Court supported position of tax officials regarding reality’s denial of business operation

Cassation court position the controlling body’s position regarding reality’s denial of the plaintiff's business operation of the purchase under the supply contract of petroleum products.

Courts found out that neither during the audit nor during the trial, the plaintiff did not provide any information regarding availability of specific storage locations for the purchased fuel. In addition, the plaintiff did not provide any documents during the audit and during the trial (quality certificates, results of laboratory tests, etc.), which would confirm that the payer purchased exactly A-92 automobile gasoline, which corresponds to code according to Ukrainian classification of the foreign activity products 2710124194.

The payer also did not provide documents regarding fuel sales for March 2019, presence of special tanks both at the plaintiff and at his counterparty.

Moreover, audit established that the plaintiff's counterparty is not a manufacturer of A-92 gasoline (code according to Ukrainian classification of the foreign activity products 2710124194) and did not purchase the specified product.

The plaintiff did not provide explanation as to how he used purchased fuel in business activity.

Also, providing assessment of the waybill, the courts established a discrepancy between data on the carriers specified in the waybill and the plaintiff’s tax reporting data.

In addition, the courts established that in fact payment for products allegedly received by the plaintiff was not made by the plaintiff.

Cassation court noted that the payer's reference to the fact of registration of tax invoices for the purchased products (fuel) in the prescribed manner cannot be indisputable evidence of reality of business operations in view of other circumstances established by the courts, which testify to fictitiousness of the payer's business relationship with the counterparty.

Courts reasonably noted that business operations for the purchase of fuel and other petroleum products differ from business operations for the purchase of ordinary products and require, in particular, presence of special tanks, special accounting of sales and write-offs, quality certificates or laboratory tests, etc.

Taking into account product specifics (petroleum products), which were subject of delivery contract concluded by the plaintiff in a period covered by the audit, the payer also did not provide evidence confirming that sender carried out transportation of dangerous products, as well as information about approval of routes for transportation of dangerous products, presence of appropriate certificates and permits, and it was not confirmed that the plaintiff had certificates for tanks of vehicles used for transportation.

Taking into account circumstances established during consideration of this case, as well as absence in the case file of documents that, according to usual business practice, accompany actual execution of such operations, the Court agrees with conclusions of the courts of previous instances that in this case reality of operations that would cause changes in the structure of assets, liabilities and equity of the company was not confirmed.

Therefore, the Cassation administrative court as a part of the Supreme Court on 12.04.2024 in case № 160/4846/20 dismissed the plaintiff's cassation appeal; decision of the Dnipropetrovsk district administrative court as of 16.03.2021 and decision of the Third administrative court of appeal as of 09.11.2021 were left unchanged.