Medicard V CIR
Medicard V CIR
Medicard V CIR
COMMISSIONER OF INTERNAL
REVENUE, respondent., G.R. No. 222743. April 5, 2017
FACTS:
MEDICARD is a Health Maintenance Organization (HMO) that provides prepaid health and
medical insurance coverage to its clients. Individuals enrolled in its health care programs pay an
annual membership fee and are entitled to various preventive, diagnostic and curative medical
services provided by duly licensed physicians, specialists and other professional technical staff
participating in the group practice health delivery system at a hospital or clinic owned, operated
or accredited by it.
MEDICARD led its First, Second, and Third Quarterly VAT Returns through Electronic Filing
and Payment System (EFPS) on April 20, 2006, July 25, 2006 and October 20, 2006,
respectively, and its Fourth Quarterly VAT Return on January 25, 2007.
Upon finding some discrepancies between MEDICARD's Income Tax Returns (ITR) and VAT
Returns, the CIR informed MEDICARD and issued a Letter Notice (LN) No. 122-VT-06-00-
00020 dated September 20, 2007. Subsequently, the CIR also issued a Preliminary Assessment
Notice (PAN) against MEDICARD for deficiency VAT. A Memorandum dated December 10,
2007 was likewise issued recommending the issuance of a Formal Assessment Notice (FAN)
against MEDICARD.
MEDICARD appealed the various rulings ordering it to pay deficiency interests and delinquency
interests alleging that the absence of a Letter of Authority (LOA) violated its right to due
process.
Based on the afore-quoted provision, it is clear that unless authorized by the CIR himself or by
his duly authorized representative, through an LOA, an examination of the taxpayer cannot
ordinarily be undertaken. Hence, unless undertaken by the CIR himself or his duly authorized
representatives, other tax agents may not validly conduct any of these kinds of examinations
without prior authority.
9. In case the above discrepancies remained unresolved at the end of the One
Hundred and Twenty (120)-day period, the revenue offcer (RO) assigned to
handle the LN shall recommend the issuance of [LOA] to replace the LN. XXXX
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 contrary to the above quoted provision. Hence,
the CTA's disregard of MEDICARD's right to due process warrant the reversal of the assailed
decision and resolution.