THE Court of Tax Appeals granted the petition of Watsons Personal Care Store (Philippines), Inc. to cancel its P430.2-million tax assessment for 2010 for being reviewed by unauthorized revenue officers.

In a 27-page decision dated June 11, the court’s first division said the records showed that the revenue officers who conducted the investigation were not authorized through a letter of authority (LoA) to review the company’s accounts records, deeming the assessments void.

“Not having the authority to examine petitioner in the first place, the subject tax assessments are void,” the court ruled.

“Wherefore, in light of the foregoing considerations, the instant Petition for Review is granted. Accordingly, the FLD (formal letter of demand) and the tax assessments dated December 17, 2014…inclusive of penalties and interest, are withdrawn and set aside,” it added.

The court cited jurisprudence that says a letter of authority be issued to authorized representatives before an examination of deficiency tax assessment. If the revenue officer who conducted the examination is not authorized by the said letter, “the assessment is inescapably void.”

It said the letter was issued in 2011 by the Bureau of Internal Revenue (BIR) to examine Watsons records for 2010. However, a memorandum of assignment was issued referring the case to another set of officers to replace those initially assigned.

The 2014 assessment worth P1.5 billion was then issued by the BIR upon recommendation of one of the officers in the memorandum and two others.

The court said a referral memorandum does not give authority to the new set of revenue examiners, noting that a letter of authority validly issued does.

While the issues framed by the parties can be tackled by the appellate court, there are exceptions such as when, in the interest of justice, matters of record have some bearing on issues submitted but were not raised or ignored and questions involving matters of public importance.

“In this case, whether or not the assailed Decision of respondent and the subject tax assessments are valid is a matter of record, and of public importance,” it said.

“In view of the finding that the subject tax assessments are invalid for lack of the requisite LoA to conduct an investigation or examination of the petitioner’s books of accounts and accounting records, it becomes unnecessary to address the other issues and respective arguments raised by the parties,” it added.

Watsons was first assessed by the BIR for deficiency in taxes worth P1.85 billion in the preliminary assessment notice.

In the formal letter of demand in December 2014, the amount was reduced to P1.46 billion and to P430.2 million in the final decision on disputed assessment in November 2015, which was then raised to court after the company’s request for reconsideration was denied by the bureau.

Watsons questioned the findings of the bureau for its assessment for deficiency income tax. It also said that for failure to properly compute its value added tax liability per quarter, it must be declared void.

The expanded withholding tax and withholding tax on compensation assessments “lack a solid mathematical computation” and since the computation was not made on a monthly basis, it was not apprised of which of the expanded withholding tax fell under which month.

The final withholding tax, final withholding value-added tax, and documentary stamp tax are “bereft of factual and/or legal basis,” it claimed.

The BIR maintained that Watsons is liable for the assessed deficiencies.

The decision was penned by Associate Justice Catherine T. Manahan and concurred by Presiding Judge Roman G. Del Rosario. Associate Justice Esperanza R. Fabon-Victorino was on leave — Vann Marlo M. Villegas

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