Pillay v The Commissioner for the South African Revenue Service

• Jurisdiction: South Africa
• Judge: Mngadi J
• Judgment Date: 06 August 2018
• Docket Number: 0119/2017
• Court: KwaZulu-Natal Division, Durban
• Hearing Date: 06 August 2018
• Citation: 2018 JDR 1875 (KZD)

Mngadi J:

[1]

The first applicant seeks an order extending the period within which to lodge an appeal against disallowance of his objection on 27 May 2014 against the assessments

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for the 2008 to 2010 years of assessment as envisaged in Rule 52(2)(e) of the Tax Court rules to 1 October 2014, and declaration that such an appeal is valid.

[2]

The second applicant seeks an order extending the period within which to lodge an objection against the assessments raised on 27 June 2014 against her for the 2008 to 2011 years of assessment, as envisaged in Rule 52(2)(c) to 9 February 2015, and the declaration that the objection lodged on 9 February 2015 is valid.

[3]

The first applicant is a practicing attorney and the second applicant is the wife of the first applicant. They are married to each other in community of property. The respondent is the Commissioner for South African Revenue Service (SARS), a statutory entity responsible for tax administration in the Republic of South Africa. The respondent initially opposed the application until a day before the date of hearing when it indicated that, without furnishing reasons, it was not opposing the relief sought and it was tendering to pay costs of the application. Nevertheless, the relief sought, if granted, is granted by the court and the basis for granting such a relief must be set out.

[4]

The issues for determination are issues envisaged in s117(3) of the Tax Administration Act 28 of 2011 ('the Act') which provide that the court may hear and decide an interlocutory application or an application in a procedural matter relating to the dispute under this Chapter as provided for in the 'rules'. The provisions of s118 (3) of the Act provides that if an appeal to the tax court involves a matter of law only or is an interlocutory application or application in a procedural matter under the 'rules', the president of the court sitting alone must decide the appeal.

[5]

The application emanates from the respondent's audit of first and second applicants' tax affairs in respect of the 2007 to 2011 years of assessments in respect of the first applicant, and the 2008 to 2011 years of assessment in respect of the second applicant, in terms of the Income Tax Act 58 of 1962, as well as the audit of their tax affairs in respect of the 02/2007 to 02/2011 VAT periods as per the Value Added Tax Act 89 of 1991. The audit related to their assets and liabilities and lifestyle expenditure computed

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from bank statements and drawings compared to the income declared by the applicants.

[6]

The respondent issued the assessments in respect of the first applicant on 18 March 2014. The first applicant delivered his notice of objection (NOO) on 15 April 2014 and the respondent disallowed the NOO on 27 May 2014. On 30 September 2014 the first applicant filed a notice of appeal (NOA) and the respondent invalidated the NOA on 25 March 2015.

[7]

The respondent states, as reasons for invalidating the NOA, the first applicant did not deliver a valid NOA. The respondent can only grant an extension to deliver a valid NOA up to a period of 75 days, and that the first applicant did not upon the late delivery of the NOA request any extension or applied for condonation for the late delivery of the NOA.

[8]

In the case of the second applicant the respondent issued the assessments on 27 June 2014. The second applicant delivered her NOO on 9 February 2015. The respondent invalidated the NOO on 30 April 2015. The respondent maintains that upon delivery of the NOO the second applicant did not request any extension or applied for condonation for late delivery of the NOO. Therefore, the second applicant, it is argued, did not deliver a valid NOO as prescribed.

[9]

Taxpayers have a fundamental right to challenge the legality of actions and decisions within the tax system. The Act and the Rules lay down the procedure to be followed relating to objections and appeals. The rules promulgated in terms of the Act with effect from 11 July 2014 regulate disputes not finalized as at the date of the commencement of the rules.

[10]

Section 104 of the Act reads as follows:

'(1) A taxpayer who is aggrieved by the assessment made in respect of the taxpayer may object to the assessment.

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(2) The following decisions may be objected to and appealed against in the same manner as an assessment-

(a) a decision under subsection (4) not to extend the period for lodging an objection;

(b) a decision under section 107(2) not to extend the period for lodging an appeal; and

(c) any other decision that may be objected to or appealed against under a tax Act.

(3) A taxpayer entitled to object to an assessment or 'decision' must lodge an objection in the manner, under the terms, and within the period prescribed in the 'rules'

(4) A senior SARS official may extend the period prescribed in the 'rules 'within which objections must be made if satisfied that reasonable grounds exist for the delay in lodging the objection.

(5) The period of objection must not be so extended-

(a) for a period exceeding 30 business days, unless a senior SARS official is satisfied that exceptional circumstances exist which gave rise to the delay in lodging the objection;

(b) if more than three years have lapsed from the date of assessment or 'decision'; or

(c) if the grounds for objection are based wholly or mainly on a change in a practice generally prevailing which applied on the date of assessment or the 'decision'.

[11]

Section 107 of the Act provides:

'(1) After delivery of the notice of the decision referred to in section 106 (4), a taxpayer objecting to an assessment or 'decision' may appeal against the assessment or 'decision 'to the tax board or tax court in the manner, under the terms and within the period prescribed in this Act and the 'rules'.

(2) A senior SARS official may extend the period within which an appeal must be lodged for-

(a) 21 business days, if satisfied that reasonable grounds exist for the delay; or

(b) up to 45 business days, if exceptional circumstances exist that justify an extension beyond 21 business days.

(3) A notice of appeal that does not satisfy the requirements of subsection (1) is not valid.

(4) ......

(5) ......

(6) ......

(7) .......'

[12]

Section 106 of the Act provides that:

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'(1) SARS must consider a valid objection in the manner and within the period prescribed under this Act and the 'rules',

(2) SARS may disallow the objection or allow it either in whole or in part.

(3) If the objection is allowed either in whole or in part, the assessment or 'decision' must be altered accordingly.

[13]

In view of the issues arising in the matter it is necessary to quote Regulation 7 of the Act which provides:

'(1) A taxpayer who may object to an assessment under section 104 of the Act, must deliver a notice of objection within 30 days after that a taxpayer who may object to an assessment under section 104 of the Act, must deliver a notice of objection within 30 days after-

(a)

delivery of a notice under rule 6(4) or the reasons requested under rule 6; or

(b)

where the taxpayer has not requested reasons, the date of assessment.

(2) A taxpayer who lodges an objection to an assessment must -

(a) complete the prescribed form in full;

(b) specify the grounds of the objection in detail including-

(i) the part or specific amount of the disputed assessment objected to;

(ii) which of the grounds of assessment are disputed; and

(iii) the documents required to substantiate the grounds of objection that the taxpayer has not previously delivered to SARS for purposes of the disputed assessment;

(c) .........

(d) ..........

(e) ..........

(3) The taxpayer may apply to SARS under section 104(4) for an extension of the period for objection.

(4) Where a taxpayer delivers an objection that does not comply with the requirements of sub rule (2), SARS...