CTA grants tax refund request from real estate leasing company

THE Court of Tax Appeals (CTA) has upheld Basic Housing Solutions, Inc.’s appeal to discharge and discharge its income tax debts for the year 2014 worth $21.41 million pesos, including interest.

In a 17-page decision dated June 28 and made public on July 1, the CTA’s Second Special Chamber barred the Inland Revenue Commissioner (CIR) from collecting the company’s 2014 tax assessment.

“In this case, no letter of authorization (LoA) has been issued for the review of the books of accounts and other accounting documents of the applicant (Basic Housing Solutions)”, according to the decision written by Associate Judge CTA Marie A Bacorro-Villena.

The petitioner is a national company engaged in the improvement, development and rental of real estate properties.

The court noted that only a memorandum of assignment (MoA) was issued by a tax district official to audit the company’s books of account, which is not a valid substitute for a LoA.

He added that the Ministry of Agriculture only gave an opinion and was not signed or issued by the CIR, which does not grant designated revenue officers the authority to conduct the audit.

“However, notice of the fact of reassignment and transfer of cases is one thing; proof of the existence of the authority to conduct a review and assessment is another matter,” the court said, citing previous case law.

He ruled that the assigned revenue officers were not authorized to perform the audit due to the absence of the LoA.

Under the country’s tax code, only the CIR or its duly authorized representative can authorize a review of a taxpayer’s tax debts. Tax officials can only perform audits and assessments through an authorization letter issued by the CIR.

The CIR represented by the Batangas Regional Director, Maridur V. Rosario, argued that the tax assessments were presumed correct and made in good faith and that the taxpayer had to prove otherwise.

“Well entrenched are the principles that, in the absence of such authority, the valuation or review is void and a void valuation 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 address the other issues raised as their resolution could no longer change the outcome of the case.” — John Victor D. Ordonez