On recognition as illegal and cancellation of the notification
No.6001-23-00-6ap/261 dated 07/27/2023
Plaintiff: "G" LLP
Respondent: Russian State Institution "Department of State Revenue"
The subject of the dispute: on the recognition as illegal and cancellation of Notification No. 4 dated January 18, 2022.
Review of the cassation complaints of the defendants.
PLOT: the defendant conducted a comprehensive tax audit against the plaintiff for the period from January 1, 2017 to June 30, 2020, according to the results of which: the act of documentary tax audit No. 4 dated January 18, 2022 was issued and a notification was issued.
The claim is motivated by the fact that the defendant unreasonably reduced deductions for settlements with the plaintiff's counterparties, LLP "P" and LLP "K".
Judicial acts:
1st instance: the claim is satisfied.
It was declared illegal and cancelled from the moment of acceptance of notification No. 4 dated January 18, 2022 regarding: additional payment of VAT in the amount of 115.4 million tenge and the amount of penalty on it in the amount of 135.7 million tenge; additional VAT – 142.1 million tenge and the amount of penalty – 20.7 million tenge.
Appeal: the court's decision has been changed. It was canceled in terms of satisfaction of the claim for recognition as illegal and cancellation of the notification regarding additional charges by the Department for Mutual Settlements of LLP "G" with LLP "P" for the periods of the 2nd and 3rd quarters of 2019 with the corresponding accrued penalty amount, with the adoption of a new decision to dismiss the claim in this part.
The rest of the court's decision remains unchanged. Cassation: the court's decision and the decision of the appeal have been changed. The judicial acts were annulled in terms of satisfying the claim for recognition as illegal and cancellation of the notification in terms of additional charges by the Department for Mutual Settlements of LLP "G" with LLP "K" for the periods 2019-2020 with the corresponding accrued penalty amount.
In this part, a new decision was made to dismiss the claim. The decision of the court of appeal was overturned regarding the refusal to satisfy the claim for recognition as illegal and cancellation of the notification regarding additional charges to the department for settlements between LLP "G" and LLP "P" for the periods of the 2nd and 3rd quarters of 2019 with the corresponding accrued penalty amount.
In this part, a new decision was made to uphold the decision of the court of first instance.
Conclusions:
In terms of additional charges by the Department for Mutual Settlements of LLP "G" with LLP "K". The defendant's actions regarding the plaintiff's settlements with K LLP have been declared illegal by the courts. These conclusions of the courts of previous instances are due to the lack of confirmation of the defendant's arguments about the unreliability of K LLP and its counterparties, as well as the absence of a court decision invalidating the transaction.
It was established that by the decision of the Council of Economic and Social Council of Almaty dated February 22, 2023, the transaction concluded between LLP "G" and LLP "K" was declared invalid. Namely, the contract dated October 23, 2019 for the amount of turnover of 1.6 billion tenge, VAT – 176.0 million tenge.
Subparagraph 5) of Article 264 of the Tax Code stipulates that expenses for a transaction declared invalid on the basis of a court decision that has entered into legal force are not deductible. In these circumstances, the judicial board considers that the defendant's conclusions about the dubiousness of the transactions were confirmed in court during the consideration of the civil case on the claim for invalidation of the transaction.
The second part of Article 76 of the CPC stipulates that the circumstances established by a court decision or decision that entered into force in a previously considered civil case are binding on the court.
Such circumstances are not proven again in other civil cases involving the same persons. A similar provision is contained in article 119 of the CPC, which provides for prejudice in administrative matters.
In order to achieve the objectives of the administrative proceedings and in view of the fact that the judicial acts in this case were appealed in accordance with Article 169 of the CPC, and the above decision was made before the cassation hearing of this case, the judicial board considered it necessary to go beyond the cassation appeal and accept the decision as a non-evidentiary circumstance.
This means that judicial acts regarding the recognition of the illegal notification of additional charges for settlements between LLP "G" and LLP "K" are unfounded.
In terms of additional charges for mutual settlements of LLP "G" with LLP "P". By changing the decision of the court of first instance, the court of appeal concluded that the conclusions of the court of first instance regarding the settlements between the plaintiff and the counterparty of P LLP were erroneous, since there was a court verdict that was not given a proper legal assessment.
Thus, the court refers to the protocol of M.'s interrogation dated December 10, 2019, the verdict of the district court dated April 7, 2021, which contains witness statements regarding the head of LLP "P" S. that the partnership did not carry out actual financial and economic activities.
According to the first part of Article 19 of the CPC, everyone is considered innocent until his guilt in committing a criminal offense is proven in accordance with the procedure provided for in this Code and established by a court verdict that has entered into legal force.
Paragraph 5 of the Regulatory Resolution of the Supreme Court of the Republic of Kazakhstan No. 9 dated December 22, 2022 "On certain issues of the application of tax legislation by courts" clarified that the verdict that entered into force recognized the actions of a person to issue an invoice as committed without the actual performance of work, services, shipment of goods, that is, the statement of a fictitious invoice, This is the basis for excluding expenses from deductions when calculating the CPI and excluding the amount of VAT on purchased goods, works, and services.
Meanwhile, the verdict passed against S. and other persons does not contain the circumstances of the transaction with the plaintiff or the invoices issued to the plaintiff, that is, the invalidity of the transaction has not been proven, whereas every fact of the crime committed must be described in the verdict.
Consequently, the indicated conclusion of the court of appeal does not correspond to the factual circumstances, since:
1) by a court verdict, the actions of LLP "P" on the purchased goods on the basis of invoices and their statement were not recognized as illegal;
2) there is primary accounting documentation, as well as the fact of receiving goods in the warehouse.
It follows that the court of first instance gave a proper assessment of the defendant's actions in: identifying and establishing the actual performance of work by suppliers; determining the actual sale of goods, as well as justifications for labor and material resources, including those necessary to fulfill the supplier's obligations to transfer goods and perform work.
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