Johannesburg — THE South African Revenue Service (SARS) had once again come under fire from the tax courts for using unprofessional conduct against taxpayers.

In a reported judgment which was only recently made available to the public, the Pretoria Tax Court held that SARS officials had acted in a "high-handed and reckless fashion" against a taxpayer. The court ordered SARS to pay costs on the attorney and client scale.

This case was one of several punitive orders that taxpayers had obtained against SARS in the past 18 months.

It involved a businesswoman who had submitted income tax returns for the tax years 1994 to 1998. In December 1999, SARS informed her that she had failed to declare her taxable income and that it intended to raise an additional assessment based upon what it considered to be unexplained income.

When the commissioner concluded the taxpayer had failed to declare her income in full, three years had already expired in respect of the 1994 to 1996 tax years. The commissioner argued he had been defrauded by the taxpayer or, at least, he was the victim of misrepresentation.

The undeclared income was recorded as R1486659 and the additional tax assessed on it amounted to R649975,58.

The commissioner imposed additional tax at 100% and penalties. After several appeals failed, the taxpayer approached the Pretoria Tax Court. The court held that although the business transactions entered into by the taxpayer may have appeared a little unusual , there was nothing to contradict her version and that of her business associates. No case was presented by SARS that justified the conclusion the taxpayer had set out to defraud the fiscus.

Adrian Lackay, spokesman for SARS, said the matter had proceeded to the tax court as a forum where the taxpayer's version could be independently tested.

In this case, the taxpayer's and witnesses' explanations were accepted. "While it is true that the court awarded a punitive cost order since it felt SARS had acted unreasonably, SARS was justified in going to court under the specific circumstances," he said.

Lackay said SARS would remain committed to just and fair administrative action .

"SARS has accepted the credibility findings of the court and has not appealed."

Beric Croome, a tax executive at corporate law advisors Edward Nathan Sonnenbergs, said it was not easy to get a costs order in a tax court in SA.

"But to get a punitive costs order against SARS is even more difficult, particularly when it is awarded on the attorney and client scale. It shows how serious the abuse must have been."

He said SARS officials must be aware that their conduct would be scrutinised by the courts in future in appeal cases.