Tax officials proved legitimacy of additional accrual of 5.12 million UAH to the enterprise

Cassation Administrative Court as a part of the Supreme Court upheld conclusion of the courts of previous instances and position of Main Directorate of the State Tax Service of Odessa region regarding impossibility (unreality) of conducting business operations with determined counterparties.

Panel of judges stated that providing a legal assessment of disputed legal relations, the courts of previous instances proceeded from the fact that only expense invoices, tax invoices, turnover and balance information were provided to confirm actual implementation of operations by the taxpayer and no goods and transport invoices were provided, despite the fact that the supply and purchase contracts - sale directly provides for the drawing up of the corresponding goods and transport invoices after the transfer of ownership of goods.

In addition, the courts objectively drew attention to the fact that no information was provided to confirm self-delivery by the plaintiff, just as it was not proved the possibility of carrying out such self-delivery by own transport and/or involvement of third-party companies in such removal, which refutes the movement of purchased goods, especially since the volume and weight of goods, in view of invoices, are significant and such movement of goods cannot be implemented without involvement of vehicles.

The courts also took into account that the case materials do not contain and the plaintiff did not provide specifications for contracts, as well as any explanations regarding method of formation of the product nomenclature when it was purchased from other counterparties.

Cassation Court indicated correctness of observations of the courts of previous instances regarding the physical possibility of storing the disputed goods (bearings), which is significant in view of its volume and scope, namely, from the case materials, it is seen that the plaintiff had office and warehouse for rent only in 2018. No evidence was provided regarding the possibility of storing the disputed goods in a period of 2016-2017.

In addition, the provided payment orders do not contain any signature and seal of the bank that made the transfer, which does not prove that payment for goods was properly made.

Cassation Administrative Court summarizes that in order to confirm the actual implementation of economic operations, the enterprise must have relevant primary documents, which must be properly executed, contain all the necessary requisites, be signed by authorized persons and which, in combination with established circumstances of the case, in particular with regard to possibilities of conducting relevant operations by enterprises, taking into account the time, enterprise location, amount of material and labor resources economically necessary to fulfill conditions stipulated by the contracts, should testify to the undeniable fact of real execution of economic operations, which is the basis for formation of tax accounting by the payer.

Therefore, by the decision of the Cassation Administrative Court as a part of the Supreme Court, the taxpayer’s cassation appeal was dismissed, decisions of the courts of previous instances, which refused to satisfy claims for recognition tax notifications-decisions as illegal and their cancellation for the total amount of 5.12 million UAH were left unchanged.