable with tax credit ___ Exempt without tax credit ___ Exempt with tax credit ___ Refundables ___ ___ CORPORATION Taxable ___ Exempt ___ ___ PARTNERSHIP ___ WITHHOLDING AT SOURCE ___ OUT OF REGION RETURNS ___ TOTAL === (b) A report on the classification of the returns as follows: 1. Number of Class A returns 2. Number of Class B returns 3. Number of Class C returns 4. Number of returns with Partnership Income 5. Number of returns for Office Audit verification 6. Number of reviewed returns (c) A competent audit program submitted by the Revenue District Officer as approved by the Revenue Director. 2. Letters of Authority to investigate shall be issued only by the following: (a) The Revenue District Officer for fieldmen under his jurisdiction (b) The Commissioner of Internal Revenue for fieldmen under the Anti-Smuggling Division, Special Investigation Division and International Operations Division, upon the recommendation of the Revenue Operations Head (Special Operations): for fieldmen in the Assessment Department upon recommendation of the Revenue Operations Head (Assessment); and such other authorities as may be issued in the National Office upon the recommendation of the Revenue Director and Revenue District Officer or at the discretion of the Commissioner of Internal Revenue. (c) Revenue District No. 32 (Cavite) of Revenue Region No. 6, Revenue Districts Nos. 37 (Occidental Mindoro) and 38 (Palawan) of Revenue Region No. 8 shall not be covered by the procedure outlined hereinbelow but by (a) above. (d) For fieldmen for Revenue Districts under Revenue Regions Nos. 6, 7 and 8, the following procedure shall be followed in the issuance of Letters of Authority to investigate: (1) In accordance with previous procedures all duplicates of income tax returns duly classified into Class "A" "B" "C" and "Office Audit" shall remain in the custody of the Chief, Assessment Branch until directed otherwise by the Director. Henceforth, the practice of classifying certain returns as Class "A-1" is discontinued. LLjur (2) As soon as the investigation of the income tax returns for the current year has been authorized by the Commissioner of Internal Revenue, the Revenue Director shall instruct the Revenue District Officers under his jurisdiction to submit a request/requisition for the quantity and corresponding classes of returns that his office can initially handle but in no case shall it exceed 10 returns for every examiner. Upon approval by the Director, the Chief, Assessment Branch shall prepare the returns in accordance with the requisition wherein a list shall be prepared by the said branch containing the names, addresses, assessment numbers and tax account numbers of the taxpayer. The list of returns together with the corresponding number of authorities to investigate shall then be transmitted by the Revenue Director to the Revenue District Officer for assignment and preparation of the authority to investigate. Care should be taken that the returns as classified are distributed to the examiners in accordance with their classification and the standing regulations on the matter. The accomplished letters of authority, duly signed by the examiner, initialed by the Group Supervisor, in the space provided for signature of the Revenue District Officer, and signed by the Revenue District Officer, together with the necessary examination cards, shall be forwarded to the Revenue Director, without detaching any copies thereof. After the signature by the latter, the duplicate copies of the return and the corresponding letter of authority, shall then be returned to the Revenue District Officer. The copies of the letter of authority and examination record card for the Assessment Branch and the Director shall, however, be detached before transmitting the papers to the Revenue District Officer. (3) In order to prevent backlog of work, the Director must see to it that the number of returns released for examination must not exceed an average of ten (10) for each examiner. (4) The Revenue District Officer shall keep a record of the returns and Letters of Authority received by him. The Group Supervisors shall do likewise for those received by them for transmittal to their respective examiners. (5) The Letter of Authority must be carefully prepared and erasures shall be avoided as much as possible, particularly in the name and address of the taxpayer and the assessment number. A new one should be made if material erasures appear on any Letter of Authority. The period covered by the authority must be stated definitely. The use of such phrases as "last five years," "1962 and up," "1962 and previous years" and all others of similar import shall not be allowed. In the preparation of the Letter of Authority the Revenue District Officer must not put the date, the same shall be supplied by the Director immediately before the release thereof by his Office. (6) If any Letter of Authority has been cancelled for any reason whatsoever, the Revenue District Officer shall submit all copies thereof to the Director for his disposition or file. (7) Upon the termination of the investigation, the Examiner shall submit his report thereon to the Group Supervisor who shall make a review thereof to see that the same has been made in accordance with the requirements of the Handbook on Audit Procedure & Techniques, with respect to notices to taxpayers, informal conferences, etc. If the report is in order, he shall forward it to the Revenue District Officer who, after further review, shall submit the same to the Chief, Assessment Branch for processing. The Group Supervisor and the Revenue District Officer shall not hold or delay any report but should act upon it within thirty (30) days from receipt thereof. (8) Letters of Confirmation for all cases investigated shall be prepared by the Assistant Revenue District Officer and forwarded for the signature of the Assistant Revenue Director, after same was initialed by the Revenue District Officer. (9) After processing and review of the report, the Chief, Assessment Branch shall make the necessary letter of demand which shall be forwarded to the Director for approval, including the field audit report. In case there is no discrepancy, or deficiency assessment, the report shall nevertheless be forwarded to the Director for approval. (10) As soon as the Director approves the letter of demand and/or the report, the same shall be returned to the Chief, Assessment Branch for recording in the Letter of Authority Register of the following information: cdtech a. Date of submission of the report b. Net income per return c. Net income after investigation d. Tax due per return e. Deficiency tax per investigation f. Date of release of letter of demand In case the deficiency assessment in the report exceeds P20,000.00 (P10,000.00 for Revenue Districts other than those under Revenue Regions Nos. 6, 7, and 8), no entry shall be made of such information in the Register. In the "Remarks" column, however, it should be indicated that the docket was forwarded to the National Office. The examination record card should likewise be filled up in the Assessment Branch in accordance with the information required therein. The records of the case shall then be transmitted to the Administrative Branch for release of the Letter of Demand or for file as the case may be. The Chief, Assessment Branch, shall use the approved report in the accomplishment of Form 40.00. (11) To have a close check of the authorities and returns investigated, the Assessment Branch shall utilize the "D" copy of the examination record cards. The cards must be filed alphabetically to facilitate references thereon. As soon as a report is received, the corresponding card shall be removed from the said file and placed in another file called "Reported File". When the report has been approved and the letter of demand is released or the docket is transmitted to the Administrative Branch for file (there being no discrepancy or tax due), said card shall be removed from the "Reported File" and transferred to the "Closed File". The "C" copy of the card shall be kept in the Assessment Branch until it is transmitted to the Data Processing Center for processing of statistical data. (12) The Assessment Branch shall keep a Letter of Authority Register and a separate file for the copies of the Letters of Authority, as well as for the copies of the examination record cards. Said copies will be supplied by the Director who makes the final release of the papers to the Revenue District Officer. 2. Revenue Memorandum Order No. 30-65, dated July 27, 1965, is hereby modified as follows: (a) No replenishment of cases shall be made for examiners who have pending cases and dockets in excess of twenty (20). (b) Dockets previously assigned to examiners shall be reckoned with in the determination of pending cases of such examiners. Likewise, cases already reported but returned to the Examiner concerned by the Group Supervisor, Revenue District Officer, or the Director, for mistakes therein, discrepancies, failure to submit supporting papers, etc., shall be deemed outstanding in the examiner's hands. (c) For any examiner entitled to replenishment, the Revenue District Officer shall submit a request or requisition for additional returns, in no case exceeding five (5) returns for every examiner entitled thereto. Upon approval of the request, the issuance of the Letters of Authority therefor, recording, reporting, and other internal control requirements shall be governed by the same procedure as that for initial releases of returns. 3. The procedure set forth above shall also apply to the distribution, assignment and replenishment of business and transfer tax returns and dockets, as far as they are material and/or applicable thereto. 4. This Revenue Memorandum Order supersedes Field Circular No. V-157, Revenue Memorandum Circular No. 22-64 and Revenue Memorandum Order No. 30-65 which are inconsistent herewith. 5. This Revenue Memorandum Order shall take effect upon approval. LLjur MISAEL P. VERA Commissioner of Internal Revenue APPROVED: JUAN PONCE ENRILE Acting Secretary of Finance