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[2017] ZAWCHC 40
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Williams v Minister of Police and Others (2560/2016) [2017] ZAWCHC 40 (1 February 2017)
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IN
THE HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE DIVISION, CAPE TOWN)
(Coram:
Holderness, AJ)
[Not
Reportable]
Case
Number: 2560/2016
In
the matter between:
HYDIE
JASMIEN WILLIAMS
Applicant
And
MINISTER
OF POLICE
First
respondent
CAPTAIN
WEITZ (CAPE TOWN POLICE STATION)
Second respondent
SARS
(CAPE TOWN)
Third
respondent
COMMISSIONER
OF SOUTH AFRICAN REVENUE
SERVICES
(CAPE TOWN)
Fourth respondent
DIRECTOR
OF PUBLIC PROSECUTIONS
(CAPE
TOWN)
Fifth
respondent
JUDGMENT
HOLDERNESS,
AJ
INTRODUCTION
[1]
Two issues arise in this matter. Firstly, whether the alleged failure
by the second
and third respondents (hereafter referred to
collectively as “SARS”) to notify the applicant of her
rights arising
from a post-audit assessment, including her right to
object, suspended her obligation to pay her personal tax debt.
Secondly, whether
the applicant, on the facts presented, was in fact
notified of her rights, and the monies were validly transferred by
the South
African Police Services (“SAPS”) to SARS in
terms of section 179 of the Tax Administration Act 28 of 2011 (“the
TA Act”).
RELIEF
SOUGHT AND CONDUCT OF THE MATTER
[2]
The final relief sought by the applicant in this matter is framed as
follows:
“
The
applicant intends to make an application...for an order in the
following terms:
1.
That the matter be heard as a matter of urgency and that the
Applicant’s failure to
comply with the time limits, forms and
procedures prescribed by the Uniform rules of Court be condoned.
2.
Directing Respondents to release the money to the amount of about
R960,00 or the actual amount
seized on or about 25 October 2013 at
[…] H. Road, Parow the residency of applicant to allow her to
maintain a living and
to pay for her legal fees;
3.
That such funds be paid directly to the Trust Account of Mate
Attorneys being 0035402113.
4.
Such further and / or alternative relief;
5.
Costs.”
[2]
The matter was initially enrolled for hearing on 18 February 2016,
and was postponed
to 18 March 2016, and thereafter to 26 April 2016.
[3]
On 26 April 2016 the matter was argued and the parties were directed
to address the
Court on two issues, urgency and whether there was a
dispute of fact on the papers.
[4]
According to counsel for the respondents, the merits of the matter
were not dealt
with during the hearing on 26 April 2016. The
respondents argued that the matter was not urgent and if it was found
that it was
urgent, such urgency was self-created. In response to the
second issue raised, it was argued that there were no disputes of
facts
which could not be resolved on the papers.
[5]
After hearing argument, the Court
mero motu
referred the
matter for the hearing of oral evidence on the following issues:
“
The
right of the applicant to the funds that were seized by the Fourth
Respondent from the South African Police Services SAP 13/6100/2013.
The
right of lack thereof of Third and Fourth Respondents to seize such
funds from First Respondent taking into account S179 of
Tax
Administration Act 28 of 2011
and
S20
, read with
Section 30
,
31
of
the
Criminal Procedure Act 51 of 1977
.”
[6]
The parties agreed to abandon the court order referring the matter to
oral evidence,
and to proceed on the papers as they stood. In so
doing the applicant must, of course, have accepted that as she was
seeking final
relief, the matter would be approached based on the
well-established principle set forth in
Plascon-Evans
Paints Ltd v Van Riebeeck Paints (Pty) Ltd.
[1]
FACTUAL
BACKGROUND
[7]
The two issues outlined above arise from the following facts.
[8]
The applicant is a registered tax practitioner.
[9]
In October 2013, the second respondent, executing a search warrant,
searched the applicant’s
business and residential premises, and
seized two safes and various documents.
[10]
It is common cause that the search and seizure was lawfully executed.
[11]
The safes were subsequently opened in the applicant’s presence,
and were found to contain
cash sums of money in South African Rands.
The applicant counted the money in the presence an employee of the
third respondent,
her attorney and the second defendant, Captain
Weitz of SAPS (“Weitz”).
[12]
The first safe contained an amount of R861,850, and the second safe
contained the sum of R60,000.
It is common cause that the second
amount of R60,000 was returned to the applicant’s attorney on
the same day.
[13]
On 22 November 2013 the applicant and her husband were arrested and
charged with
inter alia
1,656 counts of fraud, relating to the
submission of tax returns by the applicant on behalf of her clients
in which she allegedly
claimed false amounts in respect of medical
expenses, with the intention of improperly obtaining refunds from
SARS.
[14]
According to the charge sheet, the applicant charged a fee of R300
and/or 10% when the amount
of the refund to the taxpayer exceeded R5
000.00. All fees were paid in cash.
[15]
The applicant was released on bail, subject to the condition that she
was “
prohibited from conducting any illegal business in
respect of submission of any tax return to SARS.”
[16]
SARS subsequently discovered that the applicant may have submitted
further false information
to SARS, in respect of income tax returns
submitted by her on behalf of taxpayers. On 14 July 2014 the
applicant was, once again,
arrested on charges of fraud.
[17]
A protracted bail application ensued in respect of the new charges
against the applicant. She
was released on bail a second time,
subject to stricter bail conditions, prohibiting her from
inter
alia
providing any services as a practitioner or submitting any
returns on behalf of any taxpayer, either directly or indirectly
.
[18]
Considering the nature of the charges pending against the applicant
and her conduct after she
was released for the first time on bail,
SARS became increasingly suspicious regarding the accuracy of the
figures submitted by
her in her 2013 personal tax assessment, and
proceeded to conduct an audit in respect of her tax affairs.
[19]
In her 2013 personal tax assessment, the applicant recorded her
turnover as R900,000, but reflected
a loss of R378,553. The applicant
included in this assessment “Cost of Sales” in the total
amount of R562,609. In addition
to the cost of sales, the applicant
claimed expenses in the sum of R383,753.
[20]
Based on the declared loss, the applicant did not pay any income tax
for the 2013 financial year.
[21]
The applicant’s audit was conducted by Charl Haynes (“Haynes”),
an audit specialist
in the employ of SARS. Haynes communicated with
the applicant during the audit process, and afforded her numerous
opportunities
to submit relevant financial documentation, and to
engage with him regarding the assessment and any penalties to be
imposed.
[22]
Notwithstanding the fact that she is a tax practitioner, the
applicant furthermore engaged the
services of a certain Mr. Mogamat
Fryddie (“Fryddie”) to assist her with her tax matters,
prior to the completion of
the audit by SARS.
[23]
On 28 October 2014 Haynes addressed an email to the applicant
recording that she had failed to
comply with certain requests made by
him, and requesting her to provide the required information without
delay.
[24]
The applicant provided Haynes with the requested financial
documentation, and on 30 October 2014
addressed an email to him, as
follows:
“
I
have received the calculation in respect of the 2013 year of
assessment. I hereby would like to explain where the amounts claimed
in original submission come from. In fact I instructed my assistant
to submit the tax return 2013 having provided the excel sheet
where I
captured all expenses from 2012 to 2013 but some of the expenses fall
in the year 2014 and my assistant made a mistake
of submitting the
total expenses as a cost of sales not understanding exactly what it
meant.”
[25]
On 4 November 2014 the applicant addressed an email to Haynes setting
out her further submissions
regarding the understatement penalties
which SARS intended imposing on her.
[26]
In short, the applicant stated that it was never her intention to
submit incorrect figures to
SARS, that the “cost of sales”
claimed was a misunderstanding, and that:
“
monies
given to my close family was a misunderstanding, also the donations
claimed was monies given to my close family that I did
not keep
receipts or proofs and which could be considered as private expenses.
[27]
Pertinently, the applicant went on to state the following:
“
This
is also to deeply and sincerely apologize for my recklessness and my
ignorance which I will overcome henceforth by getting
a professional
assistance from my accountant before I submit any figures to SARS in
the future.
[28]
These statements are relevant for two reasons. Firstly, they
demonstrate that the applicant admitted
that she had misstated her
expenses. Secondly, as a tax practitioner, one would have expected
the applicant to have been capable
of preparing her own personal tax
return, and, at the very least understanding the meaning of “cost
of sales”. Considering
the magnitude of the so-called “error”,
the applicant’s explanation, to my mind, does not bear
scrutiny.
[29]
On 9 December 2014 SARS finalised the audit. SARS imposed an
understatement penalty of 150% in
terms of sections 222 and 223 of
the TA Act, as it was found that there was intentional tax evasion by
the applicant in claiming
fictitious expenses.
[30]
It was noted, in the finalisation of audit document, that, based on
the revised financial statements
presented by the applicant, she in
fact earned a net income of R733,390, as opposed to the declared loss
of R379,334. These figures
were audited and the applicant’s net
income was further increased to R862,462. In summary, the adjusted
“gross income”
was R1,241,796, and an understatement
penalty of R501,204.33 was imposed.
[31]
In conclusion the applicant was advised in writing, on the last page
of the letter of finalisation
of audit, that should she have any
queries relating to the audit she should address them to Haynes
directly, or could contact the
call centre.
[32]
On 15 December 2014 SARS issued an updated ITA 34 assessment for the
2013 year of assessment,
reflecting an amount owing of R845 335.44
(“the second assessment”).
[33]
It is common cause that the applicant never objected to the second
assessment.
[34]
The applicant states, in her affidavit in reply, that if she had the
right to object to this
assessment, she should have been informed of
such right. She states, in somewhat vague terms, that after receiving
the assessment
she contacted the call centre and was advised that a
decision had already been taken, but was not informed of her right to
object.
[35]
The applicant was informed
inter alia
of the following in the
body of the second Notice of Assessment:
“
Below
you will find the amounts of income included and deductions allowed
in calculating this assessment. It is very important that
you check
these amounts to ensure they are correct and they reflect all your
taxable income and allowable deductions for the year.
If
you are of the view that the assessment contains a processing,
calculation or other error, you should submit a revised return.
If
you are unsure as to how the assessment was concluded or the reasons
for any of the adjustments made, you may write a letter
requesting
SARS to provide further information as to how the assessment was
concluded. This letter must be delivered to your nearest
SARS branch
within 30 days of this date of assessment or sent via registered mail
to the address at the top of this notice.
If
you are aggrieved by this assessment, you may submit a Notice of
Objection (NOO) using the form available from eFiling or your
nearest
branch to you or by calling 0800 00 SARS (7277). You have 30 days
from the date of assessment in which to do this.
NOTE:
Your obligation to pay any amount due is not suspended by any
objection or appeal. However, SARS will consider a motivated
application for the suspension of payment pending the finalisation of
an objection or appeal as stipulated in the
Tax Administration
Act.”
(emphasis
added)
[36]
The applicant did not allege that she exercised any of the rights
available to her as set out
in the second Notice of Assessment. On
the papers as they stand, the application did not object to or appeal
against the outcome
of the assessment, nor did she make application
for suspension of payment pending an objection or appeal.
[37]
It is noteworthy that the applicant does not state why she did not
exercise any such right, nor
why she did not contact Haynes directly,
as she was entitled to do. The applicant furthermore did not state at
what stage she contacted
the call centre.
[38]
Pertinently, the applicant does not state that she would have
objected to the assessment following
the final audit had she been
informed of her right to do so. Moreover, the applicant does not
state what the basis of her objection
would be. Nowhere in her papers
does the applicant dispute the figures used by SARS in the final
audit. In fact, she appears, from
the correspondence which I have
referred to above, to admit the revised calculations.
[39]
On 11 February 2015 SARS issued a “final notification of
outstanding debt” for an
amount of R851 246.87.
[40]
On 19 February 2015 SARS issued a notice in terms of section 179 of
the TA Act to the first and
/ or second respondents, and on 25 March
2015 the funds seized from the applicant by the SAPS were paid over
to SARS.
[41]
It is clear, from the chronology of events, that the 30-day period
within which the applicant
was required to either submit a revised
return, request reasons for adjustments made or how the assessment
was concluded, or to
file an objection to the assessment, lapsed on
15 January 2015 (30 days of the date of assessment), and that the
demand for payment
and subsequent filing of a section 179 notice were
not premature.
[42]
If the applicant could show that she never received the notice or did
not receive it timeously,
this may have been a ground for condonation
for the late filing of a letter requesting reasons or a notice of
objection, but not
for the return of the funds which were lawfully
paid over to SARS.
FACTS
NOT PLACED IN DISPUTE
[43]
The applicant made no mention of the assessment of her personal tax
assessment, or of the audit,
and the outstanding income tax and
penalties due in her founding affidavit.
[44]
She stated, somewhat disingenuously in the context of the background
to this matter, that the
funds were taken from SAP13 to SARS and that
“
she was never informed of the reason for this move”.
[45]
The applicant fails to make any mention whatsoever of the audit
[46]
The applicant sets out her financial circumstances in detail in her
founding affidavit, including
judgments taken against her and her
personal liabilities, and urgent need to access the funds to pay
legal costs as she does not
have faith in the legal aid attorney
appointed to represent her to defend the criminal charges pending
against her.
[47]
It is significant that the applicant does not state that the seizure
of the money by SAPS was
unlawful, and does not make mention of the
transfer of the money by SAPS to SARS pursuant to the section 179
notice issued by SARS.
[48]
The high-water mark of the applicant’s case appears to be the
allegation that “
no court of law has ruled that the money no
longer belongs to me
”, and “
I have also had a
deeper look at the charge sheet provided to me and discovered that
there is no charge relating to the money seized
in my house by second
respondent.
”
[49]
This may be a basis for the return of the funds if they were not
required in the criminal investigation
or proceedings, however the
transfer of the funds to SARS to satisfy the applicant’s
undisputed personal tax liability is
a complete defence to the
applicant’s claim to vindicate the funds.
[50]
The applicant further concedes that there may have been valid reasons
to seize the funds during
the investigation but as she has not been
charged with acquiring the funds through a commission of a crime, she
should not lose
the money.
[51]
Detailed answering affidavits were filed on behalf of SAPS and SARS,
setting out the full background
leading up to the transfer of the
funds by the SAPS to SARS. A number of crucial, and at times adverse,
allegations by the respondents
have not been
replied to by the applicant at all, and therefore must be accepted as
being correct.
[52]
The affidavit deposed to by Jessica McClusky (“McClusky”)
on behalf of SARS runs
to 83 paragraphs. In her replying affidavit,
the applicant purports to deal which each of the answering affidavits
filed on behalf
of the respondents in turn, however she does not
reply
seriatim
to any of the paragraphs in McClusky’s
affidavit from paragraph 43 onwards, and has not adopted the usual
precautionary (albeit
generally unhelpful) measure of a general
denial of all allegations not specifically dealt with or replied to.
[53]
The applicant
inter alia
does not deny that:
53.1
She was aware of the audit and the final demand for payment of the
tax debt, but failed to act thereon
53.2
In terms of section 179 of the TA Act SARS is entitled to obtain the
monies;
53.3
In terms of the relevant statutory provisions and by operation of
law, the monies were lawfully paid over to SARS in
terms of section
179 of the TA Act to discharge the debt owing by the applicant to the
fiscus;
53.4
The monies were obtained in terms of the TA Act and in the
circumstances judicial intervention was not necessary;
53.5
Prior to the application, the applicant never objected to the seizure
of the monies in question; and
53.6
The monies forming the subject matter of the application were seized
by SARS from the SAPS to discharge the applicant’s
personal tax
liability, which is unrelated to the pending criminal charges.
[54]
To my mind the failure by the applicant to make out a case in her
founding affidavit for a final
order, and to join issue regarding the
above allegations, is fatal to the final relief sought.
RELEVANT
LEGISLATIVE PROVISIONS
Section
31 of the Criminal Procedure Act 51 of 1977 (“The CPA”)
[55]
In the applicant’s heads of argument it is submitted that the
“
bone of contention is whether SAPS acted lawfully in
failing to notify applicant or establishing whether was
(sic)
aware of the section 179 Notice prior to releasing applicant’s
funds from SAP 13 to SARS.”
[56]
The applicant refers to several provisions in both the Criminal
Procedure Act 51 of 1977 (“The
CPA”) and the TA Act.
[57]
I will only deal with the provisions which are relevant to the relief
sought in the present matter.
[58]
Section 31(1)(a) of the CPA, which sets out how seized property is
dealt with, states as follows:
31
Disposal
of article where no criminal proceedings are instituted or where it
is not required for criminal proceedings
(1)
(a)
If
no criminal proceedings are instituted in connection with any article
referred to in section 30 (c) or if it
appears that such
article is not required at the trial for purposes of evidence or for
purposes of an order of court, the article
shall be returned to the
person from whom it was seized, if such person may lawfully possess
such article, or, if such person may
not lawfully possess such
article, to the person who may lawfully possess it.
[59]
As the monies are no longer in the possession of the SAPS, who in
terms of the section 179 Notice
were obliged to hand the monies over
to SARS, the provisions of the CPA do not assist the applicant and it
is not necessary to
deal with this aspect any further.
Section
179 of the TA Act
[60]
Section 179 of the TA Act (“Section 179”) has undergone
two amendments since it was
first enacted, firstly by the Tax
Administration Laws Amendment Act No. 39 of 2013
(“the TAL
Act 39 of 2013”)
and later by the Tax Administration Laws
Amendment Act No. 23 of 2015
(“the TAL Act 23 of 2015”).
[61]
The TAL Act 39 of 2013 was assented to on 14 January 2014, but only
commenced on 16 January 2014.
[62]
The TAL Act 23 of 2015 was assented to on 24 December 2015 and
commenced on 8 January 2016.
[63]
The audit, the second assessment and the section 179 notice were all
issued before 8 January
2016, therefore the section as it read prior
to the 2015 amendment applies.
[64]
The section read as follows:
“
A
senior SARS official may by notice to a person who holds or owes or
will hold or owe any money, including a pension, salary, wage
or
other remuneration, for or to a taxpayer, require the person to pay
the money to SARS in satisfaction of the taxpayer’s
tax debt.
[65]
The applicant has failed to show that the section 179 notice was
premature, or that it was not
lawfully issued in accordance with the
relevant provisions set forth in section 179 as it stood at the time
the notice was issued.
[66]
The applicant’s argument that section 31 of the CPA takes
precedence over section 179 of
the TAA to my mind is misguided.
[67]
The SAPS was in possession of the funds, but on receipt of a valid
and enforceable notice to
hand over such funds, was duty bound to
transfer the monies to SARS. Section 179 of the TA Act is peremptory.
[68]
Notwithstanding the applicant’s argument to the contrary, there
was no duty or obligation
on the Second Respondent personally or the
SAPS to bring the TA Act notice to the applicant’s attention,
and the applicant
had no right to ‘
negotiate with SARS
post-audit’.
[69]
Pertinently the applicant annexed the second ITA34 to her replying
affidavit, therefore she cannot
dispute receiving it.
[70]
Lastly, as this is not a judicial review, the applicant’s
reliance on the
Promotion of Administrative Justice Act 3 of 2000
is
misplaced.
[71]
As it is common cause that the
seizure by SAPS was lawful, the only basis upon which the applicant
is entitled to the return of
the funds, is to show that transfer of
monies from SAPS to SARS is invalid or unlawful and falls to be set
aside. Applicant failed
to do so and therefore the application must
fail.
CONCLUSION
[72]
In all the circumstances, I am satisfied that the monies were
lawfully paid over by SAPS to SARS,
in terms of section 179 of the TA
Act, in discharge of the tax debt of
the applicant.
[73]
Accordingly, I make the following order:
1.
The
application is dismissed.
2.
The applicant
is ordered to pay the costs of the First, Second, Third, Fourth and
Fifth Respondents.
HOLDERNESS,
AJ
ACTING
JUDGE OF THE HIGH COURT
APPEARANCES
For
the Applicant:
Adv T Twalo
Instructed
by:
Matte Attorneys
For
the Respondent(s):
Adv R Williams SC
Instructed
by:
Office of the State Attorney
Date(s)
of Hearing:
21 November 2016
Judgment
delivered on:
1 February 2017
[1]
[1984] ZASCA 51
;
1984
(3) SA 623
(A) at 634E-635A