December 26, 2019 | 10:21 pm [ bworldonline.com ]
BW FILE PHOTO
THE Court of Tax Appeals (CTA) denied for lack of merit an appeal of the Bureau of Internal Revenue (BIR) seeking to overturn the cancellation of the P1.63-billion deficiency tax assessment against Metro Rail Transit Corp. (MRTC).
The BIR filed the motion for reconsideration against the amended decision on Oct. 2, which cancelled the tax liabilities assessment for 2007 due to a void Letter of Authority (LoA) for revenue officers (RO) to assess the company.
It said in its motion for reconsideration that the issue on the authority was raised only by MRTC in its supplemental motion for partial reconsideration, claiming that it should not be allowed to raise an issue that has not been raised “at the administrative forum, nor during the pretrial of the present case.”
In a five-page resolution on Dec. 4, the court’s special second division, the court, however, said it finds the arguments of the BIR “untenable.”
“Section 1, Rule 14 of the Revised Rules of the Court of Tax Appeals, as amended, provides that this Court may not limit itself to the issues stipulated by the parties but may also rule upon related issues necessary to achieve an orderly disposition of the case,” according to the ruling.
It also cited a Supreme Court decision which affirmed the authority of the CTA to settle issues on scope of authority of revenue authorities in conducting an audit although it was not raised by the parties in pleadings and memoranda.
The court also noted lack of authority of ROs to assess through a valid LoA puts into question the validity of the assessment. It said that the lack of an LoA meant the nullity of the assessment.
“Be it noted that in the absence of such an authority, the assessment or examination is a nullity. An invalid assessment bears no valid fruit. The law imposes a substantive, not merely a formal requirement,” the court said.
“To proceed heedlessly with tax collection without first establishing a valid assessment is evidently violative of the cardinal principle in administrative investigations: that taxpayers should be able to present their case and adduce supporting evidence,” it added.
The court also rejected the claim of the BIR that a referral memorandum is sufficient to authorize ROs to continue the audit of a taxpayer.
It cited revenue Memorandum Order No. 29-07 which said that an RO can conduct examination of a taxpayer through an LoA issued by the regional director or by that assistant commissioner/head revenue executive assistants.
For re-assignment, a new LoA is not needed, provided that the letter or notice or memorandum for the re-assignment was signed by the Assistant Commissioner/Head Revenue Executive Assistants of the Large Taxpayers Service.
In the case, however, the referral memorandum was signed by the chief of the Large Taxpayers Audit and Investigation Division I, which is not sufficient to authorize an RO to continue the investigation.
“Indeed, taxes are the lifeblood of government and should be collected without hindrance. Yet, the collection of taxes should be exercised reasonably and in accordance with the prescribed procedure,” the court said.
Associate Justice Catherine T. Manahan wrote decision which was concurred in by Associate Justice Juanito C. Castañeda. — Vann Marlo M. Villegas
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