[2024] KETAT 1081 (KLR)

Cherry Interior v Commissioner of Investigation and Enforcement (Tax Appeal 229 of 2023) [2024] KETAT 1081 (KLR) (28 June 2024) (Judgment)

Neutral citation: [2024] KETAT 1081 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal 229 of 2023

E.N Wafula, Chair, E Ng'ang'a, M Makau, EN Njeru & AK Kiprotich, Members

June 28, 2024

Between

Cherry Interior

Appellant

and

Commissioner of Investigation and Enforcement

Respondent

Judgment

Background 1. The Appellant is a private company incorporated in the Republic of Kenya under the Companies Act Cap 486 of the laws of Kenya and whose principal business activity is the importian and sale of timber.

2. The Respondent is a principal officer appointed under and in accordance with Section 13 of the Kenya Revenue Authority Act, the Authority is charged with the responsibility of among others, assessment, collection, accounting, and the general administration of tax revenue on behalf of the Government of Kenya.

3. The Respondent carried out investigations on major timber importers as a result of reports that major timber importers were engaged in under-declaration of quantities and under-valuation of timber based on USD/Cubic Metre. Consequently, the Respondent issued a tax demand of Kshs. 58,449,097. 00 vide a demand letter dated 11th November 2021.

4. The Appellant vide a letter dated 15th March 2023 lodged an objection to the tax demand. Upon review of the objection, the Respondent vide a letter dated 3rd April 2023 issued its objection decision.

5. Being aggrieved with the Respondent’s decision, the Appellant filed a Notice of Appeal on 28th April 2023.

The Appeal 6. The Appellant filed its Memorandum of Appeal dated and filed on 5th May 2023 raising the following grounds of appeal:a.That the Respondent erred in law and fact in invalidating the objection issued by the taxpayer.b.That in issuing the objection decision the Respondent failed and or neglected to take into account the fact that the Appellant had provided all the documents in support of its objection.c.That the Respondent erred in law and fact by confirming the demand of Kshs 58,443,097. 00 as Corporation and Custom taxes as due and payable.d.That the Respondent erred in law and fact in failing to appreciate that the Appellant’s KRA Pin was used by unknown third parties.e.That the Respondent erred in law and fact in failing to disclose the basis of the finding that the consignments were allegedly misdeclared.

Appellant’s Case 7. The Appellant’s case is premised on its Statement of Facts filed on 16th May 2023 and written submissions dated 7th December 2023 and filed on 8th December 2023.

8. The Appellant submitted that of the 187 entries highlighted by the Respondent as being misdeclared only 65 of them pertained to it while the rest were unknown to it.

9. The Appellant averred that it provided the relevant documentation supporting its 65 entries. The Appellant maintained that it cannot speak to the other entries due to the simple fact that the entries were not made by the Appellant but rather a third party who had been illegally using its KRA Pin.

10. The Appellant alleged that it reported the misuse of the PIN to the Respondent via email on 15th February 2023 but the Respondent did not follow up with the assertions made by the Appellant to its logical conclusion.

11. According to the Appellant, the purported under declaration was based on the alleged variance between declarations made in the Asycuda system used in Uganda and the Simba System used in Kenya. The Appellant argued that in arriving at its conclusion, the Respondent neglected to take into account that the two systems use methods which are fundamentally different, to arrive at the volume of the timber and subsequently the customs value.

12. The Appellant argued that the Respondent neglected to consider the fact that the values in the Ugandan System are arrived at by offloading the trucks and taking the actual volume of the timber being transported. In Kenya, the Respondent's officers during the joint verification, ordinarily measure the outline of the trucks on which the timber is loaded to arrive at an estimated weight of the goods.

13. According to the Appellant, it was reasonable that the measurements taken by the URA after offloading of the trucks would be more accurate compared to the method adopted by the Respondent, which is prone to variations. The Appellant further accused the Respondent of failing and or neglecting to consider the fact that the Appellant in making its declarations based on the volume on actual measurement of the timber as opposed to the truck outline adopted by the Respondent.

14. The Appellant’s case is that the practice of measuring the truck outline to obtain the volume of goods transported was introduced and has been maintained by the Respondent as the only means of verifying the customs value of goods in the nature of timber and or wood. It argued that other timber importers, have been forced to accept the Respondent’s method even though it is highly prejudicial and makes payment of the duty uplifted in order to ensure business continuity.

15. The Appellant stated that assuming the value of the goods obtained by actual measurement was higher, any departure from the Respondent’s own established method of measuring the volume of the goods cannot be done retrospectively. That to do so would not only be unfair to the Appellant but also contrary to the principles of fair administrative action enshrined in the Constitution 2010.

16. The Appellant pointed out that the timber is arranged on the trucks according to the trucks axles. It stated that the first axle is a single axle which holds the least timber, the middle one has two axles carrying a higher load than the first while back of the truck, carries the heaviest load with three axles. The Appellant maintained that an inconsistency that the Respondent did not take into consideration when relying on calculating the volume of the timber based on the volume of the truck, is that there is hollow space in the trucks not covered by the timber, due to the arrangement.

17. According to the Appellant, the Respondent’s estimation of the volume of the timber based on the volume of the truck results in an excessive estimate which did not accurately reflect the true volume of the timber. The Appellant argued that it is well known that when transporting timber, the high variability of species, assortments and moisture content of the wood raw material does not allow the weight of the transported timber to be precisely determined.

18. The Appellant maintained that the Respondent’s method of measurement is not an accurate assessment of the volume of the timber imported by the Appellant. It maintained that the Respondent's Simba system requires the Appellant to input the weight of the consignment, however the weight is not a determinant for purposes of payment of duty.

19. It was the Appellant’s case that the Respondent did not verify the weight input in the system and that weight input is usually an essential measurement relied on for calculation of toll fees at various weigh bridges in the Kenya National Highways Authority (KENHA) toll stations for purposes of transportation on Kenyan roads.

20. The Appellant asserted that it solely relied on the volume of the timber for assessment of duty owed to the Respondent, this is because weight of timber fluctuates from the point of felling to the point of payment of duty at the Port. Further, the Appellant averred that it did not rely on weight in declaring the volume of timber at the Port.

21. The Appellant submitted that the Respondent did not have a weighbridge at the entry point to accurately measure the weight of goods passing through the border and as such the Appellant was curious as to why the Respondent would rely on weight when arriving at its decision.

22. The Appellant further stated that it paid all duty payable on the assessed consignment and all taxes owed to the Respondent in full. Further, the Appellant had a legitimate expectation that the Respondent having made duty adjustments based on the truck measurements was satisfied with the uplifted tax issued in form F147.

23. The Appellant maintained that the Respondent's system was also questionable as it forced the Appellant to also input the weight of the timber yet this was not considered by the Respondent. The Appellant further argued that the weight input in the Respondent’s system was purely an estimate and corresponds to the weighbridge measurements by Kenya Forest Service for purposes of transporting the timber on highways in Kenya.

24. The Appellant reiterated that the volume measured by the Respondent was not an accurate depiction of the weight of the timber. The Appellant submitted that it was an estimate of the approximate volume of the timber for which duty should be paid. The Appellant stated that the estimated weight of the timber in the Respondent’s system should not be relied upon as the conversion rate for cubic metres for which duty was paid on the basis that duty should be assessed on the volume of the timber.

25. The Appellant argued that allegation of misdeclaration by the Respondent was not only highly prejudicial against the Appellant but was also an act of bad faith on its part since the Respondent had an option of making adjustments at the point of verification to not only factor in any under declaration but also the now alleged misdeclaration.

26. According to the Appellant, the Respondent failed to exercise this right at the point of verification occasions the Appellant significant economic loss owing to the fact that it would ordinarily factor in the cost of acquiring the timber including taxes at the final retail price of its products. The Appellant stated that any departure from the current mode of estimating duty by the Respondent ought to be founded on solid principles and should not be applied retrospectively to the detriment of the Appellant.

27. The Appellant asserted that in most cases, Kenya records higher volume than the volume recorded at the entry or transit point due to the fact that Kenya estimates measurement of the timber by measuring the truck rather than the actual timber. The Appellant further asserted that it provided the Respondent with an analysis of entries where the volume recorded at the point of entry were higher than those recorded at the transit point.

28. The Appellant alleged that it is forced to pay duty based on the cubic metre measurement taken by the Respondent’s customs officers. The Appellant found it curious that the Respondent was doubting the measurements taken by Respondent’s customs officers using a method routinely used by the Respondent’s customs officers.

29. The Appellant noted that the Respondent in issuing its objection decision had indicated that it observed a trend where most declarations, the declared density (net weight/cubic meter) is 1000 kg/cubic meter. The Respondent averred that this position was incorrect since according to the SI unit metric, only 1000 kg of pure water equals one cubic meter. Based on its research therefore, the Respondent applied an average density of 805 kg per cubic meter.

30. The Appellant averred that for all declarations made by the Respondent for the period 2016 to 2020, the Respondent applied this standard of an average density of 800 kg per cubic meter, and as a result it issued an assessment, which was the subject matter of this Appeal.

31. The Appellant submitted that whereas the Respondent is empowered by Sections 235 and 236 of the East African Community Customs Management Act, 2004 to conduct post clearance audit, it is trite law that the Respondent is bound to exercise such power in a reasonable manner and in keeping with principles of fair administrative action.

32. The Appellant also stated that whereas the Respondent is at liberty to issue guidelines and a measurement standard for calculating the density, any such guidelines cannot be applied retrospectively to the detriment of the Appellant.

33. The Appellant maintained that the Respondent choosing to exercise its right to make duty adjustments 3 years after the fact is not only unreasonable but has also caused the Appellant significant economic loss owing to the fact that it would ordinarily factor in the cost of acquiring the timber including taxes at the final retail price of its products.

34. The Appellant submitted that it is wrong for the Respondent to state that it explained the basis of the new customs value was determined as per paragraph 40 in line with Sections 121 and 122 of EACCMA. The Appellant submitted that this explanation was given in its objection decision and not in its original demand dated 11th November 2021 and that by issuing the objection decision there is no way to interrogate the Respondent unless in the Appeal.

35. The Appellant submitted that a demand and an objection decision should not vary and that an objection informs an objection decision and no new facts should be introduced by the objection decision as they were not canvassed in the objection as per Section 51 of the Tax Procedures Act.

36. The Appellant submitted that the objection decision should either be in agreement or disagreement with the objection filed by a taxpayer but in this case, the Respondent introduced new facts. To support its position, the Appellant relied on the case of Commissioner of Domestic Taxes v Bank of Africa Limited (Civil Appeal E127 of 2020) [2023] where the High Court stated that the Commissioner cannot issue a new assessment within an objection decision.

37. The Appellant submitted that the Respondent did not in its original objection, canvass the issue of the Ascuda system or the issue on best international practices as it did not form part of the dispute at the time.

38. The Appellant further submitted that had the Respondent brought the issue of the mirror analysis and the issue of international best practices in its initial demand, the Appellant would have addressed the issue in its original objection dated 15th March 2023. The Appellant argued that this introduction of new facts was prejudicial to its case.

39. The Appellant further submitted that in calculating duty payable in regards to timber in East Africa the method used is the measuring of the volume of the timber consignment as dictated by the East African Common Exchange tariff H.S Code 4407. 21. 00 that requires timber (mahogany) to be measured in meter cubed (CBM). This notwithstanding, the Appellant submitted that each Country has the autonomy to use different methods of assessing the volume of timber consignments. That therefore, the variance between the Uganda and Kenya system in the mirror analysis can be attributed to the fact that the two Countries use different method in assessing volume of shipments.

40. The Appellant submitted that under Ugandan System measurements are arrived at by offloading the trucks and taking the actual volume of the timber being transported while in Kenya, the Respondent's officers during the joint verification, ordinarily measure the outline of the trucks on which the timber is loaded to arrive at an estimated weight of the goods.

41. The Appellant submitted that the Tribunal ought to note that the reason why the Respondent resorts to measuring the outline of the trucks is simply due to the lack of capacity by the Respondent to unload the trucks and measure the volume of the individual timber at the border point. Consequently, the Appellant submitted that the misdeclaration that the Respondent makes reference to simply is a product of the faults in the Respondent’s own system of measuring that it fails to fix and deems it fit to just uplift the value of the Appellant’s consignment.

42. Based on this variations, the Appellant submitted that it pays high taxes. The Appellant relied on the case of Republic vs Kenya Revenue Authority Ex Parte Bata Shoe Company(Kenya) limited (2014) eKLR where it was held that:-“Payment of tax is an obligation imposed by the law. It is not a voluntary activity. That being the case, a taxpayer is not obliged to pay a single coin more than is due to the taxman.”

43. The Appellant further submitted that the law is ambiguous on how volume of timber should be measured either through the measurement of the volume of the truck or through measuring the individual volume of the timber. It submitted that any ambiguity should be in favour of the taxpayer as illustrated in the case of Stanbic Bank Kenya Limited vs. Kenya revenue Authority Civil Appeal No. 77 of 2008, where the Court of Appeal stated:-“I would wish to repeat again what I said in the case of Commissioner of Income Tax vs. Westmont Power (K) Limited 2006 1EA 54, that taxation laws that have the effect of depriving citizens of their property...must be interpreted with great caution. It is paramount that their provisions must be express and clear so as to leave no room for ambiguity. Any ambiguity in such a law must be resolved in favour of the tax payer and not the public revenue authority which are responsible for their implementation,”

Appellant’s prayers 44. The Appellant prayed that this Honourable Tribunal makes the following orders that:a.The Respondent’s Objection decision dated 3rd April 2023 be set aside;b.The Appeal be allowed with costs to the Appellant; andc.Any other orders that the Honourable Tribunal may deem fit

Respondent’s Case 45. The Respondent’s case is premised on its Statement of Facts dated 20th June 2023 and filed on 21st June 2023 and its written submissions dated 20th December 2023 and filed on 21st December 2023.

46. The Respondent relied on Sections 121; 122 (1); 122 (2) of the EACCMA and the 4th Schedule of EACCMA.

47. In response to ground one of the Memorandum of Appeal, the Respondent averred that the Appellant’s objection was invalidated as it provided 65 out of 187 entries required and that the Appellant was unable to differentiate entries lodged by itself and those lodged without its consent.

48. The Respondent averred that the entries were conducted in the name and PIN of the Appellant as the consignee and were lodged by the tax agents engaged by the Appellant. The Responded also stated that the Appellant did not provide any evidence of reporting the occurrence of the crime to relevant authorities.

49. The Respondent maintained that it profiled imports by the Appellant of Mahogany from DRC through Malaba and Busia OSBP within the period under investigation and that the analysis used as a basis for the demand letter issued to the Appellant, was based on the number of entries cleared which resulted in a tax assessment of Kshs 58,443,097. 00.

50. The Respondent averred that it compared the value, quantity, and weights declared by major timber importers, which were profiled including the Appellant and compared the information with the declarations done on the Ugandan side. The Respondent further averred that it established that there was gross underdeclaration and smuggling of timber at Busia and Malaba OSBP due to underdeclaration of quantity therefore undervaluation.

51. In response to the second ground of appeal, the Respondent stated that the Appellant provided a document which was a list of 187 entries to elaborate that only 65 out of 187 entries were lodged by it and that the remaining 122 entries had been lodged using its PIN as a consignee without its consent. The Respondent maintained that no further adjustments were made as the Appellant did not provide any evidence of reporting the occurrence of the crime to relevant authorities.

52. In response to the third ground of appeal, the Respondent stated that it profiled imports by the Appellant of Mahogany from DRC through Malaba and Busia OSBP within the period under investigation. The Respondent also averred that the analysis used was based on the number of entries cleared which resulted to tax assessment and demand of Kshs 58,443,097. 00. The Respondent further averred that there was no error in confirming the tax assessment as analyzed.

52. In response to the fourth ground of appeal, the Respondent stated that the Appellant provided a list of entries and alleged that 122 out of 187 entries were lodged using its PIN without its consent. The Respondent averred that it reviewed the list of entries provided and found that the Appellant was unable to differentiate entries lodged by itself and those lodged without its consent since the entries were done in the Appellant’s name and PIN as the consignee and were lodged by the tax agents engaged by the Appellant. Further, the Respondent stated that the Appellant did not provide any evidence of reporting the occurrence of the crime to relevant authorities.

54. In response to the fifth ground of appeal, the Respondent stated that a mirror analysis on transit timber declarations in URA Asycuda versus timber imports in KRA Simba database for the period was carried out. The Respondent argued that it compared the value, quantity, and weights declared by major timber importers profiled including the Appellant to confirm whether the declarations on the Ugandan side match those in Kenya. The Respondent averred that this was carried out by requesting data from Uganda as provided in the relevant bilateral agreements.

55. The Respondent averred that the mirror analysis established that there was gross under-declaration and smuggling of timber at Busia and Malaba OSBP due to under-declaration of quantity hence under-valuation since the customs value of timber is pegged on USD/Cubic Metre.

56. The Respondent further averred that Sawn raw timber is a product that falls under the HS code 4407 whose unit of measure for purposes of customs valuation is cubic meter.

57. The Respondent stated that according to the declarants at Malaba and Busia OSBP’s the Harmonized nomenclature system of goods unit of measure is cubic meter differs from the seller’s unit of measure i.e. body feet.

58. The Respondent relied on the provisions of Section 121 of the EACCMA in determination of duty payable. In addition, the Respondent averred that it explained in writing how the customs value of the goods was determined in the objection decision. The Respondent relied on the provisions of Section 122 of EACCMA to support its case.

59. The Respondent stated that the determination of the tax liability depended on submission of necessary records by the Appellant.

60. The Respondent submitted that it did not introduce any new facts that varied from the objection decision. It further submitted that the Objection decision was informed by the notice of tax investigation and demand notice dated 11th November 2021.

61. The Respondent further averred that in its objection decision dated 3rd April 2023 it mentioned the international best practices on Paragraph 2. 2.1 and that the issue of mirror analysis was pleaded by the Appellant in its Statement of Facts in which the Respondent has a right of reply.

62. On whether the Respondent was proper in applying the mirror analysis in determining the correct value of the imported value, the Respondent submitted that Mirror analysis (or mirror data) as defined by the World Customs Organization refers to the comparison between the import (or export) data of a country X and the data for imports to (or exports from) Country X by one or more Countries.

63. The Respondent submitted that the mirror analysis aimed at establishing whether there was an over or under declaration of the imported consignment of timber by the Appellant, the Respondent submitted that it used the Mirror analysis as a complementary risk management tool for the detection of value under/over declaration, smuggling fictitious exports, fraud and for revision of existing valuation databases. The Respondent submitted that the mirror analysis established gross under declarations and smuggling of timber at the Busia and Malaba OSBPs due to under-declaration of quantity.

64. The Respondent submitted that there being short levy of taxes the Respondent was guided by the provisions of Section 135 of EACCMA and that was proper in demanding for the short levied taxes. The Respondent further submitted that it was proper in carrying out its investigations and verification process as provided for in Section 236 of EACCMA to determine the accuracy of the imports made by the Appellant and confirm whether the correct taxes had been paid.

65. The Respondent relied on the case of Anne Wanjiku Kahwai vs. Kenya Revenue Authority & another (2019) eKLR wherein the court stated that the Respondent has a duty to carry out audit and tax investigations. Consequently, the Respondent submitted that it was proper in applying the mirror analysis method in determining whether the Appellant was properly accounting for and paying the resultant taxes.

66. As to whether the Respondent was proper in issuing the assessment, the Respondent submitted that the assessments are justified as there was gross under-declaration of the imported consignments. The Respondent relied on jurisprudence from John Kabui Mwai & 3 Others vs. Kenya National Examination Council & 2 others [2011] eKLR.

67. The Respondent relied on cases of Mulherin vs Respondent of Taxation [2013] FCAFC 115; Afya X-Ray Centre Vs Commissioner of Domestic TAT NO. 70 Of 2017; and Republic v Public Procurement Administrative Review Board & 2 others [2019] eKLR to submit that the Appellant has burden to proof to prove that the Respondent’s decision is incorrect but the Appellant has failed to discharge its burden.

Respondent’s prayers 68. The Respondent prayed that the Tribunal be pleased to;a.Uphold the Objection decision dated 3rd April 2023 andb.Dismiss the Appeal with costs

Issues For Determination 69. The Tribunal having evaluated the pleadings and submissions of the parties puts forth the following issues as falling for its determination:-a.Whether the Respondent introduced new facts through its objection decision;b.Whether the demand of Kshs 58,443,097. 00 was justified

Analysis And Findings 70. The Tribunal having determined the issues falling for its determination proceeds to analyse them as hereunder.

a) Whether the Respondent introduced new facts through its objection decision 71. The Appellant submitted that the Respondent introduced new issues different from the issues raised in its original demand notice dated 11th November 2021. The Appellant submitted that the Respondent introduced the mirror analysis of Uganda’s Asycuda system and KRA Simba system and the use of international best practices.

72. The Tribunal has reviewed the notice of tax demand dated 11th November 2021 issued by the Respondent which alleged that the Appellant misdeclared consignments. In the Objection decision, the Respondent explained that the Mirror analysis of Uganda’s Asycuda system and KRA Simba system and reference to international best practices revealed under-declaration of consignments. The Objection decision stated that upon the analysis, the Respondent then issued the demand for Kshs 58,443,097. 00.

73. The Tribunal has also examined the Appellant’s objection dated 15th March 2023. The objection is based on three grounds mainly that out of 187 entries, only 65 were made by the Appellant while the rest were fraudulent; that the Appellant had raised issue of its Pin being used by unknown entities and that new laws on calculations of import duty be done prospectively and not retrospectively for fairness in imposition of tax.

74. The Tribunal notes that whereas the tax demand dated 11th November 2021 accused the Appellant of ‘misdeclared quantities’ and ‘undeclared timber purchases’ in 187 entries, the Appellant’s objection did not address these allegations. Whereas the Appellant acknowledged that only 65 were made by the Appellant, the Appellant in its objection did not address the allegations of ‘misdeclared quantities’ and ‘undeclared timber purchases’ even in the 65 entries that the Appellant admitted to have made.

75. Notwithstanding the 122 entries that the Appellant disowned, the Tribunal takes the view that the bare minimum that the Appellant ought to have done at objection stage was to at least defend the 65 entries against the allegations of ‘misdeclared quantities’ and ‘undeclared timber purchases’. The Tribunal notes that the Appellant failed to do so.

76. Based on the above, the Tribunal is of the view that the Respondent did not introduce any new facts. The mirror analysis of Uganda’s Asycuda system and KRA Simba system and the use of international best practices were not new facts. If the Appellant had defended the 65 entries against the allegations of ‘misdeclared quantities’ and ‘undeclared timber purchases’ then this issue would not have risen or if it would have risen, it would be in a different context.

b) Whether the demand of Kshs 58,443,097. 00 was justified 77. The Respondent raised a tax demand alleging that 187 entries had been misdeclared. The Respondent then demanded a total tax liability of Kshs 58,443,097. 00. On the other hand, the Appellant admitted that out of 187 entries only 65 entries were made by the Appellant while the rest were fraudulent.

78. The Respondent averred that the Appellant’s objection was invalidated as the Appellant provided 65 out of 187 entries required. The Respondent alleged that the Appellant was unable to differentiate entries lodged by itself and those lodged without its consent.

79. Further, the Respondent averred that the entries were conducted in the name and PIN of the Appellant as the consignee and were lodged by the tax agents engaged by the Appellant. The Respondent further asserted that the Appellant did not provide any evidence of reporting the occurrence of the crime to the relevant authorities.

80. The Appellant stated that on 15th February 2023 it reported to the Respondent that its PIN was misused to lodge 122 entries. The Tribunal has confirmed through email correspondences that the Appellant reported this issue to the Respondent. The Respondent on the other hand disallowed the 122 entries on grounds that the Appellant did not produce evidence to confirm that the Appellant had reported the matter to the relevant investigative authority.

81. Section 91 of the Tax Procedures Act provides for offences relating to use PINs. It provides that:“(1)A person commits an offence if that person uses a false PIN on a tax return or other document used for the purposes of a tax law. 2. A person who uses the PIN of another person shall be treated as having used a false PIN, unless the PIN has been used in the circumstances specified in section 13(3).

2. A person commits an offence if the person obtains a PIN using a false document, a forged document or through fraud, misrepresentation or deceit.”

82. The Tribunal is of the view that using a PIN contrary to its purpose is a crime pursuant to Section 91 of the Tax Procedures Act. The Appellant claimed that it reported this issue to the Respondent but it did not deny that the 122 entries were made by its agents.

83. Further, the Appellant did not mention when it got to know that its PIN was being misused. The Respondent issued the demand on 11th November 2021 and the Appellant notified the Respondent about the alleged misuse of the PIN on 15th February 2023.

84. The burden to prove that the 122 entries were made fraudulently fell on the Appellant. The Tribunal therefore finds that the Appellant failed to demonstrate that the Respondent failed to allow the 127 entries. The Tribunal is guided by the decision in Darwine Wholesalers Limited v Commissioner of Investigations and Enforcement (Income Tax Appeal E051 of 2021) [2023] KEHC 23537 (KLR) where the court held that the burden of proof lies on a taxpayer who has to prove that the Respondent’s decision is wrong.

85. From the foregoing analysis the Tribunal finds that the Appellant has failed to discharge its burden of proof in respect to the 122 entries and therefore the Respondent’s tax demand of Kshs 58,443,097. 00 was justified.

Final Decision 86. The upshot to the foregoing analysis is that the Tribunal finds that the Appeal lacks merit and consequently makes the following Orders;-a.The Appeal is hereby dismissed;b.The Respondent’s Objection decision dated 3rd April 2023 is hereby upheld; andc.Each party to bear its own costs.

87. It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 28TH DAY OF JUNE, 2024ERIC NYONGESA WAFULA- CHAIRMANEUNICE N. NG’ANG’A -- MEMBERMUTISO MAKAU- MEMBERELISHAH N. NJERU - MEMBERABRAHAM K. KIPTROTICH- MEMBER