Taxpayer W v Commissioner for the South African Revenue Service (24622) [2019] ZATC 21 (25 November 2019)

Taxpayer W v Commissioner for the South African Revenue Service (24622) [2019] ZATC 21 (25 November 2019)

The court found that the incorrect statement in the appellant's tax return resulted in prospective prejudice to SARS, as the overstated assessed loss could have reduced future taxable profits if undetected. The error was not a bona fide inadvertent error because the appellant failed to exercise reasonable care in completing its tax return. The appellant did not implement or evidence any control measures to avoid obvious errors, nor did it scrutinise the tax return before submission, despite significant discrepancies in reported profits and losses. The duty to submit a correct return remains with the taxpayer, even when using professional accountants. The appeal was dismissed and the...

Citation
[2019] ZATC 21
Parties
Appellant: Taxpayer W; Respondent: Commissioner for the South African Revenue Service
Court
Tax Court
Jurisdiction
South Africa
Judgment Date
25 November 2019
Case Number
24622
Procedural Posture
Tax Appeal / Final Judgment
Outcome
Appeal dismissed with costs, except for the reserved costs of 10 September 2019, which are to be paid by the respondent.
Judges
D Van Zyl, Kemp, L Groener
Legal Topics
Understatement Penalty, Reasonable Care in Tax Return, Bona Fide Inadvertent Error, Burden of Proof, Taxpayer Liability for Agent, Assessment of Prejudice
Tax Law Civil Procedure Understatement Penalty Reasonable Care in Tax Return Bona Fide Inadvertent Error Burden of Proof Taxpayer Liability for Agent Assessment of Prejudice

Case Brief

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Parties

Taxpayer W

Appellant

Commissioner for the South African Revenue Service

Respondent

Procedural Posture

Tax Appeal / Final Judgment

Legal Issues

  1. 1 Whether the incorrect statement in the appellant's tax return caused prejudice to SARS as contemplated in section 221 of the Tax Administration Act.
  2. 2 Whether the appellant's error constituted a bona fide inadvertent error excusing it from the understatement penalty under section 222(1) of the Act.
  3. 3 Whether the appellant exercised reasonable care in completing its tax return.

Ratio Decidendi

The court found that the incorrect statement in the appellant's tax return resulted in prospective prejudice to SARS, as the overstated assessed loss could have reduced future taxable profits if undetected. The error was not a bona fide inadvertent error because the appellant failed to exercise reasonable care in completing its tax return. The appellant did not implement or evidence any control measures to avoid obvious errors, nor did it scrutinise the tax return before submission, despite significant discrepancies in reported profits and losses. The duty to submit a correct return remains with the taxpayer, even when using professional accountants. The appeal was dismissed and the...

Court Disposition

Appeal dismissed with costs, except for the reserved costs of 10 September 2019, which are to be paid by the respondent.

Orders

  • The appeal is dismissed with costs.
  • The reserved costs of 10 September 2019 are to be paid by the respondent.