[2023] KETAT 1004 (KLR)

Karson Motors Limited v Commissioner of Domestic Taxes (Appeal 558 of 2022) [2023] KETAT 1004 (KLR) (19 October 2023) (Judgment)

Neutral citation: [2023] KETAT 1004 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Appeal 558 of 2022

Grace Mukuha, Chair, E Komolo, Jephthah Njagi, T Vikiru & G Ogaga, Members

October 19, 2023

Between

Karson Motors Limited

Appellant

and

Commissioner Of Domestic Taxes

Respondent

Judgment

Background 1. The Appellant is a private limited liability company incorporated in Kenya under the Companies Act. Its principal activity is retail of fuel-petroleum and other related ancillary products. The Appellant operates a Shell branded petrol station.

2. The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act, Cap 460 Laws of Kenya. Under Section 5 (1) of the Act, the Kenya Revenue Authority is an agency of the Government for the collection and receipt of all revenue. Under Section 5(2) of the Act with respect to the performance of its function under subsection (1), the Authority is mandated to administer and enforce all provisions of the written laws as set out in Part I & II of the First Schedule to the Act for the purposes of assessing, collecting and accounting for all revenues in accordance with those laws.

3. This Appeal arises from assessments for the sum of Kshs. 38,474,743. 00 dated 15th March, 2021 issued by the Respondent following an audit of the Appellant’s tax affairs.

4. The assessments were based on the variances between income sales declared in the income tax returns and VAT returns. Additionally, the Respondent carried out a monthly analysis and classified the Appellant’s sales as taxable at 16%, 8% or exempt and brought to charge the variances arising from the misclassification.

5. Being dissatisfied with the Assessment, the Appellant lodged a late notice of objection dated 16th May, 2021, objecting to the whole of the said assessment. It proceeded to explain itself as to the reasons for the delay in lodging an Objection and sought the Respondent’s indulgence in that respect.

6. On 9th July 2021, the Respondent accepted the late objection and requested for additional documents to enable it to review the objection.

7. Vide an objection decision dated 14th April 2022, the Respondent rejected the objection in total confirming its prior assessments for the sum of Kshs. 38,407,743. 00.

8. Dissatisfied with the objection decision dated 14th April 2022, the Appellant lodged a Notice of Appeal dated 13th May 2022 and filed on the same date.

The Appeal 9. The Appeal is premised on following grounds stated in the Memorandum of Appeal dated 26th May 2022 and filed on 30th May 2022:-a.It was neither permissible nor open in law for the Respondent to issue its objection decision dated 14th April 2022 in response to a notice of objection lodged on 16th May 2021, when by dint of the provisions of Section 51(11) of the TPA the Appellant’s notice of objection had been deemed as allowed.b.The Respondent having accepted the Appellant’s notice of objection as having been properly filed, though out of time and proceeded to render an objection decision in connection thereto having failed to question its validity on any ground, including late filing thereof, the Respondent erred in upholding its tax assessments for the sum of Kshs. 38,474,743. 00 with respect to a notice of objection that was already deemed to have been allowed by operation of the law.c.That the Respondent erred in law and in fact in its objection decision by rendering itself that there was a variance for the sum of Kshs. 52,096,821. 00 arising out of the year of income of 2018 thereby upholding the income tax assessment in the sum of Kshs. 15,696,046. 00 when the Appellant had in its notice of objection disputed the purpoted variance and proceeded to furnish the Respondent with the audited financial statements for the year 2018, bank statements for the said year and the reconciliations in this regard.d.It was therefore a fundamental error on the part of the Respondent to find in its objection decision that with respect to the 2018 income tax assessments for Kshs. 15,696,046. 00 that Appellant had not provided it with the primary documents, when in fact no specific documents were requested by the Respondent, for which the Appellant defaulted to provide thereby disenfranchising the Appellant of its right to fair administrative action as envisaged under Article 48 of the Constitution and Section 4(3)(b) of the Fair Administrative Actions Act, 2015. e.The Respondent erred both in law and in fact in confirming its assessment for the sum of Kshs. 22,778,697. 00 being VAT for the period of 2018 to April 2020, merely on the basis that there was a variance in the income as declared in the audited financial statements and the VAT 3 returns for the year 2019 by disregarding the evidence tabled before it and the supporting documents that clarified the purpoted variance.f.The Respondent’s objection decision was factually and legally erroneous for failing to consider the applicable law and the evidence so tabled before it by the Appellant.

The Appellant’s Case 10. The Appellant’s case was premised on the following documents: -a.Statement of Facts dated 26th May 2022 and filed on 30th May 2022;b.The Appellant’s Written Submissions dated 30th January 2023 and filed on 2nd February, 2023.

11. The Appellant averred that it is not in doubt that the assessment was issued on 15th March 2021 and that it was expected to have lodged an objection no later than the 15th of April, 2021. However, it only managed to lodge the said Objection on 16th of May 2021, which is just a month after the deadline.

12. The Appellant submitted that Respondent having accepted its notice of objection as properly filed, though out of time and proceeded to render an objection decision in connection thereto and having failed to question its validity on any ground, including late filing thereof, the Respondent erred in upholding its tax assessments for the sum of Kshs. 38,474,743. 00 with respect to a notice of objection that was already deemed to have been allowed by operation of the law.

13. The Appellant contended that in any event the provisions of Section 51(4) of the (now amended in 2022 by the Finance Act, 2022), provided as follows:“Where the Commissioner has determined that a notice of objection by a taxpayer has not been validly lodged, the Commissioner shall immediately notify the taxpayer in writing that the objection has not been validly lodged.”

14. That the operating word here was immediately. That the Respondent did not either in its objection decision or in any notice, notify the Appellant that its objection was being disallowed for being lodged out of time. That this is an issue that the Respondent has now raised for the first time in its Statements of Facts and submissions.

15. The Appellant submitted that a delay of less than 30 days cannot be said to be unreasonable. That in addition, thereto, the Respondent having accepted its Objection, and having not communicated immediately to the Respondent that the Objection had been lodged out of time, the Respondent is estopped by its conduct from denying that it had deemed the notice of objection as having been filed within prescribed time.

16. To buttress its point, the Appellant cited the High Court in the Case of Keroche Industries Limited V Kenya Revenue Authority & 5 Others [2007] eKLR, held that:-“Stated simply legitimate expectation arises for example where a member of the public as a result of a promise or other conduct expects that he will be treated in one way and the public body wishes to treat him or her in a different way…….. Public authorities must be held to their practices and promises by the courts and the only exception is where a public authority has a sufficient overriding interest to justify a departure from what has been previously promised.”

17. The Appellant submitted that the Respondent by its conduct accepted the Appellant’s notice of objection lodged out of time. That accordingly, there was created a legitimate expectation that it had accepted the same as having been validly lodged and/or had in the alternative accepted the late notice of objection pursuant to Section 51(7) (b) of the TPA.

18. The Appellant further stated that guided by the Case of Keroche vs. KRA (Supra), it was it’s humble submission that by the Respondent’s conduct, it granted leave to file the notice of objection out of time and subsequent thereto proceeded to treat the said notice of objection as allowed. That as such, it cannot recant from this conduct and is accordingly, estopped from denying its validity. That further, the Respondent has not demonstrated the overriding interest justifying departure from what, it had by its conduct deemed as allowed.

19. The Appellant posited that in any event, this legitimate expectation does not contravene the statutory provisions as by dint of Section 51(7) of the TPA, the Respondent has discretion to allow or reject an objection filed out of time, and in these circumstances, the Respondent by its conduct did allow the said objection filed out of time.

20. The Appellant relied on the High Court decision in Brian Weke & another v Attorney General & another [2014] eKLR in which the court confirmed that where a statute requires a Court or Authority to extend time for doing an act, the said extension of time can be done, suo moto by the Authority, whether or not a formal application for extension of time has been made. In the words of the Court: -“31….I say so also because Section 59 of the Interpretation and General Provisions Act, Cap.2 provides as follows:- Where in a written law a time is prescribed for doing an act or taking a proceeding, and power is given to a court or other authority to extend that time, then, unless a contrary intention appears, the power may be exercised by the court or other authority although the application for extension is not made until after the expiration of the time prescribed.”

21. The Appellant submitted that although there is no formal application for extension of time, the Tribunal can suo moto extend the time between the events contemplated by Section 11(5) and (6) of the Act and appropriately and invoke Section 11(15) of the Act.”

22. The Appellant contended that in line with the dictum of the High Court in the Brian Weke Case (Supra), the Respondent, by its conduct did extend time, suo moto, for filling of the objection and consequent thereto proceeded, by its conduct to treat the said objection as having been validly lodged.

23. The Appellant averred that monumentally, neither in the objection decision nor in any other correspondence thereto, did the Respondent question the validity of the notice of objection on the basis of its lateness and therefore the Respondent cannot raise this issue in its pleading as this was never an issue that was deliberated on by the Commissioner in its decision dated 14th April, 2022, which is the subject of this Appeal.

24. To fortify it’s submissions on this issue, the Appellant relied on the decision of the Tribunal in TAT No. 282 of 2020 Kenya Breweries Limited Vs. Commissioner of Customs & Border Control [2021] at paragraph 111 of the said decision, in which the Tribunal agreed with the Appellant that the Respondent could not in its pleadings ventilate a product [issue] that was not before it for consideration while making its appealable decision.

25. The Appellant submitted that had the Respondent intended to invalidate its objection on the basis of late filing, then nothing would have been easier than state as such in its correspondences, including in the objection decision. That evidently, this issue is therefore an afterthought and ought to be disregarded by the Tribunal.

26. The Appellant submitted that further, in the notice of objection, it gave reasons for the delay in filing the notice of objection out of time. It cites the decision of the Tribunal in the case of TAT NO. 168 OF 2021 Walters Trading Co. Ltd – Vs – Commissioner Of Domestic Taxes, where it held thus on this issue:“22. We now turn our attention to the Respondent’s invalidity argument on the basis of late filing of the objection notice by the Appellant. With respect, we are not in the least bit persuaded by this argument. In the first place, this issue of late filing is being introduced by the Respondent at the Appeal stage in this matter; it did not form part of the Commissioner’s notice of invalidity. The Respondent could have recorded its position on the late objection in the notice of invalidity, but it simply did not thus indicating acceptance of the reasons provided by the taxpayer. Secondly, and perhaps more imperative, the Appellant explained the reason for the late objection in its notice of objection. The reasons given should have sufficed given that the delay in question was not inordinate. From where we sit, this is just another case of the Respondent’s escapegoatism for failing to render an objection decision within the statutorily prescribed timelines. In objection decision within the statutorily prescribed timelines. In the premise therefore, the Appellant succeeds on this ground of appeal.”

27. The Appellant submitted that 30 days delay was not inordinate, it stated that it explained the reasons for the delay in the notice of objection; The Respondent made no attempt either in the notice of objection or in any other correspondence to disallow the objection on this basis.

28. That based on the foregoing, the Appellant asked the Tribunal to find that the Respondent having, by its conduct, allowed the Appellant’s notice of objection, though filed out of time, the same was deemed as having been filed validly.

29. The Appellant averred that it lodged its objection on 16th May 2021, the Respondent neither requested for additional documentation as anticipated under Section 51(11) of TPA nor rendered a decision within 60 days of receiving the Notice of Objection as prescribed under Statute. That it should be noted that the 60th day fell on 16th July 2021.

30. The Appellant contended that long after the expiry of the timelines within which the Respondent ought to have issued an objection decision, it purported to revive a process that had by operation of the law been deemed as determined. That it therefore sought for numerous documentations in connection with the matter, copies of which the Appellant furnished.

31. The Appellant submitted that having failed to request for the additional information within the 60 days window and pursuant to the provisions of Section 51(11) of TPA, the Appellant’s objection was deemed to have been allowed by operation of law. To buttress its submission, it relied on the case of the Republic v Kenya Revenue Authority Ex Parte M-Kopa Kenya Limited [2018] eKLR where the court emphasized that:-“106. In my view since there is no format for making an objection, what is required is the substance rather than the form. What the law frowns at is an objection that is framed in such an ambiguous manner as not to be certain whether the taxpayer is seeking further particulars or indulgence to enable it pay the taxes demanded. In this case the applicant had clearly made what was in substance an objection as envisioned under section 51 of the Tax procedures Act, 2015. Accordingly, the Respondent was required to make a decision in respect thereof within sixty (60) days under section 51(11) of the said Act. As the Respondent defaulted in making a termination thereon within the prescribed time, the said objection was deemed to have been allowed.”

32. The Appellant further relied on the case of Total Kenya Limited v Kenya Revenue Authority; Barclays Bank of Kenya Limited & 2 others (Interested Parties) [2020] eKLR wherein the Court clarified without an iota of doubt the effect of an objection that had been deemed as allowed by operation of law in the following terms:-“24. Furthermore, it is pertinent to note that according to Section 51(11) of the TPA, where the Commissioner fails to make an objection decision within sixty days of the notice of objection, the objection shall be allowed. In line with the provision, the Petitioner’s objection to the Respondent’s demand for the amount of Kshs. 72,426,128. 00 stood allowed upon the lapse of sixty days from the date of receipt of the objection and the Respondent was no longer authorised to pursue the amount from the Petitioner.”

33. The Appellant submitted that the cases it had cited advised that objections once deemed as allowed have the effect of estopping the Commissioner from demanding for taxes issued pursuant to an assessment.

34. The Appellant averred that the Respondent in itspleadings claimed that it sought for leave to lodge an objection out of time and that the same was granted on 7th September 2021. The Appellant stated that it found these submissions rather strange because by the said date the time within which to make an Objection had lapsed.

35. The Appellant posited that if a request was made in May, 2021 and the Respondent reverts 4 months later, i.e. on 7th September 2021, this cannot be said to be within a reasonable time.

36. The Appellant further noted that prior to amending TPA, there was no timelines prescribed within which to deal with an application for extension of time, the same ought to have been dealt with reasonably. It quoted Section 58 of the Interpretation and General Provisions Act, Cap, 2:“58 Where no time is prescribed or allowed within which anything shall be done, such thing shall be done without unreasonable delay, and as often as due occasion arises.”

The Appellant’s Prayers 37. The Appellant prayed that the Tribunal to associate itself with these pronouncements and accordingly find that the Notice of Objection was deemed as allowed and consequently,a.Set aside the Respondent’s additional assessment and the attendant objection decision in the sum of Kshs. 38,474,743. 00. b.Allow this Appeal as so particularly set out its the Memorandum of Appeal.

The Respondent’s Case 38. The Respondent premised its case on the following documents before the Tribunal:a.Respondent’s Statement of Facts dated 23rd June 2022 and filed on 24th June 2022. b.The Respondent’s written Submissions filed on 26th January, 2023.

39. The Respondent averred that the assessments were based on the variances between income tax sales and VAT 3 sales. That additionally, it carried out a monthly analysis and classified the Appellant’s sales as taxable at 16%, 8% or exempt and brought to charge the variances arising from the misclassification.

40. The Respondent averred that it issued the 2018 income tax assessment based on the identified variance between VAT 3 sales and sales turnover as per financial statements.

41. The Respondent stated that from the analysis of the Appellant’s bankings in comparison with the ledgers, a variance was noted and it could not verify the Appellant’s reconciliation of the variances noting other than the excel reconciliations provided the taxpayer did not provide primary records and documents in support of the workings.

42. That additionally, the Respondent stated that it noted that the sales as per the banking’s were different from the sales provided in the excel analysis. That equally the same sales differed with the sales reported in the financial statements.

43. The Respondent submitted that due to this mismatch and variances in the three (3) sales analysis, it could not rely on the sales derived from the banking method. That furthermore, the banking method also revealed under declaration of sales when compared with the sales declared in the original returns.

44. The Respondent averred that it concluded that in absence of the primary supporting documents the variance remained unreconciled and the assessment was confirmed as issued.

45. The Respondent averred that it reviewed the taxpayer’s daily sales for the period September 2018 to April 2020 and classified the monthly sales into either vatable sales at 16%, 8% or exempt sales. That these sales were then compared with the Appellant’s monthly VAT 3 declarations and the sales variances brought to charge from September 2018 when fuel became vatable at the rate of 8%.

46. The Respondent stated that additionally, the VAT assessment was based on variances between income as per financial statements and VAT 3 returns for the year 2019. The total VAT assessed was Kshs. 22,778,697. 00.

47. The Respondent stated that during the review of the objection, the Appellant provided it with Z-reports in support of the VAT 3 sales analysis however the monthly Z-reports provided were erroneous and could not be relied upon. That this fact was brought to the attention of the Appellant.

48. The Respondent averred that it requested the Appellant to provide the primary sales documents including the daily sales book to aid in reviewing the objection but the same were not provided.

49. The Respondent stated that it concluded that in absence of the primary sales documents, the classification of sales in the excel workings provided could not be verified. That therefore, the objection was rejected and the assessment was confirmed as raised. The objection decision was communicated on 14th April 2022.

50. The Respondent averred that with regard to the validity of the Appellant’s notice of objection Section 51(3) provides as follows;“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 or has applied for an extension of time to pay the tax not in dispute under section 33 (1).(c)all the relevant documents relating to the objection have been submitted.”

51. The Respondent submitted that the Appellant made an application to the Respondent for extension of time to lodge an objection out of time (late objection application). The grounds of late objection were reviewed and accepted on 7th September 2021.

52. The Respondent averred that upon acceptance of the late objection on 7th September 2021, the Respondent’s 60 days in accordance with Section 51 of the TPA started running from 8th September 2021. That it was expected that the objection decision would be rendered on 7th November 2021. However, on 21st October 2021, the Appellant provided further documents in support of its objection.

53. The Respondent submitted that follow up meetings were held between it and the Appellant to review documents and consider the Appellant’s notice of objection. The Appellant provided the last of the documents on 21st February 2022 in compliance with Section 51(3)(c ) in order for the Appellant’s objection to be considered validly lodged.

54. The Respondent stated that its computation of 60 days began after provision of the last documents and the Commissioner was to render the objection decision on 22nd April 2022. The Appellant was issued with the objection decision on 14th April 2022 and hence the Commissioner was well within the provisions of Section 51(11) of the TPA.

55. The Respondent averred that the Appellant's objection was validly lodged on 17th February 2022 noting that the Appellant provided documents in piece meal for review between 16th April 2021 to 21st February 2022 a fact that was communicated to the taxpayer in the objection decision issued on 14th April 2022.

56. The Respondent asserted that based on the facts above, the Appellant cannot then purport that the objection decision was issued out of time as Section 51(11) provides that;“The Commissioner shall make the objection decision within sixty days from the date of receipt of— the notice of objection; or any further information the Commissioner may require from the taxpayer, failure to which the objection shall be deemed to be allowed”.

57. The Respondent averred that the Appellant had a positive duty under Section 56(1) of the Tax Procedures Act 2015, as read with Section 50(4) to show what its actual taxable income was, at the objection stage. That it failed to adduce the necessary document to discharge this burden of proof and instead resorted to exposing the Respondent’s errors.

58. The Respondent stated that it can only estimate the tax liability from information in its custody. That the alleged errors are occasioned by the Appellant’s reluctance to provide the necessary documents. That it should not therefore seek to benefit from a problem which can be substantively traced to its actions or omissions.

59. To buttress its point, the Respondent relied on the case of Kenya Revenue Authority v Man Diesel & Turbo Se, Kenya [2021] eKLR where the court stated that:“…The shifting of the burden of proof in tax disputes flows from the presumption of correctness which attaches to the Commissioner's assessments or determinations of deficiency. The commissioner's determinations of tax deficiencies are presumptively correct. Although the presumption created by the above provisions is not evidence in itself, the presumption remains until the taxpayer produces competent and relevant evidence to support his position. If the taxpayer comes forward with such evidence, the presumption vanishes and the case must be decided upon the evidence presented, with the burden of proof on the taxpayer.”

60. The Respondent submited that when the Appellant made the objection to the assessments raised by the Respondent, the Appellant was obligated to provide all the relevant documentation it relied on in making the objection as it is required to maintain the same in accordance with Section 23 (1) (a) (b) and (c) of the TPA which states;“a person shall maintain any document required under a tax law so as to enable the person's tax liability to be readily ascertained’’

61. The Respondent argued that the Appellant should have readily provided the purchase invoices by virtue of Section 23 of TPA which requires the Appellant to have tax records and retain the same 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.

62. The Respondent further argued that the Appellant should have availed the VAT sales in support of its objection application and did not. That it therefore failed to discharge its burden of proof under Section 56 (1) of the Tax Procedures Act in failing to produce evidence challenging the Respondent’s assessment.

63. The Respondent averred that while raising the objection to the assessment, the Appellant, as per the provisions of Section 51, should state the reasons why the assessment is erroneous and shall provide documentation to show that the assessment is erroneous. That in this case it did not provide sufficient documents to show that the assessment was erroneous even when it was requested to do so.

64. The Respondent stated that the Appellant only provided bankings and when compared during the analysis together with the ledgers, it was at variance and therefore the Respondent could not verify its reconciliation of the variances noting that other than the excel reconciliations provide, there were no primary documents to support the excel reconciliations.

65. The Respondent further stated that the banking documents were also at variance with the excel analysis and the sales as reported in the Appellant’s financial statement and therefore unreliable as there were no other primary documents to compare.

66. The Respondent affirmed that without any documentation to prove otherwise, the Respondent was obligated to confirm the assessment. It was noted that the documents provided by the Appellant did not discharge its burden of proof.

Respondent’s Prayers 67. The Respondent prays that the Appellant’s Appeal be dismissed with costs.

Issues For Determination 68. Having considered the pleadings and submissions of the parties and the documentation availed, the Tribunal is of the considered view that this Appeal raises the following issues for determination:a.Whether the Respondent’s Objection Decision was made out of time.b.Whether the Respondent erred in confirming the Appellant’s tax assessment of Kshs. 38,407,743. 00.

Analysis And Findings 69. The Tribunal has carefully considered the pleadings filed by the parties, the Respondent’s submissions and the numerous authorities and provisions of law which they have sought to rely on. The Tribunal’s findings and holding on the issues for determination are set out below:

a.Whether the Respondent’s Objection Decision was made out of time 70. The Appellant anchored its Appeal on the premise that the Respondent’s objection decision was out of time and that its notice of objection had been deemed allowed by operation of the law.

71. The Respondent on the other hand stated that Section 51(11) of the TPA as it was then had the effect of restarting the timelines where the Respondent requested for or received further information from the Appellant, hence its objection decision of 14th April 2022 was rendered within statutory time.

72. In order to determine the issue in dispute, the Tribunal took into consideration the chronology of events and important dates in this dispute, which are as follows;a.Date of assessment was on 15th March 2021b.The date of objection was 16th May 2021c.The late objection was accepted on 9th July 2021d.The Respondent requested for information on various dates: 9th July 2021, 5th August 2021, 7th October 2021, 21st October 2021 and 24th December 2021. e.The Appellant provided additional information on various dates: 5th August 2021, 25th August 2021, 21st October 2021 and 21st February 2022. f.The objection decision was made on 14th April 2022.

73. Upon the acceptance of the late notice of objection, the Respondent and the Appellant engaged in exchange of emails on various dates regarding provision of supporting documents. The correspondence began on 9th July 2021 and ended on 21st February 2022 when the Appellant provided the last set of information that was required by the Respondent.

74. As at the time this dispute arose in May 2021, Section 51(11) of the TPA provided that:“The Commissioner shall make the objection decision within sixty days from the date of receipt of—a.the notice of objection; orb.any further information the Commissioner may require from the taxpayer,failure to which the objection shall be deemed to be allowed”.

75. The Tribunal noted that the Respondent in its submissions erroneously captured the date of acceptance of late notice of objection as 7th September 2021 instead of 9th July 2021. The Appellant then relied on this erroneous date in the Respondent’s submissions to state in its own submissions that the Respondent had reverted four months after receipt of the notice of objection when in actual sense the Respondent had reverted within the statutory 60-day period by requesting for additional information on the 9th of July, 2021. Sixty days from the date of objection would have lapsed on 16th July 2021.

76. The Respondent’s request for information on 9th July 2021 had the effect of restarting the timelines and in accordance with Section 51(11) of the TPA the sixty days started counting upon the Respondent’s receipt of further information from the Appellant.

77. The material laid before the Tribunal indicates that the last correspondence between the parties before the objection decision was issued was on 21st February 2022 when the Appellant provided additional information to the Respondent.

78. By Interpretation Section 51(11) of the TPA as it was then, the sixty days in the instant case began to count from the day further information from the Appellant was received by the Respondent, that is on 21st February 2022 hence the sixtieth day would have been on 22nd of April 2022.

79. A scrutiny of the chronology of events shows that the Respondent’s acceptance of the Appellant’s late objection and its subsequent request for information were done within 60 days from receipt of the notice of objection.

80. Further, the Respondent rendered its objection decision within sixty days from its receipt of the last set of information from the Appellant in accordance with Section 51(11) of the TPA 2021 Version.

81. In light of the above, the Tribunal finds that the Respondent’s objection decision rendered on 14th April 2022 was well within the statutory timelines.

b.Whether the Respondent erred in confirming the Appellant’s tax assessment of Kshs. 38,407,743. 00 82. The Tribunal having determined that the Respondent’s decision was rendered within statutory timelines now shifts its focus to the veracity of the additional tax assessments.

83. Once the Respondent raises an assessment, the burden of proof falls on the Appellant to show that the assessment is excessive or incorrect. Section 56(1) of the TPA provides as follows: -“In any proceedings under this part, the burden of shall be on the taxpayer to prove that a tax decision is incorrect.”

84. It was the Appellant’s assertion that it had provided sufficient documents to show that the Respondent erred in arriving at the said VAT and income tax assessments. The Respondent on its part countered that the Appellant only provided bank statements and reconciliations which when analysed were themselves at variance and could not be relied on. That in addition, the Appellant did not provide primary documents such as purchase invoices and VAT sales which would have enabled the Respondent to ascertain the Appellant’s tax liability.

85. The Tribunal followed through the thread of email correspondences between the parties running from April 2021 to February 2022 which demonstrate that the Respondent made several attempts to obtain documents to enable it resolve the variances identified between the Appellant’s income tax sales and VAT sales.

86. The Tribunal also analysed the documents which were provided by the Appellant as annexures to its Appeal and arrived at the conclusion that Appellant did not provide primary documents which were critical in resolving the tax dispute. The Appellant failed to comply with Section 23(1) (b) of the TPA which provides that: -“A person shall;-(b)maintain any document required under a tax law so as to enable the person’s tax liability to be readily ascertained”

87. Section 30 (1) (b) of the Tax Appeal Tribunal Act provides that in proceedings before the Tribunal, an Appellant has the burden of proving that an assessment is excessive. This requirement is buttressed in TAT 7 of 2015 Ushindi Exporters Limited V Commissioner of Investigation and Enforcement (Tax Appeals Tribunal No. 7 of 2015) where the Tribunal held that: -“The burden of proving that the tax assessment is excessive or should have been made differently never shifts to the Respondent and is placed squarely on the Appellant as Section 30 (a) and (b) of the Tax Appeals Tribunal Act states:1. Where an appeal related to an assessment, that the assessment is excessive; or2. In any other case, that the tax decision should not have been made or should have been made differentlyBy purporting to shift the burden of proving that the tax assessment against it was incorrect or should have been made different the Appellant failed in discharging the burden, placed upon it by law”

88. By failing to provide the primary documents, the Appellant failed to discharge its burden of proof. The Tribunal is guided by the holding of the High Court in the case of Commissioner of Domestic Taxes -vs- Structural International Kenya Ltd ITA E089 of 2020 (2021) KEHC 152 (KLR): -“For the avoidance of doubt, the Tribunal is reminded that in matters where the supply of goods, be it for VAT purposes or Corporation Tax, the burden is always on the trader / taxpayer to show that, the documentation set out in the statute and in which he relies on arose out of a commercial transaction. Period. If additional documents, which would reasonably be expected to be in his possession is requested for to verify the alleged transactions, he should produce the same to the Commissioner. That is what is expected of a keen and diligent trader.”

89. In view of the foregoing, the Respondent cannot be faulted for having applied its best judgment on the basis of available information in arriving at the Appellant’s tax liability. The Tribunal therefore finds that the Respondent did not err in confirming the additional assessments.

Final Decision 90. In light of the foregoing analysis, the Tribunal makes the following orders:a.The Appeal be and is hereby dismissed.b.The Respondent’s objection decision dated 14th April 2022 be and is upheld.c.Each party shall bear its own costs.

91. It is so ordered.

DATED AND DELIVERED AT NAIROBI ON THIS 19TH DAY OF OCTOBER, 2023. GRACE MUKUHACHAIRPERSONDR. ERIC KOMOLOMEMBERJEPHTHAH NJAGIMEMBERTIMOTHY VIKIRUMEMBERGLORIA OGAGAMEMBER