THE Court of Tax Appeals (CTA) granted the appeal of an automobile distribution and wholesale company to set aside the deficiency excise tax of P141.1 million, which the Bureau of Internal Revenue (BIR) required the company to pay for the calendar years 2010, 2011, and 2012.
In a 15-page resolution released on March 2, the court’s third division said that the internal revenue commissioner failed to present a letter of authority and a revenue memorandum order to legally authorize a tax assessment on Formula Sports, Inc. (FSI).
The court cited the country’s tax code and defined a letter of authority as one “given to the appropriate revenue officer assigned to perform assessment functions and empowers said officer to examine the books of account and other accounting records of a taxpayer for the purpose of collecting the correct amount of tax.”
“The Commissioner of Internal Revenue, his representatives, agents, or any person acting on his behalf are enjoined from collecting or taking any further action on the subject deficiency taxes,” the ruling written by CTA Associate Justice Maria Rowena Modesto-San Pedro ordered.
The revenue officers found FSI liable for deficiency excise tax and value-added tax in the amount of P141.1 million in 2016. This was based on the purchase price of the imported vehicles declared by the company to be lower than the purchase price found in its authority to release imported goods.
The petitioner is a domestic corporation engaged in the wholesale and distribution of automobiles. It is also the sole importer and distributor of luxury sports car brand Maserati in the Philippines.
The respondent issued a mission order in 2014 to revenue officers directing them to inspect the automobile distribution company’s importation and sales accounts of automobiles from 2010 to 2012.
The tax court said that because the respondent failed to secure the letter of authority and revenue memorandum order, the assessment was considered void and that the previously issued mission order cannot replace the absent letter, or function in the same way.
“Clearly, there must be a grant of authority before any revenue officer can conduct an examination or assessment,” the court said in its ruling. “Equally important is that the revenue officer so authorized must not go beyond the authority given,” the tax court added. — John Victor D. Ordoñez
