Facts
The Federal Tax Administration lodged an appeal with the Federal Supreme Court against the dismissal ruling of the President of the Cantonal Tax Court of Solothurn of 6 April 2004. The respondents, A. and B. [X.] , had withdrawn their appeal against the tax assessment ruling for the 1999 cantonal tax and the 1999/2000 direct federal tax. The tax authority of Grenchen had requested in its statement of 30 January 2004 that the appeal be dismissed and the taxable income from employee stock options be increased to CHF 352,963.--.
The Federal Tax Administration requested that the dismissal ruling be revoked and the lower court be instructed to conclude the appeal procedure with a material decision. The Tax Office of the Canton of Solothurn requested that the appeal be granted, while the Cantonal Tax Court of Solothurn and the respondents requested that it be dismissed.
Considerations
The Federal Supreme Court examined whether the lower court had violated federal law by granting the respondents' request to withdraw their appeal instead of rendering a material decision in the appeal procedure despite the withdrawal. The court found that the lower court has the same powers as the tax authority in the tax assessment procedure and that it can also amend the tax assessment to the detriment of the taxpayer.
The Federal Supreme Court rejected the view that the lower court must always grant a withdrawal of an appeal and decided that a reformatio in peius is admissible despite a withdrawal of the appeal if the contested ruling is obviously incompatible with the applicable legal provisions and an adjustment is clearly necessary when reviewing the disputed issue.
In the present…