https://new.kenyalaw.org/akn/ke/judgment/ketat/2026/90

Golden Genesis Company Ltd v Commissioner of Domestic Taxes (Tax Appeal E924 of 2025) [2026] KETAT 90 (KLR) (26 June 2026) (Judgment) Neutral citation: [2026] KETAT 90 (KLR) Republic of Kenya In the Tax Appeal Tribunal Tax Appeal E924 of 2025 RO Oluoch, Chair, AM Diriye & E Komolo, Members June 26, 2026 Between Golden Genesis Company Limited Appellant and Commissioner Of Domestic Taxes Respondent Judgment Background 1.The Appellant is a private limited company whose principal business is the retailing of Timber and Hardware. 2.The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act, 1995 Cap 469, Laws of Kenya. Under Section 5(1), the Respondent is an agency of the Government for the collection and receipt of all tax revenue. Further, under Section 5(2) with respect to performance of its functions under subsection (1), the Respondent it mandated to administer and enforce all provisions of the Written Laws as set out in Part 1 & 2 of the First Schedule to the Act for the purposes of assessing, collecting and accounting for all revenue in accordance with those laws. 3.The Respondent conducted a desk review on the Appellant and vide a letter dated 22nd May 2025 issued additional assessments for Kshs 14,946,858.00 for Corporation Tax and Value Added Tax for the period 2020 to 2023. 4.The Appellant objected to the assessment through its Notices of Objection via i-Tax on 4th June 2025, to which the Respondent issued its Objection Decision on 29th July 2025. 5.Aggrieved by the Respondent’s decision, the Appellant filed its Notice of Appeal on 25th August 2025. The Appeal 6.The Appeal is premised on the following grounds of appeal as stated in the Appellant’s Memorandum of Appeal dated 25th August 2025 and filed on 26th August 2025;a.That the Respondent erred in law and fact by amending the Appellant’s self-assessment returns for Income Tax and Value Added Tax through additional assessment.b.That these additional assessments are primarily incorrect and have led to a demand for unsubstantiated and non-existent taxes.c.That these assessments are highly erroneous and excessive.d.That the Respondent erroneously added non-existent sales to Income Tax and Value Added Tax returns.e.That the Respondent applied a 20% markup on exaggerated sales from unknown sources.f.That the Appellant availed all documents as requested by the Respondent.g.That the Respondent issued a rushed objection decision without considering all the material information and facts in the tax dispute. The Appellant’s Case 7.The Appellant’s case is premised on its Statement of Facts dated 25th August 2025 and filed on 26th August 2025 together with the documentation attached thereto. The Appellant did not file its Written Submissions. As such, its case will be considered on the basis of its pleadings on record. 8.The Appellant stated that it filed its original Income Tax returns for the years 2020, 2021, 2022 and 2023 and Value Added Tax returns for December 2020, December 2021, December 2022 and December 2023 on respective diverse dates. It further stated that it filed returns in accordance with the respective provisions of the law, which returns were consequently acknowledged and approved by the Respondent. 9.It contended that the Respondent, however, erred in law by arbitrarily amending the returns which hypothetically introduced new sales with no sufficient basis. 10.The Appellant averred that it had the requisite documentation of its import purchases invoices and entry declarations, which it had used in the submitted VAT returns on diverse dates, claiming input tax therein and in accordance with the provisions of Section 17 of the Value Added Tax Act and other laws and regulations. 11.It was the Appellant’s assertion that its import purchases invoices and entry declarations were within the stipulated six months after the end of the tax period in which the importation accrued and did not understand the basis for which the Respondent claimed a variance in the Appellant’s declared import purchases, as all import purchases invoices had been claimed and were in compliance with the respective provisions of the law. 12.The Appellant averred that Section 15 of the Income Tax Act was clear and unambiguous in so far as it sets out the criteria to be followed by the taxpayer in claiming expenses incurred in the generation of taxable income. 13.The Appellant contended that the Respondent rushed to issue the Objection Decision on 29th July 2025 without considering that import purchases had been claimed as input VAT while filing Value Added Tax returns on diverse dates as provided by law. 14.The Appellant argued that the Respondent appeared to have been limited by scope and time to review the supporting and available records to support the dispute. It averred that the decision made by the Respondent to fully disallow the Appellant’s objection and confirm the additional assessments was improper, inadequate, and unjust. Appellant’s Prayers 15.The Appellant prayed that:a.The Respondent be and hereby compelled to set aside the confirmation assessments and fully vacate the additional assessment issued.b.The Respondent be compelled to revise any penalties and interest payable.c.The cost of this appeal is borne by the Respondent. The Respondent’s Case 16.The Respondents case is premised on its:a.Statement of Facts dated and filed on 17th September 2025 together with the documentation attached thereto.b.Written Submissions dated 8th April 2026 and filed on 9th April 2025. 17.The Respondent asserted that it conducted a desk review on the Appellant to review the variances and/or assess discrepancies between purchases claimed in the returns and those in the Customs data vis-à-vis the stocks reported in the Appellant’s VAT and Income Tax returns for the periods covering 2020 to 2023. It further asserted that the analysis of the customs records revealed an uncounted stock value at Kshs 59,180,088.00 that was not declared in the Appellant’s returns for the years under review. It therefore proceeded to apply a 20% make-up on the uncounted purchases and used the mark-up to compute additional tax. 18.The Respondent averred that it requested for specific documents from the Appellant on 9th and 16th June 2025.However, the Appellant did not avail all the requested documents. Further that the Appellant only provided copies of bank accounts and financial statements out of the list of ten documents requested, which was insufficient on their own as they did not demonstrate how imports had been appropriately declared and accounted for. 19.It further averred that Section 56(1) of the Tax Procedures Act (TPA) required the taxpayer to prove that the tax decision made by the Commissioner was incorrect. It stated that in this case the Appellant failed to discharge this statutory burden of proof despite being granted an opportunity to support its objection. It stated further that the Appellant failed to provide critical documents and also failed to account for the unaccounted stock. 20.The Respondent stated that, in the absence of this information, it was unable to independently verify the Appellant’s claims or assets, which the assessment was indeed excessive or incorrect. 21.In response to the Appellant’s grounds of Appeal, the Respondent contended that it requested the Appellant to provide documents on 9th and the 16th June 2025 in support of its objection, but the Appellant failed to do so, thereby failing to rebut the assessments issued and properly support its objection as provided under Section 51(3) of the Tax Procedures Act. 22.The Respondent further contended that it was upon the Appellant to prove that the Respondent erred in exercising its best judgment in applying the 20% mark-up on the unaccounted purchases derived from the Appellant’s average profit margin based on the Income Tax returns for the years 2020 to 2023.It argued that the Appellant failed to support its case; hence the Respondent upheld its assessment. 23.The Respondent asserted that Section 56(1) of the Tax Procedures Act (TPA) requires the Appellant to prove that a tax decision made by the Commissioner is incorrect. It reiterated that it requested the Appellant for records to support its objection vide an email sent on 9th and 16th June 2025. However, despite being accorded an opportunity, the Appellant failed to discharge the burden of proof as provided for under Section 56 of the TPA. 24.The Respondent asserted that Section 23 of the TPA mandates that the Appellant has a duty to keep and maintain records required under a tax law which the Appellant failed to do. The Respondent therefore maintained that the tax assessment issued was properly founded in fact and law, and that the objection decision was fair, reasonable, and was made in accordance with statutory provisions. 25.In its Written Submissions, the Respondent raised seven issues for determination. a) Whether the Respondent Erred in law and fact by Amending the Appellant’s Self-assessment Returns for Income Tax and Value Added Tax Through Additional Assessments. 26.The Respondent submitted that the assessment was lawfully issued pursuant to Section 24 of the TPA which empowers the Commissioner to assess tax using any information available where the taxpayer’s declarations are incomplete or inaccurate. 27.It submitted that it established that the Appellant had unaccounted imports amounting to Kshs 59,180,089.00 which were not declared in VAT and Income Tax returns. It therefore applied a 20% mark-up derived from the Appellant’s own historical profit margins to determine taxable income. 28.The Respondent relied on the case of Kenyacof Limited vs Commissioner of Dometic Taxes (Tax Appeal E1278 of 20204) where the Court affirmed that the Commissioner was entitled to rely on available data and make assessments based on best judgment where taxpayer records are deficient. It further relied on the case of Republic vs Kenya Revenue Authority, Ex parte Bata Shoe Company (Kenya) Limited where the Court held that the Commissioner is not bound by a taxpayer’s returns and may issue assessments where discrepancies arise. It therefore stated that it acted within the law in issuing the additional assessments. b) Whether the additional Assessments are Primarily Incorrect and have led to Demands for Unsubstantiated and Non-existent Taxes. 29.The Respondent submitted that the Appellant failed to discharge the burden of proof as required under Section 56(1) of the TPA. It relied on the Tribunal ‘s holding in the case of Muhumed vs Commissioner of Domestic Taxes (Tax Appeal 1567 of 2022) where in upholding this principle it held that a taxpayer must provide sufficient documentation to rebut an assessment. 30.The Respondent submitted that despite being requested to provide supporting documentation on 9th and 16th June 2025, the Appellant failed to furnish critical records including;a.Sales ledgersb.Invoicesc.Import schedulesd.Z-reportse.Reconciliation statements. 31.It submitted further that the Appellant only provided bank statements and audited financial statements, which did not demonstrate how imports were declared or reconciled. It again relied on the cases of Kenyacof (Supra) where the Tribunal further held that financial statements alone are insufficient without supporting source documents, emphasizing that failure to provide documentation justifies the Commissioner’s assessment. 32.The Respondent argued that the Appellant failed to rebut the Respondent’s findings and did not meet the evidentiary threshold. It stated, therefore, that its decision to arrive at the confirmed assessments was justified and was in conformity with the law under Sections 23(1) 24, 51(30(c)(8)(a), 56 and 59 of the Tax Procedures Act. c)Whether these Assessments are Highly Erroneous and Excessive 33.The Respondent submitted that a compliance review of the Appellant’s returns for the period January 2020 to December 2023 was lawfully initiated for purposes of verifying the correctness of the Income tax declarations pursuant to Sections 58 and 59 of the Tax Procedures Act, which empowers the Commissioner to require production of documents and information relevant to a taxpayer’s liability. 34.It submitted that, in the course of the review, the Appellant failed and/or neglected to provide all the requested records, explanations, and supporting documentation necessary to verify the declared income and expenses. 35.The Respondent averred that the Appellant was uncooperative throughout the review process, thereby frustrating the verification exercise. It consequently, and in accordance with Section 29 of the TPA issued additional assessments on 22nd May 2025 amounting to Kshs 14,946,858.00 based on the best information available. Further, the law expressly empowers the Commissioner to make such assessments where a taxpayer fails to provide adequate records. d)Whether the Respondent Erroneously Added Non-existent Sales to the Income Tax & Value Added Tax Returns. 36.It was the Respondent’s submission that it did not erroneously include non-existent sales in the Appellant’s Income Tax and VAT returns; rather, the additional sales were derived from a best judgment assessment pursuant to the law after the Appellant failed to provide the requested supporting documentation, including bank statements, M-Pesa records, and sales records, as communicated in the pre-assessment notice dated 15th March 2025. 37.The Respondent submitted that it is empowered under Section 31 of the Tax Procedures Act to assess a taxpayer’s liability using any available information where the taxpayer has failed to maintain or provide adequate records. It argued that, in the absence of verifiable documentation from the Appellant, it reasonably relied on alternative sources of information to reconstruct the Appellant’s income and taxable supplies. It therefore submitted that, as a consequence, the adjustments made were lawful, justified, and not based on non-existent sales but on information available to the Respondent. f) Whether the Respondent Approved A 20% Mark-up on Exaggerated Sales from Unknown Goods. 38.The Respondent submitted that the 20% mark-up it applied was neither arbitrary nor based on exaggerated sales from unknown sources. Rather, it was a reasonable estimation method applied in line with best-judgement principles after the Appellant failed to substantiate its declared sales and expenses. 39.It asserted that where a taxpayer fails to avail sufficient records, the Commissioner is permitted to apply industry-based rates and reasonable assumptions to determine taxable income. It stated that the Appellant did not provide any evidence to rebut the basis or reasonableness of the applied mark-up, and that in the absence of contrary documentation, its approach remained valid, as it was necessitated by the Appellant’s non-compliance and failure to maintain proper records as required under the law. f) Whether the Appellant Availed all Documents Required as Requested by the Respondent. 40.The Respondent reiterated that the Appellant did not avail all the requested documents. In particular, the Respondent stated that it requested bank statements, M-pesa records, and sales records to verify the Appellant’s tax declarations. However, the Appellant failed to submit all the requested documentation within the stipulated timelines or at all. 41.It submitted that the Appellant did not lodge a valid objection within the prescribed statutory timelines under Section 51 of the TPA. As such, any purported objection was therefore rightfully rejected. It added further that the failure to provide the requested documents and to comply with statutory timelines undermined the Appellant’s position and justified the Respondent’s reliance on alternative methods to assess tax liability. g) Whether the Respondent issued a Rushed Objection Decision Without Considering all the Material Information and facts of the Tax Dispute. 42.The Respondent submitted that the Appellant’s objection lodged on 4th June, 2025 was invalid for failure to comply with Section 51(3) of the TPA, which requires that a valid objection must:i.State precise grounds of objectionii.Specify amendments soughtiii.Provide supporting documents 43.It submitted that the Appellant’s objection lacked grounds and was unsupported by documentation. It relied on the case of Commissioner of Domestic Taxes vs Trical and Hard Limited where the Court held that failure to provide grounds and supporting documentation rendered the objection invalid. It submitted further that it provided the Appellant with an opportunity to furnish documents, an opportunity which was not fully utilized. It again relied on the case of Muhumed vs Commissioner of Domestic Taxes (Tax Appeal 1567 of 2022) (2025) where it was held that the Commissioner was justified in confirming an assessment where a taxpayer fails to substantiate an objection. 44.The Respondent submitted that notwithstanding the Appellant’s failure to fully comply, it proceeded to consider the objection and the documents availed and issued an Objection Decision on 29th July, 2025, in accordance with Section 51(8) of the Tax Procedures Act, confirming the assessments on the basis of variances between income as per Withholding Tax certificates and the income declared by the Appellant. 45.It therefore submitted that the Appellant was afforded multiple opportunities to respond to the verification notice and to substantiate its position, both at the review and objection stages. It therefore asserted that the allegation that the Appellant was denied a fair opportunity to be heard was unfounded and contrary to the factual record. 46.It was the Respondent’s submission that the duty to provide records and substantiate claims lies squarely with the taxpayer under Section 59(1) of the TPA and that the burden of proof rests on the taxpayer under Section 56(1) of the same Act, which the Appellant failed to discharge. 47.The Respondent again relied on the case of Muhumed (Supra) where the High Court affirmed that where a taxpayer fails to provide records, the Commissioner is entitled to rely on available information to issue assessments and that such action does not amount to procedural unfairness. 48.The Respondent further relied on the case of Faizal Dharamshi & Company Limited vs Kenya Revenue Authority (2024) KEHC 2717 (KLR) where the Court emphasized that a taxpayer must actively participate in the statutory process and cannot later allege procedural unfairness where they failed to utilize the opportunities accorded under the law. 49.It therefore asserted that it did not err in law or procedure, as the assessments and subsequent objection decision were issued lawfully, procedurally, fairly, and in strict compliance with the applicable statutory framework. Respondent’s Prayers 50.The Respondent prayed that the Tribunal;a.Dismiss the Appeal in its entirety;b.Upholds the tax assessment as confirmed by the Objection Decision; andc.Orders the Appellant to pay the costs of the appeal. Issues for Determination 51.The Tribunal has carefully considered the parties’ pleadings and documentation. The Tribunal is of the view that that this appeal raises one issue for determination: Whether the Respondents Assessment was justified. Analysis and Findings 52.Having identified the single issue for determination, the Tribunal will proceed to analyse it as hereinunder. Whether the Respondent’s Assessment was Justified 53.The dispute arose after the Respondent conducted a desk audit on the Appellant’s tax affairs for the period 2020 to 2023. According to the Respondent, the audit revealed unaccounted stock valued at Kshs 59, 180,088 which the Respondent applied a 20% mark-up which it then used to compute tax. 54.The Appellant stated that it did not understand the basis on which the Respondent claimed variances in the Appellant’s declared import purchases, as its import invoices had been claimed and were in compliance with the respective provisions of the law. 55.The Tribunal notes that during the review and objection stage, the Respondent requested the following documents, as the Appellant’s objection did not provide any records in support:a.Notice of objection, clearly outlining the grounds of objection, the amendment required to correct the decision, and the reasons for those amendments.b.Sales ledgers, preferably in Excel (soft copy) for the years 2020 to 2023.c.Copies of sales invoices for the years 2020 to 2023.d.Detailed sales schedules for the years 2020 to 2023 in Excel (soft copy)e.Monthly Z-reports for the years 2020 to 2023.f.Detailed imports purchase schedule clearly showing the entry number, date, amount, and account, how each entry had been declared for VAT and Income tax for the years 2020 to 2023 in Excel (soft copy)g.Reconciliation between imports purchases and purchases, as claimed per Income Tax and VAT returns, for the years 2020 to 2023, and explanation for variances. 56.It is the Tribunal’s considered view that the said requested documents and information were relevant to the issue under dispute, which arose after analysis of the Appellant’s import data based on customs records. The Appellant only availed bank statements and audited accounts, without source documents, to explain the amounts in these records. 57.Section 23 of the Tax Procedures Act obligates the Appellant, or the taxpayer the duty to keep and maintain records to aid in the ascertainment of one’s tax liabilities. It provides as follows;“A person shall-a)Maintain any document required under a tax lax in either of the official languages;b)Maintain any document required under a tax law so as to enable the person’s tax liability to be readily ascertained; andc)Subject to subsection (3), retain the documents for a period of five years from the end of the reporting period to which it relates or such period as may be specified in a tax law” 58.It is to be noted that the Appellant lodged its Notice of Objection through i-Tax and did not avail any documentary evidence to support its objection, even after being prompted to do so by the Respondent on the 9th and 16th of June, 2025. 59.The Tribunal will rely on its decision in TAT No. 55 of 2018- Boleyn International Limited vs Commissioner of Investigations & Enforcement, where it held as follows:“The Appellant failed to provide documents and the Tribunal held that there was no conceivable way the Respondent would have considered the objection as the same did not place itself within the parameters of Section 51(3) of the Tax Procedures Act” 60.The Tribunal notes that the Appellant had stated at paragraph 13 of its Statement of Facts that it had the requisite documentation of its imports, purchases invoices, and entry declarations, which it had used in its VAT returns. If indeed therefore that it had the requisite documentation, why were the same documents not availed when requested or availed at the appeal stage. 61.Section 56(1) of the Tax Procedures Act places the burden of proof in tax matters on the Appellant to disprove the Respondent’s tax decision. It provides as follows;“In any proceedings under this Part, the burden shall be on the tax to prove that a tax decision is incorrect.” 62.It is the Tribunal’s view that the Appellant neither provided the relevant document during the review and objection stage when requested nor availed any documents at the Appeals stage to discharge its burden of proof hence compromising its position in this Appeal. 63.In the case of Primarosa Flowers Ltd vs Commissioner of Domestic Taxes HCITA No. 19 of 2017, the learned judge cited with approval the case of Mulherin vs Commissioner of Taxation (2012) FCAFC115, where the court held;“…in tax disputes, the taxpayer must satisfy the burden of proof to successfully challenge income tax assessments. The onus is on the tax payer in proving that an assessment was excessive by adducing positive evidence which demonstrates the taxable income on which tax ought to have been levied” 64.It is the Tribunal’s view that the Appellant just made mere averments that it possessed the requisite documents but failed to avail the same as evidence in the case. Averments without the backing of evidentiary proof cannot come to the aid of the Appellant as a litigant. 65.Consequently, the Tribunal finds and holds that the Respondent was justified in raising the Assessment in the manner that it did. Final Decision 66.The upshot of the foregoing is that the appeal is bereft of merit and the Tribunal proceeds to issue the following orders;a.The Appeal be and is hereby dismissed.b.The Respondent’s Objection Decision dated 29th July 2025 be and is hereby upheld.c.Each party to bear its own costs. 67.Orders accordingly. DATED AND DELIVERED AT NAIROBI THIS ………26TH ...……. DAY OF ……JUNE..…… 2026................................................................RODNEY O. OLUOCHCHAIRMAN…………………………….… …..............……………..ABDULLAHI M. DIRIYEMEMBER…………………………….… …..............……………..DR ERICK K’OMOLOMEMBER