[2025] KETAT 60 (KLR)

Amadeus Global Travel Distributions Ltd v Commissioner of Legal Services & Board Cordination (Tax Appeal E519 of 2024) [2025] KETAT 60 (KLR) (24 January 2025) (Judgment)

Neutral citation: [2025] KETAT 60 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal E519 of 2024

RO Oluoch, Chair, AK Kiprotich, G Ogaga & Cynthia B. Mayaka, Members

January 24, 2025

Between

Amadeus Global Travel Distributions Ltd

Appellant

and

Commissioner of Legal Services & Board Cordination

Respondent

Judgment

Background 1. The Appellant is a private limited liability company incorporated in Kenya wholy owned by Amadeus IT Group and is in the business of travel agency.

2. The Respondent is a principal officer of the Kenya Revenue Authority, appointed under Section 13 of the KRA Act, and the Authority is charged with the responsibility of assessing, collecting, accounting and the general administration of tax revenue on behalf of the Government of Kenya.

3. The Respondent issued default assessment in itax on the Appellant on 18th December 2023. The Appellant objected through a letter dated 5th March 2024 and online in iTax on the same date.

4. Through an email dated 18th March 2024, the Respondent requested for some documents. The Appellant replied vide a letter dated 21st March 2024.

5. The Respondent subsequently issued its Objection decision vide a letter dated 4th April 2024.

6. Dissatisfied with the Respondent’s Objection decision, the Appellant filed a Notice of Appeal on the 3rd May, 2024.

The Appeal 7. The Appellant’s Memorandum of Appeal filed on 17th May, 2024 is premised on the following grounds:i.The Respondent erred in law and fact by raising a default assessment in total disregard of the Appellant's tax computations which represent the factual position.ii.The Respondent erred in law and fact by raising an assessment relating to corporate income tax without consideration of expenses incurred in generating income as provided for in Section 15 (1)of the Income Tax Act.iii.The Respondent erred in law and fact by failing to provide the Appellant with sufficient documents and rationale justifying its default assessments contrary to Article 47 of the Constitution and Section 6 of the Fair Administrative Action Act, 2015 (FAA).iv.The Respondent erred in law and fact by raising an assessment based on erroneous figures and without sufficient information to make the best judgment contrary to Section 29 of the Tax Procedures Act, 2015. v.The Respondent erred in law and fact by misapplying itself in its findings and lacks legal and factual basis.

Appellant’s Case 8. The Appellant’s case is premised on the following documents filed before the Tribunal;a.Its Statement of Facts dated 17th May, 2024 and filed on the same date together with the documents attached thereto.b.Its written submissions dated and filed on 17th September, 2024.

9. The Appellant submitted that its Appeal arose as a result of the rejection of its annual Corporate Income Tax(CIT) returns for the 2019-2022 period on the iTax platform.

10. That the iTax system failed to acknowledge the Appellant's filed returns as a result of an existing default assessment issued by the Respondent on 18th December 2023 relating to the period 2019 to 2022.

11. It stated that based on the default assessments, the Respondent alleged that the Appellant has outstanding CIT payable of Ksh 667,996,451. 88 as tabulated below:Period AssessmentNumber (KES) Principal tax(KES) Penalty(KES) Interest (KES) Total

2019 KRA202321386625 142,252,059 10,981,772 51,030,524. 86 204,264,355. 86

2020 KRA202321388553 90,865,473. 25 6,355,899. 72 20,974,469. 09 118,195,842. 06

2021 KRA202321390478 171,980,671. 01 14,345,563. 20 30,125,682. 72 216,451,916. 93

2022 KRA202321391620 112,946,702. 50 8,493,491. 85 7,644,142. 67 129,084,337. 03

TOTAL 518,044,905. 76 40,176,726. 77 109,774,819. 34 667,996,451. 88 12. That through a notice of objection dated 3rd March 2024, the Appellant objected to the entire assessment.

13. It stated that in total disregard of the Appellant's averments and documentary evidence, the Respondent proceeded to issue its objection decision dated 4th April 2024, confirming the assessment as follows:

Period Assessment Principal tax Penalty Interest (KES) Total (KES)

2019 KRA202321386625 142,252,059 10,981,772 51,030,524. 86 193,282,583. 86

2020 KRA202321388553 90,865,473. 25 6,355,899. 72 20,974,469. 09 111,839,942. 34

2021 KRA202321390478 171,980,671. 01 14,345,563. 20 30,125,682. 72 202,106,353. 73

2022 KRA202321391620 112,946,702. 50 8,493,491. 85 7,644,142. 67 120,590,845. 17

TOTAL 518,044,905. 76 40,176,726. 77 109,774,819. 34 627,819,725. 10

14. The Appellant further expounded on each ground as hereunder;

a. The Respondent erred in law and fact by raising a default assessment in total disregard of the Appellant's tax computations which represent the factual position. 15. The Appellant asserted that the tax computations for the 2019-2022 period provided to the Respondent represented the factual position of the Appellant's CIT payable. The Appellant in support of its arguments attached its tax computations for 2019-2022.

16. That the below is a table summary of the tax computations for the period under review;Period TaxableProfit/(Loss)KES Tax@30%KES Tax CreditsKES Balance of tax(Overpayments)KES

2019 106,660,806 31,998,242 (37,191,298) (5,193,065)

2020 71,325,833 21,397,750 (27,306,476) (5,908,726)

2021 104,735,607 31,420,682 (28,525,039) 2,895,643

2022 175,356,907 52,607,072 (28,011,784) 24,595,288

17. Based on the above, the Appellant reiterated that its correct CIT liability is as outlined in the table. That further, the Respondent did not provide any evidence to rebut the workings provided by the Appellant as well as present any justifications for the alleged CIT payable by the Appellant.

18. That in total disregard of the Appellant's presented evidence, the Respondent issued an assessment whose basis remains unknown, unclear and unreasonable. That damningly, the Respondent did not justify its assessments with any supporting workings or documents as is required by law.

19. The Appellant maintained that the Respondent's default CIT assessments were completely baseless, without merit and unfairly punitive.

20. The Appellant averred that it had effectively discharged its burden of proof under the law by production of sufficient supporting evidence as held in the case of Kenya Revenue Authority V Man Diesel & Turbo Se, Kenya[2021]eKLR where the High Court quoted the case of Hickman Motors Ltd. v. Canada, [1997] 2 S.C.R. 336.

21. The Appellant maintained that it discharged its burden of proof by presenting all the requested documentation and relevant evidence to the Respondent which were not taken into consideration when arriving at its assessment and objection decision.

22. The Appellant further relied on High Court case of Commissioner of Domestic Taxes vs Trical and Hard Limited (Tax Appeal E146 of 2020) [2022] KEHC 9927 (KLR) (Commercial and Tax) (8 July 2022) (Judgment).

23. The Appellant reiterated that the burden of proof in tax cases is not static, and by virtue of presenting material evidence and required explanations, the Respondent was required to prove that the Appellant's position was incorrect if in disagreement.

24. That the Respondent plainly failed to provide any proof to refute the Appellant's evidence. That therefore, the Appellant humbly requests the Tribunal to set aside the Respondent's default assessments and objection decision in its entirety because they were erroneous, unreasonable and unjustified.

b. The Respondent erred in law and fact by raising an assessment relating to corporate income tax without consideration of expenses incurred in generating income as provided for in Section 15(1) of the Income Tax Act. 25. The Appellant asserted that the Respondent's assessment was materially flawed for failure to follow basic tax and accounting principles. Specifically, the Appellant averred that in issuing its default assessments, the Respondent failed to consider the Appellant's material expenses incurred in the course of business.

26. To support its arguments, the Appellant relied on the High Court case, Primarosa Flowers Limited v Commissioner of Domestic Taxes (2019 eKLR) as cited with approval the dictum of the Supreme Court of India in Hero Cycles (P)Ltd vs Commissioner of Income-tax (Central) Ludhiana {20151 63 308 {SC], wherein, the Supreme Court of India had observed as follows:“We are of the opinion that such an approach is clearly faulty in law and cannot be countenanced. The Revenue cannot justifiably claim to put itself in the armchair of the businessman or in the position of the Board of Directors and assume the role to decide how much is reasonable expenditure having regard to the circumstances of the case. It further held that no businessman can be compelled to maximize his profit and that the income tax authorities must put themselves in the shoes of the assessee and see how a prudent businessman would act. The authorities must not look at the matter from their own viewpoint but that of a prudent businessman.”

27. It averred that in that regard, the Respondent's assessments subjected the entire amount presumed as the Appellant's income, to CIT without any deductions thereof or adjustments.

28. That this was especially mystifying because the Respondent had sight of some of the Appellant's expenses such as staff costs and other purchases through the monthly Pay-As-You-Earn (PAYE) and Value Added Tax (VAT) returns, respectively.

29. The Appellant asserted that the methodology applied in the Respondent's assessment was fundamentally flawed and wholly unreasonable. That this resulted in an unfair tax demand issued to the Appellant because it was not sound from an accounting and tax perspective.

c. The Respondent erred in law and fact by failing to provide the Appellant with sufficient documents and rationale justifying its default assessments contrary to Article 47 of the Constitution and Section 6 of the Fair Administrative Action Act,2015 (FAA). 30. To support its case the Appellant cited that case of Republic vs Kenya Revenue Authority & Another Ex Parte Tradewise Agencies (2013) eKLR and Section 6 of the FAA Act.

31. The Appellant asserted that the Respondent never provided any supporting documentation or workings to justify the default assessments. That without providing any accounting basis, the Respondent proceeded to issue an erroneous demand that had no supporting accounting or business rationale.

32. The Appellant reiterated that the Respondent, being an administrative body, was required by law to justify its assessment by providing the source of its information and documents relied upon. That this would give the Appellant a fair chance to respond appropriately and conclusively.

33. The Appellant prayed that the Tribunal vacates the Respondent's assessment for the period 2019 to 2022 and sets aside the objection decision in its entirety.

d. The Respondent erred in law and fact by raising an assessment based on erroneous figures and without sufficient information to make the best judgment contrary to Section 29 of the Tax Procedures Act,2015. 34. The Appellant asserted that the Respondent raised an assessment based on erroneous and fictitious figures in total disregard of the provisions of Section 29 of the Tax Procedures Act,2015 (TPA).

35. That further, in the case of Cussens v Revenue &Customs [2019] UKFIT 543 (TC) the court relied on the position in Johnson v Scott [1978] STC 48 where Mr. Justice Walton, concluded that the assessments in question were not based on fair inferences and fair figures.

36. That additionally, it should not be for the Tribunal to second-guess what proper inferences could have been drawn or what result is best judgment but for the Respondent to demonstrate that it was.

37. The Appellant averred that the Respondent did not exercise its best judgment in issuing its default assessments as required by Section 29(1) of the TPA. That moreover, in contravention of established case precedent, the Respondent was not fair in its estimations while issuing the default assessments to the Appellant.

38. That it was plainly obvious that the default assessments were improper and legally invalid because the Respondent did not provide any factual basis or supporting workings in arriving at the alleged CIT payable. That furthermore, the default assessments did not take into account the Appellant's valid business expenses thereby violating well-established tax and accounting principles.

39. The Appellant therefore prayed that the Tribunal sets aside the Respondent's objection decision in its entirety.

e. The Respondent erred in law and fact by misapplying itself in its findings and lacks legal and factual basis. 40. The Appellant posited that the Respondent had not only misapplied itself in its findings but also raised an assessment that lacked legal and factual basis.

41. The Appellant asserted that the Respondent was relying on assumptions to raise default assessments and deem tax payable without exercising fair and reasonable judgment. To support its case, the Appellant cited the case of Republic vs Kenya Revenue Authority Ex parte Jaffer Mujtab Mohammed (2015) eKLR.

42. The Appellant stated that it had consistently illustrated its adherence to the relevant tax provisions and justified its position with supporting documentation. That therefore, the Respondent's assessment was erroneous and flawed and submitted that the Tribunal should set aside the objection decision.

Appellant’s Prayers 43. The Appellant prayed that;a.The objection decision dated 4th April, 2024 demanding Corporate Income tTax of Ksh 627,819,725. 10 be declared null and void and be set aside in its entirety.b.The Appeal be allowed with costs to the Appellant.c.The Tribunal be pleased to issue any other orders that it deems just and reasonable.

Respondents Case 44. The Respondent’s case is premised on the hereunder filed documents before the Tribunal: -i.The Respondent’s Statement of Facts dated and filed on 14th June 2024 together with the documents attached thereto.ii.The Respondent’s written submissions dated 8th November, 2024 and filed on 11th November, 2024.

45. The Respondent stated that it noted that the Appellant had failed to file its Income tax returns for 2019 to 2022 as is its mandate and issued default assessments to the Appellant for the said period.

46. The Respondent submitted that upon receiving the assessments issued, the Appellant objected vide the notice of objection dated 3rd March 2024 stating that the said assessments did not align with its financial statements, hence the assessments were erroneous and unreasonable.

47. That upon review of the objection, the Respondent sent an email to the Appellant vide its tax agent KPMG Kenya invalidating its objection and requesting that certain documents be provided to it on or before 22nd March 2024 so that it could issue its objection decision within the statutory timelines. That the documents were:i.Self-assessment returns for the years under review;ii.The audited financial statements; andiii.The general ledgers.

48. That upon failure of issuance of the requested documents, the Respondent went on to issue the objection decision dated 4th April 2024 confirming the default assessments.

49. In response to the Appellant’s grounds of Appeal, the Respondent averred that Section 29 of the Tax Procedures Act (TPA) allows it to issue default assessments where a taxpayer has failed to submit its tax returns. That moreover, Section 24(2) of the TPA allows it to issue assessments based on the information available to it. That the Respondent noted that the Appellant had failed to submit its tax returns and relied on information available to it to issue the default assessments.

50. It submitted that when the Appellant objected, the Respondent invalidated the objection and informed it of the documents that were required to validate the same. That the Appellant was the one that failed to furnish the same, therefore the Respondent had no other option other than to confirm its assessments.

51. The Respondent stated that it did not fail to consider the expenses rather, the Appellant failed to prove that there were any expenses incurred. That Section 15 of the Income Tax Act (ITA) requires that documents be submitted to prove deductions, which the Appellant failed to do.

52. That Section 23 of TPA puts the onus on the Appellant to maintain tax documents and when required, to produce them per Section 59 of the TPA. That the Appellant failed to extinguish its burden of proof per Section 56(1) of the TPA and cannot seek to place that statutory burden on the Commissioner.

53. On the issue that the Respondent erred in failing to provide it with documents and rationale for the assessments, the Respondent stated that the Appellant was trying to relinquish itself of its burden of proof and place it on the Commissioner unjustifiably.

54. That the Appellant was the one who is supposed to disprove the Respondent's assessments through evidence and cannot abdicate that duty and place it on the Respondent.

55. The Respondent asserted that its actions were administratively fair, reasonable, justifiable and within the confines of Article 47 of the Constitution of Kenya.

56. The Respondent submitted that from the facts presented, the law as it provides and the argument put forth, the Respondent had proved that its actions were proper and fully justifiable.

Respondent’s Prayers 57. The Respondent prayed that the Tribunal;a.Dismiss the Appeal.b.Upholds the Respondent's Objection decision dated 4th April 2024. c.Award the Respondent the costs of the Appeal.

Issue For Determination 58. The Tribunal frames the only issue for determination to be: Whether the Respondent was justified in confirming the assessments.

Analysis And Findings 59. The Tribunal having appropriately ascertained the issue that falls for its determination shall proceed to make analysis as hereunder.

60. The Appellant submitted that its Appeal arose as a result of the rejection of its annual Corporate Income Tax(CIT) returns for the 2019-2022 period on the iTax platform.

61. That the iTax system failed to acknowledge the Appellant's filed returns as a result of an existing default assessment issued by the Respondent on 18th December 2023 relating to the period 2019 to 2022.

62. It stated that in total disregard of the Appellant's averments and documentary evidence, the Respondent proceeded to issue its objection decision dated 4th April 2024, confirming the assessments.

63. The Respondent on its part stated that it noted that the Appellant had failed to file its income tax returns for 2019 to 2022 as is its mandate it issued default assessments to the Appellant for the said period.

64. The Respondent further submitted that when the Appellant objected, it invalidated the objection and informed the Appellant of the documents that were required to validate the same. That the Appellant was the one that failed to furnish the same, therefore the Respondent had no other option other than to confirm its assessments.

65. The Tribunal notes the following undisputed facts in this dispute;a.The Respondent issued default assessment in itax on the Appellant on 18th December 2023. b.The Appellant objected through a letter dated 5th March 2024 and online in iTax on the same date..c.Through an email dated 18th March 2024, the Respondent requested for some documents.d.The Appellant replied vide a letter dated 21st March 2024. e.The Respondent issued its Objection decision vide a letter dated 4th April 2024. f.The Appellant filed the Notice of Appeal dated 3rd May 2024.

66. It was not in dispute that the Appellant did not file Income tax returns for the period 2019 to 2022 prior to the Respondent issuing the default assessment on 18th December 2023.

67. The Tribunal notes that the Respondent via email, the objection decision and its pleadings was consistent in its argument that the Appellant failed to provide documents and information in support of its objection. In particular the Tribunal notes that the Respondent on 18th March 2024 requested for the following documents;a.Self-assessment returns for the years under review;b.The audited financial statements; andc.The general ledgers.

68. In its email response dated 21st March 2024 regarding the request for documents, the Tribunal notes that the Appellant only addressed the issue of financial statements when it stated in part as follows;“…We wish to inform you that Amadeus have confirmed that only the 2019 financial statements will be signed by the end of April 2024. …”

69. The Tribunal notes that in the objection decision the Respondent stated in part as follows;“3. 0 Statement of Findings…We note that you failed to provide the requested documents to enable us deal with the default assessment. It is our considered view that you have failed to substantiate your objection, consequently, you have not discharged your burden of proof as prescribed under Section 56(1) of the Tax Procedures Act…”

70. The Tribunal further perused through the documents attached to this Appeal by the Appellant and notes that among the documents attached were its tax computation for the period 2019 to 2022 and trial balances for the same period. It however failed to demonstrate which documents and when it shared the same with the Respondent and the Respondent failed to consider them. The Appellant further did not address the reasons why it did not provide the documents requested by the Respondent during the objection stage.

71. It is the view of the Tribunal that the Appellant ought to have provided the documents requested or the documents it is required by law to keep under the Income Tax Act in support of its objection and this failure which means its arguments remain mere averments.

72. The provision of documents as evidence is well stated under Section 30 of the Tax Appeals Tribunal Act which provides thus:-“In a proceeding before the Tribunal, the appellant has the burden of proving –i.where an appeal relates to an assessment, that the assessment is excessive; orii.in any other case, that the tax decision should not have been made or should have been made differently.”

73. The Tribunal holds that the Appellant failed to meet the obligation placed on it under Section 30 of the Tax Appeals Tribunal Act to discharge its burden of proof by providing supporting documents.

74. The Tribunal reiterates its decision in TAT 1296 of 2022 JAmes Finlay (Kenya) Limited VS Commissioner Legal Services And Board Coordination where it held as follows at paragraph 83;“In the instant case the Tribunal found that the Appellant failed to address the specific documents mentioned by the Respondent in the objection decision and therefore failed to discharge the burden of proof.”

75. Consequently, the Tribunal finds that the Appellant failed to discharge the burden of proof placed upon it in demonstrating that the Respondent was not justified in confirming the assessments.

Final Decision 76. The Tribunal finds that the Appeal lacks merit and makes the following final Orders:i.The Appeal be and is hereby dismissed.ii.The Respondent’s objection decision dated 4th April 2024 be and is hereby upheld.iii.Each party to bear its own costs.

77. It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 24TH DAY OF JANUARY, 2025RODNEY O. OLUOCH..............................CHAIRPERSONABRAHAM KIPROTICH............................ MEMBERGLORIA A OGAGA.................................MEMBERCYNTHIA B. MAYAKA..............................MEMBER