[2023] KETAT 930 (KLR)

Ali v Commissioner Domestic Taxes (Tax Appeal 1381 of 2022) [2023] KETAT 930 (KLR) (24 November 2023) (Judgment)

Neutral citation: [2023] KETAT 930 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal 1381 of 2022

RM Mutuma, Chair, W Ongeti, M Makau, EN Njeru & BK Terer, Members

November 24, 2023

Between

Abdiaziz Ahmed Ali

Appellant

and

Commissioner Domestic Taxes

Respondent

Judgment

Background 1. The Appellant is a registered taxpayer within the Republic of Kenya.

2. The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act, Cap 469 Laws of Kenya. The Kenya Revenue Authority (“KRA”) is an agency of the Government of Kenya for assessing, collecting, and accounting for all revenue.

3. On 21st October 2021, the Respondent issued a notice of intention to verify tax declarations to the Appellant.

4. On 27th July 2022, the Respondent communicated to the Appellant the assessment for the period 2018 to 2020 adding up to Kshs. 3,692,287. 00. The Appellant lodged an Objection against the assessment on its iTax portal on 3rd August 2022 which was invalidated by the Respondent on 4th August 2022.

5. On 25th August 2022, the Respondent issued an Objection decision to the Appellant for the objection applications amounting to Kshs. 2,674,574. 88.

6. On receiving the Objection decision and being aggrieved, the Appellant filed this Appeal on 16th November 2022.

The Appeal 7. In its Memorandum of Appeal dated 15th November 2022 and filed on 16th November 2022, the Appellant premised its Appeal on the following surmised grounds:a.The output VAT declared by the Appellant for the period January to December 2018 is valid and complete as prescribed in the VATAct.b.All sales declared by the Appellant during the same period were from actual sales made to the Appelant’s customers and correctly filed with the Respondent.c.The Appellant has no knowledge of the basis of the confirmation of the assessment.

The Appellant’s Case 8. The Appellant set down his case in his Statement of Facts dated and filed on 16th November 2022.

9. The Appellant stated that the Respondent issued him with a confirmation of assessment dated 25th August 2022 and 2nd September 2022 wherein the objected amounts VAT of Kshs 857,102. 88 and Income tax of Kshs 1,817,472 was confirmed.

10. He averred that the output VAT declared by the Appellant during the same period was from actual sales made to his customers and correctly filed with the Respondent.

11. The Appellant contended that he filed his returns on the due dates as prescribed in theVATAct and the Income Tax Act.

12. The Appellant did not file his submissions. Consequently, the Tribunal shall rely on the available pleadings and documents attached to determine the totality of his case.

The Appellant’s Prayers 13. The Appellant subsequently prayed for the following from the Tribunal:a.The Respondent’s confirmation of assessment of VAT dated 25th August 2022 and Income Tax dated 2nd September 2022 is declared null and void.b.The Respondent be restrained on any recovery process of the confirmed tax on any of the Applicant’s assets.

The Respondent’s Case 14. The Respondent’s case is premised on its:a.Statement of Facts dated and filed on 16th December 2022. b.Written Submissions dated and filed on 10th July 2023.

15. The Respondent relied on Section 24 of the Tax Procedures Act 2015 and stated that it is not bound by the information provided in the tax returns submitted by the Appellant and can assess for additional taxes based on any other available information.

16. The Respondent cited Section 31 (1) (c) of the Tax Procedures Act 2015 and averred that it has the power to amend a taxpayer’s assessment to the best of its judgment.

17. It contended that the Output VAT declared by the Appellant for the period was not supported by documentation since the Appellant could not provide all the banking records, sales invoices, and ledgers to ascertain the low turnover and stock analysis. Additionally, the Respondent averred that it could not ascertain the actual sales for the period since the documentation provided was insufficient.

18. It cited Section 23 of the Tax Procedures Act and Section 43 of the VATAct and maintained that the Appellant is duty-bound to keep and maintain proper records for tax computation purposes.

19. The Respondent averred that the Appellant was informed of the assessment and had knowledge of the findings communicated informing him to pay the taxes due or file an objection which he failed to do leading to the confirmation of the assessment.

20. The Respondent stated that it relied on the Appellant’s self-assessment and documents availed in assessing the Appellant and it is trite that the Commissioner’s communication of tax deficiencies is presumptively correct which presumption remains the same until the Appellant produces competent and relevant evidence to support his position.

21. It contended that the Appellant cannot fault it for relying on the available records to assess and confirm assessments after several failed attempts to provide accurate documents and that the Appellant failed to meet the burden of proof contrary to Section 56 (1) of the Tax Procedures Act. It reiterated that the confirmed assessment issued is proper and should be upheld.

22. On whether the Respondent erred in the computation and confirming the additional assessment, the Respondent relied on Sections 31 (c), 59, and 51 (3) (c) of the Tax Procedures Act and submitted that the Appeal herein is incompetent and premature as the Appellant failed to provide the requested documents thus additional assessments were raised.

23. The Respondent reiterated that the Appellant failed in his duty to supply the Commissioner and the Tribunal with documentary evidence or any other evidence to support its claim that the Respondent’s additional assessments were erroneous.

24. It relied on the cases of Ocean Freight (EA) Limited vs. Commissioner of Domestic Taxes [2018] eKLR and Primarosa Flowers Limited vs. Commissioner of Domestic Taxes (2019)eKLR where the case of Mulherin vs. Commissioner of Taxation (2013)FCAFC 115 was approvingly cited and maintained that the Tribunal must uphold the Respondent’s assessment as a true reflection of the Appellant’s tax liability in the absence of the taxpayer’s demonstration that over and above claiming that the Respondent erred in rejecting its objection, how and to what extent the assessment regarding the taxes due and payable was erroneous.

25. It relied on Section 56 (1) of the Tax Procedures Act and the case of Grace Njeri Githua vs. Commissioner of Investigations & Enforcement (TAT No. 102 of 2018) and submitted that upon receipt of the additional assessments, the burden of proof shifts to the Appellant to disprove the Respondent’s position and the Appellant is meant to demonstrate that the Respondent erred in coming to the tax position.

26. It further cited the cases of TAT No. 55 of 2018 Boleyn International Limited vs. Commissioner of Domestic Taxes and TAT No. 70 of 2017 Afya X Ray Centre Limited vs. Commissioner of Domestic Taxes to buttress its position that due to the Appellant’s failure, the grounds of objection remained mere averments without basis.

27. It also cited Section 107 of the Evidence Act and argued that the Appellant, even before this Tribunal, has not made any attempt to discharge the pending burden of proof and having established that there was no error in its additional assessment and Objection decision, they were both right in law.

The Respondent’s prayers 28. The Respondent, therefore, prayed for orders that the Tribunal:a.Upholds the Respondent’s assessment.b.Dismisses the Appeal with costs.

Issues for Determination 29. Gleaning through the Memorandum of Appeal, the parties’ Statements of Facts, and the Respondent’s submissions, the Tribunal puts forth the following as the main issue for determination:Whether there was a competent Appeal on record.

Analysis and Findings 30. The Tribunal wishes to analyze the issue as herein-under.

31. The Tribunal noted that the Notice of Appeal was lodged on the 16th November 2022 stemming from the grievance with the Objection decision issued on 29th August 2022.

32. For a Notice of Appeal to be deemed as competently lodged, the same ought to be made and/or lodged within the prescribed timelines as set out under Section 13 (1) (b) of the Tax Appeals Tribunal Act, which states:“A notice of appeal to the Tribunal shall—(b)be submitted to the Tribunal within thirty days upon receipt of the decision of the Commissioner.”

33. Section 13 (3) of the Tax Appeals Tribunal Act, provides the remedy to any party who wishes to lodge an Appeal out of time, being that any such intended Appellant may seek leave of the Tribunal in writing, seeking an extension of time and leave to file an Appeal out of time. Section 13 (3) reads as follows:-“The Tribunal may, upon application in writing, extend the time for filing the notice of appeal and for submitting the documents referred to in subsection (2).”

34. The Tribunal observed that the Appellant ought to have lodged this Appeal within thirty days of the Respondent’s Objection decision, which would have been on or before the 29th September 2022. Yet, the Appellant’s Appeal was lodged on 16th November 2022, approximately 47 days late and did not seek leave of the Tribunal to file the Appeal out of time.

35. The Tribunal finds that the Appeal herein was lodged beyond the statutorily prescribed period and is therefore incompetent and untenable in law. The Appeal is therefore not validly and properly before the Tribunal.

Final Decision 36. The upshot to the foregoing is that the Appeal is incompetent, and the Tribunal consequently makes the following orders; -a.The Appeal be and is hereby struck out.b.Each party bears its own costs.

37. It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 24TH DAY OF NOVEMBER, 2023ROBERT M. MUTUMA - CHAIRPERSONDR. WALTER ONGETI - MEMBERMUTISO MAKAU - MEMBERELISHAH N. NJERU - MEMBERBONIFACE K. TERER - MEMBER