First, the facts. SARS issued a notice to Ackermans (the retailer) that it would raise additional assessments for the years 1998 to 2013 as it had misgivings about a series of alleged loan transactions entered into by the retailer. Ackermans had borrowed about R185 million from a financial partner, but SARS claimed that only R100 million had in fact been lent to Ackermans and that the remainder were simulated loans.
READ:Dealing with clogged losses
SARS stated in its notice that it was satisfied that the amount of tax paid in respect of the time period had been less than the amount properly chargeable and that this had been due to non-disclosure or misrepresentation of material facts. In making these statements, SARS was acting in line with the provisions of Section 79 of the Income Tax Act as illuminated in Natal Estates v SIR 1975(4) 177(A).
In a nutshell
In this instance, though, the facts of the case as such were not where the crux of the matter lay, because Ackermans wanted the decision by SARS to be reviewed and set aside under the provisions of the Promotion of Administrative Justice Act (PAJA). This was because Ackermans believed that the additional assessments – in which extra taxes were levied because the interest on the ‘simulated loans’ was disallowed – had been issued outside the scope of Section 79 of the Income Tax Act.
The raising of additional assessments after a lengthy delay, it was held, had been unreasonable and unfair. Furthermore, the decision to do so had been influenced by an error of law, all relevant information had not been considered, and the decision had been so unreasonable that no reasonable person would have taken it.
SARS responds
The dispute between the parties, then, was not based on the merits of the assessments. Rather, the question was whether the assessments were liable to be reviewed and set aside or whether the decision of SARS to issue the additional assessments was legal under the Constitution. SARS raised certain points regarding the jurisdiction of the court to hear the matter, as it was a complex one and required the expertise of the Tax Court. It also contended that all internal remedies had not been exhausted as required under PAJA and thus the application was premature.
The judgement
Referring to Section 105 of the Tax Administration Act, the judge held that the Tax Court’s powers were limited by the taxation statutes. He added that the matter did indeed fall within the court’s jurisdiction, but conceded that disputes of fact existed and the internal remedies – which included approaching the Tax Court – should be exhausted before the High Court was approached.
He therefore sent the matter down to the Tax Court – a cliffhanger decision, and I, for one, keenly await the resolution.
The case cited is Ackermans v SARS (16408/2013) and the decision was handed down on 20 February this year.
