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Tax court denies review of decision voiding P1-B assessment

The Court of Tax Appeals denied for lack of merit the petition for review of the Bureau of Internal Revenue (BIR) over the ruling declaring as void the P1.05-billion tax assessment against Marketing Convergence, Inc. for 2010.

In an 18-page decision dated Dec. 3, the court, sitting en banc, affirmed the January 2019 ruling and July 2019 resolution of its special first division reversing and setting aside the tax assessment against the company for being assessed by revenue officers who lacked the authority to do so.

The court said the grounds raised are “mere restatements” of previous arguments and “already have been exhaustively discussed” in the previous decision.

The court upheld the ruling that the tax assessments are void as the revenue officers (RO) who audited the company’s book of accounts were not authorized through a letter of authority (LoA).

It said that an LoA was issued for the assessment of Marketing Convergence, but was reassigned twice through memorandum of assignment for other revenue officers to continue the audit. The officers assigned in the MoA found the company liable for P1.05 billion in 2010.

“Considering that the original LOA did not reflect or carry the names of the aforementioned ROs to conduct respondent’s audit and assessment pursuant to an LOA, the Special First Division correctly cancelled petitioner’s assessment,” it said. 

The court also opposed the claim of the bureau that a new LoA is unnecessary in reassignment and MoAs would be sufficient pursuant to Revenue Memorandum Order No. 8-2006, saying it has ruled that revenue officers not named in the LoA is ”devoid of authority” to conduct audit investigation.

A new LoA must be issued not merely a memorandum when there is change in revenue officers, it said.

The BIR also said the Supreme Court ruling cited is not applicable to the case due to factual difference.

The court said its division did not err in applying the case where the Supreme Court interpreted Section 6(A) of the Tax Code that a valid grant of authority from the commissioner or his authorized representative is needed for an officer to conduct an assessment. The authority is through an LoA under Section 13 of the Tax Code.

The court also said the RMO No. 43-90 required a new LoA in cases of reassignment of cases to another officer.

“Considering that the FDDA (final decision on disputed assessment) dated February 2016, which was issued pursuant to an examination conducted by ROs who were not authorized to conduct such examination via LOA, the said assessment is void,” it said.

The court also said that it is allowed to resolve issues not raised by the parties, such as the issue on lack of authority of the revenue officers, contrary to the claim of the BIR that it should not have been considered by the division as it was not raised by the company in the administrative level and its original petition.

Marketing Convergence said it disagrees with the claim of the BIR that a new LoA is not required for reassignment and the case cited by the court is applicable to the case.

The BIR filed the petition for review in August 2019 and submitted the case for decision in December that year. The court referred the case to the Philippine Mediation Center-CTA for mediation, but the parties decided not to have their case mediated by the center.

Marketing Convergence filed a motion for suspension in January, saying the parties are exploring the possibility of a compromise agreement, which the bureau did not object to in its comment.

It issued a second motion in July this year to give the parties 30 more days to discuss the settlement. A resolution was then issued asking the bureau to comment. But as of October, the court said the agency failed to file any comment.

The court in November denied the motion saying it is prohibited under the Rules of Civil Procedure and the period to decide the case is about to lapse. The parties failed to submit any compromise agreement before the promulgation date, it said. — Vann Marlo M. Villegas

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