Every year, the tax authorities resolve objections to assessments and issue re-assessments. So when exactly is the game over, so to speak, in terms of a particular tax year? Put another way, taxpayers are entitled to know when the final curtain comes down on their tax hassles.
The old section 79 of the Income Tax Act, which dealt with ‘additional assessments’, is now encapsulated in sections 92 and 99 of the Tax Administration Act (TAA). Thanks to legal precedent, we know that the all-encompassing provisions of section 92 are curtailed by limitations listed in section 99.
Section 79 contained the provision which allowed SARS to re-open an assessment. In my view, the moving of the old section 79 to the TAA (as sections 92 and 99) does not change the rules that have evolved through a series of court cases, and which are so well encapsulated in the judgment in case number 10154 1998 (7) JTLR 274 (CPD) in the Cape Income Tax Court.
Also highly relevant is the judgment of Judge Rosheni Allie in the Western Cape Tax Court, both in terms of the lucid and relevant observations made from the bench and the references to case authority such as that of the Appellate Division in Natal Estates v CIR 1975 (4) SA 177 (A). This held that SARS not only had to be satisfied that a certain state of affairs existed at the time of raising a re-assessment, but that it acted upon that state of affairs in the issuing of the re-assessment.
The basic rule now is that, if full disclosure has been made of the tax affairs of a taxpayer and no fraud or misrepresentations have been made, that should be the end of the matter. Of course, this is provided that all the taxable income was assessed according to the practice generally prevailing at the time of the assessment. If income is found that was taxable in that year and this has not been taxed in accordance with the practice generally prevailing at time of assessment, SARS will raise an additional assessment.
But if all the taxable income is properly taxed, that’s it, as far as SARS is concerned. In the new section 99 of the TAA, the words ‘is satisfied’ in relation to SARS are absent, but thankfully these words are retained in section 92. Thus, the cases referred to will still find application in some form, as SARS has to indicate that it is ‘satisfied’ that an assessment does not reflect the correct application of a tax act, to the prejudice of SARS, before the assessment can stand.
Note, though, that the scope of SARS’s powers have changed. Under the old rules, SARS had to be satisfied that the non-taxation was the result of fraud or misrepresentation or non-disclosure. Now it simply has to be satisfied that the Act has not been applied correctly. SARS bears the onus of so proving, but it does not bear the onus of proving that the taxpayer is at
How much of a game changer this will be remains to be seen.