CSARS v FP (Pty) Ltd (25330; 25331; 25256) [2021] ZATC 8 (19 October 2021)

SARS applied for an order setting aside, as an irregular step, a legality review brought by the taxpayer in terms of rule 30 of the Uniform Rules of Court, which relates to irregular proceedings.

SARS contended that the review itself is both procedurally defective and irregular, since it cannot be brought in terms of the Tax Administration Act (“TAA”) and the rules promulgated thereunder. The taxpayer opposed the application on the following grounds:

• SARS improperly relied on uniform rule 30,
• the Tax Court is not precluded from entertaining a legality review; and
• there is nothing improper or irregular for a review to be launched on motion in an appeal pending before the Tax Court.

Facts

The case concerns an underlying dispute between the taxpayer and SARS relating to an audit by SARS into the taxpayer’s tax affairs in respect of its 2014, 2015 and 2016 years of assessment. The taxpayer was notified of the audit by SARS on 31 January 2018 and was issued with a notices of assessment by SARS on 8 August 2018 reflecting additional assessments raised in relation to each year as well as understatement penalties. On the very same day SARS also issued a notice of adjustment which reflected adjustments already made to all of the years in question.

The taxpayer objected, not only to alleged procedural unfairness but also the merits of the assessments themselves as far as the taxpayer could understand them. The taxpayer argued 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 TAA.

SARS issued notices disallowing all 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 and on 9 December 2020 SARS delivered its rule 31 statement (i.e. the statement of the consolidated grounds of assessment, facts or legal grounds in the notice of appeal admitted and opposed as well as the material facts and legal grounds upon which the respondent relies in opposing the appeal).

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’. 

Review application

On 16 April 2021 the taxpayer launched a legality review in terms of rule 30 of the Uniform Rules of Court, which relates to irregular proceedings.

SARS however applied for an order setting aside the legality review, on the basis of it being an irregular step. Judgement in respect of this application by SARS was delivered on 19 October 2021 and is the subject of this alert.

SARS argued the following in this respect:

“The taxpayer’s attempt to challenge and set aside assessments on the basis of alleged administrative non-compliance on application to the Tax Court, instead of following the pleading process, is irregular, since the Tax Court is a creature of statute with its jurisdiction, ambit and operation confined to the TAA and its rules which do not permit such a procedure.”

The judgement delivered considered whether the Tax Court in fact had the necessary jurisdiction to adjudicate legality reviews and considered in detail the relevant procedural requirements which have to be adhered to in respect of the applicable court rules and legislation.

Judgement

The judge considered a number of arguments and judgements in coming to his conclusion that the taxpayer’s review application to the Tax Court should indeed be 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 judge ordered that the appeal proceedings in the Tax Court are stayed (i.e. halted) pending the determination of a review application to be launched in the High Court, which application shall be instituted by the respondent within 30 (thirty) calendar days from date of this order, failing which the appeal shall proceed.

The judge also ordered that each party pay their own costs.

Find a copy of the court case here.

22/10/2021