The process to be followed by taxpayers when disputing assessments issued by the South African Revenue Service ("SARS") is set out in the Tax Administration Act, 2011 (the "TAA") read with the rules promulgated under section 103 of the TAA (the "Tax Court Rules"). Where a taxpayer is aggrieved by an assessment issued by SARS, the taxpayer has a period of 30 days from the date of the assessment (or where a request for reasons is submitted to SARS by the taxpayer in terms of Tax Court Rule 6, the date of delivery of such reasons) to lodge an objection against such assessment.

The objection lodged by the taxpayer to an assessment issued by SARS must, in terms of Tax Court Rule 7(2)(b), specify inter alia

  • the grounds of the objection in detail including the part or specific amount of the disputed assessment being objected to; and
  • the grounds of assessment that are in dispute.

In the event that the taxpayer's objection is disallowed by SARS, and the taxpayer decides to appeal such a decision, the taxpayer is, in terms of Tax Court Rule 10(3), prohibited from appealing on a ground that constitutes a new objection that was not raised in the taxpayer's objection. In addition, in terms of Tax Court Rule 32(3), once the taxpayer has lodged its appeal and received SARS' statement of grounds of assessment and opposing appeal, the taxpayer is prohibited from including in its statement of grounds of appeal a new ground of objection against the assessment which was not raised in the objection. A taxpayer's grounds of objection are of paramount importance, as these grounds of objection set the parameters for the taxpayer's dispute against the offending assessment.

The Tax Court Rules, do not explicitly address the question regarding whether, following delivery of an objection by a taxpayer, such objection can be amended to include new grounds of objection, thereby effectively granting the taxpayer a second bite at the dispute cherry.

It is interesting to note that, prior to the amendment by Act 60, 2001 of section 83(7)(c) of the Income Tax Act, 1962 SARS had the authority to agree to an amendment of a taxpayer's grounds of objection and that the Special Court could, on good cause shown, permit such amendment. No similar provision is included in the TAA or the Tax Court Rules.

This question was recently considered by the Tax Court in ABC v The Commissioner of the South African Revenue Service, where the taxpayer approached the court for leave to amend its objection in terms of rule 28 of the rules regulating the conduct of the proceedings of the several provincial and local divisions of the High Court of South Africa (the "Uniform Rules") read with Tax Court Rule 42(1). Tax Court Rule 42 provides that if the Tax Court Rules do not provide for a procedure in the Tax Court, the most appropriate rule under the Uniform Rules, to the extent consistent with the TAA, may be utilised by the Tax Court. As the Tax Court Rules do not provide for a procedure to amend an objection, the taxpayer submitted that the amendment of an objection falls within the realm of Tax Court Rule 42, and as such, the application was brought in terms of Tax Court Rule 42 read with Uniform Rule 28. Uniform Rule 28, essentially, provides for the amendment of a pleading or document other than a sworn statement filed in connection with any proceedings.

SARS opposed the taxpayer's application on the grounds that

  • the amendment sought to introduce new grounds of objection after the relevant time periods prescribed in the Tax Court rules had expired;
  • the amendment sought to introduce new grounds of objection after the assessment had become final; and
  • the statutory provisions relied on by the taxpayer for the amendment sought do not apply in relation to the amendment of an objection.

Finding in favour of the taxpayer, the Tax Court held that Tax Court Rule 42 does in fact permit an applicant to approach the court for an amendment of a document or pleading in terms of Uniform Rule 28. The court held that this is not the end of the enquiry, as an applicant that relies on Uniform Rule 28 must fulfil the requirements for an amendment. The Tax Court made reference to the judgement in Affordable Medicines Trust v Minister of Health, which enunciated the principle that amendments will be allowed unless the amendment is made in bad faith, will cause prejudice to the opponent that cannot be remedied by an appropriate costs order, or the parties cannot be restored to the same position as they were when the pleading or document which is the subject of amendment was filed. In addition, the court made reference to the judgement in Commercial Union Assurance Co Ltd v Waymark No, where the court outlined the principles to be considered in an application for an amendment as inter alia, the demonstration by the applicant that prima facie the amendment is deserving of consideration and facilitates the proper ventilation of the dispute between the parties, and that an amendment should not be refused simply to punish the applicant for neglect.

Taking into consideration the submissions of the taxpayer, the Tax Court held that the taxpayer had indeed satisfied the requirements for requesting leave to amend its objection, and held in favour of the taxpayer. Indeed, it is difficult to discern any demonstrable prejudice suffered by SARS upon the amendment of an objection, as SARS would be granted an opportunity to consider the amended grounds of objection, and either allow or disallow such amended objection. SARS may possibly, however, be inundated with requests by taxpayers to amend their objections where the taxpayers have not raised the appropriate grounds of objection for whatever reason. Whether this inconvenience to SARS overrides the importance for the proper ventilation of the disputes between SARS and taxpayers is, however, questionable.

The judgement of the Tax Court, if upheld in any subsequent appeals, will surely usher in an opportunity for taxpayers to amend their objections and "reset" the parameters of disputes with SARS where the taxpayers have omitted grounds of objection from their objection. However, taxpayers must keep in mind that this would not signal that they may simply neglect to raise grounds of objection, and rely on the courts to assist in the correction of such neglect and that the requirements for an amendment as outlined by the abovementioned judgements would have to be satisfied.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.