National High Court Decision 2007Du3874 ( December 26, 2007)

evidence of the processing transaction certificate prepared in the course of the tax investigation

If a person liable for duty payment receives a written confirmation of processing transaction from a taxpayer in the course of a tax investigation, such written confirmation shall not be readily denied the value of evidence unless there are special circumstances that make it difficult to take the written confirmation as evidence for specific facts due to a lack of the content thereof, etc.

The contents of the decision shall be the same as attached.

Article 13 (Real Taxation under Framework Act on National Taxes)

Article 17 (Payable Tax Amount)

1. The plaintiff's claim is dismissed.

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

The Defendant’s imposition of value-added tax of KRW 4,006,720 for the first term portion of 2002 against the Plaintiff on March 2, 2007 (to be deemed to be a clerical error in the statement on December 26, 2007), value-added tax of KRW 20,537,160 for the second term portion of 202, value-added tax for the first term portion of 2003, KRW 10,311,150 for the second term portion of 203, KRW 3,001,630 for the second term portion of 203, and KRW 58,801,380 for the global income tax of KRW 26,738,70 for the second term portion of 203, respectively, shall be revoked.

1. Details of the disposition;

The following facts are not disputed between the parties, or may be acknowledged by comprehensively taking into account the whole purport of the pleadings in each entry in Gap evidence 1, 2, 3, Eul evidence 1, 3-1 through 4, Eul evidence 4-1, 2, 5-1 through 4, Eul evidence 6-1, 2, Eul evidence 10, Eul evidence 14, 15-1, and 2:

A. Nauk-dong ○○○-1 (hereinafter “○○○-1”)’s name in its business registration. In filing a return of the global income tax for 2002 and 2003 as well as the global income tax for 2002 and 2002 and 2003, the sum of the supply value of KRW 40,000 from the 2-year purchase tax invoice for 2000,000 and KRW 30,000,000 (hereinafter “○○○ Unemployment”) was the aggregate of the supply value of KRW 40,00,000 from the 2-year purchase tax invoice for 200,000 and KRW 30,00,000,000 (hereinafter “○○○-1”) was the aggregate of the supply value of each of the above 3-year purchase tax invoice for 20,500,000 and KRW 30,000,00,000 (hereinafter “the above purchase tax invoice”).

B. As a result of the tax investigation conducted by the Defendant on the non-party company, the purchase tax invoice of this case is 19,636,00 won for SD Construction and construction services of 25,454,00 won for 19,636,00 won for 202 period of 202 period of 200, and the above value-added tax and global income tax are not included in the above value-added tax base and the corresponding global income tax amount, and the omitted value is not included in the above value-added tax base and the corresponding global income tax base, and the input tax amount according to the purchase tax invoice of this case is deducted from the input tax base and the corresponding global income tax amount, and the purchase amount is not included in the amount of 30,71, value-added tax, 214, value-added tax for 200, 202 period of 204, 306, 204, 2064, 206, 207, 3636, 20646, 206

C. Accordingly, on August 10, 2006, the Director of the National Tax Tribunal filed a lawsuit seeking the cancellation of the previous disposition of this case with the Seoul Administrative Court 2006Guhap28833 on August 10, 2006. The defendant judged that Na○ is only the title in the business registration of the non-party company, and that the actual business is the husband of Na○dong, and that the actual business is the husband of Na○dong, and revoked the previous disposition of this case on March 3,

D. On March 2, 2007, based on the facts stated in the above paragraph (b) above, the Defendant issued a correction and notification of the Plaintiff on March 2, 2002 value-added tax of KRW 4,006,720, value-added tax of KRW 20,537,160, value-added tax of the second quarter of 2002, value-added tax of KRW 10,31,150, value-added tax of the first quarter of 2003, KRW 3,001,630, global income tax of KRW 58,801,380, and global income tax of KRW 26,738,700 for the second quarter of 203 (hereinafter “instant disposition”).

E. On September 21, 2007, the Plaintiff filed an appeal with the National Tax Tribunal on the instant disposition, but was dismissed on December 26, 2007.

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

In fact, the Plaintiff, as stated in the purchase tax invoice of this case, has not only been actually traded as well as only the claim for construction cost without receiving the construction cost as to ○D Construction and ○○do Construction, and also it is impossible to collect it. As such, it should be included in necessary expenses as bad debt. The Plaintiff’s total labor cost of KRW 437,288,00, which was omitted at the time of filing the global income tax return should be included in necessary expenses and calculated the global income tax accordingly. However, the instant disposition

(b) Related statutes;

Article 13 (Real Taxation under Framework Act on National Taxes)

Article 17 (Payable Tax Amount)

Article 21 (Determination and Correction of Value-Added Tax Act)

Article 21 (Rectification of Value-Added Tax Act)

Article 27 (Calculation of Necessary Expenses)

Article 80 (Rectification and Determination of Value-Added Tax Act)

Article 55 (Calculation of Necessary Expenses for Real Estate Rental Income, etc.)

(c) Fact of recognition;

The following facts may be acknowledged by comprehensively taking account of the following facts: (a) Nos. 6, 7, 10, and 11-1, 1, 2, 3, 14, 15, and 16-1, 1, 15, 2, 11, 11, and 12-1, 2, 13-1, 2, 3, 14, 15-1, 16-1, 3, 16-1, 3, 17-1, 4, 18-1, 3-1, and 18-1, and 18-3 of the evidence; and (b) the purport of the whole social arguments as to the result of each of the △△△△ Bank's ○○ branch, ○○ branch, ○○ branch, ○○ branch, ○○ branch, ○○ branch, ○○ branch, ○○ branch, ○○ branch, and ○○○ branch.

(1) The Defendant obtained information that ○○ Company, ○○ Unemployment, and ○○○ Company issued tax invoices including the instant purchase tax invoices, and conducted a tax investigation on the non-party company, and found that the non-party company provided construction services of KRW 19,636,00 during the first period of 202 to ○D Construction, and 25,454,000 during the second period of 2002 to ○○ Construction, and omitted a report thereon. In addition, the Defendant rendered the instant disposition on the grounds that the transaction according to the purchase tax invoices of this case (hereinafter “the instant purchase transaction”) was conducted on the non-party company’s main type of business, and on the grounds that it was confirmed that the transaction was conducted on the non-party company’s main type of business and on the basis that it was conducted on the non-party company’s product (e.g., a waterproof and confecting agents, levis).

(2) On July 8, 2004, the Plaintiff: (a) from around 2002, when undergoing an investigation by a tax official belonging to the Defendant, etc. from around 1, 2002, trading with ○○ Company, ○ Company, or ○○ Company about the purchase from ○○ Unemployment? The actual transaction with ○○ Company is whether or not the actual transaction details are required or not; (b) the transaction with ○○ Company, ○○○ Company, etc., has been used in the construction site; and (c) the tax invoice and the passbook transfer are also known to the effect that the ○○○○○ Company, ○○ Company, and ○○ Company, etc., would have been using in the construction site; (d) some other companies would have been using in the construction industry, but some other companies would have been using in the construction industry; and (e) most of the items related to purchase were asked to answer the questions that it does not comply with the Committee’s actual transaction details on the sales contract? The Plaintiff did not make an answer to the questions that it would not present.

(3) On January 1, 2004, the head of the Gangnam District Tax Office issued a false tax invoice of KRW 2,359,190,000, including three copies of tax invoices of KRW 40,000,000 for non-party companies during the second period of 2002, and notified the Defendant of the measure taken on March 11, 2004 as data on the Seoul Gangseo-dong Police Station and as data on taxation data. In particular, according to the above findings, it was confirmed that the purchase amount of KRW 2,359,190,00 for the non-party companies was actually nonexistent.

(4) On February 17, 2004, the head of the Songpa District Tax Office issued a false tax invoice of KRW 3,610,604,000, including the issuance of three tax invoices of KRW 40,000 to the non-party company during the second period of 2002, and notified the defendant of the measure taken on February 17, 2004 as data, and as a taxation data. In particular, according to the above findings, the head of the Songpa District Tax Office presented a tax invoice of KRW 28,00,000 to the transaction amount with the non-party company and argued that the transaction amount with the non-party company was the actual transaction, but it did not comply with the request for the original transaction, although it was confirmed that the relevant account did not exist."

(5) On December 2003, the head of the Gangnam District Tax Office conducted a tax investigation on the ○○ Commercial among the Plaintiff’s purchasing places. On the other hand, in 2003, the head of the Gangwon District Tax Office: (a) prepared and submitted 7 copies of the final return of different contents received under the name of the ○○ commercial company, excluding one copy reported directly by the representative of the ○○ commercial company among the seven parts of the final return of the 1st half of the 2003 value added tax; and (b) notified the Defendant of 60,500,000 won sales tax invoice for the non-party company of the ○ commercial company as taxation data by stating that the total value of supply for the non-party company’s 60,500,000 won was issued by the ○ commercial company; and (c) subsequently, determined that the value-added tax was also processed by verifying that the ○ commercial company did not report on three copies of the purchase tax invoice for the second half period of 2003.

(6) Meanwhile, according to the Plaintiff’s non-deposited account submitted as evidence for the purchase transaction of this case at the time of the tax investigation, the non-party company deposited KRW 56,00,000 with the account of ○○ Company (Seoul Metropolitan Government ○○○ Bank Branch A) on March 11, 2003, and KRW 28,000,000 with the account of ○○ Unemployment on March 12, 2003, and KRW 56,000,000 with the account of ○○ Commercial (○○ Bank ○○○ branch C) on August 1, 203. As a result of the tax investigation, it was confirmed that there was no deposit account of ○○○○ branch, and the amount deposited with the account of ○○○ company was more than the amount of the sales tax invoice issued by ○○ company (the supply price of KRW 40,000,00 and the amount deposited with the account of ○○ company was more than the transaction of the non-party company.

(7) On the other hand, according to the financial transactions after the deposit of the non-party company with each of the above companies, the amount deposited by the non-party company appears to have been completely withdrawn after undergoing several processes of deposit and withdrawal at several business offices on the day of deposit.

(8) As a result, the Plaintiff filed a lawsuit against the proprietor’s gambling at ○○ Construction’s Seoul Eastern District Court Decision 2002Da217848 and tried by public notice, the Plaintiff was sentenced on July 30, 200 to pay the Plaintiff KRW 5,00,00 and delay damages therefrom, which became final and conclusive around that time (the Plaintiff was awarded a subcontract for construction work to ○○○○ Construction’s business owner’s gambling, but the Plaintiff did not receive any payment of the said money. Rather, the Plaintiff did not claim that the above money was not paid due to the obligor’s shortage of financial resources). The Plaintiff filed a lawsuit against the said employer’s gambling at ○○ Construction’s 2005Da1095, and did not receive any KRW 9,150,000 out of the amount of construction contract concluded at 100,000, and did not receive any damages for delay from the said court’s decision on July 30, 2005.

(9) With respect to each of the above companies that issued the purchase tax invoices of this case, ① ○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○ KRW 58630, supra, did not report the details of sales with Nonparty Company’s ○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○ KRW 34,594,438, and its delay damages, and caused damages to ○○○○○○○○○○○○○○○○○○○○○○○○○○○○○ KRW 2065, supra, on the ground that the above facts were alleged to have been 36000,000.

(10) Meanwhile, the details of the original global income tax return, the Defendant’s decision of correction, the amount claimed by the Plaintiff to be included in the necessary expenses as labor costs in the instant lawsuit, and the amount of income in the case where the Plaintiff received the aforementioned assertion are as follows.

Classification

Revenue amount

Necessary expenses

(Purchase Tax Invoice)

Amount of income;

Claimant Labor Cost

Upon ratification of labor cost, the amount of income;

202

Reporting

290,734,500

279,105,080 (227,879,240)

11,629,420

218,943,00

207,313,580

Correction

35,814,500

199,105,080 (147,879,250)

136,719,420

82,223,580

203

Reporting

321,960,000

229.793,984

(46,812,280)

120,166,016

218,345,00

216,178,984

Correction

321,960,000

92,166,016

126,178,984

D. Determination

(1) As to the first argument

Unless special circumstances exist, such as that if a tax authority received a written confirmation from a taxpayer that a certain part of a transaction is a processing transaction during the course of a tax investigation, such written confirmation cannot be readily denied solely for the evidence of such written confirmation, barring any special circumstance, such as where the written confirmation was forced against the intent of the originator, or it is difficult to consider it as evidence of the specific fact due to insufficient details (see Supreme Court Decision 2001Du2560, Dec. 6, 2002).

In light of the following circumstances, i.e., ① the Plaintiff’s specific confession that the purchase tax invoice in this case was due to the processing transaction in the process of undergoing the tax investigation by the Defendant, and the Plaintiff’s business experience, etc., and the Plaintiff appears to have been well aware of the meaning and importance of the confession in this case (and there is no particular circumstance to acknowledge the Plaintiff’s confession, etc.). ② As a result of the tax investigation with respect to each of the above companies that issued the purchase tax invoice in this case, it was clearly stated that the processing tax invoice was issued at the time of issuance of the purchase tax invoice in this case, and all of the accusation was filed. ③ The receipt without the account to be submitted by the Plaintiff as evidence of the actual transaction in this case is highly low in credibility in light of the content of the receipts and disbursements of funds thereafter, and rather, there is a doubt that the credibility of the receipts and disbursements in this case was not partially fabricated for the purchase tax invoice in this case. ④ However, it was judged in favor of the Plaintiff in this case.

Therefore, the above part of the plaintiff's assertion is without merit.

(2) Judgment on the second argument

Article 55 (1) 16 of the Enforcement Decree of the Income Tax Act provides for the bad debt amount of the necessary expenses corresponding to the total income amount of the business income in each year. The necessary expenses here refer to the expenses directly related to the income accrued, so it requires that the credit which can be included in the bad debt amount, which is the necessary expenses, is directly related to the income accrued. On the other hand, in light of the purport of Article 55 (2) of the Enforcement Decree of the Income Tax Act, the bad debt amount included in the necessary expenses, in the calculation of the income amount, is limited to the credit amount objectively confirmed that it was impossible to recover in the year it was included in the necessary expenses, and even if the debtor discontinued his business and escaped, it cannot be deemed that the whole debt amount falls under the bad debt amount without confirming the remaining assets of the person (see Supreme Court Decision 96Nu1418, Nov. 28, 1997), and there is no other evidence to acknowledge that the facts of the plaintiff's ○do construction and ○D construction are objectively confirmed, and there is no reason for the plaintiff's own loan.

(3) Judgment on the third argument

The burden of proof on the legality of taxation is imposed on the tax authority, so in principle, the tax authority bears the burden of proof on the necessary expenses that are the basis of the determination of taxable income. However, the deduction of necessary expenses is not only favorable to the taxpayer, but most of the facts that are the basis of necessary expenses are located within the control area of the taxpayer and thus, the tax authority is difficult to prove the burden of proof, so it is reasonable to have the taxpayer prove the burden of proof in consideration of difficulty in proof or equity between the parties (Supreme Court Decision 91Nu109 delivered on July 28, 192). In addition, it is difficult to obtain the reasons why the Plaintiff omitted a large amount of labor cost of 437,28,000 won when the return of global income tax was filed by the Plaintiff. In particular, in light of the fact that the resident registration certificate submitted by the Plaintiff and the details of labor cost payment (No. 12-2, 4) do not coincide with each other, there is no evidence to acknowledge that the Plaintiff did not have any other evidence.

Therefore, the plaintiff's assertion on this part is without merit.

3. Conclusion

Therefore, the plaintiff's claim of this case is dismissed as it is without merit. It is so decided as per Disposition.