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Sepataka v Commissioner SARS [2010] JOL 26139 (GSJ)

16 May 2012   (0 Comments)
Posted by: SAIT Technical
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Introduction:

The South Gauteng High Court had to consider the taxpayer’s application for rescission of judgment in terms of s 91(1)(b) of the Income Tax Act 58 of 1962 and on the ground that the taxpayer had not been aware of the South Gauteng High Court judgment until he applied for a bond and a credit check had revealed this outstanding monetary judgment against him.

Issue:

The Commissioner raised an additional assessment because he believed that there had been ‘unexplained income’ based on an income tax audit.

Despite objection by the taxpayer to the additional assessments raised, the Commissioner continued to exercise his power to obtain a judgment against the taxpayer by filing a written statement with the South Gauteng High Court, without the issue of summons and without notice to the taxpayer.

The issue before the court was whether the judgment granted against the taxpayer could be rescinded or otherwise set aside.

Facts:

SARS was of the view that there had been ‘unexplained income’ based on an income tax audit and, as a consequence, raised additional assessments on the taxpayer.

The taxpayer duly objected to the additional assessments and was allowed by SARS.

In terms of the powers conferred on the Commissioner in terms of s 78 (read with ss 79, 81(1), 89quat and 91 of the Income Tax Act), he obtained a judgment against the taxpayer based on an estimate.

Decision:

Spilg J, who delivered the judgment of the court, rescinded the South Gauteng High Court judgment granted against the taxpayer and declared it null and void.

He held as follows:

§   The powers conferred on the Commissioner entitling him to obtain judgment based on an estimate are draconian and should therefore be exercised with care by properly experienced and suitably qualified personnel, since it may otherwise be reduced to an arbitrary guesstimate with grave consequences for the taxpayer;

§        The judgment in issue could not be competently sought in the face of a pending objection.

§    Since the judgment could not be lawfully obtained regard being had to the objection that was noted and not finalised, it was a nullity and fell to be set aside, rescission being competent in these circumstances.

§       Care must be taken to ensure that before a statement is filed under s 91(1)(b) of the Act a responsible person in the Commissioner’s office has satisfied himself or herself that there is no pending objection or appeal.


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