Lutzkie v Commissioner for the South African Revenue Service

The applicant, Mr Frederick Wilhelm August Lutzkie, was assessed by SARS for the 2007 year of assessment following a lifestyle audit which revealed an amount of R1 670 099.85 deposited into his bank account on 15 June 2006 from a British Virgin Islands entity. SARS treated this amount as taxable income and imposed an additional tax penalty of 90% for understatement of income. The applicant contended that the amount was not income but either a loan or, later, repayment of a shareholder’s loan following the dissolution of a foreign company in which he claimed to be the beneficial owner. The Tax Court rejected his version, finding that he failed to discharge the onus of proving the amount was not taxable income and upheld the penalty. The Full Court of the Gauteng Division dismissed his appeal by majority. His petition for special leave to appeal to the Supreme Court of Appeal was refused, prompting this application for reconsideration under s 17(2)(f) of the Superior Courts Act 10 of 2013.

The application for reconsideration of the refusal of special leave to appeal was dismissed with costs, including the costs of two counsel.

The judgment clarifies and reinforces the stringent threshold for reconsideration of refusals of special leave to appeal under s 17(2)(f) of the Superior Courts Act. It confirms that such reconsideration is not an appeal on the merits but an exceptional procedural safeguard. The case also underscores the taxpayer’s onus in tax disputes, the limits on reliance on hearsay evidence, and the deference appellate courts afford to the Tax Court’s exercise of discretion in relation to penalties.