CASE OF ERDURAN AND EM EXPORT DIŞ TİC. A.Ş. v. TURKEY

SECOND SECTION

CASE OF ERDURAN AND EM EXPORT DIŞ TİC. A.Ş. v. TURKEY

(Applications nos. 25707/05 and 28614/06)

JUDGMENT

STRASBOURG

20 November 2018

FINAL

18/03/2019

This judgment has become final under Article 44 § 2 of the Convention. It may be subject to editorial revision.

In the case of Erduran and Em Export Dış Tic. A.Ş. v. Turkey,

The European Court of Human Rights (Second Section), sitting as a Chamber composed of:

Robert Spano, President,
Ledi Bianku,
Işıl Karakaş,
Paul Lemmens,
Valeriu Griţco,
Jon Fridrik Kjølbro,
Ivana Jelić, judges,
and Stanley Naismith, Section Registrar,

Having deliberated in private on 23 October 2018,

Delivers the following judgment, which was adopted on that date:

PROCEDURE

1. The case originated in two applications (nos. 25707/05 and 28614/06) against the Republic of Turkey lodged with the Court under Article 34 of the Convention for the Protection of Human Rights and Fundamental Freedoms (“the Convention”) by a Turkish national, Mr Mehmet Erduran, and Em Export Dış Tic. A.Ş., a company registered in Turkey (“the applicants”), on 8 July 2005 and 31 May 2006 respectively.

2. The applicants were represented by Mr O. Konak, a lawyer practising in Strasbourg. The Turkish Government (“the Government”) were represented by their Agent.

3. The applicants complained under Article 8 of the Convention about the search and seizure carried out at their business premises. They also alleged that the domestic court’s use of a tax-assessment report, which according to them had been prepared unlawfully, as the sole evidence in their case had violated their rights under Article 6 of the Convention. Lastly, they complained of a violation of their rights under Article 1 of Protocol No. 1 on account of the imposition of taxes and penalties on them.

4. On 25 January 2011 the Government were given notice of the applications.

THE FACTS

I. THE CIRCUMSTANCES OF THE CASE

5. The first applicant was born in 1941 and lives in Istanbul. He is the president of the second applicant, a company with its registered office in Istanbul.

6. In 1984 the second applicant, Em Export Dış Ticaret A.Ş. (hereinafter “the applicant company”), entered into a business contract with a State-owned company, namely the Iron and Steel Company of Turkey (Türkiye Demir Çelik İşletmeleri), for transactions in substantial amounts of coal and iron between the two companies over a certain period of time.

7. In 1988 and 1990 respectively, the applicant company brought two sets of proceedings before the Ankara Commercial Court, claiming that the Iron and Steel Company had failed to respect its contractual obligations. The court joined the two sets of proceedings and accepted the applicant company’s case. It ruled that the Iron and Steel Company was to give the applicant company a certain amount of iron and pay it compensation. The Iron and Steel Company appealed against the judgment. In the meantime, the applicants initiated enforcement proceedings while the case was still pending before the Court of Cassation.

8. As a result of the enforcement proceedings, in 2000 the Iron and Steel Company paid a total of approximately 1,600,000,000,000 Turkish liras (TRL)[1] to the applicant company.

9. By a letter dated 23 June 2000, the then under-secretary to the Treasury wrote to the Ministry of Finance requesting a tax audit of the applicant company. In their letter, the authorities indicated that the enforcement proceedings had caused such substantial damage to the Iron and Steel Company that some of its factories had stopped production. They claimed that the applicant company’s initiation of enforcement proceedings without having waited for the final decision had aimed at obstructing the Iron and Steel Company’s business and benefiting from its financial difficulties.

10. On 27 July 2000 the Directorate General of Tax Inspectors (Vergi Denetmenleri Bürosu Başkanlığı – hereinafter “the Tax Inspectorate”) decided that an audit would be carried out in respect of the applicant company.

11. On 23 August 2000, having established that the applicant company could not be found at its registered addresses, two tax inspectors went to another address in Mecidiyeköy, Istanbul, which appeared to be its business premises, in order to examine its account books. The records subsequently prepared by the inspectors stated that the first applicant, who had introduced himself with a false name, had requested a period of fifteen days to submit the relevant documents and had refused to sign the records. The inspectors also noted that following the first applicant’s refusal to sign the records, they had summoned a police officer and prepared an official letter in his presence. That official letter invited the applicant company to submit all documents related to its income and expenditure within fifteen days. The applicant company was informed that it should make a specific request in order to have the audit conducted at its premises, provided that the premises were available for such a procedure. The letter also stated that the representatives of the applicant company would be charged with tax evasion if they failed to declare the company’s income and present its account books.

12. By a letter dated 5 September 2000, the applicant company informed the inspectors that the documents were ready for examination at its office. It said that a separate room at its premises would be allocated to the inspectors during the audit and asked to be given two days’ notice in order to prepare the room and the staff who would present the documents.

13. On 13 September 2000 one of the inspectors, S.K., sent an official letter to the applicant company, stating that it was not possible to carry out the audit at its business premises as the address was not registered. She invited the first applicant to provide her with the documents requested previously within fifteen days.

14. On 29 September 2000 the first applicant responded, arguing that S.K. had not complied with the relevant legislation and that she had acted in bad faith. He pointed out that the documents were at the disposal of the authorities for examination at the applicant company’s premises on condition that they gave it five days’ notice.

15. On 10 October 2000 the tax inspectors went to the address in Mecidiyeköy together with two police officers. According to the records, the applicant company’s staff refused to present the required documents and requested five days’ notice to do so. Subsequent records stated that following a discussion during the drafting of the first record, the staff had decided to present the books for 1998 but not those relating to the tax year 2000. The inspectors stated that seven books and a total of 396 receipts had been submitted. They pointed out that all of the documents had been signed, stamped and given back to the company’s representatives. Lastly, they noted that although the office was physically available to them to carry out an audit, it would not be possible to do so in view of the tension caused by the company’s staff. The records were signed by those present, namely two inspectors, two police officers and the applicant company’s lawyer.

16. On 26 October 2000 S.K. applied to the Şişli public prosecutor’s office in the name of the Tax Inspectorate, requesting a warrant to search three addresses related to the applicant company. She submitted that an examination of its tax files had revealed that the applicant company appeared to be hiding the money it had received from the Iron and Steel Company in order to evade the payment of taxes. Summarising the content of the records drawn up until that point and referring to all the correspondence between her and the applicant company, she maintained that the company’s representatives had acted in a hostile manner and tried to obstruct the work of the inspectors by hiding information such as their names and the official address of the company, as well as by unjustly accusing her. She pointed out that under section 138 of the Tax Procedure Act, the authorities were not required to inform taxpayers in advance of an audit and that in view of that provision, the applicant company’s request to have several days’ notice, despite having already been informed of the audit, was unacceptable. She concluded that a search was required under those circumstances.

17. On the same day the Şişli Magistrates’ Court issued a warrant authorising a search of the applicant company’s premises. The relevant parts of the search warrant read as follows:

“Pursuant to the Şişli public prosecutor’s request dated 26 October 2000, it is decided that:

1. A search will be carried out at the business premises of Em Export Dış Ticaret A.Ş., located at ... Mecidiyeköy, Istanbul, taking into account that the account books and other documents to be examined are [being] presented to the authorities at that address. The search will be conducted during the daytime and only once.

2. The request with regard to the other two addresses is rejected for the reason indicated above.”

18. Later the same day, two tax inspectors, including S.K., searched the applicant company’s premises and seized a number of documents. According to the records, the search was carried out in the presence of the first applicant, staff members of the applicant company and two police officers. It was noted that the documents that were considered relevant for the audit had been placed in a bag and sealed, and that a detailed inventory would be made at a later stage. The records were signed by the two inspectors, the two police officers and a staff member of the applicant company. The first applicant refused to sign them.

19. On 1 November 2000 the applicant company was informed that the seized documents would be “unsealed” (mührün fekki) on 28 November 2000 and was invited to be present during the procedure.

20. On 27 November 2000 the first applicant sent a letter, stating that he had not understood the meaning of “unsealing”. He reiterated his argument that the audit should be carried out at the applicant company’s premises.

21. On 28 November 2000 S.K. and two other inspectors opened the two bags containing the documents that had been seized during the search and drew up an inventory. The inspectors recorded the fact that the seals had been broken in the absence of the taxpayer as it had not attended the procedure despite having been invited to do so. The inventory listed the names of all the books and tax declarations seized. A note was made that the receipts concerning various years had been classified and sealed separately.

22. On 11 December 2000 the head of the Tax Inspectorate informed the first applicant of the address where the seized documents were being kept. He also explained what “unsealing” meant.

23. By two letters dated 4 November and 6 December 2000 the Tax Inspectorate requested that the applicant company submit the account books for the years 1996, 1997 and 2000, as they were not among the seized documents.

24. On 23 December 2000 the applicants submitted certain documents.

25. On 23 January 2001 the Tax Inspectorate requested an extension of the audit period, on account of the substantial number of documents seized during the search and the fact that the applicant company had not submitted the missing documents until 23 December 2000. It also stated that the applicant company had not yet presented some of the documents requested. In line with the request, the Şişli Magistrates’ Court extended the audit period by six months.

26. The applicants objected to that decision. On 31 May 2001 the Şişli Criminal Court of General Jurisdiction decided to annul the remainder of the extended period, holding that the four months that had passed since the Magistrates’ Court’s decision must have been sufficient to conclude the audit.

27. During the course of the audit, tax inspector S.K. compiled three records, listing in detail the information obtained from the seized documents and putting certain questions to the applicants in respect of those. One of the records was read by the applicants’ lawyer, who objected to its findings by means of a handwritten note. The other two records stated that the applicants had submitted a letter, according to which they refused to sign them. Consequently, the seized documents had been kept by the authorities.

28. In the meantime, S.K. had several exchanges of correspondence with the enforcement authorities, whereby she requested certain information about the amount that had been paid to the applicant company and how much of that amount corresponded to interest.

29. By a letter dated 1 May 2002 the applicant company was informed that the audit had been completed.

30. On 25 May 2002 S.K. drew up a tax-assessment report, noting several irregularities in the applicant company’s financial records and payment of taxes, in particular with regard to the amount it had obtained as a result of the payment made to it by the Iron and Steel Company. In that connection, among many documents examined, the report also referred to the information provided by the enforcement authorities, which specified the total amount paid to the applicant company by the Iron and Steel Company and the interest rate applied in the calculation of that amount. It pointed out that the applicant company, which had not been active for a long time, appeared to have made a substantial number of transactions with some of its partners, without any documents justifying them. Moreover, it found that the company had profited from its investments in foreign currencies, which had not been declared to the authorities. Concluding that the applicant company had acted fraudulently in its bookkeeping, the report requested that corporate income tax and provisional tax be imposed on it, together with a penalty for potential lost revenue.

As regards the procedure that had been followed, the report pointed out that the authorities had been unable to locate the applicant company at its registered addresses. It also stressed the difficulties caused to them by the company’s staff at another address which the company was using temporarily as its business premises. Reiterating the content of the records drawn up during the visits to that latter address, the report noted that after having obtained a search warrant from the Magistrates’ Court, the inspectors had had to seize the relevant documents and take them to the Tax Inspectorate, as the audit could not be carried out there due to the staff’s behaviour and as it was not the applicant company’s registered business address within the meaning of section 139 of the Tax Procedure Act (Law no. 213).

31. On 11 July 2002 the Tax Office issued several tax notices to the applicant company under sections 341 and 344 of the Tax Procedure Act. It ordered it to pay TRL 123,205,000,000 in income tax and TRL 587,688,150,000[2] as a penalty (cezalı gelir stopaj vergisi ve fon payı tarhiyatı) in respect of different periods of year 2001. For the year 2000, the Tax Office ordered the applicant company to pay provisional income tax of TRL 111,059,520,000 and a penalty of TRL 563,071,740,000[3] (geçici kurumlar gelir vergisi ve vergi ziyaı cezası).

A. Proceedings concerning the income tax and penalty imposed in respect of the year 2001

1. Taxation proceedings

32. The applicant company brought two sets of proceedings before the Istanbul Tax Court, requesting the annulment of the income tax and the penalty imposed in respect of different periods of year 2001. It stated that both the tax and the penalty had resulted from the payment made to it by the Iron and Steel Company following the judgment of the Commercial Court to that effect, and that the amount was not yet subject to any tax as proceedings were still pending before the Court of Cassation. It also challenged the findings of the tax-assessment report, arguing that the transactions between partners did not justify the imposition of the tax and the penalty.

With regard to the procedure, the applicant company claimed that both the search and the audit had been conducted unlawfully. Despite the allegations of tax inspector S.K., its address was registered and the documents should have been examined at its premises. Although the Tax Procedure Act provided that a search could only be conducted on suspicion of tax evasion, S.K. had obtained a search warrant without there being any such indication. The applicant company further alleged that S.K. had refused to make an inventory of the documents seized during the search, had prevented it from sealing the documents with its own seal and had distorted the facts in the search records as well as in the tax-assessment report she had drafted. Lastly, the audit had been carried out unlawfully after the expiry of the period indicated in the warrant issued by the domestic court.

33. On an unspecified date the Tax Court held a hearing attended by the applicants and S.K.

34. On 11 June 2003 the Tax Court delivered two judgments regarding the two sets of proceedings brought by the applicant company. The court allowed the applicants’ claims in part, and reduced the tax penalty to one-third of the amount originally imposed. It dismissed the applicant company’s claims as regards the unlawfulness of the search and seizure, finding that the procedure had been in compliance with the relevant legislation. Referring to section 139 of the Tax Procedure Act, the court held that the applicants’ behaviour before the search, as well as their failure to submit the required documents and to respond to the tax inspectors’ letters, had made it clear that the audit could not be conducted at the applicant company’s premises. It also held that the documents in the case file did not substantiate the company’s allegations against the tax inspector.

As for the tax and the penalty imposed, the court held that despite certain flaws in the tax inspector’s methods, the findings of the tax-assessment report were reliable. In that connection, it held that the amount paid to the applicant company by the Iron and Steel Company was subject to taxation and that the former had failed to clarify the source of substantial transactions with some of its partners.

35. The applicant company appealed, arguing, inter alia, that the Tax Court had relied on the tax-assessment report, which, according to it, had been drawn up unlawfully. S.K. had distorted the content of certain documents she had seized during the search and had not notified it of the records she had drawn up during the course of the audit, in breach of the relevant legislation. Lastly, the applicant company requested that a criminal investigation be opened against S.K.

36. On 27 April 2004 the Supreme Administrative Court upheld the judgments.

37. The applicant company applied for rectification of the judgment, arguing that although the tax-assessment report pointed to the absence of certain receipts as one of the reasons for the penalty, those receipts and other important documents had unlawfully been taken from its premises during the search and had not been made accessible to the applicants later on. It submitted that despite its requests to that effect, the Tax Court had failed to obtain those documents and to request that criminal proceedings be instituted against the officials who were responsible for their unlawful seizure.

The Supreme Administrative Court rejected the rectification requests on 25 November 2004. Final decisions were served on the applicant company on 10 January 2005.

2. Provisional seizure measures imposed on the applicant company and criminal proceedings against tax inspector S.K.

38. On 14 November 2000 and 29 June 2001 respectively, the Governorship of Istanbul imposed two provisional seizure measures on the applicant company in line with S.K.’s reports.

39. Both seizure measures were found to be unlawful and were annulled by the Istanbul Tax Court.

40. Subsequently, on 19 December 2001 the applicant company requested that criminal proceedings be instituted against S.K., claiming that she had abused her powers by presenting false information to the authorities. On 14 October 2002 the Governorship of Istanbul delivered a decision. Finding that S.K. had acted in compliance with the law, it refused to give permission for the opening of an investigation against her.

41. On 20 February 2003 the District Administrative Court dismissed an objection lodged by the applicant company to that decision.

B. Proceedings concerning the provisional tax and penalty imposed in respect of the year 2000

42. The applicant company brought two sets of proceedings before the Istanbul Tax Court, this time requesting the annulment of both the provisional income tax and the penalty imposed in respect of tax year 2000. It argued that the tax assessment report had been drafted in vague terms and had failed to clearly indicate the reasons for its conclusions. In its petition, the applicant company repeated once again its claims as regards the unlawfulness of the search and the audit.

43. On 11 June 2003 the Tax Court accepted the cases and held that both the provisional income tax and the penalty related to it had been imposed unlawfully. The domestic court noted that due to the applicant company’s failure to declare its yearly income in full, its income for year 2000 had been calculated ex proprio motu by the authorities. It found that an income calculated in that manner was not subject to provisional taxation and that no penalty could be imposed on the company as a result. The court did not mention the search and seizure.

44. On 27 April 2004 the Supreme Administrative Court partially quashed the judgments, finding that although the annulment of the provisional taxation was in line with the relevant legislation, as the set-off period had elapsed, under the relevant provisions a penalty could still be imposed for failure on the part of the taxpayer to declare the correct amount.

45. On 10 March 2005 the Tax Court dismissed the applicant company’s claim for annulment of the penalty, holding that it was in line with the legislation as the company had failed to declare a certain part of its income. The court held that it was not necessary to rule on the provisional tax, as that part of the judgment had already been upheld by the Supreme Administrative Court.

46. The applicant company appealed. After raising several arguments concerning the imposition of the tax penalty and its calculation, it pointed out that the search had been conducted unlawfully in that all the documents had been seized by the inspectors without making an inventory. It further argued that the Tax Court had failed to address its arguments and to deliver a reasoned judgment.

47. On 5 October 2005 the Supreme Administrative Court upheld the judgments. The decisions were served on the applicant company on 2 December 2005.

48. In 2004 and 2005 the applicant company made several payments to the Tax Office as regards the years 2000 and 2001.

II. RELEVANT DOMESTIC LAW

A. Tax Procedure Act (Law no. 213)

49. The relevant provisions governing tax audits (sections 134-141) and searches (sections 142-7) read as follows:

Section 138

“The date of a tax audit does not have to be notified to the taxpayer in advance.

...”

Section 139

“As a general rule, tax audits shall be carried out at the taxpayer’s business premises.

If substantial reasons, such as the unavailability of the premises or death, render the audit at the premises impossible, or if the taxpayer and the inspectors so wish, the audit may be carried out at the tax office.

In such a case, the taxpayer shall be requested to bring his or her books and documents to the tax office.

Those who do not bring their documents to the tax office in time shall be deemed to have failed to present them to the authorities ...”

Section 142

“If there are indications that a taxpayer is evading the payment of taxes, the premises belonging to that person or to any other person found to be associated with the evasion may be searched.

A search may be carried out only on fulfilment of the following conditions:

1. if those who are authorised to conduct a tax audit consider a search necessary and submit a reasoned request to the magistrates’ court;

2. if the magistrates’ court decides that the search could be carried out in the requested places.

...”

Section 143

“Any books and documents which are found during the search and deemed necessary for the audit shall be listed in an inventory.

If such an inventory cannot be drafted due to lack of time or for any other reason, those books and documents shall be put in a secure place provided by the taxpayer or be transferred to the tax office in bags or boxes (kablar). Those places, bags or boxes shall be sealed by those conducting the search and, if possible, also by the seal of the taxpayer. At a later stage, the places, bags or boxes shall be opened and an inventory shall be made. Records shall be drawn up for both the sealing and the unsealing, and a copy of the inventory shall be given to the taxpayer.

These actions shall be taken:

1. by those who are present during the search, if the taxpayer declines to be present during the search or the sealing;

2. by the person who carried out the search and two other officials, if the taxpayer declines to be present during the unsealing and the drafting of the inventory.

The books and documents which are found during the search and deemed necessary for the audit and which are secured in a safe place, or in bags or boxes, may be transferred to the office of the tax inspector even if this was not expressly stated in the search warrant.

Those books and documents must be well protected. The administration is liable for any damage that might be caused if it fails to protect them.”

Section 144

“In cases where a search has been carried out, the audit shall be conducted expeditiously and before any other business.

Documents such as personal letters that are found to be irrelevant for the tax assessment shall be given back to their owners in exchange for a receipt.

The taxpayer has the authority to inspect the seized books and documents and to make copies of them in the presence of the relevant official.

...”

Section 145

“The audit of the seized books and documents shall be concluded within a maximum of three months and they shall be given back to their owner after a record has been drawn up.

In cases where the audit cannot be concluded within three months for valid reasons, that period may be prolonged by a decision of the magistrates’ court.

Any acts and account situations that are considered to be unlawful during the course of the audit shall be recorded. If the taxpayer refuses to sign those records, the relevant books and documents shall not be given to him or her until any taxes and penalties imposed in relation to the search have been settled.

Those concerned may note their objections and submissions in those records.

They may take their books and documents back at any time on condition that they sign the records. The books and documents may be retained by the authorities only if they constitute evidence of an offence.”

Section 147

“Cases which are not expressly regulated in this section shall be governed by the provisions of the Code of Criminal Procedure concerning searches.”

50. Section 341 provides that if the taxpayer fails to fulfil his or her tax-related responsibilities in time or does so in an incomplete manner, the resulting deficiencies in the tax assessment constitute potential lost revenue (vergi ziyaı).

Section 344 provides that a fine will be imposed on those who cause losses to the Treasury.

B. Code of Criminal Procedure and Criminal Code

51. Articles 90 to 103 of the former Code of Criminal Procedure in force at the time (Law no. 1412) set out the general terms governing search and seizure. In particular, Articles 90 and 97 provided that the authority to order searches and seizures lay with the judge. Additionally, Article 90 required judicial confirmation within three days of the seizure if the seizure had been carried out without a prior judicial decision. It also provided that the person whose property had been seized could apply to a judge at any time for a review of the legality of the seizure.

52. Article 94 provided that in order to apprehend a suspect or to collect evidence, the authorities could carry out a search of the residence of a person suspected of committing a crime or aiding and abetting others to commit a crime.

53. Article 98 provided that the owner of the premises or the items that would be searched should be present during the search. If he or she could not be present, his representative, someone who resided with him or a neighbour should be invited to attend the search.

54. Article 99 provided that the person who was the subject of a search by the authorities would be given, if he or she so requested, a document indicating the prospective charges that he or she faced and a list of the seized property.

55. Pursuant to Article 101, seized property would be listed in an inventory. The bags or boxes containing the seized property would then be officially sealed in order to prevent its loss or any change being made to it.

56. Article 194 of the Criminal Code in force at the time (Law no. 765), stipulated that if an official entered a person’s residence by abusing his or her power, or without following the procedure prescribed by law, he or she would be sentenced to a term of imprisonment of between three months and three years. If that official conducted any other arbitrary acts, such as searching the person’s residence, the prescribed term of imprisonment would start from six months.

If private places such as a person’s business premises or offices were searched in breach of the relevant legislation, the perpetrator would be sentenced to a term of imprisonment of between two months and two years.

THE LAW

I. JOINDER OF THE APPLICATIONS

57. Given their similar factual and legal backgrounds, the Court decides that the two applications should be joined in accordance with Rule 42 § 1 of the Rules of Court.

II. THE FIRST APPLICANT’S VICTIM STATUS

58. The Court notes that the Government did not raise an objection as regards the first applicant’s victim status. It finds, however, that the question concerns incompatibility ratione personae of the application which goes to the Court’s jurisdiction and which it is not prevented from examining of its own motion (see, mutatis mutandis, Blečić v. Croatia [GC], no. 59532/00, § 67, ECHR 2006‑III; Béláné Nagy v. Hungary [GC], no. 53080/13, § 71, ECHR 2016; and Özmurat İnşaat Elektrik Nakliyat Temizlik San. ve Tic. Ltd. Şti. v. Turkey, no. 48657/06, § 22, 28 November 2017).

59. The Court reiterates that the term “victim” used in Article 34 of the Convention denotes the person directly affected by the act or omission which is in issue (see, among other authorities, Vatan v. Russia, no. 47978/99, § 48, 7 October 2004). It further reiterates that a person cannot complain of a violation of his or her rights in proceedings to which he or she was not a party, even if he or she was a shareholder and/or director of a company which was party to the proceedings (see, among other authorities, F. Santos, Lda. and Fachadas v. Portugal (dec.), no. 49020/99, ECHR 2000-X, and Nosov v. Russia (dec.), no. 30877/02, 20 October 2005). Furthermore, while in certain circumstances the sole owner of a company can claim to be a “victim” within the meaning of Article 34 of the Convention where the impugned measures were taken in respect of his or her company (see Ankarcrona v. Sweden (dec.), no. 35178/97, ECHR
2000-VI, and Glas Nadezhda EOOD and Anatoliy Elenkov v. Bulgaria, no. 14134/02, § 40, 11 October 2007), when that is not the case the disregarding of a company’s legal personality can be justified only in exceptional circumstances, in particular where it is clearly established that it is impossible for the company to apply to the Court through the organs set up under its articles of incorporation or – in the event of liquidation – through its liquidators (see Agrotexim and Others v. Greece, 24 October 1995, § 66, Series A no. 330-A; CDI Holding Aktiengesellschaft and Others v. Slovakia (dec.), no. 37398/97, 18 October 2001; Amat-G Ltd and Mebaghishvili v. Georgia, no. 2507/03, § 33, ECHR 2005‑VIII; and Meltex Ltd and Movsesyan v. Armenia, no. 32283/04, § 66, 17 June 2008).

60. The Court notes that no such exceptional circumstances have been established in the instant case (see, by contrast, G.J. v. Luxembourg, no. 21156/93, § 24, 26 October 2000). It further observes that the first applicant was the main shareholder and the president of the applicant company and not its sole owner. All the material in the Court’s possession indicates that it was the applicant company alone, as a legal entity, which was the subject of the taxes and penalties imposed. Moreover, the first applicant never became a party to the taxation proceedings and all the judgments delivered by the domestic courts concerned the applicant company alone. Accordingly, the Court cannot regard the first applicant as a “victim”, within the meaning of Article 34 of the Convention, of the acts of which he complained (see Meltex Ltd and Movsesyan, cited above, § 67, and Centro Europa 7 S.r.l. and Di Stefano v. Italy [GC], no. 38433/09, § 93, ECHR 2012).

61. Having regard to the foregoing, the Court concludes that the application, in so far as it was lodged by the first applicant, is incompatible ratione personae with the provisions of the Convention within the meaning of Article 35 § 3 (a) and must be rejected in accordance with Article 35 § 4.

62. The Court will therefore confine itself to examining the complaints brought on behalf of the applicant company.

III. ALLEGED VIOLATION OF ARTICLE 8 OF THE CONVENTION

63. The applicant company complained that the search of its business premises and the seizure of its documents had violated its right to respect for its home as they had been carried out unlawfully. It relied on Article 8 of the Convention, which reads as follows:

“1. Everyone has the right to respect for his private and family life, his home and his correspondence.

2. There shall be no interference by a public authority with the exercise of this right except such as is in accordance with the law and is necessary in a democratic society in the interests of national security, public safety or the economic well-being of the country, for the prevention of disorder or crime, for the protection of health or morals, or for the protection of the rights and freedoms of others.”

A. Admissibility

64. The Government argued that the applicant company had not exhausted domestic remedies as it had not brought its complaints concerning the alleged violation of its right to respect for its home before the domestic authorities.

65. The applicant company stated that it had submitted its argument as regards the unlawfulness of the search at its business premises at every stage of the taxation proceedings. In particular, in its request for rectification it had drawn the attention of the Supreme Administrative Court to the Tax Court’s failure to lodge a criminal complaint against the officials concerned. The applicant company further submitted that it had also asked the public prosecutor to initiate criminal proceedings against tax inspector S.K. for having carried out the search and the audit in breach of the relevant legislation, but the authorities had not given permission for an investigation to be opened against her.

66. Taking account of the scope of the Government’s objection, the Court will limit its analysis to establishing whether the applicant company raised its complaint under Article 8 of the Convention before the domestic authorities.

67. The Court reiterates that the rule of exhaustion of domestic remedies referred to in Article 35 § 1 of the Convention requires that complaints intended to be brought subsequently before the Court should have been made to the appropriate domestic body, at least in substance and in compliance with the formal requirements laid down in domestic law (see, among many other authorities, Elçi and Others v. Turkey, nos. 23145/93 and 25091/94, § 604, 13 November 2003).

68. The Court observes that although the applicant company did not expressly claim a violation of its right under Article 8 of the Convention before the domestic courts, it raised the complaint in substance on various occasions during the course of the proceedings, arguing that both the search and the audit had been carried out unlawfully and had not complied with the Tax Procedure Act. As for the applicant company’s submission that it requested the opening of criminal proceedings against S.K., the Court observes that its request to the public prosecutor was made solely in relation to S.K.’s report calling for the imposition of provisional seizure on the applicant company. Nevertheless, it appears that the applicant company asked the Tax Court to lodge a complaint with the public prosecutor against the inspector for her conduct during the search. Consequently, the Court finds that the applicant company brought the alleged unlawfulness of the search to the attention of the domestic authorities by means of its submissions before the Tax Court and the Supreme Administrative Court.

It is true that in a traditional criminal case, regular trial proceedings would normally not constitute an effective remedy under the Court’s case-law to pursue a claim based on the illegality of a measure of search and seizure by the police (see, mutatis mutandis, P.G. and J.H. v. the United Kingdom, no. 44787/98, § 86, ECHR 2001 IX, and İrfan Güzel v. Turkey, no. 35285/08, §§ 106-7, 7 February 2017). However, the Court notes that in the present case, the applicant company sought the annulment of the tax assessments within two levels of the Turkish administrative tax court system in which the courts were competent to review allegations of illegality of administrative procedures within the context of the tax proceedings.

In view of the foregoing, the Court rejects the Government’s preliminary objection.

69. The Court notes that this complaint is not manifestly ill-founded within the meaning of Article 35 § 3 (a) of the Convention. It further notes that it is not inadmissible on any other grounds. It must therefore be declared admissible.

B. Merits

1. The parties’ submissions

(a) The applicant company

70. The applicant company argued that the search and seizure and the ensuing audit had not been conducted in compliance with the domestic law and had therefore violated its right to respect for its home. It maintained first of all that under the Tax Procedure Act, an audit must be carried out at a company’s business premises and that the procedure must be conducted expeditiously. However, tax inspector S.K. had acted in bad faith and had applied for a search warrant, despite the availability of the relevant documents at the applicant company’s premises for a period of two months before she submitted her application. Referring to the Court’s judgment in the case of Ernst and Others v. Belgium (no. 33400/96, 15 July 2003), it argued that even assuming that the reasons relied on by the inspector in requesting a search warrant had been relevant, they had not been sufficient to justify the search and seizure.

71. The applicant company stated that the search warrant had been drafted in broad terms and had not specified the documents that could be seized. Although the domestic legislation provided that tax searches could only be conducted on the basis of a prior judicial decision, it failed to require that the content of such decisions should be specific. The applicant company compared its case to that of Van Rossem v. Belgium (no. 41872/98, 9 December 2004) and stated that the tax inspectors had indiscriminately seized all the documents at its premises without drawing up an inventory and without allowing its staff to seal the bags with its own seal. It claimed that that failure had resulted in the seizure of important documents for the company, some of which had been irrelevant for the purposes of the tax audit. In that connection, it also argued that it had not had access to those documents throughout the proceedings.

72. As for the audit conducted on the basis of the seized documents, the applicant company claimed that it had been carried out unlawfully after the final date determined by the domestic court. It concluded that the deficiencies in the procedure revealed the domestic authorities’ intention to intimidate it by imposing substantial tax penalties in retaliation for having started enforcement proceedings against the Iron and Steel Company.

(b) The Government

73. The Government stated that the interference complained of in the present case had been in accordance with the law. The right to respect for home was recognised by the Constitution as a fundamental right and the Criminal Code envisaged substantial sanctions for those acting in violation of that right. The interference in question in the present case had been based on sections 139-47 of the Tax Procedure Act, which regulated in detail the search of business premises within the context of tax evasion and the procedure to be followed during and after such a search.

74. As regards the legitimate aim of the interference, the Government submitted that the search and seizure at issue had been conducted with a view to collecting evidence which would help establish whether the applicant company had committed tax evasion, a severe offence affecting the rights of others. The impugned measures had thus pursued a legitimate aim for the purposes of Article 8 § 2 of the Convention as they had been taken in the interests of the economic well-being of the country and for the prevention of crime.

75. As for the necessity of the impugned search and seizure, the Government referred to the Court’s Ernst and Others judgment (cited above) and maintained that the States could resort to such measures in order to obtain evidence regarding certain offences. Nevertheless, their legislation and practice should afford individuals adequate and effective safeguards against abuse. In that connection, they reiterated that sections 139-47 of the Tax Procedure Act provided such safeguards concerning searches and seizures. In the present case the search warrant had been issued by a judge and the aim of the search had been restricted to verifying whether there existed documentary evidence of tax evasion at the applicant company’s premises. The warrant also stipulated that the search would be carried out at one address and only once during the daytime. This, according to the Government, specified the limits of the search and seizure in terms of subject, time and place.

76. As regards the alleged lack of an inventory, the Government stated that in complex cases such as the one at issue, which required the seizure of a substantial number of documents, it was not possible for inspectors to make an inventory immediately at the place searched. They argued that in any event, in such cases, the question whether an inventory was drawn up or not did not affect those concerned as all the documents seized were at the disposal of the parties, in compliance with the rights of the defence.

77. Lastly, the Government contended that the search and seizure in the present case had been proportionate to the aim pursued, in that they had been carried out in relation to proceedings concerning tax evasion and the officials had acted within the limits of the warrant.

2. The Court’s assessment

(a) Whether there was an interference

78. The Court observes first of all that it is common ground between the parties that the search of the applicant company’s premises and the seizure of its documents constituted an interference with its right to respect for its “home” guaranteed by Article 8 of the Convention (see Bernh Larsen Holding AS and Others v. Norway, no. 24117/08, § 106, 14 March 2013).

(b) Whether the interference was justified

79. Next, the Court has to determine whether the interference was justified under paragraph 2 of Article 8, in other words whether it was “in accordance with the law”, pursued one or more of the legitimate aims set out in that paragraph and was “necessary in a democratic society” to achieve that aim.

(i) In accordance with the law

80. The Court reiterates that the expression “in accordance with the law” not only requires that the impugned measure should have some basis in domestic law, but also refers to the quality of the law. This implies that where a national law authorises intervention, it must be sufficiently accessible, precise and foreseeable in its application, in order to avoid all risk of arbitrariness. A law is “foreseeable” if it is formulated with sufficient precision to enable the individual – if need be with appropriate advice – to regulate his conduct (see, among other authorities, S. and Marper
v. the United Kingdom [GC], nos. 30562/04 and 30566/04, § 95, ECHR 2008, and Bernh Larsen Holding AS and Others, cited above, § 123). In addition, in the context of investigative activities such as the one at issue, because of the lack of public scrutiny and the risk of abuse of power, compatibility with the rule of law requires that the domestic law provide adequate protection against arbitrary interference with Article 8 rights (see Bože v. Latvia, no. 40927/05, § 74, 18 May 2017).

81. As noted above, the applicant company raised a number of complaints in relation to the authorities’ compliance with the domestic legislation, namely, with sections 139 and 142-47 of the Tax Procedure Act.

82. The Court notes that both the Tax Procedure Act and the Code of Criminal Procedure in force at the time contained detailed provisions regarding the search and the seizure of objects and documents. In the present case, the applicant company’s complaints mainly concern the authorities’ alleged failure to comply with those provisions and therefore relate primarily to the manner in which the legal framework was applied. The applicant company’s arguments concerning the lawfulness of the interference being closely related to the question as to whether the “necessity” test was complied with in their case, the Court will address jointly the “in accordance with the law” and “necessity” requirements (see, mutatis mutandis, Kvasnica v. Slovakia, no. 72094/01, §§ 83-84, 9 June 2009, and Cacuci and S.C. Virra & Cont Pad S.R.L. v. Romania, no. 27153/07, § 88, 17 January 2017).

(ii) Legitimate aim

83. The Government maintained that the search and seizure had served a legitimate aim, namely, the economic well-being of the country and the prevention of crime. Their submission was not disputed by the applicant company.

84. The Court finds no reason to arrive at a different conclusion in this regard.

(iii) Necessary in a democratic society

(α) General principles

85. In accordance with the Court’s established case-law, the notion of “necessity” implies that an interference corresponds to a pressing social need and, in particular, is proportionate to the legitimate aim pursued. In determining whether an interference is “necessary in a democratic society”, the Court will take into account that a margin of appreciation is left to the Contracting States (see Keegan v. the United Kingdom, no. 28867/03, § 31, ECHR 2006-X). However, the exceptions provided for in paragraph 2 of Article 8 are to be interpreted narrowly, and the need for them in a given case must be convincingly established (see Miailhe v. France (no. 1), 25 February 1993, § 36, Series A no. 256-C; Smirnov v. Russia, no. 71362/01, § 43, 7 June 2007; and Mastepan v. Russia, no. 3708/03, § 40, 14 January 2010).

86. As regards searches of premises and seizures in particular, the Court has consistently accepted that the Contracting States may consider it necessary to resort to such measures in order to obtain physical evidence of certain offences (see Vasylchuk v. Ukraine, no. 24402/07, § 79, 13 June 2013). The Court will assess whether the reasons put forward to justify such measures were relevant and sufficient, and whether the aforementioned proportionality principle has been adhered to (see Smirnov, cited above, § 44).

87. As regards the latter point, the Court must first ensure that the relevant legislation and practice afford individuals adequate and effective safeguards against abuse (see Funke v. France, 25 February 1993, § 56, Series A no. 256‑A, and Société Colas Est and Others v. France, no. 37971/97, § 48, ECHR 2002‑III). Secondly, the Court must consider the specific circumstances of each case in order to determine whether, in the particular case, the interference in question was proportionate to the aim pursued. The criteria the Court has taken into consideration in determining this latter issue are, inter alia: the severity of the offence in connection with which the search and seizure were effected; the manner and circumstances in which the order was issued, in particular whether any further evidence was available at that time; the content and scope of the order, having particular regard to the nature of the premises searched and the safeguards implemented in order to confine the impact of the measure to reasonable bounds; and the extent of possible repercussions on the reputation of the person affected by the search (see, among many others, Buck v. Germany, no. 41604/98, § 45, ECHR 2005-IV; Sérvulo & Associados - Sociedade de Advogados, RL and Others v. Portugal, no. 27013/10, § 100, 3 September 2015; and K.S. and M.S v. Germany, no. 33696/11, § 44, 6 October 2016).

(β) Application to the present case

- The granting and terms of the order

88. The Court notes that the search and seizure complained of were carried out on the basis of a warrant issued by the Şişli Magistrates’ Court following a request to that effect by an official authority, namely the Tax Inspectorate. In submitting that request, inspector S.K., who was acting in the name of the Tax Inspectorate, explained why she considered that a search should be conducted at the applicant company’s business premises. Besides pointing out that there were indications of tax evasion, which was a prerequisite for making such a request pursuant to section 142 of the Tax Procedure Act, she referred to her previous visits to the said premises and argued that the representatives of the applicant company had acted in a manner which obstructed the work of the tax inspectors. In these circumstances, the Court is satisfied that the search and seizure warrant was based on reasonable grounds. It does not accept the applicant company’s argument that the request for a warrant had been made in bad faith in that the requested documents had already been presented to the inspectors at its business premises, as the gist of the request was that an audit could not be carried out at those premises due to the difficulty caused by the representatives of the applicant company themselves. In that connection, the Court cannot but take note of the records drawn up during the visits of the tax inspectors, which, although not signed by the first applicant, were signed by all the other persons present, including the applicant company’s lawyer (see paragraph 15 above).

89. As mentioned above, the search and seizure warrant was requested in respect of tax evasion, an offence which affects States’ resources and their capacity to act in the collective interest. As such, tax evasion constitutes a serious offence, particularly in a case such as this where the suspected tax evasion related to a substantial amount – approximately 77,000 euros (EUR), taking solely into account the income tax imposed on the applicant company (see K.S. and M.S. v. Germany, cited above, § 48). Furthermore, in this field – the prevention of tax evasion – States encounter serious difficulties owing to the scale and complexity of banking systems and financial channels and the immense scope for international investment, made all the easier by the relative porousness of national borders (compare Crémieux v. France, 25 February 1993, § 39, Series A no. 256‑B; Miailhe, cited above, § 37; and Funke, cited above, § 56, all of which concern the searches and seizures carried out by customs authorities within the context of prevention of capital outflows and tax evasion).

90. As regards the question whether the scope of the search and seizure warrant was reasonably limited, the Court considers that the warrant was couched in very broad terms. Although it limited the place of the search to one address and specified that it could be carried out only once, it authorised in a general and unlimited manner the search and seizure of “the books of accounts and other documents”, which did not in any manner restrict the scope of the search to be conducted on the company’s business premises. The Court will therefore examine whether the deficiencies in the limitation of the scope of the warrant were offset by sufficient procedural safeguards, capable of protecting the applicant company against any abuse or arbitrariness (see Robathin v. Austria, no. 30457/06, § 47, 3 July 2012; Bernh Larsen Holding AS and Others, cited above, § 163; and
Sérvulo & Associados - Sociedade de Advogados, RL and Others, cited above, § 104).

- Whether there existed sufficient safeguards

91. As noted above, the Court observes that the Tax Procedure Act contains detailed provisions which set forth a number of procedural safeguards as regards the search and seizure of documents for the purposes of a tax audit. In accordance with those provisions:

(a) an inventory listing the items seized must be drafted at the end of the search; if that is not possible, the documents must be secured by a seal and an inventory must be drawn up after the breaking of the seal by those concerned (section 143);

(b) the administration must protect the seized documents and will be liable for any damage caused to them (section 143);

(c) documents that are not relevant for the tax assessment must be given back to the taxpayer (section 144);

(d) the seized documents must be made accessible to the taxpayer if he or she wishes to inspect them or make copies of them (section 144);

(e) the audit must be carried out expeditiously, preferably within three months of the seizure; that period may be prolonged by a court decision (sections 144 and 145);

(f) during the course of the audit, the findings of the inspector must be recorded and the taxpayer must have the possibility of noting his or her objections on the records drawn up (section 145).

92. The Court also observes that the Code of Criminal Procedure in force at the time (Law no. 1412) contained additional provisions which were applicable to situations not regulated by the Tax Procedure Act, which provided, in particular that the taxpayer concerned or someone representing him would be present during the search and seizure (Article 98).

93. It remains to be seen whether those safeguards were applied in an effective manner in the present case.

- Application of the safeguards

94. The Court observes at the outset that the search was carried out by two inspectors, in the presence of the first applicant, staff members of the applicant company and two police officers. The inspectors sealed the documents they deemed relevant for the audit and stated that an inventory would be drawn up at a later stage. The Court notes that such an inventory was indeed drafted after the seals of the bags containing the documents had been broken, in line with section 143 of the Tax Procedure Act. By a letter sent approximately one month before the bags were unsealed, the applicant company was invited to be present during the procedure. However, neither the first applicant nor any other person representing the applicant company accepted the invitation. Under those circumstances, the Court considers that the applicant company implicitly but unequivocally waived an important guarantee offered to it by the domestic legal system (see, mutatis mutandis, D.H. and Others v. the Czech Republic [GC], no. 57325/00, § 202, ECHR 2007‑IV), which would have allowed it to perform an ex post facto check of the content of the bags in order to reveal whether the authorities had seized any documents that were irrelevant for the tax audit, as it alleged (see Cacuci and S.C. Virra & Cont Pad S.R.L., cited above, § 99). In that connection, the Court contends that the first applicant’s letter, sent only one day before the unsealing procedure, requesting information as to the meaning of the word “unsealing” (see paragraph 20 above), does not constitute sufficient reason to depart from this finding. It notes that the applicant company benefited from the assistance of a lawyer during that period (see paragraph 15 above). Moreover, it did not explain why it had failed to attend the unsealing procedure and did not mention its lack of understanding of the procedure either before the domestic courts or in the present applications.

95. The Court further observes that the applicant company took no steps to inspect any of the documents seized, either during the course of the audit or during the taxation proceedings. In the absence of any proof to indicate that it requested permission to examine the documents and was not allowed to do so, the Court cannot give weight to its allegations concerning its inability to have access to the seized documents. As the Government pointed out, those documents appear to be at the disposal of the applicant company pursuant to section 144 of the Tax Procedure Act. The Court further observes that the applicant company did not make any requests for the return of its books and documents either. It notes that under section 145 of the same Act, it could have had the seized documents returned to it on condition that its representatives signed the records drawn up by the inspector during the course of the audit. That would have enabled it to have access to them and to submit whatever comments it wished to make about the inspector’s findings before the end of the audit.

96. In relation to the particular complaints that the representatives of the applicant company were not given the opportunity to seal the bags with the company’s own seal and that the tax inspector failed to conclude the audit within the time-limit set by the domestic court, the Court considers that the salient issue essentially concerns the use of allegedly unlawfully obtained evidence in the taxation proceedings against the applicant company, rather than a breach of its Article 8 rights (see Cacuci and S.C. Virra & Cont Pad S.R.L., cited above, § 101). It notes that the applicant company had the opportunity throughout the taxation proceedings to contest the impugned measures and their impact on its rights. All of its complaints concerning the circumstances in which the search and seizure were carried out and the tax-assessment report was drafted were examined by the Tax Court and were found to be unsubstantiated. In these circumstances, the Court is unable to arrive at a different conclusion from that of the domestic authorities. It reiterates that its power to review compliance with domestic law is limited, it being in the first place for the national authorities, notably the courts, to interpret and apply that law (ibid., § 103).

97. While it is true that the warrant authorising the search and seizure of the account books and other documents relevant for tax-assessment purposes was couched in very broad terms, in the light of the above, the Court is satisfied that it was based on relevant and sufficient reasons, and was attended by adequate safeguards against abuse and arbitrariness (see, mutatis mutandis, Bernh Larsen Holding AS and Others, cited above, § 172, and Cacuci and S.C. Virra & Cont Pad S.R.L., cited above, § 104).

98. The Court is mindful of the fact that the nature of the interference complained of in the present case was not of the same seriousness and degree as is ordinarily the case where search and seizure are carried out under criminal law, the type of measures considered by the Court in a number of previous cases (see, for instance, Funke; Crémieux; Miailhe; Société Colas Est and Others; Buck; Robathin; and Bernh Larsen Holding AS, all cited above).

99. Lastly, the Court reiterates that a wider margin of appreciation could be applied where the business premises of a legal person are concerned than would have been the case had it concerned an individual (see, mutatis mutandis, Niemietz v. Germany, 16 December 1992, § 31, Series A no. 251 B; Société Colas Est and Others, cited above, § 49; and Bernh Larsen Holding AS and Others, cited above, § 159).

(γ) Conclusion

100. Having regard to the circumstances of the case as a whole, the Court finds that the search measure itself and the manner it was carried out were in accordance with the relevant law and that the domestic authorities, acting within their margin of appreciation, struck a fair balance between the applicant company’s right to respect for its “home” and the legitimate aim pursued by means of the search and seizure of its documents for tax-assessment purposes.

101. Accordingly, there has been no violation of Article 8 of the Convention in the present case.

IV. ALLEGED VIOLATION OF ARTICLE 6 § 1 OF THE CONVENTION

102. The applicant company complained that the proceedings before the Tax Court had been unfair in that the domestic court had relied solely on the tax-assessment report which, according to it, had been drawn up unlawfully. It also raised a number of other complaints concerning its defence rights. The applicant company relied on Article 6 § 1 of the Convention, the relevant parts of which read as follows:

“In the determination of ... any criminal charge against him, everyone is entitled to a fair ... hearing ... by an independent and impartial tribunal established by law.”

103. The Government contested those arguments. They stated that the applicant company’s case had been assessed by means of an oral hearing by an independent and impartial tribunal and that it had had the opportunity to submit its arguments concerning the search-and-seizure warrant and its execution, as well as the tax-assessment report. The Tax Court had examined the applicant company’s submissions and delivered a judgment partially in its favour. Furthermore, the applicant company had had recourse to appeal proceedings and had its arguments assessed by the Supreme Administrative Court as well.

104. The applicant company maintained that the proceedings had not been in compliance with the principle of equality of arms in that it had not had access to the relevant documents, which had been seized without any inventory having been made. It also claimed that the tax inspector had exchanged a certain amount of correspondence with the enforcement authorities, which had been important for the assessment of its taxes, but that the domestic court had failed to request those documents.

The applicant company further alleged that the amount it had obtained as a result of the enforcement proceedings had not been subject to taxes, and that the Tax Court had failed to assess that issue. It also argued that both the Tax Court and the Supreme Administrative Court had failed to deliver reasoned decisions.

105. The Court notes first of all that no plea of inadmissibility on account of lack of jurisdiction ratione materiae was made by the Government. Nevertheless, reiterating that incompatibility ratione materiae is a matter which goes to the Court’s jurisdiction rather than a question of admissibility in the narrow sense of that term (see, mutatis mutandis, Blečić; Béláné Nagy; and Özmurat İnşaat Elektrik Nakliyat Temizlik San. ve Tic. Ltd. Şti., all cited above), it examines the matter of its own motion and finds that in the present case, which concerns taxation proceedings, Article 6 applies under its criminal head, in line with its Jussila v. Finland judgment ([GC], no. 73053/01, ECHR 2006‑XIV).

106. The Court must therefore consider whether the proceedings complied with the requirements of Article 6, having due regard to the facts of the individual case, including any relevant features flowing from the taxation context.

107. The general principles to be applied in cases concerning the use of unlawfully obtained evidence were summarised in the Court’s Prade v. Germany judgment (no. 7215/10, §§ 32-5, 3 March 2016).

108. In the present case the Court notes at the outset that the case brought by the applicant company for the annulment of the taxes and penalties imposed on it was assessed before two levels of jurisdiction. The applicant company had the opportunity to submit its arguments regarding both the procedure, namely, the search and seizure carried out at its business premises, and the findings of the tax-assessment report. The Tax Court held a hearing during the course of the proceedings, at which the parties concerned were present.

109. As regards the quality of the evidence in question, the Court takes note of the deficiencies in the preparation of the tax-assessment report, in particular, the inspector’s failure to conclude the audit within the time-limit and her submission of the report almost one year after the date specified by the Şişli Criminal Court of General Jurisdiction (see paragraphs 26 and 29 above). Nevertheless, having regard to its finding under Article 8 of the Convention concerning the procedure whereby the said evidence was obtained, the Court cannot consider that those deficiencies cast any doubt on the reliability or accuracy of the tax-assessment report. Accordingly, although the Tax Court relied to a large extent on the impugned report, in the absence of any risk of unreliability, the need for supporting evidence was correspondingly weaker.

110. Moreover, as pointed out above (see paragraph 96 above), the Tax Court examined the applicant company’s arguments concerning the alleged unlawfulness of the search and seizure and the said report and found them to be unsubstantiated, providing the reasons for its finding. In so far as the applicant company complained about the lack of reasons given by the Supreme Administrative Court in its decisions, the Court reiterates that in dismissing an appeal, an appellate court may, in principle, simply endorse the reasons for the lower court’s decision (see García Ruiz v. Spain [GC], no. 30544/96, § 26, ECHR 1999-I).

111. The Court observes that the applicant company’s submissions regarding the domestic court’s alleged failure to provide certain documents cited in the impugned tax-assessment report relate to the court’s compliance with the principle of equality of arms. Nevertheless, the Court notes that the documents the applicant company requested were not among those relied on in the tax-assessment report and were not in the case file before the court, causing no hindrance to its ability to have a complete picture of the case (see, mutatis mutandis, Schuler-Zgraggen v. Switzerland, 24 June 1993, § 52, Series A no. 263, and Bendenoun v. France, 24 February 1994, § 52, Series A no. 284). In that connection, the Court also points out that there is nothing in the case file to indicate that the applicant company’s access to the seized documents or the file before the Tax Court was restricted in any way. Nor is there anything to call into question the objective impartiality of the domestic court. Lastly, despite the applicant company’s allegations that the Tax Court failed to examine whether the amount it had received from the Iron and Steel Company had been subject to taxes, the Court observes that the domestic court assessed these arguments and dismissed them in its judgment (see paragraph 34 above).

112. It follows that the applicant company’s complaints under this head must be rejected as manifestly ill-founded pursuant to Article 35 §§ 3 and 4 of the Convention.

V. ALLEGED VIOLATION OF ARTICLE 1 OF PROTOCOL No. 1 TO THE CONVENTION

113. The applicant company complained that the taxes and penalties unlawfully imposed on it had rendered the judgment of the Ankara Commercial Court in its favour meaningless in that it had paid the amount it had obtained back to the State in the form of taxes. In that connection, it argued once again that the State authorities’ aim had been to punish it for the enforcement proceedings it had initiated against the Iron and Steel Company, as demonstrated by the letter of the under-secretary to the Treasury dated 23 June 2000. It also complained of several irregularities in the calculation of the penalty for potential lost revenue. It argued in the second application that the penalty for potential lost revenue had been calculated on the basis of different provisions for years 2000 and 2001, and that the provision, which had been taken into account in the calculation of the penalty for year 2000, had been annulled by the Constitutional Court during the course of the proceedings. The applicant company relied on Article 1 of Protocol No. 1 to the Convention, which reads:

“Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.

The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.”

114. The Government contested the applicant company’s allegations.

115. The Court reiterates that taxation is in principle an interference with the right guaranteed by the first paragraph of Article 1 of Protocol No. 1, since it deprives the person concerned of a possession, namely the amount of money which must be paid. While the interference is generally justified under the second paragraph of this Article, which expressly provides for an exception as regards the payment of taxes or other contributions, the issue is nonetheless within the Court’s control, since the correct application of Article 1 of Protocol No. 1 is subject to its supervision (see Burden v. the United Kingdom [GC], no. 13378/05, § 59, ECHR 2008).

116. In that respect, the Court notes that the applicant company made several payments to the tax authorities following the judgments delivered by the Tax Court in relation to the years 2000 and 2001. Accordingly, there is no doubt that the taxes and penalties imposed on it constituted an interference within the meaning of Article 1 of Protocol No. 1.

117. The Court observes that the legality of the interference and the legitimate aim it pursued have not been disputed by the parties. It accepts that the interference was based on sections 341 and 344 of the Tax Procedure Act and served the general interest referred to in the second paragraph of Article 1 of Protocol No. 1. This provision expressly reserves the right of Contracting States to enforce such laws as they may deem necessary to secure the payment of taxes. The margin of appreciation afforded to the national authorities is therefore a wide one (see Jokela v. Finland, no. 28856/95, § 57, ECHR 2002‑IV; Balaz v. Slovakia (dec.), no. 60243/00, 16 September 2003; and Orion-Břeclav, S.R.O. v. the Czech Republic (dec.), no. 43783/98, 13 January 2004).

118. As to the proportionality of the interference, the Court observes that the taxation procedure against the applicant company, which led to the imposition of substantial amounts of taxes and penalties on it, appear to have commenced following its initiation of enforcement proceedings against the Iron and Steel Company. However, it cannot give weight to the applicant company’s allegation that the State authorities imposed those taxes and penalties arbitrarily, with the sole aim of recouping the amounts paid to it. In that connection, the Court has due regard to the safeguards which surrounded the impugned interference, which have been assessed in detail above, in relation to the complaints under Articles 6 and 8 of the Convention.

119. The Court observes, in particular, that the imposition of taxes and penalties was partially upheld by the domestic courts following proceedings which complied with Article 6 of the Convention. The applicant company had an opportunity to challenge before the courts both the procedure leading up to the imposition of those taxes and penalties, and their calculation. The courts eventually delivered decisions partially in its favour by reducing the amount of the penalty for the year 2001 and annulling the imposition of provisional income tax for the year 2000. Although the amounts were substantial, there is nothing to indicate that their calculation was inaccurate or arbitrary (compare Porter v. the United Kingdom (dec.), no. 15814/02, 8 April 2003). Accordingly, no issue of proportionality arises as regards the imposition of taxes and penalties on the applicant company.

120. The Court observes that the applicant company did not substantiate the complaints it raised in the second application regarding the calculation of the penalties for year 2000. It made no further reference to them following the communication of the case either.

121. Accordingly, this part of the application is manifestly ill-founded and must be rejected in accordance with Article 35 §§ 3 and 4 of the Convention.

FOR THESE REASONS, THE COURT, UNANIMOUSLY,

1. Decides to join the applications;

2. Declares the applicant company’s complaint concerning Article 8 of the Convention admissible and the remainder of the applications inadmissible;

3. Holds that there has been no violation of Article 8 of the Convention.

Done in English, and notified in writing on 20 November 2018, pursuant to Rule 77 §§ 2 and 3 of the Rules of Court.

              Stanley NaismithRobert Spano
RegistrarPresident

In accordance with Article 45 § 2 of the Convention and Rule 74 § 2 of the Rules of Court, the separate opinion of Judge Lemmens is annexed to this judgment.

R.S.
S.H.N.

CONCURRING OPINION OF JUDGE LEMMENS

1. It is not without some hesitation that I agree with my colleagues that there has been no violation of Article 8 of the Convention. In this separate opinion, I would like to express the reasons for my hesitation.

2. The facts of the case give me the impression that there was “tax harassment” on the part of the tax authorities after they found out that the applicant company had started proceedings to enforce the judgment rendered in its favour against the Iron and Steel Company, even though an appeal was still pending before the Court of Cassation.

Two visits were carried out by the tax inspectors before they decided to request a warrant to search the applicant company’s addresses. The first time they arrived without any prior announcement of their visit and invited the company to submit to them “all documents related to its income and expenditure”. The applicant company’s representatives replied that they could make the documents available within fifteen days (see paragraph 11 of the judgment). The company subsequently made the documents ready for inspection at its premises, and asked to be given prior notice of the tax inspectors’ visit in order to prepare the room and the staff who would present the documents (see paragraph 12 of the judgment). Rather than making use of the offer to inspect the documents at these premises, the tax inspectors replied that it was not possible to do so “as the address was not registered” (see paragraph 13 of the judgment). I regard this as a formalistic reply. Be that as it may, some weeks later the tax inspectors presented themselves a second time at the said premises, but again without any prior notice. On that occasion the applicant company’s representatives initially refused to cooperate, as they had not received such notice. Nevertheless, after some discussion, the books for 1998 were presented to the tax inspectors. The latter apparently refused to do their work, complaining that they could not do so “in view of the tension caused by the company’s staff” (see paragraph 15 of the judgment). I cannot but wonder whether it was not the tax inspectors themselves who, by their unexpected visit, were the cause of the tension.

Then followed the request for a search warrant. The tax inspector S.N. argued “that the company’s representatives had acted in a hostile manner and tried to obstruct the work of the inspectors by hiding information such as their names and the official address of the company, as well as by unjustly accusing her” (see paragraph 16 of the judgment). She also argued that, since the authorities were not required to inform tax payers in advance of an audit, the applicant company’s request to have several days’ notice was unacceptable (ibid.). I would like to note that I find these arguments rather unconvincing. They reflect an authoritarian view of the role of the public authorities, without any consideration for the legitimate interests of those under their control.

The search warrant issued by the Magistrates’ Court did not specify the documents that could be seized. It mentioned, in a very general way, “the account books and other documents to be examined” (see paragraph 17 of the judgment). This amounted, in my opinion, to an authorisation for a fishing expedition.

Later the same day, the search took place and a large number of documents were seized (see paragraph 18 of the judgment).

A few weeks later the tax inspectorate requested specific, additional documents, which were submitted without any problem (see paragraphs 23‑24 of the judgment).

3. The majority do not accept the applicant company’s arguments about the absence of a proper justification for the search-and-seizure operation (see paragraph 88 of the judgment). My own views are more reserved. While the applicant company’s representatives may not have been very cooperative during the first two visits of the tax inspectors, the conduct of the tax authorities themselves was not above criticism. They did not seem to be interested in finding a solution that would be acceptable to both parties. I should add that there is no indication that during these visits the applicant company was trying to hide any books or other documents from them.

The majority do accept, however, that the search-and-seizure warrant “was couched in very broad terms”, by authorising “in a general and unlimited manner the search and seizure of ‘the books of accounts and other documents’, which did not in any manner restrict the scope of the search to be conducted” (see paragraph 90 of the judgment). I fully agree with that assessment.

4. On the basis of the latter assessment, and taking into account the fact that the applicant company complained primarily about the disproportionate nature of the interference with the right to respect for its “home”, the question was, as is stated in the judgment, “whether the deficiencies in the limitation of the scope of the warrant were offset by sufficient procedural safeguards, capable of protecting the applicant company against any abuse or arbitrariness” (see paragraph 90 of the judgment).

The majority attach importance to the fact that the Tax Procedure Act provided for the drafting of an inventory after the breaking of the seals of the bags containing the seized documents. They also note that the applicant company did not accept the invitation to be represented at this operation. They conclude “that the applicant company [thus] implicitly but unequivocally waived an important guarantee offered to it by the domestic legal system” (see paragraph 94 of the judgment). In my opinion, this guarantee was not very helpful in the case of the search and seizure carried out at the applicant company’s premises. There was never any complaint about documents having disappeared or not being returned to the applicant company. Rather, the complaint was about the search and seizure as such. The harm was already done by the time the bags were to be opened and an inventory was to be made.

The majority further reject the applicant company’s argument “concerning its inability to have access to the seized documents”, noting that the documents were at the disposal of the company and that it did not make any request for the return of its books and documents (see paragraph 95 of the judgment). While the possibility of inspecting the seized documents at the offices of the tax authorities was capable of alleviating certain of the practical inconveniences resulting from the seizure, it is in my opinion speculative to mention the possibility of obtaining the return of any of them. Section 144 of the Tax Procedure Act placed an obligation on the tax authorities to return irrelevant documents to their owners, and the tax authorities did not see any need to apply this provision in the applicant company’s case.

5. The reason why in the end I concurred with the majority is that it was possible for the applicant company to contest the search and seizure throughout the taxation proceedings, and that the Tax Court, in a reasoned decision, found all of its complaints to be unsubstantiated (see paragraph 96 of the judgment).

If I had to decide directly on the proportionality of the interference with the applicant company’s rights under Article 8 of the Convention, I might have come to another conclusion than the domestic courts. However, when it comes to assessing whether an interference was proportionate or not, these courts must be given some margin of appreciation, provided that they proceed on the basis of a correct interpretation of the relevant Convention standards and a reasonable assessment of the facts. Moreover, where a search and seizure is carried out at the business premises of a legal person, rather than in the home of a physical person, the seriousness of the interference with fundamental rights must be placed in perspective (see paragraph 99 of the judgment, where the majority mention a “wider margin of appreciation”).

Having regard to the analysis made by the Tax Court in the proceedings concerning the 2001 tax year (see paragraph 34 of the judgment), and even though I do not agree with all of its assessments, I concede that the domestic courts were entitled to find that the search and seizure had not been conducted unlawfully. Since our Court does not act as a court of appeal, but only as a court reviewing the acts of the competent domestic authorities, I therefore concur with the majority that there has been no violation of Article 8.

The reader will understand from the foregoing that this conclusion is reached without much enthusiasm. The conduct of the tax authorities was, in my opinion, far from exemplary.

[1]. Approximately 2,900,000 euros (EUR) at the time

[2]. Approximately EUR 76,000 and 360,000 respectively, at the time

[3]. Approximately EUR 68,000 and 346,000 respectively, at the time

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