[2024] KETAT 145 (KLR)

Mbari v Commissioner of Domestic Taxes (Tax Appeal 1282 of 2022) [2024] KETAT 145 (KLR) (9 February 2024) (Judgment)

Neutral citation: [2024] KETAT 145 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal 1282 of 2022

RM Mutuma, Chair, BK Terer, EN Njeru, M Makau & W Ongeti, Members

February 9, 2024

Between

Stephenson Karuri Mbari

Appellant

and

Commissioner of Domestic Taxes

Respondent

Judgment

Background 1. The Appellant is an individual engaged in several businesses in real estate by way of owning residential and commercial rental properties.

2. The Respondent is a principal officer appointed under and in accordance with Section 13 of the Kenya Revenue Authority Act, the Authority is charged with the responsibility of among others, assessment, collection, accounting, and the general administration of tax revenue on behalf of the Government of Kenya.

3. The Respondent carried out investigations on the Appellant’s tax affairs and indicated that it found that the Appellant owned several properties as per KPLC data for which rental income was not properly declared for tax purposes.

4. Pursuant to several engagements between the parties herein, the Respondent issued the Appellant with an assessment dated 18th August 2020 for Income tax for the period 2014 to 2019 in the sum of Kshs. 31,415,550. 00.

5. Subsequently, the Respondent issued four (4) Assessment Orders on iTax i.e. KRA 20xxxx61, KRA 20xxxx66, KRA 20xxxx1, KRA 20xxxx11 and Default assessment No. KRA 20xxxx68 on the 10th October 2020 totaling to Kshs. 19,911,609. 44.

6. The Appellant being dissatisfied filed his notice of objection on 26th October 2020.

7. The Respondent issued its Objection decision invalidating the Appellant’s Objection through a letter dated 17th December 2020.

8. The Appellant being aggrieved by the Respondent’s decision filed a Notice of Appeal dated 31st October 2022, with leave of the Tribunal.

The Appeal 9. The grounds of the Appeal are outlined in the Memorandum of Appeal dated and filed on 31st October 2022 and as summarized hereunder:a.That the Respondent claimed assessments amounting to Kshs. 31,415,550. 00 in respect to alleged Income tax for the period 2014 to 2019 and subsequently leading to this Appeal challenging the same pursuant to Section 52 of the Tax Appeals Tribunal Act 2013. b.The Respondent erred in law and by fact by assessing taxes and demanding the production of documents in contravention of Section 23 (1) (c) of the Tax Procedures Act No. 29 of 2015 which provides:“Subject to Subsection (3), retain the document for a period of five years from the end of the reporting period to which it relates or such shorter period as may be specified in Tax Law."c.That the Respondent relied on hearsay in estimating alleged rental income, without providing actual evidentiary proof of such fact, even after being given all the documentary evidence by the Appellant which it ignored yet tax law provides that the taxes paid must be factual and just.d.That the Respondent erred in fact by considering electricity meters application as ownership of the houses for purposes of imposing tax, and that the personal PIN of the Applicant was used to apply for such electricity meters for properties owned by Master Enterprises Limited a company where the Appellant is a director and the same has already been canvassed in great detail under Appeal No 265 of 2021 Master Enterprises Limited vs. the Commissioner and the Judgement delivered on 14th April 2021 hence the current assessment to the Appellant amounts to double taxation.e.That the Respondent confirmed the notice of assessment without due regard to all records, explanations and information provided by the Appellant thereby failing to appreciate all issues presented by the Appellant before confirming the assessment.f.That the amounts confirmed by the Respondent of Kshs. 31,415,550. 00 in respect to Income tax for the period January 2014 to 2019 is therefore wrong in law and fact and should be annulled.

The Appellant’s Case 10. According to the Appellant, the tax audit of the Appellant was triggered by the Respondent by giving a notice of demand pursuant to Sections 59 (1) (c) and 61 of the Tax Procedure Act on 18th May 2020 with a follow up letter on 20th July 2020.

11. Despite the Respondent carrying out a physical audit at the Appellant premises on 18th August 2020, the Appellant stated that the Respondent went ahead and issued a notice of assessment of income for the Period 2014 to 2019 of Kshs. 31,415,550. 00 and demanded an immediate payment of tax or give a notice of objection in writing with 30 days pursuant to the provisions stipulated under Section 51 of the tax Procedures Act No. 29 of 2015.

12. That the notice of assessment dated 18th August 2020, demanded Kshs. 31,415,550. 00 while Assessment Orders on iTax, particularly KRA 20xxxx61, KRA 20xxxx66, KRA 20xxxx31, KRA 20xxxx11 and Default Assessment No. KRA 20xxxx68 totaling to Kshs. 19,911,609. 44.

13. The Appellant asserted that the Respondent’s assessment taxes for the year 2014 dated 16th October 2020, are time barred pursuant to Section 29 (5) of the TPA. The Appellant therefore raised the issue of the respondent's contravening Section 23 (1) (c) of the Tax Procedures Act which state that:“Subject to Subsection (3) retain the document for a period of five years from the end of the reporting period to which it relates or such shorter period as may be specified in Tax Law."

14. It is the Appellant’s case that the Respondent did not have any justification to carry out the assessments as interpreted under Section 29 (6) of the TPA, which provide Subsection (5) shall not apply in the case of gross or willful neglect, evasion or fraud by a taxpayer. The Appellant further posited that the burden of proof pursuant to Sections l07 and Section 108 of the Evidence Act rests on the Respondent to prove that the Appellant's failure to file returns was motivated by gross or willful neglect to file returns, in an attempt to evade paying taxes.

15. In Appellant’s view, the Respondent failed to consider and prove the Appellant’s breach of Section 29 (6) of the TPA so as to justify making assessments concerning taxes for the year 2014, notwithstanding the five-year limit rule.

16. The Appellant stated that on 26th October 2020, he filed an objection to the demanded tax as provided for in law stating the grounds of objection and providing all the relevant documentation pursuant to Section 51 (3) (c) of the Tax Procedures Act No. 29 of 2015.

17. From 25th November 2020 to 17th December 2020 several emails and documents were shared between the Appellant and the Respondent culminating into an invalidation letter dated 17th December 2020.

18. The Appellant herein posited that the Respondent has not invalidated the Objection on iTax to date, and that the claims as alleged were well canvassed in the courts Judgment under Appeal No 265 of 2021 Master Enterprises Limited vs. the Commissioner. The Appellant maintained that all documents provided under the above stated matter, gave an insight on who owned the properties and the Court made a determination on the same.

19. According to the Appellant, looking at the communication from the Respondent, there does not appear to be any document that can be pointed out to meet all the tenets of an objection.

20. It is also the Appellant’s case that once the Appellant denied that he owned the properties, the onus was therefore on the Respondent to justify the notice of assessment by providing copies of the documents and material relied upon in arriving at that tax demand as held in the co-director's matter TAT Appeal No. 191 of 2021 Jose Waigwe Karuri vs. The Commissioner of Domestic Taxes.

21. According to the Appellant’s written submissions, the issues for determination are as follows:a.Whether the Respondent acted Ultra Vires in issuing an assessment for the year 2014; andb.Whether the Respondent was right in assessing the Appellant and demanding settlement of taxes attributable to Master Enterprises Limited.a.Whether the Respondent Acted Ultra Vires in Issuing an Assessment for the Year 2014

22. The Appellant submitted that the Respondent acted ultra vires to the provisions of the Tax Procedures Act (No. 29 of 2015) by raising an additional assessment with regards to the 2014 year of income.

23. According to the Appellant, Section 29 (5) of the Tax Procedures Act limits the period within which the Respondent can issue such an assessment by providing as follows;“Subject to subsection (6), an assessment under subsection (1) shall not be made after five years immediately following the last date of the reporting period to which the assessment relates.”

24. Therefore, the Appellant added that the Respondent assessment taxes for the year 2014 dated 16th October 2020, are time barred pursuant to Section 29 (5) of the Tax Procedures Act.

25. Further, the Appellant posited that Section 29 (6) of the Tax Procedures Act allows the Respondent to carry out an assessment beyond the five-year period in cases of willful neglect or fraud. According to the Appellant, it is trite law that fraud must be both specifically alleged and proved. The Respondent should not be allowed to assess tax by merely stating that there was fraud or willful neglect on the part of the Appellant without providing sufficient proof. Without proof, the Respondent's assessment in respect of year 2014 is without basis in law. The burden of proving any willful neglect or fraud is on the Respondent which in this case, the Appellant submits, the Respondent had not fulfilled.

26. The Appellant relied on the case of Kenya Revenue Authority vs. Jimmy Mutuku Kiamba [2015] eKLR where the learned judge analyzed the provision of the now repealed provisions of Section 79 of the Income Tax which similarly granted the Respondent powers to assess outside the statutory period of 7 years in cases of willful neglect or fraud and stated as follows:“…by dint of the provisions of section 79 (1) (a) of the Income Tax Act, the Kenya Revenue Authority is permitted to conduct an assessment of tax even after the lapse of 7years, provided that the person for who tax was being assessed, willfully neglected an accurate self-assessment, · or where the said person was deemed to have been fraudulent.’" ...I am very cautious about being perceived as making any pronouncement which could be construed to imply that the Respondent was guilty of a criminal offence yet he had not been charged, tried and convicted for any such criminal offence. It is important to distinguish between criminal culpability and civil liability. A person is only said to be criminally culpable upon his being convicted for a criminal offence. And in order for the court to find somebody criminally culpable, the evidence adduced must prove the guilt of that person beyond any reasonable doubt ... "

27. The Appellant submitted that its director has not at any time been tried and convicted for a criminal offence in relation to fraud and therefore the Respondent's cannot purport to rely on the provisions of Section 29 (6) to assess the Appellant or the director outside the five-year statutory period. Any attempt to so do can only be termed as ultra vires to the clear provisions of the law.

28. That according to the Appellant, the Respondent further did not have any justification to carry out the assessments as interpreted under Section 29 (6) of the TPA, which provides Subsection (5) shall not apply in the case of gross or willful neglect, evasion or fraud by a taxpayer.

29. The Appellant submitted that the burden of proof pursuant to Sections 107 and 108 of the Evidence Act rests on the Respondent to prove that the Appellant's failure to file returns was motivated by gross or willful neglect to file returns, in an attempt to evade paying taxes.

30. According to the Appellant, on 26th October 2020, he filed an objection to the demanded tax as provided for in law stating the grounds of objection and providing all the relevant documentation pursuant to Section 51 (3) (c) of the Tax Procedures Act No. 29 of 2015.

31. Apart from the foregoing, the Appellant submitted that from 25th November 2020 to 17th December 2020 several emails and documents were shared between the Appellant and the Respondent culminating into an invalidation notice letter dated 17th December 2020.

b. Whether the Respondent was Right in Assessing the Appellant and Demanding Settlement of Taxes Attributable to Master Enterprises Limited 32. On this issue, the Appellant submitted that the Respondent has not invalidated the objection on iTax to date, and that the claims as alleged were well canvassed in the courts Judgment under Appeal No. 265 of 2021 Master Enterprises Limited vs. the Commissioner. That all documents provided under the above stated matter, gave an insight on who owned the properties and the court made a determination on the same.

33. Looking at the communication from the Respondent, it is the Appellant’s case that there does not appear to be any document that can be pointed out to meet all the tenets of an Objection.

34. According to the Appellant herein, once the Appellant denied that he owned the properties, the onus was therefore on the Respondent to justify the notice of assessment by providing copies of the documents and material relied upon in arriving at that tax demand as held in the co-director's matter in TAT Appeal No. 191 of 2021 Jose Waigwe Karuri vs. The Commissioner of Domestic Taxes. According to the Appellant, it is not clear why after its findings as above; the Respondent went ahead to issue an assessment to the Appellant including assessment of the company's tax affairs.

35. Additionally, the Appellant submitted that the Respondent failed to take into account the provisions of the Companies Act, which clearly provide that upon a company’s registration, the company acquires a legal personality different from its directors. This position has long been enunciated since the 1896 in the famous House of Lords decision of Salomon vs. Salomon, and quoting Lord Halsbury L.C in the unanimous holding:“t seems to me impossible to dispute that once the Company is legally incorporated it must be treated like any other independent person with its rights and liabilities appropriate to itself...... I can only find the true intent and meaning of the Act from the Act itself; and the Act appears to me to give a company a legal existence with, as I have said, rights and liabilities of its own ...’’

36. In Appellant’s view, the holding in Salomon vs. Salomon has recently been buttressed by the High Court vide a Ruling delivered by Honourable Grace Nzioka L.J in Nairobi H. C. C. C. No. 15 of 2018; Styles Industries Limited vs. Kenya Revenue Authority & Anor wherein the court stated;“The general principles of company law states that the legal consequences of incorporation of a company is to make it a separate and independent legal entity from its own shareholders and/or directors (See Salmon vs Salmon & Co's case). Therefore, the two subject companies herein shall be treated as such.”

37. The Appellant submitted that the Respondent issued its assessment to the Appellant on taxes arising from what were clearly findings of the director's tax affairs, away for the Appellant. The Appellant further submitted that as per the holding in Salmon vs. Salmon, the director being the Appellant is separate from the entity that is Master Enterprises Limited. What the Respondent ought to have done and which it failed to do was to issue different tax assessments culminating into different objection decisions hence separate Appeals.

38. In the circumstances, the Appellant submitted that to the extent that the assessment was issued to and addressed to the Appellant, the same is a nullity ab initio to the extent that it relates to the tax affairs of Master Enterprises Limited.

Appellant’s Prayers 39. The Appellant requested the Tribunal to;i.Set aside the assessment amounts on the basis of incorrect interpretation of the law and fact by the Respondent, andii.Hold that the same were already taxed and well canvassed under Appeal No 265 of 2021 Master Enterprises Limited vs. the Commissioner and TAT Appeal No. 191 of 2021 Jose Waigwe Karuri vs. The Commissioner of Domestic Taxes and that the confirmed assessments be set aside.

The Respondent’s Case 40. In response to the Appeal, the Respondent presented its;i.Statement of Facts dated and filed on 17th November 2022, andii.Written submissions dated and filed 5th July 2023.

41. That the Respondent stated it carried out investigations on the Appellant and found that the Appellant owned several properties as per KPLC data for which rental income was not properly declared for tax purposes.

42. The investigations carried out on the Appellant indicated that the directors and the company owned several properties as per KPLC data for which rental income was not properly declared for tax purposes. The meters were in relation to houses in Umoja1, Huruma, Ngei and Athi River. The Respondent estimated the rental income per unit based on the location was calculated as per table below:

43. The Respondent alleged that it notified the Appellant of the commencement of the review of the Appellant’s tax returns through a notice dated 18th May 2020. Through the notice the Respondent requested the Appellant to provide bank statements for the years 2014 to 2019 before 29th May 2020.

44. Based on the above estimates for income and the Appellant having not produced the documents as requested, the Respondent raised additional assessments and sent a demand letter indicating the additional tax payable as follows:

45. The Respondent stated that it issued another demand for taxes due through a letter dated 18th August 2020. The Appellant lodged an objection through a letter dated 26th October 2020. The Respondent acknowledged the Objection through an email dated 19th November 2020 and requested records in relation to rental income as indicated in the demand letters. There was no immediate response from the Appellant and Respondent sent another email on 1st December 2020. The Appellant was given seven days to respond accordingly and advised that failure to do so would result in invalidation of the objection notice in line with Section 51 (4) of the TPA.

46. It is the Respondent’s case that the Appellant failed to respond and avail the documents resulting in invalidation of Objection through a letter dated 17th December 2020. According to the Respondent, upon receipt of notice of invalidation, the Appellant responded through a letter dated 21st December 2020 stating the following about the properties in contention:i.Kyumbi/Athi River/619 - The taxpayer has never owned this property, hence no income from the same.ii.Umoja 1 Plot C5269 - Income from the property was accounted for under Masters Enterprises ltd a company where Mr. Mbari is a director.iii.Ngei Estate Phase 2, plot 19 - The family resided on this property hence no income.iv.Hururna Juja Road Plot 20 - Income from the property was accounted for under Masters Enterprises ltd a company where Mr. Mbari is a director.

47. On whether the assessments were correctly raised, the Respondent stated that Section 5 (2) of the Kenya Revenue Authority Act places an obligation on the Respondent to enforce all tax laws. It provides that:“In the performance of its functions, the Authority is mandated to Administer and enforce the provisions of the written laws, set out in part II of the First Scheduled relating to revenue and for that purpose, to assess, collect and account for all revenues in accordance with those laws. ……to advise the Government on all matters relating to the administration and collection of revenue under the written laws.”

48. In fulfilling its mandate, the Respondent noted that it is not bound by the tax returns of the Appellant. The Respondent may asses a taxpayer's tax liability using any information available to the Respondent as provided for in Section 24 (2), Tax Procedure Act, 2015 which provides as follows:-“The Commissioner shall not be bound by a tax return or information provided by, or on behalf of, a taxpayer and the Commissioner may assess a taxpayer's tax liability using any information available to the Commissioner.”

49. The Respondent relied on Section 23 of the Tax Procedures Act, which requires the Appellant to keep tax records in a manner that his tax liability can be easily determined. The Appellant was required to avail the documents as provided under Section 59 of Tax Procedures Act. The Respondent requested for the bank statement from the Appellant for the years under review but the Appellant did not avail any.

50. The Respondent provided a basis for the assessment which was information from Kenya Power & Lighting Company on the meters registered under the KRA Pin of the Appellant. According to the Respondent, the Appellant through a letter dated 21st December 2020, acknowledged the property which he had earlier denied through a letter dated 26th October 2020.

51. That the Appellant through its letter dated 21st December 2020 and Paragraph 4 of the grounds of Appeal has alleged that the properties in the assessment had been declared by Masters Enterprises Limited giving rise to TAT Appeal No. 265 of 2021. However, according to the Respondent, the Appellant has not adduced records by Masters Enterprises to determine that indeed the properties were declared by Master Enterprises as it claims.

52. The Respondent maintained that until the Appellant can bring documents for the specified house as claimed by the Appellant, double taxation cannot be claimed. Further, the Respondent argued that the burden is on the Appellant to avail the records of Masters Enterprises Limited and reference in those records where the assessed houses are indicated.

53. The Respondent therefore denied the assertions that the houses were declared under Masters Enterprises Limited and put the Appellant to strict proof to demonstrate the same.

54. The Respondent averred that immediately it availed records from Kenya Power & Company Ltd indicating that the Appellant had registered several meter numbers using his KRA PIN the burden shifted to the Appellant to prove that he was not the owner of the houses and mere rhetoric is not supported in law.

55. The Respondent also averred that it is empowered to use best judgement based on the available information in making its decision. The Respondent used the electric meter information to determine the Appellant as the owner of the houses and estimated the rental rates since the Appellant refused to provide records requested by the Respondent.

56. On whether the notice of objection was valid, the Respondent stated that Section 51 (3) of the Tax Procedures Act provides that:“A notice of objection shall be treated as validly lodged by a taxpayer under subsection (2) if-(a)the notice of objection states precisely the grounds of objection, the amendments required to be made to correct the decision, and the reasons for the amendments;(b)in relation to an objection to an assessment, the taxpayer has paid the entire amount of tax due under the assessment that is not in dispute or has applied for an extension of time to pay the tax not in dispute under section 33 (1); and(c)all the relevant documents relating to the objection have been submitted.”

57. It is the Respondent’s case that the Appellant objected through a letter dated 26th October 2020, which had made reference to houses in Buruburu, Ruaka, Jericho and Parklands in paragraph 1 and 2 of the said letter. However, on the demand notice dated 20th July 2020 the Respondent only referred to houses in Umoja 1, Huruma, Ngei and Athi River therefore that objection and those paragraphs were misplaced and not in relation to the assessment.

58. According to the Respondent, the Objection did not comply with Section 51 (3) (a) and 51 (3) (c), however the Appellant was notified and informed to remedy the defects through an email dated 19th November 2020. The Respondent invalidated the objection on 17th December 2020, however the Respondent was still willing to engage the Appellant whenever the documents requested are availed.

59. That instead of the Appellant complying with the provisions of the law as advised, the Respondent stated that the Appellant refused to provide documents in support of his objection and as requested by the Respondent and further stated in his email dated 21st December 2022 that production of the documents is not a legal requirement.

60. That it is the Respondent’s case that through the letter dated 21st December 2020 the Appellant indicated that the Properties in Umoja and Huruma were accounted for under Masters Enterprises Ltd but nothing was attached to demonstrate the assertions. The Respondent through an email dated 22nd December 2020 reminded the Appellant that no documents from Master Enterprises Ltd were attached.

61. The Respondent maintained that it correctly invalidated the objection for non-compliance to Section 51 (3) of the Tax Procedures Act. All relevant supporting documents were not provided in support of the objection. Consequently, the Respondent stated that the burden lies with the Appellant to proof that the decision of the Respondent is wrong pursuant to Section 56 (1) of the Tax Procedures Act.

62. According to the Respondent’s submissions, the following issues are for determination:

i. Whether the assessments were correctly raised. 63. It is the Respondent’s submissions that the Respondent provided a basis for the assessment, which was information from Kenya Power & Lighting Company on the meters registered under KRA Pin of the Appellant.

64. The Respondent submitted that it can assess a taxpayer's tax liability using any information available to the Respondent and is not bound by the tax returns of the Appellant. This is provided in Section 24 (2) Tax Procedure Act which states:-“The Commissioner shall not be bound by a tax return or information provided by, or on behalf of, a taxpayer and the Commissioner may assess a taxpayer's tax liability using any information available to the Commissioner.”

65. The Respondent further submitted that Section 23 of Tax Procedures Act requires the Appellant to keep tax records in a manner that his tax liability can be easily determined. Section 23 of Tax Procedure Act provides that:“(1)A person shall—(a)Maintain any document required under a tax law, in either of the official languages;(b)Maintain any document required under a tax law so as to enable the person's tax liability to be readily ascertained; and(c)subject to subsection (3), retain the document for a period of five years from the end of the reporting period to which it relates or such shorter period as may be specified in a tax law.’

66. The Respondent submitted that it requested for bank statements for the years under review but the Appellant failed to provide the same. That this is contrary to Section 59 of Tax Procedures Act that provides:“(1)For the purposes of obtaining full information in respect of the tax liability of any person or class of persons, or for any other purposes relating to a tax law, the Commissioner or an authorized officer may require any person, by notice in writing, to –(a)produce for examination, at such time and place as may be specified in the notice, any documents (including in electronic format) that are in the person's custody or under the person's control relating to the tax liability of any person;(b)Furnish information relating to the tax liability of any person in the manner and by the time as specified in the notice; or(c)Attend, at the time and place specified in the notice, for the purpose of giving evidence in respect of any matter or transaction appearing to be relevant to the tax liability of any person.”

67. That the Appellant alleged that the properties in the assessment had been declared by Masters Enterprises Limited giving rise to TAT Appeal No. 265 of 2021. On the other hand, the Respondent averred that the Appellant failed to avail any evidence to show that taxes in respect to rental income had been declared and paid by Masters Enterprises Limited. The Appellant in this regard failed to satisfy the burden placed under Section 56 (1) of Tax Procedure Act, 2015 which provides:“In any proceedings under this Part, the burden shall be on the taxpayer to prove that a tax decision is incorrect.”

68. The Respondent submitted that it used its best judgement based on available information to make its decision. The records from Kenya Power and Lightening Corporation indicated that the electric meters of the aforementioned houses are registered to the Appellant which would then make any reasonable man to believe the Appellant to be the owner of the said houses.

69. The Respondent cited the case of Boleyn International Ltd vs. Commissioner of Investigations and Enforcement, Nairobi TAT Appeal no. 55 of 2018 where the Tribunal held that:“We find that the Appellant at all times bore the burden of proving that the Respondent's decisions and investigations were wrong. The Tribunal is guided by the provisions of Section 56(1) of the TPA, 2015 which states: In any proceedings under this part, the burden shall be on the taxpayer to prove that a tax decision is incorrect. Further, the Tribunal finds the following paragraph from Pierson vs. Belder (H.M. Inspector of Taxes) (1956-1960) 38 TC 387 to be instructive: But the matter may be disposed of, I think, even more shortly in this way: there is an assessment made by the Additional Commissioners upon the Appellant; it is perfectly clearly settled by cases such as Norman v. Golder, 26 T.C. 293, that the onus is upon the Appellant to show that the assessment made upon him is excessive or incorrect; and of course he has completely failed to do so. That is sufficient to dispose of the appeal, which accordingly I dismiss with costs."

70. The Respondent further submitted and relied on Gashi vs. Respondent of Taxation [2012] FCA 638, where the court stated that:“it is not enough for the applicants to establish that the Respondent's estimations were mistaken or erroneous in some or even many respects. It is necessary that they go further and establish what their taxable incomes actually were. If, in the course of that project, they demonstrate that they were not in partnership, and/or that their own incomes did not contribute to accretions in the assets of other members of the family, all well and good. But the bottom-line question, as it were, will always be: what were the taxable incomes of the applicants? It is for them to determine how they will go about answering that question."

71. The Respondent submitted that the Appellant has failed to discharge the onus of proving that the Respondent relied on wrong in its assessments and objection decision.

ii. Whether the Notice of Objection is valid 72. The Respondent submitted that Section 51 (3) of the Tax Procedures Act provides that:-‘‘A notice of objection shall be treated as validly lodged by a taxpayer under subsection (2) if-(a)the notice of objection states precisely the grounds of objection, the amendments required to be made to correct the decision, and the reasons for the amendments; and(b)in relation to an objection to an assessment, the taxpayer has paid the entire amount of tax due under the assessment that is not in dispute(c)All the relevant documents relating to the objection have been submitted.’’

73. The Respondent submitted that Appellant objected through a letter dated 26th October 2020 which made reference to houses in Buruburu, Ruaka, Jericho and Parklands in paragraphs 1 and 2 of the said letter. However, on the demand notice dated 20th July 2020 the Respondent only referred to houses in Umoja 1, Huruma, Ngei and Athi River therefore those paragraphs were misplaced.

74. That the Objection notice failed to comply with Sections 51 (3) (a) and 51 (3) (c) of the TPA. The Respondent notified the Appellant and informed him to remedy the defects through an email dated 19th November 2020. In addition, the Respondent submitted that the Appellant through an email dated 21st December 2020 stated that production of documents is not a legal requirement.

75. It is the Respondent’s case that the Appellant failed to provide evidence to support its objection and;i.That the tax had been accounted for in the accounts of another company;ii.That some of the properties are in use as residential premises for his family;iii.What the correct rents for the premises were;iv.The list of rental premises that are excluded for purposes of imposing tax.

76. The Respondent was of the view that the conduct of the Appellant in this matter is similar to that of the Appellant in TAT No. 394 of 2018 Nextgen Office Suites Limited vs. Commissioner of Domestic Taxes; where the Tribunal held that“The Appellant's objection notice has violated this last requirement in order to fully meet the validity threshold of the notice of objection. However, the Commissioner was accommodating enough to remind the Appellant to provide the several documents in order to make a conclusive determination on notice of objection. The Appellant's failure in submitting these documents in a timely manner speaks to callous disregard for the requirements of the Tax Procedures Act both in terms of the validity requirements of objection notices and the timeless set therein.”

77. The Respondent also relied on TAT No. 618 of 2020 Ahmed Salah Mohamed vs. Commissioner of Domestic Taxes in paragraph 21 where this Tribunal held,“the Tribunal has carefully read the Appellant's Notice of Objection and observes that nowhere in the said objection has the Appellant alluded to providing evidence to support his case.”In the same case, the Tribunal held in paragraph 26,“the Tribunal is of the view that the Appellant has not adduced any evidence to support his contention. A mere averment is not sufficient to prove any claim.”Further, in paragraph 30 of the Judgement, the Tribunal held;“It is the Tribunal's view that the Appellant has failed to demonstrate the desire to prosecute his case by not availing adequate documentary evidence to support his case ......”

78. From the foregoing, the Respondent submitted that the Appellant failed to meet the requirements of Section 51 (3) of the Tax Procedures Act and subsequently failed to sufficiently discharge its burden of proof as provided in Section 56 (1) of the Tax Procedures Act.

The Respondent’s Prayers 79. The Respondent prayed that the Tribunal be pleased to hold as follows:i.The Respondent's decision dated 17th December 2020 as proper in law and in conformity with the provisions of the Tax Procedures Act, 2015 and the Income Tax Act.ii.That the Appeal be dismissed with costs to the Respondent as the same is devoid any merit.

Issues for Determination 80. The Tribunal has carefully studied the parties pleadings and submissions and is of the respectful view that the issues that call for its determination are as hereunder:a.Whether the Notice of objection was validly lodged under Section 51 (3) (c) of the Tax Procedures Act;b.Whether the 2014 assessments are time barred;

Analysis and Findings 81. The Tribunal addresses issues as hereunder: -a.Whether the Notice of objection was validly lodged under Section 51 (3) (c) of the Tax Procedures Act;

82. The Respondent submitted that since the notice of objection failed to comply with Sections 51 (3) (a) and (c) of the Tax Procedures Act, it notified the Appellant and informed him of to remedy the defects through an email dated 19th November 2020. In addition, the Respondent submitted that the Appellant through an email dated 21st December 2020 stated that production of documents is not a legal requirement.

83. The Respondent’s assertions call for the Tribunal to evaluate the Appellant’s notice of objection vis a vis the provisions of the law. Section 51 (3) of the Tax Procedures Act provides as follows with regard to a notice of objection:-‘‘A notice of objection shall be treated as validly lodged by a taxpayer under subsection (2) if—(a)the notice of objection states precisely the grounds of objection, the amendments required to be made to correct the decision, and the reasons for the amendments;(b)in relation to an objection to an assessment, the taxpayer has paid the entire amount of tax due under the assessment that is not in dispute or has applied for an extension of time to pay the tax not in dispute under section 33(1); and(c)All the relevant documents relating to the objection have been submitted.’’

84. The failure to comply with the provisions of Section 51 (3) of the Tax Procedures Act renders the notice of objection invalid. When the notice of Objection is invalid, the Respondent has a duty under Section 51 (4) of the Tax Procedures Act to notify the taxpayer to regularize the notice of objection. The said Section 51 (4) provides as hereunder:‘‘Where the Commissioner has determined that a notice of objection lodged by a taxpayer has not been validly lodged, the Commissioner shall within a period of fourteen days notify the taxpayer in writing that the objection has not been validly lodged.’’

85. The Respondent submitted that the notice of objection was invalid and that it notified that the Appellant to provide documents in support of the notice of objection. The Appellant has not attempted to deny that the Respondent informed him that the notice of objection was invalid.

86. That it is the Respondent’s case that when it requested for documents, there was no immediate response from the Appellant and Respondent sent another email on 1st December 2020 but the Appellant failed to avail the documents resulting in invalidation of the objection through a letter dated 17th December 2020. The Respondent alleged that the Appellant finally responded to the notice of invalidation on 21st December 2020 but failed to provide supporting documents on time. The question then is whether the Appellant complied with Section 51 (3) (c) of the Tax Procedures Act, which requires a taxpayer to provide all the relevant documents relating to the objection for the objection to be valid.

87. The Appellant maintained that once the Appellant denied that he owned the properties, the onus was on the Respondent to justify the notice of assessment by providing copies of the documents and material relied upon in arriving at the tax demand as held in the co-director's matter TAT Appeal No. 191 of 2021 Jose Waigwe Karuri vs. The Commissioner of Domestic Taxes.

88. The defense that the Appellant puts forth is that the Respondent erred in fact by considering electricity meters application as ownership of the houses for purposes of imposing tax, and that the personal PIN of the Appellant was used to apply for such electricity meters for properties owned by Master Enterprises Limited a company where the Appellant is a director and the same has already been canvassed in great detail under Appeal No. 265 of 2021 Master Enterprises Limited vs. the Commissioner and the Judgement delivered on 14th April 2021 hence the current assessment to the Appellant amounts to double taxation.

89. The Tribunal has examined the pleadings as filed by the Appellant and notes that the Appellant admitted that he is a director of Master Enterprises Limited. The Appellant also admitted that he used his KRA PIN to register properties belonging to Master Enterprises Limited. However, the Appellant failed to adduce ownership documents to indicate that the assessed properties to do not belong to him but belong to Master Enterprises Limited.

90. The Tribunal has perused the pleadings and notes that there are no documents of ownership filed in relation to any of the properties forming subject of the assessment. However, the Appellant has not denied that the electricity meters to the properties were registered using his KRA PIN. It appears that the KRA PIN is the link between the properties in issue and the Appellant.

91. Moreover, the Appellant did not deny this allegation that it had not provided documents in support of it Objection and the Tribunal having perused the email of 1st December 2020 from the Respondent informing the Appellant to regularize the Objection, then, the Tribunal arrives at the position that the Respondent discharged its legal mandate under Section 51 (4) of the Tax Procedures Act.

92. Due to the foregoing, the Tribunal finds that the Appellant failed to discharge its mandate under Section 51 (3) (c) of the Tax Procedures Act.

93. Consequently, the Tribunal finds and hold that the Appellant’s notice of objection was not validated by the Appellant in accordance with Section 51 (3) (c) of the Tax Procedures Act.

94. Consequently, the Tribunal having established that the notice of objection is invalid under Section 51 (3) (c) of the Tax Procedures Act, it did not delve into other issue.

Final Decision 95. The upshot of the foregoing is that the Appeal is unmerited and the Tribunal makes the following Orders: -a.The Appeal be and is hereby dismissed.b.The Respondent’s decision invalidating the Appellant’s notice of objection issued on 17th December 2020 be and is hereby upheld;c.Each party to bear its own costs

96. Orders accordingly.

DATED AND DELIVERED AT NAIROBI THIS 9TH DAY OF FEBRUARY, 2024ROBERT M. MUTUMA - CHAIRPERSONBONIFACE K. TERER - MEMBERELISHAH N. NJERU - MEMBERMUTISO MAKAU - MEMBERDR WALTER ONGETI - MEMBER