The facts were as follows: the tax administrator conducted a tax investigation of the Applicant and subsequently initiated a tax audit to verify the correct calculation, declaration, and payment of personal income tax (PIT).

During the audit, applying Article 70(1) of the Law on Tax Administration (LTA) and the expenditure method laid down in point 6.3.3 of the Rules, it was determined that the Applicant's expenditures exceeded the income received. It was found that the Applicant had income whose sources he had not substantiated in accordance with the procedure prescribed by law and which he had not declared in his Annual Income Tax Returns as required by Articles 25(1) and 27(1) of the Law on Personal Income Tax (LPIT). He had neither calculated PIT on that income nor paid it into the State budget. As a result of this violation, EUR 88,878 of PIT was assessed against the Applicant. The audit also found that the Applicant had incorrectly reported income in his Annual Income Tax Returns, and the tax administrator therefore assessed additional PIT.

Assessment of the Appeal Arguments

The Supreme Administrative Court of Lithuania (SACL) panel held that, although the Applicant challenged the assessment of the evidence in his appeal, he presented no new legally substantiated arguments and identified no new material circumstances supported by objective data that could cast doubt on the sufficiency of the information collected by the State Tax Inspectorate (STI) or on the reliability of the STI's conclusion that the Applicant had at his disposal [amount not specified in the source] EUR whose sources could not be substantiated as income taxed in accordance with the procedure prescribed by law and which he had not declared. 

Neither in his complaint nor in his appeal did the Applicant provide detailed arguments, factual data, or evidence capable of rebutting the circumstances established by the STI regarding the calculation of a certain amount of income, as required by Article 67(2) of the LTA. The Applicant's assertion alone that the funds he deposited into his own bank account and immediately transferred to the Company's account represented cash earned by the Company was insufficient to call into question the reliability and correctness of the tax administrator's findings. 

By choosing to receive income in cash - meaning that the receipt of that income was not recorded in account entries held by credit institutions - the taxpayer assumed the full risk associated with the burden of proof. Moreover, merely providing explanations or data regarding income received, in the absence of evidence of the actual receipt of that income, [the source text is incomplete here]. The SACL therefore agreed with the first-instance court that the Applicant bore the burden of proving that the funds in his possession did not belong to him.

Cooperation with the Tax Administrator

The Court held that the Applicant's arguments on appeal concerning an alleged lack of cooperation were declaratory and lacked an objective basis. In the panel's view, the Applicant did not prove that the tax administrator had failed to cooperate with him. The emails submitted by the Applicant and their contents showed the opposite: the Applicant had repeatedly been asked to provide documents substantiating his income and expenditures, and he had received those emails. The fact that the Applicant interpreted the contents of the emails differently or considered them insufficiently specific did not negate the fact that cooperation had taken place.

Cash Receipt Vouchers and Evaluation of Evidence

Agreeing with the reasoning of the first-instance court's challenged decision and its assessment of the circumstances relating to cash receipt vouchers, the appellate panel rejected the Applicant's argument that the court had failed to address that issue. In this case, the first-instance court clearly identified the reasons and evidence decisive to its judgment and, based on the evidence as a whole, concluded that the Applicant was attempting to substantiate his possession of the funds with formally prepared documents in the absence of objective evidence that the funds had actually been received.

The panel stated that it agreed with the first-instance court's assessment because that assessment was based on the totality of the evidence rather than on isolated pieces of evidence. There was no factual or legal basis to find that the first-instance court had violated the rules governing the assessment of evidence or, based on the written evidence in the case, had failed to establish all circumstances material to the proper resolution of the case. 

The fact that the Applicant assessed the information collected by the STI differently and questioned its reliability without providing supporting evidence did not, in itself, provide a basis for concluding that the court had violated evidentiary rules and therefore issued an unlawful and unfounded decision.

Application of Article 70(1) of the Law on Tax Administration

In considering the Applicant's arguments that Article 70(1) of the LTA had been applied without justification, the panel noted that SACL case law consistently holds that the tax administrator is entitled to determine the amount of tax by estimation only when two necessary conditions are met. 

Together, those conditions provide the basis for applying the mechanism established by that provision: first, the amount of tax payable cannot be calculated under the ordinary procedure established by the relevant tax law; and second, the tax cannot be calculated because the taxpayer fails to perform, or improperly performs, the duties to calculate taxes, cooperate with the tax administrator, keep accounting records, or retain accounting or other documents.

Accordingly, the SACL panel rejected the Applicant's argument that the tax administrator had no grounds to apply Article 70 of the LTA. The evidence in the case established that the Applicant had at his disposal a certain amount of income whose sources he could not substantiate with income taxed in accordance with the procedure prescribed by law and which he had not declared. He did not provide the tax administrator with conclusive data showing what income he used to cover his expenditures. The receipt of income from unidentified sources and the failure to declare that income therefore provided the legal basis for the tax administrator to apply Article 70 of the LTA.

Court's Conclusion and Ruling

The SACL therefore held that the first-instance court had properly assessed the circumstances established in the case and the evidence collected, correctly applied the legal provisions governing the dispute, and issued a lawful and well-founded decision that there was no basis to amend or reverse on the grounds raised in the appeal. Accordingly, the appeal was dismissed, and the first-instance judgment was affirmed.