Tax court junks P131-M assessment vs. service provider

By Benjamin Pulta

September 6, 2023, 10:03 pm

MANILA – The Court of Tax Appeals (CTA) en banc has affirmed its earlier decision favoring a private service provider in a PHP131-million tax case.

In its decision dated Aug. 31, the CTA upheld the July 2021 decision of the tax court's first division over PHP131.278 million in alleged deficiency value-added tax (VAT) sought to be collected from LBP Service Corporation in 2010.

LBP is one of the country's largest providers of contract worker services for private and government offices.

The tax court said the revenue officials failed to prove that its investigators were issued Letters of Authority (LoA) instead of just a letter notice (LN) to examine the company's books.

It also said it had failed to validly issue a final assessment notice (FAN) to an authorized recipient from which date would have provided a reckoning period within which the company may appeal the assessment.

"Upon perusal of the records, the Court en banc notes that petitioner (Bureau of Internal Revenue) failed to establish the service of the FAN (final assessment notice)," the court said.

The court said the purported FAN cannot be considered proof of the actual service as it was received by a certain Nhoy Etcobanez and "no proof was adduced to prove the relationship, if any, of the recipient" with the taxpayer.

"There was likewise no testimony given that the server of the notice made any verification on the authority of the such Mr. Etcobanez to receive documents on behalf of respondent (taxpayer)," the court said.

There was also a lack of proper Letter of Authority to revenue officers to examine the papers.

"Taking all of the foregoing into consideration, it now requires emphasis that an invalid assessment bears no fruit," it said. (PNA)