18 Keerom Street, Cape Town, 8001 P O Box 3191, Cape Town, 8000 Editorial: Telephone. 021 423 5554 Facsimile. 021 424 2537 E-mail. email@example.com Administration: Telephone. 021 424 5733 Facsimile. 021 424 0534 E-mail. firstname.lastname@example.org
Volume 67 No 4, April 2018 www.taxpayer.co.za
E d i t o r i a l
P e r v e r s e O b j e c t i o n ?
At first blush it may seem perverse to submit a tax return which one considers to be partly wrong, and then to object to that part of the resulting assessment that one considers to be wrong. One might even question whether an objection in such circumstances is permissible – after all, the assessment is in line with the return submitted by the taxpayer, who is surely the author of any misfortune that might arise.
Sometimes, however, there might just be method in such apparent madness.
Take the situation where a taxpayer feels very strongly that a particular amount is not taxable, strongly enough to litigate about it, but knows that its view is not shared by the South African Revenue Service (‘SARS’), and that a dispute with SARS is thus highly likely. If the taxpayer simply omits the amount in question from its gross income, SARS might assess it in respect of the amount anyway and also levy a penalty on the basis of non-disclosure of the amount in question. By including the amount in its return and then objecting to the inclusion of that amount in the resulting assessment, the taxpayer protects itself against the possibility of SARS levying a penalty. (There could, of course, also be ‘pay now, argue later’ considerations to be taken into account, but we leave these aside for present purposes.)
In GB Mining and Exploration SA (Pty) Ltd v Commissioner, South African Revenue Service 2015 (4) SA 605 (SCA) at paras  to , Swain AJA (as he then was) said the following:
‘ A taxpayer may seek a reduction in the
Commissioner’s assessment in terms of section 79A without objecting to the assessment in terms of section 81. The Commissioner’s power to reduce the assessment exists “notwithstanding the fact that no objection has been lodged or appeal noted”. In addition, the power of the Commissioner is not restricted to its mero motu exercise, because the error in the assessment has to be “proved to the satisfaction of the Commissioner”. To discharge this burden of proof the taxpayer must place information before the Commissioner to substantiate the error relied upon. In so doing it may rely upon an error that it made in its return.  The Commissioner may therefore act in terms of section 79A to reduce an assessment in the absence of an objection in terms of section 81 of the Act and may do so even where it flows from incorrect information provided in the taxpayer’s return. Can the taxpayer who has been the cause of the incorrect assessment by the Commissioner instead claim to be “aggrieved” thereby and object to an assessment in terms of section 81?  The statement that the powers of the Commissioner under section 79A can be exercised “notwithstanding the fact that no objection has been made”, suggests that an alternative route for the taxpayer to follow is by way of objection and, if necessary, appeal. That was the conclusion of Hurt J in ITC 1785 67 SATC 98, where he said:
“(T)he fundamental object of tax legislation is to exact from each citizen his due. What is ‘due’ is, in each case (questions of penalty aside), strictly prescribed by statute and the amount of the