[2023] KETAT 305 (KLR)

Lenguris v Commissioner of Domestic Taxes (Appeal 291 of 2022) [2023] KETAT 305 (KLR) (26 May 2023) (Judgment)

Neutral citation: [2023] KETAT 305 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Appeal 291 of 2022

RM Mutuma, Chair, EN Njeru, RO Oluoch, D.K Ngala & EK Cheluget, Members

May 26, 2023

Between

Pauline Lenguris

Appellant

and

Commissioner Of Domestic Taxes

Respondent

Judgment

1. The Appellant is a registered contractor trading in her own name. The taxpayer is registered for income tax obligations.

2. The Respondent is a principal appointed under Section 13 of the Kenya Revenue Authority Act, 1995. 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) with respect to the performance of its functions under subsection (1) of the Act, the Authority is mandated to administer and enforce all provisions of the written laws as set out in Part 1 & 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 investigated the Appellant’s tax affairs for the year 2015 and raised tax liability of Kshs 585,432. 00 through an Assessment Order dated April 4, 2018.

4. The Appellant objected to the said assessment on May 16, 2018. The Respondent thereafter issued an Objection decision dated July 13, 2018.

5. The Appellant was aggrieved with this decision and she lodged an Appeal before the Tribunal on the March 21, 2022.

The Appeal 6. The Appellant’s Memorandum of Appeal filed on the March 21, 2022 was premised on the single ground that the Respondent erred in fact by raising the income tax assessment based on an erroneous income rather than consultation fee of Kshs 32,500/- paid by Catholic Organization for Relief and Development that was paid in the year 2015.

The Appelants Case 7. The Appellant stated as follows in its Statement of Facts filed on the March 21, 2022, that:a.The Respondent raised the income tax assessment for the year 2015 and served the demand notice dated 4 April 2018. b.She responded to the said Assessment orders raised by the Respondent via her Objection letter dated 16 May 2018. c.She was issued with an Objection decision on July 13, 2018. d.She could only file the tax returns for years 2015 once the assessment currently in the tax system was vacated from the system.

8. Based on this ground, the Appellant prayed that;a.The Respondent’s decision to raise the income tax assessments was based on erroneous income rather than consultation fee made for the year 2015 be struck out in its entirety(sic).b.The Respondent be directed to amend the income tax assessments for the year 2015 in accordance with the consultation fee paid by Catholic Organization for Relief and Development.c.The costs of this Appeal.

The Respondent’s Case 9. The Respondent has set out its response to the Appellant‘s case in the Statement of Facts filed on June 24, 2022 and Written Submissions filed on November 16, 2022.

10. The Respondent stated that the Appellant worked for Catholic Organization for Relief and Development and withholding tax was withheld and remitted to KRA by the Organization.

11. That arising from this transaction, the Appellant who was a nil-filer was issued with an assessment on April 4, 2018 for taxes amounting to Kshs 585,432. 00 being Income Tax-Resident individual for the year 2015.

12. The Appellant objected to the additional assessment on May 16, 2018 on iTax and subsequently, the Respondent issued an electronic decision on May 22, 2018 rejecting the Appellant’s notice of objection on grounds that the Appellant did not give reason for late objection.

13. The Respondent thereafter issued its Objection decision on July 13, 2018 upholding the assessment amounting to Kshs 587,057. 00.

14. It is the Respondent’s submission that there is no proper Appeal for determination before the Honourable Tribunal pursuant to the provisions of Section 13(3) & (4) of the Tax Appeals Tribunal Act because it had rejected the Appellants notice of objection and subsequently issued its Objection decision on July 13, 2018 upholding its assessment because the Appellant did not provide a valid notice of objection.

15. It submitted further that the Appeal herein was lodged on March 21, 2022 which was 3 years 8 months late. That the Appellant has failed/refused and or neglected to make an application seeking for extension of time to file the Appeal as provided for in Section 13(3) & (4) of the Tax Appeals Tribunal Act. It relied on the case of Speaker of the National Assembly v James Njenga Karume[1992] eKLR to stress this point.

16. The Respondent posited that the Appellant lodged its notice of objection on May 16, 2018, which was 13 days late. That no reason was given for this lateness contrary to the provisions of Section 51(3) of the Tax Procedures Act. It supported its position with the case of Pearson v Belcher CH.M Inspector of Taxes) Tax Cases Volume 38 referred to by Justice DS Mjanja inPZ Cussons East Africa Limited v Kenya Revenue Authority(2013) eKLR.

17. The Respondent submitted that having shown that its Assessment Order was based on information held in its database, information from third parties and based on its best judgment, it was upon the Appellant to provide evidence to prove that its objection was not proper as is envisaged in Section 56(1) of the Tax Procedures Act. Its position was that this burden of proof was not discharged by the Appellant. It supported its argument with the case TAT No 331 of 2018: Geoffrey Mwanjoria Mwangi versus Commissioner of Domestic Taxes.

18. Based on the above, the Respondent prayed that this Honorable Tribunal do find that:a.There is no proper Appeal for determination before the Tribunal.b.The Respondent’s Objection decision issued on December 13, 2018 as well as the Late Objection Rejection Notice issued on May 22, 2018 are proper and prays that the same be upheld.c.This Appeal be dismissed with costs to the Respondent for lack of merit.

Issues For Determination 19. The Tribunal having carefully considered the parties’ pleadings, documentation and submissions determines that the issue that call for its determination is whether the Respondent’s Objection decision dated July 13, 2018 is valid.

Analysis and Detrmination 20. The cause of this dispute relates to the issuance of an Assessment Order for withholding tax in regard to supplies that were made to Catholic Organization for Relief and Development(CORD).

21. The Appellant argued that the fees paid for her supplies to CORD was only Kshs 32,500/=.

22. Despite the fact that the Appellant was the one in possession of the documents that could proof that she supplied and was only paid Kshs 32,500/=, she opted not to share these documents with the Tribunal. This was the only way it could have dislodged the Objection decision for a withholding tax assessment amounting to Kshs 587,057. 00.

23. In other words, having alleged that her taxable supplies were only worth Kshs 32,500/=, the Appellant was statutorily obliged to provide evidence to proof that the actual value of this transaction was Kshs 32,500/= and not Kshs 587,057. 00 as affirmed by the Respondent.

24. Section 30 of the TAT Actprovides as follows in regard to burden of proof:“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.”

25. Based on the foregoing analysis and the express provisions of Section 30 of theTAT Act, the Tribunal holds and finds that the Appellant has failed to discharge her burden of proof in this Appeal. The Respondent’s Objection decision dated 1July 3, 2018 for withholding tax assessment amounting to Kshs 587,057. 00 is therefore proper and valid.

26. It is on this premise that the Tribunal has arrived at the conclusion that this Appeal is incompetent and bereft of any merit.

Final Decision 27. The upshot of the foregoing is that the Appeal 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 July 13, 2018 be and is hereby upheld.c.Each party to bear its own costs.

28. It is so ordered.

DATED AND DELIVERED AT NAIROBI ON THIS 26TH DAY OF MAY, 2023. ............................................ROBERT M. MUTUMACHAIRMAN.............................................ELISHAH N. NJERU RODNEY O. OLUOCHMEMBER MEMBER.............................................DELILAH K. NGALA EDWIN K. CHELUGETMEMBER MEMBER