[2024] KETAT 1132 (KLR)

County Government of Kitui v Commissioner of Legal Services and Board Co-ordination (Tax Appeal E410 of 2023) [2024] KETAT 1132 (KLR) (1 August 2024) (Judgment)

Neutral citation: [2024] KETAT 1132 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal E410 of 2023

RM Mutuma, Chair, M Makau, EN Njeru, B Gitari & AM Diriye, Members

August 1, 2024

Between

The County Government of Kitui

Appellant

and

Commissioner of Legal Services and Board Co-ordination

Respondent

Judgment

1. The Appellant is one of the 47 County Governments created under Article 6 (1) of the Constitution of Kenya, 2010 and specified in the First Schedule.

2. The Respondent is an officer of Kenya Revenue Authority, Statutory Corporation duly established under the provisions of the Kenya Revenue Authority Act (CAP. 469 of the Laws of Kenya) as the sole agent of the government for the assessment and collection of all government revenue. In exercise of that mandate, the Respondent enforces provisions of law set out in the first schedule to the KRA Act, among them the Value Added Tax (VAT) Act No. 35 of 2013.

3. The dispute in this Appeal arose when the Appellant received demand letters from the Respondent on three occasions: on 24th November 2022, pertaining to Income Tax, Withholding VAT, and PAYE totaling to Kshs. 101,472,703. 37 for Kitui and Mwingi Municipalities; on 25th November 2022, in relation to Withholding Income Tax on rent and Withholding VAT amounting to Kshs. 83,893,493. 00 based on alleged iTax ledger arrears; and, on 7th February 2023, regarding Withholding VAT, Withholding Income Tax, and PAYE totaling to Kshs. 873,651,814. 00 for the period from May 2018 to December 2020 in Kitui County.

4. The Appellant objected to the three tax demands vide letters dated 13th March 2023. Consequently, the Respondent issued three distinct Objection Decisions vide letters, all dated 15th May, 2023.

5. The Appellant being aggrieved by the Objection Decisions, lodged this Appeal, filing its Notice of Appeal dated 14th June, 2023 and filed on 27th July 2023 with leave of the Tribunal.

The Appeal 6. The Appellant’s Memorandum of Appeal dated 26th July 2023 and filed on 27th July, 2023 is premised on the following consolidated grounds:a.There is no basis for the Respondent’s demand for alleged withholding income tax, withholding VAT and PAYE in the sum of Kshs. 101,472,703. 00 for the period of July 2018 and June 2022, or any part thereof.b.There is no basis for the Respondent’s demand for alleged withholding income tax on rent, withholding income tax and withholding VAT in the sum of Kshs. 83,893,493. 00 for the period of October 2020 to June 2022, or any part thereof.c.There is no basis for the Respondent’s demand for alleged withholding VAT, withholding income tax and PAYE in the sum of Kshs. 873,651,814. 00 for the period of May 2018 to December 2020, or any part thereof.

Appellant’s Case 7. The Appellant’s case is premised on its;a.Statement of Facts dated 26th July 2023 and filed on 27th July, 2023 together with the documents attached thereto; and,b.Written submissions dated 16th January, 2024 and filed on 22nd January, 2024.

8. The Appellant stated that the Respondent carried out a tax reconciliation exercise on the records of the Appellant for the period May 2018 to June 2022 and issued tax demands as follows;a.Relating to WVAT, WHT and PAYE on Kitui and Mwingi Municipalities in the sum of Kshs. 101,472,703. 37 inclusive of penalties and interest.b.Relating to WHT Rent, WHT Income Tax and WHT VAT on alleged iTax Ledger arrears in the sum of Kshs. 83,893,493. 00 inclusive of penalties and interest.c.Relating to WVAT, WIT and PAYE for the period May 2018 to December 2020 in the sum of Kshs. 873,651,814. 00 inclusive of penalties and interest.

9. The Appellant contented that it objected to the above assessments distinctly vide the Notices of Objection all dated 13th March 2023 and the Respondent issued its Objection Decisions distinctively on 15th May 2023, subsequently the Appellant being aggrieved lodged this instant Appeal.

10. The Appellant stated that the assessments were erroneous as the basis applied in raising the tax demands ignored material facts regarding chargeability of tax under the three heads resulting in erroneous Objection decisions.

11. The Appellant contested the Respondent’s demand for alleged Withholding Value Added Tax (WVAT), Withholding Income Tax (WHT), and Pay As You Earn (PAYE) in the sum of Kshs. 101,472,703. 00, claiming that it lacked basis and legality.

12. That in the case of WVAT, the Appellant asserted that it made a full remittance of the principal amount of Kshs. 13,945,865. 70 but disputed penalties and interest, arguing that the Respondent failed to update their records accordingly, which rendered the demand for penalties and interest unjustified.

13. That, similarly, regarding WHT, the Appellant argued that it declared and remitted the entire principal amount of Kshs. 15,073,944. 70 and refuted the imposition of penalties and interest. The Appellant provided evidence of remittance and emphasized the Respondent’s disregard of the same.

14. That concerning PAYE, the Appellant challenged demands related to travel allowances and other payments, citing exemptions under Section 5 of the Income Tax Act. The Appellant argued against the Respondent’s insistence on additional documentary evidence, it asserted the unlawfulness and unreasonableness of such demands. The Appellant supported this contention by citing Section 5 (2) of the Income Tax Act.

15. That furthermore, the Appellant disputed the alleged PAYE arising from discrepancies between their bank account balances, asserting a non-existent variance in the Respondent’s computations. The Appellant provided evidence of remittance from their grant account, asserting that the Respondent failed to consider the said remittance, which led to the inaccurate tax demands.

16. That the Appellant contended that a significant portion of the taxes demanded by the Respondent were already paid and accounted for. It argued that the remaining balance of taxes demanded by the Respondent pertained to payments that were stopped or canceled from the Appellant’s IFMIS system, particularly towards the end of financial years. Despite providing details of these stopped or cancelled payments to the Respondent, the Appellant asserted that the Respondent ignored this information, resulting in erroneous tax demands.

17. That furthermore, the Appellant argued that the taxes demanded by the Respondent under this category were related to alleged iTax arrears following a reconciliation exercise. It highlighted that the period under review (October 2020 to June 2022) overlapped with another existing review from May 2018 to December 2020, and suggested a duplication of assessments.

18. That the Appellant acknowledged a tax liability of Kshs. 98,491,026. 30, which had been fully settled, leaving only the disputed sums under contention. The Appellant raised the following subsequent points, that:i.The alleged Withholding VAT (WVAT) deducted and not Remitted was inaccurate. The Appellant disputed the principal tax amount demanded by the Respondent, pointing out instances of duplication and payments reflected in their bank statements. The Appellant argued that penalties and interest are unjustified due to the Respondent’s failure to consider stopped or cancelled payments.ii.The alleged WVAT not withheld on Development Vote: The Appellant asserted that it deducted taxes where required but were not considered for payments stopped or cancelled, despite providing a detailed analysis of the payments.iii.The alleged WVAT not withheld under Recurrent Vote: The Appellant argued against the accuracy of the principal tax demanded and highlighted the Respondent’s oversight of payments stopped or cancelled, despite providing analysis.iv.The alleged WVAT on monies paid to Individuals under the Recurrent and Development Votes: The Appellant contested the demand for WVAT on payments made for staff allowances, it argued that it was exempt under Section 5 of the Income Tax Act, it further argued against penalties and interest.v.The alleged Withholding Income Tax Deducted and Not Remitted: The Appellant disputed the principal tax amount, it pointed out the duplications and payments reflected in its bank statements, it further argued against penalties and interest.vi.With regards to the alleged Withholding Income Tax Not Deducted; the Appellant asserted that it deducted and remitted all applicable taxes, it disputed the accuracy of the demand, it further argued against penalties and interest.vii.On the alleged Withholding Tax on Rental Income Not Withheld; the Appellant contested the demand for withholding income tax on rent, it argued against the accuracy of the demand and highlighted payments stopped or cancelled.viii.Concerning the alleged PAYE Arrears; the Appellant disputed the alleged PAYE arrears and provided detailed workings to support their contention that certain taxes were fully paid or not applicable, it argued against penalties and interest.ix.With regards to the Advance Tax Recovered from the Appellant's Account with CBK; the Appellant disputed the recovery of advance tax, it asserted that it was improperly withdrawn from its account and provided the details of the transactions and dates of withdrawal.

19. The Appellant in its written submissions raised the following issues for determination, namely;a.Whether there is basis for the Respondent’s demand for alleged Withholding Income Tax, Withholding VAT and PAYE in the sum of Kshs. 101,472,703. 00 for the period July 2018 to June 2022, or any part thereof.b.Whether there is basis for the Respondent’s demand for alleged Withholding Income Tax on Rent, Withholding Income Tax and Withholding VAT in the sum of Kshs. 83,893,493 for the period October 2020 to June 2022, or any part thereof.c.Whether there is basis for the Respondent’s demand for alleged Withholding VAT, Withholding Income Tax and PAYE in the sum of Kshs. 873,651,814. 00 for the period May 2018 to December 2020, or any part thereof.d.Who should bear the costs of this Appeal.i.Whether there is basis for the Respondent’s demand for Withholding Income Tax, Withholding VAT and PAYE in the sum of Kshs. 101,472,703. 00 for the period July 2018 to June 2022, or any part thereof.

Alleged withholding VAT amounting to Kshs 22,958,568. 89. 20. Regrading, this issue, the Appellant submitted that the Respondent demanded the sum of Kshs. 22,958,568. 89 inclusive of penalties and interest relating to WVAT, however in so doing it disregarded the Appellant’s evidence that it had declared and paid the principal sum of Kshs. 13,945,865. 70, the Respondent was yet to update its records. The Appellant having paid the amount in full, the Respondent’s demand of Kshs. 9,012,703. 19 as penalties and interest on that amount was without any basis.

Alleged Withholding Income Tax amounting to Kshs 24,815,684. 11. 21. On this issue, the Appellant submitted that the Respondent demanded the sum of Kshs. 24,815,684. 11 inclusive of penalties and interest relating to WHT Income Tax, however in so doing the Respondent disregarded the Appellant’s evidence that it had declared and paid the principal sum of Kshs. 15,073,944. 70, the Respondent was yet to update its records. The Appellant having paid the amount in full, the Respondent’s demand of Kshs. 9,741,739. 41 as penalties and interest is baseless.

Alleged PAYE amounting to 7,207,823. 00. 22. On this issue, the Appellant submitted that the Respondent demanded the sum of Kshs. 7,207, 823. 00 inclusive of penalties and interest relating to PAYE arising from travel allowances/daily subsistence allowances, the same being per diems and reimbursements are tax exempt under Section 5 of the Income Tax Act. The Appellant argued that the Respondent disregarded the evidence provided and unreasonably insisted that the Appellant ought to have provided a clear breakdown of how its staff actually utilized the per diem and/or reimbursement given to it.

23. The Appellant submitted that the Respondent’s demand on PAYE was erroneous and the penalties and interest thereon is without any basis.

24. The Appellant submitted that the Respondent demanded the sum of Kshs. 4,828,603. 80 inclusive of penalties and interest relating to PAYE with respect to Boards, Committees, Conferences and Seminars, however the same related to payments made to casuals engaged by the municipalities which fall below the taxable threshold within the meaning of Section 5 (2) of the Income Tax Act. It submitted that it was erroneous for the Respondent to compute tax on the basis of a lump sum instead of dealing with it on an employee-by-employee basis. The Appellant submitted that it conceded the stated amount and settled the same in full therefore, there is no tax liability in that regard.

25. The Appellant also submitted that the principal tax demanded by the Respondent relating to alleged PAYE arising from an alleged discrepancy between the Appellant’s opening and closing bank balances in its two Grant accounts in the sum of Kshs. 20,581,955. 52, the same was predicated upon a totally non-existent discrepancy between the Appellant’s two Grant Bank Account opening and closing balances by Kshs. 68,606,518. 40.

26. The Appellant further submitted that the non-existent variance arose from the fact that in its tabulations, the Respondent only considered the Appellant’s Recurrent and Development bank statements with absolutely no reference to the Appellant Grant Account number: 1000353651 - Kitui County Road Maintenance Levy-KES. On the contrary, the Appellant submitted that an analysis of the stated Grant account demonstrated that a total of Kshs. 80,429,312. 65, which appears nowhere in the Respondent’s computations, was indeed remitted as tax.

27. The Appellant submitted that had the Respondent factored the foregoing payment in its computations, it would have become apparent that a sum of Kshs. 29,019,810. 40 was indeed paid with respect to WVAT and WHT hence the inaccurate tax that is the subject of the erroneous tax. It submitted that the penalties and interest of Kshs. 13,301,365. 45, and which is demanded on the basis of the aforesaid erroneous principal tax ought to be vacated.ii.Whether there is basis for the Respondent’s demand for alleged Withholding Income Tax on Rent, Withholding Income Tax and Withholding VAT in the sum of Kshs. 83,893,493 for the period October 2020 to June 2022, or any part thereof.

28. Regarding this issue, the Appellant submitted that the balance of the taxes demanded by the Respondent related to payments that had been stopped or canceled from the Appellant’s IFMIS system especially towards the end of the respective financial years, and whose details were provided to the Respondent. It submitted that this was ignored by the Respondent resulting in the erroneous tax demands.

29. It also submitted that the tax demanded under this head was thus with respect to alleged iTax arrears following a reconciliation exercise. It asserted that there is an apparent duplication that ought to be vacated for the period 2018 to December 2020. iii.Whether there is basis for the Respondent’s demand for alleged Withholding VAT, Withholding Income Tax and PAYE in the sum of Kshs. 873,651,814. 00 for the period May 2018 to December 2020, or any part thereof.

30. The Appellant submitted it conceded and fully settled a tax liability of Kshs. 98,491,026. 30. Alleged withholding VAT deducted and not remitted in the sums 106,381,199.

31. The Appellant submitted that the alleged WVAT deducted and not remitted of Kshs. 65,264,490. 00 in principal tax is inaccurate on grounds that amount of Kshs. 10,373,697. 85 was duplicated in the Respondent’s demand while Kshs. 1,091,744. 30 is clearly reflected in the Appellant’s bank statement as having been remitted to the Respondent. The Appellant further submitted that the Respondent failed to consider the tax charged on stopped or cancelled payments, which renders the penalties and interest of Kshs. 41,116,629. 00 moot. Therefore, the Appellant submitted that the Respondent should not be demanding these sums.Alleged Withholding VAT not withheld on Development Vote in the sum of Kshs. 38,914,626. 00.

32. The Appellant submitted that it deducted taxes and accordingly remitted the same to the Respondent. In some instances, however, some of the transactions in respect to which VAT had been charged were subsequently stopped or cancelled yet the Respondent mechanically demanded WVAT on all payments that appeared to have been made through the IFMIS platform notwithstanding that some had been subsequently stopped or cancelled for various reasons, including insufficient funds.

33. The Appellant submitted that despite providing an analysis of these payments, the Respondent simply ignored the same and persisted in its demand which from the analysis provided by the Appellant was evidently not due.Alleged Withholding VAT not withheld under Recurrent Vote in the sum of Kshs. 27,898,262. 00.

34. The Appellant submitted that the Respondent alleged that it tax arrears of Kshs. 17,1152,498. 00 as principal tax arising from the recurrent vote, which is inaccurate, as are the penalties and interest of Kshs. 10,782,764. 00. The Appellant submitted that the Respondent simply relied on IFMIS authorization of payments without necessarily considering that some of those payments were subsequently stopped or cancelled for various reasons, including insufficient funds and end of financial year, when payments are deferred to the next year.Alleged Withholding VAT on monies paid to Individuals under the Recurrent Vote in the sum of Kshs.194,416,300. 00.

35. The Appellant submitted that the Respondent erroneously demanded a sum of Kshs. 119,273,804. 00 as alleged WVAT on monies paid to individuals under the recurrent vote. It submitted that the amounts relate to travelling and accommodation expenses, as well as subsistence allowances paid to the Appellant’s staff who were on official duties outside their workstations. The Appellant submitted that the payments are recommended by the Salaries and Remuneration Commission guidelines and constitute exempt reimbursements within the meaning of Section 5 of the Income Tax Act. Therefore, the Appellant maintained that the resultant penalties and interest of Kshs. 75,142,496. 00 ought to be vacated.Alleged Withholding VAT on monies paid to Individuals under the Development Vote in the sum of Kshs.44,296,227. 00.

36. The Appellant submitted that the Respondent erroneously demanded alleged WVAT in the sum of Kshs. 27,175,599. 00 on monies paid to individuals under the development vote, which relate to traveling and accommodation expenses as well as payments made to the Appellant’s staff who were on official duties outside their work stations and were entitled to daily subsistence allowances as guided by the Salaries and Remuneration Commission guidelines.

37. It submitted that the Respondent purported to demand additional documentary evidence to support those expenditures notwithstanding that the SRC has recommended what is considered as reasonable for the various cadres of the Appellant’s staff, and the Appellant does not, as a consequence, demand such evidence. Consequently, the Appellant submitted that the penalties and interest demanded by the Respondent in the sum of Kshs. 17,120,627. 00 ought to be vacated.Alleged Withholding Income Tax Deducted and Not Remitted in the sum of Kshs. 64,326,136. 00

38. The Appellant submitted that the alleged withholding Income Tax of Kshs. 39,463,887. 00, demanded by the Respondent as principal tax deducted and not remitted was inaccurate on grounds that the demand amounts were duplicated, for instance, an amount of Kshs. 4,501,518. 45 was duplicated in the Respondent’s demand while Kshs. 606,738. 00 is reflected in the Appellant’s bank statement as remitted yet, the Respondent has demanded for those same tax payments.

39. The Appellant submitted that the Respondent mechanically copy pasted purported entries in the Appellant’s account and disregarded the fact that some of the transactions, although initiated, were either stopped or automatically aborted, inter alia, on account of insufficient funds.Alleged Withholding Income Tax Not Deducted in the sum of Kshs. 63,194,328. 00.

40. The Appellant submitted that the alleged withholding income tax in arrears of Kshs. 38,769,527. 00 demanded by the Respondent as principal tax not withheld is inaccurate. The Appellant maintained that it deducted and remitted all the taxes that ought to be remitted. It submitted that the Respondent assumed that all payments that were initiated by the Appellant went through, which is not the case.

41. The Appellant further submitted that some of the payments initially initiated by the Appellant were cancelled on account of insufficient funds and hence, the Appellant cannot be expected to have paid Withholding Income Tax on transactions that never materialized.Alleged Withholding Tax on Rental Income Not Withheld in the sum of Kshs.2,704,317. 00.

42. The Appellant submitted that the alleged Withholding Income Tax on rent of Kshs. 1,659,090. 00 demanded by the Respondent as principal tax was inaccurate in that the Respondent mechanically copy pasted purported entries in the Appellant’s account and disregarded the fact that some of the transactions, although initiated, were either stopped or automatically aborted, inter alia, on account of insufficient funds.Alleged Pay As You Earn (PAYE) Arrears in the sum of Kshs.331,520,498. 00

43. The Appellant submitted that appealed against the entire the alleged PAYE arrears of Kshs. 186,755,174. 00 on the following grounds:i.The alleged Payroll PAYE of Kshs. 155,479,313. 00 being the principal amount demanded was fully paid as indicated per the Appellant’s workings under Appendix E.ii.The alleged Branch payroll tax of Kshs. 684,091. 00 for Kitui Level IV Hospital Management Account as principal tax was fully settled as indicated in payment slips under Appendix E.iii.The alleged Airtime benefits tax of Kshs. 1,674,000. 00 as principal tax does not arise since the amounts are below the threshold of Kshs. 36,000. 00 per annum on a staff-by-staff basis. Under Section 5 of the Income Tax Act, the same is exempt from tax.iv.The alleged Motor Vehicle benefits tax of Kshs. 26,821,895. 00 as principal tax is incorrect, since the County vehicles are used as pool vehicles and are not assigned to specific staff.v.The alleged Housing Benefit tax of Kshs. 1,234,574. 00 in principal tax is inaccurate since the Governor was not provided with a house. She was living in her own house during her tenure.vi.The Appellant appealed against the entire alleged tax on other benefits of Kshs. 861,300. 00 in principal taxes since no workings were provided to the Appellant.Advance Tax Recovered from the Appellant’s Account with Central Bank of Kenya (CBK) in the sum of Kshs 30,950,863. 37.

44. The Appellant submitted that an amount of Kshs. 30,950,863. 37 as principal tax plus interest and penalties was recovered from the Appellant’s account allegedly for WHT and WVAT for the period January to November 2019. The Appellant submitted that the amount was swiped from the Appellant's account via notice instructions to CBK as follows:i.On 6th January 2021 - Kshs. 10 million as indicated under Appendix F; andii.On 8th June 2021 - Kshs. 5,071,214. 00 and Kshs. 15,879,650. 00 as indicated under Appendix G.

Appellant’s Prayers 45. The Appellant made the following prayers to the Tribunal:a.The Cost of this Appeal be in the course;b.The Assessments hereof be annulled; and,c.Respondent’s decision contained in the letters dated 15th May 2023 be set aside in entirety.

The Respondent’s Case 46. The Respondent’s case is premised on its;a.Statement of Facts dated 25th August 2023 and filed on 28th August, 2023 together with the documents attached thereto; and,b.Written submissions dated 17th January, 2024 and filed on 18th January, 2024.

47. The Respondent averred that the Appellant lodged its application for extension of time to lodge its notices of objection on 16th March 2023, which the Respondent upon consideration allowed.

48. The Respondent stated that vide the correspondence dated 28th March 2023, it wrote to the Appellant requesting it to provide its supporting documents within 7 days. Subsequently, the Respondent issued three Objection Decisions dated 15th May 2023 partially confirming its assessments.

49. The Respondent contended that there were three Objection decisions that were issued which shall be discussed herein below under the following headings A, B and C.A. Ground of Appeal to the withholding Income Tax, Withholding VAT and PAYE - Kshs. 101,472,573. 00 for the period July 2018 to June 2022. B. Ground of Appeal to Withholding Income Tax on rent, withholding Income Tax and withholding VAT- Kshs. 83,893,493. 00 for the period October 2020 to June 2022. C. Ground of Appeal to Withholding VAT, Withholding Income Tax and PAYE – Kshs. 873,651,814. 00 for the period May 2018 to December 2020.

50. With reference to Withholding VAT in the sum of Kshs. 22,958,568. 89, the Respondent averred that the Appellant did not provide any documentary evidence that it paid principal tax of Kshs. 13,945,856. 70. That the Appendix B1 referred by the Appellant in their bundle of documents is not proof of payment but an excel workbook that is not accompanied by corresponding bank statements showing the money being debited from the Appellant’s bank accounts and the same being credited to the Respondent’s bank account.

51. With reference to Withholding Income Tax (WHT) in the sum of Kshs. 24,815,684. 00, the Respondent stated that the Appellant had not provided any documentary evidence that it paid principal tax of Kshs. 16,073,945. 00. That the Appendix B1 referred by the Appellant in its bundle of documents is not proof of payment but an excel workbook that is not accompanied by corresponding bank statements showing the money being debited from its bank accounts and the same being credited to the Respondent’s bank account.

52. The Respondent contended that in its Objection Decision it correctly pointed to the Appellant that this was not an additional assessment but a reconciliation issue where the Appellant was required to demonstrate that the taxes had been paid by providing supporting documents to show the Payment Registration Numbers (PRN) had been paid as generated by the Appellant.

53. The Respondent asserted that upon verification of when the payment was done, the correctness of whether the penalty and interest were charged accordingly will automatically be determined as due date and payment date will now be an issue of fact.

54. The Respondent averred that the Appellant failed to provide any documentary evidence to support that the amount charged PAYE does not attract tax. The Appellant failed in its duty to provide a schedule showing details of employees (Name, KRA PIN), amount paid, trip and nature of trip, imprest surrender forms after the trip, proof of disbursement of the imprest/per diem. The Appellant should be compelled to provide the said information and in the absence of the same the assessment should be confirmed.

55. The Respondent contented that the Appellant failed to provide a schedule showing the details of casuals (names, Id No. or KRA PIN, Telephone No.) that were engaged, project they were engaged in, mode of payment, a mapping of the payments to the bank statements.

56. The Respondent stated that the Appellant stated that it made payment of Kshs. 98,491,026. 00 and part of this was used to settle Kshs. 4,828,603. 00. However, Appendix C2 is not accompanied by PRN or a bank statement to prove the amount was paid. Therefore, the Respondent avers that the Appeal should not be admitted until the conceded amount is fully paid or proof of payment of the same is provided.

57. The Respondent contented that the Appellant failed to provide a proper bank reconciliation and proof of payment of taxes and without such the Respondent could not determine whether the self-assessed tax was paid or not as alluded by the Appellant in their Appeal.

58. With reference to Withholding Income Tax on rent, Withholding Income Tax and Withholding VAT for the period October 2020 to June 2022 in the sum of Kshs. 83,893,493. 00, the Respondent averred that this is not an additional tax assessment and thus not a tax decision that could be objected as the demanded taxes related to self-declaration by the Appellant through raising of Payment Registration Numbers (PRN) where the Appellant withheld taxes from its customers but failed to remit the same. Had the amount been remitted to the Respondent, the same would have reflected in the Appellant iTax ledger and the customers from whom it was withheld from. Without the same being paid the Appellant infringes on the rights of its clients to get credit in iTax for taxes deducted at source.

59. The Respondent stated that the document provided by the Appellant and marked as appendix C2 is an excel worksheet and is not supported with the actual bank statements to map the payments so as to verify the amounts were credited to the Respondent’s accounts and where the same was not credited the reason for such. The Respondent confirmed that the amounts reflected in the Appellant iTax ledger and thus called for a reconciliation of the same and at no time did the Respondent raise an additional assessment for this amount.

60. The Respondent stated that this matter should not be before the Tribunal as it was not based on an additional assessment but a demand by the Respondent for self-assessed taxes filed for and not paid. The Appellant if it disputes its own assessment, it is entitled to lodge an amendment as per Section 31 of the Tax Procedures Act. It’s upon the Respondent rejecting such an application can the Appellant file a Notice of Objection which then can be responded to by an Objection Decision that will then be brought before the tribunal if there is no consensus.

61. The Respondent avowed that the Appellant failed to demonstrate to the Respondent the reasons for the PRN to cancel having already withheld the taxes from its clients. The Appellant was only acting as an agent and cannot purport to cancel the payment of the same once the withholding taxes are deducted from its suppliers/clients.

62. The Respondent stated that the Appellant indicated that the cancellation clearly showed that this was not an additional assessment being raised by the Respondent. The Respondent stated further that in its three Objection Decisions that the issue was well articulated and Appellant notified that this was a matter of reconciliation and not an additional assessment as alluded by the Appellant. The Appellant was invited by Respondent for a joint reconciliation upon provision of documentations to support the cancellation and proof of payment. However, the Appellant failed in its duty to provide the same.

63. The Respondent averred that the three Objection Decisions dealt with the issue of overlap and Appellant was requested to provide documents to demonstrate how the tax had been double counted and later proof the taxes had been paid.

64. With reference to Withholding VAT, Withholding Income Tax Withholding and PAYE for the period May 2018 to December 2020 in the sum of Kshs. 873,651,814. 00, the Respondent stated that the Appellant did not provide evidence to show that the amount had been paid. Further, as stated in (i) above this is not proof of payment. Had the amounts been paid, the same would have reflected in its iTax ledger which it has not. That the Appellant should have provided PRNs and bank statement showing the payment and from there the Respondent can follow up with Central Bank of Kenya for updating of the same.

65. Relating to the alleged Withholding Vat deducted and not remitted in the sum of Kshs. 106,381,199. 00, the Respondent stated that the Appellant did not provide evidence to show the amount had been paid. Further, as stated in (i) above this is not proof of payment. Had the amounts been paid the same would have reflected in its iTax ledger which it has not. That the Appellant should have provided PRNs and bank statement showing the payment and from there the Respondent can follow up with Central Bank of Kenya for updating of the same.

66. The Respondent averred that there was no duplication as the amounts were picked from PRNs generated by the Appellant. Each PRN has a unique number. For avoidance of doubt the PRNs in this case were for self-assessed tax and the Respondent did not raise an additional tax of Kshs. 106,381,199. 00.

67. The Respondent stated that the closure of a year or insufficient funds by the Appellant cannot be an adequate reason as to why the taxes should not be paid once it was withheld. The Appellant would have requested for a payment plan to make payments.

68. Regarding Withholding VAT on recurrent & development vote in the sum of Kshs. 194,416,300. 00 and Kshs. 44,296,227. 00, the Respondent contented that the Appellant failed to provide a breakdown of the amounts to show the names, KRA Pin, nature of payment, approval documents for the travels and imprest surrender forms to demonstrate that this were payment for official duties outside the employees’ work station. Appendix E attached is just an analysis and does not have the documents stated above.

69. In relation to Withholding Income Tax Deducted and not remitted in the sum of Kshs. 64,326,136. 00 and Kshs. 63,194,328. 00, the Respondent averred that the Appellant agrees that withholding tax was deducted by it under the self-assessment regime. However, Appellant has failed to demonstrate how after deducting the same from suppliers how it paid the same to the Respondent. The Respondent notified the Appellant via the Objection Decision that this is not an additional assessment (objectionable decision) but rather a call to the Appellant to provide documentary proof that the amount withheld had been paid as the Respondent was not able to trace the same Appellant’s iTax ledger account. As stated earlier, appendix C2 is not a proof of payment.

70. The Respondent as related to the Withholding tax on rental income Kshs. 2,704,317. 00, averred that the Appellant agrees that withholding tax was deducted by itself under the self-assessment regime. However, the Appellant has failed to demonstrate how after deducting the same from suppliers how it paid the same to the Respondent. The Respondent notified the Appellant via the Objection Decision that this is not an additional assessment (objectionable decision) but rather called to the Appellant to provide documentary proof that the amount withheld had been paid as the Respondent was not able to trace the same in the Appellant’s iTax ledger account. As stated earlier, appendix C2 is not a proof of payment.

71. With regard to PAYE in the sum of Kshs. 331,520,498. 00, the Respondent averred that the Appellant agrees that PAYE was deducted by itself under the self-assessment regime. However, Appellant failed to demonstrate how after deducting the PAYE how it paid the same to the Respondent as its iTax ledger does not reflect the said amount. The Respondent notified the Appellant via the Objection Decision that this is not an additional assessment (object-able decision) but rather called to the Appellant to provide documentary proof that the amount withheld had been paid as the Respondent was not able to trace the same in the Appellant’s iTax ledger account. As stated earlier appendix E is not a proof of payment.

72. The Respondent stated that the payment slips attached by the Appellant are not reflected in the Appellant’s KRA iTax ledger and the Appellant had been tasked to provide its bank statement for the Respondent to verify with Central Bank of Kenya if the amount was remitted to the Respondent’s accounts. The Appellant failed to provide the same. Therefore, the authenticity of the payment slip was brought into question.

73. The Respondent stated that the Appellant failed to provide the beneficiaries of airtime to enable the Respondent to determine if the benefit to each individual was below the threshold of Kshs 36,000 per annum.

74. The Respondent contended that the Appellant failed to provide the work ticket of the vehicles for the Respondent to determine if the vehicles were being utilized as a pool or the car had been assigned a particular individual.

75. The Respondent averred that the Appellant was paying rent and therefore the rent paid was treated as a benefit. The onus was on the Appellant to prove why there was rent being paid if the Governor was living in her own premises.

76. The Respondent stated that it is empowered by Section 42 of Tax Procedures Act to recover taxes where a taxpayer has an outstanding liability. At the time of recovery, the Appellant had not lodged any valid Objection.

77. Further to the above, the Respondent avowed that the Kenyan tax system is a self-assessment system where a taxpayer assesses itself and makes payments to KRA. All that one is required to do is to acquire a KRA PIN and access the iTax system to file their returns for purposes of Income Tax and VAT.

78. The Respondent stated that the Appellant was accorded the opportunity to file its returns and only thereafter can the Respondent proceed under Section 31 of the Tax Procedures Act to review the Appellant’s self-assessment returns. It was upon the conclusion of the review it was discovered that there were some areas where there were omissions.

79. The Respondent stated that pursuant to Article 47 of the Constitution and Section 51 of the Tax Procedures Act, the Respondent engaged the Appellant at every stage of the process.

80. The Respondent stated that according to Section 59 of the Tax Procedures Act, the onus is on the Appellant to produce records for the purposes of obtaining full information in respect of the Appellant’s tax liability.

81. Further, the Respondent averred that Section 30 of the Tax Appeals Tribunal Act and Section 56 of the Tax Procedures Act impose the burden of proof on the taxpayer to prove that an assessment is excessive or a tax decision is incorrect.

82. The Respondent asserted that all the grounds of Appeal ought to be struck out as there was no additional assessment raised.

83. The Respondent in its written submissions raised a single issue for determination, namely;Whether the Respondent was right in rejecting the Appellant’s Objection applications.

84. The Respondent rebutted the Appellant’s objections by asserting that the Appellant had conceded to Withholding Tax on rent of Kshs. 155,817. 00 and Kshs. 91,767,630. 00 on principal Tax arrears during the objection period, thereby becoming due and payable.

85. The Respondent submitted that it further invoked Section 32 of the Tax Procedures Act, which stipulates that tax payable to the government is a debt and should be paid to the Commissioner.

86. Additionally, the Respondent submitted that, regarding an amount of Kshs. 30,950,864. 00 that was recovered from the Appellant’s accounts through agency notices placed at the Central Bank of Kenya, the Respondent argued that recovery of taxes from a taxpayer with outstanding liability is permissible under Section 42 of the Act.

87. The Respondent submitted that certain issues raised by the Appellant during objections were matters of reconciliation based on the Appellant’s own assessments rather than additional assessments. The Respondent invoked Section 24 (2) and Section 31 (1) of the Tax Procedures Act, which empower the Commissioner to amend assessments based on available information and best judgment.

88. That the Respondent emphasized the burden of proof on the taxpayer, citing Section 56 (1) of the Tax Procedures Act and argued that the Appellant failed to discharge this burden under Section 107 (1) of the Evidence Act.

89. That the Respondent cited the case of Family Signature Limited vs. The Commissioner of Investigations and Enforcement TAT No. 25 of 2016 and TAT No. 28 of 2018 to support its position. They argue that the Respondent exercised reasonable judgment in assessing the taxes and that the burden of proof lies with the taxpayer to demonstrate any errors in the assessment.

Respondent’s Prayers 90. The Respondent called upon the Honourable Tribunal to find that the;a.Appellant’s Appeal lacks merit and should be dismissed.b.Objection Decisions dated 15th May 2023 be upheld.c.Respondent be awarded costs of the Appeal.

Issues For Determination 91. The Tribunal upon the careful consideration of the Pleadings, Statements of Facts and submissions made by the parties respectively, was of the view that the issues that recommend themselves for its determination are:i.Whether the Respondent’s objection decisions were justified; and,ii.Whether the Appellant has successfully discharged its burden of proof in demonstrating that the Respondent's tax assessments were incorrect or excessive, as required by law.

Analysis And Findings 92. The Tribunal wishes to analyse the issues identified hereunder.i.Whether the Respondent’s objection decisions were justified.a.Tax demands under the demand letter dated 24th November 2022 and Objection Decision dated 15th May 2023.

Withholding VAT demand in the sum of Kshs 22,958,568. 89. 93. With regard to demand letter dated 24th November 2022 and Objection Decision issued on 15th May 2023, the Appellant submitted that the Respondent demanded Kshs. 22,958,568. 89 inclusive of penalties and interests yet the Appellant submitted that it had declared and remitted the entire principal amount of Kshs. 13,945,865. 70 therefore, the demand of Kshs. 9,012,703. 19 as demanded by the Respondent was baseless. To substantiate its assertion, the Appellant referred the Tribunal to examine Appendix B1 attached to it documents.

94. The Tribunal upon perusal of the said Appendix B1, it noted that the same is a table that appears to be prepared by or under the instructions of the Appellant, it is not representative of an official document from the Appellant’s institution. To demonstrate that it is a document was from the County in issue, at the very least, the said annexure could have been prepared in its official letterhead and the requisite and/or source documents could have been attached thereto. In our view, the document referred as Appendix B1 could be prepared by anyone who has basic commuter skill and cannot stand by itself without the support of its source documents.

95. The Tribunal observed that the Appellant did not adduce evidence to demonstrate that it paid the principal amount of Kshs 13,945,865. 70, receipt(s) in the settlement or documents in support of funds transfer from the bank or any such other source would have gone a long way to support and suffice its claims.

96. Consequently, the Tribunal finds that the said document (Appendix B1) does not have any probative value to the Appellant’s claims, thus, the Tribunal is cannot to fault the Respondent regarding the assessment under this tax head.

Withholding Income Tax in the sum of Kshs. 24,815. 684. 11. 97. With regard to demand letter dated 24th November 2022 and Objection Decision dated 15th May 2023, the Appellant submitted that the Respondent demanded Kshs. 24,815,684. 11 inclusive of penalties and interests yet the Appellant submitted that it had declared and remitted the entire principal amount of Kshs. 15,073,944. 70 therefore, the demand of Kshs. 9,741,739. 41 as demanded by the Respondent was baseless. To substantiate its assertion, the Appellant referred the Tribunal to examine Appendix B2.

98. Upon perusal of the said Appendix B2, the Tribunal noted the the same is a table that appears to have been prepared by the Appellant, it is not representative of an official document from the Appellant’s institution. In order to demonstrate that it is a document from the Appellant, at the very least, the said annexure could have been prepared in the letterhead of the Appellant and the relevant documents attached thereto.

99. The Tribunal observed that the Appellant did not adduce evidence to demonstrate that it made the alleged payment of the principal amount in the sum of Kshs. 15,073,944. 70, receipt(s) in settlement thereof or source documents in support of funds transfer from the bank would have sufficed.

100. Consequently, the Tribunal’s view of the said document is that it does not have any probative value, thus, the Tribunal is cannot to fault the Respondent regarding the assessment on this tax head.

PAYE in the sum of Kshs. 7,207,823. 00; 101. The Appellant submitted that the Respondent demanded PAYE amounting to Kshs. 7,207,823. 00 inclusive of penalties and interests arising from travel allowances/daily subsistence allowances. It argued that this against Section 5 of the Income Tax Act which exempts Per Diems and reimbursements from tax.

102. Section 5 (2) (a) subsection (ii) and (iii) of the Income Tax Act are instructive and provides as follows:‘‘(2) For the purposes of section 3 (2) (a) (ii) ‘gains or profits’ includes—(a)any wages, salary, leave pay, sick pay, payment in lieu of leave, fees, commission, bonus, gratuity, or subsistence, travelling, entertainment or other allowance received in respect of employment or services rendered, and any amount so received in respect of employment or services rendered in a year of income other than the year of income in which it is received shall be deemed to be income in respect of that other year of income:Provided that—(ii)Where the Commissioner is satisfied that subsistence, travelling, entertainment or other allowance represents solely the reimbursement to the recipient of an amount expended by him wholly and exclusively in the production of his income from the employment or services rendered then the calculation of the gains or profits of the recipient shall exclude that allowance or expenditure.(iii)notwithstanding the provisions of subparagraph (ii), where such amount is received by an employee as payment of subsistence, travelling, entertainment or other allowance, in respect of a period spent outside his usual place of work while on official duties, the first two thousand shillings per day expended by him for the duration of that period shall be deemed to be reimbursement of the amount so expended and shall be excluded in the calculation of his gains or profits.’’

103. Whereas Section 5 (2) (a) subsection (ii) of the Income Tax Act provides that travel allowances/daily subsistence allowances are exempt expenses, such exemption is not available to the beneficiary as of right.

104. The aforesaid section imposes conditions that are to be met, including one that requires the Respondent to be ‘satisfied’ that subsistence, travelling, entertainment or other allowance was incurred. The person to satisfy the Respondent in terms of Section 5 of the Act is a taxpayer, when such a taxpayer provides documentary evidence to support the expenditure.

105. The Respondent herein submitted that the Appellant did not provide evidence in support of its assertions. The Appellant relied and referred the Tribunal to Appendix C1 to support its claim.

106. The Tribunal has perused the record and observed that whereas the Appellant referred to the said document being Appendix C1, the same was not placed on record or filed together with its documents (either manually or electronically or in the portal).

107. As such, the Appellant’s claims and/or assertions remain unsupported, thus the Tribunal is is of the view that the Respondent’s finding on the issue of travel allowances/daily subsistence allowances or Per Diems remains unchallenged.

108. The Appellant also urged the Tribunal to examine Appendix C2 which the Appellant asserted that it contains evidence to extinguish the Respondent’s demand of Kshs. 4,828,603. 80. The Appellant maintained that this tax demand relates to payments made to casuals engaged by the municipalities which falls below the taxable threshold within Section 5 (2) of the Income Tax.

109. The Tribunal had an opportunity to peruse Appendix C2 and noted that same is a correspondence dated 21st June 2023 addressed to the Respondent concerning conceded amounts. The said correspondence (Appendix C2) does not contain any details of said casuals/employees nor does it have any source documents annexed thereto.

110. The Tribunal is of the view that Appendix C2 does not provide evidence in support of the Appellant’s case. Consequently, the Tribunal finds that the Appellant did demonstrate to have provided documents to challenge the Respondent’s decision on this issue.

111. The Appellant argued that the Respondent unlawfully demanded for Kshs. 20,581,955. 52 as PAYE arising from an alleged discrepancy between the Appellant’s opening and closing bank balances in its two grant account. The Appellant invited the Tribunal to peruse Appendix C3 which according to the Appellant, demonstrates that a total of Kshs. 80,429,312. 65 was remitted to the Respondent, but the said amount does not appear in the Respondent’s computations.

112. The Tribunal having examined Appendix C3, it noted that whereas the AppendixC3 provided a breakdown of Kshs. 80,429,312. 65, the Appellant failed to provide evidence to confirm payment of the said amount or evidence of acknowledgement of receipt of the said amount by the Respondent.

113. Further, it is not lost on the Tribunal that Appendix C3 cannot suffice to demonstrate the Appellant’s claims in the absence of source documents supporting the schedules thereof, it would have been prudent for the Appellant provide sufficient evidence to confirm the actual payments.

114. In our view, the Appellant failed to discharge this evidential burden in a bid to demonstrate that the Respondent’s decision was made erroneously.b.Tax demands under the demand letter dated 25th November 2022 and Objection Decision dated 15th May 2023;Demand for withholding income tax on rent, withholding income tax and withholding VAT for the Period October 2020 to June 2022;

115. The Appellant asserted that the taxes demanded by the Respondent related to payments that had been stopped or cancelled from the Appellant’s IFMIS system towards the end of the respective financial years. The Appellant further submitted that the tax demanded under this head was in respect to alleged iTax arrears following a reconciliation excise.

116. On the hand, the Respondent submitted that this was not an additional assessment and thus not a tax decision that could be objected as the demanded taxes related to self-declaration by the Appellant. The Respondent further argued that the matter should not be before the Tribunal as the Appellant withheld taxes from its customers but failed to remit the same to the Appellant.

117. It was maintained by the Respondent that any self-declared assessment and not remitted, it has the right to demand for payment of the same, if the Appellant was aggrieved by an amended assessment it could object to the same and upon a decision then the Appellant can appeal to this Tribunal if it is aggrieved.

118. The Appellant did not lead any evidence in disputing the Respondent’s position of that the demand did not arise from any decision that the Appellant objected to.

119. The Tribunal noted that the aspect of the alleged overlaps with another existing review resulting to a duplication, it is to be noted that the parties participated in a reconciliation exercise, the Appellant did not dispute the Respondent’s assertions that the issues were subjected to a joint reconciliation where the Appellant was requested to avail documents to support its claim for the cancellation and proof of payment, but failed to do so.

120. Pursuant to the Appellant’s assertion of apparent duplication of assessment and the stopped or cancelled from the Appellant’s IFMIS system, it follows that the Appellant was obligated to tender all the requisite documents in support of its claims, which the Appellant has failed to so do.

121. Based on the foregoing, the Tribunal is of the view that the Appellant has failed to demonstrate that this demand was as a result of the Respondent’s decision to which the Appellant objected to. Further, the Appellant has not provided any evidence in support of the cancellation or stoppage from the IFMIS system or payment of the declared taxes, thus failing to demonstrate that the Respondent’s demand was erroneous.c.Tax demands under the demand letter dated 7th February 2023 and Objection Decision dated 15th May 2023

122. The Appellant’s case is that the Respondent issued erroneous tax demands concerning these tax heads. In support of these assertion, the Appellant relied on its evidence under Appendix C2, D1, D2 as well as under Appendix E and Appendix F. The Tribunal has already pronounced itself concerning the evidence under Appendix C2 therefore, will not delve into it further.

123. The Respondent argued that the alleged Withholding VAT amounting to Kshs. 106,381,199. 00 was deducted but not remitted to the Respondent. On the other hand, the Appellant submitted that this figure is inaccurate on grounds that Kshs. 10,373,697. 85 was duplicated in the Respondent’s demand while Kshs. 1,091,744. 30 is reflected in the Appellant’s bank statement. Therefore, the Appellant argued that penalties and interests amounting to Kshs. 41,116,629. 00 is moot. The Tribunal examined the demand dated 7th February 2023 and noted that the figure of Kshs. 10,373,697. 85 is not captured in the said demand therefore, the Appellant failed to prove the claim. With regards to Kshs. 1,091,744. 30, the Appellant did not furnish the said bank statement for the perusal and review by the Tribunal.

124. With Regards to withholding VAT not withheld on development vote in the sum of Kshs. 38,915,626. 00, the Appellant submitted that it deducted the amount and remitted to the Respondent. Upon examining the Appellant’s pleadings, the Tribunal established that the Appellant did not provide evidence to confirm that the amount was paid and remitted to the Respondent.

125. With Regards to withholding VAT not withheld under recurrent vote in the sum of Kshs. 27,898,262. 00, the Appellant submitted that it deducted the amount and remitted to the Respondent. Upon examining the Appellant’s pleadings, the Tribunal established that the Appellant did not provide evidence to confirm that the amount was paid and remitted to the Respondent.

126. With Regards to withholding VAT on monies paid to individuals under the recurrent vote, and for monies paid to individuals under development vote, the Appellant submitted that the Respondent demanded in the sum of Kshs. 194,416,300 and Kshs. 44,296,227 erroneously on grounds that the amount relates to travelling and accommodation and subsistence allowance paid to Appellant’s staff on official duties. The Appellant relied Appendix E to substantiate its case.

127. The Tribunal has reviewed Appendix E which is a schedule with various entries. The Tribunal is of the view that the said schedule is not evidence to demonstrate that amount relates to travelling and accommodation and subsistence allowance paid to Appellant’s staff on official duties. Ideally, when employees travel for work related purpose away from their ordinary stations, beyond the schedules provided, the Appellant ought to have provided further and better evidence including, but not limited to registers, receipts and other material in support of the travel, accommodation and conference. The Appellant failed to provide actual supporting documents.

128. On withholding income tax deducted and not remitted in the sum of Kshs. 64,326,136. 00, the Appellant asserted that the figure is inaccurate on grounds that Kshs. 4,501,518. 45 was duplicated in the demand while Kshs. 606,738 is reflected in the Appellant’s bank statement. The Tribunal examined the demand dated 7th February 2023 and noted that the figure Kshs. 4,501,518. 45 is not captured in the said demand therefore, the Appellant failed to prove the claim. As regards Kshs. 606,738. 00, the Appellant did not file a bank statement, thus the Tribunal did not sight any evidence in support of such claim.

129. On withholding income tax deducted and not remitted in the sum of Kshs. 63,194,328. 00, the Appellant asserted that Kshs. 38,769,527. 00 demanded is not accurate on grounds that the Appellant deducted and remitted all taxes to the Respondent. The Appellant relied on Appendix E to support this claim. The Tribunal has already made its observations on Appendix E and shall not belabour on the same. Further, the Appellant failed to provide evidence to confirm that it made payment(s) in relation to the amount in issue.

130. Regarding withholding tax in rental income not withheld in the sum of Kshs. 2,704,317. 00, the Appellant submitted that the sum of Kshs. 1,659,090. 00 was inaccurate on grounds that the Respondent copy pasted the entries in the Appellant’s account and disregarded the facts that some transactions had been stopped on account of insufficient funds. The Appellant relied on Appendix C2 to support its claim. The Tribunal examined Appendix C2 which is a letter dated 21st June 2023. The said letter indicated that the Appellant conceded the sum of Kshs 1,659,090. 00, that being the case the Appellant cannot turn around and claim to be aggrieved of a conceded figure. Further, the Appellant did not proffer any evidence relating to difference of the amount thereof as to whether the same was settled or explanations as why the same is not payable.

131. On alleged PAYE arrears in the sum of Kshs. 331,520,498. 00, the Appellant alleged that it had paid part of the claim. The Appellant placed reliance on Appendix E. the Tribunal found that the Appellant failed to substantiate its claims by providing actual evidence to confirm payments.

132. Finally, on the issue of advance tax recovered from the Appellant’s account with CBK in the sum of Kshs. 30,950,863. 37, the Appellant submitted that the amount was recovered from its accounts. The Appellant sought to rely on Appendix F and G which are correspondences dated 29th December 2020 and 17th May 2021 from the Respondent to CBK. The Respondent submitted that the amount had not reflected in the Appellant’s iTax ledger. Regrettably, the Appellant failed to provide evidence to confirm that the amount had been swiped from its accounts as alleged.

133. Based on the foregoing analysis, the Tribunal finds that the Appellant failed to prove that the Respondent erred in assessing the Appellant under various tax heads save for the demand save of 25th November 2022 for the Period October 2020 to June 2022 which should be subjected to account reconciliation.ii.Whether the Appellant has successfully discharged its burden of proof in demonstrating that the Respondent’s tax assessments were incorrect or excessive, as required by law.

134. The Appellant stated that the assessments were erroneous as the basis applied in raising the tax demands ignored material facts regarding chargeability of tax and the payment of taxes conceded resulting in erroneous Objection Decisions since the Respondent did not upgrade its information.

135. The Respondent averred that the Appellant did not provide any documentary evidence that it paid any principal tax due and the Appendix B1 referred by the Appellant in their bundle of documents is not proof of payment but an excel workbook that is not accompanied by corresponding source documents such as bank statements showing the money being debited from the Appellant’s bank accounts and the same being credited to the Respondent’s bank account.

136. The Respondent further argued that the Appellant failed to provide any documentary evidence to support that the amount charged under PAYE did not attract tax by failing to provide a schedule showing details of employees and the details of casuals (names, Id No. or KRA PIN, Telephone No.) that were engaged, project they were engaged in, mode of payment, a mapping of the payments to the bank statements.

137. Section 30 of the Tax Appeals Tribunal Act provides:“the appellant has the burden of proving—(a)where an appeal relates to an assessment, that the assessment is excessive; or(b)in any other case, that the tax decision should not have been made or should have been made differently.”

138. Similarly, Section 56 of the Tax Procedures Act further provides:(1)In any proceedings under this Part, the burden shall be on the taxpayer to prove that a tax decision is incorrect.”

139. Section 43 of the VAT Act 2013 requires a taxpayer to keep transactional records for a period of five years. The section provides: -“Every registered person shall, for the purposes of this Act, keep in the course of his business, a full and true written record, whether in electronic form or otherwise, in English or Kiswahili of every transaction he makes and the record shall be kept in Kenya for a period of five years from the date of the last entry made therein.”

140. It is the Tribunal’s finding that Section 43 of the VAT Act clearly provides for the documents that a taxpayer should keep as proof of transactions and which ought to be presented to the Respondent upon request.

141. In Tumaini Distributors Company (K) Limited vs. Commissioner of Domestic Taxes [2020] eKLR Justice D.S Manjanja held that the taxpayer has the burden to prove that the tax decision is wrong.

142. Similarly, in Commissioner of Domestic Taxes vs. Metoxide Africa Limited (Tax Appeal E121 of 2021) [2022] KEHC 14613 (KLR) the Court emphasized that the burden is upon the taxpayer to prove that the Respondent’s decision is incorrect. In addition, this Tribunal in the case of Digital Box Limited vs. Commissioner of domestic investigations and Enforcement [2020] affirmed that that the burden to prove that the Respondent’s decision is wrong falls on the taxpayer.

143. The Appellant was required to provide bank statements to demonstrate corresponding transactions of disbursements to different employees and wage workers and receipts from the Respondent as proof of remittances made. The Tribunal noted that the Appellant provided excel sheets showing transactions it had made but there are no bank statements and other primary documents supporting the transactions. Therefore. The Tribunal is not able to find that the Appellant transacted as it alleged.

144. In the Tribunal’s view, excel sheets on their own cannot not be deemed as sufficient proof of payments or disbursements or transactions by a tax payer. There must be sufficiency of evidence in supporting, particularly in instances where further evidence is available to be availed and/or presented.

145. It therefore behooves the Tribunal to find that the Appellant has not satisfactorily complied with the provisions of the law by discharging its burden of proof in accordance with the various tax statutes.

146. Consequently, the Tribunal finds and holds that the Appellant did not present evidence to support its assertions and claim hence the Appellant failed to discharge the burden of proof, thus the Appellant’s Appeal fails.

Final Determination 147. The upshot to the foregoing is that the Appeal is unmerited and the Tribunal consequently makes the following orders; -a.The Appeal be and is dismissed.b.The Respondent’s Objection Decisions dated 15th May 2023 be and are hereby upheld; and,c.Each party shall bear its own costs.

148. It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 1ST DAY OF AUGUST 2024ROBERT M. MUTUMACHAIRPERSONMUTISO MAKAU ELISHAH N. NJERUMEMBER MEMBERABDULLAHI M. DIRIYE BERNADETTE GITARIMEMBER MEMEBER