[2024] KETAT 759 (KLR)

Mamiri v Kenya Revenue Authority (Tax Appeal E007 of 2023) [2024] KETAT 759 (KLR) (9 May 2024) (Judgment)

Neutral citation: [2024] KETAT 759 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal E007 of 2023

Grace Mukuha, Chair, E Komolo, Jephthah Njagi, W Ongeti & G Ogaga, Members

May 9, 2024

Between

James Simel Mamiri

Appellant

and

Kenya Revenue Authority

Respondent

Judgment

Background 1. The Appellant is a resident of Kenya and a registered taxpayer.

2. The Respondent is a statutory body duly established under Section 3 of the Kenya Revenue Authority Act Cap. 496 of the Laws of Kenya) as the sole agent of the Government for the assessment and collection of all Government revenue.

3. The Respondent received information based on IFMIS data that showed that the Appellant received payments totaling to Kshs. 36,933,991. 05 from Kajiado Government County for the years 2015 to 2019.

4. The Appellant had filed nil returns for the years 2015, 2016 and 2017, and declared zero business income for the years 2018 and 2019.

5. The Respondent sent a nil filer/credit filer notice to the Appellant on 1st December, 2020 covering the period of income for the years 2015 to 2019, which the Appellant did not respond to.

6. On 19th October, 2021, the Respondent issued additional assessment on account of residential income tax on the Appellant of Kshs. 178,408. 33 inclusive of interest.

7. The Appellant filed a late objection to the assessment on 27th September 2022.

8. The parties thereafter engaged in correspondence where the Respondent sought additional documents from the Appellant. The last correspondence on record was dated 23rd November 2022.

9. On 24th November 2022, the Respondent issued its Objection decision confirming the additional assessments of Kshs. 706,421. 00 for 2017 and 2019.

10. Aggrieved by the Respondent’s Objection decision, the Appellant lodged his Notice of Appeal dated 15th December 2022 and filed on the same date.

The Appeal 11. The Appeal is premised on the Memorandum of Appeal filed on 18th January, 2023 stating the following grounds: -a.That the Respondent erred in facts by raising additional assessment without engaging the taxpayer to give facts on the tax period in question.b.That the Respondent failed to make the amendment of the accounting period in question based on the taxable profits as per the audited books of account for the said period.c.That the Respondent failed to communicate with the taxpayer the shifting of tax station from Thika to Muranga hence failed communication between the parties.

The Appellant’s Case 12. The Appellant’s case is premised on the Appellant’s Statement of Facts filed on 18th January 2023 together with annexures thereto.

13. The Appellant averred that the Respondent raised income tax assessment for the years 2017, 2018 and 2019 on him based on estimated income without engaging him.

14. The Appellant further averred that he responded to the Respondent’s additional assessment orders via objection letters and provided audited accounts for the same periods, yet the Respondent proceeded to confirm the assessments.

15. That communication was not done to the Appellant by the Respondent since there was a change in taxpayer’s email address and his station was changed to Muranga without his knowledge.

16. That the error in filing was done when the taxpayer was not in the Country and had limited access to communication due to the nature of his work.

Appellant’s Prayers 17. The Appellant prayed to the Tribunal for the following orders: -a.That the Respondent’s decision to raise additional income tax assessment for the years 2017, 2018 and 2019 be struck out in its entirety.b.That the Respondent be directed to amend income tax additional assessment for the years 2017, 2018 and 2019 based on audited books of accounts provided by the Appellant.c.Costs of the Appeal.d.Any other remedies the Honourable Tribunal deems just and reasonable.

The Respondent’s Case 18. The Respondent’s case is premised on the following documents filed before the Tribunal: -a.The Respondent’s Statement of Facts dated 21st March 2023 and filed on 23rd March 2023. b.The Respondent’s Written Submissions dated 10th August 2023.

19. The Respondent averred that it received information based on IFMIS data that showed that the Appellant received payments totaling Kshs. 36,933,991. 05 from Kajiado County for the years 2015 to 2019.

20. The Respondent further stated that the Appellant had filed nil returns for the years 2015, 2016 and 2017, and declared zero business income for the years 2018 and 2019.

21. That the Respondent subsequently sent a nil filer/credit filer notice to the Appellant on 1st December 2020 covering the periods of income from the years 2015 to 2019, to which the Appellant did not respond.

22. The Respondent averred that it then proceeded to issue additional assessments and tax due brought to charge on 19th October 2021 to capture variances between income tax sales and VAT sales for the respective years.

23. The Respondent stated that the Appellant objected to the additional assessments on 27th September 2022 vide a letter that stated the following grounds: -a.That the assessments were done without his knowledge.b.That he had cleared his debt with KRA in 2020 that was being handled by the Debt Enforcement Head Office.c.That the nil returns were done erroneously by the then accountant who was handling his tax issues.d.That he wishes to be accorded an opportunity to amend his returns and file proper returns as supposed.e.That he is ready to provide the necessary documentations.

24. The Respondent stated that from documentary evidence and explanations given by its assessing team and Appellant, it is apparent that the Appellant filed nil/zero returns for the periods 2017 and 2019 yet he clearly had business income.

25. That data from IFMIS and VAT returns filed by the Appellant stated that the Appellant had business income for the respective period.

26. That the Appellant averred that his then accountant did nil returns erroneously, and the Appellant requested for opportunity to amend his income tax returns and file the correct returns.

27. That the Respondent requested the Appellant to provide documents to enable the Respondent to determine whether to allow the application to amend the nil returns.

28. The Respondent averred that it requested the following documents from the Appellant: audited accounts for the year 2017 and 2019; source documents for the audited accounts; primary evidence of the cost of sales and expenses claimed in the respective audited accounts; self-assessment return in the provided excel formats for the periods 2017 and 2019; and P9 forms for the period 2017 and 2019.

29. That the Appellant provided the Respondent with the audited accounts on 22nd November 2022 for the periods 2017 and 2019, but did not provide evidence of the expenses and cost of sales.

30. The Respondent stated that it expected the following documents to be provided by the Appellant, which were not provided: detailed schedules for the costs of goods claimed; copies of invoices/receipts for the cost of goods claimed with their respective evidence of payment/purchase; detailed schedules for the expenses claimed and copies of invoices/receipts of the expenses claimed with their respective evidence of payment.

31. That based on the foregoing, the Appellant did not provide valid grounds of objection with evidence and the Respondent proceeded to confirm the additional assessments vide objection decision dated 24th November 2022.

32. The Respondent further averred that the period within which an Appellant should lodge notice of objection is provided for under Section 51(2) of the TPA as 30 days, yet the Appellant lodged his objection the additional assessments on 27th September 2022, which is 11 months late.

33. That the Appellant applied for extension of time to lodge a late objection in terms of Section 51(7) of the TPA, which was allowed but the Appellant did not provide all the documents requested by the Respondent as evidenced by email correspondences between 11th October 2022 to 14th November 2022.

34. That the Respondent was bound by statutory timelines and the documents provided by the Appellant when it proceeded to issues the objection decision on 24th November 2022.

35. That the Appellant lodged an invalid objection that was not supported by all relevant documents contrary to Section 51(3)(c) of the TPA.

36. The Respondent further relied on Section 59(1) of the TPA requiring the Appellant to provide records to enable the Commissioner to determine its tax liability, which the Appellant failed to avail thereby constraining the Respondent to confirm the additional assessments.

37. The Respondent averred that Section 56 of the TPA and Section 30 of the TAT Act places the onus of burden of proof on the Appellant to demonstrate that he had discharged his tax liability, burden which the Appellant has not discharged.

38. The Respondent placed further reliance on Section 31(1) of the TPA, which empowers the Commissioner to amend an assessment.

39. The Respondent, accordingly, urged the Tribunal to find that there is no valid appeal before it.

Respondent’s prayers. 40. The Respondent prayed to the Tribunal for the following orders: -a.The Appeal be dismissed with costs to the Respondent.b.That the Respondent’s additional assessments plus interest and penalties as per Objection decision dated 24th November 2022 be upheld.

Issues for Determination 41. The Tribunal, having carefully reviewed the pleadings and filings made by the parties and the supporting documentation is of the view that the following issue falls for its determination: -Whether the Respondent’s Additional Assessment of the Appellant as per Objection Decision dated 24th November, 2022 is Proper in Law and Justified.

Analysis and Findings 42. The Tribunal takes note of the fact that the substratum of the instant dispute between the Appellant and the Respondent emanates from additional assessments on the Appellant that we confirmed vide the Respondent’s Objection decision dated 24th November 2022.

43. The Respondent submitted that it carried out the additional assessments after noting that the Appellant had filed nil returns and or declared no business income for the periods on dispute, being 2015 to 2019, yet IFMIS and the Appellant’s own VAT returns indicated that he had done business with Kajiado County Government.

44. The Tribunal observes that these factual averments and submissions by the Respondent relating to Appellant’s business with Kajiado County Government are not controverted. Instead, the Appellant extensively submitted that the nil returns were erroneously filed by his then accountant and sought leave to file amended returns out of time.

45. The Tribunal notes that the Respondent’s averments and submissions that it granted leave to the Appellant to lodge late objection Application in terms of Sections 51 (6), 51(7) and 51 (3)(c) of the TPA, but the Appellant did not provide the necessary supporting documents and therefore his objection was invalid.

46. The Tribunal further notes that both the Appellant and the Respondent, from their submissions, concur that the Appellant did provide his audited accounts for the period in dispute.

47. It was, however, the contention of the Respondent that the Appellant did not provide important documents requested including the following: detailed schedules for the costs of goods claimed; copies of invoices/receipts for the cost of goods claimed with their respective evidence of payment/purchase; detailed schedules for the expenses claimed and copies of invoices/receipts of the expenses claimed with their respective evidence of payment.

48. This factual deposition is also not contested by the Appellant, and indeed it is the submission of the Respondent that it was under statutory duty to make an objection decision in compliance with statutory timelines.

49. From the totality of the evidence before the Tribunal, the Tribunal notes that outside the averments, the Appellant neither provided nor annexed documents and additional information requested by the Respondent, and which would have informed amendment of the impugned additional assessments.

50. The Tribunal notes that the duty to make full and accurate disclosures in tax matters vests with the Appellant and this is now settled law in tax disputes in Kenya. In this regard, the Tribunal reiterates the authority in Commissioner of Investigations and Enforcement vs Kidero (Income Tax Appeal E028 of 2020 eKLR, where it was held that: -“…the duty imposed on the taxpayer to keep records and the provisions on the burden of proof all go to support the Kenyan tax collection regime which is centered on a system of self-assessment. This system relies on the taxpayer making full and good faith disclosures in their tax declaration and affairs and hence empower the Commissioner to demand documents from time to time when investigating the affairs of a taxpayer…”

51. The Tribunal notes that the Respondent’s contention that the Appellant did not provide sufficient information and documents to vacate its additional assessment and that led to objection decision dated 24th November, 2022 is largely unrebutted. Indeed, there is nothing on the record before us to conclude that the Appellant provided such information and documents, which could have led to shifting of burden of proof to the Respondent.

52. The Tribunal has previously addressed itself on the obligation of parties in tax matters and the shifting of burden of proof. In Digital Box Limited vs Commissioner of Investigations and Enforcement (2020) eKLR, this Tribunal observed as follows: -“The question of burden of proof in taxation matters is provided for under the Tax Procedures Act as well as the Tax Appeals Tribunal Act. Section 56(1) of the Tax Procedures Act stats that: ‘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 similarly provides that: 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; orb.In any other case, that the tax decision should not have been made or should have been made differently.”In this case, the Appellant is the one seized of the desire to prove that the Respondent used extraneous information in arriving as its assessment. Thus, according to the provisions of Evidence Act, the Tax Procedures Act and the Tax Appeals Tribunal Act, the burden of proof falls upon the Appellant…the Tribunal is of the view that the Appellant did not discharge its burden proof in showing that the Respondent used extraneous considerations and documents other than those prescribed in the law. The averments made by the Appellant did not amount to evidence.”

53. In the instant case, the Tribunal is of the considered view that the Appellant has not discharged his obligation and proved that he provided the information and documents to the Respondent. Indeed, the Appellant did not even make effort to annex those relevant documents and information as part of the instant Appeal.

54. Accordingly, the Tribunal holds that the Appellant has failed to discharge his burden of proof.

Final Decision 55. The upshot of the foregoing is that the Appeal fails 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 November 2022 be and is hereby upheld.c.Each party to bear its own costs.

56. It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 9TH DAY OF MAY, 2024GRACE MUKUHA - CHAIRPERSONDR. ERICK KOMOLO - MEMBERJEPHTHAH NJAGI - MEMBERDR. WALTER J. ONGETI - MEMBERGLORIA A. OGAGA - MEMBER