Unreasonable delays can prejudice taxpayers

© Olivier Le Moal – za.fotolia.com

In a recent judgment, Ackermans Limited v Commissioner for the South African Revenue Service (SARS), the Gauteng High Court was asked to review and set aside a SARS decision to raise additional assessments. Ackermans' main ground for review was that SARS had unreasonably delayed raising additional assessments.

Ackermans was given notice in July 2006 that SARS would raise additional assessments, but heard nothing further from them until they received a Letter of Findings in November 2011. It was contended by Ackermans that:

• SARS had all the necessary information to make a timeous decision but failed to do so;
  
• the unreasonable delay was contrary to section 237 of the Constitution which provides that 'all constitutional obligations must be performed diligently and without delay'; and
  
• they may be prejudiced by the delay as relevant documents, which might prove vital to their defence, may have been lost or destroyed and memories of witnesses may fade.

Unfair administrative action

The court held that an unreasonable delay will result in procedurally unfair administrative action which is reviewable. Further, the decision to raise additional assessments is an administrative action which is an exercise of public power that falls within the ambit of the Constitution. It was not in dispute that SARS took six years to raise the additional assessments the question was whether this delay was unreasonable. The Constitution does not prescribe what period would be unreasonable; this is left to the courts to determine.

The law requires additional assessments to be raised within three years of the date of the original assessment. There are circumstances which allow SARS to go beyond the three years if, for example, the full amount of tax chargeable was not assessed due to fraud, misrepresentation or non-disclosure of material facts.

Ackermans contended that there was no misrepresentation while SARS contended that there was. In dismissing the application, the court held that it could not determine on the affidavits before it, if there had been a misrepresentation, and oral evidence was required.

It further held that the appropriate forum for hearing the oral evidence was the Tax Court, but what is of importance in this judgment is the finding that that an unreasonable delay by SARS can result in procedurally unfair administrative action, which is reviewable conduct.