[2024] KETAT 555 (KLR)

Muasya v Commissioner of Domestic Taxes (Appeal E190 of 2023) [2024] KETAT 555 (KLR) (22 March 2024) (Judgment)

Neutral citation: [2024] KETAT 555 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Appeal E190 of 2023

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

March 22, 2024

Between

Vivian Ngenyi Muasya

Appellant

and

Commissioner Of Domestic Taxes

Respondent

Judgment

Background 1. The Appellant is an individual taxpayer registered in Kenya and trading under the business names Vivilinks Solutions and Westpack Ventures.

2. The Respondent is a principal officer appointed under and in accordance with Section 13 of the Kenya Revenue Authority Act, and KRA 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 commenced investigations against the Appellant for the period between 2014 to 2017 covering VAT and Income tax.

4. The investigations revealed that the Appellant conducted business with Kirinyaga County Government but did not declare taxes from the corresponding income.

5. During the investigations, the Respondent reviewed and analysed the Appellant's bank statements so as to determine the income received.

6. The Respondent established that the Appellant carried out business and earned income but failed to declare the income in tax returns as the Appellant had been filing Nil returns.

7. Upon conclusion of the investigations, the Respondent issued an assessment on 7th November 2022.

8. The Appellant objected to the assessment on 1st December 2022.

9. On 23rd January 2023, the Appellant sought to enter into a payment plan with the Respondent for the payment of Kshs. 2,216,733. 00. The payment plan was approved by the Respondent on 30th January 2023.

10. The Respondent issued an objection decision on 20th March 2023.

11. Aggrieved by the Respondent’s objection decision, the Appellant filed the Notice of Appeal on 19th April 2023.

The Appeal 12. The Appeal is premised on the Memorandum of Appeal dated and filed on 3rd May raising the following grounds:-a.That the Respondent erred in law and in fact by disregarding the Appellant's submission that the business in question was opened under the false and fraudulent behest of Shawn Mwangi T/A Jewel Enterprises and confirmed in its objection decision, an assessment arising from Income tax and VAT for the years 2015, 2016 and 2017 amounting to Kshs. 11,251,935. 00. b.That the Respondent erred in law and fact by issuing the assessment without clarity on the rightful culprit as the assessment was generic and lacked the requisite details in support of the assessed incomes.c.That the Respondent violated the Appellant's right to fair administrative action by ignoring the criminal elements of the case as presented and unfairly subjecting the Appellant to taxes due from a third party.

Appellant’s Case 13. The Appellant’s case was also premised on the following documents filed with the Tribunal:-a.The Appellant’s Statement of Facts dated and filed on 3rd May 2023 and the documents attached thereto.b.The Appellant’s written submissions dated 5th February 2024.

14. The Appellant averred that the Respondent issued assessments to her vide its assessment notice dated 7th November 2022 and issued a demand notice assessing Kshs. 11,251,935. 00 on Income tax and VAT arising from income received under the business name Vivilinks Solutions.

15. That the Appellant, being dissatisfied with the assessments objected to the tax assessment vide notice of objection dated 1st December 2022.

16. That in its objection, the Appellant presented various arguments urging the Respondent to re-consider its position contained in the tax assessments, based on applicable tax legislation, the principle of equity and fairness and the industry's best practice.

17. That the Respondent, vide a letter dated 20th March 2023 confirmed the assessments by issuing its objection decision.

18. That in its objection decision, the Respondent confirmed the assessment on the Income tax and VAT for the years 2015, 2016 and 2017 amounting to Kshs. 11,251,935,00.

19. That the Appellant, being dissatisfied with the Respondent's objection decision on Income tax and VAT for the years 2015, 2016 and 2017 amounting to Kshs. 11,251,935. 00 lodged a Notice of intention to Appeal dated 19th April 2023.

20. The Appellant submitted that the following are the issues for determination in relation to the assessed taxes.a)Whether the actions of the Respondent to demand the Income tax and VAT amounting to Kshs. 11,251,935 for the years 2015, 2016 and 2017 from the registered taxpayer instead of the alleged 'owner' of the business was reasonable;b)Whether, given the facts of the criminal intent in this case, the demand for the Income Tax and VAT amounting to Kshs. 11,251,935 for the administrative action;c)Whether the actions of the Respondent in accepting the self-assessed tax liability and approving a payment plan for the payment of the Income Tax and VAT amounting to Kshs. 11,251,935 for the years 2015, 2016 and 2017 created a legitimate expectation in favour of the Appellant that the

21. The Appellant submitted that the Respondent disregarded her submissions that the liability arose from fraudulent business transactions carried out with criminal intent through the pre-meditated, planned and deliberate actions of Shawn Mwangi T/A Jewel Enterprises who went ahead to endear himself and enter into a marriage with her so as to defraud her and her family members.

22. That the Respondent further disregarded the Appellant's self-assessed liability amounting to Kshs. 2,216,733. 00 based on the information available.

23. The Appellant submitted that that she opened the business name and bank account under the false and fraudulent behest of her estranged husband, Shawn Mwangi Mwachofi, trading as Jewel Enterprises.

24. The Appellant submitted that Jewel Enterprises was the actual owner of the tenders contracted by Kirinyaga County and it was in full control of her bank accounts.

25. The Appellant submitted that payments were made into her bank account and the funds were immediately transferred to Jewel Enterprises or to the personal or business accounts or business accounts of Shawn.

26. The Appellant submitted that although she willingly provided her company details to enable the trade with Kirinyaga County for tenders to supply materials, Jewel Enterprises operated in bad faith and with the intention to defraud the Appellant based on the close relationships he held with her leading to the assessment on the Appellant.

27. The Appellant submitted that Shawn/Jewel Enterprises gave an undertaking that they had hired a qualified Accountant to ensure that all accounting and tax declarations for business transacted under her business names would be made to the Respondent.

28. The Appellant submitted that she took all necessary steps in trying to mitigate the assessment by holding consultative forums with the Respondent's team with a view to directing the assessment to the rightful culprit and as a sign of goodwill undertook to carry out a review of the bank statements and to determine their rightful share of benefit arising from the payments amounting to Kshs. 2,216,733. 00.

29. That in arriving at the self-assessed tax liability, the Appellant was cognizant of the fact that there were no supporting documents available and therefore made the computation in good faith on the basis of the gross income received.

30. The Appellant submitted that the Respondent acknowledged the self-assessed tax and further approved a payment plan for the settlement of the self-assessed liability upon the request of the Appellant. That further, the Respondent issued the payment registration notifications (PRNs) to enable the Appellant to settle the first instalment, for which payments were made. That the Respondent did not issue additional PRNs to enable the Appellant to make subsequent instalment payments despite reminders to share the same.

31. The Appellant relied on the case of Republic V Commissioner of Domestic Taxes ex parte Barclays Bank of Kenya Limited, (Misc. Application no. 1223 of 2007), where Hon. Justice Majanja held that:-“in assessing taxes, the Respondent was under duty to identify the transactions or payments that attract tax, especially where there are objections to such categorization. Section 35(1)(a) of the Income Tax Act identifies specific types of payments that attract tax, the respondent is obligated by law to state with clarity its claim and state how the transaction falls within the terms of the statute. The respondent cannot exercise its duty like a trawler in the deep seas expecting all the fish by casting its net wide. The respondent's decision in this respect falls below this standard and the transaction caught by the decision cannot be said to fall within the statutory definition of the tax."

32. The Appellant submitted that the Assessment Orders as raised by the Respondent did not offer sufficient clarity in terms of the amounts assessed and the rightful party whom the liability relates to.

33. That the objection decision was not accompanied by the reasons why the facts of this case were ignored and hence the correct tax liability owing by the Appellant was not adjusted even after several requests. That this therefore rendered the assessments unreasonable and procedurally unfair.

34. The Appellant submitted that she had a legitimate expectation that the Respondent would not issue an assessment because she had already provided a self-assessment on the extent of the benefit she accrued from the payments received. That in addition, during a meeting with the Appellant's team, it was agreed that the self-assessed tax would be paid through an agreed payment plan.

35. That the Appellant had a legitimate expectation that the acceptance of the payment plan and the facts provided to the Respondent on the criminal intent to defraud the Appellant were taken into consideration and that the Respondent would not come back and alter the position and avoid charging the liability to the rightful culprit.

36. The Appellant submitted that it was inconceivable how the Respondent accepted Appellant's self-assessment in the first instance and approved a payment plan to settle the liability of Kshs. 2,216,733. 00 then later confirmed principal taxes amounting to Kshs. 11,251,935 for the period 2016 and 2017.

37. The Appellant relied on the following cases: -a.H.T.V. Ltd vs Price Commission [1976] I.C.R. 170. b.Republic vs Institute of Certified Public Accountants of Kenya ex parte Vipichandra Bhatt T/A JV Bhatt & Company Nairobi HCMA No. 285 of 2006. c.Republic vs Attorney General & Another Ex Parte Waswa & 2 Others [2005] 1KLR 280. d.Keroche Breweries Limited & 6 Others vs Attorney General & 10 Others [2016] eKLR.e.Pz Cussons East Africa Limited v Kenya Revenue Authority (2013} eKLR,f.Republic vs. Commissioner of Customs Ex Parte Mulchand Ramji & Sons Limited [20101 eKLR.g.Samuel Muihia Kariuki & 26,249 others v Attorney General & 4 others [2021]eKLR,

Appellant’s Prayers. 38. The Appellant made the following prayers to the Tribunal: -a.That Respondent’s assessment dated 20th March 2023 be annulled.b.That the costs of this Appeal be awarded to the Appellant.

Respondent’s Case 39. The Respondent’s case was premised on the following documents filed with the Tribunal:-a.The Respondent’s Statement of Facts dated and filed on 30th May 2023 together with the documents attached thereto.b.The Respondent’s Written Submissions dated 1st November 2023 and filed on 2nd November 2023 together with the authorities attached thereto.

40. The Respondent averred that the Appellant registered for VAT on 1st May 2017 but began filing VAT returns from December 2018. That the Appellant was dealing in vatable goods prior to the registration. That further, the Appellant has been filing nil income tax returns from 2015 to date.

41. The Respondent averred that the case was referred by I&SO on allegations that the Appellant was not tax compliant in regard to VAT and Income Tax. That the Appellant was doing business with Kirinyaga County Government and not declaring taxes from the corresponding income.

42. That the investigations covered the period 2014 to 2017 covering VAT and Income tax.

43. That the Appellant filed nil returns for the years of income 2015 to 2022 and began filing VAT returns from December 2018.

44. That the investigation reviewed and analysed the Appellant's bank statements for accounts held Cooperative Bank to determine the income earned. That the investigation revealed deposits of Kshs. 31,906,366. 00.

45. That from the analysis, it was established that the Appellant carried out business and earned income but did not declare the income in tax returns.

46. That the established income as per the bank deposit analysis was treated as business income and consequently charged tax under Section 3(2)(a)(i) of the Income Tax Act and Section 5 of the VAT Act as follows;-Income Tax ComputationYear Amount Tax@30% Penalty Interest Total Tax

payable

2014 472,672 141,802 28,360 124,786 294,948

2015 13,507,792 3,993,381 3,074,903 7,068,284

2016 9,706,514 2,853,087 1,854,507 4,707,594

2017 3,451,039 970,558 48,528 514,396 1,533,482

Total 27,137,717. 00 7,958,828. 00 76,888. 00 5,568,592. 00 13,604,308. 00 VAT ComputationYear Amount VAT@16% Interest Penalty Total Tax

Payable

Jun 21,499,407 2,965,435 1,927,533 4,892,968

Dec 1,052,586 145,184 85,659 7,259 238,102

Totals 22,551,993 3,110,619 2,013,192 7,259 5,131,070

47. That upon conclusion of the tax investigations, the Respondent proceeded to issue an assessment on 7thNovember 2022.

48. That the Appellant objected to the Respondent's findings and lodged a notice of objection dated 1st December 2022.

49. That on 16th December 2022 the Respondent invalidated the Appellant's objection dated 1st December 2022 as it was not in compliance with the provisions of Section 51(3)(c) of the Tax Procedures Act.

50. That the Appellant was granted seven (7) days to validate her objection.

51. That on 23rd January 2023 the Appellant sought time to lodge an appeal for a payment plan which was submitted and subsequently approved by the Respondent on 30th January 2023.

52. That on 20th March 2023, the Respondent communicated its decision vide a letter confirming the principal tax liability of Kshs. 11,251,935. 10 exclusive of penalty and interest as due and payable.

53. That aggrieved by the objection decision, the Appellant lodged its Memorandum of Appeal before the Tribunal.

54. The Respondent stated that the Appellant's main contention was the presence of the criminal element in the manner in which the taxes arose.

55. The Respondent stated that it is proper first for the Tribunal to satisfy itself as to whether it has jurisdiction to entertain the Appellant's claim before delving to the merit of the Appeal.

56. That it is trite law that jurisdiction is everything, without it, the Tribunal cannot take the step of looking at the Appellant's grounds but rather, has to withdraw itself.

57. The Respondent placed its reliance on Section 52 and Section 3 of the Tax Procedures Act, 2015 which sets out what constitutes the jurisdiction of the Tax Appeal Tribunal.

58. In response to grounds 1 and 2 of the Appeal, the Respondent averred that the investigation conducted was on the tax affairs of the Appellant and not Shawn Mwangi T/A Jewel Enterprises. That income was derived from the Appellant's bank deposits which indicated that the Appellant did business and failed to declare its income.

59. The Respondent averred that it did not make a determination of a criminal case and does not have the requisite powers to do so. That it is the preserve of the ODPP and the National Police Service to introduce a criminal charge before a competent court.

60. In response to ground 3 of the Appeal, the Respondent averred that it is the Respondent's position that the investigation conducted in the Appellant's bank account revealed that the Appellant received income from Kirinyaga County Government and the same was charged to tax.

61. The Respondent submitted that the Appellant did not provide any documents in support of her objection and instead, the Appellant carried her own analysis of the bank statements to confirm that she was not the beneficiary of the income from the County Government of Kirinyaga.

62. The Respondent averred that the Appellant did not provide any records to clarify that she was wrongly assessed or documents and details indicating the rightful person(s) to be assessed. That in the circumstances, the Respondent was constrained to issue the assessment on the basis of the information available at the time of the assessment.

63. That in the absence of supporting documents, the Respondent issued a decision to the Appellant as provided for in Sections 29 and 31 of the Tax Procedures Act.

64. The Respondent indicated that its powers to assess, demand and collect taxes was derived from Section 24(2), 29 and 31 of the Tax Procedures Act, 2015 which gives the Respondent the power to assess a taxpayer's tax liability using information available and best judgement.

65. The Respondent further averred that its actions were in line with Section 51(3) and 51(4) of the Tax Procedures Act.

66. The Respondent submitted that the objection decision was made within the stipulated timeline as provided for in the now repealed Section 51(11) of the Tax Procedures Act before the current amendment of 2022.

67. The Respondent relied on Section 56(1) of the Tax Procedures Act which provides that the burden of proving that the tax assessment is wrong lies with the taxpayer and the Appellant herein failed to prove to the satisfaction of the Respondent that the assessment was wrong.

68. The Respondent also relied on Section 54(A)(1) of the Income Tax Act which provides that the Appellant shall keep records and expenses, goods purchased and sold, and accounts and books, deeds and contracts and vouchers which in the opinion of the Respondent are adequate for the purpose of computing tax.

69. The Respondent submitted that the following should be the issues for determination.a.Whether the Tribunal has jurisdiction to hear and determine the Appeal;b.Whether the additional assessments were justified;c.Whether the Appellant has discharged its burden of proof.

70. The Respondent submitted that it is evident from the Appellant's grounds of appeal that its main contention is the presence of a criminal element in the manner in which the taxes arose.

71. The Respondent submitted that the Tribunal should satisfy itself as to whether it has the jurisdiction to entertain the Appellant's case before delving to the merits of the appeal.

72. That it is trite law that jurisdiction is everything, without it, the Tribunal cannot take the step of looking at the Appellant's grounds but rather, has to withdraw itself.

73. That in Owners of the Motor Vessel "Lillian S." vs Caltex Oil (Kenya) Ltd (1989) eKLR, the Court held that: - ... Jurisdiction is everything. Without it, a court has no power to make one more step. Where a court has no jurisdiction, there would be no basis for a continuation of proceedings pending other evidence. A court of law downs tools in respect of the matter before it the moment it holds the opinion that it is without jurisdiction."

74. The Respondent submitted that the Appellant in its appeal alleges that investigations were conducted on the tax affairs of the Appellant and not Shawn Mwangi T/A Jewel Enterprises. The Respondent thus submitted that it did not make a determination of a criminal case against the Appellant as it does not have the requisite powers to do so.

75. The Respondent submitted that it is the preserve of the Office of the Director of Public Prosecution and the National Police service to introduce a criminal charge.

76. The Respondent submitted that a decision to charge the Appellant if at all for criminal offences do not constitute an appealable decision as defined by Section 3 of the Tax Procedures Act.

77. That Section 3 (1) of the Tax Procedures Act defines a tax decision as follows: -“tax decision" means-a.an assessment;b.a determination under section 17(2) of the amount of tax payable or that will become payable by a taxpayer;c.a determination of the amount that a tax representative, appointed person, director or controlling member is liable for under section 15, section 17 and section 18d.a decision on an application by a self-assessment taxpayer under section 31(2);e.a refund decision;f.a decision under section 48 requiring repayment of a refund; org.a demand for a penalty;”

78. The Respondent relied on Section 52 of the Tax Procedures Act, 2015 which provides:-'A person who is dissatisfied with an appealable decision may appeal the decision to the Tribunal in accordance with the provisions of the Tax Appeals Tribunal Act'.

79. That Section 3 of the Tax Procedures Act defines an appealable decision and states: - "appealable decision" means an objection decision and any other decision made under a tax law other thana.a tax decision; orb.a decision made in the course of making a tax decision;”

80. The Respondent further submitted that jurisdiction is everything and where the Tribunal finds that it has no jurisdiction, it should proceed to strike out the Appeal.

81. The Respondent relied on the case of Fleur Investments Limited v Commissioner of (Domestic Taxes & another [2018] 7 eKLR where the Court of Appeal while determining whether a litigant can be exempt from the doctrine of exhaustion held as thus:-“Whereas courts of Law are enjoined to defer to specialized Tribunals and other Alternative Dispute Resolution Statutory bodies created by Parliament to resolve certain specific disputes, the court cannot, being a bastion of justice, sit back and watch such institutions ride roughshod on the rights of citizens who seek refuge under the Constitution and other legislations for protection. The court is perfectly in order to intervene where there is clear abuse of discretion by such bodies, where arbitrariness, malice, capriciousness and disrespect of the Rules of natural justice are manifest. Persons charged with statutory powers and duties ought to exercise the same reasonably and fairly."

82. On whether the additional assessments were justified, the Respondent submitted that the decision to issue the additional assessments was justified and had basis in law as required under the Tax Procedures Act.

83. The Respondent submitted that in conducting its investigations against the Appellant's bank account, it was revealed that the Appellant received income from Kirinyaga County Government and the same was charged to tax.

84. The Respondent submitted that the Appellant was requested to provide documents in support of her objection to enable the Respondent to ascertain the correctness of her tax declarations as the Appellant had filing nil returns for the period under review.

85. The Respondent submitted that the Appellant failed, refused and or neglected to proffer any documentary evidence in support of her objection and instead carried out its _own analysis of the bank statements to confirm that they were not fully the beneficiary of the income from the county government of Kirinyaga.

86. The Respondent submitted that the Appellant neither provided records to clarify that they were wrongly assessed nor documents and details indicating the rightful person(s) to be assessed hence compelling the Respondent to issue additional assessments.

87. The Respondent submitted that the Respondent was not bound by the tax returns filed by the Appellant. That the Respondent may assess a taxpayer's tax liability using any information available to the Commissioner.

88. The Respondent submitted that it is not bound by the Appellant's returns or self assessment and it is empowered to vary the assessments using any available information in their possession. That Section 24(2) of the Tax Procedures Act states that:“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."

89. That Section 31 of the Tax Procedures Act empowers the Respondent to make alterations or additions to original assessments from available information for a reporting period based on Commissioner's best judgement. That this Section provides;_“The Commissioner may amend an assessment (referred to in this section as the "original assessment'') by making alterations or additions, from the available information and to the best of the Commissioner's judgement, to the original assessment of a taxpayer for a reporting period to ensure that-b.in the case of an excess amount of input tax under the Value Added Tax Act, 2013 (No. 35 of 2013), the taxpayer is assessed in respect of the correct amount of the excess input tax carried forward for the reporting period."

90. The Respondent submitted that it is the duty of the Appellant to provide documents whenever required by the Respondent. That Section 23(1) (a) of the Tax Procedures Act provides that a taxpayer is required to keep documents or records in such a manner that the taxpayer's tax liability can be readily ascertained.

91. The Respondent further relied on Section 54A (1) which provides as follows: -“A person carrying on a business shall keep records of all receipts and expenses, goods purchased and sold and accounts, books, deeds, contracts and vouchers which in the opinion of the Commissioner, are adequate for the purpose of computing tax."

92. The Respondent submitted that Section 59 of the Tax Procedures Act empowers the Respondent to seek any information relating to a tax liability from the Appellant.

93. The Respondent relied on the case of Osho Drapers Limited Versus Commissioner Of Domestic Taxes (2022] Eklr, where the Court held that Section 59 of the Tax Procedures Act empowers the Commissioner to request for more and additional information to satisfy himself on the taxable income declared.

94. The Respondent submitted that despite requesting for additional documents from the Appellant, she failed to provide any documents to support her allegations.

95. That in the circumstances, the Respondent urged the Tribunal to find that the additional assessments were anchored in law and that the same were factual and legally justified.

96. On whether the Appellant discharged its burden of proof, the Respondent submitted that the Appellant bore the burden to demonstrate that the Respondent's assessment was excessive or erroneous by placing evidence before the Tribunal.

97. The Respondent submitted that the Appellant did not discharge its burden of proof under Section 56 (1) of the Tax Procedures Act and Section 30 of the Tax Appeals Tribunal Act.

98. The Respondent submitted that Section 56(1) of the Tax Procedures Act places the burden on the taxpayer to proof that a tax decision is incorrect. That the Section states as follows: -“In any proceedings under this Part, the burden shall be on the Appellant to prove that a tax decision is incorrect."

99. The Respondent also submitted that Section 30 of the Tax Appeals Tribunal Act provides that when appealing to the Tribunal, the Appellant has the burden of proving that where an appeal relates to an assessment, that the assessment is excessive or in any other case, the tax decision should not have been made or should have been made differently.

100. The Respondent relied on the case of Prima Rosa Flowers Limited V Commissioner Of Domestic Taxes [2019] Eklr where the High Court relied on Mulherin V Commissioner Of Taxation [2013] FCAFA 115 in which the Federal Court of Australia held that in tax disputes, the taxpayer must satisfy the burden of proof to successfully challenge income tax assessments. The onus is on the taxpayer in proving that the assessment was excessive by adducing positive evidence, which demonstrates the taxable income which ought to have been levied.

101. The Respondent also relied on the case of Ushindi Exporters Limited V Commissioner Of Investigation And Enforcement (Tax Appeals Tribunal No 7 Of 2015) where the Tribunal held that:“The burden of proving that the tax assessment is excessive or should have been made differently never shifts to the Respondent and is placed squarely on the Appellant as Section 30 (a) and (b) of the Tax Appeals Tribunal Act states,a.Where an appeal related to an assessment, that the assessment is excessive; orb.In any other case, that the tax decision should not have been made or should have been made differently.”

102. The Respondent also relied on the case of Commissioner Of Domestic Taxes v Metoxide Limited [2021] where the Court held that:-“Section 56(1) of the Tax Procedures Act provides that, the taxpayer has the burden of proving that a tax decision is incorrect. It is common knowledge that, the Kenyan system of taxation is based on self-assessment. The taxpayer assesses self and remits what he/it considers to be the tax due to the tax authorities. In this regard, the tax laws mandate the appellant to later on assess the taxpayer in order to ascertain whether the tax remitted was proper or not. Ordinarily, the assessment is made years after the tax has fallen due and been paid or the economic activity or commercial transaction for which the tax arises has been undertaken. It is for this reason that the tax laws shoulder the taxpayer with the burden of disproving the correctness of the Appellant’s tax decision."

103. The Respondent submitted that the Appellant did not adduce any evidence before the Tribunal to show that the Respondent's assessments were excessive or erroneous. The Appellant therefore failed to discharge her burden of proof under the law.

Respondent’s Prayers. 104. The Respondent prayed that: -a.The Tribunal upholds the Respondent’s objection decision dated 20th March 2023 as proper and in conformity with the provisions of the law.b.That this Appeal be dismissed with costs to the Respondent as the same is devoid of any merit.

Issues For Determination 105. The Tribunal has considered the facts of the matter and the submissions made by the parties and identified the following to be the issues for determination in this matter:-a.Whether the Tribunal has jurisdiction to hear and determine the Appeal;b.Whether the Respondent erred in law and in fact by issuing an assessment for years 2014 to 2016;c.Whether the additional income tax assessment for year 2017 and VAT assessment for December 2017 were justified;

Analysis And Findings 106. Having identified the issues that falls for its determination, the Tribunal proceeds to analyze them as hereunder.

107. The genesis of this Appeal is the assessment issued by the Respondent to the Appellant on 7th November 2022.

108. The Appellant lodged an objection to the assessment on 1st December 2022.

109. The Appellant entered into a payment plan with the Respondent for the payment of Kshs. 2,216,733. 00 on 30th January 2023.

110. The Respondent issued an objection decision on 20th March 2023.

111. Aggrieved by the Respondent’s objection decision, the Appellant filed this Appeal. a). Whether the Tribunal has jurisdiction to hear and determine the Appeal;

112. The Respondent submitted that the Tribunal should satisfy itself as to whether it has the jurisdiction to entertain the Appellant's case before delving into the merits of the Appeal.

113. That it is trite law that jurisdiction is everything, without it, the Tribunal cannot take the step of looking at the Appellant’s grounds but rather, has to withdraw itself.

114. The Respondent relied on Section 52 of the Tax Procedures Act which provides that; 'A person who is dissatisfied with an appealable decision may appeal the decision to the Tribunal in accordance with the provisions of the Tax Appeals Tribunal Act'.

115. That Section 3 of the Tax Procedures Act defines an appealable decision and states; "appealable decision" means an objection decision and any other decision made under a tax law other thanc.a tax decision; orc.a decision made in the course of making a tax decision;

116. The Tribunal has reviewed the documents submitted by the parties and noted that the Respondent gave an objection decision on 30th March 2023. In that objection decision in the last paragraph, the Respondent advised the Appellant as follows:-“If you are dissatisfied with this decision, you may appeal to the Tax Appeals Tribunal within 30 days of this decision in accordance with the relevant provisions of the Tax Appeals Act 2013. ”

117. The Appellant followed the advice provided by the Respondent and moved to the Tribunal within the stipulated period. The Tribunal did not consider the averments made by the Appellant in respect of the criminal nature of the transactions with other parties and confined itself to the assessment and the objection decision.

118. The Tribunal therefore finds that it has the jurisdiction to hear and determine the Appeal.

b). Whether the Respondent erred in law and in fact by issuing an assessment for years 2014 to 2016. 119. The Tribunal notes that the instant Appeal relates to the tax dispute for the years 2014 to 2017 as outlined in the Respondent’s Statement of Facts.

120. The Tribunal also notes that the objection decision did not state the period covered by the Kshs. 11,251,935. 10 which the Respondent was demanding from the Appellant.

121. The Tribunal further notes that Section 29(5) of the TPA states that: -“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.”

122. The only time that Respondent is allowed to assess beyond the five years period is in a situation where there is “gross or wilful neglect, evasion or fraud by a taxpayer.”The Respondent did not allege wilful neglect or fraud in this matter.

123. The Tribunal noted that the assessment was made on 7th November 2022. Since the law allowed the Respondent to assess the taxpayer for a period of not more than 5 years, the earliest the Respondent should have gone back to was October 2017 for VAT and the year 2017 income tax as it did not allege or prove “wilful neglect, evasion or fraud” by the taxpayer.

124. The Tribunal reiterates its holding in a similar matter TAT Appeal No. 411 of 2021, City Gas East Africa v Commissioner of Investigations & Enforcement where Tribunal held that the Respondent erred in assessing the Appellant for a period longer than five years when there was no evidence of wilful neglect or fraud.

125. The Tribunal is also guided by the High Court holding in Tax Appeal No E033 of 2020 Commissioner of Domestic Taxes V Unga Limited where Justice DS Majanja held at Paragraph 41 as thus: -“Under Section 29 of the TPA, the Commissioner is empowered to make a default assessment when a taxpayer fails to file a tax return. This power is however limited in time to five years under section 29(5) thereof. There is thus an expectation that the Commissioner would move with haste in doing so before the statutory timeline expires.”

126. Based on the statute and case laws cited above, the Tribunal finds that the Respondent erred in law and in fact by issuing assessment for the years 2014 to 2016 for income tax and June 2017 for VAT which period was outside the statutory timelines of five years provided by the law.

(c). Whether the additional income tax assessment for year 2017 and VAT assessment for December 2017 were justified; 127. The Appellant submitted that she made a self-assessed tax liability of Kshs. 2,216,733. 00 in recognition of the fact that she did not have any supporting documents to provide to the Respondent.

128. On the other hand, the Respondent submitted that since Appellant did not provide any documents after her payment plan was approved on 30th January 2023, it had no choice but to make an objection decision based on the information that it had in its possession.

129. The Tribunal notes that Section 59(1) of the Tax Procedures Act, 2015 provides that;“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; orc.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. "

130. The Tribunal observes that the Appellant expressly stated that she did not provide any documents to the Respondent.

131. The Tribunal notes that Section 56(1) of the Tax Procedures Act places the burden of proof on the taxpayer. The Section reads as follows: -“In any proceedings under this Part, the burden shall be on the taxpayer to prove that a tax decision is incorrect.”

132. Further, Section 30 of the Tax Appeals Tribunal Act provides as follows: -“In any proceeding before the Tribunal the Appellant has the burden of proving-a.where an appeal relates to an assessment, that the assessment is excessive; orb.in any other case, that the tax decision should not have been made or should have been made differently.”

133. In analyzing this matter, the Tribunal reiterates its holding in Ushindi Exporters Limited V Commissioner of Investigation and Enforcement (Tax Appeals Tribunal No. 7 of 2015) on the issue of burden of proof where the Tribunal held that:-“The burden of proving that the tax assessment is excessive or should have been made differently never shifts to the Respondent and is placed squarely on the Appellant as Section 30 (a) and (b) of the Tax Appeals Tribunal Act states:a.Where an appeal related to an assessment, that the assessment is excessive; orb)In any other case, that the tax decision should not have been made or should have been made differently.By purporting to shift the burden of proving that the tax assessment against it was incorrect or should have been made differently, the Appellant failed in discharging the burden, placed upon it by law.”

134. The Tribunal further reitarates its holding in the case of TAT No. 70 of 2017 Afya X-RAY Centre Limited v Commissioner of Domestic Taxes to emphasise the importance of a taxpayer discharging its burden of proof. In the said Appeal, the Tribunal held that: -“From the foregoing chain of events, it is our understanding that the Appellant failed in its duty in providing these documents in order that a comprehensive audit of its affairs be done. Accordingly, the Respondent can hardly be faulted for raising the assessment in accordance with the availed documents.Moreover, the Appellant had an opportunity to consider the Respondent’s finding after the confirmation of the assessment. Both are instances, where the Appellant could have produced its books of accounts to counter the Respondent’s assessment, after all, the Appellant by law bears the burden of proof…”

135. After consideration of the documents submitted by the parties, the law and the case laws cited above, the Tribunal finds that the Appellant did not discharge its burden of proof and the Respondent was therefore justified in issuing the Income tax assessment for year 2017 and the VAT assessment for December 2017.

Final Decision 136. The upshot of the foregoing is that the Appeal partially succeeds. Consequently, the Tribunal makes the following Orders: -a.The Appeal be and is hereby partially allowed.b.The Respondent’s objection decision dated 30th March 2023 is varied in the following terms: -i.The Respondent’s income tax assessments for the years 2014 to 2016 are hereby vacated.ii.The Respondent’s VAT assessments for June 2017 is hereby vacated.iii.The Respondent’s income tax assessment for year 2017 is hereby upheld.iv.The Respondent’s VAT assessment for December 2017 is hereby upheld.c.Each party to bear its own costs.

137. It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 22ND DAY OF MARCH, 2024. GRACE MUKUHA.........................CHAIRPERSONJEPHTHAH NJAGI........................MEMBERDR. ERICK KOMOLO.......................MEMBERDR WALTER ONGETI........................MEMBERGLORIA A. OGAGA.........................MEMBER