Decision on the Violation of the Right to be Heard in a Reformatio in Peius in Federal Tax Proceedings

Facts

The appellant [X.] was initially assessed for direct federal tax 1991/92 on a taxable income of CHF 640,300. After an objection, the Cantonal Tax Office of Zurich set the taxable income at CHF 392,100. Against this decision, the married couple appealed to the Federal Tax Appeal Commission of the Canton of Zurich, which ultimately increased the taxable income to CHF 581,800. Against this, [X.] filed an administrative court appeal with the Federal Supreme Court.

Considerations

The Federal Supreme Court held that the Appeal Commission should have heard the appellant before its intended reformatio in peius, i.e. the increase of the taxable income to his detriment. This results from Art. 143 para. 1 sentence 2 of the Federal Act on Direct Federal Taxation (DFTA) and Art. 110 sentence 2 of the Federal Council Decree on the Levying of a Direct Federal Tax (FCD). Such a hearing serves to give the taxpayer the opportunity to comment before the final cantonal authority decides.

Since the Appeal Commission had not heard the appellant in advance, it violated the right to be heard. This leads to the annulment of the contested decision, regardless of the prospects of success in the matter itself. The Federal Supreme Court referred the case…