[2024] KETAT 1598 (KLR)

Ndungi v Commissioner of Domestic Taxes (Appeal 326 of 2023) [2024] KETAT 1598 (KLR) (Commercial and Tax) (11 October 2024) (Judgment)

Neutral citation: [2024] KETAT 1598 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Commercial and Tax

Appeal 326 of 2023

E.N Wafula, Chair, G Ogaga, Jephthah Njagi & E Ng'ang'a, Members

October 11, 2024

Between

Muema Ndungi

Appellant

and

Commissioner of Domestic Taxes

Respondent

Judgment

Background 1. The Appellant is a taxpayer and a businessman.

2. The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act, Cap 469 Laws of Kenya (KRA Act). Under Section 5 (1) of the Act, KRA is an agency of the Government for the collection and receipt of all revenue. For the performance of its function under Subsection (1), the Authority is mandated under Section 5(2) of the Act to administer and enforce all provisions of the written laws as set out in Parts I and II of the First Schedule to the KRA Act to assess, collect, and account for all revenues under those laws.

3. The Respondent issued upon the Appellant additional tax assessments for the period between January 2018 and May 2018 with respect to Value Added Tax.

4. The Appellant being dissatisfied with the assessments lodged an objection on 6th August 2020.

5. The Respondent on 10th June 2021 issued the objection decision partially accepting the Appellant’s notice of objection and amending the assessments.

6. The Appellant being aggrieved by the Respondent’s decision filed the Appeal on 5th May 2023.

THE APPEAL 7. The Appeal is premised on the Memorandum of Appeal filed on 5th May 2023 which raised the following ground: -a.That the Appellant submitted all the requested documents initially and on time and he is still willing to submit again the same upon request.

APPELLANT’S CASE 8. The Appellant’s case is premised on the Statement of Facts filed on 5th May 2023 stating that the Appellant submitted the requested documents relating to the period in question and is willing to resubmit the same upon request.

Appellant’s prayers 9. The Appellant prayed that the Tribunal: -a.Allows the Appeal.

RESPONDENT’S CASE 10. The Respondent’s case is premised on the following documents:a.The Respondent’s Statement of Facts dated and filed on 16th September 2023b.Its Written Submissions dated and filed on 26th February 2024.

11. The Respondent reiterated its position as stated in the objection decision and in response to the Appeal averred that it is allowed by Section 24(2) of the Tax Procedures Act to assess a taxpayer's liability using any information available to it.

12. The Respondent further averred that the determination of the tax liability depends on submission of necessary records by the Appellant and that it is allowed to make additional assessments based on the available information to the best of its judgment pursuant to Section 31 of the Tax Procedures Act.

13. The Respondent also stated that under Section 56 of the Tax Procedures Act and Section 30 of the Tax Appeals Tribunal Act, the Appellant bears the burden to demonstrate that he has discharged a tax liability.

14. The Respondent also submitted that in accordance with Sections 23, 43 and 59 of the TPA the Appellant is bound to keep records for a period of five years and further to produce them in ascertaining his correct tax liability.

15. The Respondent submitted that the Appellant did not discharge its burden of proving that VAT assessments were erroneous since it did not adduce all invoices as evidence in support of its objection.

16. The Respondent in support of its case made reference to the holdings in the cases of Ushindi Exporters Ltd vs Commissioner of Investigation and Enforcement [TAT appeal No.7 of 2015] and Commissioner of Domestic Taxes v Altech Stream [EA] Ltd [2021] eLR.

Respondents prayers 17. The Respondent prayed that the Tribunal: -a.Upholds the Respondent’s amended assessments dated 10th June 2021. b.Dismisses the Appeal with costs to the Respondent.

ISSUE FOR DETERMINATION 18. The Tribunal has considered the facts of the matter and the submissions made by the parties, and is of the view the issue falling for its determination is as follows:Whether the Respondent was justified in issuing its decision dated 10th June 2021.

ANALYSIS AND FINDINGS 19. Having identified the issue for its determination, the Tribunal proceeds to analyze it as hereunder.

20. The Appellant objected to the VAT tax assessments in issue and as per his Statement of Facts he supplied the Respondent with all the requested documents. The Respondent’s response to this is that it reviewed the documents supplied and adjusted the assessments accordingly.

21. The parties have not shown or indicated in their pleadings what the requested documents were. They have equally failed to show what the adjustments in the assessments were. It is the Respondent who mentioned the two issues in its Statement of Facts but no details of the same were provided.

22. The Appellant filed a big bundle of documents in his Appeal. However, his Statement of Facts does not indicate what was included in the notice of objection and what the Respondent failed to consider when making its final assessments. The Appellant’s Statement of Facts is very brief and it indicates that the Appellant provided all the required documents in support of its case and no more.

23. The Appellant did not provide to the Tribunal his notice of objection and it is therefore not possible for the Tribunal to determine what documents were sent to the Respondent and whether the same were considered by the latter.

24. The Tribunal is guided by Section 51 (2) and (3) of the Tax Procedures Act which states as follows:-(51)(2) A taxpayer who disputes a tax decision may lodge a notice of objection to the decision, in writing, with the Commissioner within thirty days of being notified of the decision.(3)A notice of objection shalI be treated as validly lodged by a taxpayer under subsection (2)if-(a)the notice of objection states precisely the grounds of objection, the amendments required to be made to correct the decision, and the reasons for the amendments;(b)in relation to an objection to an assessment, the taxpayer has paid the entire amount of tax due under the assessment that is not in dispute or has applied for an extension of time to pay the tax not in dispute under section 33(1);and(c )all the relevant documents relating to the objection have been submitted.”

25. Further, Section 56 (1) of the Tax Procedures Act states as follows:-“In any proceedings under this Part, the burden shall be on the taxpayer to prove that a tax decision is incorrect.”

26. It is the Tribunal’s considered view that the Appellant has failed to discharge its evidential burden of proof under Section 107 (1) of the Evidence Act in demonstrating that the assessment by the Respondent was in any reasonable manner incorrect or excessive.

27. Although the law recognizes the self-assessment regime, the Respondent is empowered by Section 31 of the Tax Procedures Act to amend such assessment if it has available information as held in Nairobi TAT No. 25 of 2016 Family Signature Limited Vs.The Commissioner of Investigations &Enforcement.

28. The Tribunal reiterated its decision in TAT NO.28 OF 2018- Joycott General Contractors Limited -VS-Kenya Revenue Authority, where in dismissing the Appeal it held that:-“We find that the Appellant seems to forget that it bears the burden of proof, in law, to demonstrate to this Tribunal that the Respondent's assessment was wrong. Especially with regards to the under declarations and variance in respect of VAT and income sales. To the contrary, the Appellant has not bothered to substantially traverse the assessment raised. All it has done is to make sweeping and expansive accusations without substantial support.”

29. The Tribunal is therefore persuaded that the Respondent was right in upholding the assessments made against the Appellant.

FINAL DECISION 30. The upshot to the foregoing analysis is that the Appeal is unmeritorious and the Tribunal consequently makes the following Orders;-a.The Appeal be and is hereby dismissed.b.The Objection decision dated 10th June, 2021 be and is hereby upheld.c.Each party to bear its own costs.

31. It is so ordered.

DATED and DELIVERED at NAIROBI this 11th day of October 2024. ………………………………….ERIC NYONGESA WAFULACHAIRMAN……………………………… ….……..………….……..GLORIA A. OGAGA JEPHTHAH NJAGIMEMBER………………………………EUNICE N. NG’ANG’AMEMBER.