https://new.kenyalaw.org/akn/ke/judgment/ketat/2026/262

 REPUBLIC OF KENYA IN THE TRIBUNAL OF KENYA AT NAIROBI COUNTY COURT NAME: TAX APPEALS TRIBUNAL CASE NUMBER: TATC/E847/2025 MOUNTAIN VIEW GENERAL CONTRACTORS LIMITED VS KENYA REVENUE AUTHORITY JUDGMENT # BACKGROUND 1. The Appellant is a private limited company duly incorporated in Kenya under the provisions of the Companies Act and has operations in Kenya engaged in road construction works. 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, conducted a desk audit of the Appellant's VAT returns for the years 2014, 2015, 2016, 2017 and 2018. On 7th September 2017, the Respondent issued an additional VAT assessment on the VAT return for September 2015, assessing a total sale of Kshs. 6,811,477.08 inclusive of VAT, with a VAT amount of Kshs. 939,514.08. 1. The Appellant lodged a Notice on Objection on 17 th July 2023. The Respondent having considered the objection, issued an Objection Rejection dated 25th July 2023. 2. Dissatisfied by the Respondent’s decision, the Appellant filed this appeal vide the Notice of appeal on 5th August 2025. # THE APPEAL 1. The Appeal is premised on the Memorandum of Appeal dated 5 th August 2025 and field on even date. The memorandum raised the following grounds of appeal: 1. That the Respondent failed to take into account VAT deductible inputs which were legitimately incurred in the course of the Appellant's road works projects, including purchases of cement, fuel, and other construction materials. 2. That Section 17 of the Value Added Tax Act, 2013 provides for deduction of input tax against output tax, and the Respondent acted in breach of the law by failing to allow the Appellant's legitimate input VAT claims without requesting for supporting documentation. 3. That the Appellant further avers that there is no record showing that the Respondent requested the Appellant to provide documentation supporting deductible inputs prior to issuing the additional assessment for the tax period of September 2015. 4. That the Appellant avers that such conduct is in violation of Article 47 of the Constitution of Kenya, 2010, which guarantees every person the right to fair administrative action that is expeditious, efficient, lawful, reasonable and procedurally fair. 5. That On or about January 2017, the Respondent further issued an additional assessment on VAT return for the tax period of January 2017, assessing VAT in the sum of Kshs. 4,067,424, which was in excess of the Appellant's declared VAT return of Kshs. 1,525,284. 6. That the Appellant maintains that the amount in the January 2017 VAT return was correctly declared and supported by actual payments received, as evidenced by the Appellant's bank statement for the relevant period. The bank statement from Equity Bank, Kitui Branch, Account Number 0720261340286 is hereto attached. * 1. That the Respondent did not provide any explanation or basis for the inflated assessment and failed to accord the Appellant an opportunity to be heard, contrary to Article 47 and the provisions of the Fair Administrative Action Act, 2015. 2. That With regard to income tax for the tax periods ending 31st December 2016 and 31st December 2014, the Appellant avers that the Respondent erroneously assessed tax based on gross sales without considering business expenses legitimately incurred in the execution of road construction projects. 3. That it is the Appellant's contention that no business in the construction industry in Kenya operates on a model where 30% of sales is taxed as profit without factoring costs of doing business, including but not limited to cost of sales, direct wages, transport, insurance and interest on overdrafts. 4. That the Respondent acted unfairly and failed to apply standard accounting principles and industry margins known to the Kenya Revenue Authority when computing the assessed income # THE APPELLANT’S CASE 1. In support of the appeal, the Appellant relied on its Statement of facts dated 5th August 2025 and field on even date and no written submissions 2. The Appellant averred that the Respondent conducted a desk audit covering various tax periods and thereafter issued additional VAT and Income Tax assessments for, among others, the VAT periods of September 2015 and January 2017 and the Income Tax years ending 31 December 2014 and 31 December 2016. 3. The Appellant contended that the VAT assessment for September 2015 was issued without any prior request from the Respondent for supporting documentation relating to deductible input VAT. According to the Appellant, the assessment was therefore unfair and contrary to Section 17 of the VAT Act and Article 47 of the Constitution of Kenya, 2010. 4. The Appellant further stated that the Respondent issued a VAT assessment for January 2017 that was substantially higher than the output tax declared by the Appellant despite the Appellant having provided supporting documentation, including bank statements, in support of its tax position. 5. With regard to Income Tax, the Appellant asserted that the Respondent assessed tax on the basis of gross turnover without allowing deductions for business expenses allegedly incurred wholly and exclusively in the production of income as contemplated under the Income Tax Act, Cap 470. 6. The Appellant maintained that it submitted expense schedules and bank records to demonstrate the legitimacy of the claimed business expenses and input VAT deductions but that the Respondent ignored the said documentation when raising the assessments. 7. The Appellant further averred that its position is supported by judicial precedents which underscore the principles of fair administrative action and recognize the deductibility of business expenses where sufficient supporting evidence has been provided. 8. Consequently, the Appellant contended that the assessments issued by the Respondent are erroneous both in fact and in law and urged the Tribunal to set them aside. # Appellant’s Prayers 1. The Appellant prayed for the following reliefs: 2. That the additional VAT assessments for the months of September 2015 and January 2017 be set aside in their entirety; 3. That the income tax assessment for the tax periods ending 31st December 2016 and 31st December 2014 be set aside; 4. That the Honourable Tribunal orders the Respondent to consider and factor all legitimate business expenses and VAT inputs in any tax assessment raised against the Appellant; 5. That the Honourable Tribunal grants such other or further reliefs as it may deem just and appropriate in the circumstances. # THE RESPONDENT’S CASE 1. The Respondent’s case was premised on its Statement of facts dated 26th September 2025 and filed on 2nd October 2025 and its written submissions dated 26th March 2026 and filed on 27th March 2026. 2. The Respondent stated that it conducted a returns verification exercise on the tax affairs of the Appellant for the purpose of establishing whether the Appellant was declaring all income earned and paying the corresponding taxes due under the law. In the course of this exercise, the Respondent requested the Appellant to avail relevant records for review in order to verify the accuracy of the declared tax returns. 3. The Respondent stated that upon review of the records and returns submitted, it was established that the Appellant had failed to declare all sales made as required under the applicable tax laws. As a result of this finding, the Respondent proceeded to make adjustments on the undeclared sales and subjected the same to Value Added Tax, resulting in an additional tax assessment amounting to Kshs. 682,827.20. 4. The Respondent stated that the Appellant lodged a notice of objection late, approximately two years after the issuance of the assessment, and did so without an application seeking extension of time within which to lodge the objection as required under Section 51 of the Tax Procedures Act, 2015. 5. The Respondent stated that upon receipt of the late objection, the Appellant was requested via email dated 17th July 2023 to provide supporting documentation to justify the reason for the late filing of the objection. The Appellant was specifically required to submit such supporting documents by 24th July 2023 to enable the Respondent to consider the application for extension of time. 6. The Respondent stated that the Appellant failed, refused, and/or neglected to provide the requested information and supporting documentation within the stipulated time or at all. Consequently, the Respondent had no option but to reject the objection application vide a rejection notice issued on 25th July 2023. 7. The Respondent stated that the Appellant, being dissatisfied with the rejection of its objection application, proceeded to file the present Appeal before the Tribunal. 8. The Respondent stated that the dispute before the Tribunal relates to the additional VAT assessment arising from the returns verification exercise conducted on the Appellant’s tax affairs, which revealed undeclared sales subject to taxation. 9. The Respondent stated that during the verification exercise, the Appellant was requested to provide records for review, and the Respondent established that the Appellant had not declared all sales made as required by law. Accordingly, the Respondent lawfully subjected the undeclared sales to VAT amounting to Kshs. 682,827.20. 1. The Respondent stated that the Appellant’s objection was filed out of time, and in the absence of an application for extension of time, the objection was incompetent and invalid under the provisions of the Tax Procedures Act, 2015. 2. The Respondent stated that the Appellant was duly notified of the requirement to provide supporting documentation regarding the late objection but failed to comply, thereby leaving the Respondent with no alternative but to reject the objection application. 3. The Respondent stated that the present Appeal is incompetent and offends the provisions of the Tax Procedures Act and the Tax Appeals Tribunal Act, and that the Respondent shall raise a preliminary objection on jurisdiction. 4. The Respondent stated that the rejection notice issued does not constitute an appealable decision within the meaning of Section 52 of the Tax Procedures Act, and therefore this Honourable Tribunal lacks jurisdiction to entertain the Appeal and ought to down its tools. 5. The Respondent stated that the jurisdiction of the Tribunal has not been properly invoked as no valid objection decision was issued within the meaning of Section 52 of the Tax Procedures Act. 6. The Respondent stated that the impugned decision was made pursuant to Section 51(7) of the Tax Procedures Act and is therefore not capable of being challenged before this Honourable Tribunal. 7. The Respondent stated that it relies on the assessment notice, objection application, email correspondences, and objection decision as documentary evidence in support of its position. 8. The Respondent stated that all actions taken were in strict compliance with the Tax Procedures Act, 2015, the VAT Act, and all applicable laws and regulations, and that the Appellant was accorded due process and opportunity to be heard. 9. The Respondent stated that the tax assessment was properly founded in law and fact, and that the objection decision was fair, reasonable, and lawful. 10. The Respondent submitted that as the agency mandated under the Kenya that it lawfully conducted a returns verification exercise on the tax affairs of the Appellant for the purpose of establishing whether the Appellant was declaring all income earned and remitting the corresponding taxes due under the law. 11. The Respondent submitted that during the said verification exercise, the Appellant was requested to avail relevant records for review and that upon examination of the records and returns submitted, it was established that the Appellant had failed to declare all sales made as required under the tax laws. The Respondent further submitted that it therefore adjusted the undeclared sales and subjected them to Value Added Tax, resulting in an additional assessment of Kshs. 682,827.20. 1. The Respondent submitted that the Appellant lodged a notice of objection approximately two years after the issuance of the assessment and that the objection was filed without an application for extension of time as required under Section 51 of the Tax Procedures Act, 2015. 2. The Respondent submitted that upon receipt of the late objection, the Appellant was requested through an email dated 17th July 2023 to provide supporting documentation explaining the reason for the delay and that the Appellant was required to submit the same by 24th July 2023. The Respondent further submitted that the Appellant failed to provide the requested documentation or any justification. 3. The Respondent submitted that due to the Appellant’s failure to comply with the request for supporting documents, it had no option but to reject the objection application vide a rejection notice issued on 25th July 2023. 4. The Respondent submitted that the Appellant, being dissatisfied with the rejection, proceeded to file the present Appeal before the Tribunal. 5. The Respondent submitted that the dispute before the Tribunal relates to the additional VAT assessment arising from the returns verification exercise which revealed undeclared sales that were subject to taxation. 6. The Respondent submitted that the Appellant’s objection was filed out of time and in the absence of an application for extension of time, it was incompetent and invalid under Section 51 of the Tax Procedures Act. 7. The Respondent submitted that the Appellant was duly notified to provide supporting documentation but failed to comply, thereby justifying the rejection of the objection application. 8. The Respondent submitted that the present Appeal is incompetent, offends the provisions of the Tax Procedures Act and the Tax Appeals Tribunal Act, and that it would raise a preliminary objection on jurisdiction. 9. The Respondent submitted that the rejection notice does not constitute an appealable decision within the meaning of Section 52 of the Tax Procedures Act and that the Tribunal therefore lacks jurisdiction to entertain the Appeal. 10. The Respondent submitted that the jurisdiction of the Tribunal has not been properly invoked as no valid objection decision was issued within the meaning of Section 52 of the Tax Procedures Act. 11. The Respondent further submitted that the impugned decision was made under Section 51(7) of the Tax Procedures Act and is therefore not appealable before this Honourable Tribunal. 12. The Respondent submitted that all actions taken were in strict compliance with the Tax Procedures Act, the VAT Act and all applicable laws, and that the Appellant was afforded due process and opportunity to be heard. 13. The Respondent submitted that the tax assessment was properly founded in law and fact and that the objection decision was fair, reasonable and lawful. 14. The Respondent therefore submitted that the Appeal should be dismissed in its entirety, that the tax assessment as confirmed by the objection decision should be upheld, and that the Appellant should be ordered to bear the costs of the Appeal. 15. The Respondent relied on the principle that where a statute provides a clear dispute resolution mechanism, that procedure must be strictly followed as # held in W.E.C. Lines Ltd v Commissioner of Domestic Taxes [2020] eKLR and **Krystalline Salt Ltd v Kenya Revenue Authority [2019] eKLR**, where the courts emphasized that statutory procedures for tax objections are mandatory and not optional. 1. The Respondent further relied on ***Speaker of the National Assembly v Karume [1992] KLR 21****,* where the Court of Appeal held that where a procedure for redress is prescribed by statute, that procedure must be strictly followed. 2. The Respondent also relied on **Republic v Commissioner of Domestic Taxes ex parte Mayfair Insurance Company Limited [2019] eKLR**, where the High Court affirmed that compliance with Section 51 of the Tax Procedures Act is mandatory and failure to comply renders an objection invalid. 1. The Respondent further relied on **Equity Group Holdings Limited v Commissioner of Domestic Taxes [2021] KEHC 25 (KLR)**, where the court emphasized that statutory tax provisions must be strictly interpreted and complied with, and that there is no room for equity in taxation. 1. The Respondent also cited **Commissioner of Domestic Taxes v Barclays Bank of Kenya Limited [2018] eKLR**, where the Court of Appeal reiterated that tax statutes must be strictly construed and adhered to without deviation. 1. The Respondent further relied on **Nicholas Kiptoo Arap Korir Salat v IEBC & 7 Others [2014] eKLR**, where the court held that filing pleadings without compliance with statutory requirements or leave of court renders them a nullity. 1. The Respondent also relied on **Eldo-Rosta Construction Limited v Commissioner of Domestic Taxes (Tax Appeal E459 of 2023) [2024] KETAT 1277 (KLR)**, where the Tribunal held that failure to provide evidence in support of a late objection is fatal and that mere averments are insufficient to satisfy statutory requirements. 1. Finally, the Respondent relied on **Kenya Revenue Authority v Maluki Kitili Mwendwa [2021] eKLR**, where the Court held that under a self- assessment system, the burden of proof lies on the taxpayer, who is best placed to justify its declared tax position and disprove assessments raised by the Commissioner. # Respondent’s Prayers 1. Based on the above grounds, the Respondent prayed that: 1. The Appeal be dismissed in its entirety, 2. That the tax assessment as confirmed by the objection decision be upheld, and; 3. That the Appellant be ordered to bear the costs of this Appeal. # ISSUES FOR DETERMINATION 1. The Tribunal has considered the parties’ pleadings and submissions, and has identified the following issues for determination: # Whether this Tribunal has jurisdiction to entertain the Appeal * 1. **Whether the Respondents rejection of the Appellant’s objection application was justified** **ANALYSIS AND FINDINGS** 1. Having identified the issues for determination, the Tribunal proceeds to analyse the same as hereunder: - # Whether this Tribunal has jurisdiction to entertain the Appeal 1. The Respondent conducted a returns verification and desk audit of the Appellant’s tax affairs covering the years 2014, 2015, 2016, 2017 and 2018 with the aim of establishing whether the Appellant had correctly declared its income and Value Added Tax obligations. During the verification exercise, the Respondent requested records and reviewed the returns filed by the Appellant. 2. Following the review, the Respondent established that the Appellant had allegedly failed to declare all sales as required under the tax laws. Consequently, on 7th September 2017, the Respondent issued an additional VAT assessment in respect of the tax period of September 2015, assessing total sales of Kshs. 6,811,477.08 inclusive of VAT and additional VAT amounting to Kshs. 939,514.08. 3. The Appellant did not challenge the assessment within the statutory period prescribed under Section 51 of the Tax Procedures Act. According to the Respondent, the Appellant remained inactive for several years after the issuance of the assessment, subsequently, on 17th July 2023, nearly six years after the assessment had been issued, the Appellant lodged a Notice of Objection against the assessment. The Respondent considered the objection to have been filed outside the statutory thirty-day period and therefore treated it as a late objection. 4. On the same date, 17th July 2023, the Respondent communicated to the Appellant through email requesting supporting documentation and an explanation to justify the late filing of the objection. The Appellant was required to provide the relevant documents and reasons for the delay by 24th July 2023 to enable the Respondent consider an extension of time. 5. The Respondent stated that the Appellant failed to furnish the requested documentation or provide any satisfactory explanation for the delay within the stipulated period. Consequently, the Respondent concluded that the requirements for admission of a late objection had not been satisfied as a result, on 25th July 2023, the Respondent issued a Rejection Notice, rejecting the Appellant’s objection on the basis that it had been lodged out of time and without sufficient justification or supporting documentation as required under Section 51 of the Tax Procedures Act. 6. The Appellant, being dissatisfied with the rejection of its objection, subsequently lodged the present Appeal by filing a Notice of Appeal on 5th August 2025, challenging both the underlying assessments and the Respondent’s decision to reject the objection. 7. A Taxpayer has a statutory duty to object to the assessment within thirty days. In particular, Section 51(2) of 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.* 1. Considering the timelines under Section 51(2) the TPA, it was obvious that the taxpayer delayed to object to the assessment. 2. Whereas Section 51(2) of the TPA mandates the taxpayers to file an objection within 30 days of being notified of the assessment, the TPA also foresees scenarios where taxpayers may delay to file objection against the assessments. As a result, 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.* 1. When filing the application for extension of time under Section 51(6) of TPA, Section 51(7) of TPA provides the grounds that the taxpayer must prove for the application to be allowed. The Taxpayer only needs to prove any one of them. In this regard, Section 51(7) of the TPA provides as follows: 2. *The Commissioner shall consider and may allow an application under Subsection* [*(6)*](https://new.kenyalaw.org/akn/ke/act/2015/29/eng%402025-07-01) *if—* 1. *the taxpayer was prevented from lodging the notice of objection within the period specified in Subsection* [*(2)*](https://new.kenyalaw.org/akn/ke/act/2015/29/eng%402025-07-01) *because of an absence from Kenya, sickness or other reasonable cause; and* 2. *the taxpayer did not unreasonably delay in lodging the notice of objection*. 3. The Appellant made an application seeking leave from the Respondent to object to the assessment out of time but the Respondent rejected the application on the basis that the Appellant did not provide the supporting documentation. 4. This Tribunal does not have jurisdiction to look into the Respondent’s decisions made under Section 51(7) of the TPA. 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 an appealable decision. 1. Taking into account that the Respondent did not allow the Appellant to file an objection out of time, then, the Appellant did not object to the assessment. If an objection to assessment was not filed, this appeal cannot arise, therefore the jurisdiction of this Tribunal cannot be invoked. 2. Section 51(1) of TPA sheds more light on this issue. It provides as follows: ***51. Objection to tax decision*** *(1) 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****.* 1. Section 51(1) of the TPA speaks to the doctrine of exhaustion wherein the taxpayer has to exhaust the available remedies before approaching this Tribunal. It also speaks to what the Tribunal has stated above that if an objection to assessment was not filed, an appeal cannot arise therefore, the jurisdiction of this Tribunal cannot be invoked successfully. 2. In the case of ***Samwel Kamau & Another v Kenya Commercial Bank & Others [Application No. 2 of 2011] 92012 KESC (KLR)*** the Supreme Court emphasised that a court’s jurisdiction flows from either the Constitution or legislation or both. 3. The jurisdiction of this Tribunal flows from the tax law statutes and where tax laws such as Section 51(1) of TPA provides that the Tribunal does not have jurisdiction where the taxpayer has not objected to the assessment, the Tribunal cannot proceed. 4. The Tribunal is guided by the findings of **Nyarangi J in the *locus classicus*** case of ***Owners of Motor Vessel “Lilian S” v Caltex Oil (K)*** ***Limited [1989] eKLR*** where the Court observed that, jurisdiction is everything without it, a court must down its tools. 1. Having established that the Tribunal does not have jurisdiction to determine this Appeal, the Appeal is ripe for striking out. 2. Considering the foregoing analysis, the determination of the remaining issue is rendered moot. # FINAL DECISION 1. The upshot of the foregoing is that the Appeal is incompetent and the Tribunal proceeds to make the following orders: 2. The Appeal be and is hereby struck out. 3. Each party shall bear its own costs. 4. It is so ordered # DATED AND DELIVERED AT NAIROBI THIS 3RD DAY OF JULY 2026 SIGNED BY/FOR: **★ TH E JUDICIAR Y O F KENY A ★** **HON. EUNICE NJERI NGANGA HON. SANKALE SPENCER OLOLCHIKE** **HON. BERNADETTE MUTHIRA GITARI** **HON. BILLY GRAHAM OKUMU MIJUNGU** Tax Appeals Tribunal Tribunal Date: 2026-07-03 13:45:36