The Court of Cassation has recently established that, in the case of a real estate sale, a difference between the price declared in the sales deed and the amount of the loan granted to the buyer can justify the assessment of a higher income by the Revenue Agency.
With theordinance no. 25854 of 27 September 2024the judges defined the importance of this discrepancy as well-founded evidence, clarifying that it does not represent a violation of the rules on the principle of the burden of proof.
But what does this mean in concrete terms for businesses in the real estate sector? What are the practical implications of this decision for the tax management of sales?
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The case: tax assessment of a real estate company
The issue arose when the Revenue Agency, through a tax audit, notified a real estate company of an assessment for the 2005 tax year, with the aim of recovering undeclared revenues and applying the related sanctions. In particular, the Agency noted that for some real estate transactions, the selling price declared was lower than the amount of the loans granted to the buyers.
This discrepancy emerged thanks to bank checks and appraisals carried out for the purposes of granting mortgages, in which the value of the property appeared significantly higher than what was indicated in the sales deeds.
According to the Agency, the difference between the sales price and the mortgage amount is a strong indicator that the declared value has been reduced, allowing the company to declare a lower than actual income.
The company, however, contested the assessment, arguing that the data that emerged did not constitute concrete evidence and that the presumptions used by the Agency were not sufficient to justify an income adjustment.
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Tax litigation: the dispute between the Revenue Agency and a real estate company
When the real estate company received the tax assessment document, it decided to formally object, contesting the use of the inductive presumptions on which the Revenue Agency based the income adjustment. According to the company, the simple discrepancy between the price declared in the sales deed and the amount of the loan paid to the buyer could not represent sufficient proof to ascertain a greater income.
The company also argued that the Agency had not adequately demonstrated the connection between this difference and an intent to under-report taxes.
The Provincial Tax Commission (CTP), however, considered the Revenue Agency’s argument valid, confirming that the evidence of value that emerged, even if based on presumptions, was sufficient to justify the assessment.
Following this first defeat, the company appealed to the Regional Tax Commission (CTR), where it argued that the Agency’s presumptions did not meet the requirements of “gravity, precision and concordance” required to constitute a solid basis on which to base an inductive assessment.
The CTR, upholding the company’s appeal, annulled the assessment, maintaining that the Agency’s argument did not comply with the legal criteria for the use of simple presumptions. This decision led the Revenue Agency to appeal to the Court of Cassation, stating that the CTR had superficially assessed the evidence, ignoring the difference between the appraisal value, carried out for the granting of the mortgages, and the price reported in the documents of sales.
The Agency considered that this discrepancy was a sufficiently serious and precise element to confirm the tax correction.
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The reasons for the appeal to the Supreme Court by the Revenue Agency
In the appeal presented to the Court of Cassation, the Revenue Agency articulated two main reasons in support of its request for annulment of the CTR’s decision.
First of all, the Agency complained of a violation of the provisions of Presidential Decree no. 600/1973 (articles 39 and 41-bis) and Presidential Decree no. 633/1972 (article 54), arguing that the Regional Tax Commission had not adequately considered the presumptive elements available. In particular, the Agency argued that the CTR had not given the right weight to the difference between the price declared for sale and the amount of the loans granted, a gap which, according to the Agency, represented a clear signal of unreliability of the declared value .
The second ground of appeal concerned an error by the CTR in the application of the “well-known fact”. The Regional Tax Commission had considered as a fact of “common experience” the idea that, in order to obtain higher value mortgages, overestimates are made in property appraisals.
The Agency contested this assessment, stating that this presumption cannot be considered a well-known fact, since real estate appraisals and valuations require specific technical skills and cannot be taken for granted without concrete evidence.
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The decision of the Court of Cassation: confirmation of the validity of inductive presumptions
The Court of Cassation, examining the appeal, ruled in favor of the Revenue Agency, reiterating that, in matters of tax assessment, the discrepancy between the declared sales price and the amount of the loan granted can constitute a valid indication of income not declared.
The Court underlined that, in these cases, it is not necessary to produce direct evidence: it is sufficient that the evidence is serious, precise and consistent, in accordance with the provisions of article 39 of Presidential Decree no. 600/1973. In this case, the bank documentation and the appraisals of a value higher than the sales price represented a suitable circumstantial framework to justify the investigation.
Furthermore, the Court of Cassation corrected the CTR’s error regarding the use of the “well-known fact”. The judges explained that the “well-known fact” must be limited to knowledge of common experience, universally recognized, and cannot include technical or specific notions. Therefore, the presumption that appraisals can be overstated to obtain higher mortgages cannot be considered a well-known fact and instead requires detailed and specific proof.
