Dear Clients, Colleagues and Friends,

According  to  a   recent  decision   of  the Israeli  Supreme  Court,  in  the Leibovitch Case[1] , as a general rule, taxpayers cannot present to the court new evidence or factual claims that have not been raised at the tax assessment stages.


The Leibovitch case concerned a taxpayer who sold shares in a company. The taxpayer reported most of the consideration as amounts received for a sale of goodwill. The assessing officer rejected this argument and instead determined that the consideration was for a sale of shares.

The taxpayer appealed to the District Court. During the appeal, to substantiate his claim the goodwill was  indeed  sold, the taxpayer attempted to submit  an expert opinion  regarding  the value of the goodwill.

The district court refused to allow the taxpayer to present the expert opinion. The court determined that the value of the goodwill is secondary to the question of whether goodwill was sold at all. Furthermore, the court ruled that if the taxpayer wanted to present arguments regarding the value of the goodwill, then he needed to do so previously, at the stage of the administrative appeal before the tax authority. The court ruled that taxpayers should not be able to take advantage of the tax appeal stage to improve their positions by presenting new facts or evidence.

The Supreme Court Decision

The Supreme Court affirmed the District Court decision. The Supreme Court ruled that a taxpayer has to present all his arguments already at the stage of the administrative tax appeal and may not leave arguments to a later stage. The administrative tax proceedings, including the administrative tax appeals, are not meaningless stages. A tax appeal before a court is not considered the first judicial instance in which the assessment is reviewed, and a court does not review the tax assessment de novo.

The Supreme Court added that  there could be exceptional circumstances in which a court may allow new evidence to be presented to court, if necessary to assure an assessment that truly reflects the taxpayer's income. However, the Supreme Court ruled that the Leibovitch case was not amongst these exceptional cases and that the taxpayer provided no reasonable explanation for not presenting the expert opinion already at the administrative stages.


  • The Supreme Court decision has a substantial effect on both existing and future proceedings vis-à-vis the Israeli tax authorities.
  • Notwithstanding    conflicting decisions and practices of District Courts, the message of  the Supreme Court is clear - the administrative tax appeal is an integral part of the legal and judicial process.
  • As a general rule, taxpayers have to argue all facts and present all evidence already at the stage of the administrative proceedings.
  • The tax authority may use this decision to argue also that all legal arguments must already be presented at the administrative stages. 
  • The decision applies to any tax proceeding (income tax, VAT, real estate). 
  • The decision may also affect proceedings before other administrative instances which decisions may be appealed to a court.