The Court of Tax Appeals (CTA) has nullified the closure order issued by the Bureau of Internal Revenue (BIR) against a software company for its failure to apply the appropriate procedure in implementing its "Oplan Kandado" program.

In a 28-page decision, the court's third division stated that the constitutional due process right of iScale Solutions, Inc. of Paseo de Roxas, Makati City was violated when it was served with a 48-hour notice and a five-day value-added tax (VAT) notice to padlock the firm.

The BIR Makati regional office handed down the notices in connection with the company's alleged failure to issue invoices and receipts to its clients and to reflect the taxable sales for 2016.

However, the CTA said the notices neither detailed how the VAT deficiency was incurred, nor computed, as required under the Tax Code.

"No preliminary and final assessment notices were issued in this case," the resolution added.

The decision penned by Associate Justice Ma. Belen M. Ringpis-Liban said that the issuance of a formal assessment is a substantial prerequisite for the collection of taxes.

The court also noted that no mission order was issued when revenue officers conducted surveillance operations against the software company.

It said pertinent provisions of the Tax Code, particularly Section Nos. 113 and 114, require the issuance of a mission order during surveillance, or apprehension activities.

Oplan Kandado (meaning padlock) is one of the major enforcement activities of the bureau to enhance tax compliance.

For the first five months of the year, the agency padlocked more than 200 commercial establishments nationwide, but many were allowed to resume operations after paying almost P1 billion in accumulated deficiency taxes.