Supreme Court-2015-Du-52326 ( April 15, 2016)

In accordance with the request of the Board of Audit and Inspection, the taxation disposition for which notice of taxation was omitted is illegal.

Preliminary notice of taxation has the nature of a preventive remedy system protecting the rights and interests of taxpayers. Therefore, even if the Board of Audit and Inspection demands, it is against the procedural rights of taxpayers who did not give the opportunity of pre-assessment review.

Article 81-15 of the Enforcement Decree of the Framework Act on National Taxes: Scope and procedures for pre-assessment review

2016Nu41264 Revocation of Disposition of Imposing corporate tax, etc.

OOOO Co.

O Head of tax office

September 30, 2016

October 28, 2016

1. Revocation of a judgment of the first instance;

2. The Defendant’s disposition of imposition of KRW 0,00,000,000 (including additional tax of KRW 000,000,000) for the portion of corporate tax for the year 2007 against the Plaintiff on August 10, 2012, the corporate tax for the year 2008 (including additional tax of KRW 00,000,000) for the portion of corporate tax for the year 2008, the corporate tax for the year 2009 (including additional tax of KRW 00,000,000) for the portion of corporate tax for the year 209 and the amount of corporate tax for the year 200,000,000 for the portion of corporate tax for the year 2010 (including additional tax of KRW 00,000,000) shall be revoked.

3. All costs of the lawsuit shall be borne by the defendant.

The same shall apply to the order.

1. Quotation of judgment of the first instance;

The reasoning for this Court’s explanation concerning this case is as follows: (a) by adding “the relevant Acts and subordinate statutes added” to the “related Acts and subordinate statutes” attached to the judgment of the court of first instance; and (b) by adding “the judgment on the plaintiff’s argument of the trial,” under Article 8(2) of the Administrative Litigation Act and the main text of Article 420 of the Civil Procedure Act, it shall be cited as it is.

2. Judgment on the plaintiff's assertion of the trial

A. The plaintiff's assertion of the trial

(1) The Defendant omitted the notice of taxation and rendered the instant disposition, which was unlawful due to the procedural defect that deprived of the Plaintiff’s opportunity for pre-assessment review.

(2) The instant disposition was made in violation of the principle of prohibition of reinvestigation under Article 81-4(2) of the Framework Act on National Taxes.

(3) The instant subsidization costs are directly related to the sales proceeds of sheet sales, and are disbursed to promote sales to many unspecified customers who have purchased paint more than a certain amount, and thus constitute sales incidental expenses. Such promotional act is a general commercial practice before the Medical Devices Act was amended on May 27, 2010, and cannot be deemed as going against social order, and thus, the instant subsidization costs may be included in deductible expenses.

B. First, we examine the Plaintiff’s first argument.

(1) The main sentence of Article 81-15(1) of the Framework Act on National Taxes provides that "any person who has received any of the following notices may request a review of legality of the notification to the head of a tax office or the director of a regional tax office who has received the notification within 30 days from the date of receipt of the notification (hereinafter referred to as "pre-assessment review" in this Article)." In addition, Article 81-12 provides that "a written notice of the results of a tax investigation under Article 81-12 ( Subparagraph 1)" and "pre-announcement of taxation prescribed by Presidential Decree" (Article 81-15(2) provides that "in any of the following cases, paragraph (1) shall not apply." In addition, Article 81-15(2) provides that "Where there is a reason for collection prior to the due date under Article 14 of the National Tax Collection Act or a reason for the occasional imposition under tax-related Acts" (Article 14(2)); "Where a notice of results of a tax investigation and a notice of taxation are three months or less from the expiration date."

Meanwhile, Article 63-14 (2) of the former Enforcement Decree of the Framework Act on National Taxes (amended by Presidential Decree No. 2606, Feb. 3, 2015; hereinafter the same) provides that "pre-announcement of taxation prescribed by Presidential Decree" means any of the following: "Preliminary notice of taxation to the director of a regional tax office or the director of a regional tax office according to the results of audit of the director of a regional tax office or the director of a regional tax office (including cases of taking corrective measures at the site)" (Article 81-15 (1) 2; "Pre-announcement notice of taxation to the director of a regional tax office or the director of a regional tax office according to the results of audit of the director of a regional tax office or the director of a regional tax office (including cases of taking corrective measures at the site)" (Article 81-15 (1) 2; hereinafter the same shall apply). Article 63-14 (2) provides that "pre-announcement notice of taxation, the head of a regional tax office or the commissioner of a regional tax office, upon receipt of a tax office, shall make a decision of reservation."

(2) A notice of taxation has the nature of a prior notice of a disposition to protect its rights and interests by providing taxpayers with sufficient time with an opportunity to state their opinions in the procedures such as the pre-assessment review by providing them with information on the facts investigated by the tax authority. Moreover, compared to the fact that the examination, a request for trial or administrative litigation conducted after a disposition of taxation requires a large amount of time and expenses and is insufficient for efficient remedies, the pre-assessment review system has the nature of a preventive remedy system that reduces the possibility of taxing illegal and unreasonable dispositions and reflects their arguments before a disposition of taxation. Such prior notice of taxation and the pre-assessment review system have the nature of a preventive remedy system that enables taxpayers to express their opinions.

As the Framework Act on National Taxes was amended by Act No. 5993 on August 31, 199, it was introduced for the improvement of taxpayer's rights and interests and the advancement of tax justice. The pre-assessment review, which can be claimed by the person who received the pre-announcement of taxation, is also subject to review of illegal and unfair dispositions, and the scope of remedy for infringement of rights is wide compared to the ex post facto remedy procedures such as administrative litigation.

Unless there exist special circumstances, such as where the Framework Act on National Taxes and the former Enforcement Decree of the Framework Act on National Taxes do not adopt a prior notice of taxation or provide for an exception for taxation immediately without undergoing the prior notice of taxation without undergoing the prior notice of taxation, if a tax authority imposed a tax without giving taxpayers an opportunity to pre-assessment by failing to give taxpayers an opportunity to pre-assessment of taxation, it constitutes a violation of a taxpayer’s procedural right, and thereby, constitutes a case where there exists a serious procedural defect that can be controlled by denying the validity of the taxation disposition, and thus, such taxation disposition is unlawful.

In addition, each subparagraph of Article 81-15(2) of the Framework Act on National Taxes provides that where there is a need for urgent taxation, or the tax authority is bound to impose a taxation in criminal procedure, it may not undergo a pre-assessment review. In addition, even where the tax authority imposes a taxation in accordance with the audit results by the Board of Audit and Inspection’s order or request for correction, the mere reason between the government agencies cannot be deemed as a ground to permit the infringement of procedural rights by the taxpayer, and the purport of the tax authority’s order or request for correction is not to urgently impose a taxation by disregarding the procedural rights of the taxpayer. Thus, the aforementioned reason does not constitute an exception for taxation by omitting a pre-assessment notice by the tax authority or by granting the taxpayer an opportunity to impose a pre-assessment notice (see

(3) In light of the legal principles as seen earlier, in this case where there is no evidence that the Defendant notified prior notice of taxation or provided the Plaintiff with an opportunity to pre-assessment review while rendering the instant disposition, even if the Defendant rendered the instant disposition in order to comply with the Board of Audit and Inspection’s request for correction of audit results, it cannot be deemed as an exception for taxation without notice of taxation or without giving taxpayers an opportunity to pre-assessment review, and thus, the instant disposition is unlawful.

2. Conclusion

If so, the plaintiff's claim is reasonable, and the judgment of the court of first instance is unfair with different conclusions, so the plaintiff's appeal is accepted and the judgment of the court of first instance is revoked, and the disposition of this case is revoked

It is so decided as per Disposition by the assent of all participating Justices.