Wingate-Pearse v Commissioner, South African Revenue Service and Others

• Jurisdiction: South Africa
• Citation: 2019 (6) SA 196 (GJ)

Wingate-Pearse v Commissioner, South African Revenue Service and Others
2019 (6) SA 196 (GJ)

2019 (6) SA p196

Citation	2019 (6) SA 196 (GJ)
Case No	29208/15
Court	Gauteng Local Division, Johannesburg
Judge	Meyer J
Heard	July 17, 2019
Judgment	July 17, 2019
Counsel	AJ Daniels SC (with CT Picas) for the applicant.; JJ Gauntlett SC QC (with HGA Snyman SC and L Sigogo) for the first respondent and the fourth respondent (with L Sisilana).

Flynote : Sleutelwoorde

Revenue — Income tax — Assessments — Additional assessments — Nature of discretion to raise additional assessment — Meaning of 'is satisfied' of existence of particular state of affairs — Must show that subjective satisfaction C was based on reasonable grounds — Judicial deference to subjective nature of Sars' discretion limiting scope for judicial review — Tax Administration Act 28 of 2011, s 92 read with s 99(1) and (2).

Headnote : Kopnota

During April 2006 Sars issued additional income tax assessments to assess Mr Wingate-Pearse (WP) to tax on estimated underdeclared taxable income D for the 1998 – 2005 years of assessment. WP appealed the Commissioner's partial disallowance of his objections to the additional assessments, to the Tax Court. On 15 November, the first date that the matter was set down for a hearing in the Tax Court, it was postponed in order to give WP an opportunity to launch proceedings in the High Court for relief that he originally raised as points in limine before the Tax Court. This review E application was heard and dismissed in May 2012.

With the tax appeal in the Tax Court still pending, on 17 August 2015 WP launched a second review application directed at the additional assessments. Then, on 19 April 2018, WP brought an interlocutory application for the notice of motion in the review application to be amended and for leave to file a second supplementary affidavit. This case concerned these two F applications, heard together and both opposed by the Commissioner. Shortly before the hearing, WP gave notice that he would not be pursuing the relief sought in the original notice of motion but only the relief introduced in terms of the proposed amendment. This included, as additional relief, the review and setting aside of Sars' decisions to issue additional estimated assessments on the basis that the jurisdictional requirement G for raising additional assessments in s 79(1)(a) and (b) of the Income Tax Act 71 of 2008 (ITA) was not met.

Section 79(1) — since repealed and replaced by s 92 of the Tax Administration Act 28 of 2001 (TAA) — limited the period within which it was permissible to raise an additional assessment to three years from the date of the last assessment, unless the Commissioner was satisfied that the amount assessed H in the relevant additional assessment was not assessed due to fraud, misrepresentation or non-disclosure of material facts by the taxpayer [see 53]. WP argued that the 'satisfaction' contemplated in s 79 of the ITA — and now in s 92 of the TAA, which allows Sars to raise additional assessments 'if satisfied' that it would correct the prejudice to the fiscus of the original incorrect assessment — was an objective standard, and that the Commissioner must therefore be satisfied on reasonable grounds that the original I assessment was 'wrong'.

Held

Since the advent of the constitutional era, more than the decision-maker's ipse dixit was required if the subjective prerequisite of their being satisfied that a state of affairs existed was challenged. Section 33(1) of the Constitution J implied that the court must be satisfied of the lawfulness of administrative

2019 (6) SA p197

action, including any factual assumptions on which the action was based, A and that the constitutional principle of legality was to the same effect in relation to the exercise of public powers that did not amount to administrative action. The decision-maker must now show that the subjective opinion they relied on for exercising power was based on reasonable grounds. (See [58] – [59].)

This did not mean that the legislature's use of subjective language was irrelevant; B it still signalled the legislature's desire for judicial deference in particular cases. The real challenge for courts was to achieve an appropriate balance between heeding the voice of the legislature and protecting the rights of affected persons. The court should take care not to usurp the functions of administrative agencies; its task was to ensure that their decisions fell within the bounds of reasonableness as required by the Constitution. The need for C courts to treat decision-makers with appropriate deference flowed but from the fundamental constitutional principle of the separation of powers itself. (See [59] – [60].)

Although the words 'is satisfied' conferred a subjective discretion on Sars, an objective approach must be adopted to that subjective discretion. Sars must show its subjective satisfaction was based on reasonable grounds. However, D given the wording of s 79(1) of the Income Tax Act (and presently of s 92 of the TAA), the subjective nature of the discretion conferred on Sars limited scope for judicial review. (See [61].)

Having regard to the subjective nature of the discretion conferred on Sars and the limited scope for judicial review, and giving due weight to the finding made by those with special expertise in taxation and accountancy, Sars' decision E to issue the additional estimated assessments was, in the circumstances, one that a reasonable decision-maker would reach. Sars' required subjective satisfaction had been shown to be founded on reasonable grounds. (See [64].)

Cases cited

Bato Star Fishing (Pty) Ltd v Minister of Environmental Affairs and Tourism and Others F 2004 (4) SA 490 (CC) (2004 (7) BCLR 687; [2004] ZACC 15): dictum in paras [45] – [46] applied

Buffalo City Metropolitan Municipality v Asla Construction (Pty) Ltd 2019 (4) SA 374 (CC) (2019 (6) BCLR 661; [2019] ZACC 15): dictum in paras [50] – [53] applied

City Capital SA Property Holdings Ltd v Chavonnes Badenhorst St Clair Cooper and Others G 2018 (4) SA 71 (SCA): dictum in para [35] applied

Commissioner, South African Revenue Service v Pretoria East Motors (Pty) Ltd 2014 (5) SA 231 (SCA) ([2014] ZASCA 91): dictum in para [11] applied

Fedics Group (Pty) Ltd and Another v Matus and Others; Fedics Group (Pty) Ltd and Another v Murphy and Others H 1998 (2) SA 617 (C): dictum at 636D – E applied

Harvey v Niland and Others 2016 (2) SA 436 (ECG): dictum in para [47] applied

In re Alluvial Creek, Ltd 1929 CPD 532: dictum at 534 – 535 applied

Kabinet van die Tussentydse Regering vir Suidwes-Afrika en 'n Ander v Katofa 1987 (1) SA 695 (A): considered I

Key v Attorney-General, Cape Provincial Division, and Another 1996 (4) SA 187 (CC) (1996 (2) SACR 113; 1996 (6) BCLR 788): dictum in para [14] applied

Khumalo and Another v MEC for Education, KwaZulu-Natal 2014 (5) SA 579 (CC) (2014 (3) BCLR 333; [2013] ZACC 49): dictum in para [44] applied J

2019 (6) SA p198

Laingville Fisheries (Pty) Ltd v Minister of Environmental Affairs and Tourism A [2008] ZAWCHC 28: referred to

Marsh v Odendaalsrus Cold Storages Ltd 1963 (2) SA 263 (W): referred to

MEC for Local Government, Environmental Affairs and Development Planning, Western Cape and Another v Platz NO and Another [2017] ZASCA 175: referred to

Media 24 Books (Pty) Ltd v Oxford University Press Southern Africa (Pty) Ltd B 2017 (2) SA 1 (SCA): dictum at 18A – B applied

Metcash Trading Ltd v Commissioner, South African Revenue Service, and Another 2001 (1) SA 1109 (CC) (2001 (2) JTLR 37; 2001 (1) BCLR 1; [2000] ZACC 21): dictum in para [47] applied

Natal Estates Ltd v Secretary for Inland Revenue 1975 (4) SA 177 (A): dictum C at 208G – H distinguished

National Director of Public Prosecutions v Zuma 2009 (2) SA 277 (SCA) (2009 (1) SACR 361; 2009 (4) BCLR 393; [2009] 2 All SA 243; [2009] ZASCA 1): dictum at 290D – E applied

Nel v Waterberg Landbouwers Ko-operatiewe Vereeniging 1946 AD 597: dictum at 607 applied

Opposition to Urban Tolling Alliance and Others v South African National Roads Agency Ltd and Others D [2013] 4 All SA 639 (SCA) ([2013] ZASCA 148): dictum in para [26] applied

Plascon-Evans Paints Ltd v Van Riebeeck Paints (Pty) Ltd 1984 (3) SA 623 (A) ([1984] ZASCA 51): applied

Secretary for Inland Revenue v Trow 1981 (4) SA 821 (A): dictum at 825B E distinguished

Shell SA (Edms) Bpk en Andere v Voorsitter, Dorperaad van die Oranje-Vrystaat en Andere 1992 (1) SA 906 (O): dictum at 916 – 917 applied

South African National Roads Agency Ltd v Cape Town City 2017 (1) SA 468 (SCA) ([2016] 4 All SA 332; [2016] ZASCA 122): dictum in para [80] applied

South Atlantic Jazz Festival (Pty) Ltd v Commissioner, South African Revenue Service F 2015 (6) SA 78 (WCC): dictum at 89E – 90C applied

United Manganese of Kalahari (Pty) Ltd v Commissioner, South African Revenue Service 2018 (2) SA 275 (GP): applied

Viking Pony Africa Pumps (Pty) Ltd t/a Tricom Africa v Hidro-Tech Systems (Pty) Ltd and Another G 2011 (1) SA 327 (CC) (2011 (2) BCLR 207; [2010] ZACC 21): dictum in paras [37] – [38] applied

Walele v City of Cape Town and Others 2008 (6) SA 129 (CC) (2008 (11) BCLR 1067; [2008] ZACC 11): dictum in para [60] applied

Wingate-Pearse v Commissioner, South African Revenue Service 2017 (1) SA 542 (SCA): referred to

Wolgroeiers Afslaers (Edms) Bpk v Munisipaliteit van Kaapstad H 1978 (1) SA 13 (A): dictum at 43A – F applied.

Legislation cited

The Tax Administration Act 71 of 2008, s 92 and s 99(1) and (2): see Juta's Statutes of South Africa 2018/19 vol 3 at 1-1349 and 1-1395.

Case Information

AJ Daniels SC I (with CT Picas) for the applicant.

JJ Gauntlett SC QC (with HGA Snyman SC and L Sigogo) for the first respondent and the fourth respondent...