Sonko v Commissioner of Domestic Taxes (Tax Appeal E033 of 2025) [2026] KETAT 288 (KLR) (7 August 2026) (Judgment)

**REPUBLIC OF KENYA** **THE TAX APPEALS TRIBUNAL AT NAIROBI** **TAX APPEAL NO. E033 OF 2025** **HON. MIKE MBUVI SONKO…………………………….……….….………….. APPELLANT** **VERSUS** **THE COMMISSIONER OF DOMESTIC TAXES ….…….…….….…..………. RESPONDENT** **JUDGMENT** **BACKGROUND** 1. The Appellant is a Kenya citizen who is involved in various businesses within the Republic of Kenya. 2. The Respondent is the principal officer appointed under Section 13 of the Kenya Revenue Authority Act. The Kenya Revenue Authority is an agency of the Government of Kenya mandated with the duty of collection and receipting all tax revenue, and the administration and enforcing all tax laws set out in Parts 1 & 2 of the First Schedule to the Act, including assessing, collecting, and accounting for all tax revenues in accordance with those laws. 1. The Respondent undertook an investigation into the Appellant’s affairs for the period 2013 to 2019 to confirm compliance with various tax laws. 2. On 24th June 2022, the Respondent issued the Appellant with additional income tax assessments for 2013 to 2019 amounting to Kshs 407,427,322. 3. On 15th October 2024, the Appellant was allowed to file a late objection to the Respondent’s additional assessments. 4. On 13th December 2024, the Respondent issued its Objection Decision, partially confirming the additional tax assessments of Kshs 385, 142,611.40. **THE APPEAL** 1. In its Memorandum of Appeal dated 13th January 2025, the Appellant raised the following grounds of appeal: - 1. THATthe Respondent erred in both law and fact in disallowing zero rated/exempt purchases that were incurred wholly and exclusively for the business under the Income Tax Act. 2. THAT the Respondent erred in fact by failing to consider supporting documentation provided to it to support the Appellant’s purchases. 3. THATthe Respondent erred in both law and fact in refusing to consider the declaration made by the supplier of the goods to the Appellant. **APPELLANT’S CASE** 1. The Appellant’s case is based on its Statement dated 13th January 2025 and submissions dated 7th May 2026. 2. The Appellant stated that the Respondent had used the banking method to charge tax without accounting for overheads and by considering non-taxable banking. 3. That it provided bank statements, reconciliation, and other data to enable the Respondent to eliminate the non-taxable income. 4. The Appellant identified the following issues for determination in this appeal: 5. *Whether the Respondent ought to adjust the costs incurred in the generation of income, and thus whether his appeal should be allowed?* 6. *Whether the Respondent carried out its role of tax administration and governance judiciously, properly, and lawfully towards the Appellant?* 7. *Whether the Respondent has violated the Appellant’s constitutional rights and freedoms?* 8. He argued these identified issues as follows: 9. It was his view that the Respondent did not adjust the costs incurred in the generation of income, in line with the various provisions of the law, to enable him to reap his benefits and reliefs as provided in Section 15 (1) of the Income Tax Act. 10. That he was not in a position to produce most of these records, owing to circumstances beyond his individual control. 11. He asserted that the law under Section 23 of the Tax Procedures Act, No. 29 of 2015, obligates him to keep and maintain the tax records for a period of five (5) yearsfor purposes of proper tax administration and governance. 12. That, in this matter, he was subjected to tax compliance investigations for the period from 2013 through 2019, and the same was being revisited by the Commissioner from late 2022 onwards, all the way into 2024 and 2025, when there was active correspondence between himself and the Respondent. 13. That this assessment went beyond the statutorily prescribed five-year period, from where he was not required to keep records under the law. 14. The Appellant affirmed that any ambiguity in tax law should be interpreted under the *contra proferentem doctrine*in a manner that favours the taxpayer should be adopted. 15. The Appellant took the position that the Respondent could access and control the back end of the iTax web portal system. This means that the Respondent in this matter could have easily and at any point decided to use this access and confirm whether the Appellant’s supplier had declared any sales corresponding to the Appellant’s purchases tied to the generation of income, and this would have effectively enabled the Respondent to accurately determine the correct input taxes incurred by the Appellant. 16. That the Respondent could have acted reasonably by using this approach to plug any gaps in its administration of the Appellant’s taxes, if its true intention was to ensure judicious, proper, and lawful tax administration and governance. 17. The Appellant asserted that the Respondent failed, neglected, and/or refused to use comparatives and certain pre-set coefficients in the determination of its tax liability under the banking method to ensure that he only pays tax that is fair and reasonable. 18. That the method adopted by the Respondent: 1. Was arbitrary and inconsistent 2. Amounted to a breach of the national value of good governance and fidelity to the rule of law. 3. Violated several of his rights and freedoms since he was subjected to unfair, unreasonable, unjust, and improper tax administration and governance. 4. Did not conform to fair, just, and equitable tax administration and governance. 5. Did not meet the prescribed minimum requirements in law, as well as in tax administration and governance best practices, as espoused by entities such as the Organization for Economic Co-operation and Development (OECD). 6. Breached his right of legitimate expectation to be subjected to fair, reasonable, just, and lawful tax administration and governance as a taxpayer. 19. He supported his position with the following authorities: 1. **Associated Provincial Picture Houses Ltd V Wednesbury Corporation [1948] 1 K.B 223.** 2. **Petition No.: 20 of 2020 (E021 of 2020): Kenya Revenue Authority v Export Trading Company Limited.** 3. Article 10 of the Constitution of Kenya, 2010. 4. Article 47 of the Constitution of Kenya, 2010. 5. Section 4(1) of the Fair Administrative Action Act, No. 4 of 2015. 6. Quotes from A.V. Dicey’s scholarly work. 20. The Appellant posited that the respondent was malicious and acted against him in bad faith and with ill intent. That the most optimal way of balancing the scales and preventing an illegality or any further breach from being committed against the Appellant is for the Tribunal to allow the appeal. 21. That failure to do so would amount to this esteemed forum being used to rubber-stamp that perpetrator’s unjust deeds and further sanitize and whitewash the ill deeds of his perpetrators while painting them as heroic in ‘exemplary tax and revenue collection.” **Appellant’s Prayer** 1. The Appellant prays that this Honorable Tribunal: 2. Set aside and annul the objection decision in its entirety; 3. Grant the Appellant the costs of this Appeal; 4. Make such further orders as it may deem fit and just; 5. Hear this matter under ADR. **RESPONDENT’S CASE** 1. The Respondent filed its Statement of Facts dated 18th February 2025 and Written Submissions dated 14th October 2025 in opposition to the Appeal. 2. The Respondent stated that, from the investigations, it was established that the appellant was operating a number of bank accounts, namely: * 1. Equity Bank A/C No. 0350XXXXX757; 2. Equity Bank A/C No. 0020XXXXX109; 3. Equity Bank A/C No. 1380XXXXX608; 4. Equity Bank A/C No. 138XXXXXX3653 USD; 5. KCB A/C No. 1XXXXXX323; 6. DTB A/C No. 08XXXXXX001; 7. DTB A/C No. 0XXXXXX001; 8. DTB A/C No. 00XXXXXX14; 9. DTB A/C No. 5XXXXXX001 USD; 10. DTB A/C No. 504XXXXX02 EURO; 11. Cooperative Bank A/C No. 011431XXXXX300. 1. That the bank statements were obtained and, upon analysis using the banking analysis method, it was confirmed that a total net deposit amounting to Kshs 1,409,965,033 was deposited into these accounts for the period 2013 to 2019. 2. That it made adjustments for non-income items such as loans, reversals, contra-entries, bounced cheques, as well as income that had already been taxed elsewhere, such as salary income, to arrive at its net banking analysis. 3. That it also analyzed the Appellant’s self-declarations and noted that the Appellant only declared employment income earned while he was the Senator and later Governor of Nairobi County Government. 4. That, based on these variances between the banking figures and the declared income from the self-declarations, the Respondent proceeded to compute the resultant income on a graduated scale as shown below: | | | | | | | --- | --- | --- | --- | --- | | **Year** | **Income as per Banking Analysis** | **Total tax at Graduated Scale (@30%)** | **Tax Paid in iTax** | **Net Tax Due** | | 2013 | 115,644,293 | 34,693,288 | - | 34,693,288 | | 2014 | 205,921,545 | 61,776,463 | - | 61,776,463 | | 2015 | 178,145,011 | 53,443,503 | - | 53,443,503 | | 2016 | 113,891,061 | 34,167,318 | - | 34,167,318 | | 2017 | 517,934,651 | 155,380,395 | 47,998 | 155,332,397 | | 2018 | 175,446,620 | 52,633,986 | 1,000 | 52,632,986 | | 2019 | 51,271,221 | 15,381,366 | - | 15,381,366 | | **Total** | **1,358,254,401** | **407,476,320** | **48,998** | **407,427,322** | 1. That some input or costs incurred in the generation of income were not taken into account because they were unsupported. 2. That having made adjustments to the above non-income items in the banking analysis, it proceeded to recompute the resultant taxes as per the table below: | | | | | | | --- | --- | --- | --- | --- | | **YEAR** | **TOTAL BANKINGS** | **NON-INCOME** **TRANSACTIONS** | **NET TAXABLE INCOME** | **INCOME TAX** | | 2013 | 123,873,797 | 20,419,257.00 | 103,454,540.00 | 31,036,362.00 | | 2014 | 253,413,425 | 52,731,949.00 | 200,681,476.00 | 60,204,442.80 | | 2015 | 199,400,611 | 18,641,153.00 | 180,759,458.00 | 54,227,837.40 | | 2016 | 114,580,901 | 18,278,108.00 | 96,302,793.00 | 28,890,837.40 | | 2017 | 531,951,208 | 33,047,263.00 | 498,903,945.00 | 149,671,183.50 | | 2018 | 195,426,352 | 35,715,223.00 | 159,711,129.00 | 47,913,338.70 | | 2019 | 61,411,421 | 14,082,724.00 | 47,328,697.00 | 14,198,609.10 | | **Total** | **1,480,057,715** | **192,915,677** | **1,287,142,038** | **386,142,611.40** | 1. **Whether the Respondent erred in failing to adjust the costs incurred in the generation of income.** 2. On this issue, the Respondent stated that: 1. The Appellant did not avail any documents that supported any inputs that were not considered by the Respondent. 2. In the absence of the documentation, the Appellant's contention is baseless, and the ground must fail, as was found by the Court in **[See, Commissioner Investigations and Enforcement v Kidero (Income Tax Appeal E028 of 2020) [2022] KEHC 52 (KLR) (Commercial and Tax) (4 February 2022) (Judgment)]** 3. Section 56(1) of the TPA provides that the burden is on the Appellant to support his objection. 3. **Whether the Respondent erred in failing to consider the documents supplied by the Appellant in support of the purchases incurred.** 4. On this issue, it stated that: 1. It had analyzed the bank statement and established a variance with the declared income, and further made all the necessary adjustments for non-income deposits such as interbank transfers. The obligation to further explain the deposits was on the Appellant. 5. It was entitled to carry out the audit and was not bound by the Appellant’s returns under Section 24 of the Tax Procedures Act, No. 29 of 2015. 6. It was not provided with documents of non-income items. 7. That banking method is recognized model of assessment, as was explained in the case of **Digital Box Limited v Commissioner, Investigations and Enforcement (Tax Appeal Tribunal Appeal No. 115 of 2017.** 8. **Whether the Respondent erred in failing to consider declarations made by the Appellant’s suppliers.** 9. On this issue, the Respondent stated that: 1. In relation to VAT, the Appellant can only be allowed to claim inputs within the required six months as provided by section 17 of the Value Added Tax Act, 2013, as affirmed in **Highlands Mineral Water Ltd v Commissioner of Domestic Taxes [2021] eKLR** and **TAT No. 28 of 2018- Joycott General Contractors Limited v Kenya Revenue Authority.** 2. The Appellant has not demonstrated which of those were not considered. 3. Section 56 (1) of the Tax Procedures Act places the burden of proof on the taxpayer to prove otherwise. It relied on the case of **Commissioner of Domestic Taxes v Galaxy Tools Limited [2021] KEHC 5530 (KLR)** and **Republic V KRA: Proto Energy Limited (2022) eKLR.** 4. The assessment has a rebuttable presumption of correctness, as explained in the case of **Commissioner of Domestic Taxes vs Hard Limited (Tax Appeal No. E416 of 2020) [2022] KEHC 9927 (KLR) (Commercial and Tax).** **Respondent’s Prayers** 1. The Respondent prays that this Honorable Tribunal do find: - 2. THAT the objection decision dated 13th December, 2024 be upheld. 3. THAT this Appeal be dismissed with costs to the Respondent as the same lacks merit. **ISSUES FOR DETERMINATION** 1. The Tribunal, having considered the parties’ pleadings, submissions, and documents filed before it, is of the view that the issue that falls for its determination is: *Whether the Respondent’s Objection Decision dated 13th December 2024 is justified and or lawful.* **ANALYSIS AND DETERMINATION** 1. It is instructive to note that while the appeal was pending delivery of judgment, the Appellant, possibly, noted the inadequacy of its documentation and made an application for leave to file additional documents. The said application was allowed on 19th June 2026, whereupon the Appellant was directed to file its supplementary statement of facts on or before the 8th July 2026 and supplementary submissions on or before 17th July 2026. 2. The Appellant failed to comply with these directions and the *status quo ante* as at 19th June 2026 was restored, and the Tribunal has proceeded to consider the said appeal and deliver its judgment based on the pleadings and evidence on record. 3. On this issue of whether the assessment was justified and lawful, the Respondent averred that it was never provided with documents and, as such, it was forced to rely on its best judgment in applying the banking analysis method to determine the Appellant’s tax liability. 4. The Appellant argued that its lawful expenses were disallowed in the computation of the final assessment and that the assessment process itself was arbitrary, unlawful, and unconstitutional. 5. The law requires the Appellant to keep and provide documents relating to his tax affairs when so demanded by the Respondent. This is apparent in Section 59 of the Tax Procedures Act (cap 469B) which provides as follows regarding the Appellant’s duty to produce documents and records as may be sought by the Respondent: - 6. *For the purposes of obtaining full information in respect of the tax liability of any person or class of persons, or for any other purposes relating to a tax law, the Commissioner or an authorised officer may require any person, by notice in writing, to –* 7. *produce for examination, at such time and place as may be specified in the notice, any documents (including in electronic format) that are in the person's custody or under the person's control relating to the tax liability of any person;* 8. *furnish information relating to the tax liability of any person in the manner and by the time specified in the notice; or* 9. *attend, at the time and place specified in the notice, for the purpose of giving evidence in respect of any matter or transaction appearing to be relevant to the tax liability of any person.* 10. Besides, Section 56 (1) of the Tax Procedures Act (Cap 469B) also requires the appellant to discharge the burden of proof to show that it provided the demanded documents and that they were disregarded by the Respondent; or that the documents he has been requested to provide are either irrelevant or are not part of the documents he uses in his business activities or operations. 11. Section 30 of the Tax Appeals Tribunal Act (Cap 469A) provides as follows on the appellant’s burden of proof: - *In a proceeding before the Tribunal, the appellant has the burden of proving—* *(a)where an appeal relates to an assessment, that the assessment is excessive; or* *(b)in any other case, that the tax decision should not have been made or should have been made differently.* *In any proceedings under this Part, the burden shall be on the taxpayer to prove that a tax decision is incorrect.* 1. The Tribunal has gleaned through the appellant’s record of appeal and it notes as follows: 1. That besides its assertions that it had provided documents to support its objection, no evidence was provided to support this assertion. 2. The Appellant suggested in paragraph 24 of its submission that the Respondent ought to have verified the documents and information it seeks from the ‘*back-end of the iTax web portal system*’ to which it has access and control. In essence, the Appellant admitted that it did not have the documents sought, and the Respondent ought to use his right of access to ‘p*lug any gaps in its administration of the Appellant’s taxes’* (paragraph 25 of the submission.) 3. That these statements in paragraphs 24 and 25 of its submissions were an affirmation that it did not have the documents requested and that it surrendered itself to the best judgment of the Respondent in determining its tax liability. 2. The Tribunal is guided by its precedents on the production of documents and the obligation of the taxpayer to discharge his burden of proof in tax matters in ***Mugo -vs- Commissioner of Domestic Taxes (TAT E918 of 2024) KETAT 374 (KLR)***, where it held as follows: *“As noted hereinabove, the Appellant failed to adduce positive documents to demonstrate that the Respondent’s decision was incorrect. Consequently, the Tribunal finds and holds that the Respondent’s decision was justified and the Appellant failed to discharge its burden of proof contrary to Section 30 of the Tax Appeals Tribunal Act, 2013 (TATA) and Section 56(1) of the Tax Procedures Act; thus, the Appeals is not successful.”* 1. He who asserts must prove. The Appellant has engaged in mere assertions in this appeal without providing evidence contrary to the dicta in **Commissioner of Domestic Taxes v Dinesh Construction Limited (Income Tax Appeal E220 of 2024) [2025] KEHC 17058 (KLR) (Commercial and Tax) (21 November 2025) (Judgment)**where it was stated that; *“A mere statement in pleadings is not evidence.”* 1. The Appellant’s failure to prove that it had provided the documents that had been requested of it, or that the documents requested of it were not relevant, or to table any other sort of evidence before the Commissioner and to share that evidence with the tribunal means that he has failed to discharge the burden of proof that has been placed on him under Section 30 of the TAT Act. 2. This finding by the Tribunal that the Appellant was under a duty to provide documents or any sort of evidence to displace the assessment that was issued by the Commissioner, irrespective of whether the said assessment was based on circumstantial evidence, found favour in ***Kenya Revenue Authority v Maluki Kitili Mwendwa [2021] eKLR,*** where the court stated as follows: *“It is simply fair to place the burden of persuasion on the taxpayer, given that he knows the facts relating to his liability, because the commissioner must rely on circumstantial evidence, most of it coming from the taxpayer and the taxpayer's records. The taxpayer must present a minimum amount of information necessary to support his position. This safety valve seems to place the burden of production on the taxpayer without relieving the Commissioner of the overall burden of proof. The taxpayer's evidence must meet this minimum threshold.”* 1. From the above dicta, it is clear that in cases where the Appellant has not provided persuasive evidence to prove that it provided the Respondent with sufficient documents and evidence to cause it to reconsider its assessments, the Respondent’s assessment, which often has a presumptive notion of correctness, would remain justified and lawful, as was explained in ***Mugo -vs- Commissioner of Domestic Taxes (TAT E918 of 2024) KETAT 374 (KLR)*** where it was held as follows: *“As noted hereinabove, the Appellant failed to adduce positive documents to demonstrate that the Respondent’s decision was incorrect. Consequently, the Tribunal finds and holds that the Respondent’s decision was justified and that the Appellant failed to discharge its burden of proof contrary to Section 30 of the Tax Appeals Tribunal Act, 2013 (TATA) and Section 56(1) of the Tax Procedures Act; thus, the appeal is not successful.”* 1. Accordingly, the Tribunal finds and holds that the Respondent was justified in disallowing the Appellant’s objection as outlined in its Objection Decision dated 13th December 2024. **DISPOSITION** 1. The upshot of the foregoing analysis is that the Tribunal finds and holds that the appeal lacks merit and shall proceed to make the following Orders: - 2. The Appeal be and is hereby dismissed. 3. The Respondent’s Objection Decision dated 13th December 2024 be and is hereby set aside. 1. Each Party is to bear its own costs. 1. It is so ordered. **DATED and DELIVERED at NAIROBI this ………7th..……. Day of……August...…… 2026** **..........................……………………….** **DR. RODNEY ODHIAMBO OLUOCH** **CHAIRPERSON** **.…..….……………………. ..….……………………….** **CYNTHIA B. MAYAKA DR. ERICK KOMOLO** **MEMBER MEMBER** **………………………………** **ABDULLAHI DIRIYE** **MEMBER**