Article 34 of the Tax Procedure Law (No. 213) provides that taxes assessed additionally or ex officio are served on the persons concerned by a tax notice. The second paragraph of Article 35 provides that, for taxes assessed on the basis of an assessment commission decision, a copy of the decision and a copy of the examination report requiring ex officio assessment are attached to the tax notice. The court noted that the right of defense is one of the fundamental rights set out in the second part of the Constitution, which defines the rights and duties of the individual. It held that, for taxpayers to be able to exercise their legal rights such as settlement, filing a lawsuit and defense, the document on which the assessment is based must be attached to the tax notice. This means the assessment commission decision, the tax examination report, or the tax technique report issued in the taxpayer's name and relied on for the assessment, which explain the reason for the assessment and how the calculations determining the tax base difference were made. In the case at hand, it was established that the disputed tax and penalty notices and the tax examination report had been served on the plaintiff, but that the Tax Technique Report dated May **, 2019 and numbered 2019-A****, referred to in the tax examination report, had not been served on the plaintiff on grounds of tax confidentiality. The tax technique report issued in the plaintiff's name, which contained the findings about the plaintiff, was not attached to the notices, and the plaintiff's right of defense was therefore obstructed. On that ground, the court held that the value added tax assessed with a tax loss penalty, which was notified to the plaintiff by serving only the tax and penalty notices and the tax examination report without the tax technique report attached, was unlawful, and it ruled in favor of the plaintiff.
This decision was overturned by the regional court of appeal. The court of appeal reasoned that the failure to serve the reports on the plaintiff did not prevent the plaintiff from examining them at the court stage and submitting evidence to prove his case, and that this deficiency could be remedied during the proceedings by giving the plaintiff the opportunity to do so. It therefore overturned the decision.
In tax examinations, it must first be assessed whether there is genuine commercial activity. Next, it must be examined whether documents were issued in connection with any unrecorded sales. If the taxpayer did not issue documents for unrecorded sales, there is no basis on which to speak of such a penalty, and a special irregularity penalty will therefore not be lawful.
In addition, the tax examination should have determined whether illicit fuel trading had taken place by carrying out cross-checks at the taxpayers to whom the plaintiff company made sales. Instead, a cross-check was carried out at only one of those taxpayers, and that check did not show that illicit fuel trading had taken place. No concrete finding was made that the plaintiff's recorded sales or costs did not reflect reality or that the plaintiff made unrecorded purchases and sales. Nevertheless, the tax base difference was determined by directly accepting the profitability rate of the product sold by the plaintiff as … on the basis of the decision of the …… Chamber of Industry and Commerce on the sectoral profitability rate for the years ….. Considering this, the tax examination was based on incomplete findings and research. Since the tax base difference, determined according to the revenue the company should have earned as calculated with the … profitability rate, is not lawful, the court must rule in favor of the plaintiff.