THE Court of Tax Appeals (CTA) ordered the Bureau of Internal Revenue (BIR) to refund or issue a tax credit certificate to industrial gas supplier Linde Philippines, Inc. over an erroneous tax deficiency amounting to P62.4 million.
In a 26-page decision on March 28, the CTA special third division granted the petition of Linde Philippines after ruling that the assessment for its alleged final withholding tax and value-added tax deficiencies for the fiscal year ending in September 2007, which the company paid, is invalid as it was assessed by revenue officers who were not authorized by a Letter of Authority (LoA).
The CTA found that an LoA was issued to certain officers to assess Linde Philippines but officers not named in the LoA conducted and recommended the issuance of assessment notices to the taxpayer.
“Not having the authority to conduct audit of petitioner through a valid LoA, the resulting assessment in the PAN (preliminary assessment notice) and FAN (final assessment notice), are deemed void,” the CTA ruled.
The CTA also noted the significance of an LoA, citing a previous Supreme Court ruling.
“It bears stressing that the authority of BIR examiners to conduct audit investigation goes into the validity of an assessment; thus, any assessment arising from the conduct of audit examination of a taxpayer’s books of account by a BIR examiner who is not duly authorized to do so is a complete nullity. A void assessment bears no valid fruit,” the CTA said.
The court also said the revenue officers who assessed Linde Philippines were authorized through a Memorandum Referral and not an LoA. “Without a validly issued LoA, the resulting assessment or examination conducted is a nullity.
According to the Tax Code, the Commissioner or his duly authorized representative may authorize the examination of a taxpayer.
Under the Revenue Memorandum Order No. 43-90, all audits/investigation should be conducted under a LoA. In case of any re-assignment or transfer to another revenue officer, a new LoA should be issued.
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
