By Jun Ramirez
The Court of Tax Appeals (CTA) has dismissed the deficiency tax assessment of more than P1-billion imposed by the Bureau of Internal Revenue (BIR) against an affiliate of SM Corporation.
In a 53-page decision, the court’s Special First Division stated that the assessment was void as it was conducted by revenue officers (ROs) not authorized to audit the books of accounts of Marketing Convergence Inc. (MCI).
According to records, the case was originally handled by a group of examiners from the BIR’s large taxpayers service (LTS) which was later transferred to another set of examiners without changing the letter of authority (LA) issued to the former.
The court said an LA is the authority given to revenue officers to conduct audit as required in the Tax Code with the names of assigned ROs.
The court set aside the position of the BIR that an LA need not be changed in case the original ROs were transferred elsewhere as embodied in Section 17 of the Tax Code.
The BIR added there is no requirement in law that the ROs must be identified in the LA.
But the court said the BIR position was contrary to the decision of the Supreme Court in the Medicard case, that an LA is an authority given to identified ROs to perform audit function.
The P1.05-billion deficiency tax assessment against the petitioner, which is in charge of SM Advantage Card covered income, value-added and expanded withholding taxes for the year 2010, derived from the alleged underdeclaration of sales.