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[2018] ZAECMHC 1
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Ntayiya v South African Revenue Services (3613/16) [2018] ZAECMHC 1; 81 SATC 345 (23 January 2018)
IN
THE HIGH COURT OF SOUTH AFRICA
EASTERN
CAPE LOCAL DIVISION, MTHATHA
Case
No. 3613/16
Date
heard: 24 October 2017
Date
delivered: 23 January 2018
In
the matter between:
FIKILE
NTAYIYA
Applicant
and
SOUTH
AFRICAN REVENUE
SERVICES
Respondent
JUDGMENT
LAING
AJ
:
[1.]
The Applicant is an attorney, practising as a sole practitioner under
the name of Fikile Ntayiya & Associates in Mthatha.
During the
course of 2014, the Respondent assessed the Applicant’s tax
liability for the period of 2008 to 2013. Such assessment
forms the
subject of these proceedings.
[2.]
The main relief sought by the Applicant is: (a.) that the assessment
made by the Respondent’s official, Ms Karin van
Niekerk,
[1]
be reviewed and set aside; and (b.) that the annual financial
statements for the period of 2008 to 2013, submitted by APAC
Professional
Accountants and Tax Specialists, be accepted as the
correct annual financial statements.
[3.]
At the outset, it is necessary to mention that the state of the
papers in the present case was far from satisfactory. In
Louw
and Others v Nel
[2011] 2 All SA 495
(SCA), the Supreme Court of Appeal remarked, with
reference to motion proceedings, that the parties’ affidavits
constitute
both their pleadings and their evidence.
[2]
Pleadings must be lucid, logical and intelligible. A litigant must
plead his or her cause of action or defence with at least such
clarity and precision as is reasonably necessary to alert his or her
opponent to the case that must be met. A litigant who fails
to do so
may not afterwards advance a contention of law or fact where its
determination may depend on evidence which his or her
opponent has
failed to place before the court because he or she was not
sufficiently alerted to its relevance.
[3]
[4.]
Furthermore, tax disputes are often matters of some complexity where
dates and figures play a key role in the determination
of the
outcome. Although the present case does not entail overly complex
issues of tax administration, the court and indeed the
litigants
themselves would have benefitted from a more lucid, logical and
intelligible approach to the drafting of the affidavits
and a more
careful and systematic approach to the narration of the underlying
history and the calculation of the amounts in dispute.
The parties’
affidavits must tell a story. Generally, if the story is told in an
uncomplicated manner and in a chronological
sequence then the issues
in dispute may be discerned without unnecessary difficulty, by both
the court and the litigants. Similarly,
where the facts averred in
the affidavits are supported by the documents attached as evidence,
questions of law and fact may be
more readily determined.
Factual
background
[5.]
A summary of the underlying facts in the present matter follows, as
best gleaned from the papers.
[6.]
The Applicant’s erstwhile tax advisors, MNG Business
Consultants, previously prepared tax returns for the period of
2008
to 2013. The above advisors submitted such returns to the Respondent,
together with annual financial statements for the years
in
question.
[4]
During the course
of 2014,
[5]
Ms van Niekerk
advised the Applicant that the annual financial statements were
incorrect and gave him an opportunity to make the
necessary
amendments. MNG Business Consultants obliged accordingly on the
Applicant’s behalf.
[7.]
Consequently, Ms van Niekerk audited the assessment of the
Applicant’s tax liability made by MNG Business Consultants.
She
explains that the Applicant had submitted nil tax returns for the
period of 2008 to 2013 but had based these on MNG Business
Consultants’ original annual financial statements. After the
firm’s amendment thereof, Ms van Niekerk completed her
audit
and made the following adjustments:
[6]
Tax year
Adjustments
2008
R 333,836
2009
R 1,088,745
2010
R 856,339
2011
R 551,382
2012
R 700,092
2013
R 625,164
[8.]
The above information appears in the audit findings that the
Respondent sent to the Applicant on 17 September 2014.
[9.]
Ms van Niekerk further explains that when she analysed the
Applicant’s bank statements, she discovered that the Applicant
had not declared certain payments that he had received from the
state. She added together the funds that were deposited into both
the
Applicant’s business and private bank accounts and compared the
total with what was reflected in the Applicant’s
annual
financial statements. Upon comparison, it was clear that the
Applicant had grossly understated his income. Ms van Niekerk
deemed
this to be tax evasion and imposed understatement penalties.
Tax
year
Adjustments
Penalties
[7]
2008
R 333,836
R 119,591
2009
R 1,088,745
R 561,342
2010
R 856,339
R 413,609
2011
R 551,382
R 225,353
2012
R 700,092
R 308,298
2013
R 625,164
R 256,148
[10.]
The above information is evident from the Respondent’s
finalization of the audit, sent to the Respondent on 29 October
2014.
[11.]
Subsequently, the Applicant delivered notices of objection in
respect of the Respondent’s assessment. This was done
on 28
February 2015. The Applicant also produced evidence that he had
understated his expenditure in relation to hiring costs,
depreciation
and telephone use.
[12.]
On 24 April 2015, Ms van Niekerk sent an email to the Applicant.
Much has been made of the email, which is repeated in full,
below:
Good
day Mr Ntayiya
A
reconciliation has now been done iro income received via bank
statements and income declared.
Please
investigate urgently and inform me if you are not in agreement, as
the objection needs to be finalised.
Thank
you
Karin
van Niekerk
Functional
Specialist Audit
[13.]
The email was accompanied by a table, reflecting the totals of the
amounts in two accounts, the annual financial statements
in Ms van
Niekerk’s possession,
[8]
and under-declared income. The totals are for the tax years in
question, i.e. 2008 to 2013. Again, by reason of the weight that
the
Applicant has attached to the document, the table is repeated
below:
[9]
Acc
62001541912
Acc
53990062325
Total
AFS
Income
under-declared
2008
973,354
47,650
1,021,004
368,259
652,745
2009
907,011
65,432
972,444
419,716
552,728
2010
1,173,930
57,150
1,231,080
455,610
775,470
2011
1,362,691
154,900
1,517,591
520,611
996,980
2012
1,333,159
46,360
1,379,519
548,173
831,346
2013
1,073,266
51,973
1,125,239
596,825
528,414
4,337,683
[14.]
This resulted in MNG Business Consultant’s submitting a
revised set of annual financial statements on 4 June 2015.
[15.]
The Respondent partially allowed the Applicant’s objection on
the basis of the revised set of annual financial statements.
[10]
This was communicated to the Applicant on 10 June 2015. In the same
letter, the Respondent informed the Applicant that he had the
right
to appeal by completing and submitting the relevant form within 30
business days.
[16.]
The history of the matter then becomes increasingly murky. From the
contents of the affidavits and the information contained
in the
annexures thereto, it appears that MNG Business Consultants prepared
another set of annual financial statements on 9 November
2015.
[11]
A few weeks later, the Applicant’s new tax advisors, APAC
Professional Accountants and Tax Specialists, prepared a further
set
of annual financial statements and submitted these to the Respondent
together with a notice of appeal.
[12]
The Applicant avers that a tax collector, acting for the Respondent,
deducted the sum of R 250,000 from his account over this time.
[17.]
On 4 July 2016, the Respondent informed the Applicant that his
appeal was late, it fell outside the prescribed time period.
[18.]
Consequently, the Applicant applied for the reduction of the
assessments made in respect of the tax years 2008 to 2013, as
contemplated under section 93, read with section 99, of the Tax
Administration Act 28 of 2011 (‘the TAA’).
[13]
The Respondent notified the Applicant on 15 August 2016 that the
assessments would not be revised. In the event that the Applicant
wished to pursue the matter further, he was advised to seek legal
advice with regard to the remedies available.
[19.]
The Applicant instituted the present proceedings on 11 October 2016.
Issues
for determination
[20.]
The Respondent has raised two points
in limine
. Firstly, the
Applicant has failed to comply with the provisions of sub-section
11(4) of the TAA inasmuch as he did not give the
Commissioner at
least one week’s written notice of his intention to institute
legal proceedings. Secondly, the Applicant
has failed to comply with
the provisions of sub-section 11(5) of the TAA inasmuch as he did not
ensure that his application was
served at the address specified by
the Commissioner in terms of public notice to that effect.
[21.]
The issues to be determined are as follows: (a.) whether the
Respondent’s points
in
limine
succeed, which would dispose of the matter; (b.) whether the
Applicant has made out a case for the review and setting aside of
the
assessment made by Ms van Niekerk; and (c.) whether the Applicant has
made out a case for the acceptance of the correctness
of the annual
financial statements for 2008 to 2013, as prepared by APAC
Professional Accountants and Tax Specialists.
The
legal framework
[22.]
The provisions of sub-sections 11(4) and (5) are repeated below:
11.
Legal
proceedings
involving
Commissioner
-(1)
…
(2)
…
(3)
…
(4)
Unless the court otherwise directs, no legal proceedings may be
instituted in the High Court against the Commissioner unless
the
applicant has given the Commissioner written notice of at least one
week of the applicant's intention to institute the legal
proceedings.
(5)
The notice or any process by which the legal proceedings referred to
in subsection (4) are instituted, must be served at the
address
specified by the Commissioner by public notice.
[23.]
Neither counsel could refer the court to case law that addressed the
points
in limine
with direct reference to the applicable
provisions of the TAA. Fortunately, there is useful academic
commentary on the subject.
With reference to sub-sections 11(4) and
(5) of the TAA:
[e]xperience
has shown that most parties to a dispute would generally prefer
resolution over litigation and it is, therefore, necessary
to have
these measures in place to avoid unnecessary and costly litigation.
If SARS receives prior notice of an intended court
application, it
will ensure that the matter is brought to the attention of an
appropriate senior official. The senior official
can then use the
prior notice period productively to investigate the merits of the
intended application and, if appropriate, resolve
the dispute before
formal court proceedings. The compulsory prior notice is mitigated by
the ability of a court on application
by the intended applicant to
waive formal compliance in extremely urgent cases. The prior notice
requirement will ensure that resolution
is sought timeously, which
would lessen the burden on the court system. All legal processes must
be served electronically by way
of email, or facsimile and at the
physical or electronic address of the regional office as stipulated
in the public notice.
[14]
[24.]
Viewed in the above light, the applicable provisions are statutory
mechanisms that are designed to encourage dispute resolution
instead
of litigation. The effective and efficient collection of tax may have
significant implications for a taxpayer. This is
all the more so
where the taxpayer is an individual rather than a corporate entity.
In the present case, the Respondent’s
imposition of
understatement penalties on the Applicant is likely to have a
devastating effect on his personal finances in the
event that such
penalties have a proper basis. Clearly, it would be in the interests
of both parties to avoid protracted and expensive
litigation where an
alternative dispute resolution process is provided.
[25.]
The requirement of prior notice under section 11(4) of the TAA is
nothing unusual in relation to actions brought against
organs of
state or their functionaries. Case law corresponds with the academic
commentary mentioned above. In
Mohlomi
v Minister of Defence
[1996] ZACC 20
;
1997 (1) SA 124
(CC), the court said, at para 9, that the reason for
the statutory requirement is that
with
its extensive activities and large staff which tends to shift…
[an organ of state] needs the opportunity to investigate
claims laid
against it, to consider them responsibly and to decide, before
getting embroiled in litigation at public expense, whether
it ought
to accept, reject or endeavour to settle them.
[26.]
Possibly the closest analogous provisions in other legislation are
those contained in sub-section 3(1) of the Institution
of Legal
Proceedings against certain Organs of State Act 40 of 2002. These
provide that no legal proceedings for the recovery of
debt may be
instituted against an organ of state unless the creditor has given
written notice of his or her intention to do so,
within six months of
the date on which the debt became due. Under sub-section 3(4)(a),
where a creditor has failed to give written
notice and the organ of
state has not consented in writing to the institution of legal
proceedings, the creditor may apply to court
for condonation of such
failure. The circumstances where a court may grant such application
are listed in sub-section 3(4)(b).
[27.]
The TAA does not contain any similar condonation provisions.
Nevertheless, sub-section 11(4) can be interpreted to mean that
a
court may direct that legal proceedings be instituted in the absence
of prior notice. This presupposes that the applicant has
made
application to court for such an order and that he or she has
motivated why no prior notice is necessary. The question arises
as to
whether, conversely, a court may issue directions in the absence of
prior notice but after legal proceedings have already
been
instituted. In effect, this would amount to a decision on an
application for condonation of the applicant’s non-compliance
with a statutory requirement.
[28.]
The text in sub-section 11(4) of the TAA provides no ready answer to
the above. The prohibition against the institution of
legal
proceedings in the absence of prior notice is qualified by the
clause, ‘unless the court otherwise directs’.
The text
provides no assistance in relation to the circumstances under which a
court may exercise such discretion and begs the
question whether an
order can be made after the commencement of litigation.
[29.]
The
contra
fiscum
principle applies in the event of an ambiguity in a tax statute. In
other words, the ambiguous provision must be interpreted in
favour of
the taxpayer.
[15]
Nevertheless, the true intention of the legislature is of paramount
importance and remains decisive. The scope and purpose of the
legislation must be considered, together with the context in which
the words and phrases are used.
[16]
[30.]
The preamble to the TAA does not shed light on how to deal with the
subject, save to indicate that the TAA provides authority
to act in
legal proceedings. Under section 2, the purpose of the TAA is the
effective and efficient collection of tax by aligning
the
administration of the applicable legislation, prescribing the rights
and obligations of taxpayers, prescribing the powers and
duties of
tax administrators, and generally giving effect to the objects and
purposes of tax administration. Overall, the TAA itself
does not
offer much insight into the manner in which sub-section 11(4) ought
to be interpreted and applied.
[31.]
Returning to the text itself, a narrow interpretation suggests that a
court may issue directions only in circumstances where
the applicant
seeks to avoid the requirement of prior notice, in anticipation of
the institution of legal proceedings. For example,
an order would
need to be obtained where the applicant intends to bring an urgent
application against the Commissioner. A wide
interpretation suggests
that directions may be issued by the court at any stage, even after
legal proceedings have been instituted.
The latter hinges on the
meaning of ‘otherwise directs’. The dictionary meaning of
‘otherwise’, used as
an adverb, is ‘
1
in different circumstances; or else.
2
in other respects.
3
in a different way. ▪ alternatively.’
[17]
If the past tense of ‘direct’ had been used then a wide
interpretation would be more difficult to justify, i.e. ‘unless
the court has otherwise directed’ would support a narrow
interpretation, requiring an application to court prior to the
institution of legal proceedings. However, the use of the term in its
present tense permits the wider interpretation discussed.
[32.]
Mindful of the above and the relevance of the
contra fiscum
principle, this court is prepared to give a wide interpretation to
the provisions of section 11(4). Directions may indeed be issued
in
the absence of prior notice and after the institution of legal
proceedings.
[33.]
Notwithstanding the above, the court must still be satisfied that a
proper basis exists upon which to condone non-compliance
and to grant
an appropriate order. The Constitutional Court has held that the
standard for considering an application for condonation
is the
interests of justice.
[18]
This
was the standard adopted by the Supreme Court of Appeal in relation
to a condonation application brought under sub-section
3(4)(a) of Act
40 of 2002, in
Minister
of Agriculture and Land Affairs v CJ Rance (Pty) Ltd
[2010] 3 All SA 537
(SCA), where Majiedt AJA remarked, at [35], that
[i]n
general terms, the interests of justice play an important role in
condonation applications. An applicant for condonation is
required to
set out fully the explanation for the delay; the explanation must
cover the entire period of the delay and must be
reasonable.
[34.]
The courts have also applied the test of whether there is good
cause.
[19]
The meaning of the
expression was considered in
Silber
v Ozen Wholesalers (Pty) Ltd
1954 (2) SA 345
(A), where Schreiner observed, at 352H-353A, that
[t]he
meaning of ‘good cause’ in the present sub-rule, like
that of the practically synonymous expression ‘sufficient
cause’ which was considered by this Court in
Cairn’s
Executors v Gaarn
1912 AD 181
, should not lightly be made the subject of further
definition. For to do so may inconveniently interfere with the
application of
the provision to cases not at present in
contemplation. There are many decisions in which the same or similar
expressions have
been applied in the granting or refusal of different
kinds of procedural relief. It is enough for present purposes to say
that
the defendant must at least furnish an explanation of his
default sufficiently full to enable the Court to understand how it
really
came about, and to assess his conduct and motives.
[35.]
The above observation was made with reference to rule 46(5) of the
Magistrates’ Courts Rules. It was cited with approval
in
Madinda v Minister of Safety and Security
[2008] ZASCA 34
;
[2008] 3 All SA 143
(SCA), dealing with a condonation application brought in terms of
sub-section 3(4)(a) of the Institution of Legal Proceedings against
certain Organs of State Act 40 of 2002. Heher JA held, at [10], that
‘
[g]ood
cause’ looks at all those factors which bear on the fairness of
granting the relief as between the parties and as affecting
the
proper administration of justice. In any given factual complex, it
may be that only some of many such possible factors become
relevant.
These may include prospects of success in the proposed action, the
reasons for the delay, the sufficiency of the explanation
offered,
the bona fides of the applicant, and any contribution by other
persons or parties to the delay and the applicant’s
responsibility therefore.
[36.]
The apparent distinction between the standard or test applied with
regard to condonation applications is of no consequence
for purposes
of the present matter.
[20]
There is considerable overlap between the underlying sets of
principles involved.
[37.]
The above discussion has focused primarily on the provisions of
sub-section 11(4). In terms of sub-section 11(5), an applicant
must
serve prior notice or process at the address specified by the
Commissioner in a public notice. The requirement is unambiguous
and
must be understood as having been inserted to encourage the parties
to follow a dispute resolution process. It permits the
Respondent an
opportunity to investigate, consider, and decide how to deal with any
claim brought against it by ensuring that the
claim is brought to the
attention of a provincial or regional office, which, presumably,
would be in a better position to contact
the applicant and propose an
alternative to litigation.
[21]
Ex
facie
the text, there is no express authority for the court to exercise any
discretion where an applicant has failed to serve notice
or process
at the address specified by the Commissioner. At the least, it would
be expected of an applicant that a condonation
application be brought
in the event of non-compliance.
Application
of the law to the facts
[38.]
Returning to the facts of the present matter, it is common cause that
the Applicant failed to comply with either sub-section
11(4) or (5).
The explanation for his default is remarkably scant. In his reply to
the Respondent’s first point
in
limine
,
the Applicant refers to the final paragraph of the Respondent’s
letter, dated 15 August 2015, which reads as follows:
[s]hould
you wish to pursue this matter further, you should seek legal advice
with regards to legal remedies available, which may
include a Review
Application to the High Court.
[39.]
The Applicant avers that he interpreted the contents to mean that the
Respondent had consented to his proceeding with litigation,
without
further ado. Furthermore, he baldly states that no prejudice would be
suffered by the Respondent as a result of the Applicant’s
failure to have given prior notice.
[40.]
Not by any stretch of imagination can the letter be interpreted in
the manner contended by the Applicant. The Respondent’s
letter
merely urges the Applicant to obtain legal advice on the options
available to him, which may (or may not) include review
proceedings,
nothing more. In no way could it be construed as a waiver of the
Applicant’s obligation to give prior notice,
not that the
Respondent was authorised to do so in any event. The Applicant’s
explanation is simply not adequate. Before
instituting legal
proceedings against the Respondent, it was incumbent upon the
Applicant to have consulted the applicable legislative
framework and
to have satisfied himself that he had met any procedural requirements
that were stipulated. That the Applicant, as
an attorney, failed to
do so is surprising. A prescribed procedure cannot be ignored or
wished away. It is there for a reason and
if a litigant so wishes
then he or she is entitled to challenge it. Until it is declared
unlawful or repealed, the procedure must
be given effect.
[22]
[41.]
In relation to the Applicant’s averment to the effect that the
Respondent would have suffered no prejudice as a result
of
non-compliance, the court is unable to agree. Prior notice to the
Respondent would have permitted the Respondent an opportunity
to have
investigated and considered the matter further and to have decided
how best to resolve the dispute. This never happened
and the
Respondent finds itself embroiled, at the expense of the public, in
litigation that may have been possible to avoid. The
prejudice caused
is plain to see.
[42.]
To the Applicant’s second point
in limine
, the Applicant
replies that he was unaware of the specified address. Nevertheless,
he had used the Respondent’s principal
address in Pretoria and
the Respondent, in any event, had received the application and had
been able to respond. The Applicant
further alleges that no prejudice
was suffered.
[43.]
Again, the court is unable to agree. To imply that it was immaterial
whether the Respondent received the application in Pretoria
or at its
provincial office in Port Elizabeth is to miss the point entirely.
The procedural requirement is there to permit the
Respondent a proper
opportunity to deal with the matter and to allow the possibility of a
dispute resolution process to be explored,
thereby mitigating against
the delay and expense of litigation. Service on the Respondent’s
provincial office, where its
officials are more conveniently placed
to deal with an applicant located within their jurisdiction, would
have facilitated such
a scenario. The failure on the part of the
Applicant to have done so can only be to the prejudice of the
Respondent.
[44.]
In his heads of argument, Applicant’s counsel submits that the
points
in limine
have been overtaken by events because this
matter previously came before the court. On such occasion, directions
were given to
the effect that,
inter alia
, the Applicant
supplements his founding affidavit and annexes thereto the annual
financial statements prepared by MNG Business
Consultants.
[45.]
The above argument cannot be accepted. At the time that the matter
previously went before court, it was clearly deemed unripe
for
argument. No finding was made with regard to the points
in limine
.
[46.]
Counsel for the Respondent argued that the Applicant has not made
application for condonation of his non-compliance with sub-sections
11(4) and (5) of the TAA. The court is inclined to agree. Certainly,
the Applicant has not filed a formal application, accompanied
by a
substantive explanation for his default. In
Saloojee
and Another, NNO v Minister of Community Development
[1965] 1 All SA 521 (A),
[23]
it was held that application for condonation must be made without
delay when a litigant realises that he or she has not complied
with a
rule of court.
[24]
The closest
that the Applicant comes to doing so is a reference to his intention
to do so with regard to non-compliance with sub-section
11(4) and a
terse indication that he does so under reply in relation to
sub-section 11(5).
[25]
[47.]
Assuming that the Applicant has indeed made proper application for
condonation, about which this court is not persuaded, the
Applicant
would need to demonstrate that there were prospects of success in the
application. This requires further comment.
[48.]
The Applicant seeks the review and setting aside of the assessment
made by Ms van Niekerk. This has been done in terms of
the Promotion
of Administrative Justice Act 3 of 2000 (‘PAJA’).
However, as Respondent’s counsel correctly pointed
out, the
Applicant has not explicitly stated the grounds of review upon which
he seeks to rely, as listed in sub-section 6(2) of
PAJA. It is not
for the court to sift the Applicant’s submissions and make a
determination on which of the review grounds
the Applicant seems to
rely. These must be stated clearly and must be supported by the
facts.
[49.]
From the papers, it appears to the court that the Applicant alleges
that Ms van Niekerk’s assessment was flawed as a
result of
errors in the manner in which MNG Business Consultants prepared the
annual financial statements, upon which documents
Ms van Niekerk
based her assessment. This is later elaborated upon by the Applicant
to the effect that he alleges that Ms van Niekerk
was the cause of
the errors by reason of her having directed MNG Business Consultants
to amend the documents in accordance with
the table that accompanied
her email of 24 April 2015.
[26]
The Applicant alleges that Ms van Niekerk’s workings were
incorrect.
[50.]
In answer, the Respondent explains how Ms van Niekerk conducted her
assessment. Importantly, it was based on the information
provided to
her by the Applicant’s tax advisors. To that effect, the
Applicant had submitted nil returns for the tax years
of 2008 to
2013, which state of affairs was evidently supported in part by an
affidavit wherein the Applicant had stated on 4 April
2012 that he
had not generated income for the tax years of 2008 to 2011.
[27]
However, when Ms van Niekerk audited the above information,
discrepancies were discovered in relation to income received, as
opposed
to income declared, and she imposed understatement penalties.
The Applicant lodged an objection, a revised set of annual financial
statements and further information. The Respondent partially allowed
the objection. Interestingly, the revised set of annual financial
statements indicated that the Applicant had indeed generated an
income, contrary to the picture that he had presented previously.
With regard to the Applicant’s application for a reduced
assessment under sub-section 93(1)(d) or (e) of the TAA, the
Respondent
denies that there was any basis upon which to do so.
[51.]
Furthermore, Ms van Niekerk refutes the allegation that she ever
instructed the Applicant to prepare and submit annual financial
statements in accordance with her table. The email of 24 April 2015
informed the Applicant that a reconciliation had been conducted
with
regard to income received, as reflected in his bank statements, and
income declared. No expenses were depicted in the accompanying
table.
The email in question had merely invited the Applicant to investigate
and say whether he was in agreement with the reconciliation.
[52.]
In application proceedings, if disputes of fact have arisen in the
affidavits then the principles in
Plascon-Evans
Paints Limited v Van Riebeeck Paints (Pty) Ltd
[1984] ZASCA 51
;
[1984] 2 All SA 366
(A) must be applied. To that effect, a final
order may be granted if those facts averred in the applicant’s
affidavits which
have been admitted by the respondent, together with
the facts alleged by the respondent, justify such an order.
[28]
It may happen that the respondent’s denial of a fact alleged by
the applicant may not be such as to raise a real, genuine
or
bona
fide
dispute of fact. To the extent that a court is satisfied with the
inherent credibility of the applicant’s factual averment,
it
may proceed on the basis of the correctness thereof and include this
fact among those upon which it determines whether the applicant
is
entitled to the final relief which he or she seeks. There are
exceptions to the above, which include the situation where the
allegations or denials of the respondent are so far-fetched or
clearly untenable that the court is justified in merely rejecting
them on the papers.
[29]
[53.]
Mindful of the above, the allegation made by the Applicant that Ms
van Niekerk directed MNG Business Consultants to amend
the annual
financial statements in accordance with the table or the manner
prescribed by her is simply untenable. The evidence
does not support
this. The contents of the email of 24 April 2015 and the accompanying
table are what they purport to be: an invitation
to the Applicant to
comment on Ms van Niekerk’s reconciliation of the income
declared by the Applicant with the income reflected
in his bank
accounts. It cannot be said that the email constituted an instruction
given by Ms van Niekerk to compile the Applicant’s
annual
financial statements in a certain way and to contain the information
supplied.
[54.]
However, the fundamental difficulty that the court has with the
application is that the errors upon which Ms van Niekerk’s
assessment is allegedly based are far from clear. The Applicant has
averred that certain income received in his bank accounts should
not
have been treated as such because it was later paid out to counsel.
But the precise details of such income, including the dates
upon
which it was received and how much it comprised, together with what
portion was actually paid out to counsel and when, and
ultimately how
this information ought to have been interpreted and applied by Ms van
Niekerk in arriving at her assessment, are
not explained. The details
of what accounting or legal principles were applicable in the
determination of the assessment and how
Ms van Niekerk allegedly
infringed these are also not explained.
[55.]
In the circumstances, the Applicant has failed to provide a factual
and legal basis upon which to convince the court that
there is a
prospect of success with regard to his application for the review and
setting aside of Ms van Niekerk’s assessment.
[56.]
The Applicant also seeks an order that the annual financial
statements for the tax years of 2008 to 2013, submitted by APAC
Professional Accountants and Tax Specialists, be accepted as correct.
However, the weaknesses that undermine the application for
review and
setting aside of Ms van Niekerk’s assessment extend to the
remainder of the application. The Applicant has failed
to establish a
factual and legal basis upon which to assert that the annual
financial statements are a true and accurate indication
of the assets
and liabilities, income and expenses, and other factors commonly used
to describe the Applicant’s financial
situation for the tax
years in question.
[57.]
The question of why the final set of annual financial statements
submitted by APAC Professional Accountants and Tax Specialists
must
be accepted over the sets produced by MNG Business Consultants has
not been adequately addressed, if at all. Moreover, it
is not for the
court to attempt to make sense of the copies attached to the papers
in the complete absence of a detailed and comprehensive
explanation
for how the documents were compiled, in what ways they are similar to
earlier sets, in what ways they differ and why
that would be
important in relation to the broader issues of this dispute.
[58.]
There is nothing to persuade the court that there is a prospect of
success in relation to an application for an order that
the annual
financial statements in question be accepted as correct.
Relief
sought
[59.]
To the extent that the Applicant has indeed made application for
condonation of his non-compliance with sub-sections 11(4)
and (5) of
the TAA, he has failed to demonstrate a factual or legal basis for
why an order to that effect should be granted. On
the application of
either the standard of interests of justice or the test of good
cause, the Applicant falls far short of what
is required.
[30]
In the circumstances, the Respondent’s points
in
limine
must be upheld. The Applicant is not entitled to the relief
requested.
[60.]
In the circumstances, the application does not succeed. There were no
particular submissions made in relation to the award
of costs, which
must follow in accordance with the outcome.
[61.]
Whereas the Applicant has not expressly contemplated relief that
entails the possible referral of the matter to an alternative
dispute
resolution process, it was apparent during argument that this option
had not been properly investigated. The process underpins
the
provisions of sub-sections 11(4) and (5) of the TAA, as already
discussed. Without intending to make any pronouncement upon
whether
or not an alternative dispute resolution process is still available
to the Applicable, it would be in the interests of
both parties to
investigate such possibility by considering the dispute settlement
provisions contained in Part F of Chapter 9
of the TAA, read with the
rules promulgated under section 103, prescribing the procedures for
alternative dispute resolution.
[31]
Order
[62.]
The following order is made:
(a.)
the
application is dismissed; and
(b.)
the
Applicant is ordered to pay the costs of the application.
____________________
JGA
Laing
Acting
Judge of the High Court
Appearances:
For
the Applicant: Adv SG Poswa, instructed by Zilwa Attorneys, Office
Suite 452, 4
th
Floor, Development House, York Road,
Mthatha
For
the Respondent: Adv SX Mapoma, instructed by the State Attorney,
Broadcast House, 94 Sisson Street, Fort Gale, Mthatha
[1]
During the course of the litigation, it is apparent that Ms van
Niekerk married and adopted the surname of her husband. Later
affidavits describe her as Mrs van Straten. For the sake of avoiding
confusion, her unmarried name will be used, as it appears
in the
Notice of Motion.
[2]
At
para 17, quoting from
National Director of Public Prosecutions v
Phillips and Others
2002 (1) BCLR 42
(W).
[3]
National Director of Public Prosecutions v Phillips and Others
2002, op cit, para [36].
[4]
The annual financial statements are attached to the papers as ‘FN
8’ to ‘FN 13’. They are sparse in terms
of detail
and do not reflect the date upon which they were prepared.
[5]
The precise date is not evident from the record.
[6]
The Applicant stipulates an amount of R 3,600,000 in his founding
affidavit. The Respondent’s adjustments, as apparent
from the
audit findings, indicate an amount of R 4,155,558. In either event,
the amount is substantial.
[7]
The amounts have been rounded off to the nearest Rand.
[8]
From the papers, it is understood that the annual financial
statements in question are those that were originally submitted by
MNG Business Consultants.
[9]
As was done previously, the amounts involved have been rounded off
to the nearest Rand.
[10]
The Respondent indicated, however, that the figures for salaries and
wages remained the same as those contained in the original
annual
financial statements.
[11]
The annual financial statements attached to the papers as annexures
‘FN 16’ to ‘FN 21’ indicate that
they were
prepared by MNG Business Consultants and are dated 9 November 2015.
[12]
The annual financial statements in question are those attached to
the papers as annexures ‘FN 1’ to ‘FN 6’.
They were issued by APAC Professional Accountants and Tax
Specialists over the period of 28 November to 7 December 2015. The
notice of appeal is not contained in the papers. However, the
Respondent evidently received the notice of appeal on 18 December
2015, as apparent from the reference made thereto in the
Respondent’s letter to the Applicant, dated 4 July 2016.
[13]
The application was done by APAC Professional Accountants and Tax
Specialists, by letter. The date upon which this was done is
unknown.
[14]
Pugsley ES ‘Tax Administration’, in
LAWSA
(Volume
22(3), Second Edition), para 16.
[15]
Clegg D and Stretch R
Income Tax in South Africa
(LexisNexis,
August 2017), para 2.3.
[16]
Glen Anil Development Corporation Ltd v Secretary for Inland
Revenue
[1975] 4 All SA 620
(A), at 626;
Standard General
Insurance Co Ltd v Commissioner for Customs and Excise
2005 (2)
SA 166
(SCA). See, too,
CSARS v Airworld CC and Another
[2008] JOL 21130
(SCA), at [10].
[17]
Stevenson A and Waite M
Concise Oxford English Dictionary
(12
th
edition, Oxford University Press, 2011) 1014.
[18]
In
Van Wyk v Unitas Hospital and Another (Open Democratic Advice
Centre as amicus curiae)
[2008] JOL 21187
(CC), the court said,
at [20], that
… [w]hether
it is in the interests of justice to grant condonation depends on
the facts and circumstances of each case.
Factors that are relevant
to this enquiry include but are not limited to the nature of the
relief sought, the extent and cause
of the delay, the effect of the
delay on the administration of justice and other litigants, the
reasonableness of the explanation
for the delay, the importance of
the issue to be raised in the intended appeal and the prospects of
success.
See, too,
Turnbull-Jackson v
Hibiscus Coast Municipality and Others (Ethekwini Municipality as
amicus curiae)
2014 (11) BCLR 1310
(CC), at [23].
[19]
Mzizi v S
[2009] 3 All SA 246
(SCA), at [9]. Here, the SCA
dealt with an application for condonation of late filing of an
application for leave to appeal against
conviction and sentence.
Jafta JA remarked that good cause has two requirements: (a.) the
applicant must furnish a satisfactory
and acceptable explanation for
the delay; and (b.) he or she must show that there are reasonable
prospects of success on the
merits of the appeal.
[20]
In other words, the courts have applied either the standard of the
interests of justice or the test of good cause, depending
on the
legislative context of the matter in question.
[21]
See
Mohomi v Minister of Defence
1997, para 9, mentioned
above.
[22]
That is not to say, of course, that a court may not issue
appropriate directions and allow a party to proceed, notwithstanding
non-compliance with a procedural requirement, but this will depend
on the legislative context involved and the nature and extent
of the
authority available to a court.
[23]
At 525.
[24]
This was followed in
Wanga Maguga v Minister of Police
, Case
No. EL 9803/2014 (unreported), where Bloem J stated, at [22], that
… [o]nce an
applicant has knowledge of his non-compliance, he needs to ascertain
without delay from his opponent whether
the latter is agreeable to
condone the non-compliance… If the non-compliance cannot be
condoned by his opponent or the
opponent can, but refuses to,
condone such non-compliance, the applicant must without delay make
an application to court for
the condonation of his non-compliance.
At the time of argument, counsel for
the Respondent brought to the court’s attention that the above
matter was on appeal.
Be that as it may, the underlying principle is
derived from
Saloojee
[1965] and remains applicable in the
present matter.
[25]
See sub-paragraphs 4.2 and 5.1 of the Applicant’s relying
affidavit, at 49-50 of the papers.
[26]
The Applicant refers to the table as a ‘worksheet’.
Strictly speaking, this was a correct description of the document
if
the contents of the covering email are considered. The table was no
more than a depiction of the reconciliation carried out
in respect
of income received as opposed to income declared.
[27]
The Respondent has attached the affidavit to its papers and the
Applicant has never refuted its existence or contents. However,
its
context and purposes are unclear.
[28]
At 368.
[29]
Ibid.
[30]
See the discussion in relation to
Minister of Agriculture and
Land Affairs v CJ Rance (Pty) Ltd
[2010] and
Madinda v
Minister of Safety and Security
[2008], above.
[31]
The rules in question were published under GN 550 of 14 July 2014,
in terms of
Government Gazette
No. 37819.