South African Revenue Service (SARS) is empowered to raise an original, additional, reduced or jeopardy assessments. SARS may make the aforesaid assessments based in whole or in part on estimates where the taxpayer fails to submit the return as required or has submitted a return or information that is incorrect or inadequate. When a taxpayer is aggrieved by an assessment raised by SARS, taxpayer has a right to dispute it. Objection and appeal remedies are common remedies that are available to taxpayers to have the assessment reduced or a decision by SARS changed.
This article deals with remedies other than objection and appeals that are at taxpayers' disposal to challenge assessments raised or decisions made by SARS, viz. Request for an internal review in terms of section 9 of Tax Administration Act ("the TAA") and the review applications in the High Court under the Promotion of Administrative Justice Act ("the PAJA").
Request for withdrawal or amendment of decision under section 9 of the TAA. A taxpayer who is aggrieved by a decision or assessment by SARS, may request SARS to withdraw or amend the decision in terms of section 9 of the TAA, provided the assessment or decision is not subject to objection and appeal in terms of section 104 of the TAA. According to section 9, SARS may entertain request by taxpayer to withdraw or amend a decision provided, the decision given effect to in an assessment or a notice of assessment, is not subject to objection and appeal.
The limitation of section 9 remedy is that it can only be relied upon to challenge assessments or decisions that are not subject to objection and appeal. An example of such decision would a case where SARS increases provisional tax estimate under paragraph 19(3) of the Fourth Schedule to the Income Tax Act ("the Act"). A decision by SARS to increase provisional tax estimate under paragraph 9(3) of the Fourth Schedule to the Act is not subject to objection and appeal. It is therefore imperative for taxpayer to note that section 9 remedy cannot be relied upon if the decision being challenged is subject to objection and appeal.
The review applications in the High Court under PAJA SARS, as an organ of state, is subject to the provisions of the PAJA. The conduct of SARS (senior)officials constitutes an 'administrative action' as defined in section 1 of the PAJA. The PAJA requires that an administrative action which materially and adversely affects the rights or legitimate expectations of any taxpayer be procedurally fair.
The question therefore arises as to whether a taxpayer can rely on judicial review (High Court) to challenge a decision made or an assessment raised by SARS. This question is adequately addressed by provisions of section 105 of the TAA, which state that a taxpayer may only dispute an assessment or decision by SARS by launching objection and appeal procedures unless a High Court otherwise directs.
Section 105 provides that the High Court does not have jurisdiction to adjudicate tax disputes unless a High Court otherwise directs. The purpose of section 105 is clearly to ensure that, in the ordinary course, tax disputes are taken to the tax court4 .
It follows that a taxpayer can rely on PAJA to have decision by SARS judicially reviewed if the decision constitutes an administrative action and is not subject to objection and appeal. For decisions that are subject to objection and appeal, judicial review can be relied upon if a taxpayer first launch application to the High Court. The High Court will only permit a deviation from provisions of section 105 in "exceptional circumstances". The phrase "Exceptional circumstances" is not defined and in determining whether the exceptional circumstances exist, each case will be considered on its own facts. provided by our transfer pricing experts.
In Commissioner for the South African Revenue Service v Rappa Resources (Pty) (Rappa case), the Supreme Court of Appeal (SCA) was called upon to decide whether a High Court has jurisdiction in a review application made by a taxpayer who did not seek High Court direction in accordance with section 105 of the TAA. In Rappa case, SARS raised assessments against Rappa Resources for value-added tax, interest, and penalties. Rappa attempted to challenge the assessments by launching an urgent application to the High Court, seeking review and setting aside of the assessments. The SCA held that the High Court lacked jurisdiction in the review due to Rappa's failure to follow the procedure of seeking first the High Court's prior endorsement in accordance with section 105 of the TAA.
To rely on judicial review to challenge assessment or decision by SARS, one must follow the procedure of seeking first the High Court prior endorsement as required by section 105 of the TAA. Failure to follow the procedures, as was the case in Rappa Resource, renders judicial review ineffective or unhelpful as a remedy to challenge assessment raised or decision made by SARS.
In conclusion, taxpayers can rely on internal review under section 9 and High Court review to challenge assessments raised or decisions made by SARS that are not subject to objection and appeal. For assessments or decisions that are subject to objection and appeal, a taxpayer will need to seek High Court 's prior endorsement in order to rely on judicial review as required by the provisions of section 105 of the TAA. To obtain the High Court's endorsement, one will have to prove the existence of exceptional circumstances, a hurdle which many cases will struggle to overcome.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.