Certificate Authorizing Registration (CAR)

I am the third owner of a house and lot (purchased middle of the year). CTC is authentic of Owner2(I have the original copy it was also verified to the Register of Deeds). Capital Gain Tax was paid and applying for BIR Certificate Authorizing Registration (CAR).
Together with the application of the CAR we submitted a certified true copy of the old CAR (sales between Owner1 to Owner2) which we requested from the local Municipal office as Owner2 cannot provide any copy.

BIR hold our CAR application they said they cannot process the papers because they cannot find a record of the old CAR between Owner1 to Owner2. BIR also mentioned that the old CAR (certified true copy from the local municipal) was somewhat fake because they do not know the signatory and they do not have any record.
BIR won’t allow our application to be process until Owner2 prove that the old CAR is valid, if its not valid Owner2 needs to pay the Capital Gain Tax plus interest and charges fee (sale of Owner1 to Owner2) and provide explanation how did they transfer the Land Title to their name using the old CAR.

I talked to Owner2 they insist that all their transaction was authentic and they do not want to validate anything to BIR.

I Hope anyone with knowledge can provide advice/advise what to do regarding this matter. Also is BIR action in holding our application for CAR valid?

Nagtataka ako kung paano nalipat ang titulo from owner1 to owner2 if there was no valid CAR? Kasi if the old CAR from owner1 to owner2 is NOT ON FILE AT BIR, probably you can ask and get a copy from Registry of Deeds (ROD) a copy and they should have a copy as one required document to register the lot to the new owner. Also, ROD should have a copy of the Deed of Absolute Sale from owner1 to owner2 as another required document for them to transfer the property to a new owner, so ask and get a copy from them. I understand that BIR STAMPS THE CAR ON THE TRANSFER DOCUMENT OF A LOT (Deed of Absolute Sale, Deed of Donation, Deed of Assignment and Transfer of Right, Deed of Extra-Judicial Settlement of Easte, etc.) THAT INVOLVES TAX PAYMENT. Good luck!

Note: I am not a lawyer, but just an ordinary person trying to share my opinion, ideas and experience that might be of help in your problem.