THE Court of Tax Appeals (CTA) has granted the appeal of technology company Tricom Systems (Philippines), Inc. to cancel and set aside its tax liabilities for 2006 totaling P49.49 million.
In a 24-page decision dated July 7, the court’s special third division said the revenue officers assigned to conduct the tax assessment were not authorized through a Letter of Authority or LoA.
The tax court also prohibited the commissioner of internal revenue (CIR) from enforcing the collection of deficiency taxes assessed against the company.
“Consequently, there exists sufficient legal basis to grant the instant petition and it, therefore, becomes unnecessary to address the remaining arguments raised by petitioner (Tricom Systems, Inc.) in this case,” Associate Justice Erlinda P. Uy said in the ruling.
“Accordingly, the subject tax assessments are inescapably void, and thus, bears no valid fruit.”
The company’s tax liabilities represented deficiencies in income tax, value added tax, expanded withholding tax and working tax credit.
The court noted that the revenue officers were only authorized to conduct the assessment through a memorandum of assignment and a revalidated prior LoA, which it said were not sufficient to grant authority.
The CIR’s failure to issue a separate LoA for the new officials assigned to perform the audit went against the Bureau of Internal Revenue’s own guidelines, the CTA added.
“The memorandum of assignment, referral memorandum, or any equivalent document is not proof of the existence of authority of the substitute or replacement revenue officer,” it said, citing prior jurisprudence.
Under the country’s revenue code, a revenue officer may examine the deficiency tax liabilities of a taxpayer only through an LoA issued by the revenue regional director.
The tribunal noted the practice of reassigning new revenue officers without a separate LoA to continue a deficiency tax assessment or audit violates the taxpayer’s right to due process.
The petitioner is a private company based in Makati City that provides its clients with information technology support services and distributes business communication products. — John Victor D. Ordoñez
