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The jurisdiction of the High Court in a disputed assessment

08 April 2016   (0 Comments)
Posted by: Author: PwC South Africa
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Author: PwC South Africa

Section 117 of the Tax Administration Act 28 of 2011 provides that "The Tax Court . . . has jurisdiction over tax appeals lodged under section 107”, and section 107 provides that a taxpayer who has objected to an assessment and has received SARS’ decision in this regard, disallowing the objection, may appeal against the assessment to the tax board or the tax court.

Many taxpayers who wish to contest an assessment are tripped up by the procedural requirements involved in an objection and appeal to the Tax Court, in particular the tight time limits, and they then find themselves out of time to follow this process.

For this and other reasons, some taxpayers have tried to contest a disputed assessment in the High Court.

Thus, for example, in Medox Ltd v CSARS [2015] ZASCA 74; 2015 (6) SA 310 (SCA) the taxpayer tried to impugn disputed assessments on the ground that the Commissioner had acted ultra vires in issuing them, and that the assessments were therefore void.

The taxpayer’s application to the High Court for a declaratory order to this effect was rejected, and on further appeal the Supreme Court of Appeal affirmed the rejection and held (at para [15]) in regard to the taxpayer’s argument that –

"This would render the mechanisms provided in ss 81 to 83 [of the Income Tax Act as it then stood] for objections to and appeals against assessments nugatory and grant aggrieved taxpayers carte blanche to approach the High Court in virtually every instance where they disagree with an assessment made by the Commissioner.”

The jurisdiction of the High Court

It goes without saying that the High Court possesses inherent jurisdiction, and the question therefore arises as to the circumstances, if any, in which it will adjudicate a disputed assessment or some aspect of it.

Prior to its amendment in 2015, section 105 of the Tax Administration Act 28 of 2011, which appeared in Chapter 9 of the Act, used to read as follows:

"A taxpayer may not dispute an assessment . . . in any court or other proceedings, except in proceedings under this Chapter or by application to the High Court for review.”

The problem with the way this was put was that it could be read as opening up two alternative avenues to dispute an assessment, firstly by way of objection and appeal under Chapter 9 of the Tax Administration Act and, secondly, by applying to the High Court for a review of the assessment.

The existence of a parallel process for contesting an assessment with an overlapping jurisdiction between the Tax Court and the High Court is clearly untenable.

Thus, in Rossi v CSARS [2011] ZAGPJHC 16 at para [31] the court rejected the proposition that, in contesting an assessment, an objection and appeal to the Tax Court and an application for review to the High Court are two parallel and alternative procedures for contesting an assessment, because (see para [32]) –

"it is inconceivable that the Legislature intended to create competing and concurrent fora for resolution of tax disputes”.

Thus, a taxpayer who fails to set in motion the process for having his objection to an assessment heard by the Tax Court cannot seek equivalent relief by way of an application to the High Court.

In an attempt to put these principles beyond doubt, section 105 of the Tax Administration Act has now been amended by the Tax Administration Laws Amendment Act 23 of 2015 with effect from 8 January 2016 to read as follows – the words in bold within square brackets having now been deleted, and the underlined words having been added:

"A taxpayer may [notonly dispute an assessment . . . [in any court or other proceedings, except] in proceedings under this Chapter [or by application to the High Court for review],unless a High Court otherwise directs.”

The takeaway

Regrettably, the amendment to s105 of the Tax Administration Act in respect of the jurisdiction of the High Court in a disputed assessment removes one ambiguity (by making clear that there are not two alternative processes for contesting an assessment), only to introduce a new ambiguity, namely the circumstances in which a High Court will otherwise direct – presumably by agreeing to adjudicate some aspect of the disputed assessment by way of review.

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