THE COURT of Tax Appeals (CTA) has canceled the tax deficiencies and compromise penalties totaling P76.39 million of the Bukidnon Second Electric Cooperative, Inc. (BUSECO) for the taxable year 2012 due to the Bureau of Internal Revenue (BIR)’s failure to abide by the due process.
In a 21-page decision dated Nov. 28, the CTA Special Third Division nullified the tax assessment of BUSECO, citing the unauthorized status of BIR tax examiners to assess its compliance with tax laws and verify financial records due to the absence of a letter of authority (LoA).
The CTA emphasized that obtaining a LoA before examination and assessment is a due process requirement.
“[A]n assessment must be preceded by a valid LOA, before the BIR may conduct an investigation of a taxpayer; otherwise, the resulting tax assessment shall be void and ineffectual,” read part of the ruling penned by Associate Justice Corazon G. Ferrer-Flores.
BUSECO argued in its petition before the tax court that it is permanently exempt from income tax under Presidential Decree No. 269 which provides tax incentives to electric cooperatives.
The appellate court, in the same decision, rejected a distinct petition for review submitted by BUSECO concerning its tax deficiencies and compromise penalties amounting to P47.7 million for the taxable year 2014. The court clarified that since the BIR had not filed a final assessment, it had no jurisdiction to rule on the petition directly related to the assessment itself, but rather only on protests raised against the assessment. — Jomel R. Paguian
