MANILA MEDICAL SERVICES, INC., v. COMMISSIONER OF INTERNAL REVENUE (Tax 2)

MANILA MEDICAL SERVICES, INC., (MANILA DOCTORS HOSPITAL), Petitioner, -versus- COMMISSIONER OF INTERNAL REVENUE, Respondent.

CTA Case No. 8907

FACTS:

Petitioner is a domestic corporation. Respondent is the Chief of the Bureau of Internal Revenue (BIR).

Petitioner received a Preliminary Assessment Notice (PAN) dated October 19, 2010, which was duly protested on November 24, 2010 and received by the respondent also on the same day through the Officer-in-Charge (OIC) of the Letter Notice (LN) Task Force of the BIR. 

Petitioner received a FAN dated March 25, 2013 which it protested on April 16, 2013 and received by the respondent through the OIC-Regional Director on April 18, 2013.  Petitioner also filed a supplemental letter dated September 5, 2014 reiterating and further expounding its position against the assessment for the taxable year (TY) 2008. 

On September 12, 2014, a WDL dated September 5, 2014 was received by petitioner demanding the payment of the alleged deficiency IT and VAT including surcharges and interest. 

Thus, petitioner filed the instant petition.

ISSUES:

(1) Whether the Court of Tax Appeals has jurisdiction over the instant petition.

(2) Whether petitioner timely filed the instant petition as the WDL received by it may be considered as respondent's final decision appealable to this Court under Section 228 of the 1997 National Internal  Revenue Code (NIRC), as amended; 

(3) Whether the absence of Letter of Authority renders the conduct  of investigation invalid.

RULING:

(1) YES. The jurisdiction of the CTA regarding internal revenue taxes is provided under Section 7(a)(1) of Republic Act (RA) No. 1125, as amended by RA Nos. 9282 and 9503, which provides: 

"SEC. 7. Jurisdiction. -The CTA shall exercise: (a) Exclusive appellate jurisdiction to review by appeal, as herein provided: 

(1) Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the National Internal Revenue or other laws administered by the Bureau of Internal Revenue;"

Similarly, Section 3 (a)( 1) of Rule 4 of the Revised Rules of the Court of Tax Appeals provides for that.

The abovementioned provisions provide that it is not only the respondent's decision on disputed assessments that is appealable before this Court but also other matters arising under the NIRC or other laws administered by the BIR.

The appellate jurisdiction of the CTA is not limited to cases· which involve decisions of the CIR on matters relating to assessments or refunds. The second part of the provision covers other cases that arise out of the National Internal Revenue Code (NIRC) or related laws administered by the Bureau of Internal Revenue (BIR)."

In the instant case, the basis for petitioner's filing of the instant petition is respondent's issuance of the WDL. The purpose of the issuance of said WDL is for the enforcement of collection on the alleged assessment by the respondent which is within the provision of NIRC. Thus, it is classified within the "other matters arising under the NIRC or other laws administered by the BIR."

(2) YES. The WDL as issued by the respondent is tantamount to his decision as to the final denial of petitioner's protest on the alleged assessment. It is only upon the receipt of said WDL on September 12, 2014 that the period to appeal shall commence. 

Pursuant to Section 228 of the 1997 NIRC, as amended, petitioner had 30 days or until October 12, 2014 to appeal the final denial of its protest through the issuance of said WDL. Thus, the filing of the instant petition on October 10, 2014, which is within the 30-day prescriptive period to file an appeal,  has given this Court jurisdiction on the instant petition.

(3) YES. 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.

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. Hence, the CTA's disregard of MEDICARD's right to due process warrant the reversal of the assailed decision and resolution.

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 authority, the assessment or examination is a nullity.