Posted in sections, this is my Doctoral Thesis on taxpayers rights when audited by the tax authorities in South Africa – equally applicable to many English-based law systems in Africa and abroad (eg. India). This will be of particular use to any tax practitioners doing work in Africa and in other English-based legal systems around the world.

Analysis Of Challenging The Commissioner’s Discretionary Powers In Auditing Taxpayers under The Constitution Of The Republic of South Africa

CHAPTER 5 – JUDICIAL REVIEW WITH REFERENCE TO SS 74A AND 74B –

5.2 WHAT IS MEANT BY REVIEW?

The term ‘review’ is defined by Innes CJ in Johannesburg Consolidated Investment Co v Johannesburg Town Council16 in three parts, two of which are relevant to this thesis:

1. … first and most usual signification denotes the process by which, apart from appeal, the proceedings of inferior courts of Justice … are bought before … [the High] Court …
2.… second species of review [is] analogous [to the first]. Whenever a public body[such as SARS] has a duty imposed upon it by statute, and disregards important provisions of the statute, or is guilty of gross irregularity or clear illegality in the performance of the duty, this Court may be asked to review the proceedings … and set aside or correct them…
3.… Then as to the third … [t]he legislature has from time to time conferred upon this court or a judge a power to review …(with) … wider … power which it possesses under either of the … (first two) … review procedures …(Emphasis supplied).

The first of the review proceedings has no application to this thesis.

The third review proceeding is covered by the object and appeal process in the Income Tax Act, giving the Tax Court the power to revisit de novo the matter brought before it.17 This type of review is not available in respect of the discretionary powers of ss 74A and 74B, because these provisions are not specifically made subject to the objection and appeal process.

That leaves the second type of review proceeding18 as the one applicable to ss 74A and 74B of the Income Tax Act, including the review of any public power in terms of the rule of law, and the principle of legality.19

As described in Civil Procedure in the Superior Courts,20 statutory bodies such as SARS are not courts when it exercises its powers. It does not hand down judgments or grant judicial orders that are enforceable by execution. It usually exercises discretionary powers, with penalties21 if taxpayers fail to adhere to these powers in the absence of a legitimate excuse.22 Although the powers of SARS are not bound to comply with the strict procedures that are required of an inferior court, SARS must conduct its proceeding in a manner that will be just to all parties.23 If SARS fails to do this, the High Court may intervene to ensure that natural justice is done, which is a right inherent in the High Court.24

The neglect or wrongful performance by SARS of a statutory duty where the taxpayers are injured or aggrieved, is a cause falling within the ordinary jurisdiction of the court.25

The court has the power to summarily correct or set aside proceedings which fall into the categories mentioned above.26

This inherent right to review proceedings of bodies such as SARS, on which statutory duties are imposed, without having to follow special machinery of review created by the legislature,27 is traditionally termed review under the common law.28

However, with the advent of the Constitution, and more particularly the Constitutional Court case of Pharmaceutical Manufacturers,29 Chaskalson P stated: ‘the exercise of all public power must comply with the Constitution which is the supreme law, and the doctrine of legality which is part of that law…’. He was dealing specifically with the issue of judicial review. Furthermore, in dealing with the contention that there is a body of common law distinct and separate from the Constitution, Chaskalson P stated the following: ‘[44] I cannot accept this contention which treats the common law as a body of law separate and distinct from the Constitution. There are not two systems of law, each with the same subject matter, each having similar requirements, each operating in its own field with its own highest court. There is only one system of law. It is shaped by the Constitution which is the supreme law, and all law, including the common law, derives its force from the Constitution and is subject to constitutional control…[45]…Courts no longer have to claim space and push boundaries to find means of controlling public power. That control is vested in them under the Constitution…’.

The High Court has inherent jurisdiction to hear reviews in respect of a decision taken by SARS in terms of ss 74A and 74B, in the absence of an express exclusion, or by necessary implication.30SARS must consider the provisions of ss 7 and 8 of the Constitution, and so must the courts give effect to the scope, spirit and purpose of the Bill of Rights by virtue of s 39(2) read with s 173 of the Constitution.

The authors in The Civil Practice of the Supreme Court of South Africa31 state:

The courts have adopted the attitude that … the word ‘review’ must be understood in its widest and what may be called its popular sense, … as conferring a wide exercise of supervision, and a great scope of authority. (Emphasis supplied)

Sections 7, 8, and 173 of the Constitution32 supports this view.

The unconstitutional conduct by SARS in making a decision in terms of ss 74A and 74B where taxpayers rights are adversely affected, with a direct, external legal effect (as demonstrated in chapters 2 and 3 in this thesis) is cause falling within the ordinary jurisdiction of the court.33 The court has the power to summarily correct or set aside proceedings in respect of the codified grounds of review read with ss 6, 7 and 8 of PAJA, or if SARS have transgressed the principle of legality. Both types of applications will be brought in terms of a Rule 53 application to the High Court.

Next:  5.3 THE APPLICABILITY OF OBJECTION AND APPEAL

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Footnotes:

16 1903 TS 111 at pages 114-16; Loxton v Kenhardt Liquor Licensing Board 1942 AD 275 at 309; Dawlaan Beleggings (Edms) BPk v Johannesburg Stock Exchange & Others 1983 (3) SA 344 (W) at 363pr-B; Blacker v University of Cape Town & another 1993 (4) SA 402 (C) at para’s 403F-I; Magano & another v District Magistrate, Johannesburg, & others (2) 1994 (4) SA 172 (W) at para’s 175G-J; 1994 (2) SACR 307 at para’s 310G-J.
17 Income Tax in South Africawww.mylexisnexis.co.za (accessed 13 March 2013): ‘27.29 Remedies of discretionary powers of the Commissioner… all income tax assessments are subject to objection and appeal in terms of ss 81 and 83 of the Income Tax Act must mean that the discretionary decisions of the Commissioner giving rise to such an assessment must be subject to consideration by an Income Tax Special Court. Van der Walt J (in Transvaalse Suikerkorporasie 47 SATC 34) distinguished between cases where discretionary decisions are specifically made subject to objection and appeal and those where objection and appeal is neither granted nor excluded. He concluded that in the former cases the Income Tax Special Court can reach its own conclusions and substitute its own decision for that of the Commissioner, whereas in the latter cases the Special Court has the power to the exercise of the Commissioner’s discretion on the usual grounds for review (for example: that he acted in bad faith, or from improper motives, or did not apply his mind properly).’
18 LTC Harms Civil Procedure in the Superior Courtswww.lexisnexis.co.za (accessed 13 March 2013) B53.4 (hereinafter referred to as ‘Harms’ in this thesis); See Hira v Booysen 1992 (4) SA 69 (A); Shidiack v Union Government (Minister of the Interior) 1912 AD 642; Britten v Pope 1916 AD 150.
19 Democratic Alliance and Others v Acting National Director of Public Prosecutions and Others 2012 (3) SA 486 (SCA).
20 Harms B53.1 to B53.22.
21 Section 75(1)(b) of the Income Tax Act.
22 Such as a ‘just cause’; Ibid.
23 Harms B53.4.
24 Ibid. B53.4 and Section 19(1)(a) of Act 59 of 1959.
25 Ibid B53.4; Routledge Cavendish Constitutional Law (2006) at page 126 reviewing flawed decisions.
26 Ibid B53.4; Op. cit. Routledge at page 126; Gliksman v Transvaal Provincial Institute of the Institute of SA Architects & another 1951 (4) SA 56 (W); Tayob v Ermelo Local Road Transportation Board & another 1951 (4) SA 440 (A); Northwest Townships (Pty) Ltd v The Administrator, Transvaal & another 1975 (4) SA 1 (T).
27 Ibid. B53.4.
28 Ibid. B53.4. Per Feetham JA in Loxton v Kenhardt Liquor Licensing Board 1942 AD 275 at 310.
29 Pharmaceutical Manufacturers Association of South Africa and another: In Re: Ex Parte President of the Republic of South Africa and Others 2000 (2) SA 674 (CC) at para’s [40] and [41]; See also Constitutional Cases Commentary De Rebus (September 2003) Lexis Nexis (last accessed 11 January 2013); Currie I & Klaaren J The Promotion of Administrative Justice Act Benchbook (2001) SiberInk.
30 Harms B53.4; Golube v Oosthuizen 1955 (3) SA 1 (T); Main Line Transport v Durban Local Road Transportation Board 1958 (1) SA 65 (D); Charmfit of Hollywood Inc v Registrar of Companies & another 1964 (2) SA 765 (T) at 768 in fine – 769H: Local Road Transportation Board and another v Durban City Council 1965 (1) SA 586 (A) at page 594.
31 Erasmus et al The Civil Practice of the Supreme Court of South Africa Juta at page 948.
32 Sections 7, 8 and 173 of the Constitution reads as follows:
‘s7. Rights. (1) This Bill of Rights is a cornerstone of democracy in South Africa. It enshrines the rights of all people in our country and affirms the democratic values of human dignity, equality and freedom. (2) The state must respect, protect, promote and fulfil the rights in the Bill of Rights. (3) The rights in the Bill of Rights are subject to the limitations contained or referred to in section 36, or elsewhere in the Bill. s 8. Application. (1) The Bill of Rights applies to all law, and binds the legislature, the executive, the judiciary and all organs of state. (2) A provision of the Bill of Rights binds a natural or a juristic person if, and to the extent that, it is applicable, taking into account the nature of the right and the nature of any duty imposed by the right. (3) When applying a provision of the Bill of Rights to a natural or juristic person in terms of sub-section (2), a court—(a) in order to give effect to a right in the Bill, must apply, or if necessary develop, the common law to the extent that legislation does not give effect to that right; and (b) may develop rules of the common law to limit the right, provided that the is in accordance with section 36 (1). (4) A juristic person is entitled to the rights in the Bill of Rights to the extent required by the nature of the rights and the nature of that juristic person. s173. Inherent power. The Constitutional Court, Supreme Court of Appeal and High Courts have the inherent power to protect and regulate their own process, and to develop the common law, taking into account the interests of justice.’
33 Erasmus et al. The Civil Practice of the Supreme Court of South Africa Juta at page 937. Johannesburg Consolidated Investments Co v Johannesburg Town Council 1903 75 at pages 111-5