By Jun Ramirez
The Court of Tax Appeals (CTA) has voided the more than P17 million deficiency tax assessment imposed by the Bureau of Internal Revenue (BIR) against an advertising agency due to incorrect audit procedure.
The court’s Third Division ordered the BIR to return the taxes paid by Y and R Philippines of Marajo Tower, Fort Bonifacio Global City, Taguig City covering income, value-added, and withholding taxes for the year 2011.
In a 22-page resolution, the court faulted the taxing agency for sending its preliminary and final assessment notices to wrong address despite prior notice of transfer to new location which was a violation of Section 228 of the Tax Code.
According to the court, instead of sending the Letter of Authority (LA) to said taxpayer for investigation, BIR issued a Letter Notice (LN), a procedure which is not mentioned in the Tax Code.
Under the revenue regulations, LN is just a reminder that a taxpayer has outstanding tax debts based on third party information obtain from his clients.
To make the assessment valid, LN should have been converted into LA.
It also said that BIR had lost its power to collect the taxes as the three-year prescriptive period had already expired as mandated under Section203 of the Tax Code.
It noted that the BIR has been losing many cases in the court not because of “syndicated corruption but due to ineptitude in making the assessment against taxpayers.