Recent cases argued in the tax court have increasingly focused on the Tax Administration Act, 2011 instead of on the underlying tax merits. Taxpayers especially and to a lesser extent SARS are learning that the TAA is the essential starting point of dealings in tax matters and not merely a peripheral adjunct to the important matters. ITC 38/2005, decided in the South Gauteng tax court on 4 March 2016, dealt with the meaning of “exceptional circumstances” in the context of applications for condonation of failure to comply with the 30 days period for lodging objections. As this article will show, the taxpayer’s received deservedly short shrift from the court.
SARS audited the taxpayer in May 2014. After representations by the taxpayer in November 2014 following the audit findings furnished in August 2014, SARS issued an assessment in December 2014. The delay between August and November marked the first instance of the taxpayer’s disregard for the peremptory time limits set out in the TAA, a disregard that was to prove costly. The next example of this attitude was that the taxpayer submitted an objection in June 2015; this despite the fact that the “rules” issued in terms of section 104 of the TAA prescribe a 30 day period, which may be extended, but must not be so extended by more than 21 business days “unless a senior SARS official is satisfied that exceptional circumstances exist which gave rise to the delay in lodging the objection”. The peremptory word “must” was to prove the undoing of the taxpayer.
The taxpayer should have objected by 2 March 2015. The taxpayer had the benefit of the extra time afforded by the fact that the period from 16 December to 15 January doesn’t count as the courts are in recess, but nonetheless took a further three months beyond the return date. On 22 June 2015 SARS rejected the late objection, in response to which the taxpayer furnished a letter of motivation on 25 June 2015 (apparently having been at long last roused from its lax attitude to the TAA). SARS replied on 3 August 2015 confirming the 22 June decision, leaving the taxpayer saddled with the onus of showing exceptional circumstances sufficient to justify the delay.
Counsel for the taxpayer seems to have been grasping at straws in submitting five arguments in support of the application. It is evident that several of them were irrelevant to the enquiry into the existence of exceptional circumstances. The five submissions were:
- 65 days is not a long period when viewed in the context of the three year prescription period – a non sequitur if ever there was one;
- the August 2014 audit findings differed so little from the December assessments that the intervening correspondence could be regarded as an objection. With respect to counsel, one has only to read this submission in order to reject it, as did the court;
- the relevant SARS official failed to consider the reasons that motivated for exceptional circumstances before making the decision on 22 June 2015. As the court observed, the taxpayer tendered no such circumstances before the decision;
- the appeal was not against the decision of 22 June 2015 but against the 3 August 2015 confirmation letter. However, even at that late stage the taxpayer had tendered no exceptional circumstances; and finally
- SARS had allegedly invited the taxpayer in the 22 June letter to resubmit an amended objection and therefore the taxpayer’s 25 June letter should have been properly and reasonably considered and adjudicated in the 3 August letter. The court noted that, not only was there no evidence in the 22 June letter of any such invitation, but section 104 of the TAA would not have permitted SARS to do so.
- the objections and appeals involved complex questions of law. The court found itself without any evidence why tax on motor vehicles, PAYE not deducted from employees or any of the other matters in issue would be considered complex;
- the courts were closed during the December 2014/January 2015 recess. The court was unable to understand what impact this could have had;
- the taxpayer was busy in negotiations with SARS during the period from December 2014 to March 2015. The only evidence of this was of a visit by the taxpayer’s auditor to SARS on 19 January 2015. The court was clearly displeased by counsel’s persistence “ad nauseam” in referring to a series of meetings in the absence of evidence to this effect;
- the taxpayer became dissatisfied with the capabilities of the auditor, which led to the termination of his services and the need to obtain further professional advice. The court found little difference between this auditor’s letters and counsel’s opinion (presumably here the court was referring to the further professional advice). It thus appeared that the taxpayer’s dissatisfaction was with SARS’ response rather than with the auditor’s expertise;
- it took the taxpayer time to obtain new professional advice. The court pointed out that the taxpayer was based in Springs and yet obtained advice from a Florida based practitioner. In placing no weight on this argument the court took judicial notice of the multiplicity of attorneys’ firms operating all along the stretch of the Witwatersrand region between Springs and Florida and up into Sandton whence the taxpayer might at any time since December 2014 have enquired as to their tax expertise.
