CSARS v FP (Pty) Ltd (SARSTC 25330; 25331 and 25256)

The current case deals with procedural questions relating to whether SARS correctly invoked uniform rule 30 (relating to irregular proceedings) and whether SARS demonstrated prejudice. The underlying tax dispute between the taxpayer and SARS is however provided as an introduction below.

Underlying tax dispute

SARS notified the taxpayer that it would be conducting an audit into its tax affairs in respect of its 2014, 2015 and 2016 years of assessment.

According to the taxpayer’s representative it cooperated fully with the audit procedures, including providing all additional information requested by SARS. SARS however issued notices of assessment for the years in question. These reflect that: (a) additional assessments had been raised in relation to each year; and (b) understatement penalties had been levied at 25% on each.

The taxpayer filed objections in respect of all the additional assessments. The objections related not only to alleged procedural unfairness but also the merits of the assessments themselves as far as the taxpayer could understand them. Insofar as procedural unfairness is concerned, it was the taxpayer’s contention that SARS raised the additional assessments out of the blue without warning, without issuing it with a letter of audit findings, and without providing it with 21 business days within which to respond thereto, as required by the Tax Administration Act (“TAA”).

SARS issued notices disallowing all three objections. The taxpayer maintains that these notices similarly display a singular lack of detail in terms of the reasons provided, and thus fall foul of the requirements of the TAA.

The taxpayer proceeded to file its appeals, which to all intents and purposes included the same objections to the procedural fairness referred to above, but also engaged with the merits as the taxpayer understood them.

On 9 December 2020, SARS delivered its rule 31 statement (i.e. a clear and concise statement of the consolidated grounds of assessment). According to the taxpayer’s representative it was only then that legal advice was obtained and it became aware of “…the possibility of bringing a review application of the present nature, and therefore elected to proceed on this basis in an attempt to avoid a protracted Tax Court appeal and the significant legal expenses associated therewith”.

Current dispute

A review application was launched by the taxpayer on 16 April 2021, whereby the taxpayer seeks an order providing inter alia for the setting aside of the additional assessments raised in respect of its 2014, 2015 and 2016 years of assessment.

According to the taxpayer, the rationale for this approach is that determination of the review in its favour will dispense of the appeal as a whole. It is in response to the review application by the taxpayer, as referred to above that SARS launched the rule 30 application (relating to irregular proceedings) which is considered in the case summarised here.

The judge considers the grounds relied on by SARS and the taxpayer in detail.

Regarding the question as to whether SARS correctly invoked uniform rule 30, the judge notes the following: “To my mind the taxpayer has misconstrued the true nature of SARS’ complaint...”

In considering the review application by the taxpayer the judge also considers a number of cases and discuss the controversy about the reviewability of decisions in detail.

The judge notes the following in conclusion: “I am persuaded that the launching of a review application in appeal proceedings already pending before the Tax Court is an irregular step as envisaged in uniform rule 30.”

The taxpayer however sought an order in the alternative that, in the event of this tax court concluding that its review application could only be brought in the High Court, it be directed that the appeal proceedings be stayed pending the determination of such an application to be instituted within such time period as the tax court may direct. The judge notes that it makes no sense to refuse the alternative relief sought and consequently issues the ruling as set out below.

Ruling

The following order is made by the tax court in this case:

• The taxpayer’s review application to the tax court is set aside as an irregular step in terms of rule 30 of the uniform rules of court as read with rule 42 of the Tax Court rules;
• The appeal proceedings in the Tax Court are stayed pending the determination of a review application to be launched in the High Court, which application should be instituted by the taxpayer within 30 (thirty) calendar days from date of the order by the tax court, failing which the appeal shall proceed; and
• Each party is ordered to pay their own costs.

Find a copy of the court case here.

26/11/2021