https://new.kenyalaw.org/akn/ke/judgment/ketat/2026/87

Anper Ltd v Commissioner of Legal Services and Border Cordination (Tax Appeal E679 of 2025) [2026] KETAT 87 (KLR) (26 June 2026) (Judgment) Neutral citation: [2026] KETAT 87 (KLR) Republic of Kenya In the Tax Appeal Tribunal Tax Appeal E679 of 2025 RO Oluoch, Chair, E Komolo & AM Diriye, Members June 26, 2026 Between Anper Limited Appellant and Commissioner of Legal Services and Border Cordination Respondent Judgment Background 1.The Appellant is a limited liability company incorporated in Kenya under the Companies Act and deals in the importation and sale of second-hand items and clothing, mainly from the United Kingdom. 2.The Respondent is the principal officer appointed under section 13 of the Kenya Revenue Authority Act. The Kenya Revenue Authority is an agency of the Government of Kenya mandated with the duty of collection and receipting of all tax revenue, and the administration and enforcement of all tax laws set out in Parts 1&2 of the first schedule to the Act, for purposes of assessing, collecting, and accounting for all tax revenues in accordance with those laws. 3.The Appellant was audited and issued with a notice of additional assessment. It objected to the said assessments vide its objection notices dated 26th February 2025 and 7th March 2025. Its objections were disallowed vide an objection decision dated 25th April 2025. 4.Aggrieved by the said decision, the Appellant lodged its appeal before the Tribunal. The Appeal 5.The Appellant, in its Memorandum of Appeal dated 25th June 2025, has set out the following grounds of appeal:a.That the Respondent fell into serious error of fact and law by disallowing its claim for input value added Tax (“VAT”) for the period from December 2020 to December 2021, and income tax for 2020 and 2021 despite having provided the relevant documentation to prove the same.b.That the Respondent misdirected itself in law and in fact by failing to consider the allowable expenses at the rate of 50% on gross profit, which is far above the market value, since the business can hardly make 50% net profit in the years indicated in the audited financial statements, and the same is unrealistic to achieve, contrary to the provisions of the Income and VAT Acts.c.That the Respondent misdirected itself in law and in fact by failing to consider all the expenses as claimed in the audited financial statements, which are very important documents to consider as per the Income Tax Act and the same was well supported.d.That the Respondent erred in fact and in law by failing to consider the interbank credits, which involved transfers between the directors and the company, since not all credits were business income.e.That the Respondent erred in fact and in law by failing to consider the interbank transactions that could have settled the variance.f.That the Respondent erred in fact and in law by failing to allow adequate time for the applicant to provide all the evidence, since the director was outside the country, which would have been supplied in due course.g.That the Respondent misdirected itself in fact and in law by applying its power improperly and disallowing the Appellant’s purchases, against the Appellant’s legitimate expectation of fair, just, lawful, and reasonable tax administration and governance, in violation of the Appellant’s constitutional rights to fair administrative action, which is enshrined in Article 47 of the Constitution of Kenya, 2010, as well as Section 4(1) of the Fair Administrative Action Act, No. 4 of 2015. Appellant’s Case 6.The Appellant supported its appeal with its Statement of Facts dated 25th June 2025, in which it argued that it had provided several documents to support the objection, but that the same was disregarded when the Respondent issued its objection decision. 7.It stated that the Respondent acted contrary to Section 17(2) of the VAT Act and the law generally:a.By disallowing its invoices and receiptsb.By failing to appreciate the use of the coordinating conjunction “or” in the wording of section 17(2) of the VAT Act, No. 35 of 2013, which outlines the conditions to be fulfilled for a taxpayer to be eligible for a deduction of their input VAT; namely that the taxpayer furnishes the relevant documentation, or the registered supplier declares the corresponding sales in their tax returns.c.By failing to recognize that the Appellant was required to fulfil only one of the two conditions set out for it to be eligible for a deduction of its claimed input VAT, and that the two conditions therefore have mutual exclusivity.d.By acting in disregard of the consideration that the Appellant had satisfied the condition set out in section 17(2) (a) of the VAT Act, No. 35 of 2013, through the submission of the relevant invoices as evidence of the commercial transactions.e.By disallowing the Appellant’s valid claim for input VAT and expenses.f.By contravening the principle of fair administrative action as set out in Article 47 of the Constitution of Kenya, 2010, and Section 7(2) of the Fair Administrative Action Act, No. 4 of 2015, when it disregarded the documentary evidence furnished and the explanations provided by the Appellant, contrary to the Appellant’s legitimate expectation of being subjected to fair, just, lawful, and reasonable tax administration. 8.The Appellant did not file submissions in support of its appeal. Appellant’s Prayers 9.The Appellant prayed for orders as follows:a.A declaration upholding the Appellant’s claimed input VAT as being valid and proper in law, andb.An order requiring the Respondent to recognize and allow the Appellant input VAT;c.An order upholding the Appellant’s Notice of Objection dated 26th February 2025;d.An order setting aside the Respondent’s Objection Decision dated 25th April 2025 and the assessment in its entirety;e.Costs of this matter, or any other pecuniary compensation as appropriate; andf.Any other or further relief as this Tribunal would deem just and reasonable to grant. Respondent’s Case 10.The Respondent’s case is premised on its Statement of Facts dated 28th October 2025 and its submissions dated 4th May 2026. 11.The Respondent stated that it relied on the analysis of bank credits from personal bank statements, custom data from the Integrated Customs Management System (ICMS) and tax returns filed vide the iTax system by the Appellants to arrive at the applicable turnover for corporation tax return declarations. 12.It further stated that:a.In order to determine the re-sale value of imported goods, it estimated a profit margin of 25% based on industry margins.b.The appellant failed to provide invoices to support its expenses as declared in the financial statements and corporation tax returns.c.It allowed the cost of sales represented by the customs value (CIF) and taxes on importation, together with 50% of the established gross profit, as a fair share of the expenses incurred in the generation of the taxable income.d.It charged tax on the interest income earned by the appellant in its savings account and allowed for the tax withheld at source, as to yield Kshs. 724,742.e.It determined the taxable sales liable for declaration in VAT3 returns by considering:i.The bank credits;ii.adjusted for closing and opening debtors;iii.turnover declared in Corporation Tax returns; andiv.the customs value of VAT exclusively as the cost of purchases. 13.The Respondent postulated that:a.It brought to charge all the variances discovered.b.The input claimed in the VAT3 returns related to the VAT paid against the customs value of imports made in the period and supported by the customs entries, as accessed from the ICMS system, on import and export by the Appellant.c.The Appellant had not claimed any other purchases outside the customs entries and therefore, there was no input tax capable of being disallowed when there were no corresponding transactions to support them. 14.The Respondent averred that the Appellant failed to provide any analysis as to the correct bank reconciliation to sales. 15.That the only records availed were the monthly sales and purchases analysis, which indicate that the variances discovered by the Respondent arose from VAT-exempt sales that the Appellant omitted in its declaration for both VAT and Income Tax purposes. And that no primary records (sales and purchases invoices, receipts, and evidence of payments) were availed to support the contention. It supported this position with the case of Avery Lounge Limited v Commissioner of Domestic Taxes (Income Tax Appeal E213 of 2024) [2026] KEHC 769 (KLR) 16.That nothing was tabled by the Appellant to support its contention that a rate of 50% on gross profit was well above market value. 17.The Respondent contested the jurisdiction of the Tribunal on the grounds that:a.A decision of the Commissioner should be objected to within 30 days as provided in Section 51(2) the TPA.b.In this instant case, the Respondent’s decision was made based on an assessment dated 28th August 2024.c.The Appellant/Applicant ought to have lodged it objection on or before 28th September 2024.d.That the two objections dated 26th February 2025 and 7th March 2025 were made out of time without seeking leave of the Commissioner under Section 51(6) and (7) of the TPA.e.That the absence of the said leave meant that the attendant assessment issued by the Commissioners remains a tax decision which is not appealable.f.The issuance of an Objection Decision by the Respondent on 25th April 2025 did not validate the invalid objections where the Appellant/Applicant had failed to first invoke the process under Section 51(6) of the TPA to regularize its objection.g.Without a valid Objection, it was not necessary for the Respondent to have issued an Objection Decision and even where one was issued, as in this instant case, it was not an appealable decision. 18.The issue of jurisdiction was supported by the cases of Owners of the Motor Vessel ‘Lillian S’ v Caltex Oil (Kenya) Ltd [1989] KLR 1 and Macharia & Another v. Kenya Commercial Bank Limited & 2 others [2012] KESC 8 (KLR). 19.It was its view that the TPA provides for a process of appealing against the decision of the Commissioner and, as such, Article 47 of the Constitution and Section 4 of the Fair Administrative Action Act were not applicable to this appeal. 20.The Respondent contended that in the instant case, there has been no evidence adduced to show that it acted contrary to any of the provisions of Section 51 of the TPA as they relate to the consideration of objections. 21.It was the Respondent’s view that the Appellant had not discharged its burden of proof under Section 56(1) of the Tax Procedures Act, 2015. Section 30 of the Tax Appeal Tribunal Act provides, and as explained in Juliematisse Kenya Limited v Commissioner Legal Services and Board Coordination [2025] KETAT 402 (KLR) Respondent’s Prayers 22.Based on the foregoing, it is the Respondent’s prayer that:a.The Objection Decision dated 25th April 2025 be upheld.b.The appeal be dismissed with costs to the Respondent. Issues For Determination 23.The Tribunal has considered the parties’ pleadings, submissions, and documents submitted and is of the view that the issues falling for determination are:a.Whether the Tribunal has jurisdiction to hear and determine this disputeb.Whether the Respondent’s assessment was justified. Analysis And Determination 24The identified issues shall be analyzed as hereunder: Whether the Tribunal has jurisdiction to hear and determine this dispute. 25.The Respondent argued that it issued its assessment on 28th August 2024, and the Appellant objected vide letters dated 26th February 2025 and 7th March 2025. That these objections were lodged beyond the 30 days provided under Section 51(2) of the TPA. That the leave of the Commissioner was not sought and obtained to file these objections out of time, as is provided in Section 51(6) and (7) of the TPA. 26.It was its view that the absence of the said leave meant that the attendant assessment issued by the Commissioner remains a tax decision that is not appealable. 27.The Respondent was relying on this alleged assessment, dated 28th August 2024, to affirm that the Tribunal lacks the jurisdiction to hear and determine this appeal. Nevertheless, it did not file the assessment that it relies on to justify its contention and to enable the Tribunal verify its contention that the appellant's objections were indeed late. 28.The Tribunal has sighted the letter dated 28th August 2024 and it has noted as follows:a.The letter is titled “pre-assessment notice…”b.The letter provides as follows in relevant part: “Please treat this as a pre-assessment, as an additional assessment or default assessment will be issued pursuant to Section 31 and Section 29 of the Tax Procedures Act, 2015, within seven (7) days from the date of this letter” (sic) 29.It is thus clear that the letter dated 28th August 2024 was a pre-assessment notice. It was not an assessment. A pre-assessment notice is not an assessment, nor is it a tax decision as envisaged in Section 51(2) of the TPA. 30.It is therefore, the finding of the Tribunal that the Respondents’ assertions that the Appellant filed its objection late, contrary to Section 51(2) as read with Section 51(7) of the TPA, are not supported by evidence and lacks basis. 31.Flowing from the above analysis, it is the finding of the Tribunal that it has jurisdiction to hear and determine this appeal. B. Whether the Respondent’s assessment was justified. 32.The appeal is premised on whether the Respondent considered the Appellant’s documents in arriving at its decision. The Appellant asserts that it submitted documents, but that the same were ignored by the Respondent in arriving at its decision. 33.The Respondent, on its part, avers that it requested the Appellant to supply it with the following documents in its letter dated 17th May 2022:i.Sales ledgers, receipts, invoicesii.Purchase ledgers, receipts, invoicesiii.Company bank statementsiv.Directors’ bank statementsv.Expense recordsvi.Employee recordsvii.Any other relevant documentsviii.Contracts/ LSO’ 34.That it was only provided with the following documents: -i.Bank Statement _ Anper Limited, Acc No. 043000032539, Gikomba branch January 2020 to December 2022, Business Account (KES)ii.Bank Statement – Solomon Wanjema, Acc No. 043000021427 Gikomba branch, January 2019 to August 2022, Mwananchi Account (KES)iii.Financial Statements for 2021 and 2022 35.Apart from its assertions, the Appellant has not provided evidence to show that these documents were provided. It has also not provided its reason for failing to supply these documents. 36.Based on the evidence before it, it is discernible to the Tribunal that the following documents were not provided:i.Sales ledgers, receipts, invoicesii.Purchase ledgers, receipts, invoicesiii.Expense recordsiv.Employee recordsv.Contracts/ LSO’ 37.The Tribunal is cognisant of the fact that Section 59 of the TPA requires the Appellant to produce documents and records as may be sought by the Respondent: It provides as follows-1.For the purposes of obtaining full information in respect of the tax liability of any person or class of persons, or for any other purposes relating to a tax law, the Commissioner or an authorised officer may require any person, by notice in writing, to –a.produce for examination, at such time and place as may be specified in the notice, any documents (including in electronic format) that are in the person's custody or under the person's control relating to the tax liability of any person;b.furnish information relating to the tax liability of any person in the manner and by the time as specified in the notice; orc.attend, at the time and place specified in the notice, for the purpose of giving evidence in respect of any matter or transaction appearing to be relevant to the tax liability of any person. 38.Additionally, Section 56 (1) of the Tax Procedures Act (Cap 469B), provides as follows regarding the Appellant’s burden of proof: -In any proceedings under this Part, the burden shall be on the taxpayer to prove that a tax decision is incorrect. 38.The Appellant thus had a duty to prove, on a balance of convenience, that it had provided the relevant documents that had been asked of it. This view was affirmed in Mugo -vs- Commissioner of Domestic Taxes (TAT E918 of 2024) KETAT 374 (KLR), where it was held as follows:As noted herein above, the Appellant failed to adduce positive documents to demonstrate that the Respondent’s decision was incorrect. Consequently, the Tribunal finds and holds that the Respondent’s decision was justified and the Appellant failed to discharge its burden of proof contrary to Section 30 of the Tax Appeals Tribunal Act, 2013 (TATA) and Section 56(1) of the Tax Procedures Act; thus, the Appeals is not successful.” 39.The Appellant’s failure to prove that it had provided the documents that had been requested of it, or that the documents requested of it were not relevant, means that it has failed to discharge the burden of proof that has been placed on it under Section 56(1) of the TPA. 40.Accordingly, the Tribunal finds and holds that the Respondent was justified in disallowing the Appellant’s objection as outlined in its Objection Decision dated 25th April 2025. Disposition 41.The upshot of the foregoing analysis is that the Tribunal finds and holds that the Appeal lacks merit and proceeds to issue the following orders: -a.The Appeal be and is hereby dismissed.b.The Respondent’s Objection Decision dated 25th April 2025 be and is hereby upheld.c.Each Party is to bear its own costs. 42.It is so ordered. DATED AND DELIVERED AT NAIROBI THIS 26TH DAY OF JUNE 2026DR. RODNEY ODHIAMBO OLUOCH - CHAIRPERSONDR. ERICK KOMOLO - MEMBERABDULLAHI DIRIYE - MEMBER