X and Another v CSARS (A117/2025)
Table of Contents
Case Information
Court: High Court of South Africa, Western Cape Division, Cape Town
Case number: A117/2025
Citation: X and Another v Commissioner for the South African Revenue Service (A117/2025) [2026] ZAWCHC (16 April 2026)
Applicant: Dr J Reid (First Appellant) and Dr J Reid Inc (Second Appellant)
Respondent: The Commissioner for the South African Revenue Service
Jurisdiction: South Africa
Judgment date: 16 April 2026
Judgment Summary
This is an appeal under sections 133(1) and (2)(a) of the Tax Administration Act, 28 of 2011 ('TAA') against an order of the Tax Court per Magardie AJ dated 2 December 2024 [1]. The Tax Court had dismissed the appellants' application under Rule 52(2)(b) of the Rules Prescribing Procedures for Lodging an Objection and Appeal ('the 2023 Tax Rules'), in which the appellants sought an order declaring their objection filed on 14 August 2023 ('the second objection') to be valid [2, 3].
The second objection was directed at estimated additional assessments issued by SARS on 25 March 2022 under section 95(1) read with section 92 of the TAA [3]. SARS had issued a notice of invalid objection on 22 September 2023, concluding that the second objection failed to meet the requirements of Rule 7(2)(b) [4].
The Full Court, comprising Saller AJ (with Fortuin J and Ralarala J concurring), dismissed the appeal and ordered the appellants to pay the costs of the appeal jointly and severally on scale C, including the costs of two counsel where employed [1, 2 of Order].
Background
The first appellant is a specialist neurologist who renders services to the second appellant company, of which he is also the public officer [22]. SARS conducted an audit relating to the first appellant's liability for personal income tax and donations tax, and the second appellant's liability for corporate income tax and value added tax ('VAT') [22].
During the audit, SARS repeatedly but unsuccessfully sought access to the appellants' Healthbridge Electronic Medical Records System ('Healthbridge system') to verify information the appellants had provided [23]. On 25 March 2022, SARS issued estimated additional assessments under section 95(1) of the TAA read with section 92 [24]. The appellants' entitlement to challenge the assessments, and SARS' entitlement to employ section 95, were not in dispute [24].
On 25 October 2022, the appellants filed a first objection, which became the subject of a first Rule 52(2)(b) application to the Tax Court. That application was withdrawn on 1 August 2023 following publication of the 2023 Tax Rules [25]. On 14 August 2023, the appellants submitted the second objection, expressly acknowledging that Rule 7(2)(b)(iii) required the submission of substantiating documentation not already provided to SARS [26].
The second objection included a table of documents on which the appellants said they relied, with three annexures attached. In respect of the Healthbridge system records for 2016 to 2020, the second objection tendered 'Electronic access' to those documents, and later, under paragraph 34, expressly agreed to grant SARS access to the Healthbridge system [27, 28].
Engagement followed between the appellants' tax practitioners and SARS' Electronic Forensic Services Department ('EFS') regarding access to the Healthbridge system. The appellants variously suggested access over the weekend, for unreasonably short periods, and later offered a copy of the electronic data on a hard drive, while SARS consistently required access by its EFS team to the original system over two consecutive working days [39]. SARS had previously advised the appellants during the audit that its protocols required the EFS team to access electronic records directly from the source to confirm authenticity and veracity [40].
On 19 September 2023, the EFS team arrived at the appellants' premises but found no appellants or employees present to assist with practical access and guidance on the Healthbridge system. SARS explained that its officials are not permitted to access taxpayers' electronic systems unsupervised due to risks of data loss, system crashes and potential civil liability. The EFS team left without accessing the system [42].
On 21 September 2023, with one working day remaining before the Rule 7(4) deadline expired, the first appellant contacted SARS regarding electronic access but did not tender an extension of the deadline or his personal presence during the investigation. SARS responded that there was insufficient time left [43].
On 22 September 2023, the last working day before the expiry of the 30 business day period under Rule 7(4), SARS issued its 20-page notice of invalid objection concluding that the appellants had failed to submit a valid objection for non-compliance with Rule 7(2)(b), and had also failed to discharge the onus under section 102(1) of the TAA [44]. On 24 October 2023 the appellants launched their Rule 52(2)(b) application to the Tax Court [46].
Core Dispute
The central dispute concerned whether the appellants' second objection satisfied the requirements of Rule 7(2)(b) of the 2023 Tax Rules, and in particular Rule 7(2)(b)(iii), which requires a taxpayer lodging an objection to submit the documents required to substantiate the grounds of objection insofar as they have not previously been delivered to SARS [13].
The appellants argued that Rule 7(2)(b)(iii) was drafted for the ordinary situation where the taxpayer bears the burden of proof under section 102(1) of the TAA, and that where SARS had issued estimated assessments under section 95 and would bear the burden of proving their reasonableness under section 102(2), it was inherently illogical and contrary to natural justice to require the taxpayer to furnish substantiating documents [56, 57]. The appellants contended that Rule 7(2)(b)(iii) and Rule 7(4) should be interpreted, constitutionally, so as not to apply to a taxpayer who does not bear the burden of proof, and that no more should be required than that the taxpayer 'genuinely' and in good faith dispute the assessment [58].
SARS maintained that the second objection was invalid for failure to comply with Rule 7(2)(b), including the requirement to submit substantiating documents, and for the appellants' failure to provide meaningful access to the Healthbridge system [4, 35].
Court Findings
The court first addressed the proper interpretation of Rule 7(2)(b)(iii). It held that there is nothing in the language, the immediate context of Rule 7(2)(b)(iii), or in Chapter 9 of the TAA as a whole, to support the appellants' contention that a taxpayer who objects to an estimated assessment under section 95 is subjected to a less onerous procedural burden than one who objects to an ordinary assessment. The distinction contended for is not drawn either expressly or by necessary implication in the statutory scheme [63].
The court identified contextual indications to the contrary. Section 95(4) of the TAA expressly provides that the making of an estimated assessment does not detract from the taxpayer's continuing obligation to submit a return or relevant material. There is accordingly no entitlement on the part of the taxpayer to withhold documentation which the taxpayer is obliged to produce [64]. The court further noted that under section 100(1)(b), in the absence of a valid objection, an assessment becomes final, and that the requirement for substantiating documentation must be seen in this light [65]. The court also held that the purpose of Rule 7(2)(b)(iii), namely to ensure that SARS has all substantiating documentation required to make a proper determination of an objection on the merits, is of greater importance where SARS was forced to make an estimated assessment because the taxpayer did not provide a return or relevant material at the audit stage [66].
On the burden of proof argument, the court held this was a red herring for two reasons. First, the burden of proof under section 102 of the TAA does not come into play at the objection stage but applies in litigation in the Tax Court on appeal as provided for by section 129 of the TAA [69]. Second, on the facts, the appellants' grounds of objection did not in substance challenge the reasonableness of the estimated assessments but took issue with their correctness [70].
On the facts, the court found that the appellants had themselves tendered electronic access to the Healthbridge system in the second objection, identifying it as containing documents required to substantiate their grounds of objection under Rule 7(2)(b)(iii). SARS did no more than hold the appellants to their own version. When the appellants made reasonable electronic access to the Healthbridge system impossible, they failed to submit the very documents they had identified as required to substantiate their grounds of objection [61, 73].
The court dismissed the appellants' argument that only their proposed interpretation would give effect to their constitutional right under section 34 of the Constitution to have their dispute decided by a court. The preconditions imposed by Rules 7(2) and 7(4) do not infringe section 34, having regard to the ameliorating effect of Rule 52, which provides a tailor-made mechanism for taxpayers to approach the Tax Court where SARS finds that such preconditions are not met [71].
The court also dismissed the appellants' claim that SARS' notice of invalid objection was vitiated by institutional bias and improper purpose, noting that no evidence was provided and expressing considerable doubt that such an attack on procedural grounds was open to the appellants under Rule 52(2)(b), since that rule requires the Tax Court to consider the validity of the objection afresh [74].
The court agreed with the Tax Court's finding that the appellants had adopted a generalised, globular approach in the objection rather than dealing with each assessed amount individually as required by Rule 7(2)(b)(i), and had failed to submit basic substantiating documents as required by Rule 7(2)(b)(iii) [53].
Outcome
The appeal was dismissed [75]. The appellants were ordered to pay the costs of the appeal jointly and severally on scale C, such costs to include the costs of two counsel where employed [76, Order para 2].
Major Issues / Areas of Contention
- Whether Rule 7(2)(b)(iii) of the 2023 Tax Rules, which requires a taxpayer to submit substantiating documents as part of a valid objection, applies with equal force to a taxpayer who objects to estimated additional assessments issued under section 95 of the TAA where SARS bears the burden of proving reasonableness under section 102(2).
- Whether the appellants' second objection was valid, in circumstances where the appellants tendered electronic access to the Healthbridge system as substantiating documentation but then failed to facilitate meaningful access to that system when SARS' EFS team attended the premises.
- Whether the burden of proof under section 102 of the TAA is relevant at the objection stage or only in Tax Court appeal proceedings under section 129 of the TAA.
- Whether the appellants' grounds of objection in substance challenged the reasonableness of the estimated assessments under section 102(2) or rather challenged the correctness of those assessments.
- Whether the preconditions for a valid objection imposed by Rules 7(2) and 7(4) infringe the appellants' constitutional right of access to courts under section 34 of the Constitution, given the availability of Rule 52(2)(b) as a remedy.
- Whether a taxpayer has a wholly subjective choice over which documents to submit to substantiate grounds of objection under Rule 7(2)(b)(iii), or whether an objective standard applies.
- Whether the appellants' allegation that SARS' notice of invalid objection was vitiated by institutional bias and improper purpose was open to the appellants in a Rule 52(2)(b) application, which requires the Tax Court to consider the validity of the objection afresh.