The Tax Administration Act (the TAA) was introduced to, amongst others, provide clarity on that administrative procedures to be followed by taxpayers in resolving matters relating to the administration of their tax affairs.
A key piece of regulation in this regard is the rules for dispute resolution that were promulgated under section 103 of the TAA. These rules describe the procedures to be followed when objecting to or appealing against assessments or decisions and the periods within which this needs to be done.
In a recent case, CSARS v Danwet (399/2017) [2018] ZASCA 38 (28 March 2018), the SCA highlighted the importance of strictly adhering to the rules when it comes to tax disputes. This article provides a brief overview of the case.
Facts of the Danwet case
SARS audited the affairs of the taxpayer and issued an additional assessment. The taxpayer objected to this assessment and the objection was only partially allowed. The tax consultant who represented the taxpayer filed a notice of appeal against the partial disallowance on E-filing. More than 6 months later, after not having any response, the tax consultant enquired from SARS. He was informed that there was no record of the appeal of E-filing. He was advised to re-submit the appeal together with a request for condonation of the late submission. SARS rejected the condonation request on the basis that it was not legally allowed to extend the period within which a taxpayer could appeal beyond the periods specified in the TAA (in exceptional circumstances, up to 75 days from the date of the outcome of the objection).
The taxpayer successfully applied to the Tax Court for a condonation of the late filing of the appeal. SARS however approached the SCA contending that the Tax Court did not have the jurisdiction to
grant such a condonation.
Judgment
The SCA indicated that the Tax Court has jurisdiction to consider appeals by taxpayers against assessments and certain decisions. It concluded that subject to compliance with the procedures in section 104(3), as discussed below, the Tax Court had the jurisdiction to determine an application for condonation of the failure by a taxpayer to lodge an appeal timeously.
Section 104(3) requires that a taxpayer is required to object against a decision of a senior SARS official to not extend the period within which a taxpayer is allowed to lodge an appeal.
The taxpayer, through its tax consultant, failed to object to SARS’ decision not to allow it to lodge a late appeal. Instead, it applied directly to the Tax Court for condonation. In this instance, it appeared as if such an objection may have been pointless as SARS did not have the legal power to extend the period within which the appeal could be lodged. The SCA held that the requirement to object to a decision not to allow extension of the period to lodge an appeal generally serves a clear purpose. A taxpayer cannot, on the basis that it may be pointless in a particular case, disregard the requirement. As the taxpayer failed to object to SARS’ decision, the SCA held that there was no valid application before the Tax Court.
Concluding thoughts
It is submitted that this judgment provides taxpayers with a clear reminder of the importance to strictly follow all the rules and steps involved in dispute resolution. Failure to do so may leave a taxpayer in a position where it cannot continue with the dispute despite having strong grounds for its argument otherwise.
