[1] Whether it is legitimate to determine the tax base amount by mixing a single tax object with the on-site investigation and the estimated investigation (negative)

[2] The case holding that the taxation authority's estimation of the omission of sales for each business year of a corporation by applying the total profit ratio for the pertinent business year and it is unlawful to calculate the corporate tax base by on-site investigation of reported sales

[1] Article 66 of the Corporate Tax Act / [2] Article 66 of the Corporate Tax Act, Article 69 of the Enforcement Decree of the Value Added Tax

[1] Supreme Court Decision 88Nu6337 delivered on February 27, 1990 (Gong1990, 807) Supreme Court Decision 90Nu3140 delivered on May 12, 1992 (Gong1992, 1904) Supreme Court Decision 99Du9193 delivered on December 24, 2001 (Gong2002Sang, 395)

Plaintiff (Law Firm Han, Attorneys Kim Won-won et al., Counsel for the plaintiff-appellant)

The Director of the Pacific District Office

Seoul High Court Decision 2005Nu3587 delivered on September 30, 2005

The appeal is dismissed. The costs of appeal are assessed against the defendant.

The grounds of appeal are examined.

Inasmuch as determining the tax base by mixing a single tax object with on-site investigation and a separate investigation by estimation cannot be deemed as a taxation method recognized by the relevant Acts and subordinate statutes, such as the Corporate Tax Act and the Value-Added Tax Act, it cannot be deemed as a means of estimation for revenue partially omitted, and calculating and aggregating the tax base by the method of on-site investigation with respect to the reported revenue (see Supreme Court Decisions 90Nu3140, May 12, 1992; 9Du9193, Dec. 24, 2001, etc.).

According to the facts duly established by the court below, while correcting the corporate tax base and tax amount of the non-party corporation from 1999 to 2001, the non-party corporation estimated the omitted amount of sales for each business year corresponding to the fishery products total of 300,509,058 won which were omitted at the time of filing a corporate tax return by applying the total profit ratio for sales for the pertinent business year. With respect to sales for each business year reported by the non-party corporation, the corporate tax base was calculated by field investigation and then the difference arising from the omission of sales and the amount equivalent to the value-added tax was disposed as bonus to the plaintiff who is the representative of the non-party corporation, and the disposition of imposition of the global income tax in this case was imposed as a bonus. The calculation of the corporate tax base is not permissible since it combined the field investigation and the estimated amount of

The lower court’s conclusion that the Defendant’s disposition of imposition is unlawful is justifiable. Therefore, the lower court did not err by misapprehending the legal principles as to on-site investigation and the mixed taxation of estimated tax.

On the other hand, the argument that, in calculating the omitted amount of purchase based on the estimation of the omitted amount of sale, the ratio of the total purchase amount to the total purchase amount or the omitted amount of sale for a single taxable year, the method of calculating the omitted amount of sale should be applied to the method of deducting the total purchase amount reported by the corporation from the total purchase amount and the sales amount calculated based on the total profit ratio of the purchase amount reported by the corporation, and that such method of mixed taxation should be allowed, since the method of calculating the omitted amount of sale is identical to the method of calculating the omitted amount

The Supreme Court precedents invoked in the ground of appeal are different from this case.

Therefore, the appeal is dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices.

Justices Yang Sung-tae (Presiding Justice)