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CTA rules only letter of authority can collect deficiency taxes


By Jun Ramirez

The Bureau of Internal Revenue (BIR) cannot collect deficiency taxes with the use of Tax Verification Notice (TVN) or Referral Memorandum (RM) but only with a Letter of Authority (LA) to investigate taxpayer.



This was stressed by the Court of Tax Appeals (CTA) when it cancelled the more than P7 million deficiency assessments slapped against Penta Technology Inc. of Makati City for the year 2007.

In a 16-page resolution, the court’s Special First Division stated that the assessment was void as it was done by a revenue officer who has no LA but only RM and TVN. A TVN was also issued to examine the tax liabilities of Penta. The RM was issued in lieu of the LA issued to the previous examiner who was pulled out from continuing and finishing the investigation.

Citing the decision of the Supreme Court on the Medicard case, the court said “the assessment was inescapably void due to the absence of an LA.”

“It could not treat the RM and the TVN as an LA required under the law,” said the ruling penned by Associate Justice Cielito Mindaro-Grulla.

Revenue Memorandum Circular No. 43-90 which implemented Section 13 of the Tax Code said an LA shall be issued to the revenue officer before the books of accounts of taxpayer are audited.

It added that a new LA shall be issued in case the examiner is replaced by another.

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