IN THE TAX COURT OF SOUTH AFRICA
HELD AT DURBAN
CASE NO: IT45931 & VAT
22285
In the matter between:
TAXPAYER S APPELLANT/APPLICANT
and
THE COMMISSIONER FOR SOUTH AFRICAN RESPONDENT
REVENUE SERVICE
___________________________________________________________________
ORDER
___________________________________________________________________
In the premises it is ordered that:
1. The applicant’s application for discovery is dismissed .
2. The respondent is ordered to pay the applicant’s costs from the date
when the application was instituted up to the date when the respondent
filed the second discovery affidavit , including costs of two counsel on scale
C.
3. No order as to costs in respect of the application.
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JUDGMENT
___________________________________________________________________
2
Mathenjwa J
Introduction
[1] This is an application by the applicant, the appellant in the main a pplication, to
compel the respondent (SARS) to discover documents and records in its possession
relating to the appeals against his Income Tax and VAT assessments. The
application was instituted in terms of Uniform rule 35(3), read with rules 42, 36(3)
and 36(6) of the r ules promulgated under s 103 of the Tax Administration Act1 (the
Act). SARS opposes this application.
[2] The appeals in the main application relate to assessment s of the applicant by
SARS for the years 2014 to 2019, which assessment s relied on a schedule produced
by SARS dated 12 May 2020. The applicant objected to the income tax and VAT
assessment s and appealed it on the grounds that S ARS:
(a) performed an audit in respect of years for which there was no proper
authority; (b) failed to properly account for all inter -account transfers ;
(c) allow for disbursement s;
(d) failed to account for property and non- taxable items correctly ; and
(e) purportedly performed an analysis in respect of years for which it has never
requested or sought documentation, or has performed such assessment
without reference to proper documentation.
Factual background
[3] The brief factual background to this application is that on 31 January 2023 the
applicant launched an application to compel S ARS to discover and make available
for inspection and copying various documents pertaining to:
(a) the minutes of all meetings held between the applicant and SAR’s employees ;
(b) dates of minutes of mee tings ;
(c) internal memoranda placed before such meetings and record of the meetings,
including the names of committee members held by SARS in respect of the
various SARS internal committees that participated in the auditing and
assessment of the applicant’s liability for tax;
(d) the separate bundle of all documents which were used by and were before
SARS representative/s when making the assessment s, which are the subject
1 Tax Administration Act 28 of 2011.
3
matter of the appeal , in order that the applicant may place the precise
documents, used by S ARS in making the assessments, before his intended
expert witnesses;
(e) the file of documents including but not limited to the books and records
supplied by the applicant to SARS for the 2017 tax year ;
(f) copies of all documents obtained from third parties including banks, obtained by SARS for the purpose of raising the assessments in respect of the
applicant;
(g) the documents relied upon by SARS in order to calculate the figures which
gave rise to the schedule found at pages 459 and 460 of the record in Case IT
4531;
(h) the documents relied upon by S ARS in order to make the assessments ; and
(i) the section 46 notices served upon financial institutions .
[4] On 14 March 2023 S ARS filed a notice to oppose the applicant’s application
to compel. NN deposed to an affidavit on behalf of SARS in which she stated that
SARS had discovered all the relevant documents . On 4 April 2023 the applicant
deposed to a replying affidavit in which he disputed that most of the documents
SARS claimed to have discovered had in fact been discovered by SARS . On 20
September 2023 SARS deposed to a supplementary affidavit in which it discovered
additional documents .
[5] Dissatisfied with SARS further discovery, once again on 5 April 2024 the
applicant re-instituted an application calling upon SARS to discover further . On 15
July 2024 SARS filed its second supplementary discovery affidavit in which
additional document s were discovered. Dissatisfied with the supplementary
discover y, the applicant enrolled this matter for hearing.
Applicant’s contention
[6] Counsel for the applicant, submits that the progress reports discovered in
SAR’s second supplementary discover y affidavit as items 3,4 and 5 is not acceptable
because it does not comply with the requirements of s 42(1) of the Act . According to
the applicant it is not acceptable for SARS to have discovered the redacted
documents in respect of items 6 to 83 in i ts supplementary discovery affidavit. It was
4
submitted on behalf of the applicant that the discovery of original documents and
names of the officials who participated in the committees are relevant for the
preparation for trial and to enable him to issue subpoenas to the officials who took
those decisions in order that they may be examined during the appeals. The
applicant contends that items 84 to 87 consisting of the analysis of bank statement
deposits is not proper analysis undertaken by S ARS in a format that is acceptable for
the purpose of efficient tax administration. In respect of item 88 the applicant
contends that he requested copies of all documents, bank statement s and full
information relied upon for the assessment of the year 2014 and not the excel
spread sheet schedule attached to the letter of audit findings in which S ARS had
referred to .
[7] It was argued on behalf of the applicant that S ARS should be in possession of
all documents relating to items 89 to 100 and item 118 relating to the bond and
revolving account statements because in its first discovery affidavit S ARS had stated
that these documents had been supplied by the applicant, however in its second supplementary discovery affidavit SARS stated that these documents were not
received by it. In respect of item s 130,134, 138,142 and 143 relating to the section 46
notices it was submitted on behalf of the applicant that S ARS should supply the
dates on which the section 46 notices were issued and the bank statements
received. This information, the argument went , is important for verification of whether
SARS drew the schedule without any regard to the bank statements or it had
obtained the bank statements unlawfully. In respect of item 139 relating to the bank
statements the applicant contends that S ARS discovered an extract of the bank
statements from 2014 to 2018, and this was unacceptable a s the applicant was
entitled to the entire set of document s. In respect of items 145 to 341 , it is submitted
that SARS could not have made calculations in respect of these items without having
regard to the source documents, including bank statements and other records.
Further, SARS could not have relied on the schedules which it ha d discovered when
making calculations. It was contended on behalf of the applicant that he intends making the documents available that SARS relied upon to his experts for proper
calculation in preparation for the appeals.
SAR’s contention
5
[8] Counsel for SARS, contends that first and foremost the applicant provided
SARS with no information to explain massive discrepancies between his declared
income on the one hand, and the amounts paid into his bank accounts. Therefore,
given the paucity of information provided by the applicant, S ARS relied primarily on
the unexplained deposits in his bank accounts as the basis to estimate his gross income for the relevant tax years. It was submitted on behalf of SARS that the
applicant’s insistence that there must be more source documents than the documents already discovered by S ARS is unwarranted because the assessment
was based on estimates which is by definition based on limited information. Mr
Sholto -Douglas submits that the applicant’s contention that the progress reports
discovered by S ARS in terms of items 3,4 and 5 does not meet the requirements of
s 42(1) of the Act and the documents discovered by S ARS in terms of items 84 to 87
comprising the analysis of bank statements deposits is not a proper analysis undertaken by a S ARS official in a format that is deemed acceptable for the
purposes of tax administration is not a basis upon which discovery may be ordered because the obligation to discover relates to documents that are in existence, it does
not extend to requiring the opposite party to prepare a document.
[9] Regarding the applicant’s complaint about the discovery of reda cted
documents comprising minutes of various meetings including names of S ARS
representative at those meetings in terms of items 6 to 83, it was submitted on
behalf of SARS that the applicant had not established any basis for the contention
that the discovery of the reda cted documents is not acceptable. On the contrary the
discovery of the red acted documents firstly, block out personal information about
SARS officials which is protected from disclos ure in terms of s 68 of the Act.
Secondly, the disclos ure of unreda cted minutes would entail disclos ure of
information about other tax payers . Thirdly , if the applicant wishes to subpoena
SARS officials he is already aware of the identities of the SARS officials who were
involved in the audit of his tax affairs since he had named five officials whom he
describes as SARS officials involved in his audit.
[10] According to SARS, the applicant ’s submission that S ARS should be ordered
to discover copies of all documents, ba nk statements, and full information relied
upon for the assessment of the 2014 tax year in terms of item 88, does not meet the
6
threshold which is that the document sought to be discovered must be described
with sufficient accuracy to enable it to be identified. The only document identified in
this request was the bank statements which SARS have already discovered.
Furthermore, SARS disputes that it has more source documents tha n what it has
discovered in terms of items 145 to 341 compris ing the bank s tatements from 2014
to 2019 tax year s and the schedule provided by SARS relating to 2017.
[11] It was further submitted on behalf of S ARS that it is not required to discover
dates on when it had received the bank statements that it had requested in terms of
the section 46 notices under items 139,142 and 143. Regarding the applicant’s
contention that S ARS had discovered an extract of bank statements for the period 1
January 2014 to 28 February 2018 whereas the applicant had requested the
discovery of documents from 1 March 2013 to 28 February 2018 in terms of item 139 it was submitted on behalf of SARS that the applicant had not provided a basis from
which it can be inferred that S ARS in fact has or had in its possession the bank
statements that predate 1 January 2014 to 28 February 2018.
Issues for determination
[12] The issues for determination in this matter are :
(a) whether the court should go behind the documents discovered by SARS and
order it to discover more documents which the applicant contends should
be in existence and in the possession of S ARS; and
(b) whether SARS should be ordered to discover the documents which it has
discovered but in a different format as requested by the applicant .
Applicable legal principles [13] Discovery is regulated by r ule 36 of the Tax Court which enables the
applicant to request SARS to make discovery on oath of any document material to a
ground of the assessment . Rule 36(3) provides that:
‘A party may, within 15 days after delivery of the statement under rule 32 or 33, as the case
may be, deliver a notice of discovery to the other party requesting that party to-
(a) make discovery on oath of all documents relating to the issues in appeal as referred to
in rule 34; and
(b) required and reasonable, produce specified documents in a specified manner, including
electronically.’
7
Rule 36(6) provides that :
‘If either party believes that, in addition to the documents disclosed, there are other
documents in possession of the other party that may be relevant to a request under subrule
(1) or (2) or the issues in appeal, as the case may be, that have not been discovered, then
that party may give notice of further discovery …’
[14] Uniform rule 35(1) enables a party to any action to require any other party
thereto to make discovery on oath of all documents and tape recordings relating to
any matter in question in such action which are or have been in possession or
control of such other party . Rule 35(3) provides that:
‘If any party believes that there are, in addition to documents or tape recordings disclosed as
aforesaid, other documents (including copies thereof) or tape recordings which may be
relevant to any matter in question in the possession of any party thereto, the former may
give
notice to the latter requiring such party to make the same available for inspection in
accordance with subrule (6), or to state on oath within 10 days that such documents or tape
recordings are not in such party's possession, in which event the party making the disclosure
shall state their whereabouts, if known.’
Thus, Uniform rule 35(3) read with rule 36(6) of the Tax Court outlines the
procedure for additional or further discovery when a party is dissatisfied with the
discovery of another party .
[15] It is trite that the object of discovery is to ensure that before trial both parties
are made aware of all the documentary evidence that is available. By this means ‘ the
issues are narrowed and the debate of points which are incontrovertible is
eliminated ’.2
The rules prescribe for discovery of a document that relates to a matter in question.
The documents will relate to the matter if it may be used by the party requesting it to
advance his or her case or to damage the other party’s case. I n Rellams (Pty) Ltd v
James Brown & Hamer Ltd 3 Van Heerden J quoted with approval from Compagnie
Financière et Commerciale du Pacifique v Peruvian Guano Co4 where Brett LJ
stated as follows:
2 Durbach v Fairway Hotel , Ltd 1949 (3) SA 1081 (SR) at 1083.
3 Rellams (Pty) Ltd v James Brown & Hamer Ltd 1983 (1) SA 556 (N) at 564A -B.
4 Compagnie Financière et Commerciale du Pacifique v Peruvian Guano (1882)11QBD 55.
8
‘It seems to me that every document relates to the matter in question in the action which, it is
reasonable to suppose, contains information which may - not which must - either directly or
indirectly enable the party requiring the affidavit either to advance his own case or to
damage the case of his adversary .’
[16] The party requesting discovery is required to sufficiently specify the document
that is sought to be discovered. It is trite that rule 35(2) contemplates the discovery
of all relevant documents, specific or otherwise, and indeed provides that a document shall be deemed to be sufficiently specified if it is described as being one of a bundle of documents of a specifi ed nature which have been initialled and
consecutively numbered by the deponent . Even if a document is not specified, it
nevertheless should be sufficiently described in the notice. In Swissborough
Diamond Mines (Pty) Ltd and Others v Government of the Republic of S outh Africa
and Others
5 it was held that:
‘The notice may require production of any number of documents. Whilst a document need
not be described specifically within the notice, it must be described with sufficient accuracy
to enable it to be identified.’
[17] In the discovery affidavit the deponent swears as to the correctness of the
contents thereof .6 However , the court may go behind the discovery affidavit and
order further discovery if it is satisfied that there is a probability that the party making
the affidavit has or had relevant documents in his possession.7 In Rellams it was
held as follows:8
‘It is, generally speaking, no doubt true that, whilst the Court should not and would not go
behind a party's affidavit that the contents of a document are not relevant, such affidavit is
nevertheless as far as the Court is concerned not conclusive. After an examination and
consideration of the recognised sources as well as the pleadings and the nature of the case
the Court may come to the conclusion that the party making discovery in all probability has other relevant and disclosable documents in his possession or power and may order further and better discovery or production in conflict with the claim in the affidavit.’
Analysis
5 Swissborough Diamond Mines (Pty) Ltd and Others v Government of the Republic of S outh Africa
and Others 1999 (2) SA 279 (T) at 323B -C.
6 Gunn, NO v Marendaz 1963 (2) SA 281 (W) at 282.
7 Continental O re Construction v Highveld Steel & Vanadium Corporation Ltd 1971 (4) SA 589 (W).
8 Rellams above fn 4 at 560F-G.
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[18] The crux of the applicant’s objections to S ARS discovery is that SARS did not
discover all the relevant documents. The contention is premised on SARS conduct in
that on 14 March 2023 a senior S ARS official deposed to an opposing affidavit in
which she conf irmed that all the documents utilised by SARS officials in compiling
the assessment had already been discovered, whereas at that point S ARS had not
discovered the documents. That was evident when SARS deposed to a
suppleme ntary affidavit in which it discovered further documents.
[19] It is instructive to point out upfront that the lackadaisical approach in which
SARS handled the applicant’s request for discovery is evident from the various
requests for discovery made by the applicant , and from the first and subsequent
supplementary discovery affidavit s by SARS. It is clear that SARS either did not pay
attention to or was simpl y reckless to the applicant’s initial request for discovery in
that SARS had alleg ed under oath that it had discovered the requested documents
which had actually not been discovered. SARS exercises enormous powers to
assess taxe s and recover assessed tax es from tax payers. In the exercise of its
public power SARS has a duty not to act arbitrarily when dealing with tax payers. It is
not in dispute that SARS may not discover a document if such document is not
discoverable by law . The undertaking by SARS that the documents were discovered
knowing that they were not discovered resulted in the applicant incurring further
unnecessary costs by engaging lawyers and request ing discovery of the same
documents.
[20] The concession by counsel for SARS that SARS will pay the applicant ’s
costs from the date when the initial request for discovery was made to the date when
the second supplementary discovery affidavit was made is well made . However ,
those costs which will be incurred by the tax payers should have been avoided if
SARS had discovered the documents that it was obliged to discover without the
prolonged delay. While I accept that SARS conduct in this regard may be one of the
factors taken into account when the court considers whether it should go behind its
supplementary discovery affidavit, it is not decisive of whether SARS is withholding
documents . The court must be satisfied from the supplem entary discovery affidavit
10
itself and the documents in issue that there is a probability that SARS has or had
relevant documents in its possession.9
[21] The applicant’s objection to discovery in respect of items 3, 4 and 5 consist ing
of the progress reports issued by SARS officials responsible for audit is based on his
contention that the discovery made is not acceptable because it does not comply
with s 42(1) of the Act. This ground of objection is not sustainable because t he rules
require discovery of documents which are, or have been in possession or control of
another party. The rules do not require S ARS to compile a document which it does
not have or formulate a document in a particular way and deliver it in a format that is
required by another party . The same principle equally applies to t he applicant’s
contention that the discovery of items 84 to 87 pertaining to the analysis of bank
statements deposits referred to in the audit findings finalisation of audit letters; item 88 pertaining to copies of bank statements ; and full information relied upon for the
assessment of the tax year 2014 in a form of an excel spreadsheet in a schedule
attached to the letter of audit findings is not a proper analysis undertaken by a SARS
official in a format that is deemed acceptable for the purposes of tax. D iscovery does
not extend to discovery of a document in a particular format preferable or acceptable
to a party. Discover y is limited to a document in its current form in the control or
possession of the other party.
[22] The applicant’s objection in respect of i tems 6 to 83 relating to the minutes of
various meetings of S ARS internal committees relating to the assessment and
auditing of the applicant’s taxation is based on his complaint that SARS had
discovered redacted minutes without the names of the team manager s, team
leaders , chairpersons , audit specialists and legal advisers . It is instructive that 67 of
the Act prohibit s the disclos ure of certain information. S ection 67(1) provides that:
‘This Chapter applies to -
(a) SARS confidential information as referred to in section 68(1); and
(b) “taxpayer information”, which means any information provided by a taxpayer or obtained
by SARS in respect of the taxpayer, including biometric information.’
Section 68(1) provides that:
9 Continental Ore Construction above fn 7.
11
‘SARS confidential information means information relevant to the administration of a tax Act
that is -
(a) personal information about a current or former SARS official, whether deceased or not;..’
Discovery of reda cted m inutes allows the applicant to access the content of the
minutes and understand how the decision was made resulting to his assessed tax.
The removal of the names of S ARS officials will not prejudice the applicant from
exercising his rights because he already has access to the contents of the minutes.
Furthermore, there is no reason to doubt SARS contention that the discovery of
unreda cted minutes will result in a disclos ure of information about other tax payers.
For that reason, the applicant’s objection to discovery of the redacted minutes should
fail.
[23] The complaint with regard to items 98 to 100 and 118 pertaining to the
Standard Bank bond account, revolving account , call accounts and First National
Bank credit card statements is based on the applicant’s contention that since SARS
had stat ed that it had received all documents from the applicant, these documents
should be in its possession. In my view the applicant has not made a case for the
court to go behind respondent’s affidavit in which it has stated that it did not receive
these items from the applicant. Reason being that when SARS stated that it had
received all documents from the applicant , the documents in question were not
specified, therefore there is no reason to disbe lieve SARS contention that items 98
to 100 and 118 were not among the documents it received from the applicant.
[24] I agree with SARS submission that discover y of the documents under items
130,134 and 138 pertaining to the dates on which S ARS received section 46 notices
from the financial institutions is not relevant. The rules require the discovery of
documents, not information about dates when the section 46 notices were sent to
the financial institutions and the bank statements received from the institutions.
[25] Regarding the applicant’s dissatisfaction with SARS discovery of item 139
relating to copies of all bank statements for the period 1 January 2014 to 28
February 2018 instead of discovery of documents from 1 March 2013 to 28
February 2018 and the spread sheets provided by S ARS in respect of items 145 to
341 pertaining to working papers for the determination of amounts in specified
12
assessments, the applicant has not mad e a case for the court to go beyond
respondent’s affidavit wherein it stated that it does not have these documents .
[26] SARS submits that the assessment of the applicant was based on estimation.
Section 95 of the Act provides that:
‘(1) SARS may make an original, additional, reduced or jeopardy assessment based in
whole or in part on an estimate if the taxpayer -
(a) does not submit a return; or
(b) submits a return or relevant material that is incorrect or inadequate; or
(c) does not submit a response to a request for relevant material under section
46, in relation to the taxpayer, after delivery of more than one request for such material.
(2) SARS must make the estimate based on information readily available to it.’
[27] It is generally accepted that when making an estimate assessment SARS will
not have all the documents before it because the tax payer would have fai led to
submi t a return or submitted a return or information that is incorrect or inadequate.
The court has a discretion to order SARS to discover documents which was not
discovered. The discretion should be exercised judicially. It will not be an exercise of
judicial discretion to order SARS to discover documents which it does not have in its
control. The issue of how then SARS would have arrived at the assessment without
these documents and the accuracy of the assessment is not before this court and it
is a matter for hearing by the court hearing the applicant’s appeal s against his tax
assessment.
Costs
[28] This then brings me to the issue of costs. SARS agreed to pay the applicant ’s
costs up to the stage of the filing of the second supplementary discovery affidavit by
SARS. Considering the complexity of the matter costs should include costs of two
counsel on scale C . With regard to the costs of the application the applicant was not
unreasonable in pursuing litigation against SARS. More particularly after SARS had
initially refused to discover certain documents which it later discovered and went on
to state under oath that it had discovered documents which it had not discovered. Thus it was not unreasonable for the applicant to suspect that SARS might be still
13
upholding other document s. For those reasons there will be no order as to the costs
of the application.
Order
[29] In the premises the following order is made:
1. The applicant’s application for discovery is dismissed .
2. The respondent is ordered to pay the applicant’s costs from the date when
the application was instituted up to the date when the respondent filed the
second discovery affidavit , including costs of two counsel on scale C .
3. No order as to costs in respect of the application.
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Mathenjwa J
Date of hearing: 13 November 2024
Date of judgment: 6 February 2025