Cassation administrative court as a part of the Supreme Court supported conclusion of courts of previous instances and position of Main Directorate of the State Tax Service in Zaporizhzhia region in case № 280/669/21 regarding absence of real economic operations of the plaintiff with counterparties during the purchase of products (services).
Giving legal assessment of the disputed legal relationship, courts of previous instances proceeded from the fact that the plaintiff did not provide documents to confirm performance of business contracts, which confirm actual movement of his assets and real changes in the property status, as expense invoices alone are not enough to make a conclusion about reality of performance of these contracts. In fact, in addition to documents in a paper form, which confirm the fact of concluding contracts, compiling expense and tax invoices, as well as making payments, the plaintiff did not provide any other evidence to confirm reality of economic relations. At the same time, contracts, tax and expense invoices are not primary documents that confirm actual movement of assets and actual supply of products from suppliers to the plaintiff.
Courts of previous instances noted that the mere fact that the plaintiff has tax or expense invoices issued on the supplier’s behalf, or other documents compiled with reference to the supply of products (services), is not unconditional proof of reality of business operations, since other circumstances indicate the unreliability of information in these documents.
In addition, courts of previous instances noted that all contracts are completely identical and do not contain any differences or individual characteristics. Supply chain of products, producers of which are not the plaintiff's counterparties, actually does not exist, because according to tax invoices, direct counterparties of the plaintiff formalized purchase of products delivered to the plaintiff's address themselves.
Courts of previous instances agreed with the defendant's conclusions about the artificial formation of tax credit for the plaintiff due to the lack of: counterparty's chain of origin and movement of products, necessary conditions for carrying out economic operations (storage premises, means of transportation (loading, unloading) and production of the above-specified products), lack of numbers to conduct activities in the declared volumes.
Panel of judges noted that supply of products was carried out by almost all counterparties from the same address in the Mariupol city, registration of counterparties in the controlling bodies also took place within a three-month period, none of the counterparties is a permanent seller of this type of product on market, all counterparties are classified as category of risk payers, for all counterparties 1-DF calculations were submitted regarding individuals, in whose favor payments were made, which were later refuted by the controlling body due to the impossibility of identifying individuals specified in the report.
Cassation administrative court agreed with conclusions of courts of previous instances that documents examined during the case review do not confirm reality of economic operations.
Therefore, by resolution of the Cassation administrative court as a part of the Supreme Court dated 02.03.2023 in case № 280/669/21, the taxpayer's cassation appeal was dismissed, decisions of the courts of previous instances, which refused to satisfy claims for recognition of tax notifications-decisions for the total amount of 6.32 million UAH as illegal and their cancellation, remained unchanged.