[2025] KETAT 236 (KLR)

Kitobe Construction Limited v Commissioner of Domestic Taxes (Tax Appeal E530 of 2024) [2025] KETAT 236 (KLR) (Civ) (9 May 2025) (Judgment)

Neutral citation: [2025] KETAT 236 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Civil

Tax Appeal E530 of 2024

CA Muga, Chair, BK Terer, EN Njeru, E Ng'ang'a & SS Ololchike, Members

May 9, 2025

Between

Kitobe Construction Limited

Appellant

and

Commissioner of Domestic Taxes

Respondent

Judgment

1. The Appellant is a private limited company engaged in the business of construction.

2. The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act, CAP 469 of Kenya’s Laws (hereinafter “the Act”). Under Section 5 (1) of the Act, the Kenya Revenue Authority is an agency of the Government for the collection and receipt of all tax revenue. Further, under Section 5(2) of the Act with respect to the performance of its functions under subsection (1), the Authority is mandated to administer and enforce all provisions of the written laws as set out in Part 1 and 2 of the First Schedule to the Act for the purposes of assessing, collecting and accounting for all revenues in accordance with those laws.

3. The Respondent conducted investigations upon the Appellant’s tax affairs for the 2017 to 2022 review period in relation to Corporation Tax, PAYE and VAT and in a letter of findings dated 16th November 2023, the Respondent raised additional principal taxes amounting to Ksh 12,234,804. 00

4. On 5th January 2024, the Appellant was issued with principal tax assessment for the 2017 to 2022 review period amounting to Ksh 5,087,124. 00 for Corporation Tax, Ksh 7,059,117. 00 for PAYE and Ksh 88,563. 00 for VAT against which the Appellant lodged a late objection on 8th March 2024.

5. The Respondent’s objection decision dated 24th April 2024 sustained and confirmed the principal taxes as previously assessed.

6. Aggrieved by the Respondent’s objection decision dated 24th April 2024, the Appellant filed its notice of appeal dated 7th May 2024 on 21st May 2024 at the Tribunal.

The Appeal 7. The Appellant’s case was predicated upon a Memorandum of Appeal dated and filed on 21st May 2024 wherein the Appellant held that;i.The amounts assessed in the year 2017 related to withholding from previous years income for work done in the year 2015 and 2016 for Coast Waters and Kenya Ports Authority.ii.That the amounts objected in years 2018, 2019, 2021 and 2022 were retention amount for previous work done for KPA, Kenya Rural and Urban.iii.That the Appellant deals with construction and upon payment of 5% or 10% of the sales amount as retention usually payments are made after the agreed period.iv.That when retention refund is made, they usually withhold 2% VAT and 3% income tax and this might raise the issue of double taxation if the said amount is invoiced again.v.That the amount in the year 2020 was a withholding for income already declared in the previous year from KPA.

Appellant’s Case 8. The Appellant’s Statement of Facts dated 21st May 2024 were filed on even date.

9. The Appellant’s Director Mr. Musdafa Abdinasir Farah held that the Appellant sought to review the Respondent’s decision on 8th March 2024 indicating the assessment was erroneous but instead the Respondent rejected the objection and confirmed the assessments as indicated in the objection decision dated 24th April 2024.

10. That the Appellant had engaged the Respondent by way of Alternative Dispute Resolution in order to try and settle the dispute amicably.

Appellant’s Prayer 11. The Appellant’s sought the following reliefs:(a)The Respondent’s decision as contained in the objection decision dated 24th April 2024 be struck out in its entirety with cost.(b)Any remedies deemed just and reasonable.

Respondent’s Case 12. The Respondent failed to file its Statement of Facts but filed a Notice of Preliminary Objection to the Appeal.

Parties’ Written Submissions 13. Neither party filed written submissions.

Issues For Determination 14. The Tribunal notes that the Respondent filed a notice of preliminary objection stating that the Appeal herein was invalid, null and void ab initio having offended the provisions of Section 52 of the Tax Procedures Act, CAP 469B of the Laws of Kenya (hereinafter “TPA”) as well as Section 12 and 13 of the Tax Appeals Tribunals Act, CAP 469A of the laws of Kenya (hereinafter “TATA”) thus ought to be struck out with costs in the first instance.

15. The Tribunal notes the following provisions of Section 52 of the TPA:“52. Appeal of appealable decision to the Tribunal(1)A person who is dissatisfied with an appealable decision may appeal the decision to the Tribunal in accordance with the provisions of the Tax Appeals Tribunal Act (Cap. 469A).(2)A notice of appeal to the Tribunal relating to an assessment shall be valid if the taxpayer has paid the tax not in dispute or entered into an arrangement with the Commissioner to pay the tax not in dispute under the assessment at the time of lodging the notice.”

16. The Tribunal notes that Section 52 of the TPA provides that a person dissatisfied with an appealable decision my appeal to the Tribunal in accordance with the provisions of the TATA. In this regard, the Tribunal notes the following provisions of Section 12 and 13 of the TATA:“12. Appeals to the Tribunal

A person who disputes the decision of the Commissioner on any matter arising under the provisions of any tax law may, subject 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 days upon receipt of the decision of the Commissioner.(2)The appellant shall, within fourteen days from the date of filing the notice of appeal, submit enough copies, as may be advised by the Tribunal, of—(a)a memorandum of appeal;(b)statements of facts; and(c)the appealable decision; and(d)such other documents as may be necessary to enable the Tribunal to make a decision on the appeal.(3)The Tribunal may, upon application in writing or through electronic means, extend the time for filing the notice of appeal and for submitting the documents referred to in subsection (2).(4)An extension under subsection (3) may be granted owing to absence from Kenya, or sickness, or other reasonable cause that may have prevented the applicant from filing the notice of appeal or submitting the documents within the specified period.((5)An appellant shall serve a copy of the appeal on the Commissioner within two days after giving notice of appeal to the Tribunal.(6)The appellant shall, unless the Tribunal orders otherwise, be limited to the grounds stated in the appeal or documents to which the decision relates.(7)The Tribunal shall hear and determine an appeal within ninety days from the date the appeal is filed with the Tribunal.Provided that in case the panel is not able to conclude hearing an appeal within ninety days, the panel may through a resolution made by not less than half of its Members, extend the time for hearing and determination of the appeal by not more than thirty days.(8)The parties to an appeal may apply, in writing, to the Tribunal to settle the dispute out of the Tribunal and in such a case, the time taken to resolve or conclude the settlement out of the Tribunal shall be excluded when calculating the period contemplated in subsection (7).(9)For the purposes of this section, “appealable decision” has the meaning assigned to it in section 3(1) of the Tax Procedures Act (Cap. 469B).”

17. The Tribunal notes that whilst Section 12 of the TATA provides for appeals to the Tribunal, Section 13 of the TATA provides for the procedure for an Appeal.

18. The Tribunal also notes that the Appellant filed a tax decision in form of an objection decision dated 24th April 2024 together with a notice of appeal dated 7th May 2024 accompanied by a Memorandum of Appeal and Statement of Facts both dated 21st May 2024. The Appellant’s pleadings were all filed on 21st May 2024.

19. The Tribunal notes that the Appeal documents were filed 28 days after the objection decision thus within the statutory timeline of 30 days as provided for under Section 51(12) of the TPA. The Tribunal was not accorded cogent reasons why the Respondent invoked the cited Sections of the law since the Appellant was well within the statutory timelines and had filed its pleadings as contained in law.

20. Accordingly, the Tribunal dismisses the Preliminary objection with no orders as to costs.

21. The Tribunal having carefully considered the Appellant’s pleadings adduced before it notes that two issues fall for its determination as follows;i.Whether the Appellant discharged its burden of proving that the decision of the Respondent dated 24th April, 2024 was incorrect.ii.Whether the Respondent’s objection decision dated 24th April 2024 was justified.

Analysis And Findings 22. The Tribunal having established two issues for determination will proceed to analyze them as follows:

i. Whether the Appellant discharged its burden of proving that the decision of the Respondent dated 24th April, 2024 was incorrect. 23. The Tribunal notes that the genesis of the instant dispute is the Respondent’s investigation into the Appellant’s tax affairs for the 2017 to 2022 review period in relation to Corporation Tax, PAYE and VAT that yielded principal taxes of Ksh 12,234,804. 00.

24. The Tribunal notes that the Appellant’s assertions that whereas amounts assessed for year 2017 related to withholding from previous years of income 2015 and 2016, the 2018, 2019, 2020, 2021 and 2022 assessments were in respect of retention amount for previous work done for KPA, Kenya Rural and Urban [sic] which were deductions of 5% or 10% held upon payment sales amount and were payable to the Appellant after the agreed period. Further, the Appellant held that being a construction firm, it usually withheld 2% VAT and 3% income tax and that assessing the same would amount to double taxation if the amounts were invoiced again.

25. The Tribunal notes that the Appellant in the instant Appeal inspite of the colossal assessment against it merely averred in its pleadings and disputed the Respondent’s assessments. It failed to adduce any documentary evidence to substantiate its claims challenging the tax assessments. The Tribunal notes that Section 56(1) of the TPA as read with Section 30 of the TATA is couched in mandatory terms and provides as follows:“56(1)In any proceedings under this Part, the burden shall be on the taxpayer to prove that a tax decision is incorrect.30. In a proceeding before the Tribunal, the appellant has the burden of proving—(a)where an appeal relates to an assessment, that the assessment is excessive; or(b)in any other case, that the tax decision should not have been made or should have been made differently.”

26. The Tribunal when faced with a similar matter in Joycott General Contractors Limited v Kenya Revenue Authority [TAT No 28 of 2018] held as follows:“…we find that the Appellant seems to forget that it bears the burden of proof, in law, to demonstrate to this Tribunal that the Respondent’s assessment was wrong. Especially with regards to the under declarations and variance in respect of VAT and income sales. On the contrary, the Appellant has not bothered to substantially traverse the assessment raised. All it has done is to make sweeping and expansive accusations without substantial support.”

27. The Tribunal did not sight any evidentiary documentation challenging the Respondent’s assessments and as such there was nothing for the Tribunal to interrogate. The evidentiary documentation would have dispelled the Respondent’s decision to charge tax upon the Appellant. The Tribunal reiterates its stance that documentary evidence tabled before the Respondent at the objection stage should be adduced as evidence at the Appeal stage, before the Tribunal to enable it to make a determination.

28. In the circumstances, the Tribunal finds and holds that the Appellant did not controvert the Respondent’s tax assessments while making its objections and furthermore, it did not adduce documentary evidence whilst prosecuting its case at the Tribunal. The finding of the Tribunal is that the Appellant failed to discharge its burden of proving that the decision of the Respondent dated 24th April, 2024 was incorrect.

29. From the foregoing, it is the Tribunal’s finding that the Respondent’s objection decision dated 24th April 2024 was justified in the circumstances.

Final Decision 30. The upshot of the foregoing is that the Appeal herein was lacks merit and the Tribunal accordingly proceeds to make the following Orders:a.The Appeal be and is hereby dismissed.b.The Respondent’s objection decision dated 24th April 2024 be and is hereby upheld.c.Each party to bear its own costs.

31. It is so Ordered.

DATED AND DELIVERED AT NAIROBI ON THIS 9TH DAY OF MAY, 2025. ………………………………….CHRISTINE A. MUGACHAIRPERSON………………………….. …………….……………..BONIFACE K. TERER ELISHAH N. NJERUMEMBER MEMBER………….…..…………… ……….……..…………….EUNICE N. NG’ANG’A OLOLCHIKE S. SPENCERMEMBER MEMBER