[2023] KETAT 545 (KLR)

Jebess Contractors Limited v Commissioner Domestic Taxes (Tax Appeal 1143 of 2022) [2023] KETAT 545 (KLR) (Civ) (13 October 2023) (Judgment)

Neutral citation: [2023] KETAT 545 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Civil

Tax Appeal 1143 of 2022

RM Mutuma, Chair, EN Njeru, M Makau, BK Terer & W Ongeti, Members

October 13, 2023

Between

Jebess Contractors Limited

Appellant

and

Commissioner Domestic Taxes

Respondent

Judgment

Background 1. The Appellant is a private limited company duly incorporated and registered under the Companies Act within the Republic of Kenya. Its main form of business is in dealing in donor-funded roads and general works.

2. The Respondent is a principal officer appointed under and in accordance with Section 13 of the Kenya Revenue Authority Act, 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 reviewed the Appellant’s taxes for VAT on projects for 2015 and 2016 and issued assessments on 9th September 2019.

4. The Appellant lodged an objection to the assessments vide a letter dated 28th September 2020 after which the Respondent issued an objection decision on 26th August 2022 rejecting the Appellant’s objection for being late and failing to provide documents for review.

5. On receiving the objection decision and being aggrieved, the Appellant filed the instant Appeal on 7th October 2022.

The Appeal 6. In its Memorandum of Appeal filed on 7th October 2022, the Appellant premised its Appeal on the following grounds.a.The Appellant after successfully bidding, was awarded a contract by the French Development Agency AFD, to carry out several road projects within this Country from 15th December 2014. These projects being donor-funded were V.A.T exempted.b.Contrary to Section 74 of the Tax Procedures Act of 2015, the Commissioner proceeded to assess incremental taxes covering VAT on the projects, by raising additional assessments covering the years 2015 and 2016 on 9th September 2019. c.The Objection applications were done on 28th September 2020 and confirmation of the objections was on 3rd February 2022.

The Appellant’s Case 7. The Appellant set down its case in; -a.The Statement of Facts filed on 7th October 2022 together with documents attached thereto.b.The Written submissions dated 22nd May 2023 and filed on 24th May 2023

8. It stated that the Commissioner without taking into account the provisions of Section 74 of the Tax Procedures Act 2015 raised VAT additional assessments for the years 2015 and 2016 amounting to Kshs. 7,280,800. 00 and Kshs. 7,481,302. 00 respectively.

9. It averred that having gotten no further communication from the Commissioner, the taxpayer came to know of the assessments as soon as enforcement measures were taken.

10. It stated that on 21st January and 3rd February 2022, the Commissioner issued decisions, rejecting the objection applications.

11. It averred that all the taxes not in dispute have been paid.

12. The Appellant submitted that it is the Respondent who acted in bad faith by proclaiming that the taxpayer failed to provide supporting documents yet no communication requesting the production of records has ever reached the Appellant.

13. It relied on Section 30 of the Tax Appeals Tribunal Act and the case of Silver Chain Limited vs. Commissioner of Income Tax and 3 Others [2016] eKLR in its argument that it is seeking a fair computation and assessment of tax records as per the law.

The Appellant’s Prayers 14. Given that the Appellant did not make any specific prayers and that the crux of the Appeal before the Tribunal is in the Respondent’s assessments and objection decision, the Tribunal surmises that the Appellant prays for the same to be vacated.

The Respondent’s Case 15. The Respondent’s case is premised on;-a.The Statement of Facts dated and filed on 2nd March 2023 together with documents attached thereto; andb.The written submissions dated and filed on 10th May 2023.

16. It stated that the Appellant’s projects are not VAT exempt as per the VAT Act and that Section 74 of the Tax Procedures Act is on service of notices to the Commissioner thus unhelpful to the Appellant’s case.

17. It cited Section 5 (2) of the Kenya Revenue Authority, and Sections 24 (2), 29 and 31 and stated that it is not bound by the Appellant’s tax returns and that it may assess a taxpayer’s tax liability using any information available to it. It added that it is empowered to issue default assessments and amend returns based on the available information and to its best judgment.

18. It relied on Section 51 of the Tax Procedures Act and averred that it took the Appellant one year and a few days contrary to the thirty days as stipulated by law to object to the assessment as the assessment orders were issued by the Respondent on 9th September 2019 and Objected to by the Appellant on 29th September 2020.

19. It reiterated that the Appellant did not provide documents requested by the Respondent on various dates to support its claim thus the Respondent issued a late objection rejection notice.

20. It averred that it issued a late objection rejection and that this matter ought not to be dealt with at the Tribunal.

21. The Respondent relied on Section 31 of the Tax Procedures Act and Section 5(1) of the VAT Act and submitted that the burden of proof as to whether goods or services are VAT exempt is on the Appellant as provided by Section 62 of the VAT Act citing the case of Kenya Revenue Authority vs. Man Diesel & Turbo Se, Kenya [2021] eKLR.

22. The Respondent relied on Sections 23, 29 (1), and 51 (3) (c) of the Tax Procedures Act and submitted that the Appellant has an obligation to keep documents that would enable the Respondent to ascertain their tax liability.

23. It added that it notified the Appellant that their notice of objection did not meet the threshold of a valid objection and requested the Appellant to validate its objection by providing documents and in the absence of these documents it was forced to issue a notice of invalidation of objection dated 21st January 2022.

24. It relied on Sections 24 and, 56(1) of the Tax Procedures Act, Section 107(2) of the Evidence Act and the cases of Dyer & Dyer Limited vs. Commissioner of Domestic Taxes[2020], Leah Njeri Njiiru vs. Commissioner of Investigations and Enforcement Kenya Revenue Authority & Another [2021] eKLR, and Allied Wharfage Limited vs. Ganja Mavumba Yawa [2020] eKLR to buttress its position that the onus was on the Appellant to provide sufficient information/documentation to support its objection thus rendering its objection invalid.

The Respondent’s prayers 25. The Respondent, therefore, prayed for orders that the Tribunal finds that:a.The Respondent’s late Objection Rejection Notice dated 3rd February 2022 is proper in law and the same be affirmed; andb.The short-levied taxes being assessments of Kshs. 7,481,302. 08 and Kshs. 7,280,800 and resultant penalty and interest due and payable by the Appellant.

Issues for Determination 26. Gleaning through the Memorandum of Appeal, the parties’ Statements of Facts, and submissions, the Tribunal puts forth the following as the main issue for determination:a.Whether the Appellant’s Notice of Objection dated 29th September 2020 was time-barred.

Analysis and Findings 27. The Tribunal wishes to analyse the issue as herein-under.a.Whether the Appellant’s notice of objection dated 29th September 2020 is time-barred.

28. The Appellant averred that it did not become aware of the Respondent’s Objection decision as the Respondent never communicated to it and that it only came to find out about the assessments after the Respondent commenced recovery efforts on the same.

29. The Respondent contended that it took the Appellant one year and a few days to object to the assessment contrary to the thirty days timeline as stipulated by law since the assessment orders were issued by the Respondent on 9th September 2019 and Objected to by the Appellant on 29th September 2020. It added that the Appellant did not provide documents requested by the Respondent on various dates to support its claim thus the Respondent issued a late objection rejection notice.

30. With regard to the timelines for lodging an objection, Section 51 (2), (3c) and (6) of the Tax Procedures Act states:―(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)…(c)all the relevant documents relating to the objection have been submitted.…(6)A taxpayer may apply in writing to the Commissioner for an extension of time to lodge a notice of objection.‖

31. From the parties’ arguments, it is apparent to the Tribunal that the Appellant was late in lodging its Objection by one year and did not apply for an extension of time to lodge the objection out of time.

32. While the Appellant submits that it was not aware of the assessments issued by the Respondent, the Tribunal notes that the assessment orders were issued on iTax in the Appellant’s iTax profile which was the same platform used by the Appellant while lodging its Objection a year later. It has not been made clear to the Tribunal that the Appellant did not have access to its profile on iTax nor has it been sufficiently explained how the Appellant was unable to find the assessment orders on its iTax profile.

33. Evidence has also not been presented before the Tribunal by the Appellant to show that it made efforts to seek leave from the Respondent to allow its late objection.

34. The Tribunal therefore concludes that the Appellant failed to discharge its burden of proving the assertions that the assessment orders were not communicated to it as it has not even adduced evidence demonstrating how and when it found out about the Respondent’s assessment orders.

35. It is therefore the Tribunal’s finding that the Appellant’s notice of objection of 29th September 2020 was time-barred.

Final Decision 36. The upshot to the foregoing is that the Appeal is not meritorious and the Tribunal consequently makes the following orders; -a.The Appeal be and is hereby dismissed.b.The Objection decision dated 3rd February 2022 be and is hereby upheld.c.Each party to bear its own cost.

37. It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 13TH DAY OF OCTOBER, 2023ROBERT M. MUTUMA.....CHAIRPERSONELISHAH N. NJERU...........MEMBERMUTISO MAKAU...............MEMBERBONIFACE K. TERER....... MEMBERDR. WALTER ONGETI......MEMBER