Upon finding some discrepancies between petitioner’s Income Tax Returns (ITR) and VAT Returns, the CIR informed MEDICARD and issued a Letter Notice (LN) dated 20 September 2007. Subsequently, the CIR also issued a Preliminary Assessment Notice (PAN) against petitioner for deficiency VAT. On 04 January 2008, petitioner received CIR’s FAN dated 10 December 2007 for alleged deficiency VAT for taxable year 2006 inclusive of penalties.
Whether or not an examination of a taxpayer can be undertaken without a Letter of Authority (LOA).
NO. 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. Unless authorized by the CIR himself or by his duly authorized representatives through an LOA, an examination of the taxpayer cannot ordinarily be undertaken.
An LOA cannot be dispensed with just because none of the financial books or records being physically kept by MEDICARD was examined. Section 6 of the NIRC requires an authority from the CIR or from his duly authorized representatives before an examination “of a taxpayer” may be made. The requirement of authorization is not dependent on whether the taxpayer may be required to physically open his books and the financial records but only on whether a taxpayer is being subject to examination. Not having authority to examine MEDICARD in the first place, the assessment issued by the CIR is inescapably void.