Ntayiya v South African Revenue Service (848/2023) [2025] ZASCA 183 (1 December 2025)

Case Note

Ntaiya v South African Revenue Service (848/2023) [2025] ZASCA 183 (1 December 2025)

Reportability

This case is deemed not reportable, as it does not meet the criteria for establishing a precedent of substantial legal importance. However, it sheds light on the interpretation and application of the Tax Administration Act 28 of 2011 and the procedures involved in tax assessments, particularly regarding the imposition of penalties for understatement of income. This judgment underscores the necessity for clear communication between taxpayers and tax authorities, especially concerning the response to audits and submissions of tax returns.

Cases Cited

• Plascon-Evans Paints Ltd v Van Riebeeck Paints (Pty) Ltd 1984 (3) SA 623 (A)
• Commissioner for Inland Revenue v McNeil 22 SATC 374
• ABC Holdings (Pty) Ltd v Commissioner for SARS (ITC) 1890 [2016] ZATC 7; 79 SATC 62
• Rail Commuters Action Group and Others v Transnet Ltd t/a Metrorail and Others [2004] ZACC 20; 2005 (2) SA 359 (CC)

Legislation Cited

• Income Tax Act 58 of 1962
• Tax Administration Act 28 of 2011

Rules of Court Cited

• Uniform Rules of Court

HEADNOTE

Summary

In this appeal case, Fikile Ntayiya contested the assessments made by South African Revenue Service (SARS), alleging he was improperly penalized for submitting nil tax returns despite having income during the assessment years. The Supreme Court of Appeal upheld the High Court's dismissal of the appeal, reinforcing the validity of penalties imposed by SARS and emphasized the taxpayer's responsibility for their financial declarations.

Key Issues

The major legal issues addressed in this case involved the following: 1. Whether the submission of nil returns constitutes a basis for imposing penalties under the Tax Administration Act. 2. The nature of the taxpayer’s conduct in filing these returns and the associated fines for intentional tax evasion. 3. The legitimacy of a claim for the repayment of seized funds, based on the taxpayer's assertion of erroneous assessments.

Held

The Supreme Court of Appeal dismissed the appellant’s appeal, reaffirming the High Court's decision. The court found that the penalties imposed by SARS were justified due to the intentional nature of the tax evasion through the submission of nil returns. Furthermore, the court rejected the request to present new evidence on appeal and ordered costs against the appellant.

THE FACTS

Fikile Ntayiya, an attorney operating in Mthatha, filed nil income tax returns for the periods between 2008 and 2013, leading to a substantial audit by SARS that concluded he had undisclosed taxable income amounting to R3.6 million. The case arose from SARS's refusal to refund ₹762,335.08 that was attached from his law firm’s bank account as a security measure for his tax debts. The case encompasses a review of the taxation laws that govern the imposition of penalties, including those for intentional understatements of income.

THE ISSUES

The court was tasked with determining several key legal questions: 1. Did the appellant's submission of nil returns trigger lawful penalties under the Tax Administration Act? 2. Was the conduct of the appellant, particularly his claims of inadvertent error, sufficient to exempt him from penalties? 3. What was the impact of the abandonment of certain prayers in the notice of motion regarding the potential refund owed to the appellant?

ANALYSIS

The court grounded its analysis in the specifics of the Tax Administration Act, particularly sections 221 to 223 which delineate the penalties for understatement of income due to both omission and erroneous statements in tax returns. The judgment emphasized the dual role of the taxpayer's declarations and the responsibility to ensure accuracy. The court's rationale leaned heavily on the differentiation between bona fide errors and intentional misstatements, concluding that the appellant's persistent nil returns, despite evidence to the contrary, amounted to a conscious act of evasion.

The court also addressed the implications of the appellant abandoning parts of his relief requests. This abandonment effectively precluded the court from considering elements of the 2014 assessments, thereby weakening the appellant's position in contesting the penalties imposed. The Court invoked established precedent from Plascon-Evans, indicating that disputes of fact must be substantiated adequately, and the onus rested with the appellant to clarify any ambiguities concerning the assessments.

REMEDY

The Supreme Court of Appeal dismissed the application to lead new evidence and affirmed the High Court's findings. Consequently, the appellant was instructed to bear the costs of the appeal, including counsel fees.

LEGAL PRINCIPLES

The ruling established several key legal principles: 1. Intentionality in Tax Returns: Submitting inaccurate or nil returns knowingly can result in severe penalties under tax legislation, highlighting the importance of truthfulness in taxpayer obligations. 2. Finality of Assessments: Abandonment of claims affects a taxpayer's ability to contest previous assessments, emphasizing the necessity of pursuing all available legal avenues in initial proceedings. 3. Evidence and the Burden of Proof: Taxpayers bear the burden of proving that assessments or penalties are unjust, requiring concrete evidence to counter the claims of tax authorities.

The case serves as a pertinent reminder of the rigor required in fulfilling tax obligations and the consequences of failing to maintain accurate financial records.