Commissioner for the South African Revenue Service v J Company

Sars issued section 46 notices to the taxpayer requesting relevant material including annual financial statements and supporting documentation for the 2017 and 2018 years of assessment. The taxpayer responded with redacted documents, concealing the identities of clients, suppliers, attorneys, invoice numbers, nature of services rendered, VAT numbers, and bank details. The taxpayer argued that the redacted information related to third parties and was not relevant to its own tax affairs. Sars contended that the un-redacted information was foreseeably relevant for the administration of a tax Act and sought an order compelling the taxpayer to produce documents free of redaction. The taxpayer also sought continued anonymity in the proceedings.

• Whether Sars is entitled to demand un-redacted documents from a taxpayer where the taxpayer contends the redacted information does not constitute 'relevant material' as defined in section 1 of the TAA.
• Whether the reference to 'clients and service providers' in the section 46 notice meets the requirement of an 'objectively identifiable class of taxpayers' under sections 46(1) and 46(2)(a) of the TAA.
• Whether Sars must provide objective grounds for its opinion that the requested material is 'foreseeably relevant' before a court will compel compliance with a section 46 notice.
• Whether the taxpayer is entitled to continued anonymity in the proceedings and resultant judgment.

The relief sought in prayers 1 and 2 of the notice of motion was granted. The respondent taxpayer was ordered to provide Sars with the un-redacted documents within 21 days of the date of judgment.

Under section 46 of the Tax Administration Act, it is the opinion of Sars — not the taxpayer — that determines whether information, documents, or things are 'foreseeably relevant' for the administration of a tax Act. A taxpayer cannot unilaterally redact information from documents sought under section 46 on the basis that such information is not relevant. Furthermore, where a taxpayer withholds or redacts information, it cannot then complain that Sars has failed to provide objective grounds for its opinion, since the very information needed to make that determination lies within the taxpayer's exclusive knowledge.

The court observed that attorneys are officers of the court and one can hardly imagine a situation where work done by them in their professional capacity — unless privileged — would be rendered outside the reach of the taxing authority. The court also noted that if a taxpayer conducts business with persons or entities outside South Africa, different tax considerations apply and Sars is entitled to make enquiries. Fee notes are not created for the purpose of giving advice and are not ordinarily privileged; they relate to recoupment for professional mandates already completed rather than the execution of the mandates themselves.

This judgment affirms the breadth of Sars' information-gathering powers under section 46 of the TAA and confirms that taxpayers may not unilaterally redact documents on relevance grounds. It also clarifies that while the opinion of Sars is subjective, where the facts are peculiarly within the taxpayer's knowledge, the taxpayer cannot frustrate Sars' powers by withholding information and then challenging the basis of Sars' opinion. The case reaffirms that Sars may conduct 'fishing expeditions' in the sense of wide-ranging inquiries to ascertain taxable income.