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Income Tax Case No 1868 75 SATC 303

04 February 2014   (0 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical


This matter was an appeal against the decision taken by the respondent, in which the appellant’s objection to the assessments issued, was limited to the objections as set out in the notice of objection, to the assessment in question.  


The appellant, a company, had been the subject of an audit carried out by the CSARS. The audit had revealed that the appellant had under-declared and consequently, under-paid value added tax to the respondent, in terms of Value Added Tax Act 89 of 1991(the VAT Act).

The respondent revised the assessment and the appellant was thus assessed on tax that consisted of a capital amount, being understated output tax, additional tax levied on the capital amount in terms of s 60 of the VAT Act, a penalty levied on the capital amount in terms of s 39(1)(a)(i) of the VAT Act and interest levied on the capital amount in terms of s 39(1)(a)(ii) of the VAT Act.

The appellant, represented by its sole member, had filed a notice of objection on the regulation form ADR 1, however, the ADR 1 form was incomplete as the box that specifies that a miscalculation on the assessment in that an amount(s) was taken into account/not taken into account to determine the liability for tax’ was not ticked. 

On the prescribed ADR 1, nowhere was it mentioned that an objection has been raised against the merger by SARS, of the appellant’s two entities, and therefore the capital amount and the assessment itself were incorrectly calculated as the two entities were treated as one.

The appellant’s first and second objection, were directed against the reduction of the additional tax, interest and penalties.

The respondent disallowed the objection and stated the first reason for such disallowance, as follows: 

'No objection to the quantum of additional vat output raised suggesting your acceptance of these figures. Revised additional vat assessments raised on the basis of vat invoices issued and payments received for services rendered’.

Consequently, the appellant filed a notice of appeal by way of form ADR2 in respect of the disallowance of the objection and again, there was no mention in the ADR2 that the Appellant was appealing against the method in which the capital amount had been determined by SARS or the amount of the capital on which the assessment was based. SARS argued in its grounds of assessment in terms of Rule 10 of the tax rules that the appellant did not dispute liability for the capital amount, but the only amounts of the assessment that the appellant objected to, and appealed , were the levying of additional tax , interest and penalty’.

In response, the appellant filed a notice in terms of Rule 11 which, for the first time stated that, SARS had included the turnover figures of a related, but different legal entity in calculating its VAT liability.


The court held that the Commissioner could not be ordered to revisit the assessment in issue and the court in casu could not come to a decision which was contrary to what the Supreme Court of Appeal had already decided. Where a new ground of objection had been raised in the Rule 11 statement, which had no bearing on the objections in ADR 1 and ADR 2 and which the Supreme Court of Appeal had already ruled on, the court in casu could not refer the matter back to the Commissioner. The provisions of s 33(3) of Act 89 of 1991 did not apply and therefore the court in casu could not declare the assessment invalid. The appeal was dismissed with costs.

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