The Court of Tax Appeals (CTA) has stopped the Bureau of Internal Revenue (BIR) from collecting more than P172 million in deficiency taxes from a big bakeshop company due to legal technicality.
(MANILA BULLETIN)
The BIR's Large Taxpayers Service (LTS) said Red Ribbon Bakeshop had under declared its purchases in 2009, thus cutting income and value-added tax payments.
The court's Third Division, however, voided the assessment as the LTS did not follow the procedure prescribed by Revenue Memorandum Order 43-90 on how an audit should be conducted.
The guideline which implemented Section 6 of the Tax Code requires revenue officers to first secure a non-transferable Letter of Authority (LA) to investigate duly signed by the authorized representative of the BIR commissioner before he can look into the books of accounts of a taxpayer.
The Court explained that a division chief of the LTS merely reissued the same LA to a new group of ROs to continue the investigation when the original examiners were pulled out from the case.
The resolution also noted that a division head is not authorized to sign an LA, but the head of the LTS.
"There must be a grant of authority before any RO can conduct investigation. In the absence of such an authority, the assessment is a nullity," said Associate Justice Erlinda Uy who penned the decision.