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[2019] ZAWCHC 67
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Lifman and Another v Commissioner for the South African Revenue Service and Others (22820/2016) [2019] ZAWCHC 67; 81 SATC 289 (11 June 2019)
IN
THE HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE DIVISION, CAPE TOWN)
Case
Number: 22820/2016
In
the matter between:
Mark
Roy
Lifman First
applicant
The
Close Corporations, Companies and
Trusts
listed in Schedule A hereto
Second
to Thirty Sixth Applicants
And
The Commissioner for the
South African
Revenue
Service
First
Respondent
Keith
Hendricks Second
Respondent
MacRobert
Attorneys Third
Respondent
JUDGMENT
DELIVERED ON 11 JUNE 2019
BAARTMAN,J
[1]
This is an application to stay the execution process commenced
pursuant to taxes raised following the late filing of VAT and
tax
returns, and a section 50 enquiry (
the enquiry
) under Part C,
Chapter 5 of the Tax Administration Act, 28 of 2011 (
the
Tax
Administration Act
>).
[2]
The applicants have abandoned some of the relief initially sought;
below, I deal only with the relief persisted with, namely
the stay of
the execution proceeding. In May 2014, the first respondent, the
South African Revenue Services
(SARS),
launched the enquiry.
The first applicant held an interest in each of the entities that
make up the second to thirty-sixth applicants.
On 5 May 2014,
Veldhuizen J, pursuant to an
ex parte, in camera
application,
authorised the enquiry to investigate suspected non-compliance and/or
offences committed by the applicants in the assessment
periods
described in the order. In terms of the order, Marais SC
(Marais),
a member of the Pretoria Society of Advocates, was designated as
the presiding officer in the enquiry. The offences relate to
contraventions
of the Tax Administration Act, I do not deem it
necessary deal with the offences in any detail.
[3]
The enquiry commenced on 26 May
2014. In October 2015, Marais imposed a fine of R180 000 on the first
applicant for his alleged
failure to, among others, supply relevant
information
[1]
.
Midway through the enquiry, some applicants submitted outstanding
income tax and VAT returns in respect of certain years that
were
subject to the enquiry. SARS assessed those returns and on 27
November 2014 levied a tax liability totalling R13 215 062.21
against
6 applicants. The amount raised was immediately payable. Although no
dispute was raised against the assessment, payment
remained
outstanding. In February 2015, the first applicant and SARS reached
an agreement in terms whereof the tax debt would be
settled by end of
March 2015. However, payment was not forthcoming. Instead, the
applicants proposed a deferred payment arrangement
and unsuccessfully
pursued litigation. SARS was unable to enter into a deferred payment
arrangement as the applicants still had
outstanding tax returns. SARS
can only enter into deferred payment arrangements with a fully
compliant tax payer. Despite SARS
threatening to institute
proceedings to recover the debt if it was not settled by the end of
March, it remained outstanding.
[4]
The enquiry continued in respect of the periods not covered by the
assessment referred to above. In March 2015, pursuant to
evidence
gathered from the enquiry, SARS issued letters of finding to the
applicants in which it indicated further tax liabilities
and the
facts on which it had relied for the conclusions. The applicants had
21 days from date of delivery of the findings to respond
in writing
to the alleged facts and conclusions. They did not.
[5]
In October 2015, SARS issued income tax and VAT assessments against
the applicants as well as letters of assessment explaining
the basis
and stating the grounds upon which the assessments had been raised.
The applicants did not initiate any of the dispute
resolution
procedures provided for in the
Tax Administration Act. Therefore
, the
assessments raised pursuant to the submitted returns and those raised
pursuant the enquiry became final and conclusive.
[6]
On 1 April 2015, SARS obtained civil judgments and warrants of
execution against the moveable property of the affected applicants.
On 2 April 2015, SARS executed the warrants. On 7 April 2015, under
case number 5961/2015, the applicants launched an urgent application
in which they sought the setting aside of the civil judgments
alternatively their suspension and interdicting SARS from proceeding
with the execution process embarked upon. On 17 June 2015, Mantame J
dismissed the application. SARS proceeded with the execution
process
by arranging sales in execution. On 19 June 2015, the affected
applicants served a notice of application for leave to appeal
the
dismissal. The applicants failed to prosecute the appeal. SARS
intervened and the application for leave to appeal was set down
for 9
November 2015. However, the applicants withdrew the application for
leave to appeal 2 days before the hearing.
[7]
SARS resumed execution steps which led to the second urgent
application in which the applicants sought to stay the execution
process pending an application for leave to appeal the judgment
handed down in the first urgent application. In November 2015,
that
application was dismissed with a punitive costs order.
[8]
In this application, the
applicants alleged that exceptional circumstances exist in that SARS
had undertaken to conduct an internal
review and reconsider the
assessments referred to above. It is common cause that the applicants
did not avail themselves of any
of the procedures provided for in the
Tax Administration Act to
dispute the assessments raised
[2]
.
The assessments are thus final.
[9]
The first applicant alleged that he had 'on more than one occasion
complained that SARS officials are acting in an untoward
and
subjective manner.' Pursuant to the first applicant's allegations of
unfair treatment during the investigation, Gavin Cairns
(Cairns),
a specialist forensic auditor at SARS, was 'tasked to attend to
the review of the... audit.' In correspondence dated 3 November 2016,
Cairns said the following about the review:
'Please
note, (and as clarified) the purpose of the review is to compile an
internal report. Therefore, it is unlikely that the
details of our
review findings will be communicated to yourself. However,
SARS
will communicate its decision to revise, or
not, the current assessment for each taxpayer within the group
structure.
'
[10]
However, on 12 February 2018, Ms Makola, chief officer SARS
enforcement, communicated the following decision in the respect
of
the Cairns review:
'1.
I refer to the email communication from Mr Gavin Cairns... on 3
November 2016 ...
2.
Mr Cairns communicated to Mr Lifman that he intended to conduct
a
so called "review" of the audit that had been conducted
by
SARS..
…
4.
SARS
has considered its position. The notion of an internal
"review" of an assessment with the express purpose of
revising
such assessments, is neither contemplated nor countenanced
in terms of the provisions of the TAA [Tax Administration Act].
Accordingly,
there exists no statutory basis for it. A "review"
of this nature is neither
a
power conferred on the
Commissioner nor
a
right to which
a
taxpayer is
entitled in terms of the provisions of the TAA. Accordingly, the
"decision" communicated by Mr Cairns to Mr
Lifman was
erroneous, was based on an error of Jaw was consequently
a
nullity.
5.
I, in my capacity as
a
senior SARS official, have accordingly
decided, in terms of the provisions of section 9(1)(b) of the TAA, to
withdraw, to the extent
necessary, the decision to conduct such
"review". Accordingly, the assessment raised against Mr
Lifman and the companies
are final and conclusive.
...
7.
In light of my withdrawal of the decision to conduct such
"review", it appears that little purpose would be served by
the parties pursuing the stay application
...
You are
accordingly invited to withdraw the application.'
[11]
The applicants did not challenge the Makola decision. Nevertheless,
on 30 April 2019, Cairns informed the first applicant that:
'I
have completed what was requested of myself and have submitted my
findings to management. As indicated to you in my mail of 3
November
2016, I am not at liberty to share such findings with you. Please
liaise with Mr Keith Hendrickse regards all future queries
as
I am no longer involved in this matter.
'
[12]
In light of Cairn's communication, the relief sought is relevant:
'3.
That case no 14889/2015 be stayed pending the finalisation of the
internal review to be conducted by Gavin Cairns of SARS.
4.
That case no 1391712016 be stayed pending the finalisation of the
internal review to be conducted by Gavin Cairns of SARS;
5.
That any execution steps and legal proceedings pursuant to any
assessment... be stayed with immediate effect, pending the
finalisation
of the internal review to be conducted by Gavin Cairns
of SARS.'
[13]
The Cairns review is done. The applicants acknowledge that they are
not entitled to a copy of the internal review findings
and have not
requested one. Ostensibly, the relief sought is moot. Not so,
submitted Ms Bawa SC, counsel for the applicants. Instead,
so the
submission went, the review is only finalised once the applicants
have received notice from SARS 'of its decision to revise
the
assessments or not'. I disagree. The first applicant complained about
the treatment the applicants had received at the hands
of SARS'
officials. The applicants cannot elevate a complaint about 'treatment
received' to a ground of review. It follows that
the relief sought
has become moot.
[14]
Even if I am wrong, the
Tax
Administration Act makes
no provision for the reconsideration of an
assessment contended for in this application. The applicants have not
indicated where
they laid the complaint that would have initiated the
complaint mechanism provided for in the
Tax Administration Act. Each
assessment was preceded by letters of finding issued to the relevant
applicant in 2015-2016, indicating the tax debt SARS intended
to
raise and the facts relied upon for its conclusion. The amounts,
totalling R352 235 074.28, were such that one would have expected
the
applicants to have availed themselves of any opportunity to
dispute the proposed assessments
[3]
.
Section 106
of the
Tax Administration Act provides
:
'(1)
SARS
must consider
a
valid objection in the manner and within the
period prescribed under this Act and the 'rules'.
(2)
SARS may disallow the objection or allow it either in whole or in
part.
(3)
If the objection is allowed either in whole or in part, the
assessment or 'decision' must be altered accordingly.. .'
[15]
The applicants did not lodge
any objection to initiate any of the mechanisms referred to above
[4]
.
Instead, it seems that the initial dissatisfaction was about
treatment received which the applicants have belatedly and
opportunistically
sought to raise to an objection against the
assessments. That is not permissible; it follows that on this ground,
the application
must also fail. The assessments are undisputed,
final, due and payable.
[16]
Even if I am wrong, SARS cannot
exercise any power other than that conferred upon it by law
[5]
.
The applicants have relied on section 93(1)(d) and 92 for the
submission that SARS may reduce an assessment even in the absence
of
an objection or an appeal provided for in the
Tax Administration Act.
Section
92 does not assist the applicants; instead, it protects the
fiscus. The section provides:
'Additional
assessment
-
If at any
time
SARS
is satisfied
that an assessment does not reflect the correct application of
a
tax Act to the prejudice of SARS or the
fiscus, SARS must make an additional assessment to correct the
prejudice.'
[17]
SARS is not prejudiced by the
assessment; quite the opposite is apparent from the amount due and
payable. Similarly, section 93
does not find application in the
circumstances of this matter. The section makes limited provision for
an amendment to an assessment
[6]
.
The circumstances of this matter do not justify invoking the
provisions of sections 92 or 93.
[18]
The applicants contend that
there are exceptional circumstances present in this matter justifying
a stay of the execution process
[7]
.
SARS is a special body with extensive powers and can legitimately
intrude on the rights of taxpayers. However, the power SARS
exercised
is circumscribed and the applicants have been unable to indicate any
flouting or abuse of those powers. The applicants
have had ample
opportunity to engage the dispute or appeal mechanisms available and
have chosen not to.
[19]
In the exercise of my wide
discretion, I have considered the particular facts of this matter and
am persuaded that they do not establish
grounds of justice and
fairness to stay the execution proceedings. There is no indication
that an injustice will result from a
failure to suspend the
execution. On the contrary, this application appears to be an abuse
of the process. It follows that there
are no exceptional
circumstances justifying a stay of the execution proceedings
[8]
.
[20]
In respect of the costs of this application, I considered that the
applicants were brought under the impression that a lawful
review
process was in progress until 12 February 2018 when they received Ms
Makola's decision. I intend to direct that each party
pay its own
costs up to that date.
Conclusion
[21]
The application is dismissed with costs incurred after 12 February
2018;
[22]
Each party is to bear its own costs incurred prior to 12 February
2018.
______________________
BAARTMAN
J
[1]
Section 127(1) read with
sections 127(5)
and
25
of the
Tax
Administration Act, 28 of 2011
.
[2]
SARS' Dispute Resolution Guide Issue 1, 28 October 2014 promulgated
in terms of
section 103
and
Section 93
of the
Tax Administration
Act.
[3
]
Lodge a complaint at the office of the Tax Ombud; Applied for the
suspension of the payment obligation in order to alleviate
potential
hardship resulting from the 'pay-now argue-later' rule in
section 164
of the
Tax Administration Act; Disputed
the assessments
through the mechanisms in Chapter 9 of the TAA; Used the objection
and appeal process provided in
section 104(1)
and (2) of the
Tax
Administration Act.
[4
]
Part B:
section 104
and
105
of the
Tax Administration Act.
>
[5]
Fedsure Life Assurance Ltd and Others v Greater Johannesburg
Transitional Metropolitan Council and Others
[1998] ZACC 17
;
1999 (1) SA 374
(CC)
para 58-59.
[6]
Section 93:
'Reduced assessments. - (1) SARS may make a reduced
assessment if-
(a) the taxpayer successfully
disputed the assessment under Chapter 9;...
(d) SARS is satisfied that there is a
readily apparent undisputed error in the assessment by -
(i) SARS; or
(ii) the taxpayer in a return; or ...
(e) (ii) a processing error by
SARS...'
[7]
Van Ransburg and Another NNO v Naidoo and Others NNO; Naidoo and
others NNO v Van Ransburg and Others
2011 (4) SA 149
(SCA) at paras
51 and 52.
[8]
Bannister's Print (Ply) Ltd v D&A Calendars CC and Another2018
(6) SA 77 (GJ).