2013Nu20921 Revocation of administrative disposition

A Stock Company

Seoul Regional Tax Office

Seoul Administrative Court Decision 2012Guhap13979 decided June 14, 2013

July 9, 2014

August 20, 2014

1. The part against the Plaintiff regarding the order to revoke under the judgment of the court of first instance shall be revoked. The part regarding the first and second value-added tax in March 21, 2012, which was rendered by the Defendant to the Plaintiff on March 21, 2012, shall be revoked.

2. Of the judgment of the court of first instance, the part against the defendant regarding the part of corporate tax in 2010 as to the tax investigation decision under paragraph (1) is revoked, and the plaintiff's claim corresponding to the revoked part

3. The defendant's remaining appeal and the plaintiff's remaining incidental appeal are dismissed, respectively.

4. Of the total litigation costs, 80% is borne by the Defendant, and the remainder by the Plaintiff, respectively.

1. Purport of claim

A disposition of tax investigation rendered by the Defendant to the Plaintiff on March 21, 2012 shall be revoked.

2. Purport of appeal

The part against the defendant in the judgment of the court of first instance shall be revoked, and the plaintiff's claim corresponding to the revocation shall be dismissed.

3. Purport of incidental appeal;

Among the judgment of the first instance court, the part against the plaintiff regarding the order to revoke the below shall be revoked. The part regarding the disposition taken by the defendant on March 21, 2012 against the plaintiff shall be revoked.

1. Scope of adjudication of this court;

On March 21, 2012, the judgment of the first instance court revoked the corporate tax portion among the disposition of tax investigation decision rendered by the Defendant against the Plaintiff (hereinafter “instant disposition”), and dismissed the remainder of the lawsuit. Accordingly, the Defendant appealed to the part against the Defendant, namely, the part against the Plaintiff regarding corporate tax of the instant disposition, and filed an incidental appeal against the part regarding value-added tax of the instant disposition, i.e., the part against the Plaintiff. The scope of the judgment of this court is the part regarding corporate tax and value-added

2. Details of the disposition;

(a) First tax investigation (hereinafter referred to as "first tax investigation")

1) On February 25, 2010, the Director of the Daejeon Regional Tax Office rendered a disposition of tax investigation as follows to the Plaintiff.

A person shall be appointed.

2) On April 15, 2010, the Director of the Daejeon Regional Tax Office rendered the Plaintiff’s sealing “the scope of investigation and the return before type” as follows.

A person shall be appointed.

3) A tax investigation is conducted with the second investigation member belonging to the Director of the Daejeon Regional Tax Office, and the following detailed corporate tax items were recovered. At the time, the value-added tax portion was not found as a result of the investigation, and there was no recovery item.

(unit: source)

A person shall be appointed.

A person shall be appointed.

(b) the second tax investigation (hereinafter referred to as "second tax investigation")

1) On July 6, 2011, the Defendant rendered the following dispositions to the Plaintiff on the tax investigation decision.

A person shall be appointed.

2) A second investigation officer affiliated with the Defendant conducted a tax investigation and recovered the following corporate tax items: (unit: KRW 00,000)

A person shall be appointed.

A person shall be appointed.

C. On March 21, 2012, the Defendant issued the instant disposition against the Plaintiff as follows. The Plaintiff filed an appeal on May 4, 2012, but was dismissed by the Tax Tribunal on November 28, 2012.

A person shall be appointed.

2) An international trade investigator affiliated with the Defendant conducted a tax investigation, and the following details were recovered from corporate tax and value-added tax items: (unit: KRW 00 million)

A person shall be appointed.

(unit: million won)

A person shall be appointed.

(2) No input tax deduction shall be made on the basis of

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1, 2, 4, 8, 14, Eul evidence Nos. 2, 18, 19, 20, the purport of the whole pleadings

3. Whether the lawsuit of this case is legitimate

A. The defendant's assertion

Inasmuch as a tax investigation under the instant disposition has been completed, the instant lawsuit is unlawful.

B. Determination

Even if it appears impossible to reinstate due to the completion of the execution of an administrative disposition, there is a benefit to seek cancellation of such disposition in terms of ensuring legality of administration, judicial control and expansion of citizen's rights protection (see, e.g., Supreme Court Decision 2007Du13203, Feb. 14, 2008). If there is no benefit in a lawsuit claiming illegality of a decision on tax investigation solely on the ground that the period of tax investigation expires, it is possible for the investigating agency to make a decision on tax investigation again for the same reason. Thus, even if the period of tax investigation exceeds the period of tax investigation, it is reasonable to resolve the dispute, barring any special circumstance, to determine illegality of the decision on tax investigation even if it is conducted in duplicate for the same tax item and taxable period like the previous tax investigation (see, e.g., Supreme Court Decision 2004Du12070, Jun. 22, 2006).

The defendant's above assertion is without merit.

4. Whether the corporate tax and value-added tax are legitimate in the disposition of this case

A. The parties' assertion

The Plaintiff asserts that the instant disposition constitutes an unlawful tax investigation overlapping with the first and second tax investigation. Accordingly, the Defendant asserts that the instant disposition constitutes an illegal duplicate investigation due to the difference between the first and the second tax investigation and the subject matter of the investigation, and that even if it is a duplicate investigation, it constitutes an exceptional ground for permission under Article 81-4(2)1, 2, 3, and 5 of the Framework Act on National Taxes (amended by Act No. 11604, Jan. 1, 2013; hereinafter the same shall apply) (the purport of the claim regarding subparagraph 5 is that the re-investigation for the treatment of all kinds of taxation data under Article 63-2 subparag. 2 of the Enforcement Decree of the Framework Act on National Taxes falls under the “re-audit

(b) Related statutes;

It is as shown in the attached Table related statutes.

C. Determination

1) Of the instant disposition, part of the corporate tax and value-added tax in 2009

A) The substance of the first tax investigation

As seen earlier, the director of the Daejeon Regional Tax Office and the defendant claimed for a partial investigation of corporate tax in the first and second tax investigation. In this case, the term " partial investigation" means a tax investigation that verifies the appropriateness of any specific item or any part of transaction, and is compared with the term "total investigation" that comprehensively verifies the appropriateness of the report of the taxable period subject to the investigation (Article 3 subparagraphs 26 and 27 of the National Tax Service Directive No. 1877, Dec. 31, 2010; hereinafter the same). First, according to the above findings of recognition, it is clear that the entire investigation of value-added tax in the year 2009 was not a partial investigation.

Next, at the time of the first tax investigation in 2009, it is professed that the corporate tax was a partial investigation through the scope of investigation and the notice of conversion. However, in full view of the following circumstances acknowledged as above, comprehensively taking into account the facts of recognition, the statements of evidence Nos. 10 through 13, 16 through 18, Eul’s evidence No. 9 through 13, and the testimony and arguments of the witness F of the first instance trial, it is reasonable to view that the Daejeon director of the district tax office, at the time of the first tax investigation, has actually investigated the corporate tax in 2009, and there is no evidence to support that

① At the time of the first decision on tax investigation, only the value-added tax was imposed on the portion reverting to the year 2009 but not the tax item subject to the corporate tax, the Director of the Daejeon Regional Tax Office requested and submitted materials related to the corporate tax, although it is irrelevant to the value-added tax

② The scope of data so demanded was to the extent that it can investigate broad items related to corporate tax in 2009, and there was no big difference from the original consolidated investigation in 2007 and 2008.

③ Around April 15, 2010, a tax investigation officer was notified of the extension of the scope of the tax investigation by a partial investigation of corporate tax in 2009. However, the tax investigation officer already requested wide range of materials related to corporate tax in 2009 and the materials requested after the notification were not yet required, and the corporate tax portion in 2009 was also investigated as well as the corporate tax portion in 2007 and 2008 on the basis of the results.

B) Whether the case constitutes a duplicate investigation

Since the first tax investigation is a whole investigation of corporate tax and value-added tax in 2009, the part of corporate tax and value-added tax in 2009 among the disposition of this case, which is a whole investigation of the same tax item and the same taxable period, is a duplicate investigation prohibited by Article 81-4(2) of the Framework Act on National Taxes without further review whether it overlaps with the second tax investigation.

C) Whether the case constitutes exceptional grounds for permission

First of all, according to the aforementioned evidence, Gap evidence Nos. 24 and Eul evidence Nos. 24 and Eul evidence Nos. 1 and the purport of oral argument, the defendant determined that the disposition of this case does not constitute duplicate investigation even though he knows that there was a first and second tax investigation at the time of the disposition of this case, and it is not recognized that there was an exceptional reason under each subparagraph of Article 81-4(2) of the Framework Act on National Taxes although duplicate investigation was conducted, it is not recognized that there was an exceptional reason

(1) Whether there is clear evidence to acknowledge the suspicion of tax evasion (No. 1) and where there is clear evidence to acknowledge the suspicion of tax evasion (see, e.g., Supreme Court Decision 2010Du6083, Jan. 27, 2011) should be limited to cases where the probability of tax evasion is acknowledged to a considerable extent based on objectivity and rationality, and it is reasonable to interpret that such materials do not include the materials already examined in the previous tax investigation (see, e.g., Supreme Court Decision 2010Du6083, Jan. 27, 2011).

As acknowledged in accordance with the above evidence and evidence Nos. 21 and 23 through 26 and the purport of oral argument, the materials required by the defendant for the disposition of this case are merely to analyze the tax return, etc. to arrange the suspicion of tax evasion possible, and there are no other objective and reasonable materials to support the probability of such suspicion, and the above tax return, etc. should be deemed as the materials already investigated in the previous tax investigation, and there is no other evidence to acknowledge it. The defendant's assertion in this part is without merit.

(2) Whether it is necessary to conduct an investigation on the opposite contractual party (No. 2), the defendant asserts that "the plaintiff's own stocks from a person with a special relationship in 2009 are under suspicion of allocating profits to B who is the actual representative of the plaintiff," etc.

However, in the event that a reinvestigation is required to investigate the transaction partner, it shall be limited to a partial investigation on the transaction details with the transaction partner (see Article 12(1) of the Regulations on the Management of Investigation Affairs). Since the instant disposition is not a partial investigation on the transaction details between the Plaintiff and B, but a overall investigation on the items related to the Plaintiff’s corporate tax and value-added tax, it cannot be deemed necessary to investigate the transaction partner. This part of the Defendant’s assertion is without merit

(3) Whether there were errors in connection with two or more business years (Article 3) and whether it was a manufacture for the handling of various taxation data (Article 5 and Article 63-2 subparag. 2 of the Enforcement Decree of the Framework Act on National Taxes)

As seen earlier, the instant disposition is merely for investigating the overall related items, such as the Plaintiff’s corporate tax and value-added tax, and it cannot be deemed to have been erroneous in relation to two or more business years, and thus for conducting a tax investigation, or for dealing with any taxation data. There is no ground to deem the materials required for the instant disposition as the tax payer’s fee under the foregoing provision. There is no evidence to deem otherwise as constituting the foregoing exception. Therefore, the Defendant’s assertion on this part is without merit.

D) Whether the principle of good faith is violated

If the plaintiff had procedural illegality at the time of the first tax investigation, the defendant argued that the above procedural illegality should be contested at that time, but it is against the principle of trust and good faith to assert as if the investigating agency conducted the whole investigation. However, even if the plaintiff submitted data while recognizing the request for the provision of data by the director of the Daejeon Regional Tax Office at the time of the first tax investigation as illegal, it cannot be deemed that the plaintiff impliedly assisted or aided such procedural illegality. The mere fact that the plaintiff did not dispute the procedural illegality at the time of the first tax investigation does not constitute a violation of the principle of trust and good faith.

E) Sub-decision

Therefore, the corporate tax and value-added tax in 2009 among the dispositions of this case constitute a non-exclusive duplicate investigation.

2) Of the instant disposition, part of the corporate tax and value-added tax in 2010

According to the above evidence, Gap evidence and evidence Nos. 6, 19, Eul evidence Nos. 1 and 7, and the whole purport of oral argument, ① is not included in the first tax investigation subject matter for 2010, ② the second tax investigation is conducted at the request of the Board of Audit and Inspection concerning the specific items related to corporate tax, and the recovered items are limited to that part, and the third defendant requested submission of materials exceeding the necessary scope, but it appears that the investigation is not conducted except for the above specific items. ④ The defendant excluded the part subject to the second tax investigation from the investigation subject to the disposition of this case pursuant to Article 12(3) of the Regulations on the Conduct of Investigation.

Comprehensively taking account of the above circumstances, the portion of corporate tax and value-added tax in 2010 among the dispositions in this case cannot be deemed to overlap with the first tax investigation period, and the second tax investigation is deemed to be limited to the above specific items, and even if it falls under such items or taxable periods, the subject of investigation differs substantially, and thus, it cannot be deemed to be in violation of the principle of prohibition of duplicate investigation (see Supreme Court Decisions 2004Du10470, Jan. 14, 2005; 2009Du9536, Sept. 24, 2009). Therefore, the part of corporate tax and value-added tax in 2010 among the dispositions in this case does not constitute duplicate investigation, and thus, it is lawful.

The Plaintiff asserts that the disposition of this case seriously undermines the principle of due process, so even if the overlapping scope is limited to a part of the disposition of this case, the Plaintiff’s assertion is not acceptable, taking account of the following: (a) Article 81-4(2) of the Framework Act on National Taxes provides that the overlapping scope of tax investigation shall be determined based on the items of taxation and the taxable period; (b) the portion without illegality may be separated from the portion without taxation items by taxable period; (c) the tax investigation plans to impose tax; and (d) there is no special circumstance that the tax disposition may invoke the logic classified by taxation unit; and (d) some of the dispositions of this case may be the ground for

5. Conclusion

Among the dispositions in this case, the part of the corporate tax and value added tax in 2009 are illegal, and the part of the corporate tax and value added tax in 2010 are legitimate. The part of the disposition in this case is revoked in part of the judgment of the first instance court. However, the part of the value added tax in 2010 was dismissed in the judgment of the first instance, and that of the disposition in this case was dismissed in the judgment of the first instance

Since it is no more unfavorable dismissal judgment than the judgment of dismissal of the lawsuit against the plaintiff, this part of the incidental appeal shall be dismissed.

Maximum Judge of the presiding judge

Judges Kim Jae-ho

Judges Kim Gung-sung