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.
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.