https://new.kenyalaw.org/akn/ke/judgment/ketat/2026/89

REPUBLIC OF KENYA IN THE TAX APPEALS TRIBUNAL AT NAIROBI TAX APPEAL NO E773 OF 2025 LYPUT VENTURES LTD ................................................................................ APPELLANT VERSUS COMMISSIONER OF DOMESTIC TAXES………………….…………........... RESPONDENT JUDGEMENT BACKGROUND 1. The Appellant is a company registered in Kenya. Its principal activity is the supply of clean water. However, in the year 2022, the Appellant ventured into the sale of petroleum products. 2. The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act, Cap 469, Laws of Kenya. Under Section 5(1) the Respondent is an agency of the Government tasked with the mandate of collecting and receipting all tax revenue within Kenya. Further, under Section 5(2) with respect to the performance of its functions under subsection (1), the Respondent is mandated to administer and enforce all provisions of the written laws set out in Part 1 and Part 2 of the First Schedule to the Act for the purposes of assessing, collecting, and accounting for all revenues in accordance with those laws. Judgement TAT No. E773 of 2025 Lyput Ventures Limited V Commissioner of Domestic Taxes Page 1 of 11 3. The Respondent issued various assessments dated 10th April 2025, 17th April 2025, and 6th May 2025 to the Appellant, demanding tax of Kshs 11, 932,382.17, comprising income tax for the years 2020 and 2021 and VAT for 2022. 4. The Appellant objected to the assessment on 12 May 2025.The Respondent reviewed the Appellant’s objection and partially accepted the objection and confirmed total tax of Kshs. 7,365,914.24 vide the Objection Decision dated 20th June 2025. 5. Aggrieved by the Respondent’s decision, the Appellant filed its Notice of Appeal dated 23rd June 2025. THE APPEAL 6. The Appeal is premised on the following grounds of appeal, as stated in the Appellant’s Memorandum of Appeal dated 23rd June 2025 and filed on 18th July 2025. a) That the Respondent erred in law and in fact by disallowing the Appellant’s forecourts ledgers, sample invoices, account statements, invoices, and expenses ledgers, and audited financial statements, hence arriving at a wrong decision of additional income tax and VAT assessment in respect of the Appellant. b) The Respondent erred in law and in fact by confirming the assessment without due regard to all records/documents, explanations, and information provided, thereby failing to appreciate the issues presented and raised by the Appellant before confirming the assessment. Judgement TAT No. E773 of 2025 Lyput Ventures Limited V Commissioner of Domestic Taxes Page 2 of 11 c) The Respondent erred in law and in fact by omitting vital information supplied by the Appellant in respect of the invoices and expenses; that information, if factored, would have accounted for the variations reflected in the Respondent’s assessment. d) That the Respondent erred in law and in fact in its assessment of Value Added Tax by disregarding the variations imposed and failing to observe the timing differences and selling prices, hence arrived at a wrong decision. e) That the Respondent erred in law and in fact by exercising its powers arbitrarily and with reckless abandon, since it has failed to vacate the assessment notices, despite the Appellant’s discharging its burden of proof and proving that the tax demanded is unreasonable, as the Appellant has always complied with its tax obligations. f) That the Respondent erred in law and in fact by relying on estimates and not conducting proper audit and verification, hence arriving at an erroneous assessment. g) That the Respondent erred in law and in fact by infringing upon the Appellant’s legitimate expectation; therefore, the latter’s Constitutional right to fair administrative action enshrined in Article 47 of the Constitution of Kenya, as well as Section 4(1) of the Fair Administrative Act, 2015. h) That the Appellant is apprehensive that the actions of the Respondent lack merit, are unlawful, and are gravely unjust, and that unless the orders sought are granted, the Appellant risks being unjustly required to pay the alleged tax to its prejudice. Judgement TAT No. E773 of 2025 Lyput Ventures Limited V Commissioner of Domestic Taxes Page 3 of 11 APPELLANT’S CASE 7. The Appellant’s case is premised on its statement of facts dated 23rd June 2025. The Appellant did not file its written submissions. As such, its case will be considered on the basis of its pleadings on record. 8. In its statement of facts, the Appellant averred that at all material times relevant to this Appeal, the Appellant was a company duly incorporated under the provisions of the Company’s act. 9. It was the Appellant’s position that the Respondent claimed that the assessment was based on the variance between forecourt sales and VAT, failure to support expenses, and failure to reconcile the variances for income tax and forecourt sales. 10. The Appellant further stated that the Respondent also claimed that its efforts to verify all the requested documents were frustrated since the Appellant failed to avail the forecourt ledgers, sample invoices, Rubis account statements, invoices and expense ledgers, and audited financial statements; hence the additional assessment. 11. The Appellant stated that it commenced the process of submitting the supporting/requested documentation for verification when suddenly the Respondent issued its Objection Decision. 12. It was the Appellant’s position that the act by the Respondent of confirming the assessment without due regard for all the records/documents, explanations, and information provided is unfair, irrational, malicious, capricious, and against the principles of fair administrative action and fair trial as provided for in Article 47 and 50 of the Constitution of Kenya, 2010. Judgement TAT No. E773 of 2025 Lyput Ventures Limited V Commissioner of Domestic Taxes Page 4 of 11 THE RESPONDENT’S CASE 13. The Respondents’ case is premised on its: - a) Statement of Facts dated and filed on 8th September, 2025, together with the documentation attached thereto. b) Written submissions dated 27th April 2026 and filed on 28th April 2026. 14. The Respondent stated that it carried out an audit on the tax affairs of the Appellant and established variances in the Income Tax Company (IT2C) and VAT3 returns for the years 2019 to 2022. It also established variances in the purchases as declared in the Income Tax Company (IT2C) and VAT3 returns, as well as variances between salaries and wages subjected to PAYE and those declared in the Income Tax Company returns. The Respondent also established under-declared income for the purchases of whole products. 15. The Respondent stated that, in its objection, the Appellant had sought clarification on some issues as its grounds of objection. The Respondent stated that it sought the following documents from the Appellant. However, the Appellant only provided unsigned copies of financial statements: a) The forecourt ledgers b) Sample invoice c) The Returns Account Statement d) Invoices and expenses ledgers and e) Audited financial statements. 16. On the issue of VAT assessments raised in the year 2021, the Respondent stated that it had noted that the VAT sales were more Judgement TAT No. E773 of 2025 Lyput Ventures Limited V Commissioner of Domestic Taxes Page 5 of 11 by Kshs 477,403.43 and that the assessment ought to have been raised on Corporation Tax and not VAT. It then vacated it on the basis that it was on the wrong tax head. 17. It was the Respondent’s assertion that the burden of proof is upon the Appellant to demonstrate that the Respondent’s assessments were not justified; yet in this case, the Appellant was unable to reconcile the variances noted by the Respondent. 18. In its written submissions, the Respondent raised two issues for determination: a) Whether the appeal filed was proper 19. The Respondent submitted that filing proper pleadings requires drafting formal written statements that are concise, accurate, and comply with the specific procedural rules of the court. Further, pleadings define the scope of the case and ought to adhere to proper drafting standards set out in law. 20. The Respondent submitted that the Appellant only filed a Memorandum of Appeal and neither attached a Statements of Facts nor the Tax Decision, thereby outrightly flouting the rules and procedure as set out in the statute and does not deserve an audience of the Tribunal. It submitted further that the Tribunal should not provide cover, refuge, and comfort to parties who exhibit scant respect for the rules and timelines of procedure. b) Whether the Respondent Objection Decision is proper 21. The Respondent reiterated its arguments as stated in its Statement of Facts that the Appellant was unable to reconcile the variances established by the Respondent as it was unable to provide Judgement TAT No. E773 of 2025 Lyput Ventures Limited V Commissioner of Domestic Taxes Page 6 of 11 the documentation requested by the Respondent to support its objection. It relied on the case of Mulherin vs Commissioner of Taxation (2013) FCAFC 115. 22. To buttress its argument on the issue of burden of proof, the Respondent referenced the following cases; a) Intime Stone Age Limited vs Commissioner of Domestic Taxes (Appeal 714 of 2022) (2024) KETAT 44 (KLR) (26) January 2024) (Judgement). b) TATC E116 of 2025-TWAWEZA Kenya Apparel EPZ Ltd vs Commissioner Legal Services & Board Coordination. 23. The Respondent submitted that the objection ought to have indicated the documents that the Appellant ought to provide; yet in this instant appeal, the Appellant failed to provide the documents. It asserted, therefore, that the Appellant’s objection fell short. It asserted that it is empowered under Section 59 of the TPA to request more and additional information to satisfy itself on the taxable income declared. 24. It was the Respondent’s submission that Section 23 and 59 of the Tax Procedures Act place an obligation on the Appellant to keep records and produce them when called upon to do so by the Commissioner. The Respondent submitted further that it went out of its way to make follow-up communications with the Appellant to remind it to avail documentation in support of its objection, without any response. 25. The Respondent submitted that Section 56(1) of the TPA and Section 30 of the TAT Act place the onus of proof on the Appellant and that, owing to the failure by the Appellant to avail proper Judgement TAT No. E773 of 2025 Lyput Ventures Limited V Commissioner of Domestic Taxes Page 7 of 11 documentation, it was justified to fully reject the Appellant’s objection. The Respondent’s Prayer 26. The Respondent prayed that the Appellant’s appeal be dismissed with costs, that the Assessment confirmed in the objection decision be upheld, and that the principal taxes and interest be found due and payable as per the objection decision rendered by the Respondent. ISSUES FOR DETERMINATION 27. The Tribunal has considered the parties’ pleadings, documentation, and the Respondent’s submission and is of the view that this appeal raises two issues for determination. a) Whether the Appeal is properly before the Tribunal. b) Whether the Respondent’s Assessment is justified. ANALYSIS AND FINDINGS 28. Having established the two issues for determination, the Tribunal will proceed to analyse them as hereunder. a) Whether the Appeal is properly before the Tribunal. 29. The Tribunal is called upon to determine the validity of this Appeal in light of the Respondent’s contention that the Appeal is incompetent for failure by the Appellant to file its Statement of Facts and the impugned tax decision as required by law. 30. The Tribunal has reviewed the record and notes that the Appellant filed a Notice of Appeal, Memorandum of Appeal, and Judgement TAT No. E773 of 2025 Lyput Ventures Limited V Commissioner of Domestic Taxes Page 8 of 11 Statement of Facts, all dated 23 June 2025. The Tribunal has also confirmed that the Appellant’s tax decision forms part of the record before it. 31. In view of the foregoing, the Tribunal is satisfied that the requisite documents have been duly filed and is therefore properly seized of the matter. Accordingly, the Appeal is competently before the Tribunal and shall proceed to determination on its merits. b. Whether the Respondent’s assessment was justified. 32. The Tribunal notes that the Respondent's assessments arose from variances identified during an audit of the Appellant's tax affairs, including alleged discrepancies between the Income Tax Company returns and VAT returns, purchases declared in the respective returns, and salaries and wages declared for income tax purposes. 33. The Respondent argued that, upon identifying the variances, it requested supporting documentation from the Appellant, including forecourt ledgers, sample invoices, account statements, invoices and expense ledgers, and audited financial statements. 34. The Appellant did not dispute that the requested documents were sought. While the Appellant contended that it had commenced the process of providing the documents, it did not place before the Tribunal sufficient evidence demonstrating that the documents were duly furnished to the Respondent and considered prior to the issuance of the objection decision. 35. The Tribunal observes that the Appellant's case is largely founded on allegations that the Respondent disregarded records and Judgement TAT No. E773 of 2025 Lyput Ventures Limited V Commissioner of Domestic Taxes Page 9 of 11 explanations provided. However, apart from these assertions, the Appellant did not tender evidence before the Tribunal to reconcile the variances identified by the Respondent or to demonstrate that the assessments were excessive, erroneous, or otherwise unsupported. 36. The Tribunal is guided by the principle that the burden of proving that a tax decision is incorrect rests upon the taxpayer, as provided for under Section 56(1) the Tax Procedures Act that provides as follows: “In any proceedings under this Part, the burden shall be on the taxpayer to prove that a tax decision is incorrect” 37. In view of the foregoing, the Tribunal finds that the Appellant failed to discharge this burden. In the circumstances, the Tribunal is satisfied that the Respondent acted within its statutory mandate and that its assessment was justified. FINAL DECISION 38. The upshot of the foregoing is that the appeal lacks merit and the Tribunal proceeds to issue the following orders: a. The Appeal be and is hereby dismissed. b. The Respondent’s Objection Decision dated 20th June 2025 is hereby upheld. c. Each party to bear its own costs. 39. It is so ordered. Judgement TAT No. E773 of 2025 Lyput Ventures Limited V Commissioner of Domestic Taxes Page 10 of 11 DATED and DELIVERED at NAIROBI this ………26th ...……. Day of …… June..…… 2026 ................................................................ DR. RODNEY ODHIAMBO OLUOCH CHAIRMAN ……………………………. ……..............…………….. ABDULLAHI M. DIRIYE DR. ERICK K’OMOLO MEMBER MEMBER Judgement TAT No. E773 of 2025 Lyput Ventures Limited V Commissioner of Domestic Taxes Page 11 of 11