Appeal of notices issued on the basis of verdicts and decisions of investigators

A separate type of notification is those issued on the basis of criminal charges.

3.5.4.1 Thus, Resolution No. 6001-22-00-6ap/181 of March 29, 2022 describes the following situation.  It follows from the case file that the basis for issuing the contested notification was the verdict of the court No. 2 of the city of Ust-Kamenogorsk, East Kazakhstan region, dated February 2, 2021, which entered into force.

By the verdict of the court, Demitrov I.N. and other persons were convicted under Article 216 of Part 3 of the Criminal Code for committing acts to extract invoices from Semeishpalopropitochny Zavod LLP, KAZSHYGYSSLAB LLP and UKKOMPRESSOR LLP without actually performing work, providing services, and shipping goods, which caused especially large-scale damage to the state. the amount of 155,021,552 tenge.

The courts of the first and appellate instances, rejecting the claim, proceeded from the fact that the disputed notification of the tax authority was issued and based on the requirements of Articles 94, 96 of the Tax Code, since the existence of a court verdict precludes the taxpayer from executing the notification by submitting explanations.

In paragraph 3 of Article 96 of the Tax Code, it is established that a taxpayer is not entitled to provide the explanation specified in subparagraph 2) of paragraph 2 of this Article when deducting expenses for calculating VAT and offsetting the amount of VAT on purchased goods, works, services on the basis of an invoice and (or) other document, the action (actions) upon discharge of which are recognized as having entered into legal force by a judicial act or a decision of the criminal prosecution authority to terminate the pre-trial investigation on non-rehabilitating grounds, committed by a private business entity without actually performing work, rendering services, or shipping goods.

Accordingly, the tax authority proved in court that it had legitimate grounds for issuing the disputed notification to the taxpayer. This notification meets the requirements set out for the administrative act in Article 79 of the CPC.  

3.5.4.2 Resolution No. 6001-21-00-6ap/187 dated March 17, 2022 states that the management has issued a notification to the Partnership for the period from January 1, 2018 to December 31, 2018 on the tax reporting form 300.00.

The decision of the Department of Economic Investigations for the city of Almaty No.ERDR207500121000139 on the termination of the criminal case dated January 22, 2021 (hereinafter referred to as the decision dated January 22, 2021) on mutual settlements with the supplier of EURO IDEAL LLP is indicated in Appendix No. 2 to it.

The partnership, applying to the court with the present claim, indicated that the notification was issued on the basis of a resolution not approved by the prosecutor.

The court of first instance, having applied to the dispute the provisions of paragraph 3 of Article 114 of the Tax Code, part 2 of Article 129 of the CPC, came to the correct conclusion that the resolution on termination of the criminal case based on the contested notification was canceled and sent for additional investigative actions.

Thus, the conclusions of the judicial instance that the notification was issued by the defendant on the basis of a decision of the criminal prosecution authority, which had no legal force, and therefore could not be used as a basis for issuing a notification to the partnership, are correct.

The courts also legitimately invalidated the defendant's arguments about the legality and validity of the notification, despite the fact that the pre-trial investigation was terminated in any case by another decision, since the decision of January 22, 2021 was the basis for the notification.  

In accordance with part 2 of Article 129 of the CPC, the burden of proof for a challenge claim is borne by the defendant who has adopted an onerous administrative act. Part 3 of this article stipulates that the defendant may refer only to those grounds that are mentioned in the administrative act.

In the case under consideration, given the adoption of a new decision to terminate criminal prosecution against Euro Ideal LLP and the issuance of a resolution dated March 4, 2021, agreed and approved by the prosecutor on March 12, 2021, the tax authority should have notified the violations identified based on the results of desk control based on a legally binding resolution of the criminal prosecution authority.

However, these actions were not performed by the tax authority and they have not lost this right.

The arguments of the cassation appeal and the cassation petition have not been confirmed that, by analogy with the requirements of part 3 of Article 427 of the CPC, the essentially correct decision of the authority on the notification of the elimination of violations of legality cannot be overturned only for formal reasons.

By virtue of part 1 of Article 84 of the CPC, an essentially correct administrative act cannot be declared illegal on formal grounds alone.

The Judicial Board notes that a violation concerning the substance of an administrative act should be understood as an incorrect application or interpretation of the current substantive law, an incorrect or incomplete study of the factual circumstances underlying the adopted administrative act. These include the inconsistency of an administrative act or its legal basis with the Constitution of the Republic of Kazakhstan and other normative legal acts of greater legal force, the absence or illegality of a legal basis for the adoption of an administrative act, non-compliance with the requirements of the disposition of the norm that is the legal basis for the adoption of an administrative act, non-compliance with the principles of administrative procedure set out in the APPC.

The consequence of violating the requirements concerning the substance of an administrative act is, as a rule, its incorrectness, since such violations, by virtue of their significance, as a general rule, always affect the decision on the merits of the case.

Violations concerning the formal aspect of the adoption of an administrative act include certain violations of formal legality.

If there are violations of formal requirements, if there is no violation of substantive requirements, the administrative act is considered correct and cannot be considered illegal.

The violation of which formal requirements does not constitute grounds for recognizing an administrative act as illegal is not established by the above-mentioned norm of the APPC. In any case, such violations cannot include violations of the requirements that are legally required to comply with.

In this case, the reference in the contested notification to the investigator's decision of January 22, 2021, which was canceled by the prosecutor, is a significant violation of the law, since by virtue of paragraph 1 of Article 96 of the Tax Code, if violations are detected based on the results of desk control, a notification is issued on the elimination of violations identified by the tax authorities based on the results of desk control, with a description attached. identified violations.

In addition, this violation of the law, committed by the tax authority when issuing the disputed notification, led to the adoption of an incorrect administrative act.  

In such circumstances, there are no grounds for satisfying the cassation appeal and the cassation petition of the prosecutor, and the judicial acts issued in the case must be upheld.  

3.5.4.3 Resolution 6001-22-00-6ap/393 of April 28, 2022 addresses the situation of appealing the result of a tax audit. The partnership filed a lawsuit against the Department to declare illegal and cancel the notification of the results of the tax audit No. 336/1 dated February 9, 2021.        

By the decision of the SMAS of the city of Nur-Sultan dated September 29, 2021, the claim was satisfied. By a decision of the judicial board for administrative cases of the Nur-Sultan City Court dated December 8, 2021, the court's decision was overturned, the claim was denied.    

It follows from the case file that, based on the resolution of the investigator of the Economic Investigation Service dated May 13, 2019, a documentary tax audit of the Partnership was conducted on the fulfillment of tax obligations for the period from January 1, 2015 to December 31, 2018.

In satisfying the claim and canceling the notification, the court of first instance pointed out its prematurity with reference to the provisions of paragraph 4 of Article 159 of the Tax Code.

The Court of appeal, overturning the decision of the court of first instance and dismissing the claim, concluded that the tax audit was conducted as part of the investigation of a criminal case initiated against other persons, and not the management of the Partnership. Consequently, there were no grounds for applying paragraph 4 of Article 159 of the Tax Code.

SCUD did not agree with such conclusions of the court on the following grounds.

By virtue of the provisions of Article 84 of the CPC, violation of the legislation of the Republic of Kazakhstan on administrative procedures is the basis for declaring an administrative act illegal if such violation led or could have led to the adoption of an incorrect administrative act.

By virtue of paragraph 4 of Article 159 of the Tax Code, in the case of a tax audit conducted as part of a pre-trial investigation, notification of the results of the audit of the taxpayer against whom the pre-trial investigation is being conducted is issued after the completion of the criminal case. In this case, a notification of the results of the audit is issued and handed over to the taxpayer no later than five working days from the date of receipt of the official document confirming the completion of the criminal case.

In paragraph 16 of the regulatory resolution of the Supreme Court of the Republic of Kazakhstan No. 3 dated January 24, 2020 "On certain issues of the application of legislation by courts in cases of criminal offenses in the field of economic activity", it is explained that when passing a guilty verdict, a decision to terminate proceedings on a non-rehabilitating basis under Article 216 of the Criminal Code, a transaction confirmed by a fictitious account-the invoice, in accordance with paragraph 2 of Article 158 of the Civil Code, is void. It is not required for tax authorities to file lawsuits challenging transactions confirmed by fictitious invoices. Additional amounts of taxes are charged by the tax authority on the basis of a conviction that has entered into legal force or a decision to terminate proceedings on a non-rehabilitating basis, which provides a legal assessment of the illegal actions of a person to issue invoices without actually performing work, rendering services, or shipping goods.

It follows from this that in all other cases, the issuance of a notification of additional taxes is premature, which is correctly assessed by the court of first instance.    

It has been reliably established that on May 13, 2019, the Economic Investigation Service of the Financial Monitoring Committee of the Ministry of Finance of the Republic of Kazakhstan issued a resolution on the appointment of a tax audit as part of the pre-trial investigation into criminal case No. 187100121000109 initiated against the Partnership under Article 216 of the Criminal Code.

Notification No. 336 was issued on the basis of the tax audit Act No. 336 dated January 15, 2020, conducted by the decision of the head of the investigative task force, Senior Investigator of the Economic Investigation Service of the Ministry of Finance of the Republic of Kazakhstan Baschygulov A.O. on the appointment of a tax audit dated May 13, 2019 as part of the pre-trial investigation of criminal case No. 187100121000109.

From this criminal case, criminal case No. 200000121000014 was subsequently isolated in relation to the management of the Partnership under part three of Article 245 of the Criminal Code.  

It follows from the above that the tax audit was conducted as part of a pre-trial investigation and notification against the taxpayer should be issued only after the completion of the criminal case.

Thus, the court of first instance came to the correct conclusion that the criminal case against the management of the Partnership has not been completed, and the Department's notification of the audit results is premature.

In such circumstances, the conclusions of the court of first instance on the illegality of the notification of the tax authority No. 336/1 dated February 9, 2021 are justified.  

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