An aggrieved taxpayer who wishes to institute legal proceedings against SARS in relation to some aspect of his tax affairs must be sure to raise his grievance in the proper forum.
That forum may be either the Tax Court or the High Court.
But it is not for the taxpayer, nor for SARS, to simply elect the one or the other. Selecting the proper forum in a particular case can be a matter of some complexity and it is important that the taxpayer and his advisers get this right, for the High Court will decline to hear a matter that should have been brought before the Tax Court, and vice versa. Where proceedings are instituted in the Tax Court where they ought to have been brought in the High Court, this will, at the least, involve delays and perhaps an adverse costs order in the abortive High Court proceedings. At worst, the taxpayer may find statutory time limits have expired and that he is out of time to commence proceedings afresh in the Tax Court.
An important question in this regard is the proper forum in which to impugn a decision of the Commissioner, not on the merits of the particular matter, but on the basis that the decision was tainted by mala fides, bias, a failure to apply his mind to the matter, or the taking into account of irrelevant considerations – that is to say, on the basis of the common-law grounds for the judicial review of administrative action.
The Tax Court is a creature of statute and has no inherent jurisdiction
The fundamental principle in this regard is that, whereas the High Court is vested with inherent jurisdiction, the Tax Court is a creature of statute with only such jurisdiction as it is accorded by parliament.
The provisions of the Tax Administration Act 28 of 2011 have brought greater clarity in this regard. The core provisions in this regard are sections 105, 107 and 117.
Section 107 provides that –
“a taxpayer objecting to an assessment or ‘decision’ [as envisaged in section 104] may appeal against the assessment or ‘decision’ to the tax board or the tax court…’
Section 105 provides that –
“A taxpayer may not dispute an assessment or ‘decision’, as described in section 104 in any court or other proceedings, except in proceedings under this Chapter or by application to the High Court for review.”
Section 117 provides that –
“The Tax Court, for purposes of this Chapter, has jurisdiction over tax appeals lodged under section 107.”
Review jurisdiction as distinct from appeal jurisdiction
The Tax Administration Act is silent on whether the Tax Court has review jurisdiction in relation to assessments or the conduct of the Commissioner and SARS officials, or whether its jurisdiction is limited to an appeal on the merits of an assessment or a “decision” of the kind set out in section 104.
It was held in KBI v Transvaalse Suikerkorporasie Bpk 1985 (2) SA 668 (T) that a discretionary decision by the Commissioner is, except where objection and appeal have been explicitly excluded, subject to investigation by the Special Court (now the Tax Court) and that, in such a case, the appeal is in truth a review on the usual grounds applicable to review. It was held that such proceedings need not be brought in the High Court.
In the course of its judgment in this case, the Appellate Division quoted with approval from the judgment of van Winsen J in ITC 936 24 SATC 361 where he said –
“Na my mening dus is ‘n belastingbetaler geregtig om ‘n beswaar teen enige aanslag in te bring al is die beswaar slegs een teen die uitoefening van die diskresionêre mag deur die Kommissaris gerig en al kom die beswaar slegs daarop neer dat die Kommissaris in die uitoefening van sy diskresionêre magte mala fide gehandel het of dat die uitoefening van sy diskresionêre mag op een of ander hersieningsgrond aanvegbaar is.”
This principle will, however, have been implicitly superseded with the enactment of the Promotion of Administrative Justice Act 3 (PAJA) of 2000, if it is accepted that this Act has abolished common law review.
A taxpayer wrongly takes the route of objection and appeal, instead of a review in terms of PAJA
In ITC 1866 (2013) 75 SATC 268 the taxpayer claimed to be unable to submit VAT returns supported by the requisite VAT input invoices because of an alleged fraud on the part of the supplier. The taxpayer invoked the provisions of section 20(7) of the Value-Added Tax Act 89 of 1991, in terms of which the Commissioner is empowered to dispense with the necessity for the issuing of a full tax invoice. SARS instituted a tax audit into the taxpayer’s affairs, after which the Commissioner declined to exercise his powers in this regard. The taxpayer then objected to the VAT assessment; the objection was disallowed and the taxpayer appealed to the Tax Court. Clearly, the taxpayer’s grievance lay not in relation to the assessment as such, but in respect of the Commissioner’s decision not to exercise his powers in terms of section 20(7). The Tax Court pointed out that a decision in this regard was not one of the range of decisions, listed in section 32, in respect of which an objection could be lodged. The Tax Court therefore held that the Commissioner had been correct in disallowing the taxpayer’s objection and that no appeal in this regard lay to the Tax Court.
The Tax Court pointed out that the only way in which the Commissioner’s decision not to exercise his powers in terms of section 20(7) could be impeached was by way of review, as distinct from objection and appeal, and that such a review was outside the jurisdiction of the Tax Court, which is a creature of statute, possessed only of such jurisdiction as is statutorily accorded to it.
A review in terms of PAJA must be brought in the High Court
The Tax Court held that an application for review in terms of the Promotion of Administrative Justice must be brought in the High Court, for the granting of such relief is not within the powers of the Tax Court.
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This article was first published in PwC Tax Synopsis October 2013 – pwc.co.za
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