Recourse against invalid subpoena

TO AID in the speedy conduct of tax investigations, the Commissioner of Internal Revenue and its duly authorized officers are empowered to issue a Subpoena Duces Tecum (SDT) to taxpayers who deliberately refuse or ignore the request of the Bureau of Internal Revenue (BIR) to submit books of accounts and/or other documents and records. In case of non-compliance, the BIR may also invoke the authority of the courts by filing a criminal case against a taxpayer. However, is there any available recourse to the taxpayer, in case the issued SDT does not comply with the prescribed guidelines and procedures?

In Revenue Memorandum Order (RMO) 010-2013, submission of the taxpayer’s books of accounts must be done within fourteen days from the issuance of the SDT. The SDT must also be served on the taxpayer within three working days from the receipt of the revenue officers. Since the date of the issuance of the SDT is the date when it was officially signed by an authorized BIR official, it is very possible that the 14-day period given to the taxpayer to comply with, will be shortened. This is because the 14-day period does not commence from the receipt of the SDT but upon the date of its issuance. What will happen if the taxpayer received the SDT one day before the lapse of the 14-day period? Obviously, he may not be able to comply with it especially if the books of accounts or documents are voluminous. In a situation like this, what are the available remedies? Would the non-submission or incomplete submission of books of accounts and documents be tantamount to failure to obey the SDT, and therefore, subjects the taxpayer to administrative penalties?

Another thing to ponder: what if the revenue officer failed to comply with the three-day period to serve the SDT? Would such an infirmity invalidate it? The existing regulations are not clear on this. The rules only provide administrative liability to revenue officials and employees who failed to follow the guidelines and procedures on the issuance of the SDT.

Administrative rules and regulations are created to enforce the law and to implement its intent. Thus, like all laws, it must always withstand the test of reasonableness and must always be in harmony with the law. The 14-day period to comply with the SDT was put in place to afford the taxpayer a reasonable time to prepare and collate documents and accounting records. While the purpose of the SDT is to compel the taxpayer to submit such documents, the law did not envision impossibility of compliance. Therefore, the BIR must revisit the existing regulations so as to address circumstances like these.

Also, under the RMO, the revenue officer handling the particular case must be present during the designated time, date and place set for the presentation of books of accounts and other accounting records. This is to allow the officer to verify if the documents presented are substantially complete. Failure on the part of the revenue officer to do any of the aforementioned shall subject him to administrative liability. What will happen if the revenue officer does not appear on the date of compliance of SDT? Will this invalidate the SDT? Are there any remedies for the taxpayer who brings all the voluminous records and documents during the date of compliance set in the SDT?

The rules and regulations do not provide an answer. However, in most cases, the taxpayer is required to coordinate with the revenue officer for the submission of documents as the assigned action lawyer will not receive it. Now, this begs the question of whether the taxpayer is non-compliant with the SDT since no documents were received by the action lawyer due to the absence of the revenue officer.

It is worthy to note that in case of non-submission or incomplete submission of the books of accounts and other accounting records, the action lawyer assigned to the case shall request the concerned revenue officer to set a conference within five working days from the date set for compliance with SDT, to determine if there is sufficient evidence for the criminal prosecution of the taxpayer. While the regulations provide for a conference, in practice, even if the taxpayer subsequently submits all the documents to the action lawyer in the presence of the revenue officer, the BIR usually fails, probably due to lack of coordination, monitoring and heavy workload, to note the subsequent compliance of the taxpayer with the SDT. This results in the filing of a complaint with the Office of the Prosecutor.

As the filing of a complaint may result in criminal prosecution of the taxpayer, the BIR is duty-bound to strictly comply with the prescribed guidelines and procedures in the issuance and enforcement of SDT. Like any legal process, SDT must observe not only the substantive due process but also the procedural due process to protect the rights of the taxpayer.

Also, it is interesting to note that in RMO 010-13, the BIR deleted the provision found in RMO 88-2010 which allows the dismissal of the case before the Office of the Prosecutor or the Court upon payment of the penalty of P10,000 and upon presentation of joint certification of the revenue officer and authorized BIR officer on the compliance of SDT. In fact, in the said RMO, the BIR mandated that no prosecuting officer of the BIR shall cause the withdrawal or the dismissal of the case notwithstanding the subsequent submission of the document indicated in the SDT.

With the deletion of the aforementioned provision, will there be any recourse available to the taxpayer in cases of defective or invalid subpoena? Considering that the aforementioned circumstances are very prevalent today, it is highly suggested that the BIR revisit the existing rules and regulation on subpoena to guard not only the right of the government agency but also of the taxpayer. 

Farrah Andres-Neagoe

Let’s Talk Tax

Punongbayan and Araullo