https://new.kenyalaw.org/akn/ke/judgment/ketat/2026/273

**REPUBLIC OF KENYA** **IN THE TAX APPEALS TRIBUNAL AT NAIROBI** **APPEAL NO. E1114 OF 2025** **DIESEL CARE LIMITED…………………......................................................APPELLANT** **VERSUS** **COMMISSIONER OF LEGAL AND BOARD SERVICES.............................RESPONDENT** **JUDGMENT** **BACKGROUND** 1. The Appellant is a private limited liability company incorporated in Kenya, carrying on business in the motor vehicle spare parts and construction sector. 2. The Respondent is the Commissioner appointed under Section 13 of the Kenya Revenue Authority Act, Cap 469, Laws of Kenya. The Kenya Revenue Authority is charged with the responsibility of, among others, the assessment, collection, accounting and general administration of tax revenue on behalf of the Government of Kenya. 3. Upon reviewing the Appellant's self-assessment Income Tax and Value Added Tax (VAT) returns for the years of income 2016 and 2017, the Respondent formed the view that the Appellant had made taxable supplies which it declared in its VAT returns but had not fully declared in its Income Tax returns, giving rise to undeclared income which was brought to charge at the corporate rate of 30%. 4. By a letter dated 21st January 2020, the Respondent notified the Appellant of the non-declaration and required it to declare and pay the outstanding tax, failing which amended assessments would issue under Section 31 of the Tax Procedures Act, 2015 (TPA). 5. The Respondent thereafter brought the established variances to charge through additional assessments raised on 26th June 2020, resulting in principal Income Tax of Kshs. 27,456,293.00 for the year 2016 and Kshs. 12,850,976.00 for the year 2017. 6. The Appellant lodged a notice of objection to the additional assessments, which the Respondent acknowledged as having been submitted on iTax on 26th July 2020. 7. In the course of reviewing the objection, the Respondent, *vide* correspondence dated 31st August 2020, 19th November 2020, 4th February 2021 and 2nd March 2021, requested the Appellant to furnish supporting documentation to validate its objection, the Respondent having been unable to view the attachments uploaded on iTax. 8. Taking the position that the Appellant had failed to provide the documents required to validate the objection, the Respondent issued a decision dated 23rd April 2021 declaring the objection invalid for failing to meet the requirements of Section 51(3)(b) and (c) of the TPA, and stating that the principal taxes of Kshs. 33,411,353.00, together with the resultant penalties and interest, remained due and payable. 9. Aggrieved by that decision, the Appellant lodged its Notice of Appeal dated 7th October 2025 having been granted leave by the Tribunal to file its Appeal out of time. **THE APPEAL** 1. The Appeal is premised on the Memorandum of Appeal dated 25th November 2025 wherein the Appellant raised the following grounds of appeal: i. That the Respondent erred in law and in fact by ignoring valid purchases declared in the VAT returns and thereby double taxing the Appellant in the year 2017; ii. That the Respondent erred in law and in fact by failing to consider the valid expenses incurred by the Appellant for the years of income assessed; and iii. That the objection decision was not valid. **THE APPELLANT'S CASE** 1. The Appellant's case is premised on its Statement of Facts dated 31st October 2025 together with the documents annexed thereto, and its written submissions dated and filed on 12th May 2026. 2. The Appellant recounted that the Respondent carried out a tax investigation and served it with investigation findings for the years 2016 and 2017, following which it lodged an objection to the assessments and, in its account, forwarded the documents required in support of that objection. 3. On the first ground, the Appellant contended that the Respondent disregarded valid purchases which it had declared in its VAT returns, and that by charging the full sales to Income Tax without any corresponding relief for those purchases, the Respondent occasioned double taxation in the year 2017. 4. On the second ground, the Appellant faulted the Respondent for raising Income Tax assessments without allowing any cost of sales, which it characterised as a violation of basic accounting principles and standards. 5. It posited that the Respondent ought to have applied the industry profit margin, or at the very least utilised the input VAT it had filed, to determine the cost of sales, reasoning that the business could not have generated revenue without corresponding purchases, and that a proper audit would have revealed that it had consistently filed its VAT returns for 2016 and 2017 disclosing valid purchases and expenses. 6. On the third ground, the Appellant took the position that the objection decision was not valid. It reasoned that, having served its objection on 15th July 2020, the Respondent's decision issued on 23rd April 2021 came well outside the sixty-day period within which Section 51(4A) of the TPA requires the Commissioner to determine an objection where a taxpayer fails to provide the information requested. 7. Relying on **Rongai Tiles & Sanitary Wares Limited v Commissioner of Domestic Taxes [2023] KEHC 18546 (KLR)**, the Appellant urged that the Commissioner's delay in rendering the decision within sixty days meant that the objection was allowed by operation of law and that the taxes therein could not be demanded. **APPELLANT'S PRAYERS** 1. The Appellant prayed that the Tribunal grants the following orders: a) The Appeal be allowed; b) The Respondent's confirmed assessment be annulled on the strength of the grounds of appeal and the Statement of Facts; and c) The costs of the Appeal be awarded to the Appellant. **THE RESPONDENT'S CASE** 1. The Respondent's case is premised on its Statement of Facts dated 21st November 2025 and filed on 23rd November 2025 together with the documents annexed thereto, and its written submissions dated 25th May 2026 and filed on 26th May 2026. 2. The Respondent recounted that, having relied on the Appellant's self-assessment Income Tax and VAT returns for 2016 and 2017, it noted that the Appellant had under-declared income in its Income Tax returns and brought the resulting variances to charge at 30% through the additional assessments of 26th June 2020; that the Appellant lodged an objection but failed, despite several requests and reminders, to avail the supporting documentation required to validate it; and that it consequently issued the decision confirming the assessments. 3. The Respondent contended that its assessments were justified, grounding them in Section 3 of the Income Tax Act, Cap 470 (ITA), which mandates the payment of tax on income accrued in or derived from Kenya, and pointing out that although the Appellant had declared taxable supplies in its VAT returns, it had failed to declare the corresponding income in its Income Tax returns. 4. The Respondent maintained that it was not bound by the Appellant's returns and was entitled, under Section 24(2) of the TPA, to assess a taxpayer's liability using any information available to it, and that under Section 31 of the TPA it was empowered to amend an assessment by making alterations or additions from the available information and to the best of its judgement. 5. It relied on **Commissioner of Domestic Taxes v Altech Stream (EA) Limited [2021] eKLR** for the proposition that Section 31(1) of the TPA permits the Commissioner to assess on the basis of available information and to the best of its judgement. 6. On the validity of the objection, the Respondent took the position that the Appellant had not lodged a valid objection. It explained that it had, by its correspondence, called upon the Appellant to comply with Section 51(3) of the TPA, which treats a notice of objection as validly lodged only where the grounds and amendments sought are precisely stated, the tax not in dispute is paid or its payment deferred, and all relevant documents relating to the objection are submitted. 7. The Respondent reasoned that the Appellant's failure to lodge a valid objection, occasioned by the want of clarity, precision and supporting documents, tied its hands. 8. The Respondent distinguished the Tribunal's decision in **David Mwangi Mbugua v Commissioner of Domestic Taxes (TAT Appeal 293 of 2021)**, where an objection was held valid because the appeal documents demonstrated that specific documentation had been received by the Commissioner, and reasoned that the converse obtained here, the Appellant not having placed the requisite documentation before it. 9. As to the timeliness of its decision, the Respondent countered the Appellant's operation-of-law argument by explaining that, at the material time, the sixty-day period for issuing an objection decision ran from the date of the last correspondence between the parties. 10. Relying on **Highland Resources Limited v Commissioner of Investigations and Enforcement (TAT 325 of 2020)**, the Respondent reasoned that where correspondence subsists between the parties on the matter, the sixty-day timeline runs from the last such correspondence, and that its last communication before the decision having been on 2nd March 2021, the decision of 23rd April 2021 was rendered within time. 11. The Respondent underscored that the burden of proving an assessment excessive lies on the taxpayer, invoking Mulherin v Commissioner of Taxation [2013] FCAFC 115, where the Federal Court of Australia held that a taxpayer challenging an assessment must discharge the onus of proving it excessive by adducing positive evidence of the taxable income upon which tax ought to have been levied. It also cited Intime Stone Age Limited v Commissioner of Domestic Taxes (Appeal 714 of 2022) [2024] KETAT 44 (KLR) on the taxpayer's obligation to furnish relevant and specific documents in support of its objection grounds. 12. The Respondent emphasised the taxpayer's statutory record-keeping and production obligations, relying on Section 23 of the TPA, which requires a person to maintain and retain documents enabling the ready ascertainment of tax liability for five years, and Section 59 of the TPA, which empowers the Commissioner to require the production of records. 13. It relied on Osho Drapers Limited v Commissioner of Domestic Taxes [2022] eKLR for the proposition that Section 59 entitles the Commissioner to request further information to satisfy itself as to the income declared, and on Boleyn International Limited v Commissioner of Investigations & Enforcement (TAT No. 55 of 2019) and Rongai Tiles and Sanitary Ware Limited v Commissioner of Domestic Taxes (TAT No. 163 of 2017) for the proposition that an objection unsupported by the relevant documents cannot satisfy Section 51(3) of the TPA. 14. In conclusion, the Respondent maintained that the Appellant had not discharged its burden under Section 56(1) of the TPA and Section 30 of the Tax Appeals Tribunal Act, and that, owing to the Appellant's failure to avail proper documentation, it was entitled to reject the objection. **RESPONDENT'S PRAYERS** 1. The Respondent prayed that the Tribunal: a) Finds that the assessments are proper in law and that the objection was properly rejected; b) Upholds the objection decision and finds the principal taxes and interest due and payable; and c) Dismisses the Appeal with costs to the Respondent. **ISSUES FOR DETERMINATION** 1. The Tribunal has considered the parties' pleadings, documentation and submissions, and before turning to the substantive contentions of the parties, discerns a threshold question that goes to its competence to entertain this Appeal. Accordingly, the Tribunal frames the issues falling for its determination as follows: A. Whether there is a valid Appeal on record; and B. Whether the assessments confirmed by the Respondent were justified. **ANALYSIS AND FINDINGS** 1. Having identified the issues for determination, the Tribunal proceeds to analyse them as hereunder. **A. Whether there is a valid Appeal on record** 1. The jurisdiction of the Tribunal is the threshold upon which every appeal stands or falls, and it is a question the Tribunal is entitled, indeed obliged, to interrogate at the outset, whether or not the parties have raised it. As the Court of Appeal memorably held in **Owners of the Motor Vessel "Lillian S" v Caltex Oil (Kenya) Ltd [1989] KLR 1**, jurisdiction is everything, and without it a court or tribunal must down its tools. The Tribunal therefore examines, as its first port of call, whether the decision appealed against is one that clothes it with jurisdiction. 2. The Tribunal has examined the decision contained in the Respondent's letter dated 23rd April 2021, which is the decision the Appellant expressly identified in both its Notice of Appeal and its Memorandum of Appeal as the decision appealed against. In that letter, the Respondent did not confirm, vary or reject the objection on its merits; rather, it declared the objection invalid for failing to meet the requirements of Section 51(3)(b) and (c) of the TPA, the Appellant having, in the Respondent's view, failed to submit the tax not in dispute and the relevant documents relating to the objection. 3. The Tax Procedures Act requires a taxpayer who disputes a tax decision to first lodge an objection against that decision under Section 51 before proceeding under any other written law. Section 51(1) of the TPA provides as follows: *"A taxpayer who wishes to dispute a tax decision shall first lodge an objection against that tax decision under this section before proceeding under any other written law."* 1. What constitutes a validly lodged objection is set out in Section 51(3) of the TPA, while Section 51(4) of the TPA vests in the Commissioner the power to determine whether a notice of objection has been validly lodged. Those provisions state: *"(3) A notice of objection shall be treated as validly lodged by a taxpayer under subsection (2) if— (a) the notice of objection states precisely the grounds of objection, the amendments required to be made to correct the decision, and the reasons for the amendments; (b) in relation to an objection to an assessment, the taxpayer has paid the entire amount of tax due under the assessment that is not in dispute or has applied for an extension of time to pay the tax not in dispute under section 33(1); and (c) all the relevant documents relating to the objection have been submitted.* *(4) Where the Commissioner has determined that a notice of objection lodged by a taxpayer has not been validly lodged, the Commissioner shall within a period of fourteen days notify the taxpayer in writing that the objection has not been validly lodged and request the taxpayer to submit the information specified in the notice within seven days after the date of the notice."* 1. The Tribunal observes that the determination by the Respondent that a notice of objection has not been validly lodged is an administrative exercise of the discretion conferred by Section 51(4) of the TPA. 2. Where the Respondent declares an objection invalid, the legal consequence is that the taxpayer is regarded as not having filed a notice of objection at all, and, pursuant to Section 51(1) of the TPA, is barred from invoking the jurisdiction of this Tribunal until it has properly lodged an objection and obtained an objection decision within the meaning of the Act. An invalidation of an objection is therefore not, of itself, an appealable decision. 3. This distinction has been settled by the High Court. In **Commissioner of Investigations & Enforcement v Vyas t/a Rocon Enterprises (Income Tax Appeal E144 of 2021) [2022] KEHC 16027 (KLR)**, the Court, in analysing whether a decision declining a late objection was an appealable decision, held as follows: *"15. The letter of January 13, 2020 declined the application for a late objection by the respondent under section 51(7) of the TPA. He did not make or communicate his decision in relation to any assessment under section 52 of the Act. 16. The same having not been an objection decision, it could only be challenged by way of judicial review and not appeal to the tribunal. Definitely the tribunal had no jurisdiction to entertain the appeal before it."* 1. The reasoning in **Vyas** applies with equal force to the present Appeal. The Respondent's letter of 23rd April 2021 was not an objection decision determining the merits of the assessments; it was a determination, under Section 51(4) of the TPA, that the objection had not been validly lodged. 2. The Tribunal affirms that a discretionary administrative decision by the Respondent invalidating an objection does not amount to an appealable decision, and a taxpayer aggrieved by any alleged impropriety or unfairness in such a decision is entitled to ventilate that grievance through judicial review before the High Court and not by way of appeal to this Tribunal. 3. The Tribunal is alive to the fact that the parties devoted much of their pleadings and submissions to the merits of the assessments and to the competing contentions on whether the objection decision was rendered within the sixty-day period. The Appellant's argument that the decision was issued out of time, and was accordingly allowed by operation of law, presupposes that what was issued on 23rd April 2021 was an objection decision under Section 51(11) of the TPA capable of being caught by the statutory timeline. 4. The Tribunal finds that the Appellant’s premise is misconceived. The letter of 23rd April 2021 was an invalidation of the objection under Section 51(4) of the TPA, not an objection decision on the merits, and the sixty-day allowed-by-operation-of-law mechanism the Appellant invokes therefore has no probative value on the facts of this Appeal. 5. It follows that the decision the Appellant has appealed against is not an appealable decision within the meaning of the Tax Procedures Act and the Tax Appeals Tribunal Act. There being no appealable decision, there is no valid Appeal upon which the Tribunal's jurisdiction can be founded. **B. Whether the assessments confirmed by the Respondent were justified** 1. Having found that there is no appealable decision on record, and that the Tribunal is in consequence without jurisdiction to entertain the Appeal, the Tribunal is precluded from proceeding to determine the second issue, which concerns the merits of the assessments. **FINAL DECISION** 1. The upshot of the foregoing analysis is that the Appeal is incompetent. Accordingly, the Tribunal proceeds to issue the following Orders: a) The Appeal be and is hereby struck out; and b) Each party to bear its own costs. 1. It is so ordered. **DATED AND DELIVERED AT NAIROBI THIS 27TH DAY OF JULY 2026.** **……………………………..….** **ROBERT M. MUTUMA** **CHAIRMAN** **……………………………… …………..….……..………..** **GLORIA A. OGAGA DR. TIMOTHY B. VIKIRU MEMBER MEMBER** **……………………………..….** **JIMMY M. MALLA** **MEMBER**