Proven to be a Loan, Not Sales: How Banking Evidence and Notarial Deeds Overturned IDR 17 Billion in Revenue Correction at the Tax Court.

The principle of materiële waarheid (substantive truth) in tax disputes is once again tested through Decision Number PUT-010129.15/2021/PP/M.IVB Tahun 2025, involving CV TS (the Petitioner) regarding the Corporate Income Tax (CIT) Revenue Correction for the 2017 Tax Year. The core dispute, totaling IDR 20,692,590,470.00, focuses on the interpretation of cash inflows into the Taxpayer's bank account, which were corrected by the Respondent using the Accounts Receivable/Cash Flow Test method. The Tax Court judges' consideration distinctly separated the correction into parts that were nullified and parts that were upheld based on the strength of the Taxpayer’s substantive evidence.
This dispute originated from a Corporate CIT Underpayment Tax Assessment Letter (SKPKB) for 2017, issued by the Directorate General of Taxes (DGT) following an audit that resulted in a Revenue Correction. The DGT based its correction on the Accounts Receivable/Cash Flow Test method outlined in PER-04/PJ/2012, assuming all unexplained cash inflows constituted unreported sales. This correction was maintained at the objection level, compelling the Taxpayer to file an appeal.
The core conflict lies in the disagreement over the character of the fund receipts in the bank account. The DGT (Respondent) argued that the entire corrected amount was taxable income based on Article 4(1) of the Income Tax Law, as the Taxpayer was deemed to have failed to provide convincing and specific Bank Deposit Slips/Transfer Proof. Conversely, CV TS (Petitioner) strongly rebutted, asserting that the majority of the correction, specifically IDR 17,415,490,946.00, was a working capital loan from the Shareholder/Management. This rebuttal was supported by a Notarial Debt-Credit Agreement and consistent cash deposit patterns with matching bank codes, substantially establishing it as a non-taxable object. The remaining correction of IDR 3,277,100,183.00 was claimed not to be sales, despite the Taxpayer admitting to issuing Tax Invoices for these transactions to a Principal.
In its resolution, the Tax Court Panel concluded to partially grant the appeal. Regarding the IDR 17.4 Billion loan claim, the Panel nullified the correction. This decision was based on the Judges' conviction that the specific and consistent evidence presented by the Petitioner (Notarial Deed and banking proof) was sufficient to defeat the DGT's correction presumption, thus acknowledging the funds as a liability (loan). However, concerning the IDR 3.2 Billion correction (cash inflow from the Principal), the Judges upheld this correction. The key argument of the Panel was: the issuance of a Tax Invoice (Output VAT) by the Petitioner was considered a formal and substantial acknowledgment that a taxable supply of Goods/Services had occurred. Consequently, this transaction must be recognized as business Revenue for Income Tax purposes.
The analysis and implications of this ruling provide two crucial lessons for Taxpayers. First, the paramount importance of impeccable documentation for non-income transactions, where Notarial Deeds and specific banking evidence can successfully serve as a defense against technical corrections based on Cash Flow/Receivable Tests. Second, the existence of strong legal consequences stemming from VAT and CIT obligations. When a Taxpayer issues a Tax Invoice, the Tax Court will generally deem that transaction as taxable Revenue in CIT, reinforcing the absolute necessity of fully reconciling Output VAT with Corporate CIT Revenue. In conclusion, Taxpayers with non-income transactions, such as loans or capital injections, must ensure that their bank trail is meticulously supported by credible formal legal documents and professional banking administration to prevent similar disputes.

A Comprehensive Analysis and the Tax Court Decision on This Dispute Are Available Here