Cho High Court Decision 2010Du3303 ( October 28, 2011)

calculating sales on the basis of money deposited in the bank account is a objectivity on-site investigation method.

The amount deposited in the Plaintiff’s bank account is related to the sales of the Plaintiff’s bank account, and the Defendant’s calculation of sales based on this is a objective field investigation method. The amount to one million won per deposit shall not be a method of calculating the tax base calculated by dividing the balance into the actual payment, and it shall not be arbitrary and unreasonable.

Article 16 of the Framework Act on National Taxes

Article 21 of the Value-Added Tax Act

2011Guhap31536 Disposition of revocation of Value-Added Tax Imposition

Kim XX et al.

Head of Eastern Tax Office

June 12, 2012

July 19, 2012

1. All of the plaintiffs' claims are dismissed.

2. The costs of lawsuit are assessed against the plaintiffs.

The imposition of each value-added tax by the Defendant on April 1, 2010 against the Plaintiffs listed in the separate sheet Nos. 1 through 6 and the imposition of each value-added tax by the Defendant on the separate sheet Nos. 7 through 9 against the Plaintiff B and CCC shall be revoked.

1. Details of the disposition;

A. Plaintiffs KimA and OB are married couple, and Plaintiff SongCC is the husband of OB who is the female son of Plaintiff OB. The Plaintiffs jointly operate from April 1, 2004 to the KG 264-255 of Seoul Dongdaemun-gu, Dongdaemun-gu, as the trade name of 'P publicly notified telecom’ (hereinafter referred to as 'the instant public notification unit’) from January 1, 2008, and Plaintiff OB and SongCC jointly operates the instant public notification unit from January 1, 2008.

B. From January 2005 to January 2009, the Plaintiffs reported the value-added tax base and tax amount as follows.

C. From Dec. 4, 2009 to Dec. 24, 2009, the Defendant conducted a tax investigation with respect to the Plaintiffs. From Dec. 4, 2009 to Dec. 24, 2009, the Defendant: (a) during the Value-Added Tax period from Jan. 2005 to Feb. 2007, excluding the transaction amount between Plaintiff KimA and OD; (b) the transaction amount between Plaintiff KimA and OB, and the transaction amount between Plaintiff KimA and OB; and (c) the amount recognized as a high-amount fund transaction or other source; and (d) the remaining amount, among the amount deposited in the account of Plaintiff KimA and SongCC during the Value-Added Tax period from Jan. 2008 to Dec. 24, 2009, based on the list of Plaintiffs 61 to 7, each of the instant dispositions listed in the separate sheet, excluding the remaining amount of value-added tax or value-added tax, and notified each of the instant orders.

D. The Plaintiffs were dissatisfied with the instant disposition and filed an appeal with the Tax Tribunal on October 11, 2010, but was dismissed on June 28, 201.

[Reasons for Recognition] Gap evidence Nos. 1, 2, and 3 (including branch numbers; hereinafter the same shall apply), Eul evidence Nos. 1, 2, and 3, and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiffs' assertion

1) AD operates the O-Public Notice Board and the O-Public Notice Host Board. Although 000 won deposited in the O-Public Notice Board’s passbook is irrelevant to the sales of the instant Public Notice Board, the Defendant’s taxation on both of them without any reasonable ground is unlawful in violation of the principle of taxation based on the ground that it violates the principle of taxation. Meanwhile, the Defendant conducted a supplementary survey related to the value-added tax for the second term portion of 2004, and then corrected the value-added tax by deeming that the money deposited in the O-Public Notice Board’s passbook was not related to the sales of the instant Public Notice Board.

2) The Defendant’s taxation of KRW 000 on the money deposited by the Plaintiff KimA in its own account regardless of the sales of the instant public notice board is unlawful in violation of the principle of taxation based on the ground that it is against the principle of taxation where both the Defendant and the Plaintiff KimA without any reasonable investigation.

3) The Defendant calculated the sales amount by deeming the amount less than 00 won as the deposit amount for the amount deposited in the passbook of the Plaintiffs, and the amount of less than that amount as the deposit amount. For example, it is unlawful that the calculation method is arbitrary and unreasonable, because the above amount to be treated as the deposit can be calculated unfairly as the deposit fee even if the user of the announced 000 won deposit is paid in installments.

B. Relevant statutes

The entries in the attached Table-related statutes are as follows.

C. Facts of recognition

1) The Plaintiffs newly constructed the instant public announcement source building on a seven-story scale of 95, and registered its business as a public announcement source on April 1, 2004, and jointly operated the instant public announcement source.

2) The instant public official was located in the latter part of the KK University and the HH University and was in good condition, and was a new building and thus the facility was improved.

3) The Plaintiffs received KRW 000 to KRW 000 per month from the participants in the instant public notice board as the actual fee of KRW 000 per each month.

4) The Plaintiff KimA, while serving in the position of the Director since the opening of the instant public notice center, managed the facilities and revenues of the instant public notice center. In particular, the deposit of revenues from the opening of the public notice center.

Until December 31, 2007, the bank account of the plaintiff KimA (including bank***************-****************-***************************************************** ‘Korean bank account)) from January 1, 2008 to the Account of the plaintiff KimA and SongCC (including a Korean bank account)***********************************, hereinafter referred to as ‘interCC account”).

5) ① At the session of Dongdaemun-gu Seoul other than the instant Public Notice Board, DaD deposited O Public Notice Board (OCC) at the session of Dongdaemun-gu, Seoul. On the other hand, around March 201, 201, O Public Notice Board (OPublic Notice Board (OPublic Notice Board, hereinafter referred to as OPublic Notice Board and OPublic Notice Panel) operated each of the instant other business establishments. The instant other business establishments deposited OPublic Notice Board (Korea Bank************************), O Public Notice Board of Seoul, Nowon-gu, and O Public Notice Board (OPublic Notice Board of Seoul, Seoul, Nowon-gu, Seoul, considered that the value-added tax deposited into the OPublic Notice Board's account was the revenue of the instant business establishment and excluded from the amount of the instant OPublic Notice from the amount of the instant OPublic Notice to the instant other business establishment.

② Plaintiff KimA did not have any income source other than the instant public notice source.

6) At the time of the investigation with respect to the Plaintiffs, the Defendant did not submit books or other documentary evidence from the Plaintiffs at the time of the investigation with respect to the Plaintiffs, thereby investigating the details of the transaction of the SongCC account and considering that there was any omission in value-added tax reported by the Plaintiffs in the final taxable period of value-added tax from February 2, 2004 to January 2009, tax base was calculated as follows.

7) In calculating the above deposit and the fee, the Defendant applied the above 00 won standard by adding up the amount deposited into the account of KimE, DaD and SongCC as the entry fee item, the amount exceeding 000 won as the entry fee item, the amount exceeding 000 won as the deposit item, and the balance as the entry fee item, and the amount deposited continuously on the same day.

8) Meanwhile, the Plaintiffs filed a lawsuit seeking revocation on October 8, 201 with respect to the imposition of value-added tax for the second term of February 2004 on the instant Public Notice Board upon the said tax investigation, but was sentenced to the judgment against the Plaintiff on March 25, 2011 (the Plaintiff did not assert that the amount deposited in the Dadin bank account was not the revenue amount of the instant Public Notice Board in the first instance trial). Accordingly, the Defendant appealed on September 11, 201, to the effect that the amount deposited in the Dadin bank account was excluded from the revenue amount of the instant Public Notice Board, and the Plaintiffs withdrawn the said lawsuit on October 5, 201.

[Reasons for Recognition] Gap evidence Nos. 4, 5, 7, 8, Eul evidence Nos. 1, 4, 5 through 19, the purport of the whole pleadings

D. Determination

1) Principles of applicable taxation and method of field investigation

Article 16 of the former Framework Act on National Taxes (amended by Act No. 9911, Jan. 1, 2010) provides for the principle of taxation based on taxation by the tax authority, where the tax authority investigates and determines the tax base and tax amount of a taxpayer, on the basis of the books kept and kept by the taxpayer and relevant evidential materials. Provided, That where the contents of the books are different from facts or are omitted in the records, the tax authority may make a decision according to the contents of the books on-site investigation.

In order to correct the tax base return of a taxpayer in relation to the method of such on-site investigation, the tax base return of a taxpayer may be deemed to be based on account books or evidence. However, if it is recognized that there is an error or omission in the details of a tax return by other data and that it is possible to conduct a field investigation, it may be corrected by other data. On-site investigation is an objective method so long as it can be said that it actually take advantage of the actual income. Determination of a taxpayer's sales by investigating the amount deposited in a financial institution account of a taxpayer is a legitimate on-site investigation with objectivity. Generally, the burden of proof as to the facts of taxation in a lawsuit imposing tax should be borne by the taxpayer, but if it is revealed that the facts in question were proved in light of the empirical rule in the specific litigation process, it cannot be concluded that the other party are illegal dispositions that failed to meet the requirements of taxation unless it proves the circumstances that the facts in question are not eligible to apply the empirical rule (see, e.g., Supreme Court Decision 2003Du14284, Apr. 27, 2004).

2) Determination on the first argument

In light of the above legal principles, comprehensively taking into account the following circumstances acknowledged by comprehensively considering the health team, the evidence mentioned above, and the purport of the entire pleadings, the amount deposited into the OD new bank account is related to the sales of the KD new bank account, and the Defendant’s calculation of the sales of the KDB based on this constitutes an objective on-site investigation method. The Plaintiffs’ allegation in this part is without merit.

① At the time of the above tax investigation, the Plaintiffs did not submit all books or documentary evidence necessary to determine the tax base other than the KimA, DaD and CCC account.

② Plaintiff KimA and SongB are married, and Plaintiff Song-B were married, and Plaintiff Song-B and OB were married, and Plaintiff SongB and OB. From the opening of the business to December 31, 2007, the Plaintiffs jointly operated the instant public notice source (25% of the shares of Plaintiff KimA, OB, and 50% of the shares of Plaintiff SongCC) from January 1, 2008, and Plaintiff SongB and SongCC jointly operated the instant public notice source (25% of the shares of Plaintiff OB, and 75% of the shares of Plaintiff Song CCC). However, the Plaintiff KimE continued to deposit the instant public notice source from the opening of the business to the 201st day of the opening of the business to December 31, 207, the Plaintiff Song-B and Song-B deposited the instant public notice source’s new deposit account from 2007 to 201.5% of the shares of the Plaintiff Song-B, which was deposited from 2018.

③ There is no circumstance to deem that the amount of revenue from the other place of business of the instant case was deposited into the Do bank account, and otherwise, that the amount of revenue from the other place of business of the instant case was deposited into the Do bank account (Seoul Director of the Regional Tax Office excluded the money deposited into the Do bank account of the instant case from the amount of revenue of the instant other place of business according to the plaintiffs' explanation that it was not the amount of revenue of the instant other place of business but the amount of revenue of the instant Do bank account, and deemed that the money deposited into the Do bank account of the Do bank as the amount of revenue of the instant Do bank account).

④ According to the Plaintiff’s entry contract (No. 6, 7, and 8, the Defendant failed to secure the entire contract for the entry of the Institute of Notification, and the Defendant failed to secure the entire contract for the entry of the Institute of Notification) and according to the DaD New Bank Account Statement (Evidence No. 16), the participants of the Institute of Notification entered into a contract with the Plaintiffs and deposited the fees for the entry into the DoD New Bank Account.

In addition, according to the name of the Defendant’s resident registration card and abstract (No. 9 through 15) and the name of the bank account (No. 16 No. 16), the employees of the instant public notice board were registered as the resident registration holder at the address of the instant public notice board and deposited the deposit fee into the OD new bank account, as shown below.

Furthermore, according to the account specification (Evidence No. 16) of Ord new bank account transaction (Evidence No. 16), the amount equivalent to the monthly deposit amount (00 won to KRW 000 or KRW 000) of the instant public notice board was continuously deposited into the Ord new bank account from the opening of the instant public notice board to the use of the Ord new bank account (in most cases, the name was indicated only by the recipient, and the name of the instant public notice board was indicated together).

⑤ As a result of the Defendant’s confirmation of the initial resident registration card and abstract of a part of the depositors deposited into the Ord new bank account, the amount deposited into the Ord new bank account cannot be deemed as the amount of income of the Godin bank solely on the ground that the Plaintiff did not transfer the resident registration address to the Godin bank account, and thus, the amount of value-added tax was reduced or corrected for 2004 as to the Godin bank account on the ground that the amount was not considered as the amount of income of the Godin bank. This is most rare in the case where the party who entered the Godin bank temporarily lives in the Godin bank because he had a separate domicile. As seen earlier, it seems that the Godin bank account deposited the Odin bank account into the Odin bank account with the Odin bank account; as seen earlier, the fact that the amount deposited into the Odin bank account was excluded from the amount of income of the other place of business of the instant case; and that

6) If the total amount of 95 rooms were entered into the accounts based on the admission fee (00 won to 000 won) of the pertinent Institute, the amount of the admission fee is estimated to be KRW 000 won for each taxable period (00 won to 000 wonx6 months) or KRW 000 for each taxable period (00 won to 00 wonx95 x6 months). If the Defendant excluded the amount of the entry fee of the instant Institute from the amount of the instant Institute’s revenue calculated, the amount of the instant Institute’s revenue is merely KRW 00 to 000 for each taxable period, and even if considering the official fee rate of the instant Institute’s revenue, it would be remarkably different from the estimated amount of the input fee of the instant Institute. Furthermore, in light of the characteristics of the instant Institute’s business, the amount of the Plaintiff’s entry fee of the KRW 0 for each taxable period to 00 for each taxable period after the account, the amount of the Plaintiff’s entry fee of the instant Institute seems to have been calculated to 000 for each taxable period.

3) Judgment on the second argument

In light of the above legal principles, the following circumstances, i.e., ① Plaintiff KimA has no particular income source other than the instant public announcement source, ② Plaintiff KimA has been in the position of the president from the opening of the instant public announcement source to manage the facilities and revenues of the public announcement source while serving in the position of the president. In particular, it appears that the Plaintiff KimA kept cash or deposits in the account of deposits in the account of KimA. ③ As seen earlier, considering the amount of the Defendant’s actual revenues of the instant public announcement source calculated through a tax investigation, the amount of the Defendant’s actual revenues of the instant public announcement source’s input fees, the number of guest rooms, and the rate of the public announcement source’s subscription fees, etc., are deemed reasonable in light of the public announcement source’s entrance fees, the amount of money deposited in the account of KimA in the name of the Plaintiff KimA is deemed to have been received as the deposit and actual admission fees of the instant public announcement source, barring any special circumstances. The Defendant’s calculation based thereon belongs to the objective method of on-site investigation by the Plaintiffs.

4) Judgment on the third argument

The Defendant’s calculation of the balance of the deposit and the actual fee by the unit of KRW 000 is not likely to be consistent with the nature and accuracy of the amount actually received. However, in a close situation where it is impossible for the tax authority to accurately capture the real nature of revenue because the Plaintiffs did not submit any evidentiary data to calculate taxation requirements, it is difficult for the Plaintiffs to accurately grasp the real nature of revenue. As seen earlier, the method of calculating the amount of daily deposit based on the consideration of the above circumstances is deemed reasonable in light of the aforementioned: (a) the method of calculating the amount of deposit and the actual fee based on the deposit based on the consideration of the aforementioned circumstances, including the remaining amount of the deposit, except for the amount of the transaction between the Plaintiffs, or the amount of the deposit for which there is no relation with the transaction between their spouses, and the actual fee; and (b) the fact that the Defendant’s calculation method of calculating the tax base of the instant disposition does not seem to be more excessive compared with the amount of the deposit and the actual fee. In full view of the circumstances, this part of the Plaintiffs’ assertion is without merit.

3. Conclusion

All of the plaintiffs' claims are dismissed because they are without merit.