THE Court of Tax Appeals (CTA) affirmed the cancellation of the tax assessment on Autostrada Motore, Inc. worth P341.37 million inclusive of penalties and interest for the fiscal years 2011 to 2013.
In a 15-page decision on July 21 and made public on July 26, the CTA full court said it did not have jurisdiction over the case since the commissioner of internal revenue’s (CIR) motion was filed late.
“Due to this procedural lapse, the amended decision has attained finality insofar as the CIR is concerned,” CTA Associate Justice Maria Rowena Modesto-San Pedro said in the ruling.
“The CIR, therefore, may no longer question the merits of the case before this Court.”
The tribunal noted that even if the motion was timely filed, the revenue officers who conducted the audit of the company’s books of accounting were not authorized through a valid letter of authority (LoA).
The company is the official dealer of Ferrari cars in the Philippines. Its main office is located in Taguig City.
CIR, the petitioner, argued that an LoA was unnecessary to conduct the assessment since the audit was done by his office.
The audit was authorized through a mission order issued by the Bureau of Internal Revenue’s assistant commissioner for large taxpayers service.
The tax court disagreed as it pointed out that an LoA is essential to conduct a tax audit since this is part of a taxpayer’s right to due process.
Under the country’s revenue code, a mission allows revenue officers to conduct surveillance of a taxpayer’s business operation and to verify specific documents to see if a taxpayer complied with tax laws and regulations.
The CTA noted that even the mission order only grants the revenue officers the authority to observe and verify the company’s books of accounting.
It added that the tax assessments were “void and bear no valid fruit and must be slain at sight” since it did not afford the company its right to due process.
“It (LoA) is a jurisdictional requirement of a valid audit and therefore a valid assessment,” said the CTA.
“There has to be a link between the LoA and the revenue officer who will conduct an examination of the taxpayers books of accounts and accounting records.” — John Victor D. Ordoñez