Case Reference: Michael Ndichu Mburu v The Commissioner of Domestic Taxes (Civil Appeal No. E275 of 2023) [2026] KECA 1538 (KLR) (31 July 2026) (Judgment)
The Audit and the Assessment
The dispute began when the Commissioner of Domestic Taxes conducted an investigation into the tax affairs of Michael Ndichu Mburu, a director of Singapore Motors Limited, covering the years 2013 to 2017. Following the inquiry, the Commissioner issued a tax assessment of Kshs. 99,960,190, inclusive of penalties and interest.
Mburu lodged an objection, and upon review, the Commissioner confirmed a reduced liability of Kshs. 20,448,466 through an objection decision dated 23rd July 2019. Dissatisfied, Mburu appealed to the Tax Appeals Tribunal, which dismissed his appeal on 9th April 2021 and upheld the Commissioner’s decision in full.
The High Court and the Second Appeal
Aggrieved, Mburu moved to the High Court, challenging the Tribunal’s findings. He argued that the 2013 assessment was time-barred, that the Commissioner had erred by treating all credits in his personal bank accounts as taxable income, and that his supporting documentation had been disregarded. However, the High Court dismissed his appeal, holding that since he had failed to file returns, the Commissioner was entitled to assess tax beyond the five-year period, and that he had failed to provide sufficient documentation to prove the credits were not taxable income.
Undeterred, Mburu filed a second appeal to the Court of Appeal, attacking the High Court’s judgment on several grounds. He maintained that the 2013 assessment was unlawful and that the credits represented loans, property sales, and advances, not taxable income. The Commissioner opposed the appeal, arguing that Mburu’s failure to file returns amounted to wilful neglect, which permitted assessment beyond the statutory period.
The Court of Appeal’s Findings
The Court of Appeal dismissed the appeal, affirming that its jurisdiction in a second appeal is confined to matters of law only, as provided under Section 72(1) of the Civil Procedure Act and Section 56(2) of the Tax Procedures Act . It held that the 2013 assessment was not time-barred because it was issued in September 2018, before the expiry of the five-year window on 31st December 2018. Even if it had been issued later, the appellant’s admitted failure to file returns amounted to “wilful neglect” within the meaning of Section 29(6) of the Tax Procedures Act, which permits assessment beyond the limitation period.
On the crucial question of bank credits, the Court held that the deposits were correctly treated as income. The appellant’s claims that the deposits were from loans and property sales were unsupported by verifiable documentation such as loan agreements or sale contracts. Mere assertions and schedules cannot discharge this statutory burden under Section 56(1) of the Tax Procedures Act. The Court also upheld the imposition of penalties and interest, finding them lawful and self-executing once liability was established.
Practical Implications for Taxpayers
This case reinforces critical principles that every taxpayer and professional must understand:
- Money in Your Bank Account Is Presumed Taxable: If funds flow into your bank account, MPESA, or other financial channels, it is presumed taxable unless you provide credible and verifiable documentation to prove otherwise. The burden of proof lies on the taxpayer to show that a tax decision is incorrect .
- Objections Must Be Specific: Your objection must clearly state grounds for each tax head you dispute. Failing to object to a specific item, such as withholding tax or corporation tax, means that tax becomes “not in dispute” and must be paid before you can proceed .
- Wilful Neglect Extends Limitation Periods: Failure to file returns constitutes “wilful neglect,” which allows the Commissioner to assess tax beyond the standard five-year limitation period.
- Penalties and Interest Are Automatic: Once liability is established, penalties and interest accrue by operation of law, not at the discretion of the Commissioner.
- Engage Qualified Professionals: Tax disputes are complex, and procedural rules are strict. Engaging qualified tax lawyers or consultants can help you avoid costly mistakes, such as failing to object to all tax heads or missing appeal deadlines.
