CTA affirms canceled tax assessment on shipping company

THE Court of Tax Appeals (CTA) affirmed the cancellation of the tax assessment on NYK-FILJAPAN Shipping Corp. worth P25.45 million, including interests and penalties for the fiscal year 2007.

In a 16-page decision on July 7 and made public on July 15, the CTA en banc upheld its third division’s ruling, which found that the revenue officers who continued the audit of the company’s accounting books were not authorized through a letter of authority (LoA).

The court also prohibited the commissioner of internal revenue (CIR) or any official acting on his behalf from collecting or acting on the subject deficiency taxes against the company.

“This court has consistently held that a revenue officer tasked to examine a taxpayer’s books must be authorized by a LoA; otherwise, the assessment for deficiency taxes resulting therefrom is void,” CTA Associate Justice Jean Marie A. Bacorro-Villena said in the ruling.

“In view of the above disquisitions and the clear lack of authority of the revenue officers to continue with respondent’s (NYK-FILJAPAN Shipping Corp.) assessment for deficiency taxes, the said assessment issued against the latter is indisputably void,” the court ruled.

Under the country’s tax code, revenue officers assigned to pursue an examination of taxpayers’ deficiency tax liabilities may only be authorized through an LoA issued by a revenue regional director.

The CIR insisted that the memorandums of assignment (MoA) issued were enough to authorize an investigation of the company’s liabilities.

The tribunal pointed out that the absence of an LoA violates the taxpayer’s right to due process.

The petitioner is a private company engaged in shipping services such as general shipping, chartering, and international cargo handling.

Under the Bureau of Internal Revenue’s (BIR) rules, “any reassignment/transfer of cases to another revenue officer shall require the issuance of a new LoA.”

In a separate concurring opinion, Associate Justice Maria Belen M. Ringpis-Liban said it is not necessary for an LoA to be issued in a re-assignment case as long as the authority given to a revenue officer is signed by the CIR or an authorized representative.

She added that the MoAs issued were only signed by the officer-in-charge of the large taxpayer’s regular audit division of the BIR, which did not give the revenue officers valid authority.

“An LoA is not a general authority to any revenue officer,” Ms. Ringpis-Liban said, citing Supreme Court jurisprudence. “It is a special authority granted to a particular revenue officer.” — John Victor D. Ordoñez