In a recent judgment handed down in the South Gauteng High Court, Rossi and others v CSARS, a taxpayer applied for an order compelling the Commissioner to authorise a refund in terms of section 102 of the Income Tax Act. The taxpayer also sought a declaratory order to the effect that the letter tendered by the Commissioner as an assessment, was not an assessment.

Briefly, the facts were as follows: In 1999 an alleged assessment was raised against the taxpayer in respect of employees' tax. Negotiations between the parties followed, but were unsuccessful.

In 2007 the Commissioner demanded payment from the taxpayer. The taxpayer objected but the objection was dismissed because it was brought out of time. For the same reason the taxpayer could not appeal to the Tax Court. In 2008 the taxpayer made certain payments, and in 2009 money in the taxpayer's bank account was attached.

The taxpayer argued that if there was no assessment, there was no cause for the payment, and it was entitled to a refund in terms of section 102 of the Income Tax Act. The taxpayer also argued that, even if the letter was an assessment, the tax is not due because the assessment is incorrect.

The Court declined to decide whether there was a valid assessment and whether it was correct. The Court decided the matter on the issue of jurisdiction alone.

The Court emphasised that the Income Tax Act clearly provides for a procedure to be followed if a taxpayer is dissatisfied with an assessment - a taxpayer may object to an assessment, and if such objection is disallowed, he may appeal against such disallowance to the Tax Court.

That is to say, once an objection has been disallowed, the only option available to the taxpayer in challenging an assessment or amount claimed is to appeal to the Tax Court, being a court "specifically tooled to deal with disputed tax cases". The Court specifically stated that the High Court is not such a court.

The same procedure must be used where it is disputed that an assessment has been raised at all.

Section 102 of the Income Tax Act merely authorises the Commissioner to refund money overpaid following an assessment. If the Commissioner decides that no money has been overpaid, that decision is final and there is no appeal. The taxpayer's only remedy lies in challenging the assessment. The Court did not comment on whether the Commissioner's decision may be subject to review in terms of the Promotion of Administrative Justice Act.

Where a taxpayer has failed to make use of the procedures for challenging the assessment, he does not have a further remedy in section 102 to approach a High Court for relief.
The Court seemed to suggest that, because the taxpayer was out of time in noting its objection against the alleged assessment, it may well be without a remedy.

The Court made it clear that the High Court does not have jurisdiction to decide the dispute. The Court also noted that the current legal position is that a High Court only has jurisdiction in tax matters where the relief sought is of an interlocutory nature, and where the High Court does have jurisdiction, it is confined to issues of law and not fact.

Written by Heinrich Louw, Candidate Attorney, Tax Practice, Cliffe Dekker Hofmeyr