In cases where the amount of outflow from the company is included in the calculation of earnings with prior knowledge of correction;

The defendant's disposition is legitimate because it is a case where the amount of outflow from the company is counted in the calculation of the amount of outflow from the company with prior knowledge that there is correction.

Article 45 of the Framework Act on National Taxes

Article 67 of the Corporate Tax Act

1. All of the plaintiff's claims are dismissed.

2. Litigation costs shall be borne by the plaintiff.

Each disposition of imposition of KRW 720,390 as earned income tax for the year 2001 against the Plaintiff on December 11, 2005 and KRW 79,263,610 as earned income tax for the year 203 shall be revoked.

1. Details of the disposition;

A. On May 20, 2005, the Defendant sent an explanatory guide on taxation data related to the non-conforming data of the second tax invoice No. 1di and No. 2003 (hereinafter referred to as “prestigious guide”) to the Plaintiff, who runs the wholesale and retail business of the main goods from around 1994, and the Plaintiff received it from the Plaintiff deposited KRW 3,780,000 as the omission of sales for the business year of 2001 and September 13, 2001, and KRW 234,753,320 as the omission of sales for the business year of 203,00 as well as KRW 1,458,320 as each taxable income and reserved income disposition, and deposited the Plaintiff’s revised tax return in the above amount of gross income from September 6, 2005 to the above amount of gross income from September 15, 2005.

B. Accordingly, the defendant judged that the plaintiff's filing of a revised return of corporate tax after receiving the explanatory guide constitutes the case where the correction is made under the proviso of Article 106 (4) of the Enforcement Decree of the Corporate Tax Act (hereinafter referred to as the "Enforcement Decree") and judged that the amount of the outflow from the company was included in the gross income, and did not regard the above amount as the internal reserve in the gross income, and disposed of it as the bonus belonging to the plaintiff's representative director's 201 and 2003 as the bonus belonging to the 2003 representative director's ○, and notified the plaintiff of the change in the amount of income

C. Since then, the Defendant did not withhold and pay the labor income tax on the amount disposed of as bonus, and on December 11, 2005, notified the Plaintiff of KRW 720,390 as earned income tax for the year 2001 and KRW 79,263,610 as earned income tax for the year 2003.

D. Meanwhile, the explanation letter sent by the Defendant to the Plaintiff states that the taxation data related to the business of the Plaintiff were generated and taxation was provided within seven days from the date on which the explanation notice was received prior to the imposition of taxation, and that if no reply or explanation is made by mail, the taxation data will be deemed legitimate and taxable if no reply or explanation is made within the prescribed time limit, it shall be known that the taxation data will be deemed reasonable, and that the non-conforming data of the tax invoice will be attached.

Facts that have no dispute about recognition, each entry of Gap's Nos. 1, 2, 3, 4, 5, 6, 7, and Eul's No. 1 and 2 (including each number), and the purport of the whole pleadings.

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

(1) The plaintiff filed a revised return of corporate tax on the following grounds: (a) the plaintiff was aware of the fact that the bill received from a customer due to business difficulties, such as the failure to perform the duties of the person in charge of accounting and the failure to perform the duties of the person in charge of accounting and the failure to perform sales, etc. inevitably due to the chain of insolvency; (b) after being informed of the fact that the bill was sold, omitted sales and purchased after being informed by the defendant; (c) thus, the plaintiff extended the amount of the outflow from the company to be corrected to be "in the calculation of the gross income" by being aware of the fact that the tax investigation was received or the commencement of the tax investigation was known under the proviso of Article 106(4) of the Enforcement Decree, it violates the principle of no taxation without law and the principle of trust and good faith. Therefore, the plaintiff's act

(2) In addition, even though the Plaintiff actually deposited the amount equivalent to the amount included in the gross income as the Plaintiff’s passbook at the time of filing a revised corporate tax return, the act of disposing of the income as the bonus of the representative director is against the principle of substantial taxation, since it constitutes a case where the reversion is unclear under the proviso of Article 106(1)1 of the Enforcement Decree.

(b) Related statutes;

Article 45 of the Framework Act on National Taxes

(1) In cases falling under any of the following subparagraphs, a person who has filed a tax base return within the legal return term may file the revised tax base return prior to the date of determination or correction of the tax base and amount of the national tax and notify it in accordance with the provisions of each tax-

1. Where the tax base and tax amount entered in the tax base return is short of those to be returned under the tax-related Acts;

Article 67 of the Corporate Tax Act

In filing a report on the corporate tax base on the income for each business year under the provisions of Article 60 or in determining or revising the corporate tax base under the provisions of Article 66 or 69, the amount included in the calculation of earnings shall be disposed of as bonus, dividend, other outflow from the company and internal reserve, etc. according to the person to whom it reverts,

Article 106 of the Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 19328 of Feb. 9, 2006) disposes of income

(1) The amount included in gross income pursuant to Article 67 of the Act shall be disposed of pursuant to the following subparagraphs:

1. Where it is obvious that the amount included in the calculation of earnings has leaked out of the company, the person to whom it reverts shall be the dividend, bonus, other income from the disposal of earnings, and other outflow from the company under each of the following items: Provided, That where it is unclear to whom it reverts, it shall be deemed

2. Where the amount included in gross income has not leaked out of the company, it shall be deemed internal reserves;

(4) Where a domestic corporation collects illegally flown money, such as an omission of sales and processing expenses, within the deadline for filing a revised return under Article 45 of the Framework Act on National Taxes and files a report by including it in gross income as a tax adjustment, the disposition of income shall be deemed internal reserve: Provided, That this shall not apply where the amount of income flown out of gross income is calculated with prior knowledge that it would be corrected,

○ The enforcement date of Article 1 of the Addenda No. 18706, Feb. 19, 2005

This Decree shall enter into force on the date of its promulgation.

○ Application Cases on Disposal of Income under Article 7 of the Addenda

The amended provisions of Article 106 (4) shall apply to the amended provisions beginning with the part of a revised report after this Decree enters into force.

Article 106 of the Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 17033, Dec. 29, 2000) disposes of income

(4) Where a domestic corporation collects illegally flown money such as sales omission and processing expenses within the period for the revised return under Article 45 of the Framework Act on National Taxes and files a report by including them in gross income as tax adjustment, the disposition of income shall be deemed internal reserve: Provided, That the same shall not apply to cases where the amount flown out is included in gross income with prior knowledge that it would correct it.

Article 106 of the Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 17457, Dec. 31, 2001) disposal of income

(4) Where a domestic corporation collects illegally flown money such as sales omission and processing expenses within the period for a revised return under Article 45 of the Framework Act on National Taxes and reports it to include it in gross income as tax adjustment, the disposition of income shall be deemed internal reserve: Provided, That this shall not apply where the amount of outflowd

Article 106 of the Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 18174, Dec. 30, 2003)

(4) and (4) Deleted.

C. Determination

(1) Determination as to the application of the proviso of Article 106(4) of the Enforcement Decree

(A) The special provisions on the disposal of income under Article 106 (4) of the Enforcement Decree were enacted on December 29, 200 by the amendment of the Enforcement Decree on December 30, 200 and deleted on February 19, 2003, but the special provisions on the disposal of income under the main sentence of Article 106 (4) of the Enforcement Decree were newly established on February 19, 2005, and the special provisions on the disposal of income were amended in the calculation of earnings in cases where the amount of outflow from the company is known in advance that the first correction was made only for the reasons outside the special provisions on the disposal of income under the proviso of Article 106 (4) of the Enforcement Decree without any change (amended by Presidential Decree No. 17033, Dec. 29, 200) in cases where the amount of outflow from the company is included in the calculation of earnings after being notified of the tax investigation (amended by Presidential Decree No. 17457, Feb. 19, 2005).

(B) with respect to the instant case:

① In the form and history of the Special Cases Concerning Disposal of Income, "in the case of being notified of the tax investigation or being informed of the commencement of the tax investigation" under the proviso of Article 106(4) of the Enforcement Decree is merely an example of "in the calculation of earnings of the amount out of the company with prior knowledge that there is correction", and

② The special provisions on the disposition of income are defective so that a corporation may have an opportunity to correct himself/herself within the deadline for filing a revised report, and the purport of the special provisions also exists

③ As seen in the above 1. As seen in the above, the Defendant sent out a explanatory note in order to give the Plaintiff an opportunity to vindicate before the disposition of rectification, even before confirming non-conforming data of the second tax invoice in 2001 and 2003. Accordingly, in a case where the data submitted by the Plaintiff is insufficient to vindicate, the Defendant can make a disposition of rectification without a separate tax investigation.

④ Considering the Plaintiff’s business period (not less than 10 years), business size, etc., the Plaintiff could have sufficiently predicted that the correction disposition may be accompanied by the Defendant as long as the Plaintiff was served with a written explanation from the Defendant. In light of the above, the Plaintiff’s assertion on a different premise is without merit, as the Plaintiff’s assertion on this part is without merit, even if the Plaintiff’s return on the revised corporate tax was made after being informed of the fact that the correction under the proviso of Article 106(4) of the Enforcement Decree would be carried out in the calculation of the amount of the outflow.

(2) Determination as to the application of the proviso of Article 106(1)1 of the Enforcement Decree

1. As seen in the above 1. Although the fact that the plaintiff actually deposited the amount equivalent to the amount included in the gross income as the plaintiff's passbook at the time of the revised return of corporate tax is acknowledged, it is clear that the above amount was leaked out other than the company prior to the revised return of corporate tax, the above amount meets the requirements under Article 106 (4) of the Enforcement Decree in order to dispose of the amount as the retained reserve. As seen in the above 2. C. (1) of the above, the plaintiff's income cannot be treated as internal reserve because it constitutes a ground for exclusion from the special case of disposition of income under Article 106 (4) of the Enforcement Decree. Thus,

3. Conclusion

Therefore, all of the claims of the plaintiff in this case are dismissed without merit. It is so decided as per Disposition.

[Seoul High Court 2007Nu1707 (No. 11, 2008)]

1. The plaintiff's appeal is dismissed.

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

The judgment of the first instance shall be revoked. The defendant's imposition disposition of KRW 720,390 on December 11, 2005 against the plaintiff of KRW 720,390 on earned income for the year 2001 and KRW 720,390 on earned income for the year 2003 and KRW 79,263,610 on earned income for the year 2003 shall be revoked.

1. Quotation of judgment of the first instance;

The court's reasoning concerning this case is as stated in the reasoning of the judgment of the court of first instance, in addition to the parts which are written or added as stated in the following Paragraph 2 of the judgment of the court of first instance, and therefore, it shall be cited in accordance with Article 8 (2) of the Administrative Litigation Act and Article 420 of the Civil Procedure Act

2. Parts used or added;

(a)Nos. 3, 10 to 18 shall be followed by:

“(1) Although the Plaintiff omitted sales for the business year 2001 and 2003 business year as seen earlier due to the business failure of a person in charge of accounting and the management crisis due to the default of bills from the customer around 2003, the Plaintiff’s sales of the goods omitted was received from the Plaintiff’s bank account from the customer in each pertinent business year and deposited the goods omitted in the account. Thus, the disposition of this case on the premise that the omitted sales amount was leaked out of the company is unlawful.

(2) Although the Plaintiff omitted sales due to the above circumstances, but it was immediately recognized that it was an omission in sales and purchase by receiving a explanatory statement from the Defendant, and thus, the Plaintiff’s revised corporate tax return constitutes a case where the Plaintiff received a notice of tax investigation under the proviso of Article 106(4) of the Enforcement Decree, or knew that it was commenced to conduct a tax investigation, and thereby, constitutes a case where the amount of outflow from the company was included in the gross income with prior knowledge that it would be corrected, violates the principle of no taxation without law and the principle of good faith. Therefore, the instant disposition based on the premise that the Plaintiff’s act of inclusion

(b) the 3rd page 19 letter "(2)" shall be added to "(3)";

(c)in Chapter 4, the following shall be added to:

"(1) Determination as to whether an omission in sales was disclosed from the company

If a juristic person fails to enter its sales in an account book despite the fact of sales, the total omitted sales amount shall be deemed to have been leaked out of the company, except in extenuating circumstances. In this case, the special circumstance that the omitted sales amount shall not be deemed to have been leaked out of the company (see, e.g., Supreme Court Decisions 2001Du2560, Dec. 6, 2002; 2005Du2049, Dec. 21, 2006; 2005Du2049, Dec. 21, 2006); 10-3; and 200,00-1 through 10-3; and each fact-finding on the Plaintiff’s 20,00 department store ○, ○○, ○○○, and ○○ Trade, Inc., a separate evidence is insufficient to acknowledge that the Plaintiff’s omission amount was not leaked out of the company for the business year and 203 business years.

Therefore, the plaintiff's assertion on this part is without merit, since the above omitted amount of sales was leaked out of the whole company.

(d) The number of pages 4, 5, 5, 5, 5, 11, 5, 5, 11, 5 (2) shall be added to "(3)"; and

3. Conclusion

Therefore, the judgment of the court of first instance is just in conclusion, and the plaintiff's appeal is dismissed as it is without merit. It is so decided as per Disposition.