[2025] KETAT 168 (KLR)

Dalberg Research Limited v Commissioner for Domestic Taxes (Tax Appeal E642 of 2024) [2025] KETAT 168 (KLR) (14 March 2025) (Judgment)

Neutral citation: [2025] KETAT 168 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal E642 of 2024

CA Muga, Chair, BK Terer, EN Njeru, E Ng'ang'a & SS Ololchike, Members

March 14, 2025

Between

Dalberg Research Limited

Appellant

and

Commissioner For Domestic Taxes

Respondent

Judgment

Background 1. The Appellant is a company engaging in the business of providing research and analysis to its clients giving solutions to queries on markets and consumers.

2. The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act, CAP 469 of Kenya’s Laws (hereinafter “the Act”). Under Section 5 (1) of the Act, the Kenya Revenue Authority is an agency of the Government for the collection and receipt of all tax revenue. Further, under Section 5(2) of the Act with respect to the performance of its functions under subsection (1), the Authority is mandated to administer and enforce all provisions of the written laws as set out in Part 1 and 2 of the First Schedule to the Act for the purposes of assessing, collecting and accounting for all revenues in accordance with those laws.

3. The Respondent issued the Appellant with two additional principal income tax assessment dated 23rd June 2021 for Kshs 4,145,295. 00 for the year 1st January 2015 to 30th December 2015 and the other dated 30th August 2021 for the period 1st January 2017 to 31st December 2017 amounting to Kshs. 9,082,174. 90. The Appellant objected to the additional income assessment vide letters dated 28th July 2021 and 28th September 2021. The Respondent invalidated the objections vide a letter dated 27th October 2021.

4. Subsequently, the Appellant lodged a late objection application dated 7th March 2024 which was followed by the objection decision dated 3rd May 2024 wherein the Respondent confirmed the assessed amount of Kshs 4,145,295. 00 and Kshs. 9,082,174. 90 as due and payable.

5. Aggrieved by the decision of the Respondent, the Appellant filed a notice of appeal dated 31st May 2024 and filed on even date.

The Appeal 6. The Appeal is based on the Memorandum of appeal filed on 13th June 2024 wherein the Appellant raised the following grounds of appeal:a.That the Appellant's notices of objection dated 28th July 2021 and 27th September 2021 objecting to the assessment orders dated 23rd June 2021 and 30th August 2021 were deemed to be allowed by operation of Section 51(11) of the Tax Procedure Act, CAP 469B of the Laws of Kenya (hereinafter “TPA”), owing to the Respondent's failure to issue an objection decision within sixty days from the date of the objection.b.That the Respondent erred in law and fact by issuing an objection decision that does not meet the standards of Section 51 (8) of the TPA.c.That the Respondent's erred in law and fact by disregarding the principles of natural justice by failing to meet the standards of Section 51 (10) of the TPA.d.That the Respondent erred in law and fact by ignoring the fact that the Appellant's objections dated 28th July 2021 and 27th September 2021 were deemed to be allowed in law, and proceeded to disallowing CIT credits amounting to Kshs 5,721,679. 00 claimed by the Appellant in the 2017 year of income, yet the tax credits were valid and fully supported.e.That the Respondent erred in law and fact by disallowing Kshs. 9,082,174. 90 claimed in 2017 whereas the Appellant validly claimed Kshs. 5,721,679. 00 as is evidenced in its income tax return.f.That the Respondent's erred in law by configuring i-Tax to block any refund claims denying the Appellant its right to apply for a refund due to the existence any of the assessment such as the erroneous one raised by the Respondent for the 2017 year of income.

Appellant’s Case 7. The Appellant filed its statement of facts on 13th June 2024. The Appellant also filed its written submissions dated 23rd October 2024 on even date.

8. The Appellant stated that the Respondent issued a notice advising all taxpayers, including the Appellant that effective 1st August 2015 all income tax returns had to be filed using the Respondent's i-Tax platform. Pursuant to the notice, the Appellant filed a return for the year of income ended 31st December 2015 on i-Tax. In its 2015 computations, the Appellant had tax credits amounting to Kshs 4,685,497. 00 which composed of tax credits in the Legacy system, Tax credits carried forward (loss for the year), manual withholding tax credits, withholding tax credits on i-Tax from the years 1998 to 2015.

9. According to the Appellant, the i-Tax return upload file provided by the Respondent at the time did not have a separate field for the Appellant to declare the valid tax credits that were paid off the i-Tax system. These included tax overpayments brought forward from prior years, instalment taxes paid within the year; and; Manual withholding tax certificates.

10. The Appellant stated that when filing the corporate income tax ("CIT") return for the 2015 year of income, it accounted for its tax overpayments brought forward from prior years amounting to Kshs 3,798,269. 00 and manual withholding tax credits of Kshs 347,026. 00 on i-Tax by including the credits amount under the option provided for under section 42 special credits in the i-Tax return.

11. The Appellant noted that in 2016, the Appellant claimed its credits by way of manual withholding tax certificates amounting to Kshs 178,687. 00 under the Section 42 of the i-Tax template form. This was in addition to the i-Tax withholding tax credits amounting to Kshs 917,794. 00 that were keyed into i-Tax separate from the manual withholding tax certificate credits, giving Kshs 1,096,481. 00 as the total tax credit for the year.

12. In 2017, the Appellant stated that it claimed Kshs 5,721,679. 00 in the return for the year 2017 composed of tax credit as outlined in the income tax return for the year 2015 and tax credit as per the income tax return for the year 2016.

13. The Appellant averred that on 7th July 2021, the Respondent issued the Appellant with an additional assessment dated 23rd June 2021 in which it had disallowed credits claimed by the Appellant and as a result demanded CIT amounting to Kshs 4,145,295. 00 for the 2015 year of income. The Appellant averred that it objected to the assessment in its entirety through a letter dated 28th July 2021. It asserted that the notice of objection was received by the Respondent on the same day on 28th July 2021.

14. Further, the Appellant stated that on 30th August 2021, the Respondent issued the Appellant with another additional assessment dated 30th August 2021 in which it had disallowed credits claimed by the Appellant amounting to Kshs 9,082,174. 90 and demanded CIT amounting to Kshs 11,825,080. 51 for the 2017 year of income. The Appellant averred that it objected to the assessment in its entirety via a letter dated 27th September 2021 and that the notice of objection was received by the Respondent on 28th September 2021.

15. According to the Appellant, the Respondent did not issue an objection decision in response to the notices of objection stated above but instead sent a letter dated 27th October 2021 referring the issue to the Section 42 credit validation team.

16. The Appellant in the years 2022 and 2023, through its tax agent at the time, followed up with the credit validation team but was unable to resolve the issue due to delayed action by the Respondent and frequent staff changes by the Respondent that disrupted the continuing validation process.

17. The Appellant stated that in 2023, it experienced challenges on i-Tax that were preventing it from lodging tax refund applications due to the existence of the additional assessment dated 30th August 2021. The refund application related to credit refunds owed between 2015 and 2018 that arose from overpaid instalment taxes.

18. In the pursuit of removing the said tax assessment that had been objected to with no response, and in pursuit of restoring its ability to apply for tax refunds and getting their 2024 tax compliance certificate, the Appellant through its tax agent at the time consulted the Respondent and stated that it was advised to lodge late objections to the assessments and resubmit all documentation supporting the tax credits. The Appellant stated that on 7th March 2024, the Appellant's tax agent then lodged the notice of objection dated 7th March 2024.

19. The Respondent then issued its objection decision on 3rd May 2024 and issued an assessment of principal tax of Kshs 22,634,092. 00 stating that the tax credits were improperly claimed under line 13. 4 of the i-Tax ledger which allows one to make an entry regarding credits arising under Section 42 of the Income Tax Act, CAP 470 of the Laws of Kenya (hereinafter “ITA”), that is; credits arising from foreign exchange and double taxation agreements. Therefore, the Appellant lodged this appeal.

20. In support of the first ground of appeal, the Appellant stated that the Respondent has never issued an objection decision in relation to the notices of objection dated 28th July 2021 and 27th September 2021, contrary to the requirements of Section 51 (11) of the TPA. It added that the only response it received was the letter dated 21st October 2021 referring the taxpayer to the Section 42 credits validation team. It asserted that this letter was not an objection decision. Consequently, the Appellant contended that the Respondent did not issue its decision within 60 days therefore, the objection decision dated 3rd May 2024 is invalid.

21. The Appellant relied on the cases of Equity Group Holdings Limited v Commissioner of Domestic Taxes, Louis Dreyfus Company (K) Ltd v Kenya Revenue Authority, Republic v Kenya Revenue Authority Ex Parte M-Kopa Kenya Limited, and Republic v Commissioner of Customs Services Ex-Parte Unilever Kenya Limited to argue that the Respondent has to issued objection decision within 60 days upon receipt of the notice of objection.

22. In support of the position that the Respondent erred in law and fact by issuing an objection decision that does not meet the standards of Section 51 (8) of the TPA, the Appellant submitted that the Respondent in paragraph 1 of its objection decision ignored the fact that it is out of time to make an objection decision since it partially attempts to respond to the objections dated 28th July 2021 and 30th August 2021 which according to the Appellant, were allowed by law in default of the lack of a timeous objection decision.

23. The Appellant averred that the Respondent's objection decision is defective because it is anchored on allegations of fact that appear not to exist. It noted that paragraph 1 of the objection decision states that: "Reference is made to your application for an extension of time to file a notice of objection dated to the 22 January 2024 concerning the Value Added Tax additional assessment of Kshs 2,049,201 issued on 22nd December 2023. " The Appellant denied that it made any application for an extension of time to file a notice of objection, nor is it privy to any application for extension of time dated 22nd January 2024.

24. Further, the Appellant averred that the objection decision is defective ab initio due to the fact that the Respondent refers to a VAT assessment. The Appellant stated that there is no such VAT additional assessment on its i-Tax ledger as referred to by the Respondent in the objection decision. The Appellant further stated that it is not in receipt of the additional assessment letter issued on 22nd December 2023.

25. The Appellant accused the Respondent of re-opening of an assessment already allowed by operation of law. The Appellant argued that the issues raised by the Respondent are an attempt to revive the issues already addressed in the objections dated 28th July and 27th September 2021, and that were already raised in the assessments issued on 23rd June 2021 and 30th August 2021.

26. The Appellant also accused the Respondent of relying on unexplained figures. It explained that the Respondent in the objection decision demanded payment of principal tax Kshs 22,634,092. 00 varying the assessment upwards thereby effectively issuing a new assessment by way of an objection decision without giving reasons for the raised assessment, which according to the Appellant, is contrary to Section 51 (8) of the TPA.

27. Pursuant to the provisions of section 51(8) of the TPA, the Appellant stated that based on the Respondent's assessments and the objections raised by the Appellant, the Respondent is not at liberty to raise a new assessment through an objection decision. It argued that the Respondent under section 51(8) of the TPA can only fully accept the objection, fully reject the objection or partially allow the objection therefore, it maintained that the Respondent erred in raising the assessed amounts up words. In support of the case, the Appellant cited the case of Kamindi Selfridges Supermarket Limited v Commissioner of Investigations Enforcement.

28. Apart from the foregoing, the Appellant averred that the Respondent's erred in law and fact by disregarding the principles of natural justice by failing to meet the standards of Section 51 (10) of the TPA. It maintained that whereas the Respondent issued a new assessment in its objection decision demanding payment of principal tax of Kshs 22,634,092. 00 in page 2 of its objection decision, the Respondent did not furnish the Appellant with the reason or basis for the new assessment.

29. The Appellant submitted that by fundamentally changing the assessment in the objection decision, the Respondent failed to provide the Appellant reasons for the assessment. It further stated that the Respondent denied the Appellant the right to submit a notice of objection assured by Section 51 of the TPA and the right to fair administrative action provided for in Article 47 of the Constitution of Kenya 2010 (hereinafter “the Constitution”) and Section 4(3) (a) and (b) of the Fair Administrative Action Act, CAP 7L of the Laws of Kenya ("FAAA"). It added that Article 47(1) of the Constitution requires that administrative actions be expeditious, efficient, lawful, reasonable and procedurally fair.

30. Consequently, the Appellant called upon this Tribunal to set-aside the Respondent's decision on the basis that the objection decision is erroneous in law for confirming an assessment amounting to Kshs 22,634,092. 00 without it being served with the assessment and therefore, without giving the Appellant reasons for it to raise an effective objection.

31. The Appellant also stated that the Respondent erred in law and fact by ignoring the fact that the Appellant's objections dated 28th July 2021 and 27th September 2021 were deemed to be allowed in law, but proceeded to disallow CIT credits amounting to Kshs 5,721,679. 00claimed by the Appellant in the 2017 year of income, yet the tax credits were valid and fully supported. It noted that in the objection decision dated 3rd May 2024, the assessments dated 23rd June 2021 and 30th August 2021, the Respondent seeks to disallow CIT credits claimed in the Appellant's tax computations and self-assessment returns.

32. The Appellant contended that in its 2015 tax computations, it had claimed excess credits amounting to Kshs 4,685,497. 00.

33. It asserted that the i-Tax return upload file provided by the Respondent at the time did not have a separate field for the Appellant to declare valid excess tax credits that were paid off the i-Tax system consequently, when fling the corporate income tax return for the 2015 year of income, the Appellant accounted for its tax overpayments brought forward from prior years amounting to Kshs 4,145,295. 00 by including the credits amount under the option provided for under section 42 special credits in the i-Tax return.

34. The Appellant averred that the credits of Kshs 4,145,295. 00 were made up of fully supported credits that arose from previous year losses carried forward amounting to Kshs 3,798,269. 00 and manual withholding tax certificates of Kshs 347,026. 00.

35. According to the Appellant, in 2016, the Appellant claimed manual withholding tax certificates of Kshs 178,687. 00 under the Section 42 i-Tax template. This was in addition to the iTax online withholding tax credits amounting to Kshs 917,794. 00 giving Kshs 1,096,481. 00 as the total tax credit for the year while in 2017, it claimed Kshs 5,721,679. 00 in the return for the year 2017. It asserted that the claims were fully supported therefore, the Respondent had no right to reject the claims.

36. In addition, the Appellant stated that part of the tax credits arose from losses carried forward that it had been duly advised by the Respondent vide a letter dated 5th May 2017, that the law allows for carrying forward of losses. The Appellant argued that the only reason for the Respondent's rejection of the aforementioned refund claims, was that they were claimed under the wrong section in i-Tax. The Appellant further averred that in filing the CIT returns for the year 2015 and 2017 on i-Tax, the Respondent had not configured the system to enable utilization of the company's tax credits. In addition, it averred that the Respondent did not allocate a Payment Registration Number (PRN) for the Appellant's tax credits at the time of transitioning from the Legacy system to i-Tax, which meant that the i-Tax system could not reflect the tax credits brought forward from the previous years.

37. According to the Appellant, to prevent the loss of the tax credits brought forward, the Appellant claimed the credits under section 42 of the ITA. This was based on the fact that it was the only alternative available for disclosure of tax overpayments brought forward from previous years on KRA's i-Tax CIT return template.

38. The Appellant also argued that the withholding tax credits were included under special credits since it was the only available spot in i-Tax for disclosure of additional credits in the upload file as the amounts had not been reflected as advance payments in i-Tax at the point of submitting the return. Therefore, the Appellant contended that although it claimed the overpaid taxes as special credits, the tax credits are legitimate and submitted that no tax revenue was lost by the Respondent.

39. The Appellant further asserted that the Respondent failed in its mandate of administering tax laws in a manner that is expeditious, efficient, lawful, reasonable and procedurally fair as required by Article 47 (1) of the Constitution by failing to validate the credits despite having been given documentation supporting these credits at various points by the Appellant vide letter dated 16th September 2019. The Appellant also asserted that after the assessments were issued in 2021, the notices of objection dated 28th July 2021 and 30th August 2021 were lodged with the letter dated 16th September 2019 and all its annexures as supporting documentary evidence of the validity of the credits.

40. According to the Appellant, the Respondent's relied on technicalities to frustrate the Appellant's claims contrary to the provisions of Article 159 (2) (d) of the Constitution. The Appellant relied on the decision of this Honourable Tribunal in Pricewaterhouse coopers Limited vs. Commissioner for Legal Services and Board Coordination where it was held as follows:‘‘Therefore, the Respondent cannot shift the burden of the lack of provision by its own system to the Appellant. Further, in lieu of this stated provision for credits on iTax, it was incumbent on the Respondent to provide workable alternatives to bridge the gap created by the omission in the system. This would have enabled the Appellant to discharge its statutory obligations without having to seek an alternative that was workable within the (new) iTax system.’’

41. The Appellant opined that the Respondent rejected the claims based purely on the section 42 of ITA which is a technicality. Therefore, it requested this Honourable Tribunal to vacate the assessment in its entirety as well as the resultant interests.

42. Further, the Appellant averred that the Respondent erred in law by configuring iTax to block any refund claims due to the existence of any assessment such as the erroneous one raised by the Respondent for the year 2017. The Appellant averred that the Respondent's i-Tax system has been configured in a manner that does not allow a taxpayer to lodge any refund claims when there is an existence of an assessment, such as happened in this matter over the assessment for the 2017 year of income.

43. It opined that by configuring i-Tax to prohibit the lodging of refund claims, the Respondent's actions are contrary to the provisions of Section 47(1) of the TPA. It argued that the unlawful configuration of the iTax system means that the Appellant stands to lose Kshs 7,981,630. 80 in valid refunds owed between 2015 and 2021 that arose from instalment taxes paid out.

44. It averred that the refunds arose from instalment taxes paid out between 2015 and 2021 and therefore are in no way related to the section 42 tax credits claims, and the corresponding assessments dated 23rd June 2021 and 30th August 2021, therefore cannot be reasonably used as the basis for denying the Appellant not only its rights in law to the refund, but its right to even make the claim as provided in law.

45. It contended that by denying the Appellant and other taxpayers generally their right to apply, the Respondent is unjustly putting the Appellant and other taxpayers at risk of filing for the refunds out of time and unjustly losing out on money that is validly theirs because Section 47(1)(b) of TPA clearly provides that taxpayers must lodge their refund claim, in the prescribed form, within 5 years of making the payment.

46. Consequently, the Appellant submitted that the Respondent is acting ultra vires and prays that this Honourable Tribunal grant orders requiring the Respondent to allow for application and processing of refund claims by the Appellant amount to Kshs 7,981,630. 80 inclusive of refund claims that have been spent by time passing due to the Respondent's unlawful actions.

47. The Appellant also relied on its written submissions to support the position that the Respondent has to issue objection decision within 60 days of receiving notice of objection, the Appellant relied on a number of case laws including but not limited to Equity Group Holdings Limited v Commissioner of Domestic Taxes (Civil Appeal E069 & E025 of 2020) [2021] KEHC 25, Louis Dreyfus Company (K) Ltd v Kenya Revenue Authority and Walters Trading Co. Limited v Commissioner of Domestic Taxes TAT No. 168 of 2021. It therefore submitted that the Respondent erred in failing to issue objection decision with 60 days.

48. The Appellant submitted that the Respondent's objection decision cannot be salvaged or brought back into the realm of legality because it was issued against the law. The Appellant cited the case of Martin Wanderi and 106 others versus Engineers Registration Board and 10 others SC Petition No.19 of 2015 to submit that where the act done was ultra vires the mandate of the administrative entity, the act is void ab initio and the inquiry stops there as it is an outright violation of the constitution.

49. The Appellant also submitted that there was no application for extension of time made to the Respondent as the Respondent averred in its statement of facts.

50. It also submitted that the Respondent made adjustment to the Assessments in the Objection Decision contrary to the provisions of section 51(8) of the TPA. In this regard, the Appellant relied on the case of Faulu Microfinance Bank Ltd v Commissioner of Domestic Taxes TAT No. 208 of 2019.

51. It further submitted that the Respondent erred in disallowing the tax credits without factoring in technical challenges with the i-Tax system which the Appellant had no control over but are within the Respondent's control. In support of this position, the Appellant cited a multiple case laws including: PricewaterhouseCoopers Limited v Commissioner for Legal Services and Board Coordination Appeal No. 576 Of 2021; Kenya Revenue Authority v PricewaterhouseCoopers Limited (Income Tax Appeal E044 of 2023) [2024]; Althaus Services Limited v Commissioner of Domestic Taxes TAT No. 704 of 2021; and Canarian Holdings Limited v Commissioner of Domestic Taxes TAT Appeal No. 688 of 2021.

52. The Appellant prayed for the following reliefs:a.That this Appeal be allowed;b.That the Respondent's decision dated 3rd May 2024 be set aside in its entirety;c.The Appellant's credit claim of Kshs 5,721,679. 00 be declared valid and reinstated;d.The Respondent be compelled to allow the Appellant to make its refund application for refund claims amounting to Kshs. 7,981,630. 80; ande.Any other orders that the Tribunal may deem fit.

Respondent’s Case 53. In opposition to the Appeal, the Respondent filed its Statement of facts dated 18th July 2024 and filed on 19th July 2024. The Respondent also put in written submissions dated 8th November 2024 and filed on 11th November 2024.

54. The Respondent contended that it carried out a review of the Appellant's returns and noted that the Appellant had claimed credits under line 13. 1 of the income tax return, which are credits under special arrangements -Section 42 credits. The credits were disallowed because the Appellant failed to prove that it qualified for credits under Section 42 of the ITA. Consequently, the Respondent issued assessments on 30th August 2021 and the Appellant lodged a notice of objection on 13th September 2021 but the Respondent issued invalidation notice dated 27th October 2021 under Section 51 (4) of the TPA.

55. In response to ground (b) of the Appellant's Memorandum of Appeal and paragraphs 30 to 32 of the Appellant's Statement of Facts, whereas the Appellant denied lodging a request for an extension of time to submit a notice of objection the Respondent asserted that the Appellant lodged a late objection application dated 7th March 2024. It contended that the notices covered the period 2015 that amounted to Kshs 4,145,295. 00 and assessment number KRA202113079748 while for the period 2017 amounted to Kshs 9,082,174. 00 with assessment number KRA202118208884. The Respondent therefore, asserted that it was right to refer to an application for extension of time application in the objection decision.

56. With regard to Appellant’s averment on reopening of an assessment already allowed by dint of law, the Respondent averred that the Appellant submitted a manual application for an extension of time to lodge a notice of objection on 7th March 2024, prompting the Respondent to respond to the notices of objection. Furthermore, the Respondent stated that the Appellant had previously lodged a notice of objection on 13th September 2021, which the Respondent invalidated under Section 51(4) of the TPA through the letter dated 27th October 2021.

57. According to the Respondent, through the letter dated 27th October 2021, it advised the Appellant to have the credits validated by the Section 42 credits team but the Appellant submitted another manual application on 7th March 2024, for a matter that had already been resolved by the letter dated 27th October 2021.

58. In addition, the Respondent stated that it does not have any record of the Appellant's objection notice of 27th September 2021.

59. The Respondent argued that it did not reopen the assessments issued on 30th August 2021, which the Appellant objected to on 13th September 2021, and which were invalidated through the letter of 27th October 2021. It maintained that it issued the current objection decision after the Appellant lodged another objection under the guise of a late application on 7th March 2024.

60. In response to Appellant’s VAT assessment and reliance on unexplained figures, the Respondent relied on Section 78 of the TPA which provides that where there are identified errors in the tax head and the sum of the total objected amounts, it does not affect the validity of the objection decision or its contents. Therefore, the Respondent argued that the objection decision remains legally sound, and the substance of the matter is unaffected by this clerical oversight.

61. In response to ground (c) of the Memorandum of Appeal, the Respondent stated that the objection decision meets all the requirements outlined in Section 51(10) of the TPA since the decision includes the basis of the assessment, the appellant's grounds of objection, and the Respondent's statements of facts, which detail the findings from the review of the objection as evidenced in the objection letter.

62. In response to the ground (d) of the memorandum of appeal, the Respondent stated that the Appellant was only issued with a notice of assessment on 30th August 2021 to which the Appellant responded by lodging an objection on 13th September 20221 which was dealt with through the letter of 27th October 2021.

63. In response to the ground (e) of the memorandum of appeal, the Respondent stated the figure of Kshs 9,082,174. 90 was taken from the Appellant's notice of objection dated 7th March 2024, which included a principal tax of Kshs 5. 378,246. 00 and penalties and interest of Kshs 3,703,928. 00. Therefore, the Respondent stated that the Appellant should not dispute its own figures in an objection notice it lodged.

64. According to the Respondent, the Appellant failed to discharge its burden of proof that the Respondent's assessment was incorrect as required under Section 56 of the TPA. In view of the findings above, the Respondent rejected the Appellant's objection application and confirmed the earlier assessment vide an objection decision dated 3rd May 2024.

65. Further, the Respondent argued that the Kenyan tax system is a self-assessment system where a taxpayer assesses himself, herself or itself and makes payments to the Respondent. It added that all one requires is acquire a PIN and access the i-Tax system for one to file returns.

66. The Respondent contended that it proceeded under Section 31 of the TPA to issue the additional assessments. It argued that upon conclusion of the review, it discovered that there were some areas where there were omissions or taxes which were underpaid.

67. It averred that pursuant to Article 47 of the Constitution and Section 51 of the TPA, the Respondent engaged the Appellant at every stage of the process up to when the objection decision was issued.

68. It cited section 59 of the TPA, which provides that the onus is on the Appellant to produce records for the purposes of obtaining full information in respect of the Appellant's tax liability. The Respondent also cited section 30 of the Tax Appeals Tribunal Act, CAP 469A of the Laws of Kenya (hereinafter “TATA”) and section 56 of the TPA which impose the burden of proof on the tax payer to prove that an assessment is excessive or incorrect.

69. Apart from statement of facts, the Respondent filed its written submissions. In summary, the Respondent submitted that it was right in rejecting the Appellant's objection and confirming the earlier assessments.

70. It submitted that the lodgement of tax claims under Section 42 of the ITA is incorrect unless they relate to double taxation credits. It submitted that the issue at hand required reconciliation of the disallowed credits under the correct section of the law either the repealed Section 105 of the ITA or Section 47 of the TPA.

71. The Respondent submitted that refunds unrelated to special agreements are to be claimed under Section 47 of the TPA. It relied on the case of Commissioner of Domestic Taxes v Airtel Networks Kenya Limited (Income Tax Appeal E062 of 2022) [2023] KEHC 25059 (KLR) wherein the High Court held that on interpretation of tax statutes, the courts have held that the same should be given strict interpretation with no room for intendment.

72. The Respondent submitted that it is empowered by section 31 of the TPA to amend assessment based on available information and by applying best judgment. It cited the case of Family Signature Limited v The Commissioner of Investigations & Enforcement Nairobi TAT No. 25 of 2016 to support the position that the Respondent can use alternative and indirect method of assessing the Appellant's estimated tax liability. It also relied on the case of Joycott General Contractors Limited v Kenya Revenue Authority, TAT NO. 28 OF 2018 where it was held that the taxpayer has to demonstrate that the Respondent’s decision is incorrect but the Appellant failed.

73. Consequently, the Respondent urged the Tribunal to find that the appeal lacks merit and be pleased to confirm the Respondent's objection decision dated 3rd May 2024. It therefore, urged the Tribunal to dismiss this appeal with costs to the Respondent.

Issues For Determination 74. The Tribunal having considered the parties pleadings, documents and written submissions puts forth the following issues for determination:a.Whether the Respondent’s objection decision dated 3rd May 2024 is time barred under section 51(11) of TPA.b.Whether the objection decision offends section 51(8) of the TPA.c.Whether the objection decision offends section 51(10) of the TPA.d.Whether the Objection Decision is justified in law.

Analysis And Findings 75. The Tribunal will proceed to analyse the issues as hereunder:

a. Whether the Respondent’s objection decision dated 3rd May 2024 is time barred under section 51(11) of TPA. 76. The Tribunal notes from the Appellant’s bundle of documents that the Respondent issued two assessments. The first assessment for the period 1st January 2015 to 31st December 2015 was issued vide an assessment order dated 23rd June 2021 wherein the Respondent assessed income tax at Kshs 4,145,295. 00 The Appellant, as expected lodged notice of objection vide a letter dated 26th July 2021.

77. The Respondent issued a second assessment order dated 30th August 2021 for the period 1st January 2017 to 31st December 2017 wherein it assessed income tax at Kshs 9,082,174. 90. The Respondent then filed its notice of objection dated 27th September 2021. The Respondent then issued a letter dated 27th October 2021 wherein it expressly stated in part as follows: ‘‘please note that this is a response under section 51(4) of the Tax Procedures Act and not an objection decision under section 51(9).’’ It then goes without saying that the letter dated 27th October 2021 is not an objection decision within the meaning of Section 51(8) of the TPA.

78. The Tribunal notes that there was some mischief, upon its review of the pleadings of the parties. The Appellant averred that it was advised by the Respondent to file objections out of time. The Appellant in its wisdom or lack thereof, decided to file fresh objections vide letters dated 7th March 2024 for the two sets of assessments. The Tribunal perused the Respondent’s objection application acknowledgment receipt dated 13th September 2021 which indicated that the objection was for the period 1st January 2017 to 31st December 2017 for Kshs 9,082,174. 90. The Tribunal notes that since the letters of objection are dated 7th March 2024, it was impossible that an objection application acknowledgment receipt would be dated 13th September 2021.

79. The Tribunal notes that in its objection decision dated 3rd May 2024 the Respondent refers to another notice of objection purportedly dated 22nd January 2024 while in its statement of facts, the Respondent referred to a late objection dated 7th March 2024. In the objection decision, the Respondent also decided to introduce new assessments on VAT when the assessments were only in relation to income tax.

80. In view of the foregoing it is necessary for the Tribunal to determine the correct notice of objection in this matter. Other than the Respondent’s erroneous notice of objection purportedly dated 22nd January 2024, there are four notices of objections concerning the 2015 and 2017 assessments. The first one is dated 26th July 2021(for the assessment order dated 23rd June 2021); the second objection is dated 27th September 2021 (for the assessment order dated 30th August 2021); and third and fourth objections dated 7th March 2024 for the same assessments.

81. Section 51 (2) of the TPA provides as follows:‘‘51. Objection to tax decision‘‘(1)………………………………….(2)A taxpayer who disputes a tax decision may lodge a notice of objection to the decision, in writing, with the Commissioner within thirty days of being notified of the decision.’’

82. The Tribunal is of the view, pursuant to section 51(2) of the TPA, that the Appellant objected within 30 days when it issued the objection letter dated 26th July 2021 and 27th September 2021. The purported letters dated 7th March 2024 are not notices of objection under section 51(2) of the TPA neither are they notices of objection under section 51(6) and 51(7) of the TPA.

83. Consequently, the view of the Tribunal is that the Respondent ought to have Respondent, complied with the provisions of Section 51(11) of the TPA in response to the Appellant’s notices of objection dated 26th July 2021 and 27th September 2021.

84. At the time of lodging of the notices of objection, section 51(11) of TPA provided as follows:‘‘51(11)The Commissioner shall make the objection decision within sixty days from the date of receipt of—(a)The notice of objection; or(b)Any further information the Commissioner may require from the taxpayer,Failure to which the objection shall be deemed to be allowed.’’

85. The Tribunal notes the assertions of the Respondent that it issued the letter dated 27th October 2021 pursuant to the provisions of Section 51(4) of the TPA. In other words, the Respondent implied that the said letter invalidated the Appellant’s notices of objection. At the material time, section 51(4) of the TPA provided as follows:‘‘(4)Where the Commissioner has determined that a notice of objection lodged by a taxpayer has not been validly lodged, the Commissioner shall immediately notify the taxpayer in writing that the objection has not been validly lodged.’’

86. The view of the Tribunal is that even if the Respondent invalidated the notices of objection vide its letter dated 27th October 2021, the Respondent did not demonstrate why it issued its objection decision on 3rd May 2024, over 2 years from the date of invalidation of the objection. The Respondent did not even aver that it sought additional documents under section 51(11)(b) of the TPA. Even if the Respondent had requested additional documents, pursuant to Section 51(11) of the TPA, there was no justification of the Respondent’s issuance of its objection decision beyond 60 days under section 51(11)(b) of the TPA.

87. The Courts have pronounced themselves on the implementation of the provisions of section 51(11) of the TPA. For example, in Equity Group Holdings Limited v Commissioner of Domestic Taxes [2021] KEHC 25 (KLR) and Republic v Commissioner of Customs Services Ex-Parte Unilever Kenya Limited (2012) eKLR the courts asserted that if the Commissioner does not render a decision within the stipulated period, the objection is deemed as allowed by operation of the law.

88. Further, in Eastleigh Mall Limited vs Commissioner of Investigations & Enforcement (Income Tax Appeal E068 of 2020) [2023] KEHC 20000 (KLR) Mabeya J, pronounced himself as follows:“It is clear from the forgoing that the provisions of section 51(11) of the Tax Procedures Act are mandatory. They are not cosmetic. Parliament in its wisdom knew that in matters tax, time is very crucial as those in commerce need to make informed decisions. If the Commissioner is allowed to exercise his discretion and stay ad-infinitum before issuing an objection decision, the tax payer would be unable to make crucial decisions and plan his/her business properly. The timelines set are mandatory and not a procedural technicality.’’

89. The Respondent must adhere to the provisions of Section 51(11) of the TPA. The Respondent failed to do so and the finding by the Tribunal is that the Appellant’s notices of objection dated 26th July 2021 and 27th September 2021 stood allowed by operation of law.

90. Having established the foregoing, analysis of the remaining issues is moot.

Final Decision 91. The upshot to the foregoing is that the Tribunal finds and holds that the Appeal is meritorious and consequently makes the following Orders:a.The Appeal be and is hereby allowed.b.The Respondent’s objection decision dated 3rd May 2024 be and is hereby set aside.c.Each party to bear its own cost.

92. It is so Ordered.

DATED AND DELIVERED AT NAIROBI ON THIS 14TH DAY OF MARCH . 2025. ****………………………………….****CHRISTINE A. MUGA CHAIRPERSON****………………………….. …………….……………..****BONIFACE K. TERER MEMBER****………….…..…………… ……….……..…………….****ELISHAH N. NJERU MEMBER****………….…..…………… ……….……..…………….****EUNICE N. NG’ANG’A MEMBER****………….…..…………… ……….……..…………….****OLOLCHIKE S. SPENCER MEMBER