[2024] KETAT 543 (KLR)

Imara Steel Mills Limited v Commissioner of Domestic Taxes (Tax Appeal E015 of 2023) [2024] KETAT 543 (KLR) (26 April 2024) (Judgment)

Neutral citation: [2024] KETAT 543 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal E015 of 2023

E.N Wafula, Chair, Cynthia B. Mayaka, RO Oluoch, T Vikiru & AK Kiprotich, Members

April 26, 2024

Between

Imara Steel Mills Limited

Appellant

and

Commissioner of Domestic Taxes

Respondent

Judgment

Background 1. The Appellant is a private company incorporated in Kenya whose principal business activity is the manufacture of steel products.

2. The Respondent is a principal officer appointed under and in accordance with Section 13 of the Kenya Revenue Authority Act, and the Authority is charged with the responsibility of among others, assessment, collection, accounting and the general administration of tax revenue on behalf of the Government of Kenya.

3. The Respondent issued assessments on 25th March, 2022 for Income tax and VAT for the period 2015 to 2019 totaling Kshs. 681,350,937. 00, excluding penalties and interest.

4. The Appellant lodged an objection on 27th April, 2022.

5. The Respondent issued an objection decision on 24th June, 2022.

6. The Appellant being dissatisfied with the Commissioner’s decision filed a Notice of Appeal, by leave of the Tribunal, on 5th January, 2023.

The Appeal 7. The Appeal is premised on the following grounds as stated in the Memorandum of Appeal dated 19th January, 2023 and filed on 30th January, 2023:i.That the Respondent erred in law in demanding income tax for the years 2015-2018 as the said demand is excessive and is not based on law and any material facts that have been provided by the Appellant.ii.That the Respondent erred in law by issuing an objection decision outside the sixty (60) days provided by Section 51 (11) of the Tax Procedures Act.iii.That the Respondent erred in law and in fact for demanding taxes from 2015 and 2016 which is beyond the 5 years stipulated in Section 29(5) of the Tax Procedures Act.iv.That the Respondent erred in law and in fact by disallowing purchase invoices claimed in computing VAT liability.v.That the Respondent erred in law and in fact by bringing charges to income based on the VAT review and ignored operating expenses incurred in producing the taxable earnings in its computation of corporation tax.vi.That the Respondent erred in law and fact by assessing sales for the month of January 2016, December 2017 and December 2018 based on erroneous figures.vii.That the Respondent erred in law and in fact for not recognizing in its Tax computation the fact that sales reported by the Appellant in the VAT returns included sales to unregistered customers.viii.That the Respondent erred in law and in fact by failing to exercise its best judgment and assessing Corporation tax based on the VAT review and left out operating expenses incurred in producing taxable income and the cost of sales.ix.That the Respondent erred in law and fact by breaching the legitimate expectations of the Appellant by failing to afford him a fair hearing as per the provisions of the Administrative Actions Act.

Appellant’s Case 8. The Appellant’s case is premised on the following documents:i.The Appellant’s Statement of Facts filed on 30th January, 2023 together with the documents attached thereto.ii.The Appellant’s written submissions dated 24th July, 2023 and filed on 3rd August, 2023.

9. That the Respondent undertook investigations in the Applicant's affairs which resulted in issuance of a notice of tax assessments dated 25th March, 2022.

10. That in response to the said assessments, the Appellant filed a notice of objection dated 27th April, 2022 received by the Respondent on the same day which included a list of documents in support of the objection.

11. That on the 23rd of November 2022, the Respondent wrote a demand notice to the Appellant which was received on 16th December, 2022 for the sum of Kshs. 3,906,239,926. 30.

12. That prior to issuance of the said demand notice, no other communication had been forthcoming from the Respondent prompting the Appellant to make follow ups with the Respondent and eventually write a letter dated 19th December, 2022 requesting a copy of the objection decision allegedly dated 24th June, 2022.

13. That the Respondent sent a copy of the said objection decision on 23rd December, 2022. That prior to the said date, the Appellant had never received a copy of the said decision

14. That in fact, the Respondent admitted that the objection decision had been sent to an email address that was no longer in existence info@marasteel.co.ke whereas the Appellant had changed his email address and notified the Respondent including updating the Appellant's iTax details to reflect the new email address; imarasteel@gmail.com.

15. That further all along prior to the objection decision being issued, the Respondent had been communicating with the Appellant through the latter email address as shown at the address indicated in the notice dated 17th December, 2020.

16. That as late as 13th January, 2023, the Office of the Commissioner of Domestic Taxes in Machakos was still writing emails to the Appellant seeking to have a meeting convened to discuss the taxes now claimed by the Respondent.

17. That clearly, there is a disconnect between the Departments of the KRA leaving the Appellant herein in limbo on which communication it is to heed to and thus undermining its right to fair administrative actions.

18. That the Respondent herein is at fault for all the mishaps that have befallen the Respondent by failure to communicate the objection decision through the recognized email in time and then purporting to demand taxes based on the impugned decision

19. That with respect to under declared sales, the Respondent treated invoices claimed by the Appellant’s customers (as generated from its internal data system) as under declared income. That the same had been reported by the Appellant among others under the sub head (sales to unregistered customers). This action by the Respondent amounts to double taxation.

20. That the Appellant reported its total sales in the VAT returns under the sub head (sales to unregistered customers) which included the Respondent figures. That normally, taxpayers declare sale under the two headings:a)Sales to registered customers where the customer PIN details are available to the seller.b)Sales to unregistered customers which include sales to registered customers whose PIN details are not available to the seller. That nothing prohibit the seller from allocating sales partially or fully to either category or combination of both as long as the total sales amount is captured

21. That the Respondent disallowed purchase invoices from a particular supplier (Registered) claimed by the Appellant in VAT returns.

22. That the Respondent’s action resulted in diminishing the Appellant’s VAT input claim. Normally, taxpayers declare sales under the two headings:a)Sales to registered customers where the customer PIN details are available to the seller.b)Sales to unregistered customers which include sales to registered customers whose PIN details are not available to seller.

23. That it is the duty of the Respondent to enforce the correct reporting by the selling taxpayer and the buying taxpayer so that mismatching of invoices between buyer and seller is avoided.

24. That with respect to Corporation tax, the Respondent computed tax sales from the amount derived from its VAT return review and applied an industrial markup of 23% to arrive at the tax due for the years 2015 to 2018. That the markup of 23% is based on incorrect facts. That the Respondent ignored all the running costs incurred by the Appellant in earning the taxable income.

25. That the Appellant submitted the manual copies of the audited accounts as an alternative to the electronic one as attempts to submit the respective returns (2015 to 2018) via the iTax portal was not possible.

26. That the Respondent ought to have allowed the deductible expenses incurred in the course of business for purposes of determining the taxable income in compliance with the provisions of the Income Tax Act (Section l5(1)).

27. That the Respondent had access to the manually submitted returns to derive purchases, sales and stock figures to guide it in computing correct gross profit instead of estimating the GPR at 23%.

28. That with respect to sales amount for the months of January 2016, December 2017 and December 2018, the Respondent computed sales figures derived from the Appellant own declaration in the VAT3 return and information on the KRA internal system as alleged. That the notice of assessment does not indicate how these figures were arrived at and basis of allocation to the specific months.

29. That the Respondent's computation of sales amounts for January 2016, December 2017 and December 2018 was excessive. That this is outside the limit from the monthly averages of other periods.

30. That with respect to records requirements, the Respondent required the Appellant to provide the following records; audited accounts, detailed purchase ledger, sales ledger, cashbook in soft copy, detailed list of creditors & debtors, detailed asset schedule, payroll for staff which were all provided.

Appellant’s Prayers 31. The Appellant prayed for orders that:i.The Respondent’s notice of tax assessments dated 25th March, 2022, demand notice dated 13th December, 2022 and Objection Decision dated 24th June, 2022 for the years of income 2015-2022 be struck out in their entirety.ii.The Respondent's actions to demand additional taxes be declared arbitrary, unreasonable, unfair and contrary to the administration of justice and legitimate of the Appellant.iii.The Respondent, its employees, agents or other person purporting to act on its behalf be barred and/or estopped from demanding or taking any further steps towards enforcement or recovery of principal tax, penalties and interest on the Respondent’s demand as stipulated above.iv.The costs of the Appeal; andv.Any other remedies that the Honorable Tribunal deems just and reasonable,

Respondent’s Case 32. The Respondent’s case is premised on the following documents:i.The Respondent’s Supplementary Statement of Facts dated 24th November, 2022 and filed on 29th November, 2022 together with the documents attached thereto.ii.The Respondent’s written submissions dated 31st July, 2023 and filed on 1st August, 2023.

33. That the Appellant failed to provide the relevant supporting documents of records and invoices for the period years 2015-2019 in support of its objection. That the Appellant's VAT and income was therefore estimated, as this was the only reasonable basis of assessing the VAT and income tax and the objection decision issued.

34. That the Appellant failed to file an appeal within the stipulated timelines upon being served with the objection decision dated 24th June, 2022 and the Respondent issued a further demand on 13th December, 2022 for Kshs.3,906,239,926. 30 including penalties and interests on the confirmed assessments. That the Appellant filed a late Notice of Appeal on 31st January, 2023.

35. The Respondent averred that the assessments were correctly issued and conform to the VAT Act. That the Appellant did not provide any evidence that would have altered the assessment. That the Tax Procedure Act places the onus of proof in tax objections on the taxpayer who in this case failed to avail evidence that would support a contrary assessment or that would have guided the Respondent at arriving to a different objection decision. The relevant Section provides as follows:-“56(1) In any proceedings under this Part, the burden shall be on the taxpayer to prove that a tax decision is incorrect.”

36. The Respondent asserted that the Appellant lodged the objection on iTax, the same was received and acknowledged but however the same was treated as invalidly lodged as it did not have grounds of objection. The Respondent submitted that the Tax Procedures Act empowers the Respondent to notify a party where an objection as lodged is invalid and the Appellant was notified and requested to provide documents. That however, the Appellant failed to provide documents as requested.

37. That Section 51 of the TPA provides as follows in regard to objections:-“…(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.(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; and(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…”

38. That the Appellant failed to provide evidence to support purchases as claimed and the sales figures used by the Respondent to compute income were derived from the Appellant’s own declaration under VAT3 returns in the system. That further, it was noted that the Appellant had declared both sales from registered and unregistered taxpayers.

39. The Respondent insisted that the Appellant filed all necessary returns and paid what it had assessed itself to be payable. The Respondent averred that the Appellant was uncooperative in the provision of relevant records and failed to respond to request of documents hence no relevant documents or records were provided to support the objection by the Appellant. That as a result, the assessments were made based on the only available information based on the best judgement by the Respondent.

40. That the Tax Procedure Act empowers the Respondent to require production of such documents vide issuance of notice as deemed necessary in determination of tax liability. That Section 59 provides as follows regarding provision of records to the Commissioner:“(1)For the purpose of obtaining full information in respect of the income of a person or class of persons, the Commissioner may, by notice in writing, require, in the case of the income of a person, that person or any other person, and in the case of a class of persons, any person -a.to produce for examination by the Commissioner at the time and place specified in the notice, any accounts, books of account, and other documents which the Commissioner may consider necessary; and the Commissioner may inspect such accounts, books of accounts or other documents and may take copies of any entries therein….”

41. The Respondent averred that an in-depth examination of the records established that there were inconsistencies in the returns filed by suppliers and the invoices claimed by the Appellant and this indicated a variance as per the VAT returns filed and income tax returns filed. That further, the Appellant provided no explanations requested on the variance hence the same was disallowed and additional assessments carried out.

42. The Respondent averred that the Appellant was selected for a returns review following a variance from the analysis of its returns in VAT tax, which were compared. That the Respondent disallowed the direct purchase amount in the Appellant's income tax return and instead relied on the invoice value as used in the determination of VAT payable as the true direct purchase cost.

43. The Respondent insisted that the objection decision was issued within stipulated timeline on 24th June, 2022 and it provided a precise and clear breakdown of the workings used to reach the assessments.

44. That the Tax Procedures Act empowers the Respondent to make alterations or additions to original assessments from available information for a reporting period based on the best judgment. The relevant Section provides as follows:“31. Amendment of assessments(1)Subject to this section, the Commissioner may amend an assessment (referred to in this section as the “original assessment") by making alterations or additions, from the available information and to the best of the Commissioner's judgement, to the original assessment of a taxpayer for a reporting period to ensure that-(a)in the case of a deficit carried forward under the Income Tax Act (Cap.470), the taxpayer is assessed in respect of the correct amount of the deficit carried forward for the reporting period;(b)in the case of an excess amount of input tax under the Value Added Tax Act, 2013 (No.35 of2013), the taxpayer is assessed in respect of the correct amount of the excess input tax carried forward for the reporting period; or(c)in any other case, the taxpayer is liable for the correct amount of tax payable in respect of the reporting period to which the original assessment relates.”

45. That the Appellant failed to provide supporting evidence in regard to expenses incurred and costs of goods sold. The Respondent averred that according to the Income Tax Act it is the responsibility of any person carrying on business to maintain records of all transactions. The relevant Sections provide as follows:-“54A(1)A person carrying on a business shall keep records of all receipts and expenses, goods purchased and sold and accounts, books, deeds, contracts and vouchers which in the opinion of the Commissioner, are adequate for the purpose of computing tax and:55(2)person carrying on a business shall preserve every book of account, and every document which is essential to the explanation of any entry in any book of account, relating to the business for a period of not less than ten years after the year of income to which that book of account or document relates.”

46. That additionally, the few documents provided were incomplete and could therefore not form a basis for correct income determination. That Sections 15 and 16 of the Income Tax Act empower the Respondent to factor in all expenditure incurred which in this case no evidence of the same having been incurred was provided. The Sections provide as follows:“15(1)For the purpose of ascertaining the total income of a person for a year of income there shall, subject to section 16, be deducted all expenditure incurred in that year of income which is expenditure wholly and exclusively incurred by him in the production of that income, and where under section 27 any income of an accounting period ending on some day other than the last day of that year of income is, for the purpose of ascertaining total income for a year of income, taken to be income for a year of income, then the expenditure incurred during that period shall be treated as having been incurred during that year of income.16Save as otherwise expressly provided, for purposes of ascertaining the total income of a person for a year of income, no deduction shall be allowed in respect of-(a)expenditure or loss which is not wholly and exclusively incurred by him in the production of the income;(b)capital expenditure, or any loss, diminution or exhaustion of capital.”

47. That that the Appellant failed to provide the documents requested in support of its objection hence the input VAT was disallowed. The Respondent insisted that the Value Added Tax Act empowers the Respondent to disallow such input VAT where the necessary documents are not provided.

48. That Section 17 of the VAT Act provides as follows regarding claim of input tax:“17. Credit for input tax against output tax(1)Subject to the provisions of this section and the regulations, input tax on a taxable supply to, or importation made by, a registered person may, at the end of the tax period in which the supply or importation occurred, be deducted by the registered person, subject to the exceptions provided under this section, from the tax payable by the person on supplies by him in that tax period, but only to the extent that the supply or importation was acquired to make taxable supplies.(2)If, at the time when a deduction for input tax would otherwise be allowable under subsection (1), the person does not hold the documentation referred to in subsection (3), the deduction for input tax shall not be allowed until the first tax period in which the person holds such documentation. Provided that the input tax shall be allowable for a deduction within six months after the end of the tax period in which the supply or importation occurred.”

49. That Section 5 of the VAT Act provides as follows regarding charge to tax:“(1)A tax, to be known as value added tax, shall be charged in accordance with the provisions of this Act on-(a)a taxable supply made by a registered person in Kenya;(b)the importation of taxable goods; and(c)a supply of imported taxable services.”

50. That a review of the Appellant's records was carried out due to inconsistencies in the returns of the VAT 3. The Respondent insisted that not all income earned by the Appellant was declared and hence the variances were brought to charge. That the Tax Procedures Act empowers the Respondent to carry out assessment based on the information available. That the relevant Sections provide as follows:-“24(1)A person required to submit a tax return under a tax law shall submit the return in the approved form and in the manner prescribed by the Commissioner.(2)The Commissioner shall not be bound by a tax return or information provided by, or on behalf of, a taxpayer and the Commissioner may assess a taxpayer's tax liability using any information available to the Commissioner.29(1)Where a taxpayer has failed to submit a tax return for a reporting period in accordance with the provisions of- a tax law, the Commissioner may, based on such information as may be available and to the best of his or her judgement, make an assessment (referred to as a “default assessment).”

51. That examination of the Appellant's records established that the Appellant earned income from manufacture business in the period under audit, however, these incomes were not declared for tax purposes for the year earned. The Respondent asserted that the Appellant carried on business in contravention of the Tax Procedure Act which requires such documents be maintained and for purposes of taxation. The relevant Sections provide as follows:-“42. Tax invoice(1)Subject to subsection (2), a registered person who makes a taxable supply shall, at the time of the supply furnish the purchaser with the tax invoice containing the prescribed details for the supply. 43. Keeping of records(1)Every registered person shall, for the purposes of this Act, keep in the course of his business, a full and true written record, whether in electronic form or otherwise, in English or Kiswahili of every transaction he makes and the record shall be kept in Kenya for a period of five years from the date of the last entry made therein.

93. Failure to maintain documents(1)A person commits an offence if the person fails to keep, retain or maintain a document that may be required to be kept, retained or maintained in accordance with a tax law without reasonable excuse during a reporting period.”

52. That the Appellant failed to provide documentary evidence to demonstrate it was Income and VAT tax compliant. The Respondent asserted that the tax was reached at based on the information available and provided by the Appellant and the Commissioner is empowered by the Tax Procedures Act to make such decisions. That the assessment was based on the information provided. That the relevant Section provides as follows:-“29(1)Where a taxpayer has failed to submit a tax return for a reporting period in accordance with the provisions of a tax law, the Commissioner may, based on such information as may be available and to the best of his or her judgement, make an assessment (referred to as a “default assessment”)”

53. That examination of the Appellant's records, audited accounts and Income tax returns established that the Appellant failed to declare business income and all its incomes for years of income 2015 to 2019, respectfully. That the Respondent is empowered under the Income Tax Act 2013 to bring to charge income where the same is established due. That the relevant Section provides as follows:“73. (1)Save as otherwise provided, the Commissioner shall assess every person who has income chargeable to tax as expeditiously as possible after the expiry of the time allowed to that person under this Act for the delivery of a return of income.(2)Where a person has delivered a return of income, the Commissioner may(a)if he has reasonable cause to believe that the return is not true and correct, determine, according to the best of his judgement, the amount of the income of that person and assess him accordingly”

54. That the Appellant did not file income tax returns for the accounting period 2015 to 2022 in contravention of the requirements of the Tax Procedures Act and that the estimated assessments were correct. That Sections 94 and 95 provide as follows regarding failure to submit a tax return or other document and failure to pay tax respectively:“94. Failure to submit tax return or other document(1)A person commits an offence if the person without reasonable cause fails to submit a tax return or other document required under a tax law by the due date95. Failure to pay taxA person commits an offence if that person fails to pay tax by the due date.”

55. The Respondent averred that it adequately communicated to the Appellant on its requirement to share any and all relevant documents to the Commissioner vide email correspondences. That this is pursuant to Section 23(1) of the TPA, 2015 which states that;“(1)A person shall-(a)maintain any document required under a tax law, 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; and(c)subject to subsection (3), retain the document for a period of five years from the end of the reporting period to which it relates or such shorter period as may be specified in a tax law.”

56. That the decision by the Respondent was procedurally fair as it complied with requirements of Section 4(3) of the Fair Administrative Action Act which states as follows:“Where an administrative action is likely to adversely affect the rights or fundamental freedoms of any person, the administrator shall give the person affected by the decision-(a)prior and adequate notice of the nature and reasons for the proposed administrative action;(b)an opportunity to be heard and to make representations in that regard;(c)notice of a right to a review or internal appeal against an administrative decision, where applicable;(d)a statement of reasons pursuant to section 6;(e)notice of the right to legal representation, where applicable;(f)notice of the right to cross-examine or where applicable; or(g)information, materials and evidence to be relied upon in making the decision or taking the administrative action.”

57. The Respondent denied that the Appellant has paid all its tax dues and reiterated that because of its under-declaration, the Appellant is in debt of Kshs. 3,906,239,926. 30.

58. To buttress its case, the Respondent relied on the following cases:i.Kenya Revenue Authority vs. Man Diesel & Turbo Se. Kenya {2021} eKLR.ii.Janet Kaphipha Ouma and another vs. Marie Stopes International (Kenya) HCC No. 68 of 2007. iii.Commissioner of Domestic Services vs. Galaxy Tools Limited (2021) eKLR.

Respondent’s Prayers 59. The Respondent prayed that this Tribunal considers the Appeal and finds as follows:-a.That the Respondent's objection decision be upheld.b.The outstanding tax arrears of Kshs. 3,906,239, 926. 30 are due and payable by the Appellant.c.The confirmed assessments dated 25th March, 2022 were proper in law.d.That the Appeal herein be dismissed with costs to the Respondent.

Issues For Determination 60. The Tribunal has carefully considered the pleadings and documentation filed by both parties and is of the view that the issues for its determination are:i.Whether the Appeal before the Tribunal is validii.Whether the Respondent’s assessments were justified.

Analysis And Findings 61. The Tribunal having established the issues for its determination, proceeds to analyse each of them as hereunder.

i. Whether the Appeal before the Tribunal is valid 62. The Respondent averred that the Appellant filed a late appeal to the Tribunal.

63. The Appellant averred that the Respondent failed to communicate the objection decision through the recognized email in time.

64. Section 13 of the Tax Appeals Tribunal Act provides as follows regarding timelines for filing appeals:“(1)A notice of appeal to the Tribunal shall—(a)be in writing;(b)be submitted to the Tribunal within thirty days upon receipt of the decision of the Commissioner.(2)The appellant shall, within fourteen days from the date of filing the notice of appeal, submit enough copies, as may be advised by the clerk Tribunal, of—(a)a memorandum of appeal;(b)statements of facts; and(c)the tax decision.(3)The Tribunal may, upon application in writing, extend the time for filing the notice of appeal and for submitting the documents referred to in subsection (2).”

65. The Tribunal noted that whilst the Appellant filed the instant Appeal late, it sought leave from the Tribunal which leave was granted on 3rd February, 2023.

66. In this regard, the Appellant’s Notice of Appeal filed on 5th January 2023 and the Memorandum of Appeal, Statement of Facts and tax decision filed on 30th January, 2023 were deemed duly filed and served.

67. The Tribunal therefore finds that the Appeal is valid

ii. Whether the Respondent’s assessments were justified. 68. This dispute arose from the Respondent’s action of raising VAT and income tax assessments based on alleged inconsistencies established through a review of the Appellant’s records. The Respondent further averred that the Appellant did not file returns for the years 2015 to 2019.

69. Additionally, the Respondent averred that the Appellant did not provide the necessary documentation to support its objection ad thereby confirmed the assessments that are the subject of this Appeal.

70. The Appellant on its part averred that it provided the documents required to support its transactions and therefore the Respondent’s objection decision was not justified.

71. The Tribunal considered the parties’ pleadings and noted that the Appellant averred that it provided various documents to the Respondent including audited accounts, detailed purchases ledgers, sales ledgers, cashbook in soft copy, detailed list of creditors and debtors, detailed asset schedule and payroll for staff; which were said to have been provided vide letters dated 27th April, 2022.

72. A review of the said letters showed that the Appellant submitted audited accounts for the period under review, various communications to the Respondent, payrolls for 2018 and 2019, sales journals for 2018 and 2019 and purchase journals for 2018 and 2019.

73. The Tribunal notes that thereafter, the Respondent issued its objection decision on 24th June, 2022 stating that it considered the documents submitted by the Appellant but the transactions by the Appellant were not supported to the Commissioner’s satisfaction.

74. The Tribunal therefore posits that, from the pleadings, it is clear that the Appellant provided various documents prior to the issuance of the objection decision, and these were considered by the Respondent in arriving at its objection decision. The Tribunal further established that a list of documents, for provision by the Appellant, had been provided in the Respondent’s notice of investigation dated 17th December 2020.

75. The list of documents requested by the Respondent was as follows:i.audited accounts,ii.detailed purchases ledgers,iii.sales ledgers,iv.cashbook in soft copy,v.detailed list of creditors and debtors,vi.detailed asset schedule, andvii.payroll for staff

76. Notably the Appellant has not provided proof to show that all the documents listed were provided to the Respondent. The documents submitted by the Appellant in its letters of 27th April 2020 did not include the cashbook in soft copy, the detailed list of creditors and debtors, and the detailed asset schedule.

77. Due to the lack of proof by the Appellant that all the listed documents were submitted to the Respondent, the Tribunal was not able to establish the veracity of the Appellant’s claims that it provided all the documents required by the Respondent.

78. The law places the onus on the Appellant to prove its case. In this regard, the Tribunal states that Section 30 of the Tax Appeals Tribunals Act provides as follows regarding the burden of proof in tax appeals:“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.”

79. Further, Section 56 of the Tax Procedures Act provides as follows regarding the burden of proof:“(1)In any proceedings under this Part, the burden shall be on the taxpayer to prove that a tax decision is incorrect.”

80. Section 107 of the Evidence Act states that:-“Whoever desires any court to give judgment as to any legal right or liability dependent on the existence of facts which he asserts must prove that those facts exist.”

81. The Tribunal relied on the case of Alfred Kioko Muteti vs. Timothy Miheso & Another [2015] eKLR where the court held that:-“a party can only discharge its burden upon adducing evidence. Merely making pleadings is not enough”. In reaching its findings, the Court stated that: “Thus, the burden of proof lies on the party who would fail if no evidence at all were given by either party…. Pleadings are not evidence....”

82. As a result of the foregoing, the Tribunal therefore finds that the assessments raised by the Respondent were justified.

Final Decision 83. The upshot of the foregoing is that the Appeal is not merited and consequently, the Tribunal makes the following Orders: -a.The Appeal be and is hereby dismissed.b.The Respondent’s Objection decision dated 24th June, 2022 be and is hereby upheld.c.Each Party to bear its own costs.

84. It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 26TH DAY OF APRIL, 2024ERIC NYONGESA WAFULACHAIRMANCYNTHIA B. MAYAKA DR. RODNEY O. OLUOCHMEMBER MEMBERTIMOTHY B. VIKIRU ABRAHAM K. KIPROTICHMEMBER MEMBER