SARS loses court battle against taxpayers whose returns were submitted without their authority
The South African Revenue Service (SARS) has lost a High Court battle over its refusal to reconsider tax assessments based on returns allegedly submitted without a taxpayer’s authority.
The Johannesburg High Court recently set aside two SARS decisions that refused to issue reduced assessments.
This emerged in the case of TEG Asset & Risk Management v SARS Commissioner, a decision delivered on 8 October 2026.
Tax Consulting SA’s Team Lead of Tax Controversy and International Tax, Richan Schwellnus, said the judgment shows the limits of SARS’s discretion when dealing with disputed tax returns.
The ruling involved taxpayers who discovered substantial tax liabilities arising from the actions of accountants or tax practitioners and sought to have assessments reconsidered.
However, the court did not find that the disputed returns were definitively fraudulent or that the taxpayer was automatically entitled to reduced assessments.
It ruled that the revenue service’s reasons for rejecting the requests were incorrect and that the matter had to be reconsidered.
The case concerned income tax assessments for the 2017 tax year and value-added tax (VAT) assessments covering various periods between 2015 and 2017.
TEG Asset & Risk Management appointed an accountant in 2010 to manage its accounting affairs, including the submission of tax returns.
However, the accountant had subcontracted some tax compliance work to another consultant, who allegedly submitted returns without the company’s authorisation.
Following an audit, the revenue service issued assessments that the taxpayer disputed.
The company argued that SARS had incorrectly treated certain bank deposits as income and payments as expenses because the supporting documentation had not been provided.
The dispute escalated in June 2020 when SARS recovered money directly from the company’s bank account.
Despite assurances from its accountant that SARS had made an error, the taxpayer subsequently discovered substantial outstanding tax liabilities.
In October 2022, the company’s attorneys requested reduced assessments under section 93(1)(e)(iii) of the Tax Administration Act.
The provision allows SARS to issue a reduced assessment in certain circumstances where the original assessment was based on a return that was fraudulently submitted by someone not authorised by the taxpayer.
SARS rejected the request because the accountant was the company’s appointed public officer. As a result, it argued that the provision did not apply.
After a further unsuccessful engagement with SARS, the company approached the High Court to challenge the decisions.
Why the court ruled against SARS
The High Court considered whether SARS had lawfully refused to reconsider the assessments based on the accountant’s appointment as a public officer.
The court accepted that the accountant had been validly appointed. However, this did not resolve the separate question of whether the consultant who submitted the disputed returns had been authorised to do so.
Importantly, the taxpayer’s allegation that the consultant had acted without authority was not denied in SARS’s answering affidavit.
Judge Wright found that SARS had relied on an incorrect reason for refusing the requests, particularly given the undisputed allegation about the consultant’s involvement.
The court consequently reviewed and set aside SARS’s decisions dated 28 October 2022 and 23 February 2023, referring the matter back to SARS for fresh consideration. SARS was also ordered to pay the taxpayer’s legal costs.
The distinction between appointing a public officer and authorising another person to submit returns was central to the decision.
A valid appointment does not automatically establish that every person involved in the taxpayer’s accounting affairs has authority to submit returns on its behalf.
Despite the taxpayer’s success, Schwellnus stressed that the judgment does not mean that businesses can automatically escape tax liabilities by blaming their accountants.
Section 93(1)(e)(iii) requires more than an allegation that someone submitted a return without authority. The return must also have been fraudulently submitted.
The court emphasised that a return is not necessarily fraudulent simply because someone other than the taxpayer’s public officer submitted it.
It also stressed that taxpayers remain responsible for meeting their filing obligations, even when they appoint professionals to manage their tax affairs.
Schwellnus said allegations of professional misconduct do not, by themselves, establish that the requirements for a reduced assessment have been met.
The judgment also made clear the importance of presenting the relevant facts clearly when seeking relief from SARS.
According to the court, the significance of the unauthorised consultant’s involvement became apparent through the taxpayer’s founding affidavit.
