Prescribed Procedures in the Review and Reporting of Cases; Preparation, Approval and Release of Pre-assessment Notices, Assessment Notices and Demand Letters; and the Preparation of BIR Form No. 40, for All Cases under the Enforcement Service Including Special Teams

July 19, 1999 REVENUE MEMORANDUM ORDER NO. 62-99 SUBJECT : Prescribed Procedures in the Review and Reporting of Cases; Preparation, Approval and Release of Pre-assessment Notices, Assessment Notices and Demand Letters; and the Preparation of BIR Form No. 40, for All Cases under the Enforcement Service Including Special Teams TO : All Revenue Officers Concerned 1. OBJECTIVE To prescribe reporting procedures and internal controls in the review and reporting of cases, and in the preparation, approval and issuance of pre-assessment notices, assessment notices and demand letters and the preparation of Form No. 40 for all cases under the Enforcement Service, including the Special Teams. 2. POLICIES 2.1 All Letters of Authority shall be issued by the Commissioner. 2.2 Reports of investigation shall be reviewed by the Enforcement Service. However, audit reports shall not be considered final until after the final review and approval by the Commissioner. 2.3 The Commissioner shall be the approving officer for all reports of investigation. 2.4 Pre-assessment notices, letters of demand or assessment notices shall be prepared and issued by the Enforcement Service for duly approved reports of investigation categorically stating (a) the facts; and (b) the law, jurisprudence, rules and regulations on which the recommended deficiency tax assessment is based. 2.5 Protests and requests for reinvestigation/reconsideration shall be filed with the Enforcement Service. The Enforcement Service shall resolve whether or not the protest is in accordance with the provisions of Section 228 of the NIRC, as amended, and its implementing regulations; or whether or not the protest involves a question of fact or of law or both. 2.5.1 If the protest involves a question of fact which fact is available from the docket of the case, the Enforcement Service shall resolve the protest. Otherwise, it shall be referred to the investigating officer who recommended the deficiency assessment. 2.5.2 If the protest involves a question of law, the same may be acted upon by the investigating officer, unless it involves difficult questions of law in which case it shall be referred to the Legal Service for resolution of the legal issues. 2.5.3 If the protest involves both a question of fact and of law, the question of fact shall first be resolved before the question of law applying the above-mentioned procedures. 2.6 Form 40.00 (Monthly Summary of Taxes Assessed) and Form 1758 (Authority to Cancel Assessment) shall be accomplished by the Enforcement Service. A copy of these reports shall be furnished to the Assessment Service for recording and to the Collection Service for collection enforcement. 3. PROCEDURES 3.1 Reports of Investigation 3.1.1 Upon termination of audit, a Conference Letter signed by the Assistant Commissioner (ACIR) of Enforcement Service or the Division Chief of the investigating office concerned shall be issued to the taxpayer inviting him/her for a conference thereby giving him/her the chance to know the nature of the findings and to refute the same. Should the taxpayer needs more time to study and consolidate his position or gather documentary evidences to substantiate his claim, a second conference may be granted. 3.1.2 After due consideration of the taxpayer's explanations or of the documents submitted during the conference, the revenue officer concerned shall submit a report of investigation which shall include a duly accomplished "Revenue Officer's Audit Report (BIR Form 1717 or 0500 Series)". The audit report shall include the basic reporting requirements prescribed under applicable audit manuals and other regulations. 3.1.3 If, after the conference, the taxpayer is agreeable to the audit findings or some items in the audit findings, he shall be required to execute an Agreement Form specifying the kind of tax, the nature of findings and the amount involved. An Authority to Accept Payment (ATAP) shall then be issued by the ACIR, Enforcement Service to cover the payment. For taxpayers under computerized District Offices, Payment Order Form 0605 shall be used in lieu of ATAP. 3.1.4 A copy of the receipt of payment and agreement form shall form part of the docket of the case. 3.1.5 In case the taxpayer fails to appear during the conference, a report of investigation shall be prepared at once for submission to immediate supervisor within 15 days from failure of the taxpayer to appear, unless the ACIR for Enforcement or the Division Chief concerned agreed, upon request of taxpayer, to extend the conference period. dctai 3.2 Review and Approval of Reports and Service of Pre-Assessment Notices 3.2.1 All reports of investigation shall reviewed by the Enforcement Service subject to final approval by the Office of the Commissioner. 3.2.2 The Enforcement Service, after having reviewed the report of investigation, shall send a pre-assessment notice to the taxpayer, indicating therein the factual and legal basis of the assessment, and a definite time frame (15 days from receipt) within which he may protest the same, if he is not agreeable. The "Revenue Officer's Audit Report (BIR Form 1717 or 0500)" prepared by the investigating officer, as reviewed and corrected by the Enforcement Service , shall be the basis of the pre-assessment notice. 3.2.3 If the taxpayer files his protest within 15 days from receipt of the pre-assessment notice, the same reviewing office shall likewise decide whether the protest conforms with the existing requirements and whether or not to give due course to the protest. The reviewing office shall then act on the protest following guidelines under 2.4 of this Order and inform the taxpayer in writing of the result of his protest and the actions taken. 3.2.4 If the pre-assessment notice is not protested within the prescribed period, the reviewing office shall then forward the report of investigation to the Office of the Commissioner for final review and approval. 3.2.5 After final review and approval of the report, the Office of the Commissioner shall forward the docket of the case to the Enforcement Service for issuance of a letter of demand and assessment notice. 3.2.6 No report shall be considered approved unless all questions of the reviewing offices have been resolved by the investigating officer and agreed to by the reviewing offices. The reviewing office (Enforcement Service/CIR Office) shall return the docket to the investigating officer for inclusion in the report any findings/corrections made during the review. 3.3 Preparation of Demand Letters and Assessment Notices 3.3.1 All letters of demand and assessment notices shall be prepared, approved and issued by the Enforcement Service stating completely the facts and the law, jurisprudence, rules and regulations on which said assessment is based. 3.3.2 Demand letters and assessment notices shall be based on the "Revenue Officer's Audit Report (BIR Form 1717/0500)" as reviewed by the Enforcement Service and approved by the Office of the Commissioner. 3.3.3 The original copy of the Demand Letters and Assessment notices shall be sent to the taxpayer by mail or by personal delivery. The duplicate copy shall be attached to the docket and shall be stamped with the actual date of mailing. It shall then be posted in BIR Form 40. Refer to 3.5 of this Order. 3.3.4 Assessment notices and demand letters forwarded to Records Division shall be covered by a transmittal letter which shall contain among others: name, address and TIN of taxpayer, taxable period covered by the assessment, kind of tax and amount of deficiency tax (itemized). 3.4 Letter of Protest and Request for Reinvestigation or Reconsideration 3.4.1 Letters of protest or request for reinvestigation or reconsideration shall be filed with the Enforcement Service. If, by mistake, received in any other office authorized to receive communications, it shall be referred to the Enforcement Service for proper action. 3.4.2 Assessments may be protested administratively by filing a request for reconsideration or reinvestigation within fifteen (15) days from receipt of pre-assessment notice and within thirty (30) days from receipt of the assessment notice and letter of demand. 3.4.3 Upon receipt of the letter of protest or request for reinvestigation or reconsideration, the Enforcement Service shall record such documents and attach the same to the corresponding docket. It shall also act on the protest following the guidelines prescribed in 2.4 of this order. 3.4.4 Within sixty (60) days from filing of the protest, all the relevant supporting documents must be submitted to the Enforcement Service otherwise, the assessment shall become final. However, an extended period may be granted by the Enforcement Service provided it shall not exceed 30 days from the lapse of the 60-day requirement. 3.4.5 The Enforcement Service shall have one hundred and eighty (180) days from the submission of the documents within which to decide on the protest. For this purpose, all protest referred to the investigating officers or the Legal Service, as the case may be, shall be submitted to the Enforcement Service within 150 days from receipt of the protest in order to give time to the Enforcement Service to prepare the communication to the taxpayer. 3.4.6 If the documents which are the subject of the protest have in fact been submitted as when such documents have been attached to the protest letter or where the taxpayer alleges that the issues raised are purely legal in nature, the protest may be acted upon without waiting for the lapse of the 60-day period. 3.5 Preparation of BIR Form 40 . 00 3.5.1 BIR Form 40.00 shall be prepared in five (5) copies and shall reflect the disputed assessment separate from the final and executory collectible accounts. 3.5.2 If the reviewing office does not receive a protest letter within 60 days from the date of mailing of the assessment notice and letter of demand, the assessment becomes final and executory. It shall then be posted in BIR Form 40.00 as a "collectible account". 3.5.3 At the same time, the duplicate copy of the assessment notice shall also be stamped with the words "Posted in BIR Form 40.00 as a collectible account". This fact shall also be recorded in the aforementioned taxpayer's tax account on file with the reviewing office. 3.5.4 If the assessment is protested by the taxpayer pursuant to Section 228 of the Tax Code and its implementing regulations, the assessment shall be recorded in BIR Form 40.00 as a "disputed assessment". This fact shall be recorded on the duplicate copy of the assessment notice by stamping the words "Posted in the BIR Form 40.00 as a disputed assessment". It shall also be recorded in the aforementioned taxpayers' tax accounts on file with the reviewing office. 3.5.5 A duly accomplished Form 40.00 shall be furnished to the Information Systems Operations Service, Assessment Service, Collection Service and one to be retained by the Enforcement Service. 3.6 Preparation of Authority to Cancel Assessment 3.6.1 The Authority to Cancel Assessment (ATCA) shall be issued whenever an assessment is cancelled or when a previously assessed deficiency tax is reduced as a result of a reinvestigation or reconsideration requested by the taxpayer. dctai 3.6.2 The ATCA shall be prepared only after the report of reinvestigation has been approved by the Commissioner. The ATCA shall be prepared at the same time that the amended notices are prepared and shall be approved by the Assistant Commissioner, Enforcement Service. 3.7 Issuance of Termination Letters 3.7.1 For approved report of investigation, the Enforcement Service shall issue Termination Letter signed by the Commissioner in the following cases: a) Where the deficiency tax/es is/are paid immediately after investigation and the review yields no discrepancy; b) Where the deficiency assessment is paid after issuance of the pre-assessment notice but before issuance of final assessment notice; c) Where the deficiency assessment is paid within 30 days from issuance of assessment notice and letter of demand. 3.7.2 Said Termination Law shall be mailed to the taxpayer. In all cases, the payment receipt and a copy of the Termination Letter shall be attached to the docket. 3.8 Transmittal of Dockets 3.8.1 Dockets with findings of "No Discrepancy", or where the assessment is paid before issuance of Assessment Notices and Letter of Demand, or where the tax assessment is paid within 30 days from issuance of assessment notice and letter of demand shall be batched separately, each batch with a maximum of 10 dockets, and shall be transmitted directly to the Records Division for file. 3.8.2 Dockets of "collectible accounts" shall be batched, each batch with a maximum of 10 dockets, and shall be transmitted by the Enforcement Service to the Records Division for microfilming, if warranted, then to the Collection Service for collection enforcement. 3.8.3 For disputed assessments, the dockets shall be referred to the offices mentioned in 2.4 of this RMO. The office to which it was assigned shall be indicated in Form 40.00 on "disputed assessment". 3.8.4 The dockets in the batch shall be listed in the "Transmittal List of Tax Dockets" to be prepared in 5 copies. The original copy shall always remain with the batch until action on all dockets is completed. If any tax case is removed from the batch for further action, such action shall be indicated in the original and all other copies still with the batch. 4. REPEALING CLAUSE All existing issuances or portions thereof which are inconsistent herewith are hereby repealed. 5. EFFECTIVITY This Order takes effect immediately. (SGD.) BEETHOVEN L. RUALO Commissioner of Internal Revenue