07/10/2026
⚖️ CAN THE BIR EXAMINE A TAXABLE YEAR NOT COVERED BY THE LOA?
Suppose your Letter of Authority covers Taxable Year 2024.
During the audit, however, the Revenue Officer begins examining your tax liability for 2023 and eventually proposes a deficiency assessment for that year.
Can the BIR use the same LOA to do that?
As a general rule, NO.
The taxable period stated in the Letter of Authority is not a mere administrative detail. It defines the period that the authorized Revenue Officers may examine.
📌 WHAT DOES THE CURRENT BIR RULE SAY?
Under Revenue Memorandum Order No. 22-2026, the current consolidated BIR Audit Program:
An audit or verification must be strictly limited to the tax types and taxable periods specified in the eLA, Tax Verification Notice, or Mission Order.
If the BIR wants to expand the scope of the examination, the appropriate audit or verification authority must be issued.
In other words:
An authority for Year A does not automatically become an authority to audit Year B.
📌 THE SUPREME COURT HAS ALREADY ADDRESSED THIS
In CIR v. Sony Philippines, Inc., G.R. No. 178697, November 17, 2010, the LOA authorized an examination for 1997 and prior years.
Part of the BIR assessment, however, involved transactions from 1998.
The Supreme Court ruled that the Revenue Officers went beyond the scope of their authority. If the BIR intended to investigate 1998, that period should have been properly covered by the audit authority.
📌 THE RULE WAS REAFFIRMED IN LANCASTER
In CIR v. Lancaster Philippines, Inc., G.R. No. 183408, July 12, 2017, the LOA covered Taxable Year 1998.
But the deficiency income tax assessment involved the taxpayer’s succeeding fiscal year.
The Supreme Court was categorical:
The taxable year covered by the assessment was outside the period specified in the LOA. The assessment was therefore void.
📌 AN IMPORTANT DISTINCTION
This does not mean that the BIR can never look at a document or transaction originating from another period.
For example, information from an earlier or later year may sometimes be relevant to an item being verified for the taxable year properly under audit.
The critical question is different:
Is the BIR merely using information relevant to the authorized year, or is it actually examining and assessing a separate taxable period that is not covered by the audit authority?
That distinction matters.
📌 THIS ALSO DOES NOT MAKE OTHER YEARS IMMUNE FROM AUDIT
The BIR may examine another taxable year when the examination is supported by the proper audit or verification authority, subject to the Tax Code and applicable BIR rules.
The defect arises when an authority covering one taxable period is used as the basis for auditing and assessing another taxable period without the required authority.
💡 WHAT SHOULD A TAXPAYER CHECK?
When you receive an LOA or eLA, compare it carefully with the actual conduct of the audit:
1. What taxable year or period is stated?
2. What tax types are covered?
3. What taxable period is actually being examined?
4. What period is covered by the Notice of Discrepancy, PAN, FLD/FAN, or assessment?
5. If another taxable year is being investigated, what authority covers that year?
If the BIR appears to have exceeded the taxable period authorized, the issue should be raised properly and on time.
Do not ignore the assessment simply because you believe the LOA is defective. Applicable response, protest, and appeal periods must still be carefully observed.
⚖️ BOTTOM LINE
A Letter of Authority does more than notify the taxpayer of an audit.
It also defines the authority granted to the Revenue Officers conducting the examination.
If the audit authority covers one taxable year, the BIR cannot simply use it to audit and assess a different taxable year without the appropriate authority covering that period.
In a BIR assessment case, always compare:
PERIOD AUTHORIZED
vs.
PERIOD ACTUALLY AUDITED
vs.
PERIOD ACTUALLY ASSESSED
A mismatch can be legally significant.
Official Sources:
Bureau of Internal Revenue, Revenue Memorandum Order No. 22-2026
Supreme Court, Commissioner of Internal Revenue v. Sony Philippines, Inc., G.R. No. 178697, November 17, 2010
Supreme Court, Commissioner of Internal Revenue v. Lancaster Philippines, Inc., G.R. No. 183408, July 12, 2017
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