The Question Of Introducing New Or Additional Reasons
12 November 2009
Posted by: Author: Kerry Watkin
The Question Of Introducing New Or Additional Reasons
1.When a decision is taken by the Commissioner,such as raising an assessment, it constitutes an administrative action.A taxpayer who is aggrieved by an administrative action is entitled to adequate reasons therefore at the time the decision was taken by the Commissioner.SARS should then be bound to these reasons and should not be allowed to alter/amend them or introduce additional reasons or explanations thereafter.The reasons furnished by the Commissioner at the time of raising an assessment cannot be a ‘moving target’ as SARS is an administrator with constitutionally imposed duties of conduct.
2.The above mentioned principles equally apply to any decision disallowing an objection,which also constitutes administrative action.The reasons for a disallowance of objection are necessary to enable a taxpayer to exercise its procedural rights on an informed basis.The taxpayer must be placed in a position to decide whether it is worth challenging the Commissioner’s decision to disallow the objection to the assessment and note an appeal.Thereafter, rule 10(3) of the Tax Court Rules (the Rules) contained in the Income Tax Act, No. 58 of 1962 (the Act) requires the Commissioner’s statement of the grounds of assessment to set out "a clear and concise statement of the grounds upon which the taxpayer’s objection is disallowed” and to state "the material facts and legal grounds upon which the Commissioner relies for such disallowance”.This constitutes the Commissioner’s decision which should not be altered or supplemented, save for in accordance with rule 13 of the Rules which deals with amendments of the statement of grounds of assessment or grounds of appeal and provides as follows:
"(1)The Commissioner and the appellant may agree in writing to the amendment of the statement of the grounds of assessment or the statement of grounds of appeal or both.
(2)The Court, consisting of the President sitting alone,may, on application of notice grant leave to amend the statement of the grounds of assessment or the statement of grounds of appeal,subject to such orders as to postponement and costs as the Court deems appropriate."
3.These provisions do not allow SARS to simply advance new reasons for raising the assessment in the first place.The Commissioner cannot introduce additional reasons or explanations in the future and any attempt to do so would be unfair and unreasonable.
4.Furthermore,once the Commissioner has exercised his powers to raise an assessment,the reasons for that assessment stand and the Commissioner is married to the reasons at the time of making his decision to issue an assessment.The Commissioner is therefore confined to his reasons,as contained in the assessment letter,as well as any reasons furnished in response to a taxpayer’s request for adequate reasons (in terms of rule 3 of the Rules).
5.The disallowance of the objection does not give the Commissioner an additional opportunity to raise new reasons after the fact.The Commissioner can simply explain why he rejects the submissions made by the taxpayer in his objection.
6.Thus,it is often prudent to request reasons for an assessment in order to confirm the grounds the Commissioner relies upon.By obtaining confirmation in this regard,one is also protecting the taxpayer’s best interests in the event the Commissioner attempts to introduce new grounds, or resurrect grounds which were perhaps abandoned after various exchanges between SARS and the taxpayer.
7.SARS must not be permitted,at a later stage,after an administrative action has been taken and even confirmed (in the assessment letter and thereafter in SARS’ response to the request for reasons),to rely on a different finding.It would be inherently unreasonable and indeed unfair if a taxpayer,having been assessed on a particular basis in respect of which he has objected,the objection having been considered, and an appeal having been noted,were to bear the burden of proving not only that he was not taxable on the basis assessed,but on any other basis which the Commissioner might choose to raise at the hearing of the appeal.
8.In terms of s 83(7)(c) of the Act:"[a] at any such appeal,the person who made the objection shall be limited to the grounds stated in his notice of objection,unless the Commissioner agrees to the amendment of such grounds:provided that the Special Court may,on good cause shown at the hearing of the appeal,permits such person to amend his notice of objection within a reasonable period subject to such conditions with regard to postponement and costs as the court may deem fit.”
9.It would be unfair for the Commissioner to be allowed to introduce new grounds and justifications for an assessment when the taxpayer is limited to the grounds of objection to the assessment as set out in the notice of objection in terms of section 81 of the Act.
10.A situation in which the Commissioner was empowered to revise and supplement the grounds of an assessment, whereas the taxpayer was confined to the original grounds of objection, would display a lack of equality between the two litigants, a situation which could arguably infringe the guarantee of equality before the law in terms of section 9(1) of the Constitution or the guarantee of a fair hearing before a court in terms of section 34 thereof.
11.Accordingly,the taxpayer’s rights to challenge SARS’ procedure,together with available remedies, should be considered under these circumstances.
Source: By Kerry Watkin (TaxTALK)