By Jun Ramirez
The Court of Tax Appeals (CTA) has exempted a businesswoman from Mindanao from paying income and value-added taxes as the examiners of the Bureau of Internal Revenue (BIR) did not follow the audit guideline.
The court en banc upheld the decision of one of its divisions clearing Admorlina Fontejon, proprietress of M&A Trucking Services of Cagayan de Oro City of the responsibility of paying the said taxes.
The full court said the BIR did not issue Letter of Authority (LA) to Ms. Fontejon as required under the Tax Code and Revenue Memorandum Order 32-2005 which implemented the law.
The court rejected the stand of the BIR that the issuance of Letter Notice (LN) was sufficient authority to assess the tax liabilities of the taxpayer.
The petitioner said the issuance of an LA was unnecessary to confirm the validity of the assessment as the LN had already reviewed and audited its summary list of purchases and sales showing big discrepancies.
LN is based on third party information generated by the BIR’s computer system matching the taxpayer’s sales and purchases/expenses.
The en banc decision did not mention the amount of the alleged deficiency taxes incurred in 2010.
The court explained that the LN should had been converted into an LA to proceed with further assessment, stressing that the former is served to taxpayers to disqualify them from amending the tax declarations.
“After the LN has served its purpose the revenue officer should have properly secured an LA (from his regional director) before proceeding with further assessment of the taxpayer,” the court stated.
In a 16-page decision, the court also cited the decision of the Supreme Court that invalidated the BIR’s multi-million-peso deficiency tax assessment against Medicard Philippines which was not served with LA, but only LN.