https://new.kenyalaw.org/akn/ke/judgment/ketat/2026/227

 REPUBLIC OF KENYA IN THE TRIBUNAL OF KENYA AT NAIROBI COUNTY COURT NAME: TAX APPEALS TRIBUNAL CASE NUMBER: TATC/E249/2026 DAILY LAY VENTURES LIMITED VS THE INVESTIGATIONS AND ENFORCEMENT DEPARTMENT - KRA RULING 1. The Applicant moved the Tribunal vide a Notice of Motion Application dated 15th April, 2026 and filed on even date seeking the following Orders; 1. THAT this Honourable Tribunal be pleased to grant leave to the Appellant to adduce additional evidence in support of this Appeal. 2. THAT the additional evidence sought to be introduced be deemed as properly filed and admitted as part of the record. 3. THAT the costs of this application be in the cause. WHICH APPLICATION is based on the following grounds: 2. THAT the Appellant has filed the current Appeal challenging the Respondent's objection decision dated 7th January 2026 confirming additional Corporation Tax assessments amounting to Kshs. 124,146,493.66. 3. THAT the Appellant disputes the Respondent's reliance on bank statement credits as income without consideration of the Appellant's actual financial position, expenses, loans and cash flows. 4. THAT during the objection process, the Appellant was unable to avail comprehensive supporting documentation within the timelines given due to administrative disruptions, including changes in directorship and the closure of offices during the December holidays. 5. THAT the Appellant has since finalized and compiled complete and audited financial records for the relevant period which are critical to a fair and just determination of this Appeal. 6. THAT the additional evidence sought to be introduced includes audited financial statements for the years 2022, 2023 and 2024, bank statements for the period 2022 to 2024, expense invoices and receipts and supporting documentation evidencing business expenditure, financial records including general ledgers and accounting documents and income analysis reconciling bank deposits with actual taxable income. 7. THAT the said documentation is directly relevant to the issues in dispute and will demonstrate the Appellant's correct taxable income in accordance with the Income Tax Act and will assist the Tribunal make an informed decision from all relevant material. 8. THAT prior to the objection decision, the Appellant had formally engaged the Respondent via email requesting additional time to compile and submit extensive financial documentation to the Respondent. 9. THAT the Appellant's offices had closed for the December holidays and upon resuming operations on 5th January 2026, the Appellant promptly sought time to comply vide an email to the Respondent however, the Respondent proceeded to issue the objection decision on 7th January 2026, thereby denying the Appellant a reasonable opportunity to be heard on merit. 10. THAT the objection was effectively determined without consideration of substantive material and without a hearing on merit. 11. THAT the Appellant has since compiled complete and audited financial records which are essential for the just determination of this appeal. 12. THAT the audited accounts demonstrate that the Appellant's taxable profits were significantly lower than the figures adopted by the Respondent and subject to Corporation Tax at 30%. 13. THAT the said evidence directly addresses the core issue in dispute. 14. THAT the Appellant is aware that under the law, the burden of proof lies on the taxpayer to demonstrate that a tax decision is incorrect, and thus seeks leave to discharge that burden by placing all relevant material before this Honourable Tribunal. 15. THAT the additional evidence was not fully available at the time of the objection despite due diligence, as the audit and reconciliation process was ongoing. 16. THAT the admission of the additional evidence will not occasion prejudice to the Respondent, who will have the opportunity to respond thereto. 17. THAT it is in the interest of justice, fairness and proper tax administration that the Appeal be determined on the basis of complete and accurate financial records. Which Application is based on the following grounds: 1. THAT the Respondent rendered an Objection Decision dated 18th October 2021, which was communicated to the Applicant via email and confirmed on the iTax system on 12th March 2025. 2. THAT the additional income assessed is fictitious, as the amount included in the assessment does not reflect the actual income earned by the Applicant. 1. THAT the Applicant fully declared and correctly filed all income for the relevant period, and supporting documents are available. 2. THAT the disputed income does not arise from any business activity, the Applicant’s business operations being construction, with no other revenue stream capable of generating the alleged additional income. 3. THAT the said assessment distorts the Applicant’s tax liability and imposes an unjustified financial obligation on the Applicant. 4. THAT the intended Appeal raises arguable issues of both law and fact which merit determination on their merits. 5. THAT no prejudice shall be suffered by the Respondent if the orders sought are granted, whereas the Applicant stands to suffer substantial and irreparable loss through enforcement measures, including agency notices, without being afforded an opportunity to be heard. 6. THAT the Applicant is willing to abide by any reasonable conditions that this Honourable Tribunal may impose in allowing this Application. 7. THAT it is in the interest of justice that the prayers sought herein be granted. 8. The Application was supported by a Sworn Affidavit of **Samuel Gitongu**, the Applicant, dated 15th April, 2026 and filed 16th April, 2026 citing the following grounds; * 1. THAT I am a director with DAILY LAY VENTURES LIMITED, the Appellant/Applicant herein, conversant with the facts pertaining to this matter and duly authorized to swear this Affidavit. 2. THAT the Appellant filed this instant Appeal challenging the Respondent's Objection decision dated 7th January 2026 confirming default Corporation Tax assessments amounting to Kshs. 124,146,493.66. 3. THAT the Appellant was issued with a default assessment on 17th December, 2025 by the Respondent whereby I proceeded to file an Objection on even date challenging the default assessment. 4. THAT during the objection process, the Appellant unfortunately failed to file detailed written grounds of objection nor comprehensive supporting documentation within the timelines provided as the same were unavailable at the time. 5. THAT the Appellant's offices had been closed for the December holidays and upon reopening on 5th January 2026 prior to the Objection decision, the Appellant promptly sought time to comply. 6. THAT despite the said request, the Respondent proceeded to issue the objection decision on 7th January 2026 without granting the Appellant reasonable time to submit the documentation. 7. THAT in our humble opinion the objection was therefore determined without consideration of the Appellant's full financial documentation and without an assessment on merit. 8. THAT the Appellant then commissioned an audit to be conducted on their financial accounts which has since finalized and we have also compiled complete audited accounts and supporting documentation for the years 2022, 2023 and 2024. 9. THAT the Appellant has also compiled and wishes for the Tribunal to also rely on the following documents being additional relevant evidence bank statements, expense ledgers, invoices, receipts, payment vouchers. * 1. THAT the audited accounts show the Appellant's actual taxable profits as follows: i. 2022 – KShs. 2,725,869; ii. 2023 – KShs. 2,051,890; iii. 2024 – KShs. 1,324,129; all subject to Corporation Tax at 30%. * 1. THAT the said documents clearly demonstrate that the Respondent's assessment of Kshs. 124,146,493.66 was excessive, arbitrary and not reflective of the Appellant's true taxable income. 2. THAT I am aware that the burden of proof lies on the Appellant to demonstrate that the Respondent's decision is incorrect, and this application is made to enable the Appellant discharge that burden fully. 3. THAT the Respondent in its objection decision acknowledged that it may review the Appellant's tax affairs upon receipt of new information, which supports the admission of the additional evidence herein. 4. THAT the additional evidence was not fully available at the time of the objection despite the Appellant's diligence due to the ongoing audit and reconciliation process. 5. THAT the intended additional evidence is not an afterthought but is necessary for the just determination of this Appeal. 6. THAT no prejudice will be occasioned to the Respondent if this application is allowed. 7. THAT this application has been made in good faith and without undue delay. 8. THAT it is in the interest of justice that this Honourable Tribunal allows the Appellant to place all relevant material before it. 9. THAT what is deponed to herein is true to the best of my knowledge, information and belief. 10. THAT it is only fair and in the wider interest of justice that the application be allowed. 11. THAT what is deposed to herein is true to the best of my knowledge and belief, save matters sworn on information, whose sources have respectively been disclosed. 1. In Response to the Application, The Respondent was to file and serve its response by the 4th May 2026, however it never materialised as per the Tribunals Directions therefore, the Tribunal has determined the Application on its merits. # Analysis and Findings 1. The Tribunal has carefully considered the Notice of Motion Application dated 15th April, 2026, the Supporting Affidavit, then there being no grounds of opposition, detailed its findings; 2. The Appellant has demonstrated reasonable cause for its inability to furnish the requisite documentation during the objection stage. It is not disputed that the default assessment was issued on 17th December 2025, a period immediately preceding the December holiday closure. 1. The Appellant’s offices were closed, and key administrative processes including the retrieval, reconciliation, and audit of financial records could not reasonably be undertaken within that constrained period. Upon resumption of operations on 5th January 2026, the Appellant promptly engaged the Respondent and sought additional time to comply. This conduct reflects diligence and good faith rather than indifference or neglect. 2. **Under Rule 10 of the Tax Appeals Tribunal Procedure Rules and Section 13(3) and (4) of the Tax Appeals Tribunal Act**, the Tribunal is vested with discretionary power to extend time where sufficient cause is shown. While absence from Kenya and sickness are expressly listed, the inclusion of any other reasonable cause is deliberately broad and intended to accommodate circumstances that do not neatly fall within the enumerated categories but nonetheless justify departure from strict timelines. 1. The Appellant’s circumstances, including office closure during the holiday period, ongoing audit processes, and administrative disruption due to changes in directorship, clearly fall within this broader category of reasonable cause and justify the Tribunal’s intervention as **In Nicholas Kiptoo Arap Korir Salat v IEBC & 7** **Others [2014] eKLR**, the Court stated; *“Extension of time is not a right of a party. It is an equitable remedy that is only available to a deserving party at the discretion of the Court… The Court must consider the reason for the delay, the degree of prejudice to the respondent, and whether the application has been brought without undue delay.”* Which rests with the Appellant’s position that it has demonstrated reasonable cause, acted without undue delay, and that no prejudice will be suffered by the Respondent. 1. Further, the evidence shows that the Appellant had already initiated steps to compile the necessary documentation, including commissioning an audit of its financial accounts. The audit process, by its very nature, is detailed and time sensitive, and could not have been concluded within the limited statutory timelines. 2. The delay was therefore occasioned by circumstances beyond the Appellant’s control, and not by any deliberate attempt to obstruct or delay the tax process. This squarely falls within the ambit of reasonable cause, warranting the Tribunal’s exercise of discretion in favour of the Appellant, as demonstrated **In the case of** # Abdul Aziz Ngoma v Mungai Mathayo [1976] EA 61, the Court held: *“The discretion to extend time is unfettered, provided it is exercised judicially upon reason and not on caprice.”* Clearly it supports the Tribunal’s power to admit additional evidence once reasonable cause is established as indicated. 1. It is also evident that the Respondent proceeded to issue the objection decision on 7th January 2026 despite being notified of the Appellant’s request for additional time. This effectively denied the Appellant a meaningful opportunity to be heard on the merits of its case and resulted in a determination made without the benefit of complete and material facts. The right to be heard is a fundamental tenet of fair administrative action, and the Tribunal ought to lean in favour of allowing a party to fully present its case where such opportunity was previously curtailed. 2. The additional evidence sought to be introduced is not extraneous or peripheral. On the contrary, it goes to the core of the dispute, namely the determination of the Appellant’s actual taxable income. The audited financial statements, bank records, and reconciliations directly address the Respondent’s reliance on gross bank deposits as income and is supported in the case **of** # Commissioner of Income Tax v Total Kenya Limited [2021] eKLR, adopting the principles in Ladd v Marshall, the Court held; *“Additional evidence may be admitted where it is shown that such evidence could not have been obtained with reasonable diligence for use at the trial, that it would probably have an important influence on the result of the case, and that it is apparently credible.”* This case satisfies three limps, that the audit was ongoing and not complete earlier, the evidence goes to the core issue of taxable income and whether documents are audited and credible 1. The Appellant has demonstrated that its true taxable profits for the years in question are significantly lower than the assessed amounts. Admitting this evidence will therefore enable the Tribunal to arrive at a just, fair, and informed determination based on accurate financial data. 1. Importantly, the Appellant has acknowledged that the burden of proof rests upon it to demonstrate that the Respondent’s assessment is incorrect. The present Application is a bona fide attempt to discharge that statutory burden by placing all relevant material before the Tribunal. Denying the Application would, in effect, shut out critical evidence and undermine the substantive justice of the appeal. 2. The absence of any response or opposition from the Respondent further strengthens the Appellant’s case. Despite being granted an opportunity by the Tribunal to file and serve its response by 4th May 2026, the Respondent failed to do so. This omission suggests that the Application is not contested and that the Respondent does not stand to suffer any procedural or substantive disadvantage from the admission of the additional evidence. 3. Allowing the Application will not occasion any prejudice to the Respondent. The Respondent will retain the full opportunity to examine, verify, and respond to the additional evidence during the hearing of the Appeal. Indeed, the Respondent itself acknowledged in its objection decision that it may review the Appellant’s tax affairs upon receipt of new information. The admission of the additional evidence is therefore consistent with the Respondent’s own position and the broader objectives of proper tax administration. 4. Conversely, the Appellant stands to suffer significant prejudice if the Application is denied. The impugned assessment imposes a substantial tax liability of Kshs. 124,146,493.66, which the Appellant contends is excessive and not reflective of its true income. Without the opportunity to present its audited accounts and supporting documentation, the Appellant would be condemned on the basis of incomplete and potentially inaccurate information as supported in the case of # Geoffrey Otieno Oduor v Commissioner of Domestic Taxes (TAT Misc No. 185 of 2021), the Tribunal stated; *“The Respondent will not suffer prejudice if time is extended, whereas the Applicant stands to suffer prejudice if denied an opportunity to be heard.”* 1. Finally, it is in the interest of justice and the need for finality, the admission of the additional evidence will ensure that the dispute is determined comprehensively and conclusively, based on all relevant material. This will not only facilitate a fair outcome for both parties but also promote certainty and closure in the tax dispute, which is a key objective of the Tribunal process. # Disposition 1. From the foregoing, the Tribunal accordingly makes the following Orders: - 2. The Application be and is hereby Allowed 3. The additional evidence is deemed to be properly on record, namely; 1. Audited financial accounts for the years 2022,2023 and 2024 2. Bank Statements for the period 2022 to 2024 3. Expense Invoices and receipts evidencing business expenditure 4. General ledgers and accounting documents 5. Bank Deposit reconciliations 4. The Respondent to file Response within 14 days. 5. No orders as to costs. 6. It is so ordered. **DATED** and **DELIVERED** at **NAIROBI** on this 19TH DAY OF MAY 2**026.** SIGNED BY/FOR: HON. EUNICE NJERI NGANGA HON. BONIFACE KIBIY TERER HON. BILLY GRAHAM OKUMU MIJUNGU **★ TH E JUDICIAR Y O F KENY A ★** **HON. EUNICE NJERI NGANGA HON. BONIFACE KIBIY TERER** **HON. BILLY GRAHAM OKUMU MIJUNGU** Tax Appeals Tribunal Tribunal Date: 2026-05-19 16:22:14