The propriety of the disposition notified of the change in the amount of income by recognizing the representative as being leaked to the omission in the sales of the corporation.

Where a corporation fails to enter its sales in the account book despite the fact of sales, the total amount omitted from sales shall be deemed leaked, except in extenuating circumstances, and in such cases, the special circumstance that the omission in sales is not leaked to others shall be proved by the corporation's side that asserts such omission.

Article 67 of the Corporate Tax Act

1. The plaintiff's claim is dismissed.

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

The Defendant reverted to the Plaintiff on August 10, 2015, KRW 115,836,143, and KRW 2011, reverted to the Plaintiff for the year 2010.

84,649,614 won, 528,242,985 won for the year 2012, 346,65,839 won for the year 2013, and 364,941,542 won for the year 2014 shall be revoked.

1. Details of the disposition;

A. The Plaintiff is a company that produces building materials, processes and sells fire doors, etc., and the largest ○○ is the Plaintiff’s representative director.

B. From March 12, 2015 to June 10, 2015, the Defendant conducted a tax investigation with respect to the Plaintiff, and filed corporate tax returns for the business year from 2010 to 2014, and confirmed the Plaintiff’s omission of sales by means of not issuing a tax invoice to the transaction partner if the Plaintiff received the transaction amount by using the personal passbook in the name of the representative director, the personal passbook in the name of the representative director (hereinafter “personal passbook in the representative director”) as listed in the table 1 below (the omitted sales amount as listed in the table 1). However, the Defendant issued a processed tax invoice equivalent to a part of the omitted sales amount (the omitted sales amount as listed in the table 1.2), and omitted reporting the reduction of sales amount of KRW 2,154,821,676, and reporting the total amount of expenses such as personnel expenses actually paid.

C. Accordingly, on August 6, 2015, the Defendant: (a) on the aggregate of the remaining amount (excluding the amount paid as expenses from among the sales omitted at the time of filing a corporate tax return for the business year from 2010 to 2014; (b) and the value-added tax amount on the total omitted sales (attached Table 2-3); (c) pursuant to Article 67 of the Corporate Tax Act and Article 106(1)1 proviso of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 26981, Feb. 12, 2016; hereinafter the same shall apply), the said amount was leaked to the Plaintiff, but the said amount was unclear; and (c) the amount was disposed of as bonus to the Plaintiff below 15,836,143 won for the year 2010,84,649,614 won for the year 2012,524,298, 2013; and (d) the amount of income accrued to the Plaintiff.

D. On October 31, 2015, the Plaintiff appealed to the Tax Tribunal, but the appeal was dismissed on March 28, 2016.

Facts without any dispute arising in recognition, Gap's 1 through 3 evidence, Eul's 1 through 14 evidence (including each number; hereinafter the same shall apply), and the purport of the whole pleadings.

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The instant disposition is unlawful for the following reasons, and thus must be revoked.

1) The Defendant deemed that all the sales omitted in the Plaintiff’s account books were reverted to the representative director and disposed of the income. However, the omitted amount was deposited by the representative director’s personal account book and again deposited in the Plaintiff’s account book, and thus, it cannot be presumed that it was leaked, and the Defendant must prove the fact of outflow from the company. However, the evidence submitted by the Defendant alone does not prove that the omission amount was discharged from the company.

2) Although the Plaintiff additionally disbursed a total of KRW 284,197,00,00 as personnel expenses from 2010 to 2014, the Plaintiff did not report the expenditure of expenses in order to conceal the omission of sales at the time of filing a corporate tax return. The above expenses are actually paid, and thus, should be deducted from the amount recognized as the representative director.

B. Relevant statutes

The entries in the attached Table-related statutes are as follows.

C. Determination as to the assertion that the omitted amount of sales was reserved in the company

1) Where a corporation fails to enter its sales in the account book despite the fact of sales, the total amount omitted from sales shall be deemed to have been leaked out, barring any special circumstances. In such a case, the special circumstance that deeming the omission in sales was not leaked out of the company shall be proven by the corporation asserting the omission in sales (see, e.g., Supreme Court Decisions 93Nu630, May 14, 1993; 2001Du2560, Dec. 6, 2002).

2) In light of the above legal principles, comprehensively taking account of the following circumstances revealed from the statements in Gap evidence Nos. 4, 5, 7, and 15 as seen earlier, the amount omitted in sales recognized by the defendant was leaked out of the company. However, there is no special circumstance to deem that the evidence submitted by the plaintiff alone was not leaked out of the company. The plaintiff's assertion on this part is without merit.

① Around June 2015, the Plaintiff’s representative director, who was subject to a tax investigation by the Defendant, sold door doors, etc. to the wholesale and retail business operators related to fire doors, and prepared a confirmation document stating that the sales proceeds were received by the representative’s personal passbook and corporate passbook and omitted in the sales report total of KRW 4,664,208,311, and that the total of KRW 929,977,720 was omitted in the sales report. Moreover, the Plaintiff prepared a confirmation document stating that the total of KRW 1,75,297,57,572 and the total of KRW 734,089,063 are KRW 1,74,000,000 in the processing tax invoice issued in excess of the actual sales amount. In addition, in this case, the Plaintiff did not enter the omitted sales amount in the Plaintiff’s account book, barring any special circumstances. Therefore, as long as the sales proceeds are not entered in the account book pursuant to the above legal doctrine, the above omitted sales amount should be deemed leaked.

② Examining the process by which the Defendant revealed the Plaintiff’s omission of sales, the Plaintiff did not find the omitted sales amount in preparation for double books and accounting books kept separately by the Plaintiff, but confirmed that the relevant omitted sales amount was not recorded in the Plaintiff’s account book as a result of the investigation of actual transfer of the transaction details as to the cases suspected of being the sales amount among the transaction details deposited in the Plaintiff’s personal account book and the Plaintiff’s corporate account book from 2010 to 2014.

③ If the omitted amount of sales was not leaked as the Plaintiff’s assertion, but the company’s double account book was appropriated in the company’s double account book (in this case, only the Plaintiff asserts that such double account book exists, but does not specifically assert how the amount corresponding to the omission amount of sales revealed by the Defendant is included in double account book). At the time of the tax investigation, the Plaintiff was able to prevent the disposition of income against the representative director by submitting it. The Plaintiff filed an application for the suspension of tax investigation for collecting and arranging explanatory materials two times on March 23, 2015 and April 14, 2015. The Plaintiff did not submit a book or objective data to the Plaintiff even after the resumption of the tax investigation. Moreover, even if the tax investigation was conducted thereafter, the Plaintiff did not submit a double account book while filing a request for a tax trial on the instant disposition, and only submitted a account book for the 2014 year account book with the ○○ Industries.

④ Even if the Plaintiff’s double account book exists, in light of the fact that the maximum amount of the transaction amount deposited by the customer from 2010 to 2014 was set aside in cash in an amount equivalent to approximately KRW 5.8 billion, it is difficult to view that the omitted amount of the transaction was actually managed as the property of the corporation, and thus, it cannot be deemed as the internal reserve.

⑤ Supreme Court Decision 2003Du15300 Decided May 12, 2005 cited by the Plaintiff is not the case of disposition of income which is deemed to have been paid as prescribed by the Corporate Tax Act, but in the case where the tax authority imposed income tax on the representative on the ground that the income was actually reverted to the representative, the tax authority must prove that the income was actually reverted to the representative, and it is not the legal principle applicable to the case where the income was disposed of as a result of the recognition under the Corporate Tax Act.

6) The Plaintiff asserts to the effect that the personal passbook of this case was entered in the Plaintiff’s double account book and under the management of the Plaintiff Company, and thus, it should be viewed as the Plaintiff’s extra account book. However, as seen earlier, it is difficult to view that the Plaintiff managed the above individual passbook and deposit as the property of the corporation, such as from time to time in the above individual account book as to whether there exists double account book and whether it is credibility or not. Furthermore, in order for the bank account of the Plaintiff to become an extra asset of the corporation, the actual balance should be higher than the balance in the account book. In light of the above evidence, the Plaintiff appears to have counted the balance in the account book in excess of the actual balance, and thus, the Plaintiff’s above assertion cannot be accepted even in light of this point.

7) As a result of the tax investigation conducted by the Plaintiff, the Defendant deemed that there was an increase in the income amount and net sales in the pertinent year based on the amount stated in the “amount of income disposition” as stated in the table 2 of this table as above, corrected the tax base of corporate tax and value-added tax, and subsequently issued a disposition to correct each corporate tax and value-added tax in 2010 through 2014 to the Plaintiff on August 2015, but did not raise any objection thereto.

3) The Plaintiff asserts to the effect that the omitted amount of sales should be proved to be included in KRW 902,261,778 among the short-term loans of KRW 2,550,261,778 in 2014.

However, the plaintiff's above assertion cannot be accepted for the following reasons.

① At the time of undergoing a tax investigation by the Defendant, the Plaintiff did not submit a standard balance sheet (Evidence 11) and a ledger of accounts (Evidence 12) even after filing the instant lawsuit. On January 13, 2017, the pleadings of the instant case were concluded and the pleadings of February 23, 2017 were concluded, and on February 23, 2017, the Plaintiff started to make the aforementioned arguments upon submitting the standard balance sheet and the ledger of accounts. Moreover, the president of each account (Evidence 12) submitted by the Plaintiff submitted by the Plaintiff was deposited in advance on December 31, 2014, and there is no content that the Plaintiff’s total amount of income adjustment in the year 2014 is subject to a tax adjustment.

② As seen earlier, it is difficult to view that the maximum amount claimed by the Plaintiff was actually appropriated in the Plaintiff’s provisional account or managed as the Plaintiff’s assets, since the transaction amount deposited by the Customer from 2010 to 2014 was deposited in cash in an amount equivalent to approximately KRW 5.8 billion.

③ Even if the Plaintiff alleged that cash, the counterpart account, was opened for the settlement of accounts by appropriating the proceeds received by the Plaintiff from the sale to the provisional account, which is a temporary account where the contents of the sales have not been confirmed, and thus, the account was opened for the short-term loan transactions from the representative director, and if the contents of the provisional account were to be kept for the short-term loan transactions from the representative director, and it is found that such transactions do not involve a change or increase in the net assets of the corporation and thus are irrelevant to the corporation’s profits or expenses, barring special circumstances, such as the processed debt under the name of the company, which is not planned to make a counter-consumptive against the corporation, the omitted amount of the sales should have already been entered as the corporation’s profits and should have been attributed to the representative director, who is the other party to the above provisional account (see Supreme Court Decision 200Du3726, Jan. 11, 202). However, even according to the Plaintiff’s assertion, the amount of the above provisional loan transactions should be deemed to be collected to the Plaintiff 27.

D. Determination as to the assertion that additional expenses should be deducted from the amount recognized and paid.

1) If a taxpayer finds any revenue of omitted sales, etc. in filing a return due to the return of tax base of corporate tax, etc., the taxation office may include the omitted revenue in the gross income, and if the taxpayer has omitted the return of revenues to be included in the gross income, not only the omission of the return of revenues to be included in the gross income due to the return of tax base, etc., but also the expenses to be included in the deductible expenses, the existence and the amount of such expenses shall be determined by the verification by the claimant for the inclusion of the expenses (see, e.g., Supreme Court Decisions 91Nu12912, Mar. 27, 1992; 85Nu104, Oct. 13, 1987).

2) In light of the aforementioned legal principles, the following circumstances revealed by the evidence revealed in the instant case’s health team and the aforementioned evidence, namely, ① evidence Nos. 10, 13, and 15 submitted by the Plaintiff was unilaterally prepared by the Plaintiff, and the time and process of preparation is unclear, and the Plaintiff cannot be deemed to have presented the above materials at the time of the tax investigation. As such, the above evidence is difficult to believe as it is. ② As seen earlier, the maximum amount of ○○ was deposited in cash in the business partner from 2010 to 2014 on a white sum of 5.8 billion won, and the said cash was again managed as the Plaintiff’s property, or the Plaintiff paid the cash at the cost of labor cost. ③ The Plaintiff’s document confirming that the labor cost omitted at the time of the tax investigation was KRW 929, 977,720, and 200, the Plaintiff’s submission of a confirmation document to the Plaintiff’s 206, supra, cannot be easily asserted by the Plaintiff as the Plaintiff’s 207.

3. Conclusion

The plaintiff's claim is without merit, and it is dismissed. It is so decided as per Disposition.