Mubea Group Limited v Kenya Revenue Authority (Tribunal Case E946 of 2025) [2026] KETAT 233 (KLR) (26 June 2026) (Judgment)

 REPUBLIC OF KENYA IN THE TRIBUNAL OF KENYA AT NAIROBI COUNTY COURT NAME: TAX APPEALS TRIBUNAL CASE NUMBER: TATC/E946/2025 MUBEA GROUP LIMITED VS KENYA REVENUE AUTHORITY JUDGMENT # BACKGROUND 1. The Appellant is a limited liability company whose principal activity is rental business. 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 Appellant constructed a commercial building that was occupied by tenants in December 2013. 4. In a letter dated 30th April 2015, the Appellant requested for inspection and audit conclusion by the Respondent so as to file its taxes for the first year of operations as couched under the Income Tax Act (ITA). 1. The Appellant filed its returns for the January 2015 to December 2015 on 30th May 2016. 2. On 5th September 2017 the Respondent issued a Demand Notice demanding Income Tax amounting to Ksh 5,559,447.00. The Appellant’s response was contained in a letter dated 26th September 2017. 3. The Respondent’s email of 11 th November 2022 informed the Appellant of ongoing process of updating customer records on legacy system to ensure accuracy prior to migration to iTax. 4. The Appellant’s letter of 29th November 2022 was a reiteration of its position as held in the letter dated 26th September 2017. 5. The Respondent issued Agency Notices against the Appellant’s bankers on 15th April 2015 and on 25th August 2025. 6. In a Ruling dated 13 th October 2025, the Tribunal granted the Appellant leave to file its Notice of Appeal and its pleadings out of time. # THE APPEAL 1. The Appellant’s case was founded upon its Memorandum of Appeal dated and filed on 23rd October 2025 wherein the Appellant raised the following grounds: 1. That the Respondent erred in law and in fact by prematurely issuing Agency Notices contrary to Section 42(14) of the Tax Procedures Act (TPA). 2. That the Respondent erred in law and in fact by failing to appreciate that its demand notice of 15th April 2025 was egregiously un-procedural that it was not an assessment or objectionable decision that could not give rise to an Objection under Section 51 of the TPA and as such the Respondent could not purport to later apply Section 51(7) of the TPA to deny the Appellant audience. 3. That the Respondent erred in law and in fact by misapplying the provisions of Section 31 of the TPA in issuing a Demand Notice and Agency Notices without legal basis as it never issued tax assessments for the demanded taxes. * 1. That the Respondent erred in law and in fact by failing to by acting without notice and by failing to furnish the Appellant with the computation or a legal basis for the alleged tax liability in breach of the Appellant’s rights to fair hearing protected under Article 47 of the Constitution. 2. That the Respondent erred in law and fact by failing to correct the auto- populated tax returns migrated from the old system (Integrated Tax Management System-ITIMS) to the iTax system hence breaching the Appellant’s right to legitimate expectation. 3. That the Respondent erred in law and fact by failing to use best judgement in making its decision as provided under Section 29(1) and 31(1) of the TPA. 4. That the Respondent erred in law and fact by disregarding the supporting information and documents that were supplied by the Appellant in blatant disregard to the Appellant’s right to fair administrative action as provided for under Article 10 and 47 of the Constitution and Section 4(3)(b) and 4(4)(b) of the Fair Administrative Action Act (FAA Act). # THE APPELLANT’S CASE 1. The Appellant’s case was anchored upon Its Statement of Facts dated 22nd October 2025 and filed on 23rd October 2025 together with documents attached thereto; and written submissions were dated and filed on 24th March 2026. 2. According to the Appellant, the Respondent’s demand notice of 5 th September 2017 was misplaced because the year 2014 was Appellant’s first year of occupancy and the Appellant had claimed Commercial Building Allowance as provided for under Second Schedule Paragraph 6(A) 1 and 2 noting that an inspection and audit had been carried out by the Respondent’s staff who certified that the building qualified for a 25% annual deduction. 3. The Appellant maintained that its audited financial statements and supporting documentation clearly controvert the Respondent’s alleged figures in the demand. 4. It was the Appellant’s case that the Respondent’s Agency Notices were premature and contrary to Section 42(14) of the TPA as the Appellant had submitted return and made necessary correct payments and had even engaged the Respondent on various occasions regarding the demand but the Respondent never responded choosing instead to resort to Agency Notices against the Appellant’s bankers. of importance is that the Appellant had invited the Respondent to inspect its premises wherein its own staff confirmed that the commercial building qualified for deduction. 5. The Appellant asserted that it complied with Section 56(1) of the TPA by providing evidence to support its case noting that the Agency Notices were issued in error as the Respondent ignored the responses by the Appellant to its demands and proceeded to issue the notices contrary to Section 42 of the TPA which did not arise from any assessment. 6. The Appellant asserted that its legitimate expectation was breached when the Respondent failed to correct the auto-populated tax returns in the iTax system resulting from migration from the legacy system. 7. Thus, the Respondent’s demand notice of 15th April 2025 was egregiously un- procedural as it was not an assessment that could give rise to an objection under Section 51 of the TPA. The import of which was that the Respondent could not purport to later apply Section 51(7) of the TPA to deny the Appellant audience. 8. The Appellant insisted that the demand notice was null and void as it offended Article 47 of the Constitution as read with Section 51 of the TPA especially because the Appellant availed supporting documents even before the Tribunal in fulfilling its duty under Section 56(1) of the TPA and Section 30 of the Tax Appeals Tribunal Act (TAT Act). Therefore, the Respondent’s decision was unjust, premature and was invalidly issued consequently, the Tribunal should allow this Appeal. 9. The Appellant identified and submitted on the following three issues; *a) Whether the Respondents failure to issue a Decision on the Appellant’s Objection to the Demand Notice dated 5th September 2017 and disregard to the supporting information and documents that were supplied by the* *Appellant were in violation of the Appellant’s right to fair administrative action as provided for under Article 10 and 47 of the Constitution and Section 4(3)(b) and 4(4)(b) of the Fair Administrative Actions Act.* 1. The Appellant maintained that having filed its 2015 returns which were acknowledged by the Respondent on 30th May 2016, it Objected on 26 th September 2017 against the Respondent’s Demand Notice of 5th September 2017. That the Respondent’s email of 11th November 2022 was issued five years later which was contrary to Section 51(11) of the TPA. 2. That the Demand Notice of Ksh 5,559,447.00 was contrary to Appellant’s position as explained in the letter of 26th September 2017 and 29th November 2022 as the self-assessments put the Appellant in a payable negative position of Ksh 8,000.00. That 2014 being the first year of occupation, it claimed Commercial Building Allowance at 25% p.a the same having been inspected and audited by the Respondent’s staff. 3. That the Appellant was neither afforded explanations nor were its enquiries responded to in spite of providing the Respondent with audited financial statements and supporting documentation for the period in question. Further, that the Respondent failed to issue an Objection Decision instead resorting to Agency Notices without notice, computations or legal basis of the alleged liability all which was contrary to Article 47 of the Constitution and Section 4 and 6 of the FAA Act. 4. The Appellant relied on the following cases to support its position; # Keroche Industries Limited v Kenya Revenue Authority & 5 Others Nairobi [2007] eKLR 1. **Civil Appeal No. 24 of 2018: Kenya Revenue Authority & 2 others vs Darasa Investments Limited [2018]eKLR** 2. The Appellant asserted that the Agency Notices were premature and invalidly issued. 3. *Whether the Appellant discharged its evidentiary burden of proof under Section 56(1) of the TPA.* 4. According to the Appellant its letters of 26 th September 2017 and 29 th November 2022 have never elicited a response from the Respondent in whose direction the burden had shifted after the Appellant had justified its 25% p.a claim for CBA as provided for under Second Schedule Paragraph 6(A) 1 and 2 of the ITA. 5. It was incumbent upon the Respondent to give reasons why Appellant’s legacy system balances were incorrect or inaccurate as the Appellant having availed documentation had discharged its burden as provided for under Section 56(1) of the TPA and Section 30 of the Tax Appeals Tribunal Act (TAT Act). The Appellant buttressed its position citing the holding in **Kenya Revenue Authority** # v Man Diesel & Turbo Se, Kenya [2021] eKLR and National Social Security Fund Board of Trustees v Commissioner of Domestic Taxes, Kenya Revenue Authority (2016) eKLR . 1. That the Respondent’s failure to consider documents is a breach of Appellant’s constitutional right to fair administrative action. 2. *Whether in the circumstances, the Agency Notices issued by the Respondent were justified in law.* 3. It was the Appellant’s case that the main contentious issue in this appeal is the validity of Agency Notices which is an enforcement measure and were issued prematurely contrary to Section 42 (14) of the TPA as the Appellant had on various occasions engaged the Respondent and submitted a return having made the correct payments. 4. In supporting its position that the Respondent issued Agency Notices without having issued tax assessments, the Appellant relied on the holding in **Pevans East Africa Limited vs Commissioner of Domestic Taxes, Tax Appeal No. 34 of** # 2019 and SBI International Holdings vs Commissioner of Customs and Border Control Miscellaneous Application No. 159 of 2021. 1. According to the Appellant, had there been any other pending issue arising, the Respondent ought to have communicated by responding to the Appellant’s letters instead of ignoring them. That the attempt to collect taxes must strictly adhere to set procedure as emphasised in **Kombani Autoworks Limited vs** # Commissioner of Taxes(Tax Appeal 400 of 2023)[2023]. 1. The Appellant submitted that the Respondent erred in law and in fact by failing to correct the auto-populated tax returns in the iTax system resulting from legacy migration contrary to its legitimate expectation despite admittance to having received the Appellant’s objection to the legacy balances as acknowledged at paragraph 14 of the Respondent’s Statement of Facts. 2. That the Respondent’s averment at paragraph 14 of its Statement of Facts that communication from legacy to iTax was not an assessment but courtesy was incorrect as the Respondents immediately issued Demand Notice followed by Agency Notices which are appealable decisions under Section 3 of the TPA. That this was the same approach the Respondent used in the case of **Diocese of Nyeri** # Trustees v Commissioner for Legal Services & Board Coordination (Tax Appeal E1147 of 2024)[2025]KETAT 308(KLR)(9May 2025)(Judgement). 1. The Appellant held that the demand notice of 15th April 2025 was thus null and void as it offended Article 47 of the Constitution as read with Section 51 of the TPA and that should the Tribunal find the Agency Notices as properly issued the matter ought to be remitted back to the Respondent for re-evaluation on merit of its claim for CBA pursuant to paragraph 6(A) 1 and 2 of the Second Schedule to the ITA. That this was a position supported by the High Court decision in the case # of The Commissioner of Investigations & Enforcement vs Athanas Misiko **Wafula Wamunyinyi(HCCOMMITA/E059/2025).** 1. That the Appellant should not be punished for technological hitches occasioned by transition from legacy system to iTax # The Appellant’s Prayers 1. The Appellant prayed that; 1. The Appeal be allowed. 2. The Commissioner’s Demand Notice dated 15 th April 2025 and subsequent Agency Notices dated 25th and 26th August 2025 respectively be vacated and or set aside. 3. That the Honourable Tribunal awards the costs of this Appeal and any other remedies that it deems just and reasonable to the Appellant. # THE RESPONDENT’S CASE 1. The Respondent replied to the Appeal through its Statement of Facts dated 24th November 2025 and filed on 27th November 2025 and written submissions dated 31st March 2026 and filed on 1st April 2026 2. The Respondent held that its demand notice of 5 th September 2017 was based on Appellant’s self-assessed filed returns of 30th May 2016 in relation to the January 2015 to December 2015 period. 3. According to the Respondent, the dispute herein relates to agency notices issued against the Appellant who failed to act on the demand notice of 5th September 2017 and that the Respondent’s email of 11th November 2022 was to inform the Appellant of the intended transfer of legacy balances and was not meant to be an assessment. That the legacy balances were cumulated and transferred into one iTax balance as indicated in the migration notice. 4. That in the transition period, the Respondent availed an email corportedataoffice@kra.go.ke where the Appellant was requested to provide supporting documents in case of a dispute or for clarification in relation to migration. 5. That the Appellant instead objected to the legacy balances instead of acknowledging that the communication was just a courtesy rather than an assessment given that the taxes were already due and payable. 6. The Respondent asserted that the dispute before the Tribunal is restricted to Section 3 and 51(1) and (2) of the TPA as the Respondent had already issued and assessment and was merely communicating the transfer of tax liability to a new system not issuing an assessment. Thus, the Appellant’s objection could not be deemed as properly lodged since the Appellant had not been issued with an assessment and it was never the intention of the Respondent to issue one at any point. 7. That the Appellant’s admission to self-assessments forms the crux of the dispute thus the Appellant cannot allege that the Respondent failed to raise an assessment and the amounts in dispute relate to penalties emanating from those self-assessments as reflected in Respondent’s records not additional assessments. 1. In support of this position, the Respondent relied on Section 24(2) of the TPA in asserting that despite Kenya being a self-assessment system, it is not bound by taxpayer’s self-assessment. 2. As per Respondent, had the Appellant had any dispute with the said migration, the same ought to have been raised at the point when legacy assessment emerged when they filed their 2015 returns insisting that at the point when migration notice was issued, the taxes owed were already due and payable and cannot be appealable through an objection. 3. The Respondent asserted that Agency Notices is a recognized mode of enforcement under Section 42 of the TPA and that all actions were taken in accordance with the provisions of the TPA and the Appellant was granted an opportunity to respond to the findings. 4. Therefore, the tax assessment issued was properly founded in fact and law, THE Objection Decision was fair, reasonable and made in accordance with statutory provisions. 5. The Respondent submitted as follows in its written submissions; 1. *Whether the legacy balances is an appealable decision.* 6. As per the Respondent, there is no appealable decision or tax decision filed before the Tribunal. That the Respondent’s notice to the Appellant dated 11th November 2022 was a follow up to its public notice of 14th February 2020 notice of migration of legacy balances to iTax which indicated that the Appellant had a final legacy balance of Ksh 3,787,790.00. That this was not an appealable decision or an assessment requiring lodging of an Appeal that could not be reviewed under Section 51 of the TPA. Thus, the Appellant lacks grounds to anchor an appeal as provided for under Section 56(3) of the TPA. 7. That an appealable decision is defined under Section 3 of the TPA while a tax decision is as provided under Section 2 of the TPA. The Appellant failed to resolve legacy balances dispute carried forward at the point of migration to iTax despite numerous reminders to seek redress at the Respondent’s tax office thus the appeal as filed is before a wrong forum and ought to be referred back to the right forum being the Respondent as internal dispute resolution mechanisms had not been exhausted. That this was a position supported by law under Section 9(2) of the FAA Act and the Courts in the case of **Speaker of National Assembly vs** # Karume 1992 eKLR 1. *Whether the Tribunal has jurisdiction to determine this Appeal* 2. The Respondent submitted that while Article 165(3) of the Constitution confers the High Count unlimited original jurisdiction, Section 3 and 29 limit the Tribunal to hearing and determining matters filed against any tax decision made by the Commissioner. That in the instant appeal, the Appellant having not been issued with a tax decision, the orders sought therefore are outside the Tribunal’s jurisdiction. The Appellant supported this position citing the holding in # Owners of Motor Vessel “Lilian S” v Caltex Oil (Kenya) Ltd [1989]KLR 1 and **Adero & Another v Ulinzi SACCO Society Limited [2002].** 1. The Respondent submitted that it acted within statutory authority and mandate which was not arbitrary, in bad faith, bias or discrimination in disallowing refunds to the Appellant. That it was the Appellant who consumed precious court time, abused the court process and delayed tax collection by filing an appeal for a matter that could have been easily determined at the tax office. 2. That Article 159 of the Constitution recognizes alternative dispute resolution in settlement of disputes and that the Appellant having declined to comply with terms of the public notice of 14th February 2020 should be liable to balances reflected in the migration of final legacy ledger balances. 3. *Whether the Respondent was justified in issuing the Agency Notices* 4. According to the Respondent, the Appellant’s self-assessment and returns culminated in arrears which the Appellant ought to have settled or entered into a payment plan because the Agency Notices were in relation to crystalized taxes and the enforcement was a necessary tool under Section 42 of the TPA and as stipulated in Article 209 and 210 of the Constitution. That this position has found jurisprudence in Court decision in the case of **Gibb Africa Limited vs Kenya** # Revenue Authority(2017). 1. Therefore, the Agency Notices were proper in law as these taxes were as a result of self-assessment by the Appellant. A position the Appellant supported by citing the holding in the case of **Kisa Jaffar Tenge vs Kenya Revenue Authority** # & Another (2020) **The Respondent’s Prayers** 1. The Respondent prayed that the Tribunal; 1. Dismisses the appeal in its entirety. 2. Upholds the Agency Notices as issued to the Appellant; and 3. Orders the Appellant to pay the costs of the Appeal. # ISSUES FOR DETERMINATION 1. The Tribunal having carefully considered the parties’ pleadings, documentation and submissions adduced before it notes that issues call for determination as follows; # Whether the Respondent’s demand notice and subsequent agency notices were lawful; and * 1. **Whether the** Appellant discharged its burden of proof. # ANALYSIS AND FINDINGS 1. The Tribunal having established three issues for determination will proceed to analyse the same as follows; # Whether the Respondent’s demand notice and subsequent agency notices were lawful. 1. The Appeal herein emanated from Agency Notices issued by the Respondent against the Appellant’s bankers on 15th April 2015 and on 25 th August 2025 seeking to recover principal taxes, interest and penalties amounting to Ksh 10,100,774.00 which emanated from legacy balance transfers to iTax. 2. The Tribunal notes that the Appellant filed its Objection against the Respondent’s assessment of 5th September 2017 on 26th September 2017. 3. Under Section 51(11) of the TPA, the Respondent is required to issue an Objection Decision within 60 days of a taxpayer’s Objection. In this Appeal, the Respondent did not issue any decision for over five years i.e. until 11th November 2022. The Tribunal notes that in the Equity Group Holdings v Commissioner of Domestic Taxes (Civil Appeal E609 & E025 of 2020) [2021] case, it was held that that a taxpayer is entitled to a timely objection decision. 4. The Tribunal notes that in the email of 11 th November 2022 (regarding legacy balance migration), the Respondent held that the Demand Notice of 5th September 2017 was merely a *“courtesy”* and not an assessment. It follows then that, the Respondent cannot simultaneously argue that no assessment was issued while enforcing Agency Notices derived from the disputed Demand Notice. 5. The Tribunal finds that the Demand Notice of 5 th September 2017 did not constitute a valid tax assessment within the meaning of Section 3 of the TPA. 6. It is not disputed that the Appellant disputed the alleged liability and sought clarification, but instead the Respondent failed to provide a substantive response or demonstrate that it rendered a decision addressing the Appellant's concerns raised in its Objection. 7. The Tribunal finds that enforcement action through Agency Notices ought not to be undertaken where a taxpayer has raised substantive issues concerning the basis and computation of the liability and those issues remain unresolved. The Respondent failed to sufficiently demonstrate the computation and legal basis of the disputed taxes before resorting to enforcement measures. 8. The Tribunal finds that the Agency Notices issued on 15 th April 2015 and 25th August 2025 were premature and invalid. This is because under Section 42(14) of the TPA, the Respondent may issue an Agency Notice only after a tax liability has become due and remains unpaid following a valid assessment and objection process. 9. Accordingly, the Tribunal finds that the Agency Notices as issued were procedurally unfair and not based on any tax law. ii. Whether the Appellant discharged its burden of proof 1. It was not in dispute that the Appellant possessed a commercial building which was constructed and occupied in December 2013 against which it claimed 25% per annum Commercial Building Allowances. The Respondent did not controvert the Appellant’s assertion that its own staff inspected the premises and certified the building qualified for the deduction. 2. What was in dispute is the Respondent’s assertion that its auto-populated legacy balances showed the Appellant had a carrying balance of Ksh 3,787,790.00. In rebuttal, the Appellant adduced as evidence its audited financial statements and inspection reports together with year 2015 filed returns showing a carry forward credit position of negative Ksh 8,000.00 3. The Tribunal notes that Section 56(1) or the TPA provides that; *“In any proceedings under this Part, the burden shall be on the taxpayer to prove that a tax decision is incorrect.”* 1. The Tribunal notes that tax law as framed presumes the Respondent’s assessment as being inherently correct and requires a taxpayer to challenge the same through positive, relevant and sufficient documentary evidence. It is at this point that the presumption of correctness vanishes and the burden shifts to the Respondent to demonstrate why the evidence adduced should not be relied upon. 2. In this case the Respondent failed on all fours because auto-population is not a taxing law. Once the Appellant adduced reconciliations, inspection reports and audited financial statements, the Respondent should have demonstrated why the said evidence was incorrect or why it should not be relied upon. 3. The Tribunal relies on the case of by **Kenya Revenue Authority v Man Diesel & Turbo Se, Kenya [2021] eKLR** Nairobi High Court Income Tax Appeal No. E125 of 2020 where it was held that; *“The shifting of the burden of proof in tax disputes flows from the presumption of correctness which attaches to the Commissioner's* *assessments or determinations of deficiency.* *The commissioner's determinations of tax deficiencies are presumptively correct. Although the presumption created by the above provisions is not evidence in itself, the presumption remains until the taxpayer produces competent and relevant evidence to support his position. If the taxpayer comes forward with such evidence, the presumption vanishes and the case must be decided upon the evidence presented, with the burden of proof on the taxpayer.”* 1. The Tribunal finds that the Appellant adduced sufficient and relevant documentary evidence challenging the Respondent's position and therefore discharged the statutory burden imposed under Section 56(1) of the TPA. 2. Flowing from the above analysis is that the Tribunal finds the Appeal herein as merited. # FINAL DECISION 1. The upshot of the foregoing is that the Appeal herein succeeds, and the Tribunal accordingly proceeds to make the following Orders: 2. The Appeal be and is hereby allowed. 3. The Respondent’s demand notice dated 5th September 2017 be and is hereby set aside. 4. The Respondent’s Agency Notices dated 15 th April 2015 and 25 th August 2025 be and are hereby vacated in their entirety; and 5. Each party to bear its own costs. 6. It is so Ordered. # DATED AND DELIVERED AT NAIROBI ON THIS 26TH DAY OF JUNE 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: 2026-06-26 15:24:31