THE COURT of Tax Appeals (CTA) has granted the tax refund claim of Zenorex Marketing Corp. in the amount of P5.37 million representing its deficiency expanded withholding taxes (EWT) and withholding taxes on compensation (WTC) for the taxable year 2007.
In a 27-page decision dated July 10, the CTA Special Second Division said the revenue officers that conducted the audit were not authorized through letters of authority, which violated the firm’s right to due process.
“The authority given to revenue officers to conduct audit and examine taxpayer’s books is a continuing requirement and any gap in authorization will violate the taxpayer’s right to due process,” Associate Justice Jean Marie A. Baccoro-Villena said in the ruling.
The firm is the exclusive Philippine distributor of Sentry Safe products in the country.
The CTA also prohibited the commissioner of internal revenue (CIR) from collecting any taxes from the firm that stemmed from the tax assessment.
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 or a duly assigned representative.
The tribunal said the revenue officers in the case were only authorized through a referral letter and a memorandum of assignment as they pursued the tax audit.
Citing Supreme Court jurisprudence, the CTA said revenue officers must still secure a substitute or amended letter of authority upon the case’s reassignment.
“As both are neither authorized through a letter of authority nor the subordinate official who conferred authority upon them are authorized to do so, their investigation and subsequent assessment of petitioner’s (Zenorex Marketing) tax deficiency could not be sanctioned,” it said. — John Victor D. Ordoñez
