Presumption of income company that ruled on its financial statements.
BACKGROUND
By means of a decisive resolution issued by the then Local Administration of Tax Audit of Guadalajara, dependent on the General Administration of Federal Tax Audit of the Tax Administration Service, a tax credit was determined to our client in a total amount of $——-.— pesos, for Income Tax (ISR), Single Rate Business Tax (IETU) and Value Added Tax as well as an additional Profit Sharing in the amount of $ ———-. – for the fiscal year of 2011.
The determination by the client resulted mainly from the rejection of the deductions asserted in the revised fiscal year.
With the decisive resolution, the intervention of our firm began, for which the team of the Legal area began the preparation of the corresponding strategy:
Determination of the strategy for Legal Defense and development:
- Analysis of the background of the case and evidentiary support.
- Exploitation of evidentiary support, in-depth analysis of the determination by the client.
- Development of the analytical relationships of the evidentiary support, in order to generate the substantive argumentative concepts. (It should be noted that the evidentiary support was constituted by an approximate documentary volume of 650,000 documents which was related for each case in an analytical way).
- Preparation of the application for nullity.
Based on the foregoing, a petition for nullity was filed with the Federal Court of Administrative Justice, asserting arguments of substance and form, mainly related to the following:
- The incorrect application of articles 86, first paragraph, section I of the Income Tax Law in force in 2011, in relation to article 28 of the Federal Tax Code and 29 of the Regulations of the Federal Tax Code, both regulations in force in 2011, as well as the provisions of numeral 31, section III and IV of the Income Tax Law in force for 2011, when it was verified analytically and in substance that the legal assumptions were NEVER updated by our client for the supervisory authority to proceed to reject the deductions made within the reviewed period.
- It should be noted that the deductions that were rejected to the detriment of our client were mainly the following:
- Travel expenses and travel expenses and
- Fuels and lubricants.
- Union dues
With respect to which, in the stage of the Nullity Trial, compliance with all the requirements provided by the Law for the purposes of their deductibility in each of the cases was demonstrated, based mainly on the following aspects:
- Identification of the expense
- Record of the expense according to the procedure used by our client to report it, list of policies.
- Bank checks, to prove the form of payment and its execution.
- List of tax receipts for each of the items that make up the policies.
On the other hand, with regard to the initiation of the Audit Procedure from which the contested determining resolution derived, various grievances related to the substantiation of said procedure were asserted, mainly alleging its illegality by not complying with the formalities provided for that purpose.
The foregoing is so, since our client is a company that audits its financial statements and in view of that, in order to proceed to exercise powers of verification review directly and at its expense, it is necessary that previously some of the assumptions of origin provided for in numeral 52-A, section II, of the Federal Tax Code, in relation to the provisions of articles 42 section IV and 48 sections IV and V of the Federal Tax Code, are effectively updated; proving in this case, that said assumptions of origin were never updated and therefore, the illegality of the procedure.
Let us remember that a taxpayer who is obliged to audit his financial statements for tax purposes or chooses to do so and the Tax Administration Service (SAT) intends to review it, must verify in the first instance the working papers of the public accountant who ruled, and only in the event that anomalies are found in those may the taxpayer be reviewed directly, it being evident that in order to determine that anomalies were detected or as in the case at hand, it is considered that the information and/or documentation provided by the accountant reviewed under the sequential order provided for in numeral 52-A of the Federal Tax Code (and in exercise of the power provided for in numeral 42 section IV)) is insufficient, the authority had to have received, reviewed, evaluated and/or analyzed it, issuing the respective pronouncement of insufficiency and notifying it as appropriate in accordance with the provisions of numeral 48 of the Federal Tax Code.
That is, in the case of the companies that are ruled, there is a sequence of review of opinions, according to numeral 52-A of the CFF, which establishes a sequential procedure with the reasons that must be updated to proceed to initiate the audit act directly with the taxpayer and otherwise; in the absence of such cases, the admissibility of understanding an act of nuisance on the part of the taxpayer is not updated.
Then, verifying that in this case, the sequential procedure provided for in the aforementioned numeral 52-A of the CFF was not followed, it was claimed that the powers of verification exercised by our client, were given in a framework of illegality and, by the way, violating the benefits granted by the ruling.
RESULT
On April 13, 2018, the Third Western Regional Chamber of the Federal Court of Administrative Justice, issued a final judgment of nullity plain and simple, considering the arguments of grievance asserted to be well-founded.
It should be noted that against the aforementioned judgment, the defendant authority filed an Appeal for Tax Review, which was dismissed by the Collegiate Court attentive to the request made by us, via pleadings in that instance. Therefore, the favorable judgment was considered final since August 1, 2018, constituting a true success story for our client.
The above, under one of the pillars for which we work every day, to protect the most important thing for our clients… their heritage!
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