A legal battle is expected between the National Tax Service and the nation’s 26th-largest conglomerate Hyosung Group over tax evasion and other charges against its holding company and chairman.

The Seoul tax office held an inquiry commission meeting on Thursday and decided to bring to the prosecution Hyosung Corp. on charges of fraudulent accounting and group chairman Cho Suck-rai on tax evasion, officials said Friday.

Cho, along with his key aides such as vice chairman Lee Sang-woon, has been subject to prosecutorial investigation since May on charges of evading tax amounting to hundreds of billions of won using borrowed-name accounts.

In July, he was also forced to cancel the plans to accompany President Park Geun-hye in her state visit to Vietnam as tax officials ramped up the probe and imposed on him an overseas travel ban.

“Hyosung’s alleged tax evasion not only involved a large sum of money but also was highly intentional,” said an official of the tax service.

The group, however, denied most of the charges.

“It is true that we are undergoing a tax investigation by the NTS but nothing like tax evasion or fraudulent accounting has been confirmed yet,” said a company official.

“The final results will be announced after the probe officially wraps up on Oct. 10,”

The group may even consider filing administrative litigation against the tax tribunal for a flawed investigation, the official added.

The conglomerate’s trading companies and other affiliates held accumulated deficits shortly before the financial crisis broke out, the official explained.

“Since the subsidiaries were merged into the current holding company in 1998, it has taken years for the group to pay off the remaining losses,” the official said.

“This does not constitute fraudulent accounting as it has not harmed the assets or reputation of the company. It was, on the contrary, a necessary measure to stop the aftermath of the financial crisis from affecting the entire conglomerate.”

Also, chairman Cho has held shares under borrowed names since then 1970s, as was the business custom then, but has recently been converting them into his real name ― a process that generated a transfer income tax, the official added.

“Even if some of the transactions needed revision, the corresponding amount would be much lower than what has been claimed by the NTS,” the official said.

The recent investigation momentum of the NTS and the prosecution largely reflects the Park administration’s policy of zero tolerance of tax evasion by the top income bracket.

By Bae Hyun-jung (tellme@heraldcorp.com)