The Company appealed to the court with an administrative lawsuit to the Main Department of the State Fiscal Service of Ukraine (hereinafter – MD SFSU), in which it requested to declare illegal and cancel tax notices-decisions (hereinafter – TND), issued as a result of unscheduled on-site documentary inspection of the Company’s compliance with tax legislation in the relationship with the counterparty. MD SFSU tried to recognize fictitious transactions for the transfer of non-residential premises in sublease. During the inspection, the controlling body confirmed both the fact that the Company carried out its activities in the specified premises and the fact of registration in the Unified Register of tax invoices for tax sublease transactions. The claims of MD SFSU were based on the fact that one of the previous directors of the contractor was sentenced in a criminal case. By the decision of the District Administrative Court of Kyiv, the claim was denied. The company filed an appeal. Let’s consider the logic of the court's reasoning.
In deciding the case, the court took into account the following:
- sentence referred to by the tax authority is inadequate evidence that the plaintiff has violated the requirements of tax law, as it does not contain information on the subject of proof. The decision of the Supreme Court of Ukraine of September 4, 2018 in case No. 826/18952/14 contains a legal conclusion that the fact of a sentence passed on the basis of an agreement in criminal proceedings, or a decision to close criminal proceedings and release a person from criminal liability is not gives grounds for an automatic conclusion about the fictitiousness of business transactions, resulting in “an urgent need to verify the evidence of each tax offense and conduct a comprehensive study of all components of business transactions, taking into account the circumstances established by court decisions that have entered into force”;
- the decision of the Supreme Court of Ukraine of March 29, 2018 in case No. 826/3498/15 states that “given the prejudicial nature of a court decision, the court verdict is binding on the administrative court only in part of the established factual circumstances rather than a legal assessment or court opinion. In view of the above, as well as the fact that this circumstance was not investigated in the courts of previous instances in view of the date of the sentence, the reference to such a sentence as a circumstance relevant to the court decision in this case is unfounded”;
- the decision of the Supreme Court of Ukraine of July 31, 2018 in case No. 808/1507/16 states that “the very fact of the existence of sentences, especially those adopted on the basis of agreements in criminal proceedings, does not give grounds for an automatic conclusion about the fictitiousness of business transactions” and, as a consequence, the need to verify the evidence of each tax offense;
- the court pointed out the erroneousness of the adoption by the court of first instance of the above sentence as evidence in the case, because, as can be seen from this sentence, the plaintiff's company is not mentioned in it.
Judgement by the Sixth Administrative Court of Appeal of June 15, 2020 in case No. 640/17415/19: on the basis of the verdict, it is impossible to conclude that the agreements between the plaintiff and the counterparty were concluded to cover illegal activities and not to have real economic consequences. To satisfy the appeal of the Company.
