[2024] KETAT 729 (KLR)

Kingstone Construction Company Limited v Commissioner of Investigations & Enforcement (Tax Appeal 78 of 2023) [2024] KETAT 729 (KLR) (Commercial and Tax) (9 May 2024) (Judgment)

Neutral citation: [2024] KETAT 729 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Commercial and Tax

Tax Appeal 78 of 2023

RM Mutuma, Chair, M Makau, EN Njeru, B Gitari & AM Diriye, Members

May 9, 2024

Between

Kingstone Construction Company Limited

Appellant

and

Commissioner of Investigations & Enforcement

Respondent

Judgment

Background 1. The Appellant is a limited liability company duly incorporated in Kenya under the Companies Act and a registered taxpayer.

2. The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act, 1995. Under Section 5 (1) of the Act, the Kenya Revenue Authority (the Authority) is an agency of the Government for the collection and receipt of all revenue. Further, under Section 5 (2) of the Act with respect to the performance of its function under subsection (1), the Authority is mandated with the responsibility for the administration and enforcement of the various statutes set out in Parts 1 & 2 of the First Schedule to the said Act for the purposes of assessing, collecting and accounting for all revenues in accordance with those laws.

3. The dispute giving rise to the Appeal herein arose out of the Respondent’s additional assessments relating to VAT and Income tax on the 18th December 2022.

4. The Appellant objected to the additional assessments vide the letter dated the 28th February 2022.

5. The Respondent issued its confirmation of assessment on 19th August 2022 and confirmed its additional assessment in the sum of Kshs. 19,289,291. 00.

6. Dissatisfied with Respondent’s aforesaid decision, the Appellant lodged its Notice of Appeal on the 23rd January, 2023.

The Appeal 7. The Appellant in its Memorandum of Appeal dated 22nd December 2022 and filed on 23rd January 2023 set out the following grounds of appeal, that;Income Taxi.The Respondent erred in law and in fact by disregarding the actual turnover realized and reported by the Appellant in its financial statements and tax returns and arbitrarily increased the Appellant’s turnover for the period under review and thereafter assessed additional Income tax, penalties and interest;ii.The Respondent erred in law and fact by disregarding all the reconciliations, explanations and documentation provided by the Appellant including the financial statements and tax returns, and proceeded to confirm the erroneous Income tax assessments;iii.The Respondent erred in law and fact by disallowing expenses incurred by the Appellant in the production of the taxable income during the period under review, thereby assessing additional taxes on account of the disallowed expenses;iv.The Respondent erred in law and fact by disregarding the express provisions of Sections 15 and 16 of the Income Tax Act which provide that all expenses incurred wholly and exclusively in the generation of income are tax deductible;v.The Respondent erred in law and fact by purporting to charge income tax on all banking deposits without allowing for the necessary adjustments for non-revenue items such as inter-account and inter-bank transfers, related party transfers, loans reversals and contra entries and inter-company transfersValue Added Taxvi.The Respondent erred in law and fact by purporting to charge VAT on all banking deposits without allowing for the necessary adjustments for non-revenue items such as inter-account and inter-bank transfers, related party transfers, loans reversals and contra entries and inter-company transfers;vii.The Respondent erred in law and fact by arbitrarily increasing the revenue figures in the Appellant’s VAT returns and erroneously assessing additional VAT;viii.The Respondent erred in law and fact by disregarding the VAT returns filed by the Appellant and all explanations and documentation provided by the Appellant in support of its objection and proceeding to confirm the VAT assessment;ix.The Respondent erred in law and fact by assessing additional VAT on the Appellant based on arbitrary and unreasonable estimates while disregarding the actual sales and purchases made and declared in the VAT returns filed by the Appellant;x.The Respondent erred in law and fact by disallowing the input VAT incurred and claimed by the Appellant in making of taxable supplies, thereby assessing additional VAT on the Appellant based on erroneously disallowed invoices;Pay As You Earn (PAYE)xi.The Respondent erred in law and fact by assessing additional PAYE on the Appellant while PAYE had been properly deducted and remitted for the period under review;

The Appellant’s Case 8. The Appellant has set out its case on its;a.Statement of Facts dated 22nd December 2022 and filed on 23rd January 2023, together with the documents annexed thereto; andb.Written submissions dated 15th August 2023 and filed on 16th August 2023.

9. The Appellant stated that the Respondent without carry out an audit on the books and financial statements of the Appellant issued additional assessments on the 18th December 2022 vide the iTax platform.

10. The Appellant averred that it objected to the additional assessments vide the letter dated 28th February 2022. That the Respondent made its Objection decision on 19th August 2019.

11. That the Appellant being aggrieved by the Respondent’s decision lodged its Appeal with the leave of the Tribunal granted on 6th January 2023.

Income Tax 12. The Appellant averred that it duly filed its returns and paid all the income tax due during the period under review.

13. The Appellant stated that the Respondent without any basis or justification adjusted the turnover of the Appellant upwards for the period under review and thereafter erroneously assessed additional taxes on the difference between the adjusted turnover and what the Appellant had declared and disallowed some of the expenses that had been incurred by the Appellant in the generation of the taxable income.

Inter-account & Inter-bank Transfers 14. The Appellant averred that it operates several current bank accounts, in many instances, receipts in one account are transferred to other accounts for business purposes and cash flow management.

15. The Appellant further averred that the Respondent erroneously deemed these inter-account and inter-bank transfers as income and made assessments thereto.

Inter-company Transfers 16. The Appellant asserted that it is related to other entities and during the period under review, there were various inter-company transfers done from it to its sister companies, such transfers were not of a revenue nature, but merely inter-company transfer, which the Respondent proceeded to erroneously charge Corporation tax while it was clearly not income/revenue.

Reversals/Contra entities 17. The Appellant further asserted that the Respondent charged tax on refunds and reversals received in the Appellant’s bank as a result of unpaid cheques or incomplete transactions.

18. That it was to be noted that the aforementioned reversals neither constitute a gain nor a profit from a business venture to be subjected to tax.

Failure by the Respondent to consider information and documents provided 19. The Appellant stated that it kept proper books of accounts and reconciliations, which it relied on in filing of its income tax returns and inspite of providing all the information, explanations and documentation, the Respondent disregarded the same and issued impugned assessments.

Arbitrary Adjustment of Revenue 20. The Appellant contended that the Respondent arbitrarily and unjustifiably adjusted its revenue upwards, resulting to a higher assessment, despite having been provided with all the information, documentation, explanations and source documents.

Non-deduction of expenses 21. The Appellant stated that the Respondent also failed to acknowledge the expenses incurred in the business operations contrary to the ITA, which provide that all expenses incurred in the generation of income are tax allowable.

Value Added Tax 22. The Appellant avowed that it filed returns and paid all its taxes due under the VAT tax head. That the Respondent without any justification or legal basis adjusted the Appellant’s turnover upwards and thereby making an erroneous assessment.

23. The Appellant averred that the assessment issued by the Respondent was based on arbitrary figures which appeared to have been plucked from the air and not the actual sales or supplies made by the Appellant during the period under review.

Disallowed input VAT 24. The Appellant averred that it had claimed valid input VAT supported by valid tax invoices in compliance with the provisions of the VAT Act and VAT Regulations in force at the time, which was fully supported by valid tax invoices (with ETR receipts) as well as supporting documents such as payment but the same was disregarded and disallowed.

Inter-company Transfers 25. The Appellant asserted that it is related to other entities and during the period under review, there were various inter-company transfers done from it to its sister companies, such transfers were not of a revenue nature, but merely inter-company transfer, which the Respondent proceeded to erroneously charge VAT while it was clearly not income/revenue.

Inter-account & Inter-bank Transfers 26. The Appellant averred that it operates several current bank accounts, in many instances, receipts in one account are transferred to other accounts for business purposes and cash flow management.

27. The Appellant further averred that the Respondent erroneously deemed these inter-account and inter-bank transfers as income and made VAT assessments thereto.

Reversals/Contra entities 28. The Appellant further asserted that the Respondent charged VAT on refunds and reversals received in the Appellant’s bank as a result of unpaid cheques or incomplete transactions.

29. That it was to be noted that the aforementioned reversals neither constitute a gain nor a profit from a business venture to be subjected to tax.

PAYE 30. The Appellant averred that the Respondent issued PAYE assessments with no basis while the all PAYE returns had been filed and taxes due paid.

31. The Appellant in its submissions, identified four issues for determination, namely;a.Whether the Respondent erred in failing to consider and deduct the allowable expenses borne by the Appellant while assessing their Income Tax;b.Whether the Respondent erred by purporting to charge Income Tax on all banking deposits without allowing for the necessary adjustments for non-revenue items in assessing their Income Tax & VAT Tax;c.Whether the Respondent was wrong in disregarding the Appellant’s information and documentation provided; andd.Whether the Respondent erroneously issued the confirmation of assessments dated 19th August 2022;

32. The Appellant whilst submitting on the Respondent’s failure to acknowledge the expenses incurred in the generation of income, relied on Section 15 of the ITA and further submitted that the Respondent acted arbitrarily, in an unjust and unfair manner by adjusting the Appellant’s turnover, when it had no basis to so do.

33. The Appellant submitted that the Respondent failed to consider the necessary adjustments and erroneously used the banking method to compute the Income tax and VAT tax on the Appellant’s income. Further, the Respondent failed to take into account items such as inter-account, inter-bank, inter-company transfers, related party transfers, loans, reversals and contra entries.

34. The Appellant submitted that the Respondent in paragraph 7 of its Statement of Facts acknowledged to have reviewed tax returns and other records maintained by the Appellant, CR12 from the Registrar of Companies, withholding certificates and the Appellant’s bank statements and therefore was provided with all the documentation.

35. The Appellant submitted that the analysis carried by the Respondent was done selectively and aimed at raising additional taxes and therefore not determined fairly.

36. The Appellant submitted that it adhered to provisions of Section 43 of the VAT Act and 23 of the TAT Act with regards to keeping proper books of accounts.

37. Further, the Appellant submitted that while the Respondent’s argument of failing to produce all the required documents sound attractive, the Appellant invited the Tribunal to objectively analyze the documents presented in the Appeal and establish that the Appellant dutifully produced all the records as required and reconciled it accounts.

38. The Appellant submitted that it has discharged its burden of proof under Section 56 of the TPA as well as Sections 108 and 109 of the Evidence Act in establishing that the assessments were wrong or could have been made otherwise.

39. The Appellant, in fortifying its case, relied on the following authorities;a.Hancock vs. General Reversionary and Investment Company [1919] KB 5, 37. b.Silver Chain Ltd vs. Commissioner Income Tax & 3 Others [2016] eKLR.c.Kenya Revenue Authority vs. Man Diesel & Turbo Se, Kenya [2021] eKLR.d.George vs. Federal Commissioner of Taxation, [1952] HCA 21. e.Kilburn vs. Bedford (H.M Inspector of Taxes) 1955 Chancery Division, 36, p.262. f.Republic vs. Commissioner of Domestic Taxes Large Tax Payer’s Office Ex Parte Barclays Bank of Kenya Ltd [2012] eKLR.f.Miller vs. Miller of Pensions [1947] 2ALL ER 372. f.Keroche Industries Limited vs. Kenya Revenue Authority & 5 Others [2007] eKLR.

Appellant’s Prayers 40. By reason of the foregoing submissions, the Appellant prayed that the Tribunal;a.Allows this Appeal;b.Annuls the Respondent’s confirmed assessment based on the grounds above, as well as the information contained in the Statement of Facts attached; andc.Awards costs of this Appeal to the Appellant.

The Respondent’s Case 41. The Respondent has set out its case on its;a.Statement of Facts dated 16th February 2023 and filed on 17th February 2023, together with documents annexed thereto; andb.Written Submissions dated and filed on 2nd August 2023;

42. The Respondent stated that it received intelligence report that the Appellant has been underdeclaring income earned for the purposes of VAT and Corporation tax, subsequently it carried out investigations for the period between 2015 and 2022 for Corporation and VAT.

43. That the Respondent averred that it employed the following methodology whilst conduction its investigations; information extracted from the Appellant’s iTax; information from third parties i.e. bank; examination of records obtained, data analysis and comparative analysis with the declaration in the tax returns.

44. The Respondent further averred that it undertook several tests during the investigations, being; analysis of the returns filed and declared by the Appellant; analysis of the deposits in the bank statements; comparison of the investigation findings with the declarations in the returns.

The Banking Method Test 45. The Respondent averred that it confirmed that the Appellant had received into its Equity bank account Kshs. 366,212,695. 00 for the period 2016 to 2021; its HFCK bank account Kshs. 211,194,988. 00 totaling to Kshs. 643,708,949. 00.

46. The Respondent adjusted bank statements for non-business income such as charges, reversed & unpaid cheques, reversed stamp charges and accrued interest, upon conclusion of the analysis the net deposits were established in the sum of Kshs. 605,269,113. 00.

Analysis of the Appellant’s Income Tax versus VAT declaration tests 47. The Respondent analyzed the income declared by the Appellant and established that there were variances in the declarations of the its turnovers and confirmed that there were variances between the VAT and Corporation tax amounting to Kshs. 177,018,359. 00.

Analysis of the Appellant’s Withholding Tax Certificates test 48. The Respondent stated that the Appellant’s had offered services to various taxpayers at various tax rates amounting to Kshs. 882,000,237. 00, therefore the Respondent’s analysis of the Appellant’s gross income from the Withholding tax withheld from the Appellant and same revealed as Kshs. 908,556,094. 00.

Established Income 49. The Respondent asserted that upon analysis, it concluded that Appellant was under declaring the income earned and thus under declaring the tax payable.

Tax Summary 50. The Respondent avowed that it established that the principal taxes were Kshs. 16,330,701. 00 in respect of Corporation tax and Kshs. 40,481,715. 00 in respect of VAT.

51. That the Respondent asserted that upon conclusion of the tax investigation it communicated the findings to the Appellant vide the letter dated 4th November 2021, to which the Appellant did not respond to within the timelines provided, subsequently the Respondent issued additional assessment on VAT on the 19th January 2022.

52. The Respondent averred that on 2nd March 2022 vide the letter dated 28th February 2022 the Appellant responded to the letter of findings stating the variances, however, the Appellant did not provide the documentations in support of the explanations given.

53. The Respondent stated that the Appellant on 28th February 2022 applied for extension of time to lodge a late notice of objection, which was granted on the 9th March 2022 extending the time with a period of 30 days.

54. That the Appellant lodged it Objection against the VAT additional assessment of 19th January 2022 on the 18th March 2022 amounting to the principal tax amounting to Kshs. 16,330,701. 00 for the review period 2016 and 2020, however, the Appellant did not provide any documents in support of its objection.

55. The Respondent further averred that there were engagements between the parties herein, on the 1st July 2022, the Respondent wrote a reminder to the Appellant with a view to have it validate its Appeal in compliance with Section 51 (3) (c) of the TPA granting seven (7) days to the Appellant, who responded on 6th July 2022 and stated that it provided documents in support of the Objection, but only attached the letter dated 28th February 2022.

56. The Respondent further contended that on the 1st August 2022 it replied to the Appellant’s email of 6th July 2022 and informed the Appellant that it was supposed to provide documents in support of the Objection and that the letter of 28th February 2022 was in response to the tax investigations report and not the Objection, to which the Appellant neither responded to nor validated the Objection.

57. That the Respondent stated that the Appellant did not lodge its notices of objection in relation to additional assessments for Corporation tax for the years 2016 and 2020.

58. The Respondent averred that it issued its decision to the Objection on the 19th August 2022 confirming the assessment in the sum of Kshs. 56,812,417. 00 (exclusive of penalties and interest).

59. The Respondent averred that it confirmed the entire assessment on 18th November 2022 for both VAT and Corporation tax.

60. That the Appellant on the 19th December 2022 on the iTax platform lodged a late notice of objection against the additional assessment on Corporation tax for the tax period 2020.

61. The Respondent maintained that the Appellant did not object and has not objected to the additional assessments relating to Corporation tax for the year 2016.

62. The Respondent avowed that the Appellant’s Appeal is incompetent for the following grounds, that;a.It was based on an invalid notice of objection;b.It is based on an invalid Notice of Appeal;c.The Appellant has not complied with the provisions of Section 52 (2) of the TPA by making payment of taxes not in dispute amounting to Kshs. 16,178,848. 00 for the year 2016 or by entering into an arrangement with the Commissioner to pay the tax in dispute;d.There is no appealable decision that can be entertained by the Honourable Tribunal since the Appellant did not lodge any Objection against the additional assessment for Corporation taxes for the year 2016. e.As for the late notice of objection for year 2020 in relation to additional assessment for Corporation taxes, the Appellant has not sought extension of time to lodge a late notice of objection, therefore, the Appeal herein is not properly lodged;f.The Appellant has irregularly appealed against the assessment which are not subject to the Respondent’s decision of 19th August 2022, which assessments are dated 30th May 2022, 18th December 2019 and 15th November 2019;g.The said assessments are separate and different from the Respondent’s decision and thus ought to be canvassed through a separate objection process/appeal as they relate to separate decisions which are not properly before the Tribunal;

63. The Respondent stated that it is not bound by the Appellant’s self-assessment returns to determine a taxpayer’s liability, that it is empowered under Section 31 (1) of the TPA to amend the Appellant’s tax assessment by making alteration or additions based on the any other available information and its best judgement.

64. The Respondent asserted that it invited the Appellant to explain the instances of variances and warned the Appellant failure whereof it would be charged VAT and Income tax, the Appellant did not sufficiently address the issues raised relating to the variances nor support its explanations with documents or real evidence.

65. The Respondent contended that, whereas the Appellant stated that the Respondent disregarded the actual turnover realized and reported, and being provided with the revenue figures, the Appellant did not provide sufficient documents in support of the same and to demonstrate that the same were erroneous and arbitrary.

66. The Respondent further stated that, whereas the Appellant alleged to have provided documentation and information, there is no record placed before the Honourable Tribunal showing the record of documents provided, the date on which they were provided and those which were (allegedly) disregarded by the Respondent. Further, that the Appellant was requested to provide documentation and information on 18th March 2022, 1st July 2022 and 1st August 2022 and its therefore inconceivable that the Respondent would disregard documentation and information which had not been provided.

67. The Respondent maintained that for a deduction of an expense to be allowed, the same must be proven to the satisfaction of the Respondent, in the present case, the Appellant neither quantified the expenses incurred in generation of the income nor proved there were expenses at all and therefore the Respondent was justified in treating the net deposits in the Appellant’s bank accounts as net taxable income.

68. The Respondent averred that it made adjustments to the bank deposits by deducting entries relating to the charges, reversed & return cheques, unpaid cheques, reversed stamp charges and accrued interest amounting to Kshs. 38,439,836. 00 and its is therefore not factual or true that the Respondent charged Income tax and VAT on non-revenue items.

69. The Respondent stated that the Appellant did not provide proof that the transfers to inter-company, inter-account and inter-bank transfer were not income, the Appellant has not provided details or identified the sister companies by name.

70. The Respondent averred that the Appellant did not provide any documentation or information to support the sales and purchases in accordance with Section 17 (2) and (3) of the VAT Act to be entitled to input VAT deduction which must be properly supported and claimed within six months, the Appellant’s claim was therefore statutorily barred.

71. The Respondent stated that the assessment for PAYE was not raised in the its decision of 19th August 2022, however, in a separate assessment, therefore the claim is strange to the Appeal herein.

72. The Respondent asserted that by failing to validate its Objection, the Appellant deferred the assessment to the Respondent’s exclusive reliance on its best judgement and information available at his disposal and thus should not fault the Respondent for exercising its mandate.

73. The Respondent averred that the Appellant had not proven or discharged its burden of proof in accordance with Section 56 (1) of the TPA, Section 30 of the TAT Act and Section 107 of the Evidence Act.

74. The Respondent in its written submissions identified two issues for determination, namely;a.Whether this Honourable Tribunal has the jurisdiction to hear the Appeal; andb.Whether the Respondent’s Decision is valid;

75. The Respondent submitted that the Honourable Tribunal lacks jurisdiction to entertain the purported Appeal for the following reasons;a.The Appellant has no valid Notice of Appeal; andb.The Appellant’s Appeal is fatally defective and incompetent;

76. The Respondent submitted that as at 19th August 2022 the Appellant had not paid nor lodged an objection against the assessments of 30th March 2022. Further, that the Appellant is required to pay the taxes not in dispute before lodging the Notice of Appeal amounting to Kshs. 16,178,848. 00 for the year 2016 relating to Corporation tax, which action is contrary to Section 52 (2) of the TPA.

77. The Respondent submitted that it is trite law that the Notice of Appeal invokes the jurisdiction of the court or a judicial authority to hear and determine an Appeal, in the absence of a valid Notice of Appeal, the Tribunal does not have jurisdiction to entertain the Appeal herein. That the Tribunal should down its tools for want of jurisdiction, strike out the Appeal herein and uphold the Respondent’s decision of 16th February 2022.

78. The Respondent submitted that the Appellant’s Appeal is incurably defective for want of compliance with relevant statutory provisions, being;a.It is based on an invalid Notice of Appeal;b.The Appellant has irregularly appealed against the assessment which are not subject to the Respondent’s decision of 19th August 2022, which assessments include the assessments dated 30th May 2022, 18th December 2019 and 15th November 2019;c.Similarly, the Appellant has not sought leave of the Tribunal to appeal against the assessment dated 30th May 2022; 18th December 2019 and 15th November 2019. d.The said assessments are separate and different from the Respondent’s decision and thus ought to be canvassed through a separate objection process/appeal as they relate to separate decisions which are not properly before the Tribunal;e.The Appellant has not complied with the provisions of Section 52 (2) of the TPA by making payment of taxes not in dispute amounting to Kshs. 16,178,848. 00 for the year 2016 or by entering into an arrangement with the Commissioner to pay the tax in dispute;f.There is no appealable decision that can be entertained by the Honourable Tribunal since the Appellant did not lodge any objection against the additional assessment for Corporation taxes for the year 2016.

79. The Respondent submitted that the additional VAT assessment were within the purview of Section 31 (1) (b) and (c) of the TPA and thus valid, in raising the assessment the Respondent submitted that it afforded the Appellant reasonable opportunity to rectify the inconsistencies noted in its tax returns or lodge a notice of objection, however, the Appellant failed to so do. The Respondent was therefore justified to confirm the assessments.

80. The Respondent submitted that the Appellant failed to proffer reasonable grounds to the satisfaction of the Respondent for lodging a late notice of objection and/or failing to validate its invalid notice of objection, and therefore the Respondent was justified to confirm the initial assessments.

81. The Respondent submitted that the Appellant in its notice of objection did not state the grounds of objection and changes to be made to the assessments, therefore the Appellant is estopped from raising new grounds as contained under paragraphs 1 to 11 of the Appellant’s Memorandum of Appeal. The Respondent urged the Tribunal not to consider the new grounds advanced in the Appeal which had not been raised in the objection stage.

82. The Respondent relied on the following authorities;a.Nicholas Kiptoo Arap Korir Salat vs. Independent Electoral and Boundaries Commissione & 7 Others [2014] eKLR.b.Commissioner of Domestic Taxes vs. Local Productions (Kenya) Limited [2020] eKLR.c.Nairobi TAT Appeal No. 212 of 2020 Mayfair Investments Company Limited vs. Commissioner of Investigations & Enforcement.d.Kenya Revenue Authority vs. Man Diesel & Turbo Se, Kenya [2021] eKLR, Nairobi High Court Income Tax Appeal No. E125 of 2020. e.Rahima Traders Limited vs. Commissioner of Investigations and Enforcement (Income Tax Appeal E042 of 2021) [2021] KEHC 440.

Respondent’s Prayers 83. By reason of the foregoing the Respondent prayed to the Tribunal, to;a.Uphold the Respondent’s decision dated 19th July 2022 (Confirmation of Assessment) as valid and in conformity with the provision of the law; andb.Find that the Appeal herein is without merit and dismiss it with costs to the Respondent;

Issues for Determination 84. The Tribunal having carefully considered the pleadings and submissions made by the parties, is of the considered view that Appeal herein distils into three (3) issues for its determination;a.Whether the Appeal herein is validly lodged; andb.Whether the Appellant’s Objection dated 18th March 2022 was allowed by operation of the law;c.Whether the Respondent’s Objection Decision issued on 19th August 2022 relating to Corporation Tax, PAYE and VAT assessments was justified;

Analysis and Determination 85. The Tribunal having identified the issues for determination shall analyze the same as herein under;

a.Whether the Appeal herein is validly lodged? 86. The Appellant lodged it Appeal pursuant to the Respondent’s invalidation decision contained in its letter dated 19th August 2022 rejecting the Appellant’s Objection lodged on 18th March 2022.

87. The Appellant sought leave of the Tribunal to lodge its Appeal out of time vide the application dated 22nd December 2022 and filed on 23rd December in Miscellaneous Application No. 307 of 2022, which leave, of fifteen (15) days was granted on the 6th January 2023.

88. It was the Respondent’s contention that the Appellant’s Appeal is invalid for having been presented on the 23rd January 2023, beyond the timelines allowed by the Order of the Tribunal on 6th January 2023.

89. The Tribunal has perused the record and noted that whereas the hard copies of the Notice of Appeal, Memorandum of Appeal, Statements of Facts and all other documents were stamp received on the 23rd January 2023, the Tribunal sighted an email from the Appellant of 20th January 2023 at 1609 hours filing all the Appeal documents identical to the ones filed physically on 23rd January 2023.

90. Further, the Tribunal sighted the banking receipt as filing fees for the Appeal, payment whereof was made on the 21st January 2023 at 1236 hours.

91. Sections 12 and 13 (1) of the TAT Act in relation for lodging of appeals, provides;“12. Appeals to the TribunalA person who disputes the decision of the Commissioner on any matter arising under the provisions of any tax law may, subjection to the provisions of the relevant tax law, upon giving notice in writing to the Commissioner, appeal to the Tribunal. Provided that such person shall before appealing, pay a non-refundable fee of twenty thousand shillings.”13. Procedure for appeal1. a notice of appeal to the Tribunal shall –a.be in writing or through electronic means;b.be submitted to the Tribunal within thirty day upon receipt of the decision of the Commissioner.”

92. From the above provision of the law, an Appeal can be lodged in writing or electronically, both or either mode of filing are acceptable forms of filing and/or lodging of an appeal before the Tribunal.

93. Pursuant to the Orders of the Tribunal of 6th January 2023, the Appellant was required to have lodged its Notice of Appeal and Appeal documents not later than the 21st January 2023.

94. The Tribunal is of the view that the Appellant’s Appeal having filed electronically on the 20th January 2023 was lodged within the timelines of the leave as granted by the Tribunal.

95. Consequently, the Tribunal finds that there is a valid Appeal before it for hearing and determination.

b.Whether the Appellant’s Objection dated 18th March 2022 was allowed by operation of the law; 96. The Appeal is premised on three tax heads being Corporation tax, PAYE and VAT, the Tribunal however noted that the appealable decision before it is that of 19th August 2022, stemming from the assessments issued on 19th January 2022 relating to VAT. The Tribunal shall therefore restrict its analysis to the issues as appealed.

97. The Respondent asserted that there were engagements between the parties culminating in its decision of 19th August 2022.

98. The Tribunal has perused the documents attached by the parties to the Appeal, and noted that indeed communication between commenced following the Respondent’s email of 1st July 2022, where it had requested the Appellant to provide documents in support of the objection.

99. The Tribunal notes that the communication of 1st July 2022 came 105 days following the filing of the Objection.

100. Section 51 (11) (as was then) provided as follows;“(11)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.”

101. The Tribunal notes that the Appellant’s Objection dated 18th March 2022 stood as allowed by operation of law as the Respondent was mandated in law to issue a decision within 60 days of lodging of the objection.

102. The Respondent ought to have issued its decision within 60 days upon receiving the Appellant’s objection dated 18th March 2022, unless there was provision for further documents and information that had been requested, within the sixty days. In other words, the Respondent ought to have requested for further information and documentation within the statutory timelines, only then would have time been extended. Anything else that the Respondent did beyond the 60 days was null and void ab initio. Therefore, the Tribunal cannot examine any matters that were done beyond the statutory timelines.

103. This Tribunal having established that the Appellant’s Objection dated 18th March 2022 stood as allowed by operation of law, the Tribunal shall not delve into the outstanding issue as the same has been rendered moot.

104. The upshot of the foregoing is that the Appellant’s Appeal is found to be merited.

Final Decision 105. The Appeal having been found to be merited the Tribunal proceeds to make the following Orders;a.The Appeal be and is hereby allowed.b.The Respondent’s decision issued on 19th August 2022 be and is hereby set aside.c.Each party to bear its own costs.

106. It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 9TH DAY OF MAY, 2024ROBERT M. MUTUMA - CHAIRPERSONMUTISO MAKAU - MEMBERELISHAH N. NJERU - MEMBERBERNADDETTE GITARI - MEMBERMOHAMED A. DIRIYE - MEMBER