THE Court of Tax Appeals (CTA) has granted the appeal of Basic Housing Solutions, Inc. to cancel and set aside its income tax liabilities for the year 2014 worth P21.41 million inclusive of interest.
In a 17-page decision on June 28 and made public on July 1, the CTA Special Second Division prohibited the commissioner of internal revenue (CIR) from collecting the company’s 2014 tax assessment.
“In this case, no letter of authority (LoA) was issued for the examination of petitioner’s (Basic Housing Solutions) books of accounts and other accounting records,” according to the ruling penned by CTA Associate Justice Marie A. Bacorro-Villena.
The petitioner is a domestic corporation engaged in the business of improving, developing, and leasing real estate properties.
The court noted that only a memorandum of the assignment (MoA) was issued by a revenue district officer to conduct an audit of the company’s books of accounting, which is not a valid substitute for an LoA.
It added that the MoA only gave notice and was not signed or issued by the CIR, which does not grant the assigned revenue officers authority to conduct the audit.
“However, a notice of the fact of reassignment and transfer of cases is one thing; proof of the existence of authority to conduct an examination and assessment is, another thing,” the court said, citing prior jurisprudence.
It ruled that the revenue officers assigned were not authorized to conduct the audit based on the absence of the LoA.
Under the country’s revenue code, only the CIR or his duly authorized representative may authorize an examination of a taxpayer’s tax liabilities. Revenue officers can only perform audits and assessments through a letter of authority issued by the CIR.
The CIR represented by Batangas Regional Director Maridur V. Rosario argued that the tax assessments were presumed correct and made in good faith and that the taxpayer has to prove otherwise.
“Well-entrenched are the principles that in the absence of such an authority, the assessment or examination is a nullity and a void assessment bears no fruit,” the tax court said.
“With the foregoing disquisition, due to the invalidity of the assessment against the petitioner, the court finds it unnecessary to tackle the other issues raised as their resolution could no longer change the outcome of the case.” — John Victor D. Ordoñez