THE Court of Tax Appeals (CTA) has ruled against the Bureau of Internal Revenue in a P1.15 billion tax deficiency case from 2009, saying that the assessment against a drug company was made by an unauthorized official.
The CTA Special Third Division, in a Nov. 14 decision, declared null and void the alleged tax deficiency of Central Luzon Drug Corp. after finding that the revenue officer involved “acted without authority.”
According to Section 16 of the Tax Code, a revenue officer (RO) may only perform assessment duties and examine taxpayers pursuant to a Letter of Authority (LOA).
Revenue Memorandum Order (RMO) No. 38-88 also states that an LOA is valid for 120 days and can be revalidated after submission of a Progress Report. A revalidation of a LOA shall be covered by an issuance of a new LOA. RMO No. 43-90, meanwhile, states that the reassignment of case to another RO and revalidation of an expired LOA requires the issuance of a new LOA.
In the case of Central Luzon Drug Corp., the BIR issued an LOA on May 14, 2010 authorizing revenue officers (RO) to assess its taxes for 2009.
However, a Memorandum of Assignment (MOA) pursuant to the previous LOA was issued, authorizing RO III Josa C. Gomez to continue the assessment for tax deficiencies of the corporation for 2009 following the transfer of the previous ROs to another district office.
“Clearly, the requirement of the law was not complied with. The MOA for the continuance of audit signed by the Chief of LT (Large Taxpayers) Regular Audit Division I is certainly not sufficient basis for RO Gomez’s authority to examine petitioner for it cannot in any way be deemed equivalent to a LOA,” the decision read.
“In other words, RO Gomez acted without authority when she conducted the audit of petitioner, hence, the assessment subsequently issued by respondent is null and void,” the decision read.
The CTA also cited previous Supreme Court rulings that highlight the importance of an LOA and the lack of it is tantamount to violation of a taxpayer’s right to due process.
“Let it be stressed that a LOA is the proof that the person/s named therein is/are authorized to conduct the necessary investigation/audit, it is an express grant of authority. Thus, absent the necessary issuance of a new LOA specifically naming the person to whom the case will be reassigned with the corresponding annotation per RMO No. 43-90, there is no authority to conduct the investigation/audit,” the CTA ruled.
The decision was written by Associate Justice Esperanza R. Fabon-Victorino and concurred in by Associate Justice Ma. Belen M. Ringpis-Liban. — Vann Marlo M. Villegas
