No Assessment on the Basis of a Tax Technique Report Alone; the Plenary Session Has the Last Word

Council of State, Plenary Session of the Tax Chambers (reversal of the decision to persist)

In a case I conducted as counsel, which brought to an end the fundamental debate “can an assessment be made on the basis of a tax technique report alone, without a tax audit report?”, the Plenary Session had the last word.

The course of the file was as follows. The Antalya 1st Tax Court annulled the assessment on the ground that an assessment resting on a tax technique report was not in conformity with the law. The Konya Regional Administrative Court 1st Tax Chamber set that judgment aside and dismissed the action. The 7th Chamber of the Council of State reversed the appellate decision, stressing that tax technique reports are not executory acts. The regional court persisted in its first decision. The Plenary Session, adopting the reasoning of the 7th Chamber, finally reversed the decision to persist in favour of the client.

According to the majority, tax technique reports are preparatory documents drawn up to provide data for tax audit reports and form annexes to the reports to be drawn up subsequently; no tax can be assessed ex officio and no penalty imposed on the basis of a document that has no executory character. The dissent held that the content of the report rather than its title should be looked at, but that the document relied on for the assessment must contain the difference in the tax base and the proposed tax and penalty amounts beyond any doubt, and concluded that the tax technique report in the case did not meet that condition either.

The taxing power of the tax administration cannot be exercised through shortcuts that violate the procedural safeguards of the taxpayer. Administrative acts established with defective procedure are destined for annulment.