March 16, 2018

Bureau of Internal Revenue

Revenue Region No. 9B
San Pablo City, Laguna

Attention: EDGAR B. TOLENTINO

Regional Director

Re: Ostrea Mineral Laboratories, Inc.

Warrants of Garnishment and Distraint and/or Levy

Gentlemen:

On behalf of Ostrea Mineral Laboratories, Inc. (OMLI) we submit for your reconsideration the
Warrants of Distraint and/or Levy (WDL) issued and served on February 14, 2017 and the
Warrants of Garnishment (WG) connected thereto pertaining to the alleged deficiency taxes of
OMLI for taxable years 2007, 2008, and 2009.

I. Background

a. Taxable year 2007

1. On April 29, 2011, OMLI received a Formal Letter of Demand (FLD) dated
April 15, 2011 issued by the Bureau of Internal Revenue (BIR) Letter Notice
(LN) Task Force for its alleged deficiency income tax (IT) and value-added tax
(VAT) for taxable year 2007.

2. On February 14, 2017, a WDL was issued by the Arrears Management Section
(AMS) of Revenue Region 9B (RR-9B) and served upon OMLI by Revenue
Officer Don Johnson F. Guevarra (RO Guevarra).

3. On March 8, 2017, a WG was issued by the AMS RR-9B and served by RO

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 Guevarra upon the Development Bank of the Philippines (DBP), Maybank,
and Metrobank. While the Bank of the Philippine Islands (BPI) was served a
WG on February 23, 2017.

4. In response to the WG, OMLI filed a Letter Request for Compromise dated
March 16, 2017 addressed to then Regional Director Manuel V. Mapoy (RD
Mapoy) of RR 9-B.

5. On March 16, 2017, OMLI wrote a letter addressed to BPI authorizing the
garnishment of its account.

6. On March 17, 2017, the AMS RR-9B sent a letter to BPI requesting the latter to
issue checks in favor of the BIR for payment of the deficiency taxes.

7. On March 30, 2017, OMLI paid the assessed deficiency IT and VAT amounting
to PhP2,137,991.59 and PhP1,466,051.37, respectively.

b. Taxable year 2008

1. On February 26, 2010, a Letter of Authority (LA) LOA No. 00024582 covering
taxable year 2008 was issued by Revenue District Office No. 57 against OMLI.

2. On December 2, 2011, OMLI received an FLD, issued by then Regional Director

Jose N. Tan of RR-9B, on its alleged deficiency IT, VAT, expanded withholding
tax, documentary stamp tax, improperly accumulated earnings tax, and
compromise penalties for the taxable year 2008.

3. On February 14, 2017, a WDL was issued by the AMS RR-9B and served upon
OMLI by RO Guevarra. Subsequently, a WG was issued and served upon DBP,
Maybank, Metrobank, and BPI.

4. On March 3, 2017, OMLI wrote a letter addressed to RD Mapoy seeking to lift

the WG.

5. On February 28, 2017, March 1, 2017, and March 9, 2017, BPI, Maybank, and
DBP, respectively, wrote OMLI stating that in compliance with the WG, its
accounts with the banks were put on hold.

6. On March 16, 2017, OMLI wrote to RD Mapoy requesting for abatement of

taxes and to lift the WDL.

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 c. Taxable year 2009

1. On May 19, 2011, then Commissioner of Internal Revenue (CIR) Kim S. Jacinto-
Henares issued LN No. 057-TRS-09-00-00019 against OMLI.

2. OMLI received an FLD dated March 29, 2013 issued by the Office of the
Regional Director RR-9B.

3. On February 14, 2017, a WDL was issued by the AMS RR-9B and served upon
OMLI by RO Guevarra.

4. On March 2, 2017, a WG was served upon the DBP by RO Guevarra.

II. Discussion

A. Non-receipt of first, second, and final notice for presentation of books of accounts and other
accounting records for taxable years 2007, 2008, and 2009 is in violation of OMLI’s right to due
process.

OMLI has no knowledge of the first, second, and final notice for presentation of books of
accounts and other accounting records as it did not receive said notices. These notices must
be sent to the taxpayer as instructed by Revenue Memorandum Order No. 45-2010. Thus,

II. POLICIES AND PROCEDURES

The following policies and guidelines shall be observed:

1. If the taxpayer, upon receipt of the (1) Letter of Authority (LA) and
checklist of presentation of the requirements for the audit, or (2)
access to records request , the Revenue Officer (RO) concerned shall
send a First Notice, signed by himself and/or his group supervisor,
to the taxpayer, after ten (10) calendar days from receipt of the LA
and checklist of requirements/ access to records request, demanding
the taxpayer to furnish to the RO the requirements previously
requested.

2. However, if the taxpayer ignores the First Notice and continues to

disregard the demand for the submission of the required documents,
a Second and Final Notice, signed by the Head of Office concerned,
shall be sent to the taxpayer after ten (10) calendar days from receipt
of the First Notice. (Underscoring supplied.)

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 These notices are essential to afford the taxpayer an opportunity to present his side of the
case. Therefore, the absence on such notices requesting OMLI to present its records and books
of accounts deprives it of due process.

Lest it be forgotten, the cardinal rule in administrative investigations guarantees taxpayers to

present their case and adduce supporting evidence. Thus, in Missouri Square, Inc. v. CIR1 , the
Court of Tax Appeals (CTA) held:

“It is settled doctrine that the essence of due process in administrative

proceedings is the opportunity to explain one's side or seek a
reconsideration of the action or ruling complained of. xxx The
standard of due process that must be met in administrative tribunals
allows a certain degree of latitude as long as fairness is not ignored.”

B. Non- receipt of Preliminary Collection Notice (PCN) and Final Notice Before Seizure (FNBS) for
taxable years 2007, 2008, and 2009 is in violation of OMLI’s right to due process.

Although taxes are the lifeblood of the government, their assessment and collection should
be made in accordance with law as any arbitrariness will negate the very reason for
government itself.2 In this case, OMLI failed to receive a PCN and FNBS prior to the issuance
of the WDL in clear violation of its due process as mandated by law.

Revenue Regulations (RR) No. 18-13, amending RR No. 12-99, provides:

3.1.4 Disputed Assessment. — The taxpayer or its authorized

representative or tax agent may protest administratively against the
aforesaid FLD/FAN within thirty (30) days from date of receipt
thereof. The taxpayer protesting an assessment may file a written
request for reconsideration or reinvestigation defined as follows:

xxx

If there are several issues involved in the FLD/FAN but the taxpayer
only disputes or protests against the validity of some of the issues
raised, the assessment attributable to the undisputed issue or issues
shall become final, executory and demandable; and the taxpayer shall
be required to pay the deficiency tax or taxes attributable thereto, in
which case, a collection letter shall be issued to the taxpayer calling
for payment of the said deficiency tax or taxes, inclusive of the
applicable surcharge and/or interest.

1 C.T.A. Case No. 8707, September 8, 2016.

2 CIR v. Azucena T. Reyes, G.R. Nos. 159694 & 163581, January 27, 2006.

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 If there are several issues involved in the disputed assessment and
the taxpayer fails to state the facts, the applicable law, rules
and regulations, or jurisprudence in support of his protest against
some of the several issues on which the assessment is based, the same
shall be considered undisputed issue or issues, in which case, the
assessment attributable thereto shall become final, executory and
demandable; and the taxpayer shall be required to pay the deficiency
tax or taxes attributable thereto and a collection letter shall be issued
to the taxpayer calling for payment of the said deficiency tax,
inclusive of the applicable surcharge and/or interest. (Underscoring
supplied.)

Clear from the above RR that a once an assessment has become final and executory, a
collection letter shall be issued to the taxpayer for payment of the deficiency tax. Moreover,
due process requires that notices must be served on and received by the taxpayer.3 Thus, the
issuance of a collection letter and the receipt thereof is imperative and not merely directory.

It is important to note that under Section 207 (A) and (B) of the National Internal Revenue
Code of 1997, as amended (NIRC), distraint of personal property and levy on real property
shall be done upon the failure of the person owing any delinquent tax or delinquent revenue
to pay the same at the time required. It is the failure to pay the deficiency taxes within the
required time that leads to the issuance of a WDL. The WDL presupposes that a collection
letter calling for payment of the taxes within a specified time has been sent to the taxpayer.

Utilizing the provisions of the NIRC, the issuance of the WDL is premature as OMLI had no
knowledge when it should have paid its deficiency taxes considering that it did not receive a
PCN and FNBS. Hence, the failure to receive the PCN and FNBS before issuance of the WDL
violates the right of OMLI to due process and warrants the cancellation of the WDL.

Moreover, it is axiomatic that the persuasiveness of the right to due process reaches both
substantial and procedural rights and that failure to strictly comply with RR No. 18-13 is
tantamount to a denial of due process.4 Thus, the failure of the BIR to strictly comply with the
requirements laid down by law and its own rules is a complete denial of OMLI’s right to due
process.

C. Period to collect the tax assessment liabilities for taxable years 2007 and 2008 has prescribed.

i. Three (3) year period to collect taxes

Section 203 of the NIRC provides:

SEC. 203. Period of Limitation Upon Assessment and Collection. -

Except as provided in Section 222, internal revenue taxes shall be
assessed within three (3) years after the last day prescribed by law for

3 Fitness by Design, Inc. v. CIR, CTA Case No. 7160, July 10, 2012.
4 CIR v. Metro Star Superama, Inc., G.R. No. 185371, December 8, 2010.

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 the filing of the return, and no proceeding in court without assessment
for the collection of such taxes shall be begun after the expiration of
such period: Provided, That in a case where a return is filed beyond the
period prescribed by law, the three (3)-year period shall be counted
from the day the return was filed. For purposes of this Section, a return
filed before the last day prescribed by law for the filing thereof shall be
considered as filed on such last day.

Section 222 of the NIRC further provides:

SEC. 222. Exceptions as to Period of Limitation of Assessment and

Collection of Taxes. –

(a) In the case of a false or fraudulent return with intent to evade tax
or of failure to file a return, the tax may be assessed, or a
proceeding in court for the collection of such tax may be filed
without assessment, at any time within ten (10) years after the
discovery of the falsity, fraud or omission: Provided, That in a
fraud assessment which has become final and executory, the fact
of fraud shall be judicially taken cognizance of in the civil or
criminal action for the collection thereof.

(b) If before the expiration of the time prescribed in Section 203 for the
assessment of the tax, both the Commissioner and the taxpayer
have agreed in writing to its assessment after such time, the tax may
be assessed within the period agreed upon. The period so agreed
upon may be extended by subsequent written agreement made
before the expiration of the period previously agreed upon.

(c) Any internal revenue tax which has been assessed within the
period of limitation as prescribed in paragraph (a) hereof may be
collected by distraint or levy or by a proceeding in court within
five (5) years following the assessment of the tax.

(d) Any internal revenue tax, which has been assessed within the
period agreed upon as provided in paragraph (b) hereinabove, may
be collected by distraint or levy or by a proceeding in court within
the period agreed upon in writing before the expiration of the five
(5) -year period. The period so agreed upon may be extended by
subsequent written agreements made before the expiration of the
period previously agreed upon.

(e) Provided, however, That nothing in the immediately preceding and

paragraph (a) hereof shall be construed to authorize the
examination and investigation or inquiry into any tax return filed
in accordance with the provisions of any tax amnesty law or decree.
(Emphasis supplied.)

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 The BIR has three (3) years reckoned from the last day prescribed by law to file a return
or actual filing thereof, whichever comes later, to assess internal revenue taxes or file
a proceeding in court for the collection of such tax without an assessment. Upon
assessment, the BIR has another three (3) years to collect the tax through distraint or
levy or by a proceeding in court.

However, in case of a false or fraudulent return with intent to evade tax or of failure
to file a return, the prescriptive period for assessment is ten (10) years counted from
the discovery of the falsity, fraud or omission. Consequently, the BIR has five (5) years
to collect the taxes thereon as instructed by Section 222 (a) and (c) of the NIRC.

In Ishida Philippines Tube Co., Inc. v. CIR (Ishida Case),5 the Court of Tax Appeals (CTA)
held that an assessment is deemed to be made only upon receipt of the FLD by
taxpayer, thus:

The Commissioner or his duly authorized representative is required to

send a notice of the assessment against the taxpayer in order to give the
latter an opportunity to file a protest. And that an assessment is only
deemed made when it has been actually received by the taxpayer.
Clearly, there is a need to inform the taxpayers of the assessment
against them. The receipt of the assessment against them will
commence the entire process in Section 228 of the National Internal
Revenue Code. Without the assessment, the taxpayer cannot be
considered in default so as to serve basis for the issuance of a Warrant
of Distraint and/or Levy. This assessment should be taken to mean
the Final Assessment Notice and the Formal Letter of Demand which
demands payments of the taxpayer's deficiency tax assessment. The
PAN, which was issued against petitioner is only a proposed
assessment, and even if the taxpayer failed to respond thereto, such
failure will at most, only lead to the issuance of the Final Assessment
Notice (FAN) together with the Formal Letter of Demand. It is the FAN
or the Formal Letter of Demand which should be protested and which
shall, absent any protest, attain finality, and which can serve as basis
for the issuance of the Warrant of Distraint and/or Levy. (Emphasis
supplied.)

Clear from the Ishida Case is that the three (3) year period to collect commences upon
the date of receipt of the taxpayer of the FLD.

Applying Section 203 of the NIRC and the Ishida case to OMLI, the 3-year prescriptive
period to collect was from April 29, 2011 to April 29, 2014 and December 2, 2011 to
December 2, 2014 for taxable years 2007 and 2008, respectively. However, the WDL
was served in 2017, which is way beyond the 3-year prescriptive period.

5C.T.A. CASE NO. 7633, February 6, 2009.

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 In BIR Ruling No. DA-(C-134) 432-08) dated November 18, 2008, citing CIR v. Hooker6,
the BIR pronounced that “where the assessment of any internal revenue tax has been
made within the time fixed by law, the tax could be collected by distraint or levy or
by court proceeding, but only if begun within the [five (5) years] after the assessment
of the tax. After the expiration of that period, collection of the tax by any of those
methods would be without the authority of law.”

In Island Quarry and Aggregates Corp. v. CIR7, the CTA ordered the deficiency tax
assessment issued against the taxpayer withdrawn and cancelled as the right of the
CIR to collect has prescribed.

According to the above-cited jurisprudence, after the lapse of the prescriptive period,
the CIR is precluded from collecting the deficiency taxes. Any effort of collection made
by the CIR beyond said period is void and produces no legal effect. Furthermore, the
deficiency tax assessment against the taxpayer shall be cancelled.

Thus, in this case, the WDL against OMLI are null and void and without force and
effect as prescription has already set in against the BIR at the time of its issuance.
Consequently, the cancellation of OMLI’s tax liability assessments for taxable years
2007 and 2008 is warranted.

ii. Five (5) year period to collect taxes

Granting arguendo that the period to collect is five (5) years from receipt of
assessment, the right of the BIR to collect the taxes for 2007 and 2008 has elapsed. The
period to collect the taxes is from April 29, 2011 to April 29, 2016 for taxable year 2007
and December 2, 2011 to December 2, 2016 for taxable year 2008. However, on
February 14, 2017, a WDL was served upon OMLI.

Jurisprudence provides that a WDL issued beyond the prescriptive period imposed
by law is void8 and permits the withdrawal and cancellation of the same.9 As stated
earlier, after the expiration of that period, collection of the tax by any method (i.e.
through distraint and/or levy) would be without the authority of law.

Hence, even assuming that the period to collect is five (5) years, the WDL against
OMLI is void and must be cancelled for having been issued and served beyond the
prescriptive period.

iii. Erroneous payment of deficiency tax liability for taxable year 2007.

6 G.R. No. L-12194, January 24, 1959.

7 C.T.A. Case No. 8710, June 19, 2017.
8 G.R. No. L-18759, February 28, 1967.
9 Fajardo v. CIR, C.T.A. Case No. 4636, May 12, 1993.

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 An “erroneous or illegal tax” is defined as one levied without statutory authority, or
upon property not subject to taxation or by some officer having no authority to levy
the tax, or one which is some other similar respect is illegal.10

In the case at bar, oblivious that the right of the BIR to collect has expired, OMLI in
good faith paid the deficiency VAT and IT in the amount of PhP1,466,051.37 and
PhP2,137,991.59 respectively to the BIR on March 30, 2017. Albeit the voluntary
payment by OMLI, such payment is considered erroneous as prescription has set in at
the time of payment. The BIR acted without authority in accepting the payment from
OMLI despite the lapse of the prescriptive period.

D. The absence of a Letter of Authority (LA) for taxable year 2009 violated OMLI’s right to due
process.

Section 6 of the NIRC is clear that unless authorized by the CIR himself or by his duly
authorized representative, through an LA, an examination of the taxpayer cannot be
undertaken.

Section 6 of the NIRC reads:

SEC. 6. Power of the Commissioner to Make Assessments and Prescribe

Additional Requirements for Tax Administration and Enforcement. –

(A) Examination of Return and Determination of Tax Due. - After a return has
been filed as required under the provisions of this Code, the Commissioner or
his duly authorized representative may authorize the examination of any
taxpayer and the assessment of the correct amount of tax: Provided, however,
That failure to file a return shall not prevent the Commissioner from
authorizing the examination of any taxpayer. xxx (Emphasis supplied.)

A cursory examination of the above Section shows that there must be a grant of authority
before a revenue officer can conduct an assessment. In CIR v. Sony Philippines, Inc. (Sony Case)
11, the Court held that the absence of an LA renders the assessment void, to wit:

Based on Section 13 of the Tax Code, a Letter of Authority or 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. The very provision of the Tax
Code that the CIR relies on is unequivocal with regard to its power to grant
authority to examine and assess a taxpayer.

10 CIR v. Pilipinas Shell Petroleum Corporation, G.R. No. 188497, April 25, 2012, citing Black Law’s Dictionary, Fifth
Edition, p. 486.
11 G.R. No. 178697, November 17, 2010, 635 SCRA 234.

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 SEC. 6. Power of the Commissioner to Make Assessments and Prescribe
Additional Requirements for Tax Administration and Enforcement. —

(A) Examination of Returns and Determination of Tax Due. After a

return has been filed as required under the provisions of this Code,
the Commissioner or his duly authorized representative may
authorize the examination of any taxpayer and the assessment of
the correct amount of tax: Provided, however, That failure to file a
return shall not prevent the Commissioner from authorizing the
examination of any taxpayer . . .

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 an authority, the assessment or examination is a nullity.

The pronouncement in the Sony Case was reiterated in a plethora of cases. In McDonald's
Philippines Realty Corp. v. CIR12, the CTA held:

Notably however, there is no showing that RO Rona B. Marcellano, GS Frances

E. Leonida, and GS Juvy S. Dela Pena, were authorized, by way of a Letter of
Authority to investigate petitioner's books of accounts and other accounting
records.

Correspondingly, pursuant to the Sony case, since RO Rona B. Marcellano had

not been properly authorized to examine petitioner's books of accounts and
other accounting records, the resultant deficiency VAT assessment is a nullity.
Thus, the same must be cancelled and set aside.

In Cebu Mitsumi, Inc. v. CIR13, the CTA said:

In the cases of Sony, De La Salle University, University of Santo Tomas

Hospital, letters of authority were issued prior to the assessment which were
subsequently declared void. In the instant case, no letter of authority was
issued prior to the investigation and assessment. With more reason, the
assessment in the instant case is void having been issued without an LOA.

Lastly in China State Philippines Construction Corp. v. CIR14 and People of the Philippines vs. Edwin
T. So, Raymond R. Lee, Techpoint Computer Corporation15 the CTA reiterated that a deficiency
assessment issued without a valid authority is a nullity.

12 C.T.A. Case No. 8655, June 1, 2016.

13 C.T.A. Case No. 8531, May 21, 2015.
14 C.T.A. Case No. 8522, June 17, 2016.
15 CTA EB Crim. No. 028, March 6, 2010.

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 As can be observed from the narration of facts, no LA was duly received by OMLI prior to
the assessment. Applying the law and the pronouncements of the Courts to the case at hand,
the assessment against OMLI is void for want of a valid authority.

The FLD issued to OMLI indicated that LN No. 057-TRS-09-00-00019 was issued. Assuming
arguendo that an LN, under the BIR’s Tax Reconciliation System (TRS), was indeed issued,
the same is not a substitute to the issuance of an LA. This is confirmed by the Supreme Court
in the recent case of Medicard Philippines, Inc. v. CIR (Medicard Case)16 where it had the
opportunity to distinguish an LN from an LA, in this wise:

The Court cannot convert the LN into the LOA required under the law even if
the same was issued by the CIR himself. Under RR No. 12-2002, LN is issued
to a person found to have underreported sales/receipts per data generated
under the RELIEF system. Upon receipt of the LN, a taxpayer may avail of the
BIR's Voluntary Assessment and Abatement Program. If a taxpayer fails or
refuses to avail of the said program, the BIR may avail of administrative and
criminal remedies, particularly closure, criminal action, or audit and
investigation. Since the law specifically requires an LOA and RMO No. 32-
2005 requires the conversion of the previously issued LN to an LOA, the
absence thereof cannot be simply swept under the rug, as the CIR would
have it. In fact, Revenue Memorandum Circular No. 40-2003 considers an LN
as a notice of audit or investigation only for the purpose of disqualifying the
taxpayer from amending his returns.

The following differences between an LOA and LN are crucial. First, an LOA
addressed to a revenue officer is specifically required under the NIRC before
an examination of a taxpayer may be had while an LN is not found in
the NIRC and is only for the purpose of notifying the taxpayer that a
discrepancy is found based on the BIR's RELIEF System. Second, an LOA is
valid only for 30 days from date of issue while an LN has no such limitation.
Third, an LOA gives the revenue officer only a period of 120 days from receipt
of LOA to conduct his examination of the taxpayer whereas an LN does not
contain such a limitation. Simply put, LN is entirely different and serves a
different purpose than an LOA. Due process demands, as recognized
under RMO No. 32-2005, that after an LN has serve its purpose, the revenue
officer should have properly secured an LOA before proceeding with the
further examination and assessment of the petitioner. Unfortunately, this
was not done in this case. (Emphasis supplied.)

The ruling in the Medicard Case, that an assessment based on an LN alone without an LA is
void, was adopted by the CTA in a number of cases.

16 G.R. No. 222743, April 5, 2017.

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 In CIR v. Farcon Marketing Corporation17, the CTA held:

Based on the foregoing jurisprudential pronouncements, it is clear that a

revenue officer must be clothed with authority before proceeding with an
examination or assessment. Moreover, that authority must be embodied in a
Letter of Authority, and not in the form of a mere notice to the taxpayer.
The CTA in EDS Manufacturing, Inc. v. Commissioner of Internal Revenue18 ruled:

Applying the Supreme Court's ruling in the Medicard case to the present case,
the Memorandum of Assignment issued to Revenue Officer Bravo cannot be
converted into the LOA required under the law even if the same was issued by
respondent. As a consequence, the revenue officers had no authority to
examine petitioner's financial books and records. Even if respondent or the
revenue officers did not examine the accounting books and records of
petitioner, they still had no authority to examine or investigate petitioner in
relation to its taxes. Thus, the assessment issued against petitioner is void.

In Sparkland Realty, Inc. v. CIR19, the CTA said:

Clearly, Revenue Officer Diaz had already conducted an audit on petitioner

without any authority, and only based the audit on the Letter Notice No. 039-
RLF-10-00-00427.

It appears that the issuance of the Letter of Authority was just an afterthought
to cure the lack of authority of the revenue officer conducting the audit on
petitioner's tax liability.

Consequently, the FLD and the FAN are void.

In Catering Professionals, Inc. v. CIR20, the CTA declared:

Considering that no LOA was issued in this case, the deficiency taxes resulting
from the unauthorized examination and assessment of petitioner's tax liability
for taxable year 2010 is a nullity.

At this juncture, it must be emphasized that an invalid assessment bears no

valid fruit. The law imposes a substantive, not merely a formal, requirement.
To proceed heedlessly with tax collection without first establishing a valid
assessment is evidently violative of the cardinal principle in administrative

17 C.T.A. EB Case No. 1306, June 5, 201.

18 C.T.A. Case No. 8830, August 3, 2017.
19 C.T.A. Case No. 8824, November 3, 2017.
20 C.T.A. Case No. 8852, November 28, 2017.

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 investigations: that taxpayers should be able to present their case and adduce
supporting evidence.

Therefore, regardless of whether petitioner timely filed its protest or whether

there was proper service of the FAN, respondent cannot collect the assessed
tax deficiency in the FAN for being null and void.

Lastly, in the recent case of CIR v. Mid-land QC Realty Corporation21, the CTA ruled:

Based on the foregoing jurisprudential pronouncements, before an

examination of the taxpayer may be validly done, it is a legal requirement that
there must first be an LOA issued to the concerned revenue examiners, unless
the petitioner (the Commissioner of Internal Revenue) himself or his duly
authorized representative will conduct such an examination and an LN does
not suffice, simply because an LN is entirely different and serves a different
purpose than an LOA. Without such an LOA, the resulting assessment or
examination is a nullity.

In this case, there is no indication that an LOA was issued against respondent.
The BIR came up with the subject tax assessments only on the basis or pursuant
to an LN, particularly, LN No. 039-TRS-07-00-00120 dated March 15, 2010.
Thus, for lack of an LOA, the said tax assessments are void. (Underscoring
supplied.)

Undoubtedly, the BIR has the power to examine and probe into the records and books of the
taxpayer to determine if there are deficiencies or liabilities. It must be done within the bounds
of the law. In this case, LN No. 057-TRS-0900-00019 dated May 19, 2011 was issued by the BIR
but no LA was ever issued to OMLI. To reiterate, an LN is not a substitute for an LA which
the law clearly requires. But as we have clearly established in this case, the LN issued to OMLI
was never converted to an LA. In the absence of such LA, any assessment issued is a nullity.
The issuance of the FLD without the corresponding LA renders the assessment void.

In connection thereto, the CTA in Fitness by Design, Inc. v. CIR22 held:

Finally, since the subject FAN is void and bears no fruit, it logically follows
that the Warrant of Distraint and Levy subsequently issued to enforce
collection is likewise void.

The spring cannot rise above its source.23 A void assessment bears no valid fruit, hence, the
WDL and WG are likewise void. An invalid assessment cannot give rise to an obligation to

21 C.T.A. EB Case No. 1463, December 15, 2017.

22 C.T.A. Case No. 7160 (Resolution), November 21, 2012.
23 CIR v. Metro Star Superama, Inc., C.T.A. EB CASE NO. 306, September 16, 2008.

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pay deficiency taxes and for the BIR to enforce collection against OMLI through the WDL and
WG.

Based on the above premises, we most respectfully request that the deficiency tax assessments
for taxable years 2007, 2008, and 2009 be considered void for violation of due process. Since
the subject delinquency tax assessment is void, we submit that there is no basis, either in fact
or in law, for the issuance of the WDL and WG. We likewise therefore respectfully request the
WDL and WG, together with the assessments, be cancelled and withdrawn.

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