Another blooper: CTA voids BIR's P28-M tax collection case due to auditing error

Published June 18, 2021, 12:43 PM

by Jun Ramirez

The Court of Tax Appeals (CTA) has cancelled the Bureau of Internal Revenue’s (BIR) P28-million tax collection case against a Bacolod City-based cargo firm for erroneous audit.

(Photo from BIR Facebook page)

The court’s Second Division stated that the right to due process of Yan An Cargo Corporation was violated when the BIR served it with letter notice (LN), instead of a letter of authority (LA) in collecting the company’s deficiency in income and value-added taxes (VAT).

BIR insiders said this was not the first time that the bureau lost a collection case via the use of LN, citing the landmark decision of the Supreme Court (SC) on the Medicard Philippines vs. BIR case.

The decision penned by Associate Justice Jean Marie Bacorro-Villena stated that Section 6 of the Tax Code requires the bureau to first issue an LA to assess the deficiency taxes before issuing collection notices to concerned taxpayers.

Although LN is not mentioned in the Tax Code, it supposedly makes the BIR’s assessment and collection efforts easy and fast as it is based on computer data.

The resolution said the LN must be converted into an LA before proceeding with the formal assessment. This will then pave the way for the serving of collection and demand letters.

The decision likened the LN to an informal conference between a taxpayer and tax examiner, matching the former’s tax declaration with BIR findings.

Earlier this month, the CTA halted the BIR from collecting more than P512 million in deficiency taxes from a real estate company after it turned out that the investigation on the case was conducted by unauthorized revenue officers.