8 October 2021
No. In Commissioner of Internal Revenue v. BASF Philippines, Inc. (CTA En Banc Case No. 2323 (CTA Case No. 9747), August 2, 2021), the Court of Tax Appeals (CTA) En Banc ruled that the authority of revenue officers who conduct a tax audit is vital in the tax assessment process. The tax assessment cannot be considered valid just because the taxpayer actively participated in the tax audit conducted by revenue officers who were not authorized to examine the taxpayer’s accounts.
In this case, the CTA En Banc upheld the ruling of the CTA Division cancelling and setting aside the final assessment notices and the final decision on a disputed assessment issued by the BIR on the ground that the revenue officers were without authority to conduct the tax audit.
The CTA En Banc noted that a Memorandum of Assignment (MOA) had been issued authorizing the new revenue officers to conduct the audit of the taxpayer’s accounts due to the re-assignment or transfer of the original revenue officers to new district offices. The CTA En Banc held that the new revenue officers who conducted the examination of the taxpayer’s records may be deemed authorized to do so without the need for a new Letter of Authority (LOA), if the said letter, notice, or memorandum was signed by the Assistant Commissioner or Head Revenue Executive Assistant of the Large Taxpayers Service. Here, however, the MOA was signed by the Revenue District Officer who had no power to authorize the examination of the taxpayer’s accounts.
The CTA En Banc held that “[e]stoppel cannot be applied in this case to ratify the validity of the assessments made” and “[c]onsidering that due process requirements were not shown to have been fulfilled by the BIR, the assessment notices subject of this case are all null and void.”process requirements were not shown to have been fulfilled by the BIR, the assessment notices subject of this case are all null and void.”
SyCipLaw TIP: Only the revenue officers duly authorized under a LOA may conduct an examination of a taxpayer’s accounts. In case of reassignment or transfer of revenue officers, it is not necessary that a new LOA is issued; it is sufficient that an equivalent document transferring the authority to conduct the tax audit is issued by the Regional Director or, in respect of large taxpayers, the Assistant Commissioner or Head Revenue Executive Assistant of the Large Taxpayers Service. Tax assessments resulting from tax audits conducted by unauthorized revenue officers may be assailed for being null and void, notwithstanding participation by the taxpayer in the audit.
CTA decisions, while persuasive, do not become the law of the land, unlike decisions of the Supreme Court.
For further information, please contact:
Carina C. Laforteza, Tax Department Head,
SyCip Salazar Hernandez & Gatmaitan
cclaforteza@syciplaw.com
