Khalalio General Trading Company v Kenya Revenue Authority (Tax Appeal E080 of 2026) [2026] KETAT 303 (KLR) (10 August 2026) (Judgment)

REPUBLIC OF KENYA THE TAX APPEALS TRIBUNAL AT NAIROBI TAX APPEAL NO E080 OF 2026 KHALALIO GENERAL TRADING COMPANY…………………….…………….. APPELLANT VERSUS KENYA REVENUE AUTHORITY……….……………………………..………. RESPONDENT JUDGMENT BACKGROUND 1. The Appellant is a limited liability company. 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 of all tax revenue, and the administration and enforcement of 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. 3. On 23rd July 2025, the Respondent issued the Appellant with additional income and VAT assessments. 4. On 28th November 2025, the Appellant filed its Objection Application against the additional assessments. Judgement TAT No. E080 of 2026 Khalalio General Trading Company Vs Kenya Revenue Authority Page 1 of 9 5. On 19th December 2025, the Respondent issued its Objection Decision, confirming the additional assessments. 6. Aggrieved by the Objection Decision, the Appellant then lodged this Appeal vide its Notice of Appeal dated 22nd January 2026. THE APPEAL 7. The Appeal is premised on the Appellant’s Memorandum of Appeal dated 22nd January 2026, raising the following grounds of appeal: - a. THAT the Respondent erroneously assessed the Appellant’s tax payable on the basis of the Appellant being a presumed supplier, while in the actual business realm he was a commission agent. b. THAT the Appellant’s personal earnings were a derivation of low- tier commissions earned on an agency basis; hence his objection to the tax assessment levied against him. c. THAT notwithstanding the fact that supplier payments were remitted through his bank account, due diligence on the part of the Respondent could have unveiled the actual position that the Appellant made earnings as a commission agent and not supplier of goods and services. d. THAT had the Respondent undertaken a thorough financial background check on the status of the Appellant, it could have come to the realization that the Appellant is a Commission agent, and the assessment should have been anchored on its intermittent earnings as a Commission agent. e. THAT, the Respondent is the victim of an erroneous tax assessment on the part of the Respondent, and in the Judgement TAT No. E080 of 2026 Khalalio General Trading Company Vs Kenya Revenue Authority Page 2 of 9 circumstances, the Appellant is undergoing financial oppression at the hands of the Respondent. f. THAT the Respondent’s Decision of 22-12-2025 was against the weight of evidence. g. THAT the Respondent’s Decision of 22-12-2025 is erroneous and oppressive to the Applicant. 8. The Appellant did not file a Statement of Facts and Submissions in support of its appeal. RESPONDENT’S CASE 9. In opposition to the Appeal, the Respondent filed its Statement of Facts on 5th March, 2026 and its Written Submissions on 24th April, 2025, and raised the following issues for determination. a) Whether the Respondent erroneously assessed the Taxpayer’s tax payable on the principle that the Appellant was presumed supplier, whereas, in the actual business realm, he was a commission agent 10. The Respondent submitted that the characterization of the Appellant as a supplier, rather than a commission agent, was not arbitrary or presumptuous, but was an inference lawfully and reasonably drawn from the available evidence. 11. That the Appellant's bank accounts received substantial sums that were inconsistent with commission earnings. 12. That in the absence of any documentary evidence establishing an agency relationship, the Respondent was entitled to treat the Judgement TAT No. E080 of 2026 Khalalio General Trading Company Vs Kenya Revenue Authority Page 3 of 9 Appellant as conducting business in its own capacity as a principal supplier. 13. That it is a settled principle of law that agency must be proved and not presumed. The Appellant's bare assertion that it was a commission agent was unsupported by any agreement or financial records, and is insufficient to displace the assessment. b) Whether the Appellant’s personal earnings were a derivation of low-tier commissions earned on an agency basis 14. The Respondent submitted that: a. The bank credits in the Appellant's accounts, in both KES and USD, are wholly inconsistent with the income profile of a commission agent earning low commissions. b. It took the difference between income earned and costs to obtain the commission earned. c. It noted that the commission earned is not uniform for every client served during the transaction. d. The Appellant's declared turnover bore no reasonable relationship to the bank credits established through the banking analysis, giving rise to the inference that the Appellant was receiving and retaining income from the supply of goods and/or services in its own right. c) Whether due diligence on the part of the Respondent could have unveiled the actual position that the Appellant made Judgement TAT No. E080 of 2026 Khalalio General Trading Company Vs Kenya Revenue Authority Page 4 of 9 earnings as a Commission agent and not supplier of goods and services. 15. The Respondent asserted that its analysis disclosed a material and persistent inconsistency between the declared income and the bank credits, spanning three consecutive tax years (2019–2021) which was not consistent with the profile of a low-income commission agent. That no alternative explanation was provided for this inconsistency. 16. That the Appellant did not provide any evidence of commission agreements, transaction records, client statements, or reconciliations to prove that the earnings were commissions earned on an agency basis. 17. That, additionally, no certification license or approval from the Central Bank of Kenya was provided to demonstrate that the Appellant is authorized to conduct money exchange services as alleged. d) Whether the Appellant is a victim of an erroneous tax assessment on the part of the Respondent and, in the circumstances, the Appellant is undergoing financial oppression at the hands of the Respondent. 18. The Respondent asserted that the assessment was issued in the lawful exercise of the Respondent's statutory mandate following a properly conducted banking analysis, verified financial data in accordance with the Tax Procedures Act and the Income Tax Act. e) Whether the Respondent’s objection decision of 19-12-2025 was against the weight of evidence. 19. The Respondent submitted that the Objection Decision was firmly grounded on verified banking transaction data established Judgement TAT No. E080 of 2026 Khalalio General Trading Company Vs Kenya Revenue Authority Page 5 of 9 through a duly conducted banking analysis. And that the Appellant’s bare assertions and grounds of objection, unaccompanied by supporting documentation, do not constitute evidence capable of displacing the assessment. 20. The Respondent stated that the additional assessments for Corporation Tax and Value Added Tax totaling Kshs. 248,545,784 were lawfully raised, procedurally fair, and substantiated by credible financial data derived from a proper banking analysis. 21. It was its position that the appellant had failed to discharge its burden of proof as enunciated in the cases of: a.Trina Kenya Ltd v Commissioner of Domestic Taxes (Income Tax Appeal E341 of 2024) [2026] KEHC 28 (KLR) (Commercial and Tax). b.Republic v KRA: Proto Energy Limited [2022] eKLR. c. Nasscom Limited v Commissioner of Investigations & Enforcement (Tax Appeal 256 of 2022) [2023] KETAT 348 (KLR) (9 June 2023) (Judgment) Respondent’s Prayers 22. The Respondent prayed that the Tribunal be pleased to: a) Dismiss the Appeal in its entirety; b) Uphold and confirm the Respondent's Objection Decision dated 19th December 2025; c) Confirm the assessed Corporation Tax and Value Added Tax liabilities totaling Kshs. 248,545,784. ISSUES FOR DETERMINATION Judgement TAT No. E080 of 2026 Khalalio General Trading Company Vs Kenya Revenue Authority Page 6 of 9 23. The Tribunal, having considered the parties’ pleadings, submission and documents filed before it is of the view that the following issues fall for its determination: Whether the Respondent’s Additional Assessments of the Appellant are justified and proper in law. 24. In this appeal, the respondent asserted that it was not provided with documents to enable it to vary or set aside its assessment. 25. In a bizarre turn of events, the Appellant did not present any document before the Tribunal to prove its assertion that it had provided documents to support its objection. As it is, there is nothing on record to show that the Appellant supported its objection with relevant documents. 26. The Tribunal further reiterates that it is now settled that, the burden of proof in tax matters, in the first instance, rests with the Appellant. This is the import of Section 56 (1) of the TPA and Section 30 of the TAT Act, which provides: In any proceedings under this Part, the burden shall be on the taxpayer to prove that a tax decision is incorrect. 27. This position was reiterated in Commissioner of Investigations and Enforcement vs Kidero (Income Tax Appeal E028 of 2020 eKLR, where it was held that: “…the duty imposed on the taxpayer to keep records and the provisions on the burden of proof all go to support the Kenyan tax collection regime which is centered on a system of self-assessment. This system relies on the taxpayer making full and good faith disclosures in their tax declaration and affairs and hence empowers the Judgement TAT No. E080 of 2026 Khalalio General Trading Company Vs Kenya Revenue Authority Page 7 of 9 Commissioner to demand documents from time to time when investigating the affairs of a taxpayer…” 28. Accordingly, in this Appeal, the Appellant failed to provide evidence to show that it had supported its objection with relevant documents, and that the Respondent acted in error or was wrong when it affirmed its assessments. 29. It is now settled that the Respondent’s assessment would assume a notion of correctness unless challenged with credible evidence, as was exposed in Commissioner of Domestic Taxes -vs- Trical and Hard Limited (Tax Appeal E146 of 2020) [2022] KEHC 9927 (KLR) (Commercial and Tax) (8 July 2022) (Judgment) where the Tribunal stated thus; “A presumption of correctness arises from the Commissioner’s determination/ assessment. The presumption remains until the taxpayer produces competent and relevant evidence to support his/her position. When the taxpayer comes forward with such evidence, the presumption vanishes and the case must be decided upon the evidence presented.” 30. The Appellant’s failure to provide competent and relevant evidence to support his position meant that the Respondent’s assessment remained undisturbed and justified. DISPOSITION 31. The upshot of the foregoing analysis is that the Appeal lacks merit and the Tribunal shall proceed to issue the following orders: - a. The Appeal be and is hereby dismissed. Judgement TAT No. E080 of 2026 Khalalio General Trading Company Vs Kenya Revenue Authority Page 8 of 9 b. The Respondent’s objection decision dated 19th December 2025 be and is hereby upheld. c. Each Party is to bear its own costs. 32. It is so ordered. DATED and DELIVERED at NAIROBI this……10th ………..day of..…July…….. …2026 ..........................………………………. DR. RODNEY O. OLUOCH CHAIRPERSON .…..….……………………. ..….………………………. ABDULLAHI DIRIYE DR. ERICK KOMOLO MEMBER MEMBER Judgement TAT No. E080 of 2026 Khalalio General Trading Company Vs Kenya Revenue Authority Page 9 of 9