Following two recent Supreme Court rulings that support the right of the Administration to review tax obligations for a second time when the administrative act issued in the first place has been annulled, it is worth reflecting on the limits of this double shot.
There are issues in the application of the tax system that have been occupying our courts for a long time, such as the case of the so-called double shot, i.e., the power of the Tax Administration to issue a new act after the annulment of a previous one, referring to the same tax element or obligation, by a court or an economic-administrative body. And on this complicated issue, the Supreme Court has ruled in a recent judgment of April 3, 2024 (appeal 8287/2022), followed by another, which complements the previous one of April 5, 2024 (appeal 96/2023).
The doctrine of the double or second shot arises in relation to value assessments and their motivation and is soon completed with the impossibility of repeating the error (judgment of October 7, 2000, in appeal 3090/1994). But from the narrow framework of value assessment, this doctrine will jump to its general application by the Supreme Court. Among many other judgments, with their frequent dissenting opinions, we must cite those of November 19, 2012 (appeal 1215/2011), in an appeal in cassation in the interest of the law, September 29, 2014 (appeal 1014/2013), and several from 2015, among which the one of June 15, 2015 (1551/2014) stands out. According to these and other later judgments, the annulment of an administrative act requires distinguishing the reason, formal or substantive, and the scope, total or partial, of the nullity. In cases of total annulment for substantive reasons, the Administration must issue another act, already in accordance with the law, as long as this power is alive. On the other hand, the retroaction of proceedings is possible in cases of formal error that has produced defenselessness and only if that has been the claim of the appellant. Finally, the non bis in idem procedural principle prevents issuing a new act when it is a sanction that has been fully annulled for substantive reasons, with respect to the same offending subject and for the same facts, although it does not prevent adjusting the amount of a sanction to the content of a ruling.
In this doctrine there was an essential aspect since the new assessment should be issued “without processing the procedure again and without completing the pertinent investigation”. We could think, without any hermeneutical effort, that the new administrative act should be adopted within the same procedure in which the previous annulled one was issued and without conducting further investigation, verification or investigation actions. The new assessment should be issued “with identical wickers” to those that were considered in the first assessment act.
This is, exactly, what happened in the last two judgments cited. In the one of September 29, 2014, some assessments were annulled because they were issued for annual periods, being sufficient to assess the affected taxes by months or quarters, without initiating a new procedure. In the one of June 15, 2015 (in relation to a levy assessed by the Telecommunications Market Commission without proving that the income was related to and balanced with the expenses inherent to the activities carried out by the taxpayer), the Supreme Court declares that “the aforementioned Commission could not carry out new actions in the procedure to justify what it did not prove when approving the first assessment”.
We were here when the new judgments of April 3 and 5, 2024 arrive. In the first one, the TEAC had annulled a VAT assessment addressed to the transferor of a property, which affected their right to deduct the VAT borne on its purchase, because the Administration had not proven a foreseeable use of the property in the acquiring entity incompatible with the correct waiver of the exemption. The TEAC itself understood that it was a substantive error and that the retroaction of proceedings did not apply. The Administration initiated a new partial scope inspection procedure to prove this foreseeable use and the Supreme Court, and previously the National Court, confirm that this second assessment is correct. The second of these judgments is a consequence of those of July 2, 2020, in which the Supreme Court understood that the qualification power provided for in article 13 of the General Tax Law (“LGT”) had been used incorrectly. The Administration initiated a new inspection procedure that led to a new assessment, no longer a new sanction, under the simulation provided for in article 16 of the LGT. The entity rises against this assessment through an execution incident, which the Superior Court of Justice of Andalusia dismisses, with a criterion that the Supreme Court confirms.
In our opinion, the Supreme Court enshrines in these judgments the doctrine of the double shot, with the three limits that it always identified: (i) the statute of limitations (which in reality will not occur), (ii) the prohibition of reformatio in peius (with a purely quantitative analysis) and (iii) the repetition of the error (in the same error). The acts and formalities of the previous procedure can be incorporated into the new one that is initiated after the annulment of the resolution that ended the first one (which interrupted the statute of limitations, as did the subsequent claims and appeals and the administrative or judicial resolutions issued as a result of these). Hence the real inoperativeness of the limitation of the administrative power’s statute of limitations. The execution of the annulling judgment or resolution is limited to the agreement that leaves the first assessment without effect, without including the subsequent actions or the new second assessment or act that is issued. And, for this reason, the new act would actually be outside the scope of application of the rules on deadlines for conducting the execution.
However, the Supreme Court is not so clear when it qualifies its own doctrine and states that the Administration can rectify the errors made in the first assessment “[p]rocessing a new verification and investigation procedure to issue a new act adjusted to law while its power is alive”, to, immediately, underline that the challenged administrative action is in accordance with the Law since “the new processed procedure has not followed a path of verification totally distant from the previous one, but has been limited to carrying out the necessary actions to issue another assessment in substitution of the annulled one”. It would have been necessary – perhaps – for the Supreme Court to provide safe guidelines to delimit that content; because, with the statements contained in both judgments, casuistry – which seems inexhaustible – is left to determine what the scope of this “new procedure” should be in order to respect the jurisprudential requirements. On the other hand, and this is also an aspect that could have been addressed, the court does not refer in these judgments to the default interest that may apply in these cases either.
In conclusion, these judgments raise various reflections. First, perhaps the nullity frequently implies the need to replace the annulled act with another one in accordance with the grounds of the upholding ruling. This nullity cannot prevent the Administration from issuing the appropriate act, even if a total nullity has apparently mediated for substantive reasons, if such grounds show what the content of the annulled act should have been.
But, secondly, the so-called second shot cannot mean a step back (not nullity of proceedings) as if nothing had happened. The reference to the prohibition of reformatio in peius shows that there was a procedure and a verification that maintain their effects, even if this limit has only addressed the amount of the assessment and not aspects such as the meaning of a change in the anti-abuse rule applied. The Supreme Court itself, as we have warned, cites the court of instance (the National Court), which highlighted in its judgment the limited actions of the Administration, so that the new procedure has not followed a path of verification totally distant from the previous one, but has been limited to carrying out the necessary actions to issue another assessment in substitution of the annulled one, which is why there has been no abuse of rights but the mere application of the jurisprudence on the second shot. It is possible to extract from this statement a conclusion of general scope that allows to affirm without ambiguity – with the limitations that have been highlighted above – that, according to the doctrine of the Supreme Court, the new procedure is actually a consequence of the judgment or resolution issued, although the court rejects that it is an execution of judgment in procedural terms. The previous procedure, from which the acts and formalities not affected by the nullity are preserved, constitutes the unavoidable framework of the new action, which should not be considered as new and different, but must be limited – only – to what is strictly necessary to issue that new act, already in accordance with the Law, in view of the terms in which the annulment of the first one has occurred.
However, these nuances that we propose do not avoid the genuine problem of the excessive duration of tax litigation. The judgment of April 5 itself refers to the dysfunctions associated with such an important delay in relation to the rights of taxpayers when it expels the new assessment from the framework of execution and leads it again to ordinary appeals. Perhaps we should change our practices. The claim should not be only for annulment but for full jurisdiction, already defining the disputed situation. It is not idle to remember that the judgment that the economic-administrative and judicial review bodies must carry out – by imperative of the principle of congruence – must adjust to the terms of what is requested by the parties, which requires – in a case as controversial as the one that concerns us – an effort when deducing the claim so that it goes beyond the pure annulment of the appealed act to obtain the recognition of a legal situation (in court – article 31.2 of the Law of Contentious-Administrative Jurisdiction-), recognition that could clear up any doubts that could arise in relation to its execution and that would contribute to avoiding the undesirable challenge pilgrimage that reality shows us with extraordinary frequency.
It is also not trivial, in our opinion, the convenience that the appellant limits the degree of invalidity that he imputes to the act he challenges and that he expressly requests a ruling on said degree, since a reviewing or judicial decision could clear up some unknown, if it specifies that the annulled act suffered from grounds for absolute nullity without, for that very reason, being able to interrupt the statute of limitations.
And, finally, faced with a question of evidence, the resolution that is issued should go beyond the declaration of nullity due to lack of due accreditation of the facts in the administrative file, and should define the facts that have been proven and the individual legal situation that results from them. And it must be the interested parties, when filing their claim or appeal, who cause the corresponding upholding ruling to include these extremes. Sometimes it is the appellants themselves who limit their claim; they must know that, perhaps, they save time, but do not avoid a new procedure.
Abelardo Delgado and Jesús Cudero
