MANILA – The Court of Tax Appeals (CTA) has ruled in favor of two companies challenging a total of PHP5 billion in tax assessments against them.
The CTA en banc in the two separate cases ruled that the revenue officers (ROs) who recommended the assessment against Robinsons Convenience Stores Inc. and Watsons Personal Care Stores Inc. had not been appropriately authorized with valid letters of authority (LoA) at the time.
A 13-page decision written by Associate Justice Catherine Manahan dated May 13 affirmed its earlier ruling of June 30, 2020 in favor of Robinsons Convenience Stores Inc. which had challenged a PHP3.5-billion tax assessment against it.
The tax court ruling denied the commissioner of internal revenue's appeal, citing among others that the revenue officers (ROs) who recommended the issuance of the tax assessment against the company for tax years 2009 and 2010 were not the same ones given a letter of authority (LoA) to examine the company's books of accounts and other accounting records.
The assessment against the company amounted to PHP3.507 billion in deficiency income taxes, value-added tax (VAT), and withholding tax on compensation.
However, the court said a different set of ROs namely Reynante Martinez, Rosario Arriola, Carolyn Mendoza, Sheila Samaniego, and Rolando Balbido were not validly authorized by a new LoA when they exercised the assessment functions.
"The lack of authority of ROs is tantamount to the absence of an LoA itself which results to a void assessment. Being a void assessment, the same bears no fruit," it said.
"It has been the hornbook doctrine that any tax examination conducted in violation of the taxpayer's right to due process is inescapably void since the absence of an LoA is one such index of violation of due process," the tax court added.
In the second case, the CTA en banc in a 25-page decision written by Associate Justice Erlinda Uy ruled in favor of Watsons.
A formal letter of demand had been issued by the Bureau of Internal Revenue against the company on Dec. 17, 2014 for deficiency taxes for the year 2010 amounting to PHP1.458 billion.
The BIR in a final decision on disputed assessment (FDDA) on Nov. 3, 2015 reduced the assessment to PHP430 million.
Watsons then filed a petition before the CTA on March 18, 2016 questioning the assessment.
The court said an LoA had been issued on Sept. 19, 2011 by the BIR authorizing revenue officers namely Meliza Wepee, Reynoso Bravo, William Sundiam, Miguel Sulit, Maribel Serafica, and Wilfredo Reyes to examine the company's books.
On Feb. 25, 2013, a memorandum of assignment (MOA) was issued by the Regular Large Taxpayer Audit Division of the BIR referring the case to revenue officers Jennifer Almedilla and Marivic Bautista for the continuation of the audit and investigation to replace the previously assigned ROs who resigned, retired, or were transferred to another BIR district.
The BIR claims it may validly reassign a case to another issuance of a MoA to continue an audit examination.
Ruling for the company, the tax court said a MoA "is not sufficient to grant revenue officers the authority to conduct audit investigations" adding "nowhere (in revenue regulations) explicitly dispense with the requirement for the issuance of a new LoA in cases of reassignment of ROs".
In case of reassignment or transfer of cases to another revenue officer, "it is mandatory that a new LoA be issued", the court said. (PNA)
