LIFEBANK FOUNDATION, INC. v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES Court ofTax Appeals QUEZON CITY Third Division LIFEBANK FOUNDATION, INC., CTA CASE NO. 8836 Petitioner, Members: Bautista, Chairperson -versus- Fabon-Victorino, and Ringpis-Liban, fl. COMMISSIONER OF INTERNAL Pro1nulgated: REVENUE, Respondent. """"---- /!.' 17 q ........ X ---------------------------------------------------------------------------------------- X DECISION BAUTISTA, J: This is a Petition for Review1 filed on June 16, 2014, pursuant to Section 7(a)(1)2 of Republic Act ("RA") No. 11253, as amended, 1n relation to Section 2284 of the 1997 National Internal Revenue Code5, as amended ("1997 NIRC"), praying that judgment be rendered:6 1 Recorris, CTA Case No. 8836, Vol. 1, Petitio11jor Review ("PFR"), pp. 6-96, with annexes. 2 SEC. 7. Jurisdiction .- The CTA sh all exercise: a . Exclusive appellate jurisdiction to revie w by appeal, as h erein provided : 1. Decisions of the Commissioner of Internal Revenue in cases involving disputed assessmen ts, refunds of internal revenue laxes, fees or other ch arges, penalties in relation thereto, or other matters arising under the National Internal Revenue Code or olher laws administered by U1e Bureau of Internal Revenue; 3 An Act Crea tin g the Cou rt of Tax Appea ls, as amended. 4 SEC. 228. Protes ting ofAssessment. - XXX XXX XXX If lhe prolest is de nied in whole or in parl, or is nol acled upon within one hundred eighty (180) days from submission of docum e nts, the taxpayer adversely affected by lhe decision or inaction may appea l lo the Court of Tax Appeals within thirty (30) days from receipl of said d ecision, or from lapse of the one hundred eighty (180)-day period; otherwise, the d ecision shall become final, executory and demandable. s Republic Act No. 8424, January 1, 1998. 6 Records, Vol. 1, PFR, Prayer, pp. 29-30.

DECISION CTA CASE NO. 8836 Page 2of17 1. Declaring the Final Notice Before Seizure ("Final Notice") void for lack of factual and legal basis; 2. Declaring petitioner not liable for alleged deficiency income tax ("IT"), value-added tax ("VAT"), and administrative penalties for taxable year 2009 ("TY 2009") in the aggregate amount of Php282,055,951.22, inclusive of interest and penalties; 3. Ordering the said deficiency assessments withdrawn and cancelled; and 4. Other reliefs just and equitable under the premises. The Parties7 Petitioner Lifebank Foundation, Inc. is a corporation organized and existing under the laws of the Philippines, with registered address at Gov. Fermin Caram St., Brgy. Ma. Clara, Iloilo City.s It is a non-stock and non-profit corporation engaged in the creation and support of initiatives that advance comprehensive sustainable development in rural areas, such as integrated social services and micro-financing activities.9 Respondent is the duly appointed Commissioner of Internal Revenue ("CIR")1� who is tasked to assess and collect all national internal revenue taxes, fees, and charges; and to enforce all forfeitures, penalties, and fines connected therewith. He holds office at the Bureau of Internal Revenue ("BIR") National Office Building, Agham Road, Diliman, Quezon City. The Facts On July 18, 2005, Revenue Region No. 11 of the BIR issued Ruling No. 021-05 ("Ruling") confirming petitioner's exemption from IT on amounts received by it as such association; and therefore, need not file an IT return for the same.ll 7 Records, Vol. 1, Joint Stipulation of Facts and Issues ("JSFI"), pars. 1-3, p. 401. 8 Id., Exhibit "P-3," BIR Certificate of Registration, p. 455. 9 Id., Exhibit "P-1," SEC Certificate of Registration, Annex: Amended Articles of Incorporation, p. 448. �1 Formerly her Honorable CIR Kim S. Jacinto-Henares, now his Honorable CIR Ceasar R. Dulay. n Records, Vol. 1, JSFI, par. 4, p. 402. I

DECISION CTA CASE NO. 8836 Page 3 of17 On October 18, 2010, petitioner received Letter of Authority ("LOA") No. 074-2010-0000023312 dated October 15, 2010 issued by Regional Director Glen A. Geraldina authorizing Revenue Officers ("ROs") Princess Rae Dy and Cecil Rey Panelo, and Group Supervisor ("GS") Marichu Gloria Espinosa to examine petitioner's books of accounts and other financial records for all internal revenue taxes for TY 2009.13 On September 8, 2011, a Memorandum of Assignment14 was issued by Revenue District Officer Nelia A. Demalata ("RDO Demalata") to RO Joenifer S. Jolito ("RO Jolito") and RO Revina D. Gascon ("RO Gascon"), and GS Cecil Rey F. Panelo ("GS Panelo"), authorizing the latter to continue the audit and investigation of petitioner's books of accounts due to the reassignment of previous ROs named in the LOA. Thereafter, on February 7, 2012, petitioner received a Notice of Informal Conference15 ("NIC") dated February 6, 2012 issued by RDO Demalata of RDO No. 74, proposing to assess petitioner deficiency IT, VAT, WTC, EWT, DST, Final Tax and compromise penalties in the aggregate amount of Php308,549,407.98.16 On April3, 2012, petitioner filed its reply to the NIC through a letter17 dated March 31, 2012.18 The arguments raised therein were found to be without bases in a letter19 dated June 8, 2012 issued by RDO Demalata. On July 2, 2013, petitioner received a Preliminary Assessment Notice20 ("PAN") dated February 12, 2013 from Regional Director Romulo L. Aguila, Jr. ("RD Aguila"), informing petitioner that it has deficiency IT, VAT and suggested compromise penalties in the 12 BIR Records, Exhibits "P-7" and "R-2," Letter of Authority ("LOA"), p. 9. 13 Records, Vol. 1, JSFI, par. 5, p. 402. 14 BIR Records, Exhibit "R-1," Memorandum of Assignment, p. 56. 15 Id., Exhibits "P-8" and "R-6," Notice of Informal Conference ("NIC"), pp. 112-148. 16 Records, Vol. 1, JSFI, par. 6, p. 402. 17 Id., Vol. 2, Exhibit "P-8.1," Reply to the NIC, pp. 521-523. 18 Id., Vol. 1, JSFI, par. 7, p. 402. 19 BIR Records, Exhibit "R-8," Letter dated June 8, 2012, pp. 188-190. 20 Records, Vol. 2, Exhibit "P-9," Preliminan; Assessment Notice ("PAN"), pp. 524-525; BIR Records, Exhibit "R-10," PAN, pp. 300-305.

DECISION CTA CASE NO. 8836 Page4 of17 aggregate amount of Php274,687,894.25, inclusive of interest and compromise penalty.21 Petitioner filed its reply to the PAN22 through a letter dated July 9, 2013 ("Reply to PAN") on July 16, 2013, disputing the proposed assessments set forth therein.23 On August 2, 2013, petitioner received a Formal Letter of Demand with attached Final Assessment Notices24 ("FLD/FAN") dated April 25, 2013 from the same RD Aguila, assessing petitioner for supposed deficiency IT and VAT in the aggregate amount of Php282,055,951.22, inclusive of interest, compromise and other administrative penalties.2s Thereafter, a Memorandum of Assignment26 dated August 30, 2013 ("August 30, 2013 Memorandum") was issued by RDO Demalata of RDO No. 74 to RO Jolito, RO Gascon, and GS Panelo, referring the case for reinvestigation.27 This was received by petitioner on September 5, 2013.28 On January 16, 2014, petitioner received a Final Notice29 dated January 14, 2014 from OIC-Revenue District Officer Luis A. Alberto, Jr. ("OIC-RDO Alberto") of RDO No. 74 with an assessment for deficiency IT in the amount of Php146,185,993.46, deficiency VAT of Php135,789,957.76, and compromise penalty of Php80,000.00.30 On February 20, 2014, petitioner filed its protest31 to the Final Notice with RDO No. 74, addressed to RD Aguila and OIC-RDO Alberto, via registered mail.32 21 Records, Vol. 1, JSFI, par. 8, p. 402. 22 Records, Vol. 2, Exhibit "P-9.1," Reply to PAN, pp. 526-531; BIR Records, Exhibit "R-11," Reply to PAN, pp. 319-323. 23 Records, Vol. 1, JSFI, par. 9, p. 402. 24 Records, Vol. 2, Exhibit "P-10," Formal Letter of Demand/Final Assessment Notice ("FLO/FAN"), pp. 532-543; BIR Records, Exhibit "R-20," FLO/FAN, pp. 306-317. 25 Records, Vol. 1, JSFI, par. 10, pp. 402-403. 26 Records, Vol, 2, Exhibit "P-11," Memorandum of Assignment, p. 544; BIR Records, Memorandum of Assignment, p. 335. 27 Records, Vol. 1, JSFI, par. 11, p. 403. 28 BIR Records, Memorandum ofAssignment, p. 335. 29 Records, Vol, 2, Exhibit "P-12," Final Notice, p. 545; BIR Records, Exhibit "R-12," Final Notice, p. 348. 30 Records, Vol. 1, JSFI, par. 12, p. 403. 31 BIR Records, Exhibit "P-12.1," Protest to Final Notice, pp. 376-389. 32 Records, Vol. 1, JSFI, par. 13, p. 403.

DECISION CTA CASE NO. 8836 Page 5 o�17 On May 15, 2014, petitioner received a letter-reply33 dated March 4, 2013 from OIC-RDO Alberto denying petitioner's protest.34 Consequently, on June 16, 2014, petitioner filed the instant Petition for Review.35 After being granted two (2) extensions,36 respondent filed his Answer37 by registered mail on August 26, 2014. Thereafter, respondent filed a Motion to Admit Attached Amended Answer38 on September 5, 2014; which was granted by the Court in a Resolution39 dated October 20, 2014, thereby admitting the attached Amended Answer4o. In his Amended Answer, respondent interposed the following Special and Affirmative Defenses, in sum: (1) that the Court is bereft of jurisdiction to hear the present Petition for Review; (2) that the assessment for deficiency IT, VAT and compromise penalties were issued in accordance with law, rules and jurisprudence; and (3) that petitioner is not exempt from IT and VAT. Petitioner and respondent filed their Pre-trial Briefs on December 5, 201441 and April29, 201542, respectively. On March 20, 2015, respondent filed an Omnibus Motion (1) Motion for Leave to Admit Respondent's Amended Pre-Trial Brief; (2) Motion to Defer Filing of Joint Stipulation of Facts and Issues; (3) Motion to Defer Transmittal of BIR Records43 ("Omnibus Motion") which was granted by the Court in a Resolution44 dated June 18,2015, and admitting the attached Respondent's Amended Pre-trial Brief45. 33 Records, Vol. 2, Exhibit "P-14," Letter Reply, pp. 562-563. 34 Id., Vol. 1, ]SFI, par. 14, p. 403. 35 Id., PFR, pp. 6-96, with annexes. 36 Records, Vol. 1, pp. 99-102,104,105-107 and 155-156. 37 Id., Answer, pp. 108-128. 38 Id., Motion to Admit Attached Amended Answer, pp. 129-133. 39 Id., Vol. 1, pp. 166-168. 40 Id., Amended Answer, pp. 134-153. 41 Id., petitioner's Pre-trial Brief, pp. 308-320. 42 Records, Vol. 1, respondent's Pre-trial Brief, pp. 332-339. 43 Id., Omnibus Motion, pp. 365-370. 44 Id., Vol. 1, pp. 394-396. ( 45 Id., respondent's Amended Pre-trial Brief, pp. 371-376.

DECISION CTA CASE NO. 8836 Page 6 of17 Thereafter, on July 3, 2015, the parties filed their Joint Stipulation of Facts and Issue[s]46; thus, a Pre-Trial Order47 was issued on July 20, 2015. On September 18, 2015, petitioner filed its Formal Offer of Evidence With Motion for Permanent Marking48, offering Exhibits "P- 1,11 "P-2,11 "P-3,11 "P-4,11 "P-5,11 "P-5.1,11 "P-6,11 "P-7,11 "P-8,11 "P-8.1,11 "P-9,11 "P-9.1,11 "P-10,11 "P-11,11 "P-12,11 "P-12.1,11 "P-13,11 "P-13.1,11 "P- 14,11 "P-15,11 and "P-15.1 11 as evidence. This was resolved by the Court in a Resolution49 dated December 11, 2015, admitting all of the foregoing exhibits. On March 29, 2016, Respondent's Formal Offer of Evidenceso was filed, offering Exhibits "R-1,11 "R-2,11 "R-3,11 "R-4,11 "R-5,11 "R-6,11 " R - 7 I I " R-8 II "R -9I II 1"8RI 1-110"IRII -"1R9I-I1I 1"I IRI -"2R0-I 111 2I"IIR"-R21-1I II3I II "R- 14I II "R-15 I I I I 7 11 "R- nd I I "R- 1 a "R-16 I I "R-21-all as I evidence. The Court admitted all the offered evidence in a Resolution51 dated June 7, 2016. On July 12, 2016, petitioner filed its Memorandum52; and after being granted an extension,53 respondent also filed his Memorandum (For Respondent)54 on August 8, 2016 via registered mail. On August 26, 2016, the Court promulgated a Resolution55 submitting the case for decision; hence, this Decision. The Issues56 WHETHER THE FLD/FAN AND FINAL NOTICE ARE VOID; AND 46 Records, Vol. 1, JSFI, pp. 401-412. 47 Id., Pre-Trial Order ("PTO"), pp. 414-422. 48 Id., Vol. 1, pp. 436-445. 49 Id., Vol. 2, pp. 597-598. 50 Id., Formal Offer of Evidence, pp. 611-624. 51 Id., Vol. 2, pp. 640-641. 52 Records, Vol. 2, petitioner's Memorandum, pp. 646-675. 53 Id., Vol. 2, pp. 642,645, 677. 54 Id., respondent's Memorandum, pp. 679-691. 55 Id., Vol. 2, p. 693. 56 Id., Vol. 1, PTO, Issues, pp. 417-418.

DECISION CTA CASE NO. 8836 Page 7 of17 WHETHER PETITIONER IS LIABLE FOR DEFICIENCY IT, VAT, AND COMPROMISE PENALTIES IN THE AMOUNT OF PHP146,185,993.46, PHP135,789,957.76, AND PHP80,000.00, RESPECTIVELY. Petitioner's Arguments57 Petitioner avers that the FLD/FAN cannot be considered as the final notice which would warrant the collection of taxes, in view of the August 30, 2013 Memorandum issued by RDO No. 74 referring the case for reinvestigation; that in the absence of such final demand, there is no notice of assessment that can be protested, hence, the Final Notice is premature; and that even assuming that the FLD/FAN can be considered as the final demand, the same is void for being issued in violation of petitioner's right to due process considering that the FLD/FAN was prepared and issued even before the PAN was received by petitioner. Petitioner further claims that even assuming that the FLD/FAN and Final Notice are valid, these should be withdrawn and cancelled for lack of factual and legal basis; that for IT, petitioner is exempt under Section 30 of the 1997 NIRC being a non-stock and non-profit organization rendering socio-cultural and economic services to the poor; that petitioner's IT exemption is confirmed in the Ruling which was not validly revoked; and that assuming, but not granting, that the Ruling has been validly revoked, the retroactive application of such revocation violates Section 246 of the 1997 NIRC. As regards alleged deficiency VAT, petitioner posits that its interest income was derived from the pursuit of its primary function of uplifting the socio-cultural and economic services to the poor, hence, not subject to VAT; that with respect to Membership Fees & Dues and Other Income, the BIR did not provide the factual and legal basis for imposing VAT thereon, thereby violating Section 228 of the 1997 NIRC; that even assuming that the assessment for Membership Fees & Dues is valid, the same was not derived from the sale of services or goods in the course of trade or business; and that it is erroneous for the BIR to subject to VAT its interest income from bank deposits since there was no actual sale of goods or services which can serve as the basis for the imposition thereof. 57 Records, Vol. 2, petitioner's Memorandum, pp. 651-672.

DECISION CTA CASE NO. 8836 Finally, petitioner claims that since it did not agree or conform to the imposition of the compromise penalty, there is no basis for the BIR to impose the same. Respondent's Counter-Argumentsss Respondent counters that the Court has no jurisdiction over the case because petitioner failed to file a protest to the FLD/FAN within thirty (30) days from receipt thereof, thereby making the assessment final, executory and demandable; that petitioner was not deprived of its right to due process since the PAN and the FLD/FAN were both received by petitioner; and that assuming, without conceding, that the assessment did not become final, executory and demandable, petitioner is still liable for (1) deficiency IT, because it is excluded from the enumeration of exempt entities under Section 30 of the 1997 NIRC; and (2) deficiency VAT, because it is considered as a lending investor. The Ruling of the Court The Court dismisses the instant Petition for Review for lack of jurisdiction. Section 228 of the 1997 NIRC lays out the procedure to be followed in protesting tax assessments, thus: SEC. 228. Protesting ofAssessment. - XXX XXX XXX Within a period to be prescribed by implementing rules and regulations, the taxpayer shall be required to respond to said notice. If the taxpayer fails to respond, the Commissioner or his duly authorized representative shall issue an assessment based on his findings. Such assessment may be protested administratively by filing a request for reconsideration or reinvestigation within thirty (30) days from receipt of the assessment in such form and manner as may be prescribed by implementing rules and regulations. Within sixty (60) days from filing of the protest, ss Records, Vol. 2, respondent's Memorandum, pp. 681-688.

DECISION CTA CASE NO. 8836 Page 9 o�17 all relevant supporting documents shall have been submitted; otherwise, the assessment shall become final. If the protest is denied in whole or in part, or is not acted upon within one hundred eighty (180) days from submission of documents, the taxpayer adversely affected by the decision or inaction may appeal to the Court of Tax Appeals within thirty (30) days from receipt of said decision, or from the lapse of the one hundred eighty (180)-day period; otherwise, the decision shall become final, executory and demandable.s9 In this relation, Section 3.1.5 of Revenue Regulations (RR") No. 12-199960, implementing the above Section 228 of the 1997 NIRC, reads: 3.1.5 Disputed Assessment. - The taxpayer or his duly authorized representative may protest administratively against the aforesaid formal letter of demand and assessment notice within thirty (30) days from date of receipt thereof. XXX XXX XXX If the taxpayer fails to file a valid protest against the formal letter of demand and assessment notice within thirty (30) days from date of receipt thereat the assessment shall become final, executory and demandable. If the protest is denied, in whole or in part, by the Commissioner, the taxpayer may appeal to the Court of Tax Appeals within thirty (30) days from date of receipt of the said decision, otherwise, the assessment shall become final, executory and demandable. In general, if the protest is denied, in whole or in part, by the Commissioner or his duly authorized representative, the taxpayer may appeal to the Court of Tax Appeals within thirty (30) days from date of receipt of the said decision, otherwise, the assessment shall become final, executory and demandable: Provided, however, that if the taxpayer elevates his protest to the Commissioner within thirty (30) days from date of receipt of the final decision of the Commissioner's duly authorized representative, the latter's decision shall not be 59 Underscoring ours. 60 Implementing the Provisions of the National Internal Revenue Code of 1997 Governing the Rules on Assessment of National Internal Revenue Taxes, Civil Penalties and Interest and the Extra-Judicial Settlement of a Taxpayer's Criminal Violation of the Code Through Payment of a Suggested Compromise Penalty, September 6, 1999. I

DECISION CTA CASE NO. 8836 considered final, executory and demandable, in which case, the protest shall be decided by the Commissioner. If the Commissioner or his duly authorized representative fails to act on the taxpayer1s protest within one hundred eighty (180) days from date of submission, by the taxpayer, of the required documents in support of his protest, the taxpayer may appeal to the Court of Tax Appeals within thirty (30) days from the lapse of the said 180-day period, otherwise, the assessment shall become final, executory and d e m a n d a b l e . 61 Moreover, in Commissioner of Internal Revenue v. Bank of the Philippine Islands62, the Supreme Court held, to wit: The inevitable conclusion is that BPI's failure to protest the assessments within the 30-day period provided in the former Section 270 meant that they became final and unappealable. Thus, the CTA correctly dismissed BPI's appeal for lack of jurisdiction. BPI was, from then on, barred from disputing the correctness of the assessments or invoking any defense that would reopen the question of its liability on the merits. Not only that. There arose a presumption of correctness when BPI failed to protest the assessments.63 Based on the foregoing, failure of the taxpayer to file an appeal within the reglementary period shall render the assessment final and executory, and the Court has no jurisdiction to review the correctness of the assessment. Records reveal that petitioner received a PAN on July 2, 2013, with the following assessments: TAX BASIC TAX 25'Yo SURCHARGE INTEREST COMPROMISE TOTAL PENALTY IT Php 77,251,146.30 Php 19,312,786.58 Php 45,709,503.27 Php 142,323,436.15 17,527,498.29 44,596,966.65 Php 50,000.00 PHP 132,284,458.10 VAT 70,109,993.16 50,000.00 80,000.00 80,000.00 CP 274,687,894.25 GRAND TOTAL Petitioner then filed a reply to the PAN on July 16, 2013. Thereafter, it received an FLD/FAN on August 2, 2013, with the 61 Underscoring ours. 62 G.R. No. 134062, April17, 2007, 521 SCRA 373. 63 Underscoring ours.

DECISION CTA CASE NO. 8836 following assessments, in which there was no change in the taxes and penalties and the interest was only updated: TAX BASIC TAX 25'Yi� SURCHARGE INTEREST COMPROMISE TOTAL PENALTY IT Php 77,251,146.30 Php 19,312,786.58 Php 49,572,060.58 Php 146,185,993.46 17,527,498.29 48,102,466.31 Php 50,000.00 PHP 135,789,957.76 VAT 70,109,993.16 50,000.00 80,000.00 80,000.00 CP 282,055,951.22 GRAND TOTAL A Memorandum of Assignment dated August 30, 2013 was then issued by RDO Demalata to the ROs and GS assigned, referring the case for reinvestigation. Counting thirty (30) days from receipt of the FLD/FAN on August 2, 2013, petitioner had until September 2, 201364 within which to file its protest, which it failed to do. Thereafter, on January 16, 2014, petitioner received a Final Notice, with assessments for deficiency IT of Php146,185,993.46, deficiency VAT of Php135,789,957.76, and compromise penalty of Php80,000.00. Note that these are the same amounts found in the FLD/FAN. Petitioner then filed its protest to the Final Notice on February 20, 2014. In this case, petitioner filed a protest disputing the assessment only to the PAN 65, and subsequently, to the Final Notice66. However, petitioner failed to file a protest to the FLD/FAN67, which it received on August 2, 201368. For failure to file a protest, the assessment has attained finality by mere lapse of time. Nevertheless, petitioner contends that the referral of audit investigation to RO Jolito, RO Gascon, and GS Panelo in view of the August 30, 2013 Memorandum removes the character of the FLD/FAN as a final demand, hence, there can be no notice that can be protested; and that accordingly, the Final Notice is premature. The Court finds no merit in petitioner's argument. 64 September 1, 2013 falls on a Sunday. 65 Records, Vol. 2, Exhibit "P-9.1," Reply to PAN, pp. 526-531. 66 Id., Exhibit "P-12.1," Protest, pp. 546-559. 67 Id., Exhibit "P-10," FLD/FAN, pp. 532-543. 6s Id., Vol. 1, JSFI, p. 402.

DECISION CTA CASE NO. 8836 Page 12of17 The August 30, 2013 Memorandum69 reads as follows: REVENUE DISTRICT OFFICE NO. 74, ILOILO CITY Memorandum of Assignment No.: 074-2013-LA-003476 Date: 08/30/2013 MEMORANDUM TO: Revenue Officer/s: Joenifer S. Iolito/Revina D. Gascon Group Supervisor: Cecil Rey F. Panelo Subject: Audit/Verification of the AIRT Tax Liabilities/Claim for _ _ Tax Credit/Refund for Taxable Year/Period 2009 of TVN No. eLA No.: 074-2010- 00000233 dated 10/15/10 Referred to you is the subject case/docket for: [ ] XXX XXX XXX [ ] XXX XXX XXX [ ] XXX XXX XXX [ ] XXX XXX XXX [x] Reinvestigation per protest letterj request for reinvestigation filed by the subject taxpayer. (] XXX XXX XXX [] Other (specify) _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ The docket with the report of the case shall be submitted to the undersigned within the time frame prescribed under existing revenue issuances. For your information and strict compliance. (signature) NELIA B. DEMALATA Revenue District Officer Name of Authorized Revenue Official/Head, Investigating Office Received by: Date Received Joenifer S. Jolito/Revina D. Gascon Revenue Officer/s Cecil Rey F. Panelo Group Supervisor A careful reading of the above will show that the Memorandum of Assignment is merely an internal communication among the BIR 69 Records, Vol, 2, Exhibit "P-11," Memorandum of Assignment, p. 544; BIR Records, Memorandum of Assignment, p. 335. !

DECISION CTA CASE NO. 8836 officers to guide the assigned ROsin proceeding with the assessment. It is not even addressed to petitioner. Petitioner was given a copy only for its information and records. The Memorandum of Assignment appears to be an offshoot of the Reply to PAN filed by petitioner on July 16, 2013. Records reveal that subsequent to the August 30, 2013 Memorandum, OIC-RDO Alberto informed petitioner of its decision to the Reply to PAN in a letter7o dated October 8, 2013, addressed to Medelene Perales, and received by a certain Jonemae Legada on October 11, 2013, which reads as follows: Republic of the Philippines Department of Finance BUREAU OF INTERNAL REVENEU Revenue District Office No. 74 Iloilo City October 8, 2013 MEDELENE PERALES Supervisor, Finance & Accounts Department Lifebank Foundation, Inc. Lifebank Bldg., Gov. Fermin Caram St. Iloilo City RE: Letter of Authority No. 074-2010-00000233 on 2009 All Internal Revenue Taxes Madam: This has reference to your letter of protest dated July 9, 2013 in relation to the Preliminary Assessment Notice sent to Lifebank Foundation, Inc. Please be informed that your company has failed to introduce evidence refuting our previous findings/assessment. The bases of your protest on the Preliminary Assessment Notice were already discussed in our previously issued Notice of Informal Conference dated February 6, 2012, as well as in our reply letter dated June 8, 2012. As such, this office still maintains its position on your taxability on income tax and value-added tax. In view thereof, please be further informed that the complete docket of the case was returned to the Office of the Regional Director for appropriate action. Kindly direct your concerns regarding this matter to the said Office. Please be guided accordingly. Very truly yours, (signature) LUIS A. ALBERTO, JR. OIC-Revenue District Officer LAA/ CMJV/ redg 70 BIR Records, Letter dated October 8, 2013, p. 336.

DECISION CTA CASE NO. 8836 cc: Patrocinio G. Pudadera, Jr., CPA (signature) Received by: (signature) Jonemae Legada 10/11/1371 Taking everything into consideration, the Court concludes that the August 30, 2013 Memorandum was not issued to revoke the previously issued FLD/FAN. It was issued in view of the Reply to PAN filed by petitioner. Otherwise, the ROs will have nothing to "[r]einvest[e] per protest letter/request for reinvestigation filed by [petitioner]" considering that there was no protest to the FLD/FAN filed by petitioner as of date. Petitioner itself knows for a fact that it did not file any protest to the FLD/FAN to initiate the process of reinvestigation of the assessment; hence, it is illogical for it to think that the reinvestigation arose from its protest to the FLD/FAN instead of from the PAN, to which it actually filed a reply. Most importantly, the Memorandum, although dated August 30, 2013, was actually received by petitioner on September 5, 201372, through a certain Mary Grace C. Barrios. Thus, petitioner could not have known about its existence until September 5, 2013, or four (4) days after the thirty (30)-day period to file a protest to the FLD/FAN has already lapsed. Prudence dictates that petitioner should have filed the protest on or before September 2, 201373, if only to protect its interest. Petitioner simply slept on its rights. Further, petitioner avers that assuming that the FLD/FAN can be considered as final demand from which petitioner is now required to file a protest, it is still void for being prepared and issued prior to petitioner's receipt of the PAN, citing Puratos Phil., Inc. v. Commissioner of Internal Revenue74. Petitioner's argument must necessarily fail. An assessment is deemed made when notice to this effect is released, mailed or sent to the taxpayer.75 Thus, in Collector of Internal Revenue v. Bautista76, the Supreme Court held: 71 Underscoring ours. 72 BIR Records, Memorandum of Assignment, p. 335. 73 September 1, 2013 falls on a Sunday. 74 CTA Case No. 6980, October 4, 2010. 75 Basilan Estates, Inc. v. Commissioner of Internal Revenue, et al., G.R. No. L-22492, September 5, 1967, 21 SCRA 17; Clark Water Corp. v. Commissioner of Internal Revenue, CTA Case No. 8865, November 23, 2016.

DECISION CTA CASE NO. 8836 Section 331 of the Tax Code provides that the deficiency assessment must be made within five (5) years after the return was filed, and the assessment is deemed made when the notice to this effect is released, mailed or sent by the Commissioner of Internal Revenue to the taxpayer, for the purpose of giving effect to said assessment. Said Section 331 does not require that the notice be received by the taxpayer within the aforementioned period of five (5) years. 77 While the FLD/FAN78 was dated April 25, 2013, it was presented to the taxpayer only on August 2, 201379, as evidenced by the receipt of a certain Roberto H. Alfarasso. On the other hand, the PAN81 was received by petitioner on July 2, 2013, to which it filed its Reply to PAN82 on July 16, 2013. Clearly, not only did respondent complied with the mandatory requirement of issuance of PAN prior to the FLD/FAN, petitioner was even given thirty-one (31) days from receipt of the PAN to file its protest thereto before respondent had the FLD/FAN received by petitioner. Petitioner's reliance on the case of Puratos Phil., Inc. v. Commissioner of Internal Revenue83 ('Puratos case") is also misplaced, if not erroneous. It cannot take refuge in the conclusion made by the Supreme Court that taxpayers are denied their right to due process when the FAN was issued on the same day taxpayers received the PAN, hence, a clear violation of Section 228 of the 1997 NIRC and RR Nos. 12-1985 and 12-1999, as well as Revenue Memorandum Order No. 37-1994, which gives taxpayers a period of fifteen (15) days within which to file a reply to the PAN. 76 G.R. No. L-12250, May 27,1959, cited in Commissioner of Internal Revenue v. Special Services Corp., CA-G.R. SP No. 24475, April17, 1991. 77 Underscoring ours. 78 Records, Vol. 2, Exhibit "P-10," FLO/FAN, pp. 532-543; BIR Records, Exhibit "R-20," FLO/FAN, pp.306-317. 79 Records, Vol. 1, JSFI, par. 10, p. 402. 80 Records, Vol. 2, Exhibit "P-10," FLO/FAN, pp. 532-543; BIR Records, Exhibit "R-20," FLO/FAN, pp.306-317. 81 Records, Vol. 2, Exhibit "P-9," PAN, pp. 524-525; BIR Records, Exhibit "R-10," PAN, pp. 300-305. 82 Records, Vol. 2, Exhibit "P-9.1," Reply to PAN, pp. 526-531; BIR Records, Exhibit "R-11,"Reply to PAN, pp. 319-323. 83 CTA Case No. 6980, October 4, 2010.

DECISION CTA CASE NO. 8836 A careful reading of Puratos case shows that the FLD/FAN was declared void because it was issued on the same day that the PAN was issued. In the case at hand, the FLD/FAN, although dated April 25, 2013, was received by petitioner thirty-one (31) days after it received the PAN, or only on August 2, 2013, and even seventeen (17) days after receipt of petitioner's Reply to PAN on July 16, 2013. Having said the foregoing, the Court hereby finds that it has no jurisdiction over the case as no protest was filed within the prescriptive period, thus, rendering the assessment final, executory, and demandable. In view of the above discussions, the Court finds no cogent reason to rule on the remaining issue. WHEREFORE, in view of the foregoing, the Petition for Review filed by petitioner Lifebank Foundation, Inc. is hereby DENIED due to lack of jurisdiction. SO ORDERED. WE CONCUR: LOVAEsLsoL~f~}(t'eBJAuUstTicIeSTA C{N.. ~ p~- MA. BELEN M. RINGPIS-LIBAN Associate Justice

DECISION CTA CASE NO. 8836 ATTESTATION I attest that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court's Division. LOVELt. BAUTISTA Associate Justice Chairperson CERTIFICATION Pursuant to Article VIII, Section 13 of the Constitution and the Division Chairperson's Attestation, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court. c;nowQQ ROM~G. nMosARIO Presiding Justice