Appealing orders on the appointment of tax audits and securing claims

 

3.5.5.1 On this issue, Resolution No. 6001-22-00-6ap/281 dated May 12, 2022 was issued on the claim of Agrofirma Priishimsky LLP to the DGD in North Kazakhstan region on the cancellation of the order dated July 2, 2021 No. 108 on the appeal of the DGD.

The partnership appealed to the court, arguing that the department violated the procedure for conducting an administrative procedure, which led to a violation of its rights and legitimate interests. By the decision of the SMAS of North Kazakhstan Region dated October 11, 2021, the claim of the partnership was satisfied and left unchanged by the court of appeal.

It follows from the case file that on July 1, 2021, the SRC issued an order to appoint an unscheduled thematic tax audit of the partnership and instructed the Department for the fulfillment of tax obligations by the partnership on VAT and VAT for the period from January 1 to December 31, 2020.

The Department issued an order and registered it with the legal statistics authorities of the Prosecutor's Office. Then, a hearing procedure was conducted for a preliminary decision on issuing an order for an unscheduled tax audit, and a protocol was drawn up based on the results. The minutes of the hearing indicate that the representative of the Dudnik S.O. partnership expressed disagreement with the violations described. Next, a prescription and a checklist were handed over. The SRC reviewed the complaint of the partnership and issued a preliminary decision to dismiss the complaint.

An administrative procedure is understood as a strictly legally regulated procedure for carrying out activities (a certain sequence of actions) of an administrative body, an official in the field of public administration regarding the exercise of authority in relation to citizens and organizations.

In accordance with subparagraph 3) paragraph 1 of Article 155 of the Business Code (PC), subjects of control and supervision or their authorized representatives in the exercise of control and supervision have the right to appeal the act on the appointment of an audit, the order in this case.

In accordance with the first part of Article 73 of the CPC, an administrative body or official is required to provide an opportunity for a participant in an administrative procedure to express his position on a preliminary decision on an administrative case, which the participant in the administrative procedure is notified of in advance, but no later than three working days before the adoption of the administrative act.

 The notification to the partnership informed about the date and time of the hearing, as well as indicated the preliminary decision taken in the form of an order to conduct an unscheduled tax audit, while the preliminary decision itself was not served.

In accordance with sub-paragraphs 4) and 5) of the second part of Article 74 of the CPC, the hearing protocol shall specify: the content of the issue under consideration; the content of explanations, questions and answers, and statements by the participants.

It is impossible to determine the specific content of the issue under consideration from the contents of the hearing minutes dated July 28, 2021. It is only indicated that an unscheduled tax audit will be conducted on the basis of a decision of the authorized body in relation to the partnership, without specifying the specific subject of the audit or the audit period to be reviewed.

In addition, it follows from the minutes of the hearing:

- in case of agreement with the above facts of violations, the partnership has the right to independently eliminate violations by submitting tax reports and (or) paying taxes and payments to the budget.;

- in case of disagreement, an unscheduled tax audit will be scheduled according to the Committee's order.

Meanwhile, the tax authority did not inform the partnership of the subject of the tax audit, the audit period under review. This includes the facts of violations established by the tax authority, as well as what kind of reporting, for which period it is necessary to submit to it, that is, ways to eliminate them independently.

The minutes of the hearing do not contain the content of the above-mentioned issues under consideration, as well as the content of explanations, questions and answers, and speeches. Despite the fact that the representative of the partnership Dudnik S.O. stated his position in the protocol that he did not agree with the violations.

With proper explanation to the partnership of the subject of the audit, its period, violations committed, as well as ways to eliminate violations, in case of agreement with these violations, the order to conduct a thematic audit would be subject to cancellation.

In addition, a participant in an administrative procedure and (or) another person involved in an administrative case has the right to request that information about the factual circumstances that they consider essential to the consideration of the administrative case be recorded in the hearing record (part three of Article 74 of the CPC).

It follows from the submitted hearing report that the right to file petitions for entering information on essential circumstances into the protocol has not been provided to the partnership.

As can be seen from the case materials, in fact, the partnership is familiar with the subject of the tax audit only from the disputed prescription and the checklist, which were handed over after the hearing procedure on July 30, 2021.

Consequently, the hearing procedure was conducted formally, whereas this procedure is an essential part of the principle of transparency of the parties in the administrative procedure and affects the adoption of a preliminary decision affecting the rights, freedoms and legitimate interests of the partnership.

The partnership was deprived of the following rights: to know the subject of the audit, to get acquainted with the preliminary decision before the hearing, to eliminate violations on its own, to file petitions, to express its position before the adoption of an administrative act, which directly affects the contested decision of the tax authority in the form of an order.

In the circumstances described, the conclusions of the local courts on the cancellation of the contested order and all the legal consequences arising from this order are correct.

 

3.5.5.2 In the resolution on case 6001-22-00-6ap/568 dated May 31, 2022 on the claim of Network Plus LLP against the State Duma of the Karaganda Region and the State Institution "Management of the Committee on Legal Statistics and Special Accounts of the Prosecutor General's Office of the Republic of Kazakhstan for the Karaganda region", SCAD came to the following conclusions.

The partnership filed a lawsuit against the Department, the Office for the recognition of illegal actions to appoint a tax audit, for failure to familiarize with the administrative case, for the cancellation of the act on appointment of an audit dated November 4, 2021 and regulation No. 377 dated November 4, 2021, for the recognition of actions on registration of the act on appointment of an audit illegal and cancellation of registration an act on the appointment of an inspection.

By the definition of the SMAS of the Karaganda region dated December 28, 2021, the claim was returned. By the ruling of the Judicial Board for Administrative Cases of the Karaganda Regional Court dated February 3, 2022, the court's ruling was upheld.  

It follows from the case materials that the appealed actions and acts of the Tax Authority and Management were committed in order to comply with the decision of the Oktyabrsky District Court of Karaganda on September 9, 2021 in a criminal case against individuals, including the head of Mustang Corporation LLP (currently the plaintiff of Network Plus LLP) Kusainova A.M. on charges under part 1 of Article 235 of the Criminal Code (as amended on July 16, 1997), under part 3 of Article 216 of the Criminal Code, which appointed a tax audit in the activities of the partnership on the fulfillment of tax obligations for all types of taxes and other mandatory payments to the budget.

According to subparagraph 3 of paragraph 3 of Article 145 of the Tax Code, the above-mentioned court ruling in a criminal case is the basis for conducting an unscheduled tax audit.

By virtue of part 2 of Article 122 of the Criminal Procedure Code of the Republic of Kazakhstan (hereinafter referred to as the CPC), the body conducting criminal proceedings, the court, has the right to require audits and inspections from authorized bodies and officials.

In turn, by virtue of paragraph 3 of Article 1 of the Constitutional Law of the Republic of Kazakhstan "On the Judicial System and the Status of Judges of the Republic of Kazakhstan", judicial acts and requirements of judges in the exercise of their powers are binding on all state bodies and their officials, individuals and legal entities. Failure to comply with judicial acts and requirements of a judge entails liability established by law.

In this case, the plaintiff, in accordance with the procedure provided for by the CPA, requires an audit of the legality of the actions of the tax authority executing the court's decision on the criminal case.

The courts correctly noted that the grounds on which the actions of the department and the department are being challenged by this lawsuit inherently cast doubt on the legality of the court's actions in the criminal case (the decision of September 9, 2021), which required the tax authority to conduct a tax audit in relation to the partnership. However, verification of the legality of a judicial act in a criminal case must be carried out in accordance with the procedure established by the CPC.

According to subparagraph 11) of part 2 of Article 138 of the CPC, the court issues a ruling on the return of the claim if the case is not subject to consideration in administrative proceedings.

Thus, the conclusions of the judicial instances, with reference to paragraph 2 of part 7 of Article 3, part 2 of Article 102 of the CPC, that the stated claims cannot be the subject of consideration in the procedure of the CPC, are legitimate and justified.

 

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