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SARS can grant an extension of time to file an objection to an assessment

Monday, 14 March 2016   (0 Comments)
Posted by: Author: PwC South Africa
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Author: PwC South Africa

SARS can grant an extension of time to file an objection to an assessment in ‘exceptional circumstances’ – but what are exceptional circumstances?

The Minister of Finance was given the power to publish rules for the conduct of disputes with SARS by way of objection and appeal in terms of section 103 of the Tax Administration Act 28 of 2011 ('the Act'). These rules were published in the Gazette in July 2014 and govern the procedures to be followed in lodging an objection and appeal against an assessment referred to in section 104(2) of the Act.

A taxpayer who is entitled to object to an assessment or to one of the categories of ‘decision’ provided for in the rules as being open to objection, and who wishes to do so, is required to lodge the objection within the period prescribed in the rules.

Currently, rule 7 provides that a taxpayer who wishes to object to an assessment and who has not requested reasons for the assessment must deliver the notice of objection within 30 days after the date of assessment.

The Tax Administration Act provides in section 104(4)–(5) that a senior SARS official can extend the 30-day period if satisfied that ‘reasonable grounds’ exist for the delay in lodging the objection, but that the period for objection cannot be so extended beyond 21 business days ‘unless a senior SARS official is satisfied that exceptional circumstances exist which gave rise to the delay in lodging the objection’, and that the period cannot be so extended if more than three years have elapsed since the date of the assessment or the decision in question.

What are exceptional circumstances?

What constitutes ‘exceptional circumstances’ has hitherto been uncertain.

The recent decision of the Supreme Court of Appeal in Avnit v First Rand Bank Ltd [2014] ZASCA 132 has brought some clarity in this regard. In his judgment, Mpati P said that –

‘[4] The term ‘exceptional circumstances’ is one that has been used in various different statutory provisions in varying contexts over many years. It was first considered by this Court in the context of its power in exceptional circumstances to direct that a hearing be held other than in Bloemfontein. The question arose in Norwich Union Life Insurance Society v Dobbs 1912 AD 395, where Innes ACJ said at 399:

'The question at once arises, what are 'exceptional circumstances'? Now it is undesirable to attempt to lay down any general rule. Each case must be considered upon its own facts. But the language of the clause shows that the exceptional circumstances must arise out of, or be incidental to, the particular action; there was no intention to exempt whole classes of cases from the operation of the general rule. Moreover, when a statute directs that a fixed rule shall only be departed from under exceptional circumstances, the Court, one would think, will best give effect to the intention of the Legislature by taking a strict rather than a liberal view of applications for exemption, and by carefully examining any special circumstances relied upon.'

[5] Later cases have likewise declined any invitation to define ‘exceptional circumstances’ for the sound reason that the enquiry is a factual one. [S v Dlamini; S v Dladla; S v Joubert; S v Schietekat 1999 (4) SA 623 (CC) paras 75-77]

A helpful summary of the approach to the question in any given case was provided by Thring J in MV Ais Mamas Seatrans Maritime vOwners, MV Ais Mamas 2002 (6) SA 150 (C)where he said:

'1. What is ordinarily contemplated by thewords ‘exceptional circumstances’ is something out of the ordinary and of an unusual nature; something which is excepted in the sense that the general rule does not apply to it; something uncommon, rare or different: ‘besonder’, ‘seldsaam’, ‘uitsonderlik’, or ‘in hoë mate ongewoon’

2.To be exceptional the circumstances concerned must arise out of, or be incidental to, the particular case. 

3.Whether or not exceptional circumstances exist is not a decision which depends upon the exercise of a judicial discretion: their existence or otherwise is a matter of fact which the Court must decide accordingly. 

4.Depending on the context in which it is used, the word ‘exceptional’ has two shades of meaning: the primary meaning is unusual or different: the secondary meaning is markedly unusual or specially different. 

5.Where, in a statute, it is directed that a fixed rule shall be departed from only under exceptional circumstances, effect will, generally speaking, best be given to the intention of the Legislature by applying a strict rather than a liberal meaning to the phrase, and by carefully examining any circumstances relied on as allegedly being exceptional.'  

Having cited these dicta from earlier decisions, Mpati J remarked, ‘To this I would add only that in the exercise of the discretion vested in the President, the overall interests of justice will be the finally determinative feature.’

Application to the Act

The above principles would appear to apply also to the Tax Administration Act. The Act itself does not contain a universal definition of the term 'exceptional circumstances'. However, section 218, which relates to the remittance of penalties imposed, is headed 'Remittance of penalty in exceptional circumstances'.Section 218(1) empowers SARS to remit a penalty in whole or in part if any of the circumstances referred to in section 218(2) apply, namely:

(a) a natural or human-made disaster; 

(b) a civil disturbance or disruption in services; 

(c) a serious illness or accident; 

(d)  serious emotional or mental distress; 

(e) any of the following acts by SARS— 

(i) a capturing error; 

(ii) a processing delay; 

(iii) provision of incorrect information in an official publication or media release issued by the Commissioner; 

(iv) delay in providing information to any person; or  

(v)   failure by SARS to provide sufficient time for an adequate response to a request for information by SARS; 

(f )serious financial hardship, such as—  

(i) in the case of an individual, lack of basic living requirements; or 

(ii) in the case of a business, an immediate danger that the continuity of business operations and the continued employment of its employees are jeopardised; or 

(iii) any other circumstance of analogous seriousness. 

Rule 52 of the new rules now provides in this regard that –

‘(2) A taxpayer or appellant may apply to a tax court under this Part – 

(a) … 

(b) … 

(c) if the period of time to lodge an objection to an assessment has not been extended by SARS under section 104(4) [of the Tax Administration Act] on request by the taxpayer under rule 7, for an order extending the period within which an objection must be lodged by a taxpayer.’ 

No extension of time is possible if more than three years have elapsed since the assessment

However, it seems from section 104(5)(b) of the Tax Administration Act that the Tax Court has no power to grant an extension of time to lodge an objection if more than three years have elapsed since the date of the assessment in question.

Editor’s note:

Our view that section 218 is not prescriptive in the determination of what constitute 'exceptional circumstances' for purposes of section 104(5) is shared by SARS in Interpretation Note No. 15, published on 2 November 2014, in which it is stated:

‘The term "exceptional circumstances” is not defined for the purposes of section 104. Consideration must therefore be given to its ordinary grammatical meaning, taking into account the context in which it appears and the purpose to which it is directed…

Section 218 lists what comprises exceptional circumstances in the context of the remission of penalties. Although not directly relevant to section 104(5), it nevertheless provides an indication of the type of things which, taking into account the particular facts and circumstances, may constitute exceptional circumstances for purposes of section 104(5)…’(Our emphasis)

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