MR A v CSARS (SARSTC 0059/2019)

Facts

The South African Revenue Service, (“SARS”), raised additional assessments on 8 May 2015  in respect of the taxpayer’s liabilities for the 2009, 2010 and 2011 years of assessment.  On 3 May 2018 (just short of three years later), the taxpayer lodged a notice of objection, (“NOO”), in respect of each of the additional assessments.  SARS condoned the late submission of each of the objections on 4 May 2018.  On 14 May 2018, SARS delivered notices declaring the objections invalid, with the opportunity for the taxpayer to deliver new NOO’s within 20 business days.  On 14 February 2019, the taxpayer delivered what purported to be a notice in terms of rule 56 of the Dispute Resolution Rules.  The purpose of the notice in terms of rule 56 of the Dispute Resolution Rules was to call upon SARS to deliver within 15 days, a notice in terms of rule 8 of the Dispute Resolution Rules, requiring the taxpayer to produce additional substantiating documents, upon the footing that SARS had no power to “simply invalidate” the objections delivered in May 2018 without first calling for documents in terms of rule 8 of the Dispute Resolution Rules.  The notice of motion in the present application was dated 1 August 2019, and SARS delivered an answering affidavit on 20 January 2020.  A replying affidavit, attested to by the attorney of the taxpayer and not by the taxpayer himself, was delivered the day before the hearing of the present application, which took place on 12 October 2021.

Issues

As can be discerned from the aforegoing, the issue can be summarised as follows:

Issue 1:  Whether the requests for further documents by SARS in terms of rule 8 of the Dispute Resolution Rules was compulsory; and

Issue 2: Whether the court has the power to direct SARS to deliver a notice in terms of rule 8 of the Dispute Resolution Rules to the taxpayer.

Finding

With regards to the first issue, rule 8(1) of the Dispute Resolution Rules states that within 30 days after delivery of an objection, SARS may, [our emphasis], require a taxpayer to produce the additional substantiating documents necessary to decide the objection.  Council for the taxpayer argued that the word “may” must be construed to convey a power, coupled with a duty.  In support of this argument, the taxpayer relied on case law.  In the case law relied on, it was noted that the word “may”, used in that context, signifies a permissive power coupled with a duty to exercise it when the conditions for the exercise of it exist. That is to say, when SARS is satisfied that there are reasonable grounds.  Rule 8(1) of the Dispute Resolution Rules is a quite different provision. There is no logical reason why the word “may” should be taken there to convey a duty, and not merely a right to make the request.  There are no stipulated conditions laid down for the exercise of the power.  If it was intended that it be made compulsory for SARS to ask for documents, rule 8(1) of the Dispute Resolution Rules would have been structured differently.  The true position is that it is the objector’s duty to produce the documents, or at the very least to specify them if the objection is to be valid or upheld.  Rule 8 of the Dispute Resolution Rules simply furnishes SARS with the power to require the documents to be produced. 

With regards to the second issue, counsel for the taxpayer requested the court to hold that when any “additional substantiating documents” are necessary to decide on an objection, it be regarded as a so-called “jurisdictional fact” and that SARS should require the taxpayer to produce such documents.  Since such a rule could be misused in order to delay matters, and challenge decisions on objections with technical arguments as to whether any documents fall to be classified as “additional substantiating documents necessary to decide” on an objection, the court declined to make the order sought by counsel for the taxpayer.

The application was dismissed with costs.

Find a copy of the court case here.

21/01/2022