Page 790 - SAIT Compendium 2016 Volume1

CASE DIGEST 2014-2015
7. Commissioner for SARS v Jacques Sassin & Others [2015] ZAKZDHC 82; KZD HC Case No: 6927/2014 (21 October 2015) (SAFLII website)
Issue
Tax administration – section 50 of the Tax Administration Act: The issue was whether evidence obtained by SARS in a section 50 enquiry from various witnesses can be used against the taxpayer in court (ie in a motion application) without affording the taxpayer an opportunity to cross-examine his accusers and/or to give oral evidence to the contrary.
Posture of the case
The case is before the Durban High Court as court of rst instance. This is a motion application initiated by SARS.
Facts
On 30 October 2013, the North Gauteng High Court sanctioned the holding of an inquiry in terms of section 50 of the Tax Administration Act. This inquiry was performed in terms of an ex parte order (on the application of one party alone) obtained by SARS. This motion application ows from the evidence gathered by SARS in the section 50 inquiry.
The declaratory relief sought against the taxpayer in this motion application is to hold the taxpayer liable as a co- wrongdoer for the total amount of the damage caused to SARS as a result of the fraudulent scheme perpetrated by Badenhorst or SA Global and to which the taxpayer was allegedly a party. SARS further contends that an enrichment claim exists directly against the taxpayer as Badenhorst used funds originating from SARS to pay the taxpayer without a valid cause. Since SARS cannot recover the full amount from Badenhorst as a practical matter, SARS is seeking to do so directly against the taxpayer.
The taxpayer (and other respondents) countered by stating that the SARS motion application is bad in law and constitutes an abuse of the process of court. The taxpayer denied being a party to the fraudulent scheme perpetrated by Badenhorst. The taxpayer also avers that at all material times he was not aware that Badenhorst was not entitled to use his VAT 103 certi cate to purchase goods at a zero VAT rate.
Outcome
The Durban High Court disallowed SARS’s attempt to use the section 50 proceedings as factual evidence and the matter was referred to trial.
Core reasoning
Judge Rishi Seegobin held that no matter how strongly SARS may feel about the taxpayer’s involvement with Badenhorst, and whether these activities amount to fraud, proof of this behaviour is a matter that cannot be decided on the section 50 enquire evidence alone. The issues must be properly pleaded and decided at a fair trial where all the witnesses including the taxpayer and his accusers can testify and are cross-examined.
Further, the court held that there are several dif culties with SARS relying on the evidence gathered at the section 50 inquiry. Firstly, SARS simply failed to prove the authenticity of the evidence in its founding paper. Secondly, the transcript provided by SARS is incomplete. Thirdly, the evidence given by witnesses (in the absence of the taxpayer) at the inquiry was never tested under cross-examination. This evidence was viewed as hearsay.
In terms of the argument that SARS was entitled to rely on the section 50 inquiry evidence by virtue of section 56(4), the court held that section 56(4) does not legislate for the use of evidence against a person in civil or criminal proceedings. Section 56(4) should merely be read to allow the use of evidence in inquiry proceedings or in proceedings under Chapter 9 of the Tax Administration Act, which are con dential. Moreover, section 56(3) (read with section 69) con rms that the evidence taken at the section 50 inquiry must be kept con dential.
In conclusion, the court held that to permit the use of evidence compelled at a section 50 inquiry in subsequent civil proceedings against any taxpayer, would compel the taxpayer to place his version under oath solely for one-sided use against the taxpayer. Further, this use of a section 50 inquiry would also render the compelled hearsay evidence of other witnesses against the taxpayer to be admissible against him in the absence of an application under section 3 of the Law of Evidence Amendment Act 45 of 1988.
8. Lifman v Commissioner for the South African Revenue Service 2015 JDR 2146 (WCC); (WCC HC Case No: 5961/2015 (17 June 2015) (SARS Website))
Issue
Section 172 of the Tax Administration Act: The court is reviewing whether section 172 requires SARS to rst provide at least 10 business days’ notice to the taxpayer before judgment can be taken in respect of an undisputed tax debt.
Posture of case
Judge Mantame was presiding in capacity of the court of rst instance with the application being brought by the taxpayers.
782 SAIT CompendIum oF TAx LegISLATIon VoLume 1