2014Du12062. Revocation of administrative dispositions by the decision of tax investigation

Seoul High Court Decision 201

Seoul Regional Tax Office

Seoul High Court Decision 2013Nu20921 Decided August 20, 2014

February 26, 2015

The part of the lower judgment against the Plaintiff regarding the disposition of tax investigation for the business year 2010 shall be reversed, and that part of the case shall be remanded to the Seoul High Court.

The remaining appeals are dismissed.

The grounds of appeal are examined (to the extent of supplement in case of supplemental appellate briefs not timely filed).

1. As to the decision of investigation of corporate tax for the business year 2010

A. Article 81-4(2) of the former Framework Act on National Taxes (amended by Act No. 11604, Jan. 1, 2013; hereinafter the same) provides that “tax officials shall not conduct reinvestigations on the same items of taxation and the same taxable period, except in any of the following cases.” In addition, Article 81-7(1) of the former Framework Act on National Taxes provides that a tax official shall determine whether a case constitutes reinvestigations on the basis of items of taxation and the same taxable period. In addition, Article 81-9(1) provides for “tax items subject to investigation as one of the matters to be notified before commencing a tax investigation,” and Article 81-9(1) provides that a tax official may not extend the scope of a tax investigation while conducting an investigation, except in cases prescribed by Presidential Decree, such as where it is confirmed that specific suspicions of tax evasion are related to several taxable periods or other items of taxation. Furthermore, Article 81-11 of the former Framework Act on National Taxes provides that a taxpayer’s duty to make a tax return and payment in principle.

Inasmuch as the language and structure of the relevant provisions, and the same tax investigation repeated for the same tax item and taxable period may seriously infringe on taxpayers’ freedom of business and legal stability as well as may lead to the abuse of their right to tax investigation, it is necessary to be prohibited except in exceptional cases significantly contrary to the principle of fair taxation, and the legislative intent prohibiting re-audit includes the advancement of tax investigation technology. In full view of the fact that a tax official conducts a tax investigation over all items for a specific taxable period of a certain tax item, as well as conducting a tax investigation again for the same taxable period of a certain tax item, it constitutes a re-investigation prohibited under Article 81-4(2) of the former Framework Act on National Taxes, and that even if a tax official conducts a tax investigation for the same taxable period of a certain tax item, it does not change merely because it does not overlap with the content of a tax investigation by again conducting a tax investigation for only other items except for the specific items originally investigated or otherwise under Article 81-4(2) of the former Framework Act on National Taxes.

B. According to the evidence duly admitted by the lower court, the lower court rendered a tax investigation: (a) the Defendant: (b) as of July 6, 201, the tax items to be investigated by the Plaintiff; (c) as from January 1, 2006 to December 31, 201, the period of the investigation; (d) as of the matters related to the temporary special tax reduction or exemption due to the relocation of the headquarters; (e) as of December 21, 201, the scope of the investigation; and (e) accordingly, conducted the tax investigation; and (b) as of March 21, 2012, the Defendant again conducted the tax investigation to be investigated by the Plaintiff; and (e) as of January 1, 2009 to October 20, 201.

12. By the 31.31., the fact that the instant tax investigation decision and disposition were made can be known.

Examining these facts in light of the legal principles as seen earlier, the portion of corporate tax for 2010 business year in the instant disposition of tax investigation constitutes a reinvestigation prohibited under Article 81-4(2) of the former Framework Act on National Taxes, barring any special circumstance (the Plaintiff’s claim seeking revocation of corporate tax for 2009 business year portion was accepted by the lower court, and the Defendant did not appeal to the same), and the subject of the tax investigation conducted earlier was limited to the portion related to the temporary special tax reduction for relocation of the head office, and the subject of the investigation conducted earlier was excluded from the subject matter of the instant disposition

C. Nevertheless, the lower court rejected the Plaintiff’s assertion that the portion of corporate tax for the 2010 business year in the instant tax investigation disposition constitutes an illegal reinvestigation on the grounds that it does not constitute a reinvestigation prohibited under Article 81-4(2) of the former Framework Act on National Taxes even if a tax investigation is conducted again for the same tax item and taxable period. In so determining, the lower court erred by misapprehending the legal doctrine on the scope of reinvestigation prohibited under Article 81-4(2) of the former Framework Act on National Taxes, thereby adversely affecting the conclusion of the judgment. The allegation contained

In addition, Supreme Court Decision 2004Du10470 Decided January 14, 2005 cited by the court below is different and it is not appropriate to invoke the case in this case.

2. As to the disposition of tax investigation of value-added tax for the 2010 business year, the part of the value-added tax for the 2010 business year in the instant tax investigation disposition was conducted without a legitimate ground for selection as a subject of tax investigation, and thus, the allegation in the grounds of appeal in this part is alleged only in the final appeal

3. Conclusion

Without further proceeding to decide on the remaining grounds of appeal, the part of the judgment below against the plaintiff as to the disposition of tax investigation of corporate tax for the business year 2010 shall be reversed, and this part of the case shall be remanded to the court below for further proceedings consistent with this Opinion. The remaining grounds of appeal shall be dismissed. It is so decided as per Disposition by the assent of

Justices Kim Yong-deok

Justices Lee In-bok

Justices Ko Young-han

Justices Kim So-young