[2025] KETAT 228 (KLR)

Aiveo Limited v Commissioner Legal Services and Board Coordination (Tax Appeal E945 of 2024) [2025] KETAT 228 (KLR) (9 May 2025) (Judgment)

Neutral citation: [2025] KETAT 228 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal E945 of 2024

CA Muga, Chair, BK Terer, EN Njeru, E Ng'ang'a & SS Ololchike, Members

May 9, 2025

Between

Aiveo Limited

Appellant

and

Commissioner Legal Services and Board Coordination

Respondent

Judgment

Background 1. The Appellant is a limited liability company incorporated within the Republic of Kenya. The Appellant is engaged in the business of beer distribution from UDV Limited and East Africa Breweries Limited.

2. The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act, CAP 469 of Kenya’s Laws (hereinafter “the Act”). Under Section 5 (1) of the Act, the Kenya Revenue Authority is an agency of the Government for the collection and receipt of all tax revenue. Further, under Section 5(2) of the Act with respect to the performance of its functions under subsection (1), the Authority is mandated to administer and enforce all provisions of the written laws as set out in Part 1 and 2 of the First Schedule to the Act for the purposes of assessing, collecting and accounting for all revenues in accordance with those laws.

3. The Respondent caried out a compliance check on the Appellant with a view to establishing whether the company was withholding VAT on local purchases. The Respondent established that the Appellant had incurred purchases for the period 2023 and 2024 amounting to Kshs 1,254,440,425. 53 and failed to withhold VAT as required under Section 39A of the Tax Procedures Act, CAP 469B of the Laws of Kenya (hereinafter “TPA”). The Respondent then issued the Appellant a demand notice dated 29th February, 2024 and asked it to remit Withholding VAT within 7 days. The Appellant having failed to comply, the Respondent issued assessment orders dated 24th April 2024.

4. The Appellant lodged its objection to the assessment vide a letter dated 24th May 2024. The Respondent then issued its objection decision dated 17th July, 2024 wherein it confirmed the taxes of Kshs 25,088,808. 51.

5. The Appellant, being dissatisfied with the Respondent's objection decision lodged an Appeal at the Tribunal vide notice of appeal dated 28th August 2024 and filed on even date.

The Appeal 6. The Appeal was founded on a Memorandum of Appeal dated 28th August 2024 and filed on even date. The Appellant raised the following grounds of appeal:a.That the Respondent erred in issuing a decision without considering the actual assessments being objected. The Respondent issued a decision without taking note of the amount assessed and amount demanded.b.That the Respondent ignored the issues raised in the objection and went ahead and confirmed the objection without taking into consideration facts provided both in hard copies and electronic mail.c.That the Respondent failed to consider the fact that there was no revenue leakage despite Appellant failing to withhold and pay taxes as stipulated despite electronic mail confirmation from the Appellant’s suppliers.d.That the Respondent erred by making the decision to demand the total amount that was supposed to be withheld despite the Appellant proving that the respondent lost no revenue despite the Appellant failing to withhold the tax as stipulated in TPA.e.That the Respondent failed to give the Appellant an opportunity to enjoy the benefit of lodging the objections on i-Tax as stipulated by TPA. Also, the Respondent failed to implement Appellant’s request to ensure that the objection was lodged via i-Tax despite several follow ups.f.That the Respondent requested for the following documents which could have facilitated the decision process; however, the information was not submitted in the form the Respondent wanted:i.Confirmation letter from Kenya Breweries Itd and UDV Kenya limited who are the main suppliers that the Appellant paid the full invoice value to the supplier and they declared the same to the Respondent; andii.Bank statements and Customer listing showing that the Appellant paid the full invoice value to suppliers and as result no tax was withheld.

Appellant’s Case 7. The Appellant filed Statement of Facts dated 28th August 2024 on even date. The Appellant also filed written submissions dated 18th March 2025 on even date.

8. The Appellant stated that the Respondent carried audit of the Appellant records from January 2023-January 2024 in respect of withholding VAT. On 29th February 2024, the Appellant received a letter demanding a payment of Kshs 25,088,808. 51 being the amount that was supposed to have been withheld and remitted to Kenya revenue authority covering the same period.

9. The Appellant submitted all the requested documents and had a series of meetings with the Respondent on the same matter. On 24th April 2024, the Appellant received two assessments that is; KRA202432381589- Kshs 12,255,974. 50 and KRA202432383265- Kshs 1,986,831. 20.

10. According to the Appellant, both assessments amounted to Ksh 14,242,805. 70 of which the Appellant manually objected through its letter dated 24th May 2024 on the advice of the officer in charge as the Appellant had challenges filing an objection on I-tax as the assessments were invalid.

11. It stated that on 17th July 2024, the Appellant received a letter from Respondent rejecting the objection application on the ground that the Respondent failed to provide documentary evidence and also failed to demonstrate that there was no revenue leakage due to the Appellant failing to withhold and remit withholding VAT during the period in question.

12. In its written submissions, the Appellant submitted that the objection decision was invalid because the assessments amounted to Kshs 14,242,805. 70 while the amount in the objection decision was Kshs 25,088,808. 51. The Appellant submitted that under section 51(8) of the TPA, the Respondent was limited to only vary the issues raised in its initial Assessment and not introduce issues or items not indicated in the initial assessment.

13. The Appellant cited the case of Commissioner of Domestic Taxes v Bank of Atrica Limited (Civil Appeal E127 of 2020) (2023] KEHC 1036 (KLR) and Kamindi Selfridges Supermarket Limited v Commissioner of Investigations Enforcement TAT No. 52 of 2021 where it was noted that there are limited options available to the Respondent under Section 51(8) of the TPA.

14. The Appellant submitted that there was a clear disconnect between the Assessments dated 24th April 2024 and the Objection decision dated 17th July 2024.

15. The Appellant submitted that the Respondent did not experience any revenue loss as the Appellant's suppliers accounted for Value Added Tax (VAT) at the rate of 16%. The Appellant submitted that attempting to collect the withholding VAT from the Appellant amounts to double taxation, which is illegal, oppressive and discriminatory.

16. It cited the case of Kenya Pharmaceutical Association & another v Nairobi City County and the 46 Other County Governments & another [2017] eKLR, where the Court held that a double tax is the taxing of the same income twice. It also relied on the case of Republic v County Government of Nyandarua; County Assembly of Nyandarua (Interested Party), Nyandarua Recreational & Entertainment Self Help Group & 12 others (Ex-parte) [2019] eKLR to support the position that double taxation is illegal.

17. The Appellant relied on Section 42A 4(C) and 4(D) of the TPA which provides as follows regarding failure by a withholding VAT agent to collect the Withholding VAT on behalf of the Commissioner:“(4C)A person who is required under this section to withhold tax commits an offence if the person(a)fails to withhold the whole amount of the tax which should have been withheld;(b)fails to remit the amount of the withheld tax to the Commissioner by the twentieth day of the month following that in which the deduction was made.(4D)Apperson who commits an offence under subsection(4C) is liable on conviction to a penalty of ten percent of the amount involved."

18. It therefore, submitted that for the Respondent’s demand to be valid, there needed to be a conviction, which was not the case. The Appellant relied on the case of Kipeto Energy PLC v Commissioner of Domestic Taxes (Appeal 233 of 2022) [2023] KETAT214(KLR) where the Tribunal held as follows;“In this regard, the Tribunal finds that as per the foretasted provision of the law, the Respondent should have instituted criminal proceedings against the Appellant if it found it to have breached the law.Consequently, although the Appellant had proved that the suppliers subsequently accounted fully for the VAT. It was within the Respondent's right to institute criminal proceedings against for the offence committed as provided the VAT Act,"

19. The Appellant sought the following reliefs:a.That the Tribunal do set aside the Respondent's decision delivered on 17th July 2024 as it lacked merit and was made without considering the material facts provided.b.That the Tribunal do order the Respondent to vacate the assessments done on 14th July 2024 amounting to Kshs 14,242,805. 70 as they are invalid and not supported with detailed schedule of what was being assessed.c.That the Tribunal do invalidate the demanded notices of Kshs 25,088,808. 51 done by the Respondent as the Appellant has provided evidence that there was no revenue lost despite the appellant failing to withhold and remit withholding VAT. Demanding this amount meant that the Appellant was being double taxed as the tax was fully accounted for.d.That the Tribunal to order the Respondent to review the tax record of our suppliers Kenya Breweries limited and UDV Kenya considering the have access to their records, this will help the Respondent in identifying whether there any revenue leakage as result of Appellant failing to withhold and remit the withholding VAT tax as stipulated.

The Respondent’s Case 20. In opposition to the Appeal, the Respondent filed its Statement of Facts dated 27th September 2024 on even date. The Respondent filed written submissions dated and filed on 10th March 2025.

21. The Respondent averred that the Appellant incurred purchases for the period 2023 amounting to Kshs 1,254,440,425-53, and failed to Withhold VAT as required under Section 42A (4B) and section 39A of the TPA.

22. The Respondent argued that the Appellant bears the burden to prove that the additional assessments were excessive or improper and from the documents adduced in support of their appeal, the same is not evident and therefore the Appellant has failed to discharge this burden as required by Section 56(1) of the TPA and section 30 of the Tax Appeals Tribunal Act, CAP 469A of the Laws of Kenya (hereinafter “TATA”).

23. It averred that the Appellant in its objection contended that its business operating system is such that its suppliers (EABL/UDV Kenya Ltd) controlled its bank accounts and therefore the suppliers collect the full invoices amounts when they fall due including the 2% not withheld and remit the same to the Respondent. Consequently, the Appellant had no control of what is collected.

24. Upon receipt of the Appellant’s grounds of objection, the Respondent stated that it requested the Appellant to provide relevant supporting documents in compliance with Section 51(3) of the TPA. The Respondent also stated that it requested the Appellant to avail a confirmation from its supplier (EABL) demonstrating that the withholding tax was fully accounted for, precisely documentary evidence and a direct communication sent from suppliers.

25. The Respondent pleaded that it was not in dispute that the Appellant was appointed as a withholding VAT agent. It stated that under Section 42 A (1) of the TPA, the Appellant had an obligation as a withholding VAT agent to withhold and remit 2% of the taxable value incurred on purchasing taxable supplies at the time of paying for the supplies. It stated that the amount not withheld should be due and payable by the Appellant.

26. The Respondent pleaded that it acted at all times in pursuant to the relevant tax laws and considered all of the documentation availed. The Respondent added that its conduct was faultless and that it arrived at a logical assessment.

27. The Respondent asserted that the Appellant failed to prove that the assessment was excessive and/ or the Respondent's Objection decision ought to have been made differently.

28. It also put in written submissions wherein it submitted that the additional assessments were justified on the basis that it relied on its best judgement based on information available to it in compliance with Section 31 of the TPA while raising the additional VAT and Income Tax Assessments. The Respondent cited the case of Commissioner of Domestic Taxes v Altech Stream (Ea) Limited [2021] eKLR where the Court held that Section 31(1) of the TPA allows the Commissioner to make an assessment based on such information as may be available and to the best of his judgement.

29. The Respondent submitted that the failure of the Appellant to avail documents and/ or sufficient information upon receipt of the Demand Notice dated 29th February, 2024 to debunk the findings of the Commissioner caused the Commissioner to issue assessments.

30. It relied on Mulherin v Commissioner of Taxation [2013] FCAFC 115 the Federal Court of Australia held that in tax disputes, the taxpayer must satisfy the burden of proof to successfully challenge income tax assessments. It also cited the case of Intime Stone Age Limited v Commissioner of Domestic Taxes (Appeal 714 of 2022) [2024] KETAT 44 (KLR) (26 January 2024) (judgment) to emphasize the need of the taxpayer to provide relevant and specific documents to support its grounds of objection.

31. The Respondent submitted that it was right in its conclusion that the objection of the Appellant fell short. It relied on Osho Drapers Limited v Commissioner of Domestic Taxes 2022] eKLR in which the court held that Section 59 of the TPA empowers the Commissioner to request for more and additional information to satisfy himself on the taxable income declared.

32. The Respondent submitted that Sections 23 and 59 of the TPA depict that the Appellant has an obligation to keep records and produce them when called upon to do so by it but the Appellant failed.

33. The Respondent relied on Boleyn InternationalLimited v Commissioner of Investigations & Enforcement (Tax Appeal Tribunal No 55 of 2019; and Rongai Tiles and Sanitary Ware Limited v Commissioner of Domestic Taxes (TAT No 163 of 2017) to submit that the Appellant ought to have provided documents in support of notice of objection but it failed.

34. The Respondent also submitted that the appeal was invalid as the Appellant filed the appeal out of time without leave from the Tribunal.

35. Based on the foregoing the Respondent prayed that the Tribunal be pleased to uphold the Respondent's objection decision dated 17th July 2024 and dismiss the appeal with costs to the Respondent.

Issues for Determination 36. The Tribunal having considered the parties’ pleadings, puts forth the following issues for determination:a.Whether the Appeal is properly before the Tribunal;b.Whether the objection decision offends Section 51(8) of the TPA; andc.Whether the Appellant discharged burden of proof.

Analysis and Findings a. Whether the Appeal is properly before the Tribunal 37. The Respondent issued objection decision dated 17th July 2024 wherein it confirmed the taxes of Kshs 25,088,808. 51. The Appellant being dissatisfied with the decision, lodged this appeal vide notice of appeal dated 28th August 2024 and filed on even date. The Respondent submitted that the appeal was invalid as the Appellant filed the appeal out of time without leave from the Tribunal.

38. Section 13 of TATA provides for the procedures to be followed when filing an appeal. In particular section 13(1) of TATA provides as follows:‘‘Procedure for appeal(1)A notice of appeal to the Tribunal shall—(a)Be in writing or through electronic means;(b)Be submitted to the Tribunal within thirty days upon receipt of the decision of the Commissioner.’’

39. Pursuant to the date of notice of appeal and the date of filing, it was apparent that the Appellant filed the notice of appeal in contravention of Section 13(1) of TATA since it filed the notice of appeal beyond the statutory thirty days.

40. Whereas Section 13(1) of TATA provides that the notice of appeal has to be filed within 30 days upon receipt of the decision of the Commissioner. Thus, Appellant’s notice of appeal ought to have been done by 16th August 2024. The Act is also alive to the fact that a taxpayer may be unable to comply with the said timeline. Consequently, Section 13(3) and (4) of TATA provides as follows:‘‘(3)The Tribunal may, upon application in writing or through electronic means, extend the time for filing the notice of appeal and for submitting the documents referred to in subsection (2).(4)An extension under subsection (3) may be granted owing to absence from Kenya, or sickness, or other reasonable cause that may have prevented the applicant from filing the notice of appeal or submitting the documents within the specified period.’’

41. The Tribunal perused the Appellant’s pleadings to find out whether the Appellant filed an application for enlargement of time. Whereas the Appellant filed an application dated 18th March 2025 seeking leave to amend its memorandum of appeal which application was dismissed by this Tribunal, there was nothing on record to indicate that the Appellant made an application under Section 13(3) of TATA. Further, there was nothing on record to indicate that the Appellant obtained leave to file the appeal out of time under Section 13(4) of TATA.

42. A taxpayer must obtain leave to file an appeal out of time. In County Executive of Kisumu v County Government of Kisumu & 8 others (Civil Application 3 of 2016) [2017] KESC 16 (KLR) the Supreme Court stated as follows:‘‘We are in total agreement with the respondent that an appeal filed in this Court out of time without leave of this Court is irregular and this Court will not invoke such ‘novel’ principles as urged by applicant so as to validate that petition and deem it as properly filed.’’

43. In Commissioner of Domestic Taxes v Lifecare International Brokers Limited [2020] eKLR Majanja J (as he was then) observed the following:“Failure to file an appeal within time and without complying with statutory conditions is not a mere technicality that can be overlooked, it goes to the competence of the appeal. Counsel for the Appellant valiantly addressed the court on why the court should validate the appeal. The issues raised are factual issues that call for the court to exercise its discretion and can only be addressed in an appropriate application which is not before the court."

44. Both taxpayers and the Respondent must adhere to express provisions of the law to successfully invoke the powers of this Tribunal. In the case of W.E.C. Lines Ltd v TheCommissioner of Domestic Taxes [TAT Case No.247 of 2020] it was held at paragraph 70 while reiterating the following holding in Krystalline Salt Ltd vs. KRA [2019] eKLR:“Where there is a clear procedure for redress of any particular grievance prescribed by the constitution or an Act of Parliament, that procedure should be strictly followed. Accordingly, the special procedure provided by any law must be strictly adhered to since there are good reasons for such special procedures. The relevant procedure here is the process of opposing an assessment by the Commissioner.”

45. Failure to seek leave to file appeal out of time goes to the root of the appeal and negatively affects jurisdiction of this Tribunal. The Court of Appeal in the case of Patrick Kiruja Kithinji v Victor Mugira Marete MRU CA Civil Appeal No. 48 of 2014 [2015] eKLR the court held as follows:‘‘It is our view, whether or not an appeal is filed on time goes to the jurisdiction of this Court. It is trite that this Court has jurisdiction to entertain appeals filed within the requisite time and/or appeals filed out of time with leave of the Court. To hold otherwise would upset the established clear principles of institution of an appeal in this Court. Consequently, we find that an appeal filed out of time is not curable under Article 159. ’’

46. A Court of law and indeed this Tribunal cannot make a move without jurisdiction. In the locus classicus case of Owners of the Motor Vessel “Lillian S” v Caltex Oil (Kenya) Ltd [1969] KLR, Nyarangi JA held, inter alia as follows:‘‘…Jurisdiction is everything. Without it, a court has no power to make one more step. Where a court has no jurisdiction, there would be no basis for a continuation of the proceedings pending other evidence. A court of law downs its tools in respect of the matter before it the moment it holds the opinion that it is without jurisdiction.”

47. Pursuant to the foregoing analysis, the Tribunal finds that Appellant failed to follow clear provisions of the law under section 13(3) as read with section 13(4) of the TATA. Therefore, the Jurisdiction of the Tribunal to hear and determine the matter is vitiated. Consequently, the Tribunal finds and holds that the Appeal is improperly before it and ought to be struck out.

48. The Tribunal will not delve into the other issues for determination as the same are rendered moot by its preceding findings.

Final Decision 49. The Tribunal having so established the foregoing, the Tribunal makes the following Orders:a.The Appeal be and is hereby struck out.b.Each party to bear its own cost.

50. It is so Ordered.

DATED AND DELIVERED AT NAIROBI ON THIS 9TH DAY OF MAY, 2025. CHRISTINE A. MUGA - CHAIRPERSONBONIFACE K. TERER - MEMBERELISHAH N. NJERU - MEMBEREUNICE N. NG’ANG’A - MEMBEROLOLCHIKE S. SPENCER - MEMBER