https://new.kenyalaw.org/akn/ke/judgment/ketat/2026/129

**REPUBLIC OF KENYA** **IN THE TAX APPEALS TRIBUNAL AT NAIROBI** **TAX APPEAL NUMBER E471 OF 2025** **FANDA WIRED ENTERPRISES LIMITED........……………………………….….. APPELLANT** **-VERSUS-** **COMMISSIONER LEGAL & BOARD SERVICES........................................…RESPONDENT** JUDGMENT BACKGROUND 1. The Appellant is a private company registered under the Company's Act laws of Kenya. 2. The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act, CAP 469 of Kenya’s Laws. 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 conducted a compliance check on the tax affairs of the Appellant for the period January 2019 to December 2023 and noted that the Appellant had made supplies to the County Government of Kitui receiving payments of Kshs. 11,485,357 for the services/goods supplied. 4. The Respondent noted that the Appellant in said period declared Nil VAT return whereas the County Government withheld VAT amounting to Ksh.198,023. The Respondent based on the withheld amount and issued a VAT assessment vide a letter dated 15th March 2024 for VAT liability of Kshs 1,584,187 for the period February 2023. 5. The Appellant objected to the said assessment via letter dated 3rd October 2024. 6. The Respondent issued objection decision letter dated 8th November, 2024 wherein it confirmed the assessment fully. 7. The Appellant being dissatisfied with the decision, lodged this Appeal vide a notice of appeal dated 8th May, 2025 and filed on 9th May 2025. THE APPEAL 1. The Appellant lodged its Memorandum of Appeal dated 8th May 2025 and filed on 9th May 2025 raising the following ground of appeal: 2. That no tender was awarded to Appellant during the period in question **APPELLANT’S CASE** 1. In support of the appeal, the Appellant lodged a statement of facts dated 8th May 2025 and filed on 9th May 2025. It did not file written submissions. 2. It emphasised that no tender was awarded to it. It stated that all the documents supporting the above statement were provided. 3. The Appellant stated that if the withholding credit of Kshs.198,023.4 was utilized, then it was willing and capable of paying that amount. 4. It averred that the directors are proposing that upon acceptance of the above self-assessed amount of Kshs 198,024.00 they shall pay 40% deposit and the balance be cleared in six monthly equal instalments. 5. In its memorandum of appeal, the Appellant stated that it filed its objection on 3rd October, 2024 being aggrieved by the additional assessments on VAT tax heads for the month of February 2023 which were assessed on the 30th May, 2024. 6. It stated that it made a late objection on 3rd October, 2024 after an intensive consultation with Kitui County government and Tso Kitui branch and noted that nothing was supplied to Kitui County. In addition to this, the Appellant asserted that Kitui county government issued it with a letter stating that since July 2022 to January 2024 no contract was assigned to it, thus this withholding was erroneously put to KRA website. 7. The Appellant pointed out that on 11th November, 2024 an acknowledgement receipt for late Objection Rejection Notice was mailed to the Appellant. **Appellant’s Prayers** 1. The Appellant urged this Honourable Tribunal to consider the above mitigations and requested the Tribunal to consider its plea and advice where appropriate. **RESPONDENT’S CASE** 1. In opposition to the appeal, the Respondent relied on its Statement of Facts dated 14th November 2025 and filed on 19th November 2025 wherein it stated that the dispute relates to VAT assessment for the period February 2023 amounting to Kshs 1,584,187.17. 2. Whereas the Appellant claimed that it neither made any supplies nor received any funds, the Respondent averred that the Appellant received payment from County Government of Kitui and failed to declare the same as evidence from the Withholding certificate issued by Kitui County Government. 3. The Respondent averred that the taxing point for VAT is provided for under section 12 of the VAT Act which states as follows; *Time of supply of goods and services* *(1) Subject to subsection (3), the time of supply, including a supply of imported* *services, shall be the earlier of-* *(a) the date on which the goods are delivered or services performed;* *(b) the date a certificate is issued by an architect, surveyor or any other person acting as a consultant in a supervisory capacity;* *(c) the date on which the invoice for the supply is issued; or* *(d) the date on which payment for the supply is received, in whole or in part."* 1. The Respondent averred that the Appellant having received payment and withholding certificate issued, it was incumbent on the Appellant to declare the same in their VAT return for the period in question. It also averred that section 30 of the Tax Appeals Tribunal Act, Cap 469A(TATA) and section 56(1) Tax Procedures Act CAP 469B(TPA) places the burden of proof on the Appellant to demonstrate that indeed it did not receive the payment. 2. The Respondent maintained that the tax assessment issued was properly founded in fact and law, and that the objection decision was fair, reasonable, and made in accordance with statutory provisions. 3. In its written submissions dated 30th April 2026it submitted that it did not err in issuing the additional assessment and that the Appellant failed to discharge its burden of proof contrary to section 30 of the TATA and section 56(1) of the TPA. 4. It relied on the case of**Kenya Revenue Authority v Maluki Kitili Mwendwa [2021] eKLR**to submit that its decision is presumed to be correct and that is upon the Taxpayer to prove otherwise. The Respondent maintained that the Appellant failed to prove that the decision was incorrect. 5. The Respondent also cited the case of **Hickman** **Motors Ltd. v Canada [19**] where it was held as follows: *‘‘the onus is met when a Taxpayer makes out at least a prima facie case. Prima facie is another legal term that literally means “on its face.” To prove a case “on its face” you must provide evidence that, unless rebutted, would prove your position. According to the said decision, a prima facie case is made when the taxpayer can produce unchallenged and uncontradicted evidence. Once the taxpayer has made out a prima facie case to prove the facts, the onus then shifts to the Revenue Authority to rebut the prima facie case. If the Revenue Authority cannot provide any evidence to prove their position, the taxpayer will succeed*.” 1. The Respondent maintained that the tax assessment issued was properly founded in fact and law, and that the objection decision was fair, reasonable, and made in accordance with statutory provisions. **Respondent’s prayers** 1. The Respondent prayed that the appeal be dismissed in its entirety; the tax assessment as confirmed by the objection decision be upheld; and that the Appellant be compelled to pay the costs of the appeal. **ISSUE FOR DETERMINATION** 1. Having considered the parties’ pleadings, the Tribunal puts forth the following issue for determination: **Whether the Respondent erred in confirming VAT assessment.** **ANALYSIS AND FINDINGS** 1. The Appellant asserted that it did not supply services to the County government of Kitui while the Respondent asserted that the County government issued withholding certificate to the Appellant but the Appellant filed NIL returns for the month of February 2023. 2. The Respondent filed withholding certificate dated 7th February 2023 showing that the County government of Kitui withheld Kshs 198,023 arising from a transaction valued at Kshs 11,485,357. 3. On the other hand, the Appellant filed a letter dated 27th September 2024 from the County government of Kituyi wherein the County government stated as follows: *“ Fanda Wired Enterprises Limited has been awarded several contracts by the County Government of Kitui and receiving payments for the services rendered. All relevant taxes thereon have duly withheld by the County Government and remitted to the Kenya Revenue Authority accordance with the law.* *The company has not been awarded any Contract by the County Government of Kitui since 2022. The company has not received any payment for works, goods or services rendered by the county from July 2022. However, the company was paid retention for contracts which was awarded earlier of KShs.1,549,655 in the month of January 2024. This amount is not subjected to tax at the point of withholding it.”* 1. The Tribunal noted that the County Government in its letter dated 27th September 2024 did not address the issue of the withholding certificate. This was the Achille’s heel in the Appellant’s defence. Therefore, the said certificate remained unimpeached. The Appellant, apart from stating that it did not trade with the County government of Kitui in the assessment period, it did not state anything regarding the withholding certificate. 2. Rule 7 of the Income Tax (Withholding Tax) Rules Legal Notice 100 of 2001 provides for settlement of disputes in relation to withholding tax. In particular Rule 7(1) thereof provides as follows: *“ 7. Dispute in calculation of withholding tax* *(1) If a person to whom payment is made under paragraph 6 is aggrieved by reason of the nature of a payment and the rate of withholding tax applied and is unable to reach an agreement with the payer –* *(a) the payer may inform the payee of his rights under this rule and shall, at the request of the payee, furnish him with a written statement showing the manner in which the payer calculated the tax deducted;* *(b)the payee may give a notice of objection in writing to the Commissioner, but that notice shall be valid only if –* *(i) it states precisely the grounds of his objection;* *(ii)there is enclosed therewith the written statement furnished by the payer; and* *(iii) it is received by the Commissioner within thirty days of the date on which the statement from the payer under paragraph (a) was received by the payee.”* 1. Pursuant to Rule 7(1) of the Income Tax (Withholding Tax) Rules, the first port of call was for the Appellant to write to the County government of Kitui supplying it with the impugned withholding certificate and challenging the said certificate. That way, the County government would have commented on the certificate. The Appellant provided a letter from the County government but the letter was silent on issue of the withholding certificate. 2. Rule 6 of the Income Tax (Withholding Tax) Rules provides for issuance of certificates in the following terms: ***“ 6. Certificate of tax deduction*** *Upon making a payment and deducting withholding tax in any month, the person making the payment shall furnish the payee with a certificate showing the gross amount paid, the total tax deducted and such other particulars as the Commissioner may require.* 1. Until the withholding certificate is challenged and revoked, it remains a valid document that shows the County government withheld an amount of Kshs. 198,023.00 being VAT-withholding following a transaction. 2. It is also noted that the Appellant in its statement of facts accepted liability to pay Kshs 198,024 which was the same amount as stated in the withholding certificate. It stated that, *‘‘...if the withholding credit of Kshs198,023.4 has been utilized then we're willing and capable of paying that amount.* *The directors are proposing that upon acceptance of the above self-assessed amount (Kshs* *198,024) shall pay 40% deposit and the balance be cleared in six monthly equal instalments.’’* 1. Further, the Appellant did not deny that it filed NIL returns. 2. It should be recalled that in tax matters, the taxpayer has a heavier burden to demonstrate that the Respondent’s decision was incorrect. This is so because the law creates a rebuttable presumption that the Respondent’s decision is correct. This legal presumption is established under section 50(1)(a) of the TPA which provides as follows: ***‘‘50. Conclusiveness of tax decisions*** *(1) Except in proceedings under this Part—* *(a) the production of a notice of an assessment or a document under the hand of the Commissioner shall be conclusive evidence of the making of the assessment and that the amount and particulars of the assessment are correct.’’* 1. Section 56(1) of TPA places the burden of proof upon the taxpayer. It provides that: *‘In any proceedings under this Part, the burden shall be on the taxpayer to prove that a tax decision is incorrect.’’* This position has been upheld by this Tribunal and the High Court alike. The Constitutional and Human Rights Court in **Katambo v Attorney General & another (Petition E532 of 2022) [2023] KEHC 19949 (KLR) (****Constitutional and Human Rights) (30 June 2023) (Judgment)** stated as follows at paragraph 19 of the judgement: *‘‘Section 56(1) falls within Part VIII which provides for Tax Decisions, Objections and Appeals. The provision is applicable in proceedings where a decision has been made and the taxpayer objects to, or appeals against such decision. This being the case, it then falls upon the tax payer challenging a decision or assessment to provide proof that the assessment is not correct. It cannot therefore be argued that placing the burden of proof contravenes the provisions of Articles 49(1)(b) and (d) and 50(2)(a) and (l) of the Constitution.’’* 1. The Appellant asserted that it did not trade with the County government of Kituyi. However, the Appellant’s statement of facts did not speak to the withholding tax certificate in issue. Therefore, the Appellant failed to reconcile the differences between the letter dated 27th September 2024 from County government of Kituyi stating that there was supplies from the Appellant, and the withholding certificate from the same county speaking to the fact that the Appellant traded with the county. The Appellant failed to prove that it did not trade with the said county for the period under review. 2. In addition, the Tribunal notes that the Appellant provided its bank statements covering 3rd January 2023 to 30th November 2023, however the Appellant did not provide the correlation between the bank statements and the letter it claimed to be from the County Government of Kitui which stated that the Appellant had made supplies to the County. 3. Consequently, there was material non-disclosure of facts which denied the Tribunal opportunity to make a comprehensive and informed decision. 4. Considering the totality of the foregoing, and taking into account that the Appellant did not disprove the correctness of the withholding certificate relied upon by the Respondent in the assessment, the Appellant failed to discharge its burden of proof. 5. The Tribunal, therefore, finds that the Respondent did not err confirming VAT assessment. **FINAL DETERMINATION** 1. The upshot to the foregoing is that the Appeal lacks merit and the Tribunal makes the following orders: 2. The appeal be and is hereby dismissed; 3. The Objection decision dated 8th November 2024 be and is hereby upheld; and 4. Each party to bear its own cost. 5. It is so ordered. DATED AND DELIVERED AT NAIROBI THIS 30TH DAY OF JUNE 2026. ……………………………..…. ROBERT M. MUTUMA CHAIRMAN ……………………………… ……..….……..…………….. JIMMY M. MALLA DR. TIMOTHY B. VIKIRU MEMBER MEMBER ……………………………..…. GLORIA A. OGAGA MEMBER