Acceptance of adjustments has no effect if the grounds are changed
A taxpayer was subject to a tax audit, following which the French Tax Authority (administration ) determined that he should have been taxed on deemed distributed income due to the presence of funds in his current account as a partner in a company. The French Tax Authority (administration ) then considered these funds to be hidden compensation or benefits pursuant to Article 111(c) of the General Tax Code.
This position was undermined by the Conseil d'Etat , which had overturned an initial ruling by the Administrative Court of Appeals and remanded the case to that court.
administration . then sought to amend its argument before the court, stating that the amounts in question should be considered deemed distributed income under Article 111(a) because they had been made available to the partner.
However, the court rejected this argument on the grounds that theadministration did not provide evidence that the material had been made available.
administration . then filed an appeal to the Court of Cassation against that ruling.
It held that, since the taxpayer had not responded to the “ reassessment proposal ” within the statutory time limit (i.e., 30 days, or 60 days in the event of a request for an extension), the burden of proof normally rested with the taxpayer, as provided in Article R. 194-1 of the Book of Tax Procedures.
Conseil d'Etat , however, will rule that in the event of a change in grounds, this section of the Code of Tax Procedures does not apply, and that the burden of proof lies with theadministration and not with the taxpayer.
The high court held that the lower court had correctly ruled that theadministration had not provided evidence that the funds had been made available to the taxpayer, and therefore upheld the annulment of the tax assessment.
CE, Chapters 9 and 10, Oct. 21, 2026, No. 501522, Lebon T.
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