Mburu v Commissioner of Domestics Taxes (Civil Appeal E275 of 2023) [2026] KECA 1606 (KLR)

Section 29(5) of the Tax Procedures Act bars default assessments after five years from the close of the reporting period unless the Section 29(6) exception of gross or wilful neglect, evasion or fraud applies. For the 2013 year of income the clock ran from 31st December 2013, so the Commissioner had until 31st December 2018. The impugned assessment issued in September 2018 fell within that window. Alternatively, the admitted failure to file returns amounted to wilful neglect, and the appellant failed to demonstrate otherwise, so even a later assessment would have been permissible.

The court examined Sections 24 and 28 of the Tax Procedures Act and Section 52B of the Income Tax Act, which obliges every individual chargeable to tax to furnish a return of income with a self-assessment. It rejected the argument that mere possession of a PIN does not render a person chargeable to tax, holding the statutory scheme unequivocal: registration and issuance of a PIN create a continuing duty to file annual returns, including nil returns. Non-compliance is wilful neglect within Section 29(6), lifting the ordinary limitation bar. The concurrent findings of the Tribunal and High Court were upheld.

The appellant contended the bank credits were loan repayments, advances, dividends and land-sale proceeds rather than income under Section 3 of the Income Tax Act. The court held the controversy essentially turned on whether the evidentiary burden was discharged on the pleaded facts — an inquiry of fact, not law, for the Tribunal as primary fact-finder and the High Court as first appellate court. A second appeal is constrained from re-assessing the factual record absent no-evidence findings or misapprehension of law, so the High Court's finding that the appellant failed to substantiate his claims could not be disturbed.

Under Section 56(1) of the Tax Procedures Act the burden of proving a tax decision incorrect rests squarely on the taxpayer. The appellant's explanations for the deposits were general and unsupported by verifiable documentation such as loan agreements, sale contracts or bank statements capable of displacing the Commissioner's assessment. Mere assertions or schedules without primary evidence cannot discharge the statutory burden. Whether sufficient documents were furnished is essentially factual and binding on second appeal, per Kenya Breweries Ltd v Godfrey Odoyo; no error of law was demonstrated in the concurrent findings of the courts below.

Section 72D of the Income Tax Act (inserted by Act No. 8 of 1997, now repealed) imposed a 20% penalty on unpaid tax, and Section 94 imposed late payment interest at 2% per month capped at 100% of the principal; Section 84 of the Tax Procedures Act provides shortfall penalties for false or misleading statements. These provisions are self-executing: once liability is established, penalties and interest accrue by operation of law, not at the Commissioner's discretion. Persuasive Indian authority (Commissioner of Income Tax v Eli Lilly & Co (India) Pvt Ltd) confirms their compensatory character, making the imposition lawful and inevitable once liability was established.