https://new.kenyalaw.org/akn/ke/judgment/ketat/2026/282

**REPUBLIC OF KENYA** **IN THE TAX APPEALS TRIBUNAL AT NAIROBI** **TAX APPEAL NO. E1181 OF 2025** **MSEKY HOLDINGS LIMITEDAPPELLANT** **-VERSUS-** **COMMISSIONER OF LEGAL AND BOARD SERVICESRESPONDENT** **JUDGMENT** **BACKGROUND** 1. The Appellant is a limited liability company incorporated in Kenya under the Companies Act, 2015, carrying on the business of building and construction, principally the execution of infrastructural and government contracts. 2. The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act, CAP 469 of the Laws of Kenya (hereinafter “the KRA Act”). Under Section 5 of the KRA Act, the Kenya Revenue Authority is an agency of the Government mandated to administer and enforce the written laws set out in the First Schedule thereto for the assessment and collection of revenue. 3. The Respondent carried out a verification of the input Value Added Tax (VAT) claimed by the Appellant for the tax periods January 2021 to August 2024. *Vide* a notice dated 15th October 2024, the Respondent required the Appellant to provide the invoices and proof of payment for its VAT inputs by 29th October 2024. 4. *Vide* a letter dated 14th November 2024, the Respondent notified the Appellant of its intention to issue an additional assessment and granted the Appellant a further seven (7) days to avail the requested documents, failing which an amended assessment would issue pursuant to Section 31(1) of the Tax Procedures Act, CAP 469B (TPA). 5. The Respondent, on 29th November 2024, issued additional VAT assessments against the Appellant for the periods September 2021, April 2022, August 2022, September 2022, November 2022, July 2023, February 2024, March 2024 and May 2024, disallowing input VAT claims of Kshs. 40,456,637.53 with a corresponding principal tax of Kshs. 6,448,924.00. 6. On 17th July 2025, the Appellant, through its tax agents, applied for extension of time within which to lodge a notice of objection, attributing the delay to illness. The Respondent, *vide* a letter dated 18th July 2025, required the Appellant to substantiate the reason for the delay, and the Appellant adduced a medical report on 21st July 2025. 7. *Vide* a letter dated 28th July 2025, the Respondent allowed the Appellant to lodge its objection out of time, drew the Appellant’s attention to the requirements of a valid notice of objection under Section 51(3) of the TPA, and required the Appellant to provide all relevant documents in support of its grounds of objection not later than 5th August 2025. 8. The documents sought included: evidence in support of the allowability of the disallowed VAT inputs, including a demonstration of the extent to which they were acquired to make taxable supplies; purchase documentation such as copies of the disallowed invoices, fiscal receipts, delivery notes, supplier statements and supplier confirmations; proof of payment such as bank statements, M-Pesa statements, receipts and bank deposit slips; and the Appellant’s computation of the taxes due together with supporting documentation. 9. The Respondent cautioned that acceptance of the late objection did not imply the existence of a valid objection. 10. Consequently, the Respondent issued an objection decision dated 12th September 2025 disallowing the objection and confirming the assessments comprising principal tax of Kshs. 6,448,604.75, penalties of Kshs. 323,234.58 and interest of Kshs. 1,854,630.53, all aggregating to Kshs. 8,626,469.86. 11. Aggrieved by the objection decision, the Appellant lodged a Notice of Appeal dated 9th October 2025 on even date. **THE APPEAL** 1. The Appeal is premised on the Memorandum of Appeal dated 21st October 2025 and filed on even date, wherein the Appellant proffered the following grounds of appeal: a) That the Respondent erred in law and fact by disallowing input VAT claimed by the Appellant against the provisions of Section 5(3) and Section 17(1) of the VAT Act, thereby violating the Appellant’s right to deduct input VAT as enshrined in the Act. b) That the Respondent erred in law and fact by failing to consider that the taxpayers from whom the vatable supplies were obtained were, and still are, registered for VAT purposes, and that the Appellant, having carried out its due diligence to confirm the same, including querying their status on the KRA iTax portal, had no reason to doubt their status. c) That the Respondent erred in law and fact by asserting that it had been given inadequate documents by the Appellant, whereas the Appellant had supplied all relevant documentary evidence to support the inputs claimed. d) That the Respondent erred in law and fact by confirming the assessments without due regard to all records, documents, explanations and information provided, thereby failing to appreciate all the issues presented and raised by the Appellant before confirming the assessments. **THE APPELLANT’S CASE** 1. The Appellant’s case is premised on its Statement of Facts dated 21st October 2025 and filed on even date, together with its written submissions dated an filed on 25th May 2026. 2. The Appellant averred that it is engaged in the business of construction of infrastructural projects and that, in the course of executing such projects, it deals with various suppliers of vatable inputs required as raw materials. It emphasised that raw material purchases constitute a significant proportion of its inputs and that the Respondent erred in disallowing the purchase invoices underpinning its input VAT claims. 3. The Appellant asserted that the claimed input tax constituted legitimate claims in accordance with Section 17(1) of the VAT Act, which provides as follows: *“Subject to the provisions of this section and the regulations, input tax on a taxable supply to, or importation made by, a registered person may, at the end of the tax period in which the supply or importation occurred, be deducted by the registered person, subject to the exceptions provided under this section, from the tax payable by the person on supplies by him in that tax period, but only to the extent that the supply or importation was acquired to make taxable supplies.”* 1. The Appellant enumerated the conditions for claiming input VAT under Section 17 of the VAT Act, namely: that the taxpayer is registered for VAT; that the purchase was made for purposes of making a taxable supply; that the input tax does not relate to excluded or exempt supplies as set out under Section 17(4); and that the input tax is claimed within six months of the date of the supply. 2. The Appellant maintained that it fully complied with all the said requirements, its purchases having been made from registered suppliers, supported by valid tax invoices, and directly related to its taxable supplies. 3. In buttressing the right to deduct input tax, the Appellant placed reliance on the case of **Highlands Mineral Water Limited v Commissioner of Domestic Taxes [2021] eKLR,** where the High Court held as follows: *“The right to deduction of input tax is an integral part of the VAT scheme as a taxable person who makes a transaction in respect of which VAT is deductible may deduct the VAT in respect of goods and services acquired by him, provided that such goods and services have a direct and immediate link with the output transaction in respect of which VAT is deductible.”* 1. The Appellant further invoked the decision of this Tribunal in **Shreeji Enterprises (K) Ltd v Commissioner of Investigations and Enforcement TAT Nos. 58 & 186 of 2019,** wherein it was held that: *“A taxpayer is legally entitled to claim input VAT where it has properly discharged its duty of paying output Value Added Tax (VAT) and supplied corresponding information to the effect that it had purchased from registered persons prior to claiming input tax.”* 1. The Appellant contended that it had furnished all relevant documents within its possession, including invoices, receipts, bank statements, certificates of purchase and supplier confirmations, which were sufficient to substantiate the transactions in question, and that the Respondent failed to properly consider the said evidence before arriving at its decision. 2. The Appellant maintained that it exercised due diligence prior to engaging its suppliers by confirming their VAT registration status on the Respondent’s iTax portal and by ensuring that all tax invoices bore valid PINs and registration details. That having so verified, it had no reason to doubt the suppliers’ legitimacy or the validity of the supplies made. 3. The Appellant posited that nowhere does the VAT Act impose an obligation upon a purchaser to ensure that a supplier files VAT returns or remits tax in respect of a transaction. It pointed to Section 17(3)(a) of the VAT Act, which entitles a registered person to an input tax deduction where: *“at the time when the goods or services are supplied to the person, there is in existence a tax invoice issued for the supply or a customs entry duly certified by the proper officer.”* 1. It was accordingly the Appellant’s position that it was an error in law and in fact for the Respondent to attribute the suppliers’ filing failures to the Appellant and to deploy such failures as a ground for disallowing input tax. 2. In support of the proposition that the evidential onus shifted once documentation was availed, the Appellant relied on **Pwani Oil Products Ltd v Commissioner of Domestic Taxes (Tax Appeal E214 of 2023) [2024] KETAT 1275 (KLR),** where this Tribunal expressed itself as follows: *“Once the Appellant provided all the relevant documentation and explanations to the Respondent, it was for the Respondent to rebut the Appellant’s position, with sufficient reasons for departing from what the documents demonstrated.”* 1. The Appellant further maintained that it held a legitimate expectation that its input VAT claims would be allowed, the same having been anchored on valid tax invoices issued by registered suppliers, accurate returns filed in compliance with the law, and the consistent administrative practice that duly supported input claims are allowed. 2. On its third limb, the Appellant faulted the Respondent for failing to accord it fair administrative action contrary to Article 47 of the Constitution and Sections 4 and 6 of the Fair Administrative Action Act, 2015, which require written reasons that are rational, lawful and based on the evidence tendered. 3. The Appellant argued that while the Respondent issued an objection decision, the decision largely recited the conclusions in the original assessments without adequately engaging with the detailed invoices, bank statements, certificates of purchase and supplier confirmations provided. 4. Reliance in this regard was placed on **Republic v Public Procurement Administrative Review Board & 2 Others ex parte Sanitam Services (E.A.) Limited [2013] eKLR,** which cited with approval **Pastoli v Kabale District Local Government Council & Others [2008] 2 EA 300,** where it was observed that: *“Procedural Impropriety is when there is a failure to act fairly on the part of the decision-making authority in the process of taking a decision. The unfairness may be in non-observance of the Rules of Natural Justice or to act with procedural fairness towards one to be affected by the decision.”* 1. The Appellant additionally cited **Keroche Industries Ltd v Kenya Revenue Authority & 5 Others [2007] eKLR** on the duty of courts and tribunals to uphold the law regardless of the amounts involved, and **Republic v Kenya Revenue Authority ex parte Bata Shoe Company (Kenya) Ltd [2014] eKLR**, where the Court observed that: *“Payment of tax is an obligation imposed by the law. It is not a voluntary activity. That being the case, a taxpayer is not obliged to pay a single coin more than is due to the taxman. The taxman on the other hand is entitled to collect up to the last coin that is due…”* **Appellant’s Prayers** 1. The Appellant urged the Tribunal to grant the following reliefs: 2. That the Appeal be allowed; 3. The Respondent’s decision dated 12th September 2025 be set aside and reversed; c) That the costs of and incidental to the Appeal be awarded to the Appellant; and d) That the Tribunal grants any other orders it may deem fit. **THE RESPONDENT’S CASE** 1. The Respondent opposed the Appeal through its Statement of Facts dated 26th November 2025 and filed on 27th November 2025, together with its written submissions dated 25th May 2026. 2. The Respondent asserted that it is mandated under Section 4 of the TPA to enforce and ensure due compliance with tax law provisions and to make all necessary inquiries in fulfilment of the said mandate. 3. The Respondent added that, pursuant to Section 24 of the TPA, the Commissioner is not bound by a tax return or information provided by, or on behalf of, a taxpayer and may assess a taxpayer’s liability using any information available to the Commissioner. It was in exercise of this mandate that the additional assessments of 29th November 2024 were issued, the input VAT claims having remained unsupported despite the notices of 15th October 2024 and 14th November 2024. 4. The Respondent recounted that, upon allowing the Appellant to lodge its objection out of time on health grounds, it wrote to the Appellant on 28th July 2025 enumerating the documents required to validate the grounds of objection, including evidence of the allowability of the disallowed inputs, purchase documentation, proof of payment and the Appellant’s computation of the taxes due. The Respondent averred that the Appellant neither responded to the request nor adduced any of the documentation sought. 5. The Respondent anchored the said request on Section 51(3) of the TPA, which prescribes the elements of a validly lodged notice of objection, including the requirement that all the relevant documents relating to the objection be submitted. In its view, an objection unsupported by documentation cannot be considered valid, and the Appellant was nonetheless accorded an opportunity to remedy the defect. 6. The Respondent further invoked Section 59(1) of the TPA, which empowers the Commissioner to require any person, by notice in writing, to produce for examination any documents in the person’s custody or control relating to a tax liability, and posited that its request for documentation was therefore well founded in law. 7. On the burden of proof, the Respondent contended that the Appellant wholly failed to discharge the onus placed upon it by Section 56(1) of the TPA, which provides that in any proceedings under that Part, the burden shall be on the taxpayer to prove that a tax decision is incorrect. It cited **Commissioner of Domestic Taxes v Galaxy Tools Limited [2021] eKLR,** where the Court noted that: *“Further, the tax Laws reverse the well-known principle of evidence of ‘he who alleges must proof’. In this regard, the tax authorities would assess what it considers to be the tax due from a taxpayer and the tax laws would burden the tax payer to disprove that the assessment or tax demanded is wrong or incorrect…”* 1. The Respondent further invoked **Kenya Revenue Authority v Maluki Kitili Mwendwa [2021] KEHC 4148 (KLR)**, where the High Court delineated the two limbs of the taxpayer’s burden, namely establishing, with evidence, the underlying facts on which the law is to operate, and demonstrating that the operation of the law when applied to those facts establishes that the assessment is excessive or erroneous. 2. The Respondent posited that where a taxpayer fails to discharge its burden of proof, the law permits the Commissioner to determine the taxpayer’s liability to the best of the Commissioner’s judgement pursuant to Section 31(1) of the TPA. Reliance was placed on this Tribunal’s decision in **Greenroad Kenya Limited v Commissioner of Domestic Taxes**, where it was held that: *“The Tribunal’s considered view is that the failure by the Appellant to avail the documents requested granted the Respondent the power to use its best judgement as provided for under Section 31(1) of TPA.”* 1. Responding to the ground on supplier registration, the Respondent maintained that although the suppliers in question may have been registered for VAT purposes, VAT registration alone does not validate a purchaser’s input VAT claim. Its concern was not the suppliers’ registration status but the Appellant’s failure to demonstrate the actual occurrence of taxable supplies through tax invoices, delivery notes and payment confirmations. 2. The Respondent argued that verification of supplier registration on the iTax portal is no substitute for the statutory requirement to substantiate input VAT claims with transactional evidence, more so given the Appellant’s record-keeping obligations under Section 23 of the TPA. 3. The Respondent denied the assertion that the Appellant supplied all relevant documentary evidence, terming the same inaccurate, and maintained that the objection application was reviewed in full, that every opportunity was granted to the Appellant to present supporting evidence, and that the objection decision of 12th September 2025 was founded on the absence of documentation, in accordance with the law and administrative fairness. **Respondent’s Prayers** 1. The Respondent implored the Tribunal to: a) Dismiss the Appeal in its entirety; and b) Uphold the tax assessment as confirmed by the objection decision; and c) Order the Appellant to pay the costs of the Appeal. **ISSUES FOR DETERMINATION** 1. The Tribunal, having carefully considered the parties’ pleadings, documentation and written submissions, is of the considered view that the issues falling for its determination are as follows: **a) Whether the Tribunal has jurisdiction to determine the Appellant’s claim of violation of its right to fair administrative action under Article 47 of the Constitution; and** **b) Whether the Respondent was justified in disallowing the Appellant’s input VAT claims and confirming the additional VAT assessments.** **ANALYSIS AND FINDINGS** 1. The Tribunal will proceed to analyse the issues sequentially as hereunder. **a) Whether the Tribunal has jurisdiction to determine the Appellant’s claim of violation of its right to fair administrative action under Article 47 of the Constitution** 1. The Appellant impugned the objection decision on the basis that it recited the conclusions in the original assessments without engaging with the documentation allegedly furnished, contrary to Article 47(1) of the Constitution, which guarantees every person the right to administrative action that is expeditious, efficient, lawful, reasonable and procedurally fair, as operationalised by Sections 4 and 6 of the Fair Administrative Action Act, 2015. 2. The Appellant’s first ground, as framed, invites the Tribunal to determine whether its right to fair administrative action under Article 47 of the Constitution was violated. This invitation raises a threshold question touching on the Tribunal’s jurisdiction, which must be resolved before any inquiry into the merits, it being trite law that jurisdiction is everything and that a court or tribunal bereft of it must down its tools, as was held in **Owners of the Motor Vessel “Lillian S” v Caltex Oil (Kenya) Limited [1989] KLR 1**. 3. The Tribunal is a creature of statute, and its jurisdiction is circumscribed by Section 3 of the Tax Appeals Tribunal Act, CAP 469A, which confines it to hearing appeals against decisions of the Commissioner made under the tax laws. As the Supreme Court affirmed in **Samuel Kamau Macharia & Another v Kenya Commercial Bank Limited & 2 Others [2011] eKLR**, a court or tribunal can only exercise such jurisdiction as is conferred upon it by the Constitution or legislation or both, and cannot arrogate to itself jurisdiction exceeding that which is so conferred. 4. Article 165(3)(b) of the Constitution vests in the High Court the jurisdiction to determine the question whether a right or fundamental freedom in the Bill of Rights has been denied, violated, infringed or threatened, while Section 7(1) of the Fair Administrative Action Act, 2015 reserves the review of administrative action to the High Court or to a subordinate court upon which such jurisdiction is conferred. The Tribunal is not so seized, and the alleged violation of Article 47 is accordingly beyond its remit. 5. In the upshot, the Tribunal finds and holds that it lacks the jurisdiction to determine the Appellant’s claim of violation of its right to fair administrative action under Article 47 of the Constitution, that claim being the preserve of the High Court. **b) Whether the Respondent was justified in disallowing the Appellant’s input VAT claims and confirming the additional VAT assessments** 1. Section 56(1) of the TPA provides that in any proceedings under that Part, the burden shall be on the taxpayer to prove that a tax decision is incorrect. Section 30 of the Tax Appeals Tribunal Act, CAP 469A, is to like effect, placing on the Appellant the onus of proving that the tax decision appealed against is incorrect. 2. As the High Court explained in **Kenya Revenue Authority v Maluki Kitili Mwendwa (supra),** the taxpayer’s burden comprises establishing, with evidence, the underlying facts on which the law is to operate, and demonstrating that the operation of the law when applied to those facts renders the assessment excessive or erroneous. 3. The substantive right asserted by the Appellant is found in Section 17(1) of the VAT Act, reproduced elsewhere above. That right is, however, neither absolute nor self-executing. Section 17(2) of the VAT Act defers any deduction of input tax until the registered person is in possession of the documentation referred to in Section 17(3), the primary such documentation being, under Section 17(3)(a), a tax invoice issued for the supply or a duly certified customs entry. 4. The scheme of the Act is complemented by the record-keeping obligations imposed by Section 23 of the TPA, which requires a person to maintain documents required under a tax law so as to enable the person’s tax liability to be readily ascertained, and to retain the same for a period of five years. 5. It follows that a registered person who claims input tax must, when called upon, must demonstrate both possession of the prescribed documentation and the genuineness of the underlying supplies, including the extent to which they were acquired to make taxable supplies. 6. Applying the foregoing framework to the facts, the Tribunal notes that the Respondent called for the Appellant’s supporting documentation on no fewer than three occasions: *vide* the notice dated 15th October 2024, the letter dated 14th November 2024 and the letter dated 28th July 2025. On each occasion, the Appellant proffered nothing. 7. Whereas the Appellant asserted that it furnished invoices, receipts, bank statements and supplier confirmations, no evidence of transmission of the said documents to the Respondent was placed before the Tribunal. 8. The Tribunal observes that the notice of objection dated 17th July 2025 stated that copies of the relevant documents were enclosed; however, no such enclosures form part of the record. Tellingly, the Appellant did not exhibit any of the alleged invoices, bank statements, delivery notes or supplier confirmations in these proceedings, its appeal documents comprising only the objection decision, the Notice of Appeal and its pleadings. 9. It is trite that he who asserts must place the evidence supporting the assertion before the Tribunal. Bare assertions, however forcefully repeated, cannot discharge the statutory burden under Section 56(1) of the TPA. 10. The Appellant’s reliance on the suppliers’ VAT registration and its verification of their status on the iTax portal does not remedy this evidential deficit. Registration merely establishes a supplier’s status under the VAT Act; it does not, without more, prove that the specific supplies reflected in the disallowed invoices actually occurred, that payment was made for them, or that they were acquired for the purpose of making taxable supplies. 11. The Tribunal has perused the schedule of disallowed invoices annexed to the notice of 14th November 2024 and notes that the Respondent’s request for delivery notes, supplier statements and proof of payment was a proportionate means of verifying transactions of that volume and concentration. 12. The Respondent’s case, as pleaded, was not that the suppliers had failed to declare or remit tax, but that the Appellant had failed to substantiate its own claims. The line of argument that a purchaser cannot be penalised for the non-compliance of its suppliers, while sound as a general proposition, therefore simply does not arise on the facts of this Appeal. 13. For the same reason, the authorities marshalled by the Appellant are distinguishable. **Highlands Mineral Water Limited (supra), Shreeji Enterprises (K) Ltd (supra)** and **Pwani Oil Products Ltd (supra)** each proceeded on the footing that the taxpayer had actually availed documentation which the Commissioner then failed to controvert or engage with. In the present case, the evidential threshold at which the onus would shift to the Respondent was never reached. 14. The plea of legitimate expectation fares no better. A legitimate expectation must be founded on a clear and unambiguous representation by a public authority and cannot, in any event, be invoked to override the express conditions of a statute. The expectation asserted by the Appellant presupposes the very substantiation that the Appellant failed to provide, and no promise, practice or representation by the Respondent to allow unsupported claims was pleaded or proved. 15. In the circumstances, where the Appellant failed to avail the documents requested, the Respondent was entitled to determine the Appellant’s liability using the information available to it and to the best of its judgement pursuant to Sections 24 and 31(1) of the TPA, as this Tribunal held in **Greenroad Kenya Limited (supra).** 16. Consequently, the Tribunal finds that the Respondent was justified in disallowing the Appellant’s input VAT claims and in confirming the additional VAT assessments. **FINAL DECISION** 1. The upshot of the foregoing analysis is that the Appeal is devoid of merit and the Tribunal accordingly proceeds to issue the following Orders: a) The Appeal be and is hereby dismissed; b) The Respondent’s objection decision dated 12th September 2025 be and is hereby upheld; and c) Each party to bear its own costs. 1. It is so ordered. **DATED AND DELIVERED AT NAIROBI THIS 14TH DAY OF AUGUST 2026.** **……………………………..….** **ROBERT M. MUTUMA** **CHAIRMAN** **……………………………… ……..….……..……………..** **GLORIA A. OGAGA DR. TIMOTHY B. VIKIRU MEMBER MEMBER** **………………………………** **JIMMY M. MALLA** **MEMBER**