SARS filing a revised assessment without taxpayer’s knowledge
15 October 2014
Posted by: Author: SAIT Technical
Author: SAIT Technical
Q: I have a complaint regarding SARS’s
conduct, and before I take the matter further, I would appreciate it if you
could advise whether I have any grounds.
I have a client who was retrenched
by his employer during the 2013 tax year. However, he still finalised
some projects for them, for which he was paid a professional fee. He
declared this income as "local business, trade and professional income” in his 2013
During the 2014 tax year, my
client was employed for only one month, i.e. March 2013. He received
income as an independent contractor, which was declared on an IRP5
certificate. He earned no other income during the 2014 tax year, so I did
not declare any other income.
2014 Tax return
SARS asked for copies of my client’s
supporting documents, which I sent to them. But it seems they were not
happy with the fact that he declared no local business income, therefore SARS
issued an additional assessment to him, in which they included professional
income of Rx.
In terms of section 42(6) of the Tax
Administration Act, SARS had to send grounds for the additional assessment to
the taxpayer within 21 working days, which they did not do. So I called
SARS today to make sure that no reasons were posted. The SARS official
confirmed that no correspondence with the grounds was issued. She also
said that SARS’s records show that they wanted to include business income for
2014, because the taxpayer earned professional income in 2013.
What I am upset about, is that the
SARS official told me that SARS submitted a revised ITR12 on behalf of my
client on the date of the additional assessment, in which SARS declared the Rx
as local business income. Is SARS allowed to do this? How can they
submit a tax return on behalf of a taxpayer, without the taxpayer’s knowledge,
when a taxpayer must actually sign a tax return to confirm that the information
declared is true and correct?
A: We agree with you that SARS is not
allowed to submit "a revised ITR12 on behalf of my client”. The Tax
Administration Act (in section 95) provides that:
may make an original, additional, reduced or jeopardy assessment based in whole
or in part on an estimate if the taxpayer—
fails to submit a return as required; or
submits a return or information that is incorrect or inadequate.
must make the estimate based on information readily available to it.
that SARS considered that subsection 1(b) applies in this instance. It is
agreed that SARS didn’t act in an administratively fair manner in this
case. Judge Ponnan (in the Pretoria East motors case) explained it as
raising of an additional assessment must be based on proper grounds for
believing that, in the case of … income tax it must be based on proper grounds
for believing that there is undeclared income or a claim for a deduction or
allowance that is unjustified. It is only in this way that SARS can engage the
taxpayer in an administratively fair manner, as it is obliged to do.”
agree that SARS had to provide grounds for the assessment – refer to section
96(2). The problem now is that the additional assessment was already
issued and it one can’t argue that the assessment is invalid due to the fact
that no grounds for the assessment were given.
procedure to follow is to, in the first instance, request suspension of the
payment of the amount due – refer to section 164. The next step would be
to request reasons for the assessment – rule 6 of the Rules for dispute
resolution and then to make objection against the assessment.
Nothing in this query and answer should be construed as
constituting tax advice or a tax opinion. An expert should be consulted for
advice based on the facts and circumstances of each transaction/case. Even
though great care has been taken to ensure the accuracy of the answer, SAIT do
not accept any responsibility for consequences of decisions taken based on this
query and answer. It remains your own responsibility to consult the relevant
primary resources when taking a decision.