Failure to File a Return is Equal to ”Wilful Neglect “

Case Study: Kasema t/a Aracari Enterprises v Commissioner of Domestic Taxes (Tax Appeal E191 of 2023) [2025] KETAT 411 (KLR) (28 November 2025) (Judgment)

Background & Procedural History:

The Tribunal initially ruled in favor of Kasema on March 22, 2024, setting aside income tax assessments for 2015 and 2016 on the grounds that they were issued outside the statutory time limit (“time-barred”).

KRA appealed to the High Court.

The High Court, in its judgment dated June 13, 2025, found merit in KRA’s appeal. It held that while the Tribunal was correct to raise the time-bar issue on its own motion, it erred by ruling on it without first giving both parties a chance to present arguments. The High Court sent the matter back to the Tribunal for a full determination on the validity of the assessments.

This Tribunal judgment is the result of that rehearing.

The Core Issue for Determination:

Whether the income tax assessments for the years 2015 and 2016 were statutorily time-barred.

Tribunal’s Analysis & Findings:

A. On the 2016 Assessment:

• KRA proved that Kasema filed his 2016 self-assessment return on June 26, 2018.
• The law (Section 31(4)(b) of the Tax Procedures Act – TPA) states that the 5-year period for amending an assessment starts from the date the self-assessment return was submitted.
• Therefore, the clock started on June 26, 2018. Five years from that date would be around June 2023.
• KRA issued the amended assessment on November 7, 2022, which was within the 5-year window.
• Finding: The 2016 assessment was NOT time-barred.

B. On the 2015 Assessment:

• It was undisputed that Kasema did not file any tax return for 2015.
• The general rule (Section 29(5) of the TPA) is that a “default assessment” for non-filing cannot be made after 5 years from the end of the relevant period.
• However, an exception (Section 29(6) of the TPA) exists for cases of “gross or wilful neglect, evasion or fraud by a taxpayer.”
• The Tribunal agreed with KRA that the failure to file a return, especially when income was allegedly earned, constitutes wilful neglect.
• Therefore, the 5-year limitation rule did not apply.
• Finding: The 2015 assessment, though issued beyond 5 years, was NOT time-barred due to Kasema’s wilful neglect.

C. On the Burden of Proof:

• The Tribunal reiterated that in tax appeals, the burden is on the taxpayer (Kasema) to prove that an assessment is incorrect or excessive (Sections 56(1) of TPA and 30 of TATA).
• The Tribunal found that Kasema failed to discharge this burden. He did not provide sufficient evidence to show the assessments were wrong, even after being given a second chance during the rehearing.

Final Decision:

The Tribunal dismissed the Appeal. It upheld KRA’s objection decision dated March 23, 2023. Each party was to bear its own costs.

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