https://new.kenyalaw.org/akn/ke/judgment/ketat/2026/118

**REPUBLIC OF KENYA** **IN THE TAX APPEALS TRIBUNAL APPEAL NO. E1260 OF 2025** **LEGACY LA RELANCE E.A. LIMITED APPELLANT** **-VERSUS-** **COMMISSIONER OF LEGAL SERVICES AND BOARD COORDINATION RESPONDENT** **JUDGMENT** # **BACKGROUND** 1. The Appellant is a company registered in Kenya. 2. The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act, Cap 469 Laws of Kenya (KRA Act). Under Section 5 (1) of the Act, KRA is an agency of the Government for the collection and receipt of all revenue. For the performance of its function under Subsection (1), the Authority is mandated under Section 5(2) of the Act to administer and enforce all provisions of the written laws as set out in Parts I and II of the First Schedule to the KRA Act to assess, collect, and account for all revenues under those laws. 3. The Respondent issued the Appellant with Income tax and Value Added Tax (VAT) additional assessments for the periods 2022 and 2023 on 28th October 2024. 4. The Appellant objected to the assessments on 7th March 2025. 5. The Respondent issued an Objection decision on 28th April 2025 confirming the assessments. 6. The Appellant, being dissatisfied with the Respondent’s Objection decision, filed its Notice of Appeal dated 29th September 2025 on the same date having been granted leave to file out of time. # **THE APPEAL** 1. The Appeal is premised on the Memorandum of Appeal dated 29th September 2025 and filed on 5th November 2025 which raised the following grounds: - 1. That the Respondent misdirected itself in fact and in law by failing to consider that the taxes of Kshs. 13,475,132.58 demanded pertain to the financial years Dec 2022 and Year 2023 respectively, in the absence. 2. That the Respondent fell into serious error of fact and law by issuing the Appellant with additional assessments, without satisfactorily disclosing or justifying the rationale for the additional assessments, contrary to the legal requirement that the Respondent addresses and responds to all the grounds of objection raised by the Appellant by issuing a statement of reasons, as per Section 49 of the Tax Procedures Act, No. 29 of 2015. 3. That assessments of Kshs. 13,475,132.58 are erroneous and excessive, relying on a flawed banking analysis that mischaracterizes non-business income as taxable, violating Section 31(1)(c) of the Tax Procedures Act, 2015. 4. That Respondent by declining to provide the information, statements of reasons and evidence relied on in reaching its decision as per the mandatory terms of Section 4(3) of the Fair Administrative Actions Act, the Respondent has infringed on the Appellant’s rights. 5. That the Respondent misdirected itself in fact and in law by applying its powers improperly and issuing the above-said assessment and demand, despite misinterpreting the relevant legal provisions and exercising its mandate wrongly, against the Appellant’s legitimate expectation of fair, just, lawful, and reasonable tax administration and governance; in violation of the Appellant’s constitutional Right to Fair Administrative Action which is enshrined in Article 47 of the Constitution of Kenya, 2010, as well as Section 4(1) of the Fair Administrative Action Act, No. 4 of 2015. 6. That the Respondent misdirected itself in law and in fact by failing to acknowledge and recognise the place of the legal doctrine of *lex non cogit ad impossibilia* which mitigates the consequences of a party’s failure or inability to perform its duties, obligations, and/or responsibilities, as a result of a situation that creates impossibility or dire difficulty in the performance of the said duties or responsibilities, as was the case in the appeal in this instance. 7. That the Commissioner failed to consider the Appellant’s actual business operations and or sources of income resulting in misclassification and an inaccurate tax assessment. # **APPELLANT’S CASE** 1. The Appellant’s case is premised on its Statement of Facts dated 29th September 2025 and filed on 5th November 2025. The Appellant did not file written submissions and its case proceeded on the basis of the pleadings already on record. 2. That on 15th October 2024 the Commissioner issued notice of intention to issue the additional assessment which was based on the variance that was established between annual turnover declared and total monthly vatable sales of the above respective year as per the notice. 3. That the Commissioner through the said notice requested that Appellant provide explanatory, reconciliation evidence for assessment. 4. That on 28th October 2024 an approval of the additional assessment was issued respectively after failing to provide evidence as requested. 5. That on 7th March 2025, the Appellant lodged a late objection application which was accepted and was under review by the Respondent’s Independent Objection Review. 6. That on 14th March 2025 through an email the Respondent acknowledged receipt of the Appellant late objection application and requested to provide evidence of sickness as reason for late objection. That the Appellant provided prove for late objection and on 21st March 2025 the respondent through an email granted an extension of time to the Appellant’s to lodge a late objection application. 7. That through the same communication the Appellant was required to provide relevant supporting documents for the period under review (2022 and 2023) to validate the objection application on or before 28th March 2025. 8. The Appellant averred that it was unable to submit the supporting documents for the objection due to: - a) The limited time to prepare the ledger accounts and make correct bank reconciliation and cash transaction to ascertain the correct taxable profit gained and expense incurred during the time for the subsequent years. b) Limited time to conduct the auditing process and determine and correct financial position of the company as provided by the law. 1. That while the Appellant was in the process of compiling the evidence requested, the Respondent issued an Objection decision dated 28th April 2025 confirming the additional assessments of Kshs. 13,475,132.58. 2. That on 2nd May 2025 the Respondent confirmed assessment notice on the iTax system of VAT and Income Tax. The Respondent wrote to the Appellant to inform the objection application that had been received on 7th March 2025 has been fully rejected. 3. On 29th September 2025, the Appellant filed a notice of appeal with the Tax Appeals Tribunal. 4. The Appellant submitted that it would have been prudent, within reasonable judgement and information available for the Respondent to give the Appellant enough time to adduce all the records and information required for consideration before making its decision. 5. The above notwithstanding, the Appellant reiterates that the Respondent assumed the Appellant did not have any supporting documents thus making the impugned decision. 6. The Appellant submitted that there must be equality before the law. The Kenyan constitution states under Article 27(1) and (2): - *“(1) that every person is equal before that law and has the right to equal protection and benefit of the law.’* *(2) Equality includes the full and equal enjoyment of all rights and fundamental freedoms.”* 1. The Appellant argued that it is trite that a different set of rules cannot apply to individual taxpayers in similar circumstances. That should the same occur, it would result in a fundamental breach of the Constitution, which is what would occur, if the Respondent’s decision to dismiss the Appellant’s Objection stands. # **Appellant’s prayers** 1. The Appellant prayed that the Tribunal grants the following: 1. An Order setting aside the Respondent’s Objection decision dated 28th April 2025 in its entirety. 2. An Order allowing Appellant’s Objection Applications VAT & Income Tax dated on 7th March 2025 . 3. An Order upholding the present appeal by the Appellant before this Honourable Tribunal in its entirety. 4. An Order restraining the Respondent and all its officers, representatives, and agents from issuing a further or additional assessment and demand to the Appellant, regarding the surrounding set of facts and circumstances, until the complexities surrounding this matter are resolved fully and satisfactorily; 5. The costs of this matter, or any other pecuniary compensation as deemed appropriate; and 6. Any other or further relief(s) as this Honourable Tribunal would deem just and reasonable to grant. that the decision aforesaid be set aside and annulled or varied in such a manner as may appear just and reasonable. # **RESPONDENT’S CASE** 1. The Respondent’s case is premised on the following documents filed before the Tribunal: 1. The Respondent’s Statement of Facts dated 10th December 2025 and filed on 11th December 2025; and 2. Its Written Submissions dated 17th April 2026 and filed on the same date. 2. The Respondent stated that it reviewed the Appellant’s tax returns and established variances between the turnover declared and the income tax and the aggregate of the sales declared in the monthly VAT returns for the years 2022 and 2023 and noted that in 2022 the VAT sales were lower hence the variance was charged VAT whereas in 2023 the income tax turnover was lower hence the variance was charged income. 3. The Respondent proceeded to raise additional assessments on 15th October 2024. 4. That the Appellant lodged a late objection application against the assessments on 7th March 2025 citing sickness as the reason for the late application. That following review of the Appellant’s ground of the late application, the application was accepted on 21st March 2025 and the Appellant notified of the same the same day. 5. That the Appellant objected to the Respondent’s assessments on the following grounds : a) That the director has been on a sick leave and was undergoing medication therefore he was not available to oversee the auditing process and approval of the financial year under the assessment. b) That due to the nature of work under the framework contract agreement and the bulkiness of posting and reconciling the transactions with their supplier and stakeholders, they were unable to meet the deadline of filing their returns which resulted to them not declaring their revenue. 1. The Respondent stated that the Appellant was requested to validate its objection application by submitting the following records: audited financial statements, sales invoices and sales ledger, purchases invoices and ledger, bank statements, expenses ledgers and supporting documents and any other relevant documents in support of its objection application. 2. The Respondent averred that it sent a reminder to the Appellant on 17th April 2025, however no documents were availed. 3. That the Appellant was informed that if they failed to submit the requested records, the Respondent would proceed to issue the Objection decision based on the information available. 4. The Respondent averred that it also tried to reach out to the Appellant on his registered phone number, 07228xxxxxx, but the calls went unanswered. 5. The Respondent asserted that it accorded the Appellant sufficient time to submit the said financial statements and supporting documents but it failed to submit the same. 6. The Respondent contended that the provision of the above records would have enabled ascertain the correctness of the Appellant’s self-assessed return and the tax position paving way for the adoption of the same in place of the Commissioner’s additional assessments. That therefore, the Respondent limited in scope since there were no accounts for its verification, therefore, the Objection was disallowed and the assessments confirmed. 7. The Respondent issued an Objection decision dated 28th April 2025 confirming the assessment of Kshs. 15,786,461.60 comprising principal tax, penalties, and interest. That the Appellant appealed this decision. 8. The Respondent averred that all actions were taken in accordance with the provisions of the Tax Procedures Act, 2015, the Income Tax Act, VAT Act, and related regulations. 9. The Respondent asserted that the Appellant was granted an opportunity to respond to the audit findings and object to the assessment in line with due process. 10. The Respondent referred to Section 24 and Section 51(3) of the Tax Procedures Act to affirm it position. 11. The Respondent further averred that the Appellant failed to provide all relevant documents to support their objection. 12. The Respondent relies on the provisions of Section 56 of the Tax Procedures Act and Section 30 of the Tax Appeals Tribunal Act, which establish that the responsibility to prove compliance with tax obligations rests solely with the Appellant in all circumstances. 13. The Respondent relied on the holdings in the following cases regarding the burden of proof: **Commissioner of Domestic Taxes vs. Galaxy Tools Limited [2021]** and **Kenya Revenue Authority v Maluki Kitili Mwendwa [2021] KEHC 4148 (KLR).** 14. The Respondent maintains that the tax assessment issued was properly founded in fact and law, and that the objection decision was fair, reasonable, and made in accordance with statutory provisions. # **Respondent’s prayers** 1. The Respondent prayed that the Tribunal: 1. Dismisses the appeal in its entirety; 2. Upholds the tax assessment as confirmed by the objection decision dated 28th April 2025; and 3. Orders the Appellant to pay the costs of the appeal. # **ISSUE FOR DETERMINATION** 1. The Tribunal has considered the pleadings and the submissions made by the Parties, and considers the issue for determination as follows: **Whether the Respondent was justified in confirming the Income tax and VAT additional assessments.** # **ANALYSIS AND FINDINGS** 1. Having identified the issue for determination, the Tribunal proceeds to analyse the same as hereunder. 2. The Respondent assessed and subsequently confirmed additional Income tax and VAT assessments covering tax periods in the years 2022 and 2023. The basis of the assessments was provided by the Respondent in its pre-assessment notice and Objection decision. The basis was the Appellant’s purported undeclared sales arising from positive turnover variances between Income tax and VAT returns sales declarations. The Respondent averred that the Appellant failed to provide all relevant documents to support their objection. 3. The Appellant averred that it was unable to submit the supporting documents for the objection due to: - a) The limited time to prepare the ledger accounts and make correct bank reconciliation and cash transaction to ascertain the correct taxable profit gained and expense incurred during the time for the subsequent years. b) Limited time to conduct the auditing process and determine and correct financial position of the company as provided by the law. 1. That while the Appellant was in the process of compiling the evidence requested, the Respondent issued an Objection decision dated 28th April 2025 confirming the additional assessments of Kshs. 13,475,132.58. 2. The Tribunal clarifies that the Appeal before it is against an Objection decision that confirmed tax assessments. The burden therefore lay on the Appellant to demonstrate that the Respondent’s assessments were excessive or incorrect, in accordance with Section 56(1) of the Tax Procedures Act and Section 30 of the Tax Appeals Tribunal Act which provide as follows: - Section 56(1) of the Tax Procedures Act *“56. (1) In any proceedings under this Part, the burden shall be on the taxpayer to prove that a tax decision is incorrect.”* Section 30 of the Tax Appeals Tribunal Act: *“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.”* 1. Section 54A(1) of the Income Tax Act obligates a person carrying on a business to keep records of, among other documents, all receipts, accounts and books which in the opinion of the Commissioner, are adequate for the purpose of computing tax. 2. Section 43 of the VAT Act requires a person in the course of his business to keep a full and true written record of every transaction he makes, and details the records to be kept. The person shall avail the records to the Commissioner for inspection. 3. The Tribunal enumerates the chronology of the objection review process: 1. The Appellant filed a late objection application on 7th March 2025 in relation to Income tax and VAT assessments issued by the Respondent in on 28th October 2024. 2. The Respondent accepted the Appellant’s late objection application in an email dated 21st March 2025 and requested the Appellant to provide the relevant supporting documents to validate its objection by 28th March 2025. The Respondent specified that the documents should include: *“1. A notice of objection stating precisely the grounds of objection, the amendments required to be made to correct the decision, and the reasons for the amendments.* *2. Audited financial statements* *3. Sales invoices and sales ledgers* *4. purchases invoices and ledger* *5. bank statements* *6. expenses ledgers and supporting documents; and* *7. any other relevant documents in support of its objection application.”* * 1. The Respondent reminded the Appellant to provide the requested documents on 17th April 2025, and further attempted to reach the Appellant via phone call. 2. The Respondent issued the Objection decision on 28th April 2025, confirming the assessments. 1. The Tribunal perused all the documents which the Appellant presented in this Appeal, which were as follows: 1. Pre-assessment notice dated 15th October 2024. 2. Assessment orders of Income tax and VAT dated 28th October 2024. 3. Objection application acknowledgment receipts for Income tax and VAT dated 7th March 2025. 4. Email of the Respondent dated 14th March 2025 requesting the Appellant to provide evidence of its reason for the late objection application. 5. Email of the Respondent dated 21st March 2025 accepting the Appellant’s late objection application. 6. The Objection decision dated 28th April 2025. 7. Confirmation of assessment notices of Income tax and VAT dated 2nd May 2025. 2. The Tribunal compared the Respondent’s document request of 21st March 2025 with the documents that the Appellant presented to the Tribunal and notes that the Appellant, even before the Tribunal, did not present any of the documents which would ordinarily be expected to be in the taxpayers’ possession and which a taxpayer is required to maintain under Section 54A of the Income Tax Act, Section 43 of the VAT Act and Section 23 of the Tax Procedures Act, by which the variances underlying the assessments could have been explained. The Tribunal further notes that the Appellant has to date not presented to the Tribunal any substantive transactional record to support its case, and has not provided an explanation for the failure. 3. It was not enough for the Appellant to claim that it could not produce the documents to the Respondent during the review of its objection. The absence of these records is fatal to the Appellant’s case. Mere averment of a substantive tax position, however elaborate, does not discharge the statutory burden of proof placed upon the Appellant. 4. The Tribunal is guided by the case of **CMC Aviation Ltd v Cruisair Ltd (1) [1978] KLR 103** where Madan J. held that: - *“Pleadings contain the averments of the parties concerned. Until they are proved or disproved, or there is an admission of them or any of them, by the parties, they are not evidence and no decision could be founded upon them. Proof is the foundation of evidence. Evidence denotes the means by which an alleged matter of fact, the truth of which is submitted for investigation. Until their truth has been established or otherwise, they remain un-proven. Averments in no way satisfy, for example, the definition of “evidence” as anything that makes clear or obvious; ground for knowledge, indication or testimony; that which makes truth evident, or renders evident to the mind that it is truth.”* 1. Further, the Tribunal notes that the Respondent in adherence to the legal timelines for tax dispute resolution, communicated to the Appellant the Objection decision according to Section 51(11) of the Tax Procedures Act which provides that: - *“The Commissioner shall make the objection decision within sixty days from the date of receipt of a valid notice of objection failure to which the objection shall be deemed to be allowed.”* 1. Section 51(11) of the Tax Procedures Act has no provision permitting the Commissioner to postpone issuing an Objection decision. Therefore, without the Respondent having the legal authority to grant such time extension to itself, the Tribunal finds no merit in the Appellant’s desire that the Respondent should have extended the time for the Appellant to adduce all the records and information required for consideration before the Respondent made its decision. 2. The Tribunal is further guided by the case of **W.E.C. Lines Ltd vs. The Commissioner of Domestic Taxes [TAT Case No.247 of 2020]** where it was held at paragraph 70 while reiterating the holding in **Krystalline Salt Ltd vs KRA [2019] eKLR** that: - ## “Where there is a clear procedure for redress of any particular grievance prescribed by the constitution or an Act of Parliament, that procedure should be strictly followed. Accordingly, the special procedure provided by any law must be strictly adhered to since there are good reasons for such special procedures. The relevant procedure here is the process of opposing an assessment by the Commissioner.” 1. Accordingly, the Tribunal finds that the Respondent was justified in confirming the Income tax and VAT additional assessments. # **FINAL DECISION** 1. The upshot of the above analysis is that the Tribunal finds that the Appeal is not merited. The Tribunal accordingly proceeds to issue the following Orders: 2. The Appeal be and is hereby dismissed. 3. The Objection decision dated 28th April 2025 be and is hereby upheld. 4. Each party to bear its own costs. 5. It is so ordered. **DATED AND DELIVERED AT NAIROBI THIS 30TH DAY OF JUNE 2026.** **……………………………..….** **ROBERT M. MUTUMA** **CHAIRMAN** **……………………………… ……..….……..……………..** **GLORIA A. OGAGA DR. TIMOTHY B. VIKIRU MEMBER MEMBER** **……………………………..….** **JIMMY M. MALLA** **MEMBER**