https://new.kenyalaw.org/akn/ke/judgment/ketat/2026/272

**REPUBLIC OF KENYA** **IN THE TAX APPEALS TRIBUNAL AT NAIROBI** **TAX APPEAL NUMBER E1228 OF 2025** BLUESTREAM INVESTMENT COMPANY LIMITED…............……….….... APPELLANT VS **COMMISSIONER OF DOMESTIC TAXES………………………………..... RESPONDENT** **JUDGMENT** BACKGROUND 1. The Appellant is a limited liability company incorporated in Kenya whose principal activity is in construction. 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 assessed the Appellant for taxes amounting to Kshs. 984,000 for the year 2017 via i-Tax upon noting that the Appellant was a non-filler. 4. The Appellant lodged a notice of objection on 12th March 2020. 5. On 1st July 2022 the Respondent issued the Appellant with a late objection rejection notice and confirmed the assessments. 6. The Appellant being dissatisfied with the Respondent’s Decision, preferred the present Appeal vide a notice of appeal dated and filed on 31st October 2025. **THE APPEAL** 1. The Appeal is founded on the Memorandum of Appeal dated 31st October 2025 and filed on even date wherein the Appellant raised the following grounds of Appeal: 1. That the Respondent erred in law and in fact by issuing its Decision as contained in the Late Rejection Notice dated 1st July, 2022 late in violation of Section 51 (11) of the Tax Procedures Act. 2. That the Respondent erred in law and in fact by failing to credit input tax against the output tax in violation of Section 17 of Value Added Tax Act, 2013. 3. That the Respondent erred in law and fact by disregarding the supporting information and documents provided by the Appellant in making its decision. 4. That the Respondent's actions have amounted to gross violations of Article 47 of the Constitution of Kenya, which guarantees the Appellant a right to fair administrative action that is reasonable and procedurally fair. **THE APPELLANT’S CASE** 1. The Appellant relied on its Statement of Facts dated 31st October 2025 and filed on even date. The Appellant did not file written submissions hence its case proceeded on the basis of its pleadings. 2. The Appellant averred that the Respondent issued it with VAT Assessments for the period 1st December 2017 to 31st December, 2017 for Kshs. 984,000. That it objected to the said assessments on 12th March 2020 via i-tax and received a late objection rejection notice on 1st July, 2022. 3. The Appellant averred that the Respondent erred in law and in fact by issuing its decision as contained in the confirmation of assessment notice dated 1st July 2022 late in violation of Section 51 (11) of the TPA. 4. That the Appellant having objected to the assessment on 12th March, 2020, the Respondent's decision dated 1st July, 2022 was late in violation of Section 51 (11) of the TPA, that the Appellant’s objection ought to be allowed by operation of the law. 5. The Appellant averred that the Respondent erred in law and in fact by failing to credit input tax against the output tax in violation of Section 17 of VAT Act. That the Respondent disallowed input VAT contrary to Section 17 of the VAT Act 2013 which provides that: *“1) Subject to the provisions of this Section and the Regulations, input tax on a taxable supply to, or importation made by, a registered person may, at the end of the tax period in which the supply or importation occurred, be deducted by the registered person, subject to the exceptions provided under this section, from the tax payable by the person on supplies by him in that tax period, hut only to the extent that the supply or importation was acquired to make taxable supplies.* *2) If at the time when a deduction for input tax would otherwise be allowable under subsection (1), the person does not hold the documentation referred to in subsection* *(3), the deduction for input tax shall not be allowed until the first tax period in which the person holds such documentation.* *Provided that the input tax shall be allowable for a deduction within si.x months after the end of the tax period in which the supply or importation occurred.* 1. *The documentation for the purposes of subsection (2) shall be-* 1. *an original tax invoice issued for the supply or a certified copy;* 2. *a customs entry duly certified by the proper officer and a receipt for the payment of tax;* 3. *a customs receipt and a certificate signed by the proper officer staling the amount of tax paid, in the case of goods purchased from a customs auction;* 4. *a credit notes in the case of input tax deducted under section 16(2); or* 5. *a debit notes in the case of input tax deducted under section 16(5).”* 2. The Appellant averred that the Respondent erred in law and fact by disregarding the supporting information and documents provided by the Appellant in making its decision. **Appellant’s Prayers** 1. The Appellant prayed the Tribunal for the following reliefs: 2. This appeal is allowed. 3. The Respondent's objection decision as contained in its confirmation of assessment notice dated 1st July, 2022 be set aside in its entirety; 4. That the principal tax and attendant penalties and interest demanded by the Respondent vide its confirmation of assessment notice dated 1st July, 2022 be vacated forthwith in its entirety; 5. The costs of and incidental to this Appeal be awarded to the Appellant; and 6. Any other orders that the Tribunal may deem fit. **THE RESPONDENT’S CASE** 1. In opposition to the Appeal, the Respondent filed its Statement of Facts dated 11th February 2026 and filed on 12th February 2026. The Respondent also relied on its written submissions dated 25th May 2026 and filed on 26th May 2026. 2. The Respondent averred that whereas Section 24 of the TPA allows a taxpayer to submit tax returns in the approved form and manner prescribed by the Respondent, the Respondent is not bound by the information provided therein and can assess for additional taxes based on any other available information. 3. The Respondent contended that the Appellant failed to provide evidence to support his reason for late objection as prescribed in Section 51 (7) of the TPA, 2015 which states; *“The Commissioner may allow an application for the extension of time to file a notice of objection if-* * 1. *The taxpayer was prevented from lodging the notice of objection within the period specified in subsection (2) because of an absence from Kenya, sickness or other reasonable cause; and* 2. *The taxpayer did not unreasonably delay in lodging the notice of objection.”* 1. The Respondent relied on the High Court case in **Commissioner Of Investigations & Enforcement vs. Vyas T/A Rocon Enterprises Income Tax Appeal E144 Of 2022 (2022) eklr** which held that the decision to decline an application to lodge a late objection is not an objection decision and it can only be challenged by way of judicial review and not by way of an appeal to the Tax Appeals Tribunal. 2. The Respondent further averred that the import of the High Court Decision in **Rocon Enterprises** above is that the Tax Appeals Tribunal in this matter lacks jurisdiction to adjudicate on a dispute arising from the Respondent’s decision made pursuant to the provisions of Section 51(7) of the TPA and thus the Tribunal should down its tools for lack of jurisdiction. 3. The Respondent averred that the decision in **Rocon Enterprises** notwithstanding, it had a good reason to decline Appellant’s application to object as the reason proffered by the Appellant was insufficient. 4. The Respondent asserted that the Appellant’s late objection was not allowed and as such the Respondent never considered the same in order to issue an Objection decision. That it is therefore erroneous for the Appellant to object on merit. 5. The Respondent averred that in the Appeal herein it issued an assessment based on disallowed purchases claimed by the Appellant. That the Appellant however failed to provide documents as required under Section 17 (3) of the VAT Act. 6. The Respondent stated that a right to claim input VAT is premised on the assumption that the Appellant paid VAT during the purchase of his supplies. That this is provided for in Section 17(1) of the VAT Act which states that: *“Subject to the provisions of this section and the regulations, input tax on a taxable supply to, or importation made by, a registered person may, at the end of the tax period in which the supply or importation occurred, be deducted by the registered person, subject to the exceptions provided under this section, from the tax payable by the person on supplies by him in that tax period, but only to the extent that the supply or importation was acquired to make taxable supplies.”* 1. The Respondent asserted that Section 17(1) of the VAT Act 2013 is categorical that a taxpayer, in this case the Appellant is only allowed to claim input VAT only to the extent that the supply or importation acquired was used to make a taxable supply. That in order to proof the foregoing, it is imperative that the Appellant produces documents which when referred to, would inevitably lead the Respondent to believe that there was a commercial transaction. That particularly, Section 17(3) of the VAT Act provides for the documents required for one to be entitled to claim a refund. It states thus: - *3) The documentation for the purposes of subsection (2) shall be—* * 1. *an original tax invoice issued for the supply or a certified copy;* 2. *a customs entry duly certified by the proper officer and a receipt for the payment of tax;* 3. *a customs receipt and a certificate signed by the proper officer stating the amount of tax paid, in the case of goods purchased from a customs auction; and* 4. *a credit note in the case of input tax deducted under section 16(2);* 5. *a debit note in the case of input tax deducted under section 16(5); or* 6. *in the case of a participant in the Open Tender System for the importation of petroleum products that have been cleared through a non-bonded facility, the custom entry showing the name and PIN of the winner of the tender and the name of the other oil marketing company participating in the tender:* 1. The Respondent reiterated that in the instant case, the Appellant’s claim for input VAT was not supported by valid documentation and as such was fatally defective. 2. That the Appellant herein was required to adduce documents by way of invoices and evidence of underlying transactions demonstrating that the supplies indeed occurred. 3. The Respondent stated that, although the Appellant furnished it with invoices and ETR receipts, the same were manifestly insufficient to support the Appellant’s objection. 4. The Appellant thus had a burden to avail further supporting documents demonstrating that the underlying transaction indeed took place. 5. The Respondent placed reliance on Section 51(3) of the TPA 2015 which provides that: *“A notice of objection shall be treated as validly lodged by a taxpayer under subsection (2) if—* * + - 1. *the notice of objection states precisely the grounds of objection, the amendments required to be made to correct the decision, and the reasons for the amendments;* 2. *In relation to an objection to an assessment, the taxpayer has paid the entire amount of tax due under the assessment that is not in dispute.”* 3. *All the relevant documents relating to the objection have been submitted.* 1. The Respondent further placed reliance on Section 59(1) of the TPA which mandates the Respondent to require the production of documents from a taxpayer for the purposes of obtaining full information. It states thus; *“For the purposes of obtaining full information…the Commissioner or an authorised officer may require any person, by notice in writing, to—* * + - 1. *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…* 2. *furnish information relating to the tax liability of any person in the manner and by the time as specified in the notice...”* 1. The Respondent stated that the above position is also fortified by section 31(1) of the TPA which provides that: *“Subject to this section, the Commissioner may amend an assessment (referred to in this section as the “original assessment") by making alterations or additions, from the available information and to the best of the Commissioner's judgement, to the original assessment of a taxpayer for a reporting period to ensure that—* 1. *in the case of a deficit carried forward under the Income Tax Act (Cap. 470), the taxpayer is assessed in respect of the correct amount of the deficit carried forward for the reporting period;* 2. *in the case of an excess amount of input tax under the Value Added Tax Act, 2013 (No. 35 of 2013), the taxpayer is assessed in respect of the correct amount of the excess input tax carried forward for the reporting period; or* 3. *in any other case, the taxpayer is liable for the correct amount of tax payable in respect of the reporting period to which the original assessment relates.”* 4. It was the Respondent’s averment that the foregoing provisions emphasise the fact that the Appellant is bestowed with the mandate to avail the requisite documents in support of its objection and failure to which the Respondent can only make a decision in light of information in its possession. 5. The Respondent further avowed that the burden of proof is on the Appellant to produce evidence challenging the Respondent’s decision to confirm the default assessments. That Section 56(1) of the TPA provides that; *“The burden shall be on the taxpayer to prove that a tax decision is wrong/incorrect.”* 1. The Respondent contended that the documents annexed in the Appellant’s Memorandum of Appeal and statement of facts have been presented before the Tribunal in the first instance and the Respondent did not have an opportunity to review the same. That the Appellant’s allegation as laid out in its Memorandum of Appeal and Statement of Facts unless where in agreement by the Respondent are unfounded in law and not supported by evidence. 2. The Respondent stated that provisions of Section 17 of the VAT Act are very clear and specific as to when and how input VAT can be claimed. That Section 17(1), (2) & (3) of the VAT Act provides that: - *“(1) Subject to the provisions of this section and the regulations, input tax on a taxable supply to, or importation made by, a registered person may, at the end of the tax period in which the supply or importation occurred, be deducted by the registered person, subject to the exceptions provided under this section, from the tax payable by the person on supplies by him in that tax period, but only to the extent that the supply or importation was acquired to make taxable supplies.* *If, at the time when a deduction for input tax would otherwise be allowable under subsection (1), the person does not hold the documentation referred to in subsection (3), the deduction for input tax shall not be allowed until the first tax period in which the person holds such documentation.* *Provided that the input tax shall be allowable for a deduction within six months after the end of the tax period in which the supply or importation occurred.* *The documentation for the purposes of subsection (2) shall be-* * 1. *an original tax invoice issued for the supply or a certified copy;* 2. *a customs entry duly certified by the proper officer and a receipt for the payment of tax;* 3. *a customs receipt and a certificate signed by the proper officer stating the amount of tax paid, in the case of goods purchased from a customs auction;”* 1. The Respondent averred that upon request for supporting documentation for claim of input VAT, the Appellant only provided a few purchase invoices which were not accompanied by proof of payment and supplier confirmation as such the Respondent was justified in upholding its assessment. 2. The Respondent averred that the Appellant having failed to provide supplier confirmation or statements to support the said declarations, it failed to prove that the input is deductible on taxable supplies it had made. 3. That further, there was no evidence of payment or delivery notes provided to prove that the transaction actually took place and the goods were received. The Respondent relied on the case of **Holland Vs. United States of America 121 (1954),** the Supreme Court held that: *“To protect the revenue from those who do not render true accounts, the government must be free to use all legal evidence available to it in determining whether the taxpayer's books and records accurately reflect his financial history" and that the indirect method used need not be exact, but must be reasonable in the light of the surrounding facts.”* 1. The Respondent submitted that, the Appellant made a claim for input VAT within 6 months but in the absence of evidence that the purchase took place its input VAT claim was legitimately disallowed. The Appellant failed to demonstrate proof of purchase by: 1. Providing evidence of request for goods 2. Providing evidence of delivery 3. Proving proof of payment for the said purchases 4. Demonstrating the use of the said goods 5. Provide Bank statements from the suppliers to demonstrate that the suppliers actually declared the output claimed. 2. The Respondent submitted that Section 43(1) -(3) of the VAT Act 2015 enjoins the taxpayers to keep records for a period of five years to enable ascertainment of their tax liability. The Section enlists the records required for establishment of VAT claim-ability. 3. The Respondent submitted that upon objection of the assessments, the Appellant failed to provide any supporting documentation to support the objection hence their input VAT claim was disallowed. That in T**AT No.55 of 2019, Boleyn International Limited versus Commissioner of Domestic Taxes**, the court quoted the case of **Digital Box Limited versus Commissioner of Investigations and Enforcement (2020),** where it was held; *“…on 8th March 2018, the Appellant lodged an objection with the Respondent. However, the said objection did not reiterate the grounds of objection, the corrections required to be made and the reasons for the amendments. Neither did the Appellant provide the relevant documents in support of its alleged objection. Therefore, there was no conceivable way the Respondent would have considered the Appellant’s objection as the same did not place itself within the parameters of section 51(3) of the Tax Procedures Act.”* 1. That further in **TAT No.70 of 2017, Afya X-ray Centre Limited versus Commissioner of Domestic Taxes** it was held that: *“From then foregoing chain of events, it is our understanding that the Appellant failed in its duty in providing these documents, in order that a comprehensive audit of its affairs be done. Accordingly, the Respondent can hardly be faulted for raising the assessment in accordance with the availed documents. Moreover, the Appellant had an opportunity to counter the Respondent’s finding after the preliminary finding and after the confirmation of the assessment. Both are instances, where the Appellant could have produced its books of accounts to counter the Respondent’s assessment after all the Appellant by law bears the burden of proof…”* 1. It was the Respondent’s submission that the Appellant had failed to discharge the burden of proving that the taxes assessed are excessive. That it is trite law that the burden of proof is on a taxpayer to show that tax assessments are excessive as provided under section 56(1) of the TPA. 2. The Respondent asserted that due to the Appellant’s failure to provide supporting documents, it relied on available information that it had as well as the Commissioner’s best judgement in making the assessment order and confirming the assessment. That the said mandate is bestowed upon the Respondent by Section 31 (1) of the TPA which provides as follows; *(1) Subject to this section, the Commissioner may amend an assessment (referred to in this section as the “original assessment”) by making alterations or additions, from the available information and to the best of the Commissioner’s judgement.* 1. The Respondent submitted that this Tribunal has in a number of cases maintained the position that, where the Appellant fails to provide the requisite documents, then the Commissioner is by all means justified in confirming the assessments earlier issued to the Appellant. That in **Ngurumani Traders Limited versus Commissioner of Investigations and Enforcement, TAT No.125 of 2017**, the Tribunal held at paragraph 40 of its judgement that: *“From the foregoing, the Appellant’s failure to lodge a proper objection meant that the Respondent was at liberty to confirm the assessment. Measured against the provisions of section 51(3) of the Act, the Appellant’s conduct and manner of lodging the objection fell considerably short of the permissible statutory requirements under section 51(3) of the Tax Procedures Act, 2015. It would be fundamentally non-justifiable for this Tribunal to entertain this preliminary objection, taking into account the Appellant’s flagrant non-compliance with the law on raising objections.* 1. The Respondent submitted that it had demonstrated before the Tribunal what was considered in arriving at the assessment and subsequently the decisions which are within the law. **Respondent’s Prayers** 1. Consequently, the Respondent made the following prayers: 2. Dismiss the Appeal. 3. Uphold the Respondent’s assessment and decision. 4. Award the Respondent the costs of the Appeal. **ISSUES FOR DETERMINATION** 1. Upon considering the parties’ pleadings, documentations and the Respondent’s submissions, the Tribunal puts forth the following issues for determination: 2. ***Whether the Tribunal has jurisdiction to determine the Appeal;*** 3. ***Whether the Appellant discharged its burden of proving that the Respondent’s decision dated 1st July 2022 was incorrect.*** **ANALYSIS AND FINDINGS** 1. It is to these issues that the Tribunal will turn within as hereunder: - 2. **Whether the Tribunal has jurisdiction to determine the Appeal.** 3. The Respondent contended that it did not allow the Appellant’s late objection and as such it never considered the same on merit in order to issue an Objection decision. That it is therefore erroneous for the Appellant to Appeal the rejection decision to the Tribunal on merit. 4. It was the Respondent’s position that the Tribunal lacks jurisdiction to adjudicate on a dispute arising from the Respondent’s decision made pursuant to the provisions of Section 51(7) of the TPA and thus the Tribunal should down its tools for lack of jurisdiction. The Respondent relied on the High Court Decision in **Rocon Enterprise** to assert that the matter at hand does not fall within the Jurisdiction of the Tribunal. 5. The Tribunal has a duty to satisfy itself that it has jurisdiction to determine the merits of the appeal. without jurisdiction, the Tribunal cannot proceed. In the case of ***Owners of the Motor Vessel “Lillian S” v Caltex Oil (Kenya) Ltd [1989] KLR,*** wherein 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.”* 1. To determine whether it is clothed with jurisdiction to determine the instant Appeal, the Tribunal analysed the chronology of events leading to the Appeal and noted as follows: 1. The Appellant lodged a notice of objection dated 12th March 2020 2. The Respondent issued the Appellant with a notice of late objection rejection on 1st July 2022. 3. The Appellant lodged the instant Appeal against the late objection rejection. 2. The Tribunal noted that neither party attached the impugned assessment nor stated its date, the Tribunal was therefore not independently able to ascertain if indeed the notice of objection was lodged late. Be that as it may, the decision under Appeal is the rejection for late objection issued by the Respondent pursuant to Section 51(7) of the TPA on the basis that the Appellant did not demonstrate why it delayed to object within the timelines. 3. A taxpayer who disputes an assessment has a statutory duty to object to the same within the required timelines as provided for under TPA. Section 51(2) of the TPA provides as follows: *‘‘(2) A taxpayer who disputes a tax decision may lodge a notice of objection to the decision, in writing, with the Commissioner within thirty days of being notified of the decision.’’* 1. Where a taxpayer fails to object as per Section 51(2) of the TPA above, the law provides a remedy at Section 51(6) of TPA as follows: *‘‘A taxpayer may apply in writing to the Commissioner for an extension of time to lodge a notice of objection.’’* 1. It follows that a taxpayer must satisfy the Respondent on why it delayed to file an objection to the assessments. Under Section 51(7) of the TPA, the Respondent has discretion to allow or reject the application. Section 51(7) of the TPA provides as follows: *‘‘The Commissioner shall consider and may allow an application under subsection (6) if—* 1. *the taxpayer was prevented from lodging the notice of objection within the period specified in subsection (2) because of an absence from Kenya, sickness or other reasonable cause; and* *(b) The taxpayer did not unreasonably delay in lodging the notice of objection.’’* 1. In the instant case, the Respondent pursuant to Section 51(7) of the TPA issued the decision contained in the letter dated 1st July 2022 wherein it declined to grant leave to the Appellant to file its objection out of time. The legal consequence was that the Appellant was unsuccessful in lodging its objection. The Appellant’s objection having been rejected, there was no basis for the Respondent to issue an objection decision, it is such an objection decision that would have provided the Appellant with an anchor upon which to file this appeal as set out under Section 51(1) of the TPA which provides as follows: *‘‘A taxpayer who wishes to dispute a tax decision shall first lodge an objection against that tax decision under this section before proceeding under any other written law.’’* 1. There being no objection to the assessment, Section 51(1) of the TPA barred the Appellant from invoking the powers of the Tribunal under Tax Appeals Tribunal Act CAP 469A of the Laws of Kenya (hereinafter “TATA”) which simply meant that the Tribunal did not have jurisdiction to entertain the Appeal. 2. As submitted by the Respondent above, this position was affirmed in the High Court case of **Commissioner of Investigations & Enforcement v Vyas t/a Rocon Enterprises (Income Tax Appeal E144 of 2021) [2022] KEHC 16027 (KLR) (Commercial and Tax) (25 November 2022)** where the court held that: *“13. The letter of January 13, 2020 declined the application for a late objection by the respondent under section 51(7) of the TPA. He did not make or communicate his decision in relation to any assessment under section 52 of the Act.* *16. The same having not been an objection decision, it could only be challenged by way of judicial review and not appeal to the Tribunal. Definitely the Tribunal had no jurisdiction to entertain the appeal before it.”* 1. Consequently, the Tribunal finds and holds that it lacks jurisdiction to hear and determine this Appeal. This being the position, the Tribunal will not delve into the other issue for determination. **FINAL DECISION** 1. The upshot to the foregoing is that the Tribunal finds and holds that the Appeal is incompetent and makes the following Orders: 2. The Appeal be and is hereby struck out. 3. Each party to bear its own cost. 4. It is so Ordered. **DATED AND DELIVERED AT NAIROBI THIS 27TH DAY OF JULY 2026.** **……………………………..….** **ROBERT M. MUTUMA** **CHAIRMAN** **……………………………… ……..….……..……………..** **JIMMY M. MALLA. GLORIA A. OGAGA MEMBER MEMBER** **………………………………** **DR. TIMOTHY B. VIKIRU** **MEMBER**