Whether the amount of income can be estimated on the ground that the tax invoice is processed.

If a taxpayer can calculate the tax base with books or documentary evidence kept and kept by him/her, the tax base and tax amount shall be determined by the method of the on-site investigation.

Article 27 (Calculation of Necessary Expenses) of the Income Tax Act

1. The plaintiffs' appeal is dismissed.

2. The costs of appeal shall be borne by the Plaintiff.

The judgment of the first instance is revoked. The defendant revoked the disposition of imposition of KRW 196,148,310 of global income tax for the year 2002 against the plaintiff on April 6, 2004 (the defendant reduced the purport of the claim and appeal in the first instance court by reducing and correcting the imposition of KRW 196,148,910 of global income tax for the year 202 (the defendant reduced the imposition of KRW 255,980,70 on November 9, 2006).

1. Details of the disposition;

The following facts are not disputed between the parties, or may be acknowledged by the overall purport of the pleadings in each entry in Gap evidence 1, Eul evidence 4-1 to 34, Eul evidence 1, Eul evidence 3, Eul evidence 6-1 to 5, Eul evidence 7-1, Eul evidence 7-2, and Eul evidence 9.

가. 원고는 1999,3,29.부터 서울 ○○구 ○○동 ○○○에서 '●●쥬얼리'라는 상호로 액세서리 제조업을 영위하고 있는데, 1999.6.9.경부터 2003.2.28.까지 김◎◎를 경리직원으로 고용하였다.

나. 김◎◎는 2002년 7월 중순경 부가가치세를 환급받아 이를 횡령할 목적으로, 원고의 거래처인 '◇◇캐스팅' 대표 연◆◆ 작성의 세금계산서 1장을 변조한 것을 비롯하여 15회에 걸쳐 2002년 제 1기분 세금계산서 15장을 변조하고 이를 팩스를 이용하여 ○○○세무사 사무실에 제출하였고, 2002년 10월 중순경 27회에 걸쳐 2002년 제2기분 세금 계산서 27장을 변조하여 같은 방법으로 이를 위 세무사 사무실에 제출하였다.

C. The Plaintiff filed a final return on the tax base of global income tax for the year 2005 via the above ○○ Certified Tax Accountants, and reported and paid the global income tax amount of KRW 22,078,416,416, by calculating the total amount of income as KRW 1,823,750,99, as KRW 1,710,749, as necessary expenses, as KRW 113,01,609, as global income amount, as KRW 109,161,169, as global income amount.

The necessary expenses are calculated by including the total value of KRW 55,00,053,00,053, as stated in Chapter forty-two of the tax invoice altered as above (hereinafter referred to as the tax invoice in this case).

D. On April 6, 2004, the Defendant: (a) denied the inclusion of necessary expenses for KRW 554,727,00 within the scope of the supply value by deeming the instant tax invoice as a processed tax invoice issued without a real transaction; and (b) subsequently imposed and notified the global income tax amount of KRW 255,980,70 (the amount obtained by deducting the tax amount of KRW 22,078,416 from the total determined tax amount of KRW 278,059,116) for the global income tax for the year 202; (c) recognized the disposition of global income tax as necessary expenses, and subsequently reduced and corrected the said disposition of global income tax to KRW 196,148,910 for the said amount of tax (hereinafter “instant disposition”).

2. Whether the instant disposition is lawful

A. The plaintiffs' assertion

(1) The proviso of Article 80 (3) of the Income Tax Act and Article 143 (1) of the Enforcement Decree of the Income Tax Act provide that "in calculating the tax base, where necessary account books and documentary evidence are not available or important parts are incomplete or false, an estimated investigation of the amount of income shall be determined." The disposition in this case is erroneous in failing to comply with the aforementioned provision even though the global income tax should be determined and revised by estimation.

(2) The Kim Man legal representative’s purchase of goods necessary for the Plaintiff’s business from the customer and payment of the purchase price, but did not issue a purchase tax invoice, making it inconsistent with the actual transaction details, which led to the alteration of the instant tax invoice in order to conceal this. Of the total purchase price of the said tax invoice that the Defendant denied inclusion in the necessary expenses as the necessary expenses, KRW 233,425,021 out of the total purchase price of the said tax invoice, which was the expenses that the Defendant actually disbursed for the Plaintiff’s business, should be recognized as necessary expenses. Nevertheless, the Defendant’s calculation of the Plaintiff’s global income by denying the remainder is erroneous in violation of the principle of substantial taxation and the principle of good faith as to the transaction details.

(b) Related statutes;

It is as shown in the attached Table related statutes.

C. Determination

(1) The tax base and tax amount of global income tax shall, in principle, be determined by the actual amount revealed by the field investigation method, and it shall be exceptionally permitted only when there is no taxpayer’s account books or documentary evidence, etc. or when there is no other way to disclose the actual amount of income by the tax authorities without the credibility of the important part being omitted or falsely recorded. Thus, even if the account books or documentary evidence kept and kept by the taxpayer included some false parts, if the tax base can be calculated based on the clear fact that the remainder except for such parts is the materials that correspond to all facts, the tax base and tax amount shall be determined by the method of the field investigation and shall not be determined by the method of the additional investigation (see Supreme Court Decision 95Nu6809, Jan. 26, 196). In addition, the reason that the taxpayer wants to investigate and determine by the method of estimation cannot be deemed as satisfying the requirements for estimated taxation (see Supreme Court Decision 95Nu2241, Aug. 22, 195).

The Plaintiff voluntarily filed a final return on the tax base of global income tax in 2002 with the instant tax invoice and other documentary evidence. When it was found that the instant tax invoice was falsely prepared without real transaction, the Defendant denied inclusion of necessary expenses equivalent to the purchase amount in the relevant tax invoice and imposed global income tax, and then additionally recognized the amount of KRW 128,795,000 as necessary expenses other than the initially reported necessary expenses, and did not add the amount other than the total revenue amount reported by the Plaintiff as the total revenue amount, as seen earlier. Meanwhile, there is no evidence to view that the details of the remaining account books and other documentary evidence other than the instant tax invoice prepared by the Plaintiff by the Plaintiff in falsity are obviously false in light of the facility size, number of employees, raw materials, goods, or products market price and various charges of the Plaintiff’s business operated by the Plaintiff. Rather, in light of the fact that the Plaintiff voluntarily filed the tax invoice, the Defendant did not follow the method of estimated tax base and tax amount but did not constitute an unlawful disposition based on the remaining account books other than the instant tax invoice. Therefore, the Plaintiff’s allegation is without merit.

(2) In the administrative litigation seeking the revocation of taxation on the ground of illegality of taxation, in principle, the tax authority bears the burden of proving the legality of taxation and the existence of the taxation requirement fact. Thus, in principle, the customs authority bears the burden of proving necessary expenses which are the basis of the determination of taxable income. However, since necessary expenses are more favorable to the taxpayer, and most of the facts constituting the basis of necessary expenses are located within the controlled sphere of the taxpayer, and it is difficult for the tax authority to prove them. Thus, if it is reasonable to prove the taxpayer, considering the difficulty of proof or equity between the parties, it should be returned to the taxpayer. Therefore, the issue of whether some of the expenses reported by the taxpayer is not real expenses, and the tax authority has proved that the taxpayer is false to the extent that the purpose of use of the expenses claimed by the taxpayer and the other party to the payment were proved to the extent that the taxpayer was not the cost disbursement according to the details of the report, and if the taxpayer claims that there was a cost of other than the same amount, the amount of expenses should be easily proved from the taxpayer’s account books and evidence concerning the specific expenses.

The Plaintiff asserted that the total amount of KRW 233,425,021, which the Defendant spent without the receipt of purchase tax invoices in 2002, including the part additionally recognized as necessary expenses, should be recognized as necessary expenses. However, it is insufficient to recognize that the result of the fact-finding on the Plaintiff’s new bank head of this court and KRW 128,795,000, which the Defendant recognized as necessary expenses, was actually spent as necessary expenses, and there is no other evidence to acknowledge otherwise, the calculated global income amount, which is the basis of the instant disposition, is in violation of the substance over form principle or the principle of trust and good faith.

2. Conclusion

Therefore, the plaintiff's claim of this case shall be dismissed as it is without merit, and the judgment of the court of first instance is just in its conclusion, and it is so decided as per Disposition by the plaintiff.

Related Acts and subordinate statutes

/ Income Tax Act

Article 27 (Calculation of Necessary Expenses)

(1) In calculating the amount of real estate leased income, business income, temporary property income, other income, or forest income, the amount to be included in necessary expenses shall be the sum of expenses corresponding to the total amount of income in the relevant year, which is generally accepted.

(2) If the outline corresponding to the total income amount prior to the current year is not appropriated as the necessary expenses before the current year, it shall be considered as the necessary expenses of the current year.

(3) Matters necessary for calculation of necessary expenses shall be prescribed by Presidential Decree.

Article 80 (Determination and Correction)

(3) The director of a regional tax office or the director of a regional tax office having jurisdiction over the place of tax payment shall, where he determines or correctss the tax base and amount of tax for the concerned year under paragraphs (1) and (2), base them on the books and other documentary evidence: Provided, That where the income amount cannot be calculated by books or other documentary evidence for the reasons as prescribed by

【Enforcement Decree of the Income Tax Act

Article 55 (Calculation of Necessary Expenses for Real Estate Rental Income, etc.)

(1) Necessary expenses corresponding to the total amount of income from real estate rental and business income for each year shall be deemed as follows:

1. Purchase price (excluding the purchase enjoy and the purchase discount) of the raw materials for the commodities or products sold and the incidental expenses thereto. In this case, the original purchase price and incidental expenses thereto shall be applicable, if the relevant business operator has consumed such ones for a business use, as have been purchased for other purposes;

Article 143 (Determination and Revision through Estimation)

(1) The term “reasons prescribed by the Presidential Decree” in the proviso of Article 80 (3) of the Act means the cases falling under any of the following subparagraphs:

1. Where necessary account books and documentary evidence are missing or important parts are incomplete or false in the calculation of the tax base;

2. Where the contents of the entry are obviously false in light of the market price, various charges, etc. of the facilities, the number of employees, raw materials, commodities, commodities, or products;

[Supreme Court Decision 2007Du2845 [12]

1. The plaintiffs' appeal is dismissed.

2. The costs of appeal shall be borne by the Plaintiff.

The judgment of the first instance is revoked. The defendant revoked the disposition of imposition of KRW 196,148,310 of global income tax for the year 2002 against the plaintiff on April 6, 2004 (the defendant reduced the purport of the claim and appeal in the first instance court by reducing and correcting the imposition of KRW 196,148,910 of global income tax for the year 202 (the defendant reduced the imposition of KRW 255,980,70 on November 9, 2006).

1. Details of the disposition;

The following facts are not disputed between the parties, or may be acknowledged by the overall purport of the pleadings in each entry in Gap evidence 1, Eul evidence 4-1 to 34, Eul evidence 1, Eul evidence 3, Eul evidence 6-1 to 5, Eul evidence 7-1, Eul evidence 7-2, and Eul evidence 9.

가. 원고는 1999,3,29.부터 서울 ○○구 ○○동 ○○○에서 '●●쥬얼리'라는 상호로 액세서리 제조업을 영위하고 있는데, 1999.6.9.경부터 2003.2.28.까지 김◎◎를 경리직원으로 고용하였다.

나. 김◎◎는 2002년 7월 중순경 부가가치세를 환급받아 이를 횡령할 목적으로, 원고의 거래처인 '◇◇캐스팅' 대표 연◆◆ 작성의 세금계산서 1장을 변조한 것을 비롯하여 15회에 걸쳐 2002년 제 1기분 세금계산서 15장을 변조하고 이를 팩스를 이용하여 ○○○세무사 사무실에 제출하였고, 2002년 10월 중순경 27회에 걸쳐 2002년 제2기분 세금 계산서 27장을 변조하여 같은 방법으로 이를 위 세무사 사무실에 제출하였다.

C. The Plaintiff filed a final return on the tax base of global income tax for the year 2005 via the above ○○ Certified Tax Accountants, and reported and paid the global income tax amount of KRW 22,078,416,416, by calculating the total amount of income as KRW 1,823,750,99, as KRW 1,710,749, as necessary expenses, as KRW 113,01,609, as global income amount, as KRW 109,161,169, as global income amount.

The necessary expenses are calculated by including the total value of KRW 55,00,053,00,053, as stated in Chapter forty-two of the tax invoice altered as above (hereinafter referred to as the tax invoice in this case).

D. On April 6, 2004, the Defendant: (a) denied the inclusion of necessary expenses for KRW 554,727,00 within the scope of the supply value by deeming the instant tax invoice as a processed tax invoice issued without a real transaction; and (b) subsequently imposed and notified the global income tax amount of KRW 255,980,70 (the amount obtained by deducting the tax amount of KRW 22,078,416 from the total determined tax amount of KRW 278,059,116) for the global income tax for the year 202; (c) recognized the disposition of global income tax as necessary expenses, and subsequently reduced and corrected the said disposition of global income tax to KRW 196,148,910 for the said amount of tax (hereinafter “instant disposition”).

2. Whether the instant disposition is lawful

A. The plaintiffs' assertion

(1) The proviso of Article 80 (3) of the Income Tax Act and Article 143 (1) of the Enforcement Decree of the Income Tax Act provide that "in calculating the tax base, where necessary account books and documentary evidence are not available or important parts are incomplete or false, an estimated investigation of the amount of income shall be determined." The disposition in this case is erroneous in failing to comply with the aforementioned provision even though the global income tax should be determined and revised by estimation.

(2) The Kim Mandong Co., Ltd., purchased goods necessary for the Plaintiff’s business from the customer and paid the purchase price, but did not receive the purchase tax invoice, thereby making the instant tax invoice altered in order to conceal it. Of the total purchase price of the said tax invoice that the Defendant denied inclusion of the necessary expenses in the necessary expenses, KRW 233,425,021 out of the total purchase price of the said tax invoice, which was KRW 554,727,00,00, which was actually paid for the Plaintiff’s business, should be recognized as necessary expenses. Nevertheless, the Defendant recognized only KRW 128,795,00 among them, and calculated the Plaintiff’s global income by denying the remainder of the necessary expenses, is in violation

(b) Related statutes;

It is as shown in the attached Table related statutes.

C. Determination

(1) The tax base and tax amount of global income tax shall, in principle, be determined by the actual amount revealed by the field investigation method, and it shall be exceptionally permitted only when there is no taxpayer’s account books or documentary evidence, etc. or when there is no other way to disclose the actual amount of income by the tax authorities without the credibility of the important part being omitted or falsely recorded. Thus, even if the account books or documentary evidence kept and kept by the taxpayer included some false parts, if the tax base can be calculated based on the clear fact that the remainder except for such parts is the materials that correspond to all facts, the tax base and tax amount shall be determined by the method of the field investigation and shall not be determined by the method of the additional investigation (see Supreme Court Decision 95Nu6809, Jan. 26, 196). In addition, the reason that the taxpayer wants to investigate and determine by the method of estimation cannot be deemed as satisfying the requirements for estimated taxation (see Supreme Court Decision 95Nu2241, Aug. 22, 195).

The Plaintiff voluntarily filed a final return on the tax base of global income tax in 2002 with the instant tax invoice and other documentary evidence. When it was found that the instant tax invoice was falsely prepared without real transaction, the Defendant denied inclusion of necessary expenses equivalent to the purchase amount in the relevant tax invoice and imposed global income tax, and then additionally recognized the amount of KRW 128,795,000 as necessary expenses other than the initially reported necessary expenses, and did not add the amount other than the total revenue amount reported by the Plaintiff as the total revenue amount, as seen earlier. Meanwhile, there is no evidence to view that the details of the remaining account books and other documentary evidence other than the instant tax invoice prepared by the Plaintiff by the Plaintiff in falsity are obviously false in light of the facility size, number of employees, raw materials, goods, or products market price and various charges of the Plaintiff’s business operated by the Plaintiff. Rather, in light of the fact that the Plaintiff voluntarily filed the tax invoice, the Defendant did not follow the method of estimated tax base and tax amount but did not constitute an unlawful disposition based on the remaining account books other than the instant tax invoice. Therefore, the Plaintiff’s allegation is without merit.

(2) In the administrative litigation seeking revocation of taxation on the ground of illegality of taxation, in principle, the tax authority bears the burden of proving the legality of taxation and the existence of taxation requirements. As such, in principle, the customs authority bears the burden of proving necessary expenses that constitute the basis for determining taxable income. However, since necessary expenses are not only favorable to the taxpayer, but most of the facts constituting the basis for necessary expenses are located within the controlled area of the taxpayer, and it is difficult for the tax authority to prove them. Therefore, if it is reasonable to have the taxpayer prove the burden by taking into account the difficulty of proof or equity between the parties, the necessity of proof should be returned to the taxpayer. Therefore, the tax authority should have the burden of proving the burden of proof to the extent that it is reasonable for the taxpayer to prove that some of the expenses reported by the taxpayer is not real expenses, and the taxpayer has proved that the use of the expenses claimed by the taxpayer and the other party to the payment were false. If the taxpayer claimed that there was another expense required for authorization on the same amount as the amount of expenses depending on the details of the return, the tax authority should have to prove all other expenses such other expenses.

The Plaintiff asserted that the total amount of KRW 233,425,021, which the Defendant spent without the receipt of purchase tax invoices in 2002, including the part additionally recognized as necessary expenses, should be recognized as necessary expenses. However, it is insufficient to recognize that the result of the fact-finding on the Plaintiff’s new bank head of this court and KRW 128,795,000, which the Defendant recognized as necessary expenses, was actually spent as necessary expenses, and there is no other evidence to acknowledge otherwise, the calculated global income amount, which is the basis of the instant disposition, is in violation of the substance over form principle or the principle of trust and good faith.

2. Conclusion

Therefore, the plaintiff's claim of this case shall be dismissed as it is without merit, and the judgment of the court of first instance is just in its conclusion, and it is so decided as per Disposition by the plaintiff.