False Nil Returns, Intent and Tax Consequences - Ntayiya v SARS
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Fikile Ntayiya, an attorney, submitted nil tax returns from 2008 to 2013, claiming he had no taxable income. These returns were prepared by his accountants. However, a 2014 SARS audit found significant deposits in his bank accounts and concluded he had under-declared his income. SARS issued assessments totalling R3.6 million, including a 150% understatement penalty (USP) for alleged intentional tax evasion.
How the Dispute Unfolded
Ntayiya’s initial objection and appeal to SARS were dismissed. He then approached the High Court in Mthatha, seeking to overturn the assessments. That application was struck off for failing to give SARS proper notice as required by law. He then appealed to a full court of the same division. A full court is when three or more judges of a High Court sit together to hear an appeal from a single judge’s decision. It’s typically used for appeals that don’t yet go to the Supreme Court of Appeal (SCA), often to re-evaluate legal or factual findings.
The full court overturned the procedural dismissal and sent the case back to the High Court to hear the merits. It also suggested the parties consider Alternative Dispute Resolution (ADR), which they agreed to pursue. Ntayiya submitted revised financials via new accountants (APAC), but SARS largely upheld the original assessment. It later froze R1.2 million from his law firm’s bank account to secure the debt.
High Court Outcome
Back in court, Ntayiya abandoned the key parts of his case, including challenging the original 2014 assessments and the validity of the nil returns. He only asked the court to order SARS to repay R762,335.08, part of the frozen funds. The High Court dismissed this request, noting unresolved factual disputes and that the underlying assessments had not been set aside.
Ruling of the Supreme Court of Appeal (SCA)
Ntayiya then turned to the SCA, seeking to:
Introduce new evidence showing SARS may have frozen the wrong bank account.
Overturn the ruling denying him repayment.
The SCA dismissed both efforts, explaining:
The law firm is a separate legal entity and not a party to the case.
The attached funds belonged to the firm, but Ntayiya was claiming repayment personally—a legal contradiction.
The assessments from 2014 were still legally binding because he abandoned his challenge to them.
The penalties, including the 150% USP and a 10% tax on private vehicle use, were upheld. Notably, SARS relied on evidence like bank statements and vehicle purchases, while Ntayiya failed to provide documents (e.g., logbooks) to justify business use.
The SCA dismissed the appeal with costs, including the cost of two counsel, stating that Ntayiya’s decision to drop key parts of his case was fatal to his argument.
Lessons Learnt From the Case
This case serves as a sharp reminder that SARS takes the accuracy of tax filings—especially nil returns—very seriously, and that intent matters. Even if a taxpayer blames their accountants for errors, courts will still examine the surrounding facts to determine whether the taxpayer knowingly misrepresented their income. The taxpayer is ultimately responsible for their tax affairs. In this case, SARS found strong circumstantial evidence, including:
Deposits in his accounts,
Ownership of luxury vehicles, and
A signed affidavit stating he earned no income.
All of this painted a picture of intentional evasion, which justified the harsh 150% understatement penalty. Importantly, the court emphasised that without solid documentation to support claims—like logbooks for business travel or corrected statements—those defences fall flat. Tax practitioners should be aware that SARS monitors patterns of zero-income returns across both individuals and firms. If you’re filing nil returns for clients, you'd better have robust records and justifications in place. This judgment also signals that SARS is watching tax advisors too—the profession is expected to exercise due care, and mistakes can trigger serious consequences for both clients and the advisers who submit on their behalf.
