THE COURT of Tax Appeals (CTA) affirmed its decision granting the tax refund of gas manufacturer Linde Philippines, Inc. worth P62.4 million.
In a 21-page ruling dated Jan. 5, the court, sitting en banc, said that the Bureau of Internal Revenue (BIR) failed to raise a new matter to reverse its division’s ruling.
“The Court En Banc stands by its ruling that while the issue on want of authority of revenue officer to conduct the audit investigation was not raised by the parties in the proceedings before the Court in Division, nor in the present Petition, the Court En Banc is not precluded from taking cognizance of the same,” the decision read, citing a Supreme Court ruling.
“The Supreme Court already definitively settled such issue. Needless to say, this Court has no other option but to faithfully uphold and apply the same,” it added.
The BIR claimed that the court’s special third division erred in ruling on an issue that was never raised by the company in the pleadings and pre-trial, violating the bureau’s right to due process.
It also said that the conduct of audit investigation and subsequent issuance of the subject assessments were pursuant to a valid letter of authority (LoA) and the continuation of the examination by another revenue officer not named in the LoA “does not invalidate the assessment.” It added that the Final Assessment Notice is valid and the company is not entitled to claim the refund.
The court noted its previous decision, ruling that the deficiency assessments were void because the revenue officers who actually conducted the audit investigation of Linde’s accounts were different from those named in the LoA.
It said that under the Tax Code, the commissioner and his duly authorized representative, or the revenue regional director, may authorize examination of any taxpayer. The revenue regional director is authorized under the Tax Code to issue LoA for examination of taxpayers within the region.
Revenue Memorandum Order No. 43-90 also stated that only the commissioner, deputy commissioner and regional directors are authorized to issue LoAs. Other officials may do so upon prior authorization by the commissioner himself.
The memo also provided that any reassignment or transfer of cases to other officers should require issuance of a new LoA.
The court noted that an LoA was issued in December 2008, but the revenue officers named were different from those who actually conducted the audit. The officers conducted the audit based on a memorandum referral by the officer-in-charge-chief of the Large Taxpayers Audit and Investigation Division I, who is not among the authorized representatives of the commissioner, it said.
It cited a Supreme Court ruling, which said that a deficiency tax assessment is null if the revenue officers who conducted the audit of a taxpayer’s accounts had no authority.
The court also upheld the division’s ruling that the firm proved its entitlement to refund.
“In view of the foregoing, the Court En Banc finds no substantial matter much less compelling reason to disturb the findings of the Court in Division in the Assailed Decision and Resolution,” it said.
Linde in March 2014 sought refund of P62.3 million of alleged erroneously and illegally collected deficiency final withholding tax and value-added tax from October 2006 to September 2007.
The court’s division granted its petition in March 2019 and upheld it in a resolution in November 2019. — Vann Marlo M. Villegas
