https://new.kenyalaw.org/akn/ke/judgment/ketat/2026/147

Melly & Lelly General Contractors Ltd v Commissioner of Domestic Taxes (Tax Appeal E1366 of 2025) [2026] KETAT 147 (KLR) (30 June 2026) (Judgment) Neutral citation: [2026] KETAT 147 (KLR) Republic of Kenya In the Tax Appeal Tribunal Tax Appeal E1366 of 2025 RM Mutuma, Chair, JM Malla, T Vikiru & G Ogaga, Members June 30, 2026 Between Melly & Lelly General Contractors Limited Appellant and Commissioner of Domestic Taxes Respondent Judgment Background 1.The Appellant is a limited liability company whose principal activity is in construction sector. 2.The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act, CAP 469 of Kenya’s Laws. 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) of the Act with respect to the performance of its functions under subsection (1), the Authority is mandated to administer and enforce all provisions of the written laws as set out in Part 1 and 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 undertook VAT and income tax return review of the Appellant for the period 2016 to 2023. The Respondent then issued an assessment dated 9th October 2019. The Appellant being dissatisfied, lodged notices of objection dated 23rd October 2025. 4.The Respondent upon considering the objection, issued objection decision dated 12th November, 2025 wherein it confirmed the assessment. 5.The Appellant being aggrieved by the objection decision filed this appeal vide notice of appeal on 25th November, 2025. The Appeal 6.The Appellant lodged memorandum of appeal dated 25th November 2025 and filed on 26th November 2025 raising the following grounds of appeal:a.That the Respondent erred in fact and in law in assessing the tax.b.That the Respondent erred in fact and in law in failing to consider the Appellant's nature of business.c.That the Respondent erred in fact and in law in failing to consider the Appellant's allowable deductions incurred in generation of income for the period.d.That the Respondent erred in fact and law for failing to accord the Appellant a fair hearing despite lodging an objection. The Appellant’s Case 7.The Appellant lodged its statement of facts dated 25th November 2025 and filed on 29th November 2025. 8.It stated that it was registered for income tax- company obligation effective 2nd September 2009; rent income obligation effective 1st July 2021 and value added tax (VAT) obligation effective 2nd September 2025 and PAYE effective 1st December 2019. 9.The Appellant averred that it filled various self-assessments return for the income tax - company obligation and was issued with acknowledgment receipt numbers. 10.It stated that the Respondent raised various additional assessments for the income tax company obligation and issued acknowledgment receipts. 11.The Appellant averred that it filled various self-assessments return for the value added tax (VAT) obligation and was issued with acknowledgment receipts. 12.It stated that it objected to various assessments on 23rd October 2025. 13.The Appellant stated that the Respondent confirmed the assessment and issued objection decision dated 12th November 2025. The Appellant being dissatisfied by the decision, filed this appeal. 14.The Appellant did not file written submissions. Appellant’s Prayers 15.The Appellant prayed as follows:a.This Appeal be allowed with costs;b.The objection decision be set aside;c.Additional assessments issued by the Respondent for the period under review, together with penalties and interest be set aside.d.The Honourable Tribunal be pleased to assess the tax payable by the Appellant to be commensurate with the actual transactions and the evidence tendered.e.The additional assessments raised by the Respondent be vacated.f.Any other relief that this Honourable Tribunal deems fit. The Respondent’s Case 16.The Respondent lodged its statement of facts dated 19th January 2025 and filed on the even date. 17.The Respondent stated that upon review of Appellant's application for an extension of time to file a notice of objection, the Appellant failed to support its ground of objection as stipulated under Section 51(7) of the TPA. 18.It noted that an invalidation Notice was sent on 6th November, 2025. The Respondent further averred that the Appellant failed to provide records requested in an email sent to it on 27th October 2025. In particular, the Respondent asserted that it requested the Appellant to provide audited accounts, trial balances, sales & purchases ledgers, and sales & purchases invoices. 19.The Respondent relied on Section 51(3) of the TPA which provides:(3)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)c.all the relevant documents relating to the objection have been submitted. 20.The Respondent averred that the importance of full documentation for the purposes of section 51(3) (c) of the TPA 2015 is underscored in the Fuel Link Limited v Commissioner of Investigation and enforcement, where the Tax Appeals Tribunal found that a notice of objection was invalid due to the absence of requested documentation. 21.The Respondent further averred that despite several engagements with the Appellant to avail requisite documentations, the Appellant failed to provide sufficient evidence for the Respondent to render a meritious decision in the circumstance. 22.In light of the foregoing, the Respondent averred that the Appellant's notice of objection was fully rejected. 23.According to the Respondent, the Appellant disregarded section 23 (b) of the TPA which provides that, a person shall maintain any document required under a tax law so as to enable the person's tax liability to be readily ascertained. 24.It noted that whereas Section 24 of the TPA allows a taxpayer to submit tax returns in the approved form and manner prescribed by the Respondent, the Respondent is not bound by the information provided therein and can assess for additional taxes based on any other available information and to the best of the Commissioner's judgement. 25.The Respondent stated that pursuant to section 56 of the TPA and 30 of the Tax Appeals Tribunal Act Cap 469A (TATA), the burden of proof lies on the Appellant to demonstrate that it has discharged the burden of proof. 26.The Respondent relied on the provisions of section 109 of the Evidence which provides that the burden of proof as to any particular fact lies on the person who wishes the court to believe in its existence unless it is provided by any law that the proof of that fact shall lie on any particular person. 27.In light of the foregoing, the Respondent contended that the Appellant's assertions that the Respondent failed to consider and appreciate Appellant's nature of business is incorrect and misleading. On the contrary, the Respondent stated that the Appellant was granted ample time to avail documentation in support of the objection but failed to do so. 28.The Respondent filed written submissions dated 13th April, 2026 wherein it submitted that the Appellant failed to discharge its burden of proof and that the assessments are proper in law. 29.It cited the case of Commissioner for Her Majesty’s Revenue and Customs Tc/2017/02292 Saima Khalid Appellant v the Commissioners for Her Majesty's Respondents Revenue & Customs to submit that section 31(1) of the TPA allows the Respondent to use best 'judgment' when making assessment. It submitted that the word judgment as used under section 31(1) of the TPA makes it clear that the commissioners are required to exercise their powers in such a way that they make a value judgment on the material which is before them. 30.It submitted that the Appellant failed to avail documents to support the objection. 31.The Respondent submitted that it is incumbent upon the Appellant to demonstrate how expenses were apportioned. It relied on the case of Commissioner for Inland Revenue v Genn & Co (Pty) Ltd wherein SchreinerJ stated that: -“In deciding how the expenditure should properly be regarded the court has to assess the closeness of the connection between the expenditure and the income earning operations, having regard both to the purpose of the expenditure and to what it actually effects.” 32.The Respondent relied on the cases of Greenroad Kenya Limited vs Commissioner of Domestic Taxes TAT Appeal No. 538 of 2021; Nick Kikalos and Helen Kilos v United States of America, No. 2:98 CV 618. 313 F. supp. 2d 876 (2003); Digital Box Ltd v Commissioner of Investigation & Enforcement (2019) eKLR; and Afya X-Ray Centre v Commissioner of Domestic Taxes TAT No. 70 of 2017 to submit that the taxpayer has a duty to adduce documents to support the objection in order to discharge burden of proof. It submitted that the Appellant failed to do so. Respondent’s Prayers 33.The Respondent prayed that confirmation of assessments notices dated 12th November 2025 be upheld and that the appeal be dismissed with costs. Issues for Determination 34.The Tribunal having carefully evaluated the parties’ pleadings, puts forth the following issues for determination:a.Whether the Appeal is competent; andb.Whether the Respondent erred in confirming the assessment. Analysis and Findings A. Whether the Appeal is Competent 35.The Respondent in its objection decision invoked the provision of section 51(7) of the TPA. Further, in its statement of facts, the Respondent stated that upon review of Appellant's application for an extension of time to file a notice of objection, established that the Appellant failed to support its ground of objection as stipulated in Section 51(7) of the TPA. The objection decision indicates that the Respondent issued an invalidation Notice on 6th November 2025. This, in fact, is a preliminary objection. 36.In the case of Mukisa Biscuits Manufacturing Co. Ltd v West End Distributor Ltd [1969] E.A 696 Law JA discussed what constitutes a pure point of law in matters of preliminary objections as follows:“a preliminary objection consists of a point of law which has been pleaded or which arises by clear implication out of pleadings and which if argued as a preliminary point may dispose of the suit. Examples are an objection to the jurisdiction of the court or a plea of limitation or a submission that the parties are bound by the contract giving rise to the suit to refer the dispute to arbitration….a preliminary objection is in the nature of what used to be a demurrer. It raises a pure point of law which is argued on the assumption that all the facts pleaded by the other side are correct. It cannot be raised if any fact has to be ascertained or if what is sought is the exercise of judicial discretion.” (Emphasis is ours). 37.The Appellant in its statement of facts stated that the Respondent raised VAT assessments on 27th March 2023; 20th December 2022, 21st December 2022, 21st March 2024, 19th March 2024, 22nd March 2024, 28th March 2024, 12th April 2024. It stated that it objected to the assessments on 23rd October 2025. 38.Section 51(1) of TPA is key. It provides that, ‘‘a taxpayer who wishes to dispute a tax decision shall first lodge an objection against that tax decision under this section before proceeding under any other written law.’’ 39.The implication of the provisions of section 51(1) of the TPA is that it prohibits a taxpayer from relying on any other tax law unless the taxpayer files an objection against an assessment within the required timelines, or if the taxpayer delays to file objection within time, the taxpayer must obtain leave from the Commissioner before filing the objection. That means that if the taxpayer fails to lodge notice of objection within required timeline, the taxpayer cannot, lawfully, invoke the powers of this Tribunal under the Tax Appeals Tribunal Act Cap 469A. 40.A taxpayer must object to the assessment within thirty days once an assessment is received. Section 51(2) the TPA provides as follows:(2)A taxpayer who disputes a tax decision may lodge a notice of objection to the decision, in writing, with the Commissioner within thirty days of being notified of the decision. 41.Pursuant to the Appellant’s own statement, it did not object to the assessments within thirty days. However, the beauty of the tax law in Kenya is that it anticipates that a taxpayer may delay to file objection against the assessments. Consequently, the law has a remedy. In particular, section 51(6) of TPA provides:A taxpayer may apply in writing to the Commissioner for an extension of time to lodge a notice of objection. 42.The taxpayer has a duty in law to satisfy the Respondent by demonstrating why there was a delayed in filing an objection. In this regard, Section 51(7) of the TPA provides as follows:(7)The Commissioner shall consider and may allow an application under subsection (6) if—(a)the taxpayer was prevented from lodging the notice of objection within the period specified in subsection (2) because of an absence from Kenya, sickness or other reasonable cause; and(b)the taxpayer did not unreasonably delay in lodging the notice of objection. 43.Pursuant to the provisions of section 51(7) of the TPA, the Respondent has discretion to allow or reject the application. However, should a taxpayer hold the view that the Respondent has misused the discretion, a taxpayer has a right to seek judicial review remedy from a court of competent jurisdiction. The High Court in Commissioner of Investigations & Enforcement v Vyas t/a Rocon Enterprises (Income Tax Appeal E144 of 2021) [2022] KEHC 16027 (KLR) stated that the Tribunal does not have jurisdiction to entertain decisions under section 51(7) of the TPA for the reason that the decision is not appealable decision. The Court pointed out that such decisions are subject to judicial review proceedings not appeal. 44.The Respondent stated that the Appellant filed objection out of time subsequently, it issued invalidation notice dated on 6th November 2025 on the basis that the Appellant did not validate the notice of objection. This was then followed by the objection decision dated 12th November 2025 wherein the Respondent rejected the objection fully and confirmed the assessment. 45.Considering that the Appellant filed late notice of objection and did not obtain leave from the Respondent to object out of time, the Appellant is estopped by Section 51(1) of TPA from invoking the jurisdiction of this Tribunal. Simply put, in absence of valid notice of objection, an appeal to this Tribunal cannot arise. 46.Considering the foregoing, the Tribunal finds and holds that this appeal is incompetent. The Tribunal lacks jurisdiction to hear and determine it and therefore, the appeal is available for striking out. This being the case, analysis of the remaining issue is rendered moot. Final Determination 47.The upshot to the foregoing is that the Tribunal finds and holds that the Appeal is incompetent. The Tribunal accordingly issues the following orders:a.The appeal be and is hereby struck out; andb.Each party to bear its own cost. 48.It is so ordered. DATED AND DELIVERED AT NAIROBI THIS 30TH DAY OF JUNE 2026.……………………………ROBERT M. MUTUMACHAIRMAN……………………………JIMMY M. MALLAMEMBER……………………………DR. TIMOTHY B. VIKIRUMEMBER……………………………GLORIA A. OGAGAMEMBER