The Court of Tax Appeals (CTA) has voided the P180 million deficiency tax assessment by the Bureau of Internal Revenue (BIR) against a buy-and-sale company due to a defective procedure in examining the firm's financial statements.
The court en banc affirmed the earlier decision of one of its divisions that Golden Brew Marketing of Quezon City was not liable to pay the tax as the audit was conducted by unauthorized revenue officers (ROs)
Court records showed a division chief of the bureau's large taxpayers service (LTS) issued a memorandum of assignment (MOA) to a group of ROs to continue the examination of the books of accounts of the firm after the original ROs were transferred elsewhere.
The 15-page decision stated that a division chief is not one of those authorized to order the audit, but the head of the service as stipulated under Sections 6, 10 and 13 of the Tax Code.
It said the action of a division head was invalid as he has no authority to order the audit.
What should have been done, it said, was for the division chief to ask his superior to issue another Letter of Authority (LA) to continue the audit following the reassignment of the original ROs who have the LA.
"The practice of transferring ROs who have the original LA and substituting them with new examiners without LA is in effect usurpation of the authority of the revenue commissioner, or his duly authorized representatives," said Associate Justice Marian Ivy F. Reyes-Fajardo who penned the 15-page verdict.
The deficiency tax assessment covered income value-added, expanded withholding and documentary stamp taxes for 2010.