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Illegal Denial of Expenses
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2012/07/25 at 09:48:56 AM GMT
Posts: 2
Illegal Denial of Expenses

I have the unfortunate experience of having to handle situations where SARS have disallowed expenditure given to them on tax returns due to an IT14SD having not been submitted by the client.

I am given to understand that this is illegal in terms of the SARS service Charter, the Tax Administration Bill and the Constitution of the Republic of South Africa.

I have read all those documents very closely and they clearly state that if an expense is disallowed the onus is on SARS to provide written reasons for the disallowed expense and allow the taxpayer to argue the outcome.

How do I make SARS reinstate the deductions?  They have all the information they require in the tax return and are not allowed to disallow expenses given to them without valid reasons and yet they are refusing to reinstate the original assessments and insist the fanciful tax they have levied on the income is due and payable.  They refuse to give the name and service number of the person who conducted the audit and refuse to acknowledge my objections or correspondence.

My thoughts are, if you want to disallow the expenses due to a missing IT14SD you are obligated to disregard the income too - if you believe there are no expenses then surely, based on their flawed reasoning, there cannot be any income either so the assessment should be a nil.

Does anyone have any advise for me to follow?

2012/07/25 at 04:11:36 PM GMT
Posts: 56

SARS certainly seems to have acted in highhanded and prejudicial manner.

On the other hand, SARS is entitled to the requested information in terms of the appropriate sections of the Acts under its administration.

Having said that, SARS as far as I know needs to follow certain processes, if the requested information is not received by them. For example, a registered reminder /letter needs to be sent to the taxpayer. Should he not respond, then legal action should be instituted in terms of prosecuting the taxpayer for the requested info. Thus to the best of my knowledge SARS may not summarily raise assessments to adjust assessments previously raised.

If you have exhausted all your options to resolve this matter you should approach SSMO office (details on the SARS website) to intervene on your behalf.

Alternatively, I suppose you could approach an expert  on taxpayer’s rights. (eg.Refer Dr.Beric Croome see his contact details on the SAIT web page).


2012/07/26 at 01:56:04 PM GMT
Posts: 56
Going forward,I believe the very recently promulgated Tax Administration Act should address the issues raised in the situations set out by you.

2012/07/30 at 01:08:55 PM GMT
Posts: 16
The IT14SD in its current format and processes has sparked a highly contentious debate. It would seem that currently SARS disallows all expenses presumably because the taxpayer could not displace the onus on him in terms of sect 82 of the Income Tax Act. The question now remains whether the taxpayer was treated fairly, and allowed reasonable time to displace the onus of proof. According to SARS, after issuing an IT14, the taxpayer is allowed 21 working days to respond. In the event that no response is received within this period, a final demand will be issued which will allow for a further 21 days. If this fails, the taxpayer will receive a call, and if this fails, will SARS issue an additional assessment. In practice this all sounds good and well, the taxpayer did have 2 months to reply so I suppose one cannot blame SARS for taking drastic actions, but what if the taxpayer did not receive the IT14SD, and did not receive the call? Furthermore and as you have mentioned, is the drastic action taken by SARS even legal? Should SARS not rather give notice of engagement (audit) in the event that an IT14SD remains unanswered? In my mind this is what should happen, but SARS is misusing section 82 as to avoid using their work force to conduct an audit - this is the easy and cheap way out for them. It surely is a pity that there is no case law on this matter.

2012/07/30 at 09:07:44 PM GMT
Posts: 56

Based on what I have read SARS may raise estimated assessments on taxpayers in cases where the taxpayer has not responded to requests for information .However ,the courts have indicated that such assessments should not be arbitrarily raised –refer  Sepaka case 72 SATC 79( although dealing with a rescission of a judgement against taxpayer ) the court  stated the following :

"10] The powers conferred on the Commissioner under section 78 as read with sections 79, 81(1), 89quat and 91 entitle him to obtain judgment based on an estimate. These powers ensure that a taxpayer whose lifestyle is in marked contrast to his disclosed income will not escape liability for tax simply because he has under-declared his income. The provision however is draconian and should therefore be exercised with care (my underlining) by properly experienced and suitably qualified personnel since it may otherwise be reduced to an arbitrary guesstimate with grave consequences to the taxpayer(my underlining). This is so because the Commissioner is entitled, even if there is an objection or an appeal, to seize and realise assets including money standing to the credit of the taxpayer’s bank account notwithstanding that these actions may jeopardise the taxpayer’s cash flow and business. See section 88(1) read with sections 99 and 100 and Metcash at paras [60] to [62].”

Also refer paragraph 18.24 of "Silke on South African Income Tax” which comments on the above case and the  fact that the Tax Administration Act provides that the onus is on SARS to prove that its estimated assessment(s) is/are reasonable.

Based on the gravity of this matter should  it not be taken up by SAIT with SARS at the highest level?

2012/07/31 at 01:13:59 PM GMT
Posts: 2

This is exactly the point I'm making - according to s33 of the Constitution of South Africa, the SARS service Charter and the Tax Administration Bill you are entitled to written reasons for the disallowance of these expenses and be allowed an avenue to argue your defence.  SARS are not allowing this, and when I send emails to follow up an objection I'm completely ignored.

I'm now sitting with a situation where another client submitted the IT14SD after their additional assessment was received, as that's when they found out about it, however SARS have refused to revise the assessment back to it's original state and have denied the objection - no grounds at all!  They disallowed the objection three months after the IT14SD was submitted!

What do I have to do to get them to comply with the law?

2012/08/01 at 02:15:59 PM GMT
Posts: 56



My suggestion is that you should take this matter up with the office of the SSMO(contact details on SARS website),providing full details of the facts regarding each client’s position :eg  particulars of each client, information requested by SARS, details furnished to SARS  in terms of when provided and what was provided etc etc. when and how they were notified(eg. assessment with covering letter) details relating to your objection ,SARS response and details relating to their lack of  communication etc and any other information which you believe is necessary and relevant.

Other options ,consider attending SAIT’s seminars re SARS audits(deal with IT14SD’s) & Tax Admin.Act. Also consider attending SARS’s free TAX Admin Act Seminar(see SARS website for details) re the issues raised by you in this forum.

There are other options but I believe they can be very  expensive eg insituting court action.


Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.


The Act requires that a minimum academic and practical requirments be set to register with a controlling body. Click here for the minimum requirements of SAIT.

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