The judgment below is reversed and the case is remanded to Seoul High Court.

The grounds of appeal are examined.

1. Article 45-2(2) of the former Framework Act on National Taxes (amended by Act No. 13552, Dec. 15, 2015; hereinafter the same) provides that “When any transaction, act, etc., which served as the basis for calculating the tax base and the amount of tax in the initial return decision or rectification becomes final and conclusive as different by a ruling on the relevant lawsuit” under subparagraphs 1 through 4, and subparagraph 5 of the same Article provides that “when any cause similar to those referred to in subparagraphs 1 through 4 and prescribed by Presidential Decree occurs after the statutory due date of return of the relevant national tax becomes final and conclusive as different by a ruling on the relevant lawsuit.”

In addition, Article 25-2 of the former Enforcement Decree of the Framework Act on National Taxes (amended by Presidential Decree No. 27833, Feb. 7, 2017; hereinafter the same) provides that “any of the following cases shall be applicable” under Article 45-2(2)5 of the Act, and subparagraphs 1 through 3 of the same Article provides that “any of the following cases shall be applicable to a case where a contract related to the effect of transaction or act, etc., which served as the basis for calculating the tax base and the amount of tax, is rescinded by the exercise of the right of rescission or is cancelled by any inevitable reason that occurred after the formation of the relevant contract” under subparagraph 4 of the same Article.

In light of the structure of the relevant provisions and the significance, function, and limitation of the principle of confirmation of rights under the Income Tax Act, if it is objectively evident that the claim that caused income after the establishment of tax liability becomes impossible to recover due to the debtor's bankruptcy, etc., and that there is no possibility to realize such income in the future, it shall be the follow-up entry of the provision under subparagraph 4 of Article 25-2 of the former Enforcement Decree of the Framework Act on National Taxes, unless there are special circumstances.