Seoul High Court (Chuncheon)-2017-Nu-317 ( August 21, 2017)

Value-added tax, global income and revocation

Unless there are special circumstances, the imposition of taxation based on prohibited reinvestigation is unlawful in itself, and it does not change on the ground that the taxation authority does not regard the taxation data obtained by such reinvestigation as the basis for taxation or excludes the taxation data, but the same taxation is possible.

Article 81-4 of the Basic Act

2017du466 Value-added tax and revocation of such disposition

United StatesA

BB Director of the Tax Office

Seoul High Court (Chuncheon)-2017-Nu-317 ( August 21, 2017)

on October 29, 2018

The remainder other than the dismissed part of the lawsuit shall be reversed, and that part of the case shall be remanded to the Seoul High Court.

The grounds of appeal are examined.

1. Article 81-4 of the former Framework Act on National Taxes (amended by Act No. 911, Jan. 1, 2010; hereinafter the same) provides that "tax officials shall conduct a tax investigation to the minimum extent necessary to ensure proper and fair taxation and shall not abuse their authority to investigate for other purposes, etc." In addition, Article 81-4 (1) provides that "tax officials shall not conduct a tax investigation for the same item of tax and for the same taxable period unless they fall under any of the following subparagraphs," and Article 81-4 (2) provides that "where there is clear evidence to acknowledge the suspicion of tax evasion" (Article 1), "where it is necessary to conduct an investigation for two or more business years" (Article 2), "where there is error related to two or more business years" (Article 3), "where an objection, a request for examination, or a request for adjudgment is deemed reasonable and make a decision on necessary disposition, and any other case similar to subparagraphs 4 and 1 through 4 (Article 5).

The tax investigation should be conducted within the minimum necessary scope for appropriate and fair taxation, and further re-audit of the same item and the same taxable period may seriously infringe the taxpayer's freedom of business and legal stability as well as may lead to the abuse of the right to tax investigation. Therefore, it is necessary to prohibit except in exceptional cases where it is clearly contrary to the principle of fair taxation.

In the same purport, the Framework Act on National Taxes strictly limits cases where re-audit is exceptionally permitted. Thus, re-audit of the same tax item and the same taxable period should be prohibited in principle, and further, when the principle of prohibition of duplicate tax audits is violated, serious procedural defects that have no choice but to be controlled by the method of denying the validity of the taxation disposition should be deemed exist.

In full view of the language and structure of the relevant provisions, the legislative intent that strictly limits reinvestigations, and the effect of the violation thereof, barring any special circumstance, such as that the imposition of a tax by a reinvestigations prohibited under Article 81-4(2) of the former Framework Act on National Taxes is unlawful in itself by itself, barring such special circumstance as merely a case where the errors of the initial taxation disposition are corrected. This does not change on the ground that the tax authority did not regard the taxation data obtained by a reinvestigations as the basis for the taxation disposition or excluded it from the taxation disposition (see Supreme Court Decision 2016Du5421, Dec. 13, 2017).

2. The reasoning of the lower judgment reveals the following facts.

A. From April 16, 2005, the Plaintiff operated ○○○○○ 241-1 to “CCC distribution” in the trade name, and sold the apartment products to customers.

B. A tax official belonging to the defendant has formulated a local confirmation plan on the report on tax evasion from December 18, 2008 to December 26, 2008, which provides that if the fact of tax evasion is confirmed as a result of such on-site confirmation, he shall immediately convert the report into the tax investigation, and obtain approval from the defendant.

C. On December 18, 2008, five tax officials belonging to the defendant visit the plaintiff's workplace with "on-site verification certificate" stating the "verification of omission of total sales amount" and visited the plaintiff's employee's workplace to obtain information, etc. on the accounts suspected as the borrowed account by arbitrarily receiving the computer hard disks from the plaintiff's employee, checking the oars and mebbs, or preparing a confirmation document on the sales amount from 1st to 1st 2008 by the plaintiff's daily sales slips and paper sales (hereinafter "the first investigation of this case").

D. As a result, the Defendant: (a) deemed that the Plaintiff omitted sales of value-added tax by receiving the sales proceeds of hanok products from the account in the name of another person; (b) commenced a tax investigation conducted from April 16, 2005 to June 30, 2008; (c) the period of investigation conducted from February 2, 2009 to February 13, 2009 (hereinafter “the second investigation”); (d) extended the period of investigation for the purpose of verifying financial transactions; (b) converted the type of investigation into a tax offense investigation; and then imposed value-added tax from June 1, 2009 to June 1, 2008 on the Plaintiff.

3. Examining these facts in light of the legal principles as seen earlier, the first investigation of this case constitutes a tax investigation, and the second investigation of this case cannot be deemed as a case where a reinvestigation under each subparagraph of Article 81-4(2) of the former Framework Act on National Taxes is exceptionally permitted, and thus, it was prohibited pursuant to the same paragraph, and thus, it is unlawful without examining whether the instant disposition based on the second investigation of this case was based on the taxation data acquired through the second investigation of this case or whether it is possible to exclude it.

4. Nevertheless, even if the Defendant excluded the taxation data obtained through the second investigation of this case, the lower court determined otherwise as lawful the part concerning the tax amount that could have been taxed solely on the taxation data obtained through the first investigation of this case among the instant dispositions. In so determining, the lower court erred by misapprehending the legal doctrine on the prohibition of double tax investigations, thereby adversely affecting the conclusion of the judgment. The allegation contained in the grounds of

5. Therefore, without further proceeding to decide on the remaining grounds of appeal, the part of the judgment below excluding the dismissed part of the lawsuit is reversed, and this part of the case is remanded to the court below for a new trial and determination. It is so decided as per Disposition by the assent of all participating Justices on the bench.