March 25, 1994

REVENUE MEMORANDUM ORDER NO. 37-94

Subject : Revision to RMOs 27-85 and 51-89 regarding procedures on

the preparation, approval and release of assessment notices
and demand letters and the preparation of BIR Form 40.00.

To : Assistant Commissioners, Assessment Service, Collection

Service, Intelligence and Investigation Service, Regional
Directors and others concerned.

1. OBJECTIVES:

a) To revise the existing system of internal control in the preparation,

approval and issuance of demand letters and assessment notices.

b) To revise the existing procedures in the preparation of BIR Form 40.00.

c) To prescribe procedures for the expeditious resolution of protests to

assessments. aisa dc

II. POLICIES:

A. All letters of demand and assessment notices shall now be prepared,

approved and issued by the Assessment Divisions of the Revenue Regions for duly
approved reports of investigation within the jurisdiction of their respective offices,
and in the Intelligence and Investigation Service for reports of the Tax Fraud Division
in the National Office.

B. Pre-assessment notices, demand letters and assessment notices shall be

based on the "Revenue Officers Audit Report (BIR Form 1717) prepared by the
investigating officer and reviewed by the duly designated reviewing offices
(Assessment Divisions in the Revenue Regions for Regional Cases, and the
Intelligence and Investigation Service for Tax Fraud Division cases).
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 C. All letters of protests, requests for reinvestigation and similar
communications shall be filed with or referred to the Assessment Division of the
Revenue Regions or to the Intelligence and Investigation Service, as the case may be,
for proper recording and resolution of the protest.

D. The Assistant Division Chief/Division Chief of Assessment Divisions in

the Regional Offices for regional cases or the Assistant Commissioner, Intelligence
and Investigation Service for Tax Fraud Division cases shall decide whether or not the
protest to an assessment notice in accordance with the provisions of Section 229 and
its implementing regulations, should be given due course and whether the protest
involves a question of fact or of law or both;

a. If involving a question of fact, which fact is available from the

docket, the reviewing office shall resolve the same, otherwise it
shall be referred to the revenue officer who recommended the
deficiency assessment; acd

b. If involving a question of law, the same may be acted upon by the

reviewing office, otherwise, it shall be referred to the Legal
Division in the Regional Offices or to the Appellate Division/Legal
Service in the National Office, as the case may be, for resolution of
the legal issues.

c. If the protest involves both a question of fact and of law, the

question of fact shall first be resolved before the question of law
applying the abovementioned (a and b) criteria.

E. Form 40 (Monthly Summary of Taxes Assessed) and Form 1758

(Authority to Cancel Assessment) and reports on these two forms shall be
accomplished by the Assessment Divisions in the revenue regions and the Intelligence
and Investigation Service in the National Office.

F. BIR Form 40.00 shall be revised to reflect the disputed assessments

separately from the final and executory collectible accounts.

G. The Assessment Division in the Revenue Regions and the Intelligence and
Investigation Service in the National Office shall be responsible for monitoring the
issuance of assessment notices and letters of demand on the cases acted upon by them.

H. The Administrative Division in the Revenue Regions and the Records

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 Division in the National Office shall see to it that all closed cases are transmitted to
their offices for file.

III. PROCEDURES

A. Reports of Investigation —

1. The present procedures on the processing of reports of investigation and

the pre-audit of the tax returns and other activities which give rise to a deficiency
assessment shall remain effective.

2. Dockets of reports of investigation where the deficiency taxes are paid

immediately after investigation but prior to the final approval of the report in
accordance with RMO 5-86, shall include a copy of the receipt of payment.

3. The report of investigation must include a duly accomplished "Revenue

Officers Audit Report (BIR Form 1717)" which shall be the basis for the issuance of a
pre-assessment notice, demand letter and assessment notice as the case may be. The
reviewing office shall also consolidate in the aforementioned form any
findings/corrections made during the review under the "Per Review" column.

B. Approving Offices —

1. The Division Chiefs of the Assessment Divisions in the Revenue Regions

shall approve the assessment notices and demand letters including the report of
investigation, for cases falling within their respective jurisdictions. For Tax Fraud
Division cases, the Assistant Commissioner of the Intelligence and Investigation
Service shall be the approving officer. cdtai

C. Review of Reports of Investigation and Service of Pre-assessment Notices.

—

1. All reports of investigation shall be reviewed by the Assessment Divisions

in the Revenue Regions for regional cases falling within their respective jurisdiction,
and by the Intelligence and Investigation Service for cases falling under the Tax Fraud
Division.

2. The aforementioned reviewing offices, after having reviewed the report of

investigation, shall send a pre-assessment notice to the taxpayer, indicating therein the
basis of the assessment, and a definite time frame within which he may protest the
same if he is not agreeable. If the taxpayer files his protest within the period
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 prescribed in the aforesaid notice, the same reviewing offices shall likewise decide
whether the protest conforms with existing requirements and whether or not to give
due course to the protest. The reviewing office shall then inform the taxpayer in
writing of the result of the resolution of his protest.

If the pre-assessment notice is not protested within the prescribed period, the
reviewing office shall then issue a letter of demand and assessment notice to the
taxpayer.

3. The "Revenue Officers Audit Report (BIR Form 1717)" prepared by the
investigating officer, as reviewed and corrected by the reviewing office, shall be the
basis of the pre-assessment notice, the demand letter and assessment notice.

D. Preparation of Demand Letters and Assessment Notices -

1. The letter of demand and assessment notices shall be prepared, approved

and issued by the reviewing office and shall be signed by the authorized approving
officers mentioned in 11B of this memorandum order.

2. The date of issue and the due date for payment of the deficiency tax (30
days after date of issue) shall be determined giving allowance for the movement of the
docket from the time the letter and notice are prepared, signed by authorized officials
and mailed by the appropriate office. The date of issue should approximate the date of
receipt of the letter and notice by the taxpayer.

3. After the assessment notice and letter of demand are approved by the
approving officers mentioned in 11B of this memorandum order, the original copy of
the assessment notice and letter of demand shall be detached from the docket and
released to the Administrative Divisions in the Revenue Regions or to the Records
Division in the National Office, as the case may be, for mailing to the taxpayer.
Otherwise, the same may be personally served on the taxpayer.

4. The duplicate copy which is attached to the docket shall be stamped with
the actual date of mailing. It shall also be stamped with the words "Carded for posting
in BIR Form 40.00". Details of the deficiency tax assessment shall then be recorded in
cards, showing the name, address and TIN of the taxpayer, taxable period covered by
the assessment, kind of tax, amount of the basic tax, and penalties.

E. Letters of Protest —

1. Letters of protest or request for reinvestigation or reconsideration received

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 in any other office authorized to receive communications shall be referred to the
reviewing offices (Assessment Division for regional cases within the jurisdiction of
their respective offices or to the Intelligence and Investigation Service for Tax Fraud
Division cases) for proper action. cdt

2. Upon receipt of the letter of protest or request for reinvestigation or

reconsideration, the reviewing office shall record such documents and attach the same
to the corresponding docket. It shall also act on the protest following the guidelines
prescribed in 11D of this memorandum order.

F. Preparation of BIR Form 40.00

1. BIR Form 40.00 shall be revised to reflect the disputed assessment

separately from the final and executory collectible accounts.

2. If the reviewing office does not receive a protest within 60 days from the
date of mailing of the assessment notice and letter of demand, the assessment becomes
final and executory. It shall then be posted in BIR Form 40.00 as a "collectible
account".

At the same time, the duplicate copy of the assessment notice shall also be
stamped with the words "Posted in BIR Form 40.00 as a collectible account". This
fact shall also be recorded in the aforementioned taxpayers' carded tax account on file
with the reviewing office.

3. If the assessment is protested by the taxpayer pursuant to Section 229 of

the Tax Code as implemented by Revenue Regulations 12-85, the assessment shall be
recorded in Form 40.00 as a "disputed assessment". This fact shall be recorded on the
duplicate copy of the assessment notice by stamping the words "Posted in BIR Form
40.00 as a disputed assessment". It shall also be recorded in the aforementioned
taxpayers' carded tax accounts on file with the reviewing office.

4. A duly accomplished Form 40.00 shall be furnished to the Information

System Operations Service, Assessment Service, Collection Division, Regional
Director and one copy to be retained by the reviewing office.

G. Preparation of Authority to Cancel Assessment —

1. The Authority to Cancel Assessment (ATCA) shall be issued whenever an

assessment is cancelled or when a previously assessed deficiency tax is reduced as a
result of a reinvestigation or a reconsideration requested by the taxpayer. The ATCA
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 shall be prepared only after the report of reinvestigation has been approved by the
duly authorized approving officers or compromised by appropriate revenue officials.
The ATCA shall be prepared at the same time that the amended notices are prepared
and shall be approved by the Chief of the reviewing office. cdasia

H. Issuance of Termination Letters —

1. The approving officer mentioned in 111B of this memorandum order shall

issue a Termination Letter to the taxpayer in the following cases:

a) Where the deficiency taxes is paid immediately after investigation

and the review yields no discrepancy;

b) Where the deficiency assessment is paid after issuance of the

pre-assessment notice but before issuance of final assessment
notice;

c) Where the deficiency assessment is paid within 30 days from

issuance of assessment notice and letter of demand.

Said Termination Letter shall be mailed to the taxpayer by the Administrative

Division or the Records Division, as the case may be. In all cases, the receipt of
payment and a copy of the Termination Letter shall be attached to the docket.

I. Transmittal of dockets

1. Dockets with findings of "No Discrepancy" or where the assessment is

paid before issuance of Assessment Notices and Letter of Demand, or where the tax
assessment is paid within 30 days from issuance of assessment notice and letter of
demand -

a) These dockets shall be batched separately, each batch with a maximum of

10 dockets, and shall go directly to the Administrative Division of the Revenue
Regions or to the Records Division in the National Office.

2. Dockets with deficiency assessments -

a) Dockets of "collectible accounts" shall be batched, each batch with

a maximum of 10 dockets, and shall be transmitted by the
reviewing office to the Administrative Division or to the Records
Division for microfilming, if warranted, then to the Collection
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 Division for collection enforcement. cdtai

b) For disputed assessments, the dockets may be referred to the

offices mentioned in 11D of this memorandum order. The office to
which it was assigned shall be indicated in Form 40.00 on
"disputed assessment".

3. The dockets in the batch shall be listed in the "Transmittal List of Tax
Dockets" to be prepared in 5 copies. The original copy shall always remain with the
batch until action on all dockets is completed. If any tax case is removed from the
batch for further action, such action shall be indicated in the original and all other
copies still with the batch.

IV. REPEALING CLAUSE

All issuances or portions thereof which are inconsistent herewith are hereby
repealed.

V. EFFECTIVITY

This Revenue Memorandum Order shall take effect immediately.

LIWAYWAY VINZONS-CHATO
Commissioner
Bureau of Internal Revenue

ANNEX A

SN
_________________

NAME DLN NAME DLN

51 76
52 77
53 78
54 79
55 80
56 81
57 82
58 83
59 84

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 60 85
61 86
62 87
63 88
64 89
65 90
66 91
67 92
68 93
69 94
70 95
71 96
72 97
73 98
74 99
75 100

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