‘Lenient’ Sentence Overturned for Fraudulent Tax Practitioner in R3.5 Million Case

28 Jan

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A Western Cape High Court has delivered a stern reminder to tax practitioners: fraud will not be treated lightly, especially when committed by those entrusted to uphold the system. This comes after Judge James Lekhuleni overturned a “startlingly lenient” sentence handed to Shafiek Khan, a registered tax practitioner who defrauded SARS of over R1.1 million, leading to a total tax liability of R3.5 million when adjusted for inflation.

The Backstory: Fraud Behind the Facade

Between 2004 and 2008, Khan under-declared his income and exaggerated expenses in his annual SARS returns. He provided false supporting documents, continuing the deception despite SARS audits. His deceit wasn’t limited to SARS. Court evidence showed he submitted vastly higher income figures to banks when applying for home loans, further proving deliberate misrepresentation.

Fraud, specifically, five counts of fraud for under-declaring income and exaggerating expenses in tax returns submitted to SARS between 2004 and 2008.
Making false statements or omitting material facts in tax submissions, a criminal offence under South African tax law (Section 104 of the Income Tax Act 58 of 1962)
Operating as a tax practitioner without the necessary registration. Although not directly charged in this case, the article notes that acting as an unregistered tax practitioner is a criminal offence and punishable under the law.
Providing false documents to SARS. During SARS audits, Khan continued to submit misleading or false documents to justify his low income declarations.
Submitting inconsistent income declarations. Khan submitted vastly different income figures to financial institutions (for home loan applications) versus SARS, indicating intentional misrepresentation for personal gain.

Though he pleaded guilty to five counts of fraud and was convicted in September 2022, the Bellville Regional Court gave him a wholly suspended five-year prison sentence (on condition he repay R1 million and avoids reoffending), with two years’ correctional supervision on the fifth count.

Why the High Court Intervened

Unhappy with the soft sentence, the Director of Public Prosecutions appealed, arguing that it didn’t match the gravity of the offence. Judge Lekhuleni agreed, citing:

Khan’s calculated, prolonged fraud
His financial capacity to repay SARS, which he ignored
The serious breach of trust as a registered tax professional.

Lekhuleni highlighted that white-collar crime, especially from a practitioner, undermines public trust and damages national revenue. “Even if it’s not violent, fraud hits at the economic health of the country,” he said.

What This Means for Tax Practitioners

This case is more than a court ruling, it’s a warning. Tax practitioners are held to a higher standard. If you intentionally mislead SARS or clients, you will face full consequences. The ruling reinforces: