Evidence proceeding in the course of the resumed tax procedure

Resumption of proceedings one from extraordinary tax procedures. Its purpose is to eliminate from the legal trade the final decisions whose amendment or repeal is justified by the interests of the party, the failure of the decision or the procedural error which it has affected the content of such decisions.

Resumption of proceedings is compatible with the described under Article 127 Act on 29 August 1997 - Tax Ordinance 1 (and 128 o.p. the principle of duality of proceedings and the principle that a decision against which an appeal is not served in tax proceedings is final.

However, the legislator provided for the possibility of waiving these rules in the event of conditions allowing the reopening of proceedings.

The purpose of this Article is to approximate the examination of the case in the course of the resumption procedure and to identify the significant limitations that this extraordinary mode of abrogation of the tax decision entails.

1. Meaning and purpose of reopening proceedings

The reopening of proceedings allows for reconsideration of the taxpayer’s case, but this only happens when it is established that it has occurred one from the grounds for this resumption, described under Article 240(1)(1-12) o.p.

It is also possible to revoke the final decision by seeking annulment of the decision (Article 247-252 o.p.), the procedure described under Article 253-256 o.p. (repeal of the decision affected by defects not identified in other emergency procedures) and the procedure to establish the expiry of the decision (Article 258-259a o.p.).

The purpose of this work is to approximate the rules relating to the resumption procedure and to discuss the rules governing the examination of evidence by the tax authority in the event of a condition from Article 240(1)(5) o.p., namely, when new circumstances or new evidence existing at the date of the decision come to light, which is unknown to the authority which issued the decision.

The reopening of proceedings is included in the extraordinary emergency procedures provided for in the Rules of Procedure. 17 Division IV, on the principle of tax proceedings. The purpose of this proceeding is to verify whether there has been one from the indications indicated under Article 240(1) In accordance with that provision, the final decision must be resumed if:

• 1) the evidence on which the relevant facts were established proved to be false;
• 2) the decision was issued as a result of the offence;
• 3) the decision was issued by a staff member or tax authority which is exempted according to Article 130-132;
• 4) the party was not involved in the proceedings on its own account;
• 5) new facts or new evidence that existed at the date of the decision, unknown to the authority which issued the decision, will be brought to light;

5a) new facts or new evidence, unknown to the authority which issued the decision, indicating the existence of tax avoidance within the meaning of Article 119a(1) or abuse of the law in question. 5 section 5 Act on 11 March 2004 on tax on goods and services 2 (Come on. the VAT Act), or the possibility to apply contractual benefit mitigation measures;

1. the decision was made without obtaining the legitimate position of another authority;
2. the decision has been taken on the basis of another decision or decision of a court which has subsequently been repealed, amended, terminated or annulled in such a way as to affect the content of the decision taken;
3. it was issued on the basis of a provision which the Constitutional Court ruled not to comply with the Constitution of the Republic of Poland, by law or ratified international agreement;
4. the ratified double taxation agreement or other ratified international agreement to which the Republic of Poland is party shall affect the content of the decision taken;
5. settlement of double taxation disputes within the meaning of Article 2(6) Act on 16 October 2019 on the settlement of double taxation disputes and the conclusion of prior price agreements 3 influence the content of the decision;
6. the decision of the Court of Justice of the European Union shall affect the content of the decision taken;
7. specific powers under Article 119j(1) influence the content of the decision.

The above-mentioned conditions relate to significant infringements of the tax procedure, which consequently render the final decision not to be legal. Thus, the legislator, in establishing the rules governing the procedure, provided for the possibility of waiving one from the general principles of tax proceedings, which is the sustainability of decisions[4]. This principle has been described under Article 128 o.p., which states that decisions against which no appeal is sought in tax proceedings are final.

The repeal or amendment of those decisions, their annulment and the resumption of proceedings may only take place in cases provided for in this Act and in tax laws. The final decision is therefore a decision which is not appealed.

Article 128 s.p. clearly indicates when a decision of last resort can be moved. The principle of the sustainability of the tax decision is therefore clearly limited; one from the emanation of this restriction is the procedure laid down in the rules on resumption of proceedings.

A characteristic feature of the reopening procedure is its narrow scope – to examine whether the circumstances indicated are present under Article 240(1) v.p. What is important, the tax authority conducting such proceedings cannot examine a previously completed case fully[5].

At times, taxpayers attempt to repel the final decision by means of resumption, but the established view of doctrine and jurisprudence in this regard makes these efforts ineffective.

‘At the stage of the reopened procedure, there is no legal basis for verifying the facts made by the tax authority in ordinary tax proceedings, but only the grounds for resumption indicated by the taxable person shall be verified.

The basic place and time for this type of action is, therefore, essentially dimensional proceedings rather than emergency proceedings.

In a controlled emergency procedure, the findings made in the ordinary proceedings completed by the final decision could be corrected only if the conditions of Article 240(1)(5) Only in the context of the circumstances covered by the reopened proceeding’ 6 .

2. New relevant circumstances and evidence

As mentioned above, the article will outline the case for the reopening of the procedure, which has been described under Article 240(1)(5) In this regard, it is clear that new factual circumstances or new evidence existing on the date of the decision of the authority which issued the decision are relevant for the case.

The essence of this condition is that, after the adoption of a decision which has already become a final decision, a party or a tax authority has acquired new evidence or new circumstances have been disclosed which, if taken into account in the course of the original tax investigation, could affect the content of that decision.

In order to be able to raise the original decision in this way, these evidence and circumstances had to exist at a time when the tax authority was conducting proceedings which would be resumed if they were taken into account.

In order to apply the conditions of that provision, the following conditions must be met cumulatively:

• 1. New circumstances or new evidence will be disclosed;
• 2. The evidence and circumstances existed on the date of the decision;
• 3. The evidence and circumstances were not known to the investigating authority;
• 4. The evidence and circumstances may give rise to a different outcome of a previously concluded case[7].

It should be stressed that this provision is so worded that the grounds for reopening the procedure can only be new evidence or ‘circularity’. In court practice, case law has been developed, which particularly emphasizes this fact.

The sentence of the Provincial Administrative Court in Rzeszów from 18 February 2020, in which it was pointed out that ‘a new, favourable interpretation of the provisions of the law cannot therefore be regarded as a basis for reopening the procedure, since the interpretation of the provisions of substantive law is neither a new factual circumstance nor a new evidence justifying the reopening of the procedure’ 8 .

In a similar tone, the Provincial Administrative Court in Olsztyn also said: “The provisions of the O.P. do not define the concept of “actual environment”. They shall be understood in the sense in which they function in common language, i.e. as events, facts or events occurring in a physical sense or not.

The factual circumstances cannot be the thought process itself, the conclusion, the relationship between the different factual circumstances, or the relationship with the law and its interpretation.

The new facts are those which were newly discovered in the case and were not known to the tax authorities of both instances and the party, as well as for the time being first the circumstances of the party known to it but not presented to the ruling authority in ordinary proceedings’ 9 .

The judgment indicates yet one an important issue, namely the fact that evidence or circumstances should be ‘newly discovered’. It follows that proceedings can only be resumed if evidence is discovered, disclosed or found after the original tax decision has been issued.

The procedural consequence of this view for taxpayers is that non-submission of evidence in the course of the tax proceedings, with the intention of using it only after the decision has been made, may be met with the lack of recognition of such material as new evidence within the meaning of Article 240(1)(5) o.p.

This view is recognised in the caselaw: ‘Despite receipt of numerous requests and submission of a statement of presentation of the source documentation, only known reasons [the complainant] did not submit to the Authority any accounting documentation concerning the period under examination.

The authority of the first instance indicated that these documents could not be considered as new evidence in the case, as the complainant had them and could submit them in the course of the examination or tax procedure completed by the final decision.’ 10 .

Such a position indicates that any attempts to postpone proceedings and not to request evidence from the tax authority to submit them with the intention of reopening the proceedings may prove ineffective.

However, it is worth noting that there is an interpretational direction in doctrine Article 240(1)(5) o.p. different from the above. On the basis of this, there is a legal possibility to resume tax proceedings on the basis of new evidence previously hidden by the party.

‘The disclosure of new evidence by the party justifies the reopening of proceedings on the basis of Article 240(1)(5), at least they were hidden by the party during the original tax investigation’ 11 .

However, it is controversial enough that its acceptance could in principle result in the complete abolition of the principle of the sustainability of the decision described under Article 128 o.p.

A judgment acquittal against a criminal-carb offence issued by a general court cannot be regarded as a new circumstance 12. The new proof is that the taxpayer calculates the amount of the tax on the basis of the same evidence, even if the calculation of the taxpayer is correct, and this presented by the tax authority is incorrect[13].

A new factual circumstance cannot be the disclosure of information by a witness who has not been heard in the course of the tax investigation, given the rejection of the party’s evidence request to be heard[14].

Nor can the basis for the reopening of the tax procedure be "the discrepancy in the assessment of the facts between two tax authorities’ 15 .

5. Reopening procedure

According to Article 241(1) The reopening of the proceedings shall take place either ex officio or at the request of the party. Exceptions are provided for from this principle, but they do not concern matters relating to this work[16].

Given that the reopening of proceedings on the basis of Article 240(1)(5) As regards new evidence or new circumstances, it should be assumed that the party itself will most often be the initiator of the reopening of proceedings.

The reopening of the proceedings will be a much rarer case, possible only if the tax authorities of their own motion acquire evidence which they have not yet known.

In order to complete the procedure, the party must make a formal submission to the competent tax authority of a request to resume the procedure in which it will set out its reasons in detail. The general rule is that the competent authority is the one who issued the decision at the last instance (Article 244(1) o.p.).

The next step is to examine the admissibility of reopening proceedings. The authority shall decide on the admissibility of the renewal by order (Article 243(1) o.p.).

In the event of refusal to resume proceedings, a decision shall be taken, as provided for Article 243(3) The decision on the case opens the party with the possibility of appeal. The decision to refuse to resume proceedings shall only be deemed to be inadmissible for formal reasons, e.g.

in view of the effective winding-up of proceedings and the loss of legal existence of the party[17].

The decision to resume proceedings is the basis for a resumption of the case (Article 243(2)). From that point on, the tax authority may formally proceed to the examination of the evidence and circumstances submitted by the party which, in the assessment of the party, have a feature of novelty and relevance.

In the course of the reopening procedure, it shall apply Division IV in the case of a reopening procedure, in the light of the restrictions. In the course of the reopening procedure, the party shall have the right to participate.

This also includes the possibility for the party to submit requests and requests and to comment on the evidence collected on the case, as it provides for Article 200(1) o.p.

It is also clear that the taxable person may submit evidence applications in the course of such proceedings and submit new evidence which he had not previously reported at the time of the request for reopening. The evidence is then examined for the fulfilment of the conditions described under Article 240(1)(5) o.p.

It is also natural for the tax authority to apply to the taxpayer, to the parties to the reopening procedure, to request evidence or to provide an explanation where such a need arises in the course of the proceedings. In that case, the reopening procedure is no different from the ordinary tax procedure.

What constitutes the most important difference is that the tax authority cannot verify the factual findings of the original decision in its entirety, that authority is limited only by the material submitted by the applicant and can therefore only correct the findings contained in the original decision.

The complexity of the facts in tax cases allows hypothetically to assume that the reopening procedure may lead to a decision which will be completely different from the original decision.

However, the practice shows that most of the cases carried out in this procedure will end with a decision which amends the original decision only partially, leaving the original decision of the tax authority to the remainder.

This fact involves an interesting procedural problem. This is the case when carrying out evidence which can confirm the existence of evidence or circumstances having the characteristics described under Article 240(1)(5) o.p., which, in view of the lack of evidence, are contested by the tax authority.

An example is needed to bring this issue closer.

The taxable person in the course of the reopening procedure submits evidence (VAT invoices) that meet the features of novelty and materiality within the meaning of Article 240(1)(5) However, in view of the passage of time, it is unable to confirm that these invoices have actually been paid, which is captured by the tax authority, so that this passage of evidence can be disregarded in the decision.

The taxpayer also submits a request for admission and for evidence from the witness' hearing, which he believes will confirm the payment.

According to the author, such proof is acceptable even though the reopening procedure is limited. This is due to the fact that in the course of the procedure the provisions of Division IV o.p., especially the rule with Article 122 o.p. ordering the tax authorities to take all necessary measures in the course of the tax proceedings to clarify the facts accurately and to settle the matter in the tax proceedings.

The VAT invoice mentioned in the example will meet the feature of novelty, as it was not known to the tax authority at the time of the original tax investigation. It will also bear the characteristic of materiality, since its inclusion in the cost of obtaining revenue will result in a change in the taxpayer's income and, consequently, a change in the amount of tax laid down in the original decision.

In the judgment of the Supreme Administrative Court of 25 May 2018 18 : „in the case of new facts to the Authority that existed on the date of the decision, they may be derived from a document (evidence) which was drawn up after its issue, i.e. did not exist on the date of its issue.

Therefore, evidence “as such” cannot be assessed in isolation from the events or facts which it confirms or points to.

It should be borne in mind that there is no other way to disclose the circumstances that have occurred in the past, such as to extract them from certain evidence, or to obtain knowledge of them from certain documents, and it does not matter in what way this is taking place.”

It should be pointed out, by moving the argument to the ground of this example, that the facts existing at the date of the decision will arise from the re-examination of the witness. The evidence from such a hearing cannot therefore be qualified as not satisfying the conditions of existence on the date of the original decision.

This proof cannot be treated as evidence within the meaning of Article 240(1)(5) As evidence to clarify the facts in the case and to confirm that the new and relevant evidence in the form of an example VAT invoice should be included in the decision taken following the resumption of the procedure.

As the example shows, the reopening proceedings, despite the apparent precision of the provisions governing the reopening of proceedings, pose practical problems which put taxpayers at risk of dispute with tax authorities when examining the evidence they have submitted in the course of the reopening procedure. A narrow interpretation of the rules on the principle of material truth and the principle of the completeness of the evidence may lead the tax authorities, in view of the shortcomings in the evidence collected in the case, to issue tax decisions which do not take into account all the new evidence or new circumstances raised by the taxpayer in the course of the proceedings.

6. Summary

This Article refers to one of extraordinary tax procedures, concerning the resumption of the tax procedure.

The purpose of such a proceeding is to eliminate from the legal trade the final decisions whose amendment or repeal is justified by the interests of the party, the defect in the decision or the procedural error which it has had over the content of that decision.

The reopening of the procedure therefore negates the principle of dual-instance and the principle that the decision against which the appeal is not subject is final.

The conduct of the reopening investigation is significantly limited and limited by evidence which was previously assessed by the tax authority as new and relevant to the case.

Judicial jurisprudence and the practice of tax authorities indicate that this principle is carefully respected. In order to obtain a satisfactory decision repealing, in part or in full, the decision to date, the taxpayer must pay attention to the fact that the new evidence submitted can actually be carried out.

Any gaps in the evidence will be captured by the tax authority and used to refuse to repeal the existing decision.

This is due to the fact that the construction of the reopening procedure is based on the primary principle of the durability of the decision, which prevents the full substantive control of the decision taken in ordinary proceedings.

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1. point 4 only occurs at the request of the party, lodged within one month of the date of the notification of the decision;
2. points 8 and 11 only occurs at the request of the party, lodged within one month of the entry into force of the Constitutional Court ruling or the publication of the operative part of the judgment of the Court of Justice of the European Union in the Official Journal of the European Union, respectively;
3. point 9 only occurs at the request of the party;
4. point 12 occurs only at the request of the party, lodged within one month of the date of service of the specified provision under Article 119j(2).

17 Judgment of the Provincial Administrative Court in Gdańsk 11 February 2020, reference no. I SA/Gd 1478/19.

18 reference no. I FSK 1441/16.

Bibliography

1. Ziółkowska, Resumption of tax proceedings on the basis of Article 240(1)(5) Tax Ordinance in the light of the judicature, ‘territorial government’ 2011, No 3, p. 64-73.
2. Sagittarius, Evidence and Evidence Procedure in Tax Law, Warsaw 2015.
3. Radzikowski, Mistakes in the evidence procedure in the light of the possibility of reopening the tax procedure, ‘Tax Review’ 2008, No 1, p. 23-27.
4. Etel (ed.), Tax Ordinance. Updated comment, published: LEX/el 2020.
5. Dzwonkowski (ed.), Tax Ordinance. Commentary, Warsaw 2008, Edition 2, Comment to Article 240.

Judgment

1. Judgment of the Provincial Administrative Court, based in Poznań, 5 February 2020, reference no. I SA/Po 742/19.
2. Judgment of the Provincial Administrative Court in Rzeszów 18 February 2020, reference no. I SA/Rz 25/20.
3. Judgment of the Provincial Administrative Court in Olsztyn with 5 February 2020, reference no. I SA/Ol 758/19.
4. Judgment of the Provincial Administrative Court in Gdańsk 11 February 2020, reference no. I SA/Gd 1874/19.
5. Judgment of the Chief Administrative Court of 27 April 2020, reference no. I FSK 442/20.
6. Judgment of the Provincial Administrative Court in Gdańsk 11 February 2020, reference no. I SA/Gd 1478/19.