In a September 2, 2020 ruling, the Third Division of the CTA “annulled, cancelled and set aside” the P286,445,331.49 tax deficiency demanded by the BIR from the Gokongwei-woned Robinsons Toys, Inc., which runs 43 “Toys R Us” branches in the country. The tax assessment covers unpaid income tax, value added tax (VAT), extended withholding tax (EWT), withholding tax on compensation (WTC), final tax (FT), and documentary stamp tax (DST) in Robinsons Toys’s 2009 book of accounts.
The ruling was penned by Associate Justice Ma. Belen M. Ringpis-Liban and concurred by Associate Justices Erlinda Uy and Maria Rowena Modesto San Pedro.
The CTA said the BIR agents did not have an electronic letter of authority (eLOA) to support their audit investigation of Robinsons Toys which rendered void the BIR’s preliminary assessment notice (PAN) and formal letter of demand (FLD) issued in 2014 and the final decision on disputed assessment (FDDA) in 2015.
Under Revenue Memorandum Circular No. 69-10, taxpayers with manually prepared LOAs shall not entertain any Revenue Officer in any audit for taxable year 2009. THE CTA said the BIR did not show any proof that it retrieved and replaced the manual LOA with an eLOA.
“Not having the requisite eLOA to continue the examination of Petitioner’s records in the first place, the subject tax assessments issued by the BIR are inescapably void,” the CTA said.
The CTA also said the BIR assessment was void because Robinsons Toys dues were “indefinite and subject to modification” and there was no final due date on settlement.
“A void assessment bears no valid fruit. Such being the case, the subject tax assessments cannot be enforced against (Robinsons Toys). It then becomes unnecessary to address the issue or arguments raised by the parties,” CTA said.
The BIR maintained that its tax assessments were legal and its LOA issued is valid. The BIR also noted that Robinsons Toys acts during the audit and investigation constituted an “admission and further ratify the validity of the assessments.”
“Petitioner keenly participated in the audit and investigation. It even submitted documents to rebut the findings in the Preliminary Assessment Notice. 15. Further, petitioner executed several waivers. If petitioner truly believed that assessment proceedings was void for lack of electronic Letter of Authority, they should not have entertained the Revenue Officers and immediately assert their right. But, none was made,” BIR said.
“Active participation in the audit proceedings and execution of several waivers are tantamount to assent to the audit proceedings and further ratified the validity of the Letter of Authority,” it added.