Companies involved in tax cases are sometimes faced with attempts to misrepresent information at various stages of the proceedings. It is easy to overlook twisted facts and imaginary evidence, but an oversight can become a critical argument in court. Particular care should be taken during examinations and interrogations. 

Alexey Stanchin, Head of Tax Compliance practice area, told Practical Tax Planning magazine about several cases from his practice and explained what is important to do to protect your interests in difficult situations. 

Anonymous testimony

In the inspection report, the inspectors referred to the testimony of ‘a person who refused to present himself to the tax authority’. The witness said that the counterparty did not conduct real business. 

In our objections, we challenged the FTSI's argument based on anonymous testimony and demanded that the protocol of the interrogation be submitted. The inspectors did not do so, and removed the reference to this examination from the decision on the audit.

‘The organisation is not present at the address’

More often than not, there are situations when inspectors inspect the wrong premises. Especially when the company's territory is extensive or there may be several premises at the same address. In the protocol, inspectors issue facts that in no way relate to the dispute. 

But the most frequent case of misrepresentation of facts is when inspectors write in the inspection report that the organisation is absent at the address. In fact, it turns out that the inspectors asked the security guards or random passers-by about the organisation and did not even inspect the premises. 

Misrepresentation and incompleteness of information in interrogation protocols

The problem with interrogation protocols sometimes seems insoluble. Inspectors constantly abuse and do not attach the bulk of the protocols to the inspection materials, leaving only the interrogations that are unfavourable for the company. 

If a witness provides information that is inconvenient for the FTS, the inspectors may distort it. For example, in one of the VAT refund cases, the head of an organisation told the inspector: in the periods preceding the refund, the company had performed a cleaning contract. The contract ended, the company did not fulfil any other contracts in the given quarter, so it decided to reimburse VAT. 

The inspector wanted to be cunning and use the laconic: ‘the organisation does not carry out any activities’, which would have cast doubt on the tax refund and would have led the director to criminal liability for fraud. Fortunately, the director did not agree with this wording. 

Repeated interrogations and pre-prepared protocols

Many fictions are associated with repeated interrogations. At these auditors try to persuade witnesses to change their testimony. Often tax officials fill out the protocol in advance and ask only for a signature. 

The most egregious case was the repeated interrogation, when the protocol contained forged signatures, derived with the help of a special computer programme. What was striking was the detailed presentation of all the details, down to the dates and exact numbers of the primary documents, as well as the abrupt change of position of the head of the counterparty. 

In addition, according to the time reflected in the protocol, the interrogation lasted 10 hours. The situation was complicated by the fact that it was impossible to summon the witness to court - by that time he had passed away. 

How not to fall for tricks at examinations and interrogations

• go into the details of the case to confidently determine the truthfulness of the information referred to by the tax authorities; 
• to point out the unreliability of information and when drawing up a protocol by the inspector, and when writing an objection or complaint; 
• point out contradictions and ambiguities, that the facts are not disclosed. Insist on the elimination of these violations; 
• write down their remarks in the protocols, record violations on video and audio;
• use the services of lawyers at monitoring events.