PART A

INTRODUCTION

“Best judgment rule” possess no statutory definition, however judicially it was explained in the
case of GundaShubbaya vs. CIT to mean that “the Commissioner must have material on
which to base his assessments must not be capricious, and is not entitled to make a guess without
evidence, in that, he must himself take steps to procure material for the purpose if it is not
already in his possession. The Commissioner in this regard has power to call witnesses and can
make his own enquiries”.1
In the light of the case of CIT vs. AA the defendant having failed to submit a return was
assessed to tax on estimated income. Notice of assessment was served on him by post. No
objection was made against the assessment. Neither was any appeal lodged. When the demand
note for the tax was served the taxpayer disputed it. It was then held that the taxpayer was liable
on the tax assessed on estimated income.2
Also, in the case of CIT vs. Gian Singh the defendant neglected to submit a return of income.
The Commissioner assessed him to income tax on estimated income. He did not object or appeal
against the assessment. Having failed to pay the tax due after the demand note was served; the
Commissioner sued him for the tax and penalties. The defendant claimed that the assessments
were excessive. The court inter alia held that: Assessments are final and conclusive unless they
are varied on objection or appeal.3
In Tanzania, best judgment rule were adopted from India as there is no enacted provision to
provide for what it meant by best judgment rule rather there are provision to provide for
circumstances for the application of this rule.
This rule is normally apply where the taxpayer has not filled an income tax return but the
Commissioner considers that such a person has income chargeable to tax underSection 94(5)
ofthe Income Tax Act.4 According to the provision of this section, commissioner of income tax
has been vested with the power of determining according to0746218779 best of his judgment,
the amount income of an individual and assess the tax accordingly, where an individual has not

1
(1939) 1 ITR 21
2
Makinyka, Source BookIncome Tax law in Tanzania,P.211
3
3 EATC 24
4
[CAP. 332 R.E. 2010]
filed a return for any year of income whether or not he has been required by commissioner to do
so.
Although, “best judgment rule” seems to apply in most cases where an individual is in default of
submitting his annual returns whether or not he was required to do so by the commissioner, that
does not confine the parameters for the application of this rule since there are some convenient
circumstances whereby this rule applies as it is explained hereunder;
MAINBODY
In Tanzania, “best judgment rule” was adopted by our Income Tax Act, therefore it has legal
effect. The parameters for the applicability of this rule are as follows;
First and foremost, according to Section 94(4) (b) of the Income Tax Act, where an individual
has filed a return of income and the commissioner has reasonable cause to believe that such
return is not true and correct, the commissioner under the umbrella of the best of his judgment
may determine the amount of that individual and assess the tax accordingly. 5 In this sense, the
commissioner may impose any penalty to be paid by an individual who is believed to submit a
return which is either not true or that which were incorrectly made.
Another circumstance, where best judgement rule applies is when an individual is on default of
submitting a return for any year of income as it is provided forthwith under Section 94(5)
ofIncome Tax Act; in this case the commissioner via best of his judgment may determine the
income of that individual and assess the tax accordingly. Therefore under this rule the
commissioner may impose any penalty as he deemed fit due to that default.6

Again, where the tax payer under estimate the returns which is required to the CIT as it was
elaborate in the case of CIT vs. Army Strongwhereby commissioner general was empowered
to rely on best judgment rule where it is on his believe that the tax payer has under estimate the
return to be submitted to him.7

Also, while acting under best judgment rule, the commissioner may adjust assessment at any
time he deemed fit, in case the person assessed fails to file a return income in accordance with
the law with the intent of evading or delaying the payment of tax or in case of an assessment that

5
Ibid
6
Ibid
7
Makinyika, L, Op. cit,p.213
is inaccurate by reason of fraud by or on behalf of the assessed person. This is provided forunder
Section 96(3) (a) & (b) of Income Tax Act.8

Furthermore, in the case of Jumbo Mills Transport Ltd vs. Commissioner General, the
commissioner general has been vested with the powers of using mathematical figures to assess
number of units in large quantities with justification thereon through best judgment rule. 9 In this
sense while commissioner of income tax is thereby to determine the amount to be paid after
having assess the person who failed to dully submit return of income tax annually as it is
required by the law then commissioner may use mathematical figures to assess number of units
in large number after being satisfied to the best of his judgment that it is proper to do so and
there will be none to preclude him in acting in best of his judgment provided that he has made an
inquiry and consult witnesses(if any) to serve that purpose.

By the virtue of the case of Wild Spirit Safaris Ltd. vs. Commissioner General, where the best
judgment rule will not be invalid where the commissioner has the justification when he make an
assessment on best of his judgment. By this reason best judgement rule should be implemented
with reasonable justifications.10 Therefore, the commissioner may call witnesses and make his on
inquiries as he deemed fit for the purpose of guiding him in reaching appropriate decision hence
best of his judgment.

CONCLUSION

By summing up, “best judgment rule” though is subjected to some limits still it is against the
principles of natural justice as it imposes wide discretionary power to the commissioner without
considering persons who are affected by this rule. For instance this rule does not expressly
provide for the right of being heard to an individual in default, also this rule contravenes the rule
of not being a judge in your own casebecause commissioner being part of the matter is again act
as the judge to determine the same.

8
Ibid
9
(2003) Vol. 2 TTLR 12
10
(2002) Vol. 2
PART B

INTRODUCTION

In the process of assessment, certain income of the taxpayer may escape assessment or be under
assessed. When this happens, the Commissioner is empowered to raise an additional assessment.
Such assessment is called additional assessment.11

This concept of additional assessment is very much affected by the failure to file the annual
returns by the tax payer. When the annual returns have been properly filed, assessment is based
on the filed annual returns. But when the annual returns are not filed, then additional assessment
is done basing on the best of the judgment of the commissioner.12

In the other hand, rule of finality is reflected under a Section 15(1) of the Tax Revenue Appeals
Act, to imply that where in relation to any assessment no notice of objection has been filed or
where the notice of objection has been filed and the assessment has been amended or assessment
has been finally determined in the appeal then the assessment as amended or determined in
appeal shall be final and conclusive.

MAINBODY

In light of the facts elucidated in the scenario, the following issues needs to be discussed in
determining chances of the company to succeed;

Whether the commissioner of income tax has the power of making additional assessment even
for the past year of income i.e. 2013/2014?

By the virtue of Section 15(1) (a) of the Tax Revenue Appeals Act, where in relation to any
assessment no notice of objection has been given then the assessment shall be final and
conclusively as it was made.13 Again, according to Section 15(2) of the Tax Revenue Appeals
Act, commissioner general has been vested with powers of making additional assessment which
does not involve reopening of any matter that has be determined on appeal or an
assessment.14Furthermore, according to the case of Diamond Motors Ltd. vs. Commissioner
11
Act no. 15 0f (2000)
12
Ibid
13
Ibid
14
Ibid
General an additional assessment should made pursuant to the provisions of Section 15(2) 0f
the Tax Revenue Appeals Act.15

Regarding, above provisions of the law visa visfacts of the scenario, the additional assessments
which has been suddenly made by the Commissioner of Income Tax in respect of years of
income 2013/2014 are in controversial with the provision of law since the law under the
provision of Section 15(2)(supra) which prohibits additional assessment in respect of the matter
which tend to involve reopening any matter that has been determined on assessment. The same
has been cemented in the case aforementioned, and provision of Section 15(1)(supra) which
provides clearly on the rule of finality.

By summing up, that additional assessment which has been made by the Commissioner of
Income Tax in respect of the years of income 2013/2014 is outside the parameters of laws
whichallow additional assessment since it was made against the rule of finality.

Another issue is whether the company has any venue to challenge additional assessment made by
Commissioner of Income Tax?

According to Section 12(1) of the Tax Revenue Appeal Act Any person who disputes an
assessment made upon him by the Commissioner General may, by notice in writing to
theCommissioner General, object to the assessment.16 Also, according to the provisions of
Section12(4) of theTax Revenue Appeals Act, a notice given pursuant to subsection (1) shall
not be valid unless it contains a statement in a precise form, of the grounds in respect of which
the objection is made and is submitted and received by the Commissioner General within thirty
days from the date of service of the notice of assessment.17

By summing up, since there was no any prior notification to the company as to the assessment,
as it was just made suddenly then the company has the venue of objecting such additional
assessment by issuing the notice of objection.

CONCLUSION
15
(2002) Vol. 1 TTLR 54
16
Id
17
Ibid
The company has the room to succeed on their matter by issuing the notice of objection to
challenge that additional assessment which in actual sense it was made contrary to the rule
finality which suppose that if there is no notice of objection as to the assessment which has been
already made then the latter shall be final and conclusively. In this sense, it will be prudent to
suggest that the Commissioner of Income Tax was acting ultra vireswhile imposing additional
assessment to the company.
 OUTLINE

PART A

INTRODUCTION

 Over view of best judgment rule

MAINBODY

 Circumstance under which best judgment rule applies

 Parameters for the application of best judgment rule

CONCLUSION

Recommendations as to the validity of best judgment rule

PART B

INTRODUCTION

 General remarks on key words; additional assessment and rule of finality

MAINBODY

 Issues, Laws applicable, Applicability of law in facts, Summing up

CONCLUSION