[2023] KETAT 259 (KLR)

Newmont Commodities Limited v Commissioner of Domestic Taxes (Tax Appeal 175 of 2022) [2023] KETAT 259 (KLR) (26 May 2023) (Judgment)

Neutral citation: [2023] KETAT 259 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal 175 of 2022

E.N Wafula, Chair, Cynthia B. Mayaka, Grace Mukuha, A.K Kiprotich & Jephthah Njagi, Members

May 26, 2023

Between

Newmont Commodities Limited

Appellant

and

Commissioner of Domestic Taxes

Respondent

Judgment

BACKGROUND 1. The Appellant is a private limited liability company registered under the Companies Act. The Appellant’s main economic activities are in the service industry.

2. The Respondent is a principal officer appointed under and in accordance with Section 13 of the Kenya Revenue Authority (KRA) Act, and Kenya Revenue Authourity 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 Appellant was issued with pre-assessment notice vide a letter dated November 23, 2021 in relation to the variances established between VAT and income tax declarations for the years of income ending December 2016 and 2017.

4. In the letter, the Respondent alleged that the Appellant had failed to declare some sales in the VAT returns for the years 2016 and 2017 and also some purchases had not been declared in the VAT returns but were declared in the income tax company returns for the said years.

5. On December 9, 2021, the Appellant was issued with Assessment Orders with numbers KRA xxxx of Value Added Tax for December 2016 with Kshs 130,664,126. 94, KRA xxxx of Value Added Tax for December 2018 with Kshs 10,993,334. 61, KRA xxxx of Income Tax Company 2016 with Kshs 72,969,454. 18, KRA xxxx of Income Tax Company 2017 with Kshs 57,371,648. 12 and KRA xxxx of income Tax Company 2018 with Kshs 17,782,804. 43.

6. The assessment orders were issued on the Respondent’s iTax portal.

7. On January 8, 2022, the Appellant objected to the additional assessments via the Respondent’s iTax portal and was issued with the objection acknowledgement receipts.

8. On January 25, 2022 and on February 28, 2022, the Appellant was notified by the Respondent via the iTax system that the objection notices lodged were time-barred and were classified as late objections. The rejection notices also indicated that the late objection notices were not supported as per Section 51 of the TPA.

9. Aggrieved by the decision of the Respondent to reject its objection notices, the Appellant filed a Notice of Appeal on February 23, 2022.

The Appeal 10. The Appeal is premised on the following grounds as stated in the Memorandum of Appeal dated February 22, 2022 and filed on 2February 3, 2022:-a.That the Respondent erred in law and fact by disregarding the Appellant's objection notice which was lodged within the legal timeframe enshrined in Sections 51(1, 2 and 3) of the Tax Procedures Act.b.That the Appellant lodged the objection in accordance with the provisions laid down in Section 51 of the TPA but the application was declined by the Respondent on grounds that the objection was made out of time and that there was no support for the late objection.c.That the Respondent also exercised prejudice in his decision making by failing to consider the facts that were stated in the objection letter and the grounds upon which the objection was based.

Appellant’s Case 11. The Appellant’s case is premised on the following:-a.Appellant’s Statement of Facts dated February 22, 2022 and filed on February 23, 2022 together with the documents attached thereto.b.Appellant’s written submissions filed on January 5, 2023 and the legal authorities attached thereto.

12. The Appellant averred that it was issued with pre-assessment notice vide a letter dated November 23, 2021 in relation to the variances established between VAT and income tax declarations for the years of income ending December 2016 and 2017.

13. That as per the said notice, the Respondent alleged that the Appellant had failed to declare some sales in the VAT returns for the years 2016 and 2017 and also some purchases had not been declared in the VAT returns but were declared in the income tax company returns for the said years.

14. That on December 9, 2021, the Appellant, via KRA iTax portal was issued with Assessment Orders with numbers KRA xxxx of Value Added Tax for December 2016 with Kshs 130,664,126. 94, KRA202122402834 of Value Added Tax for December 2018 with Kshs 10,993,334. 61, KRA xxxx of Income Tax Company 2016 with Kshs 72,969,454. 18, KRA202122411873 of Income Tax Company 2017 with Kshs 57,371,648. 12 and KRA xxxx of income Tax Company 2018 with Kshs 17,782,804. 43.

15. That on January 8, 2022, the Appellant objected to the additional assessments on the Respondent’s iTax portal and was issued with the objection acknowledgement receipts.

16. That on January 25, 2022 and on February 28, 2022, the Appellant was notified by the Respondent via the iTax system that the objection notices it lodged were time-barred and were classified as late objections.

17. That according to Section 51 of the Tax Procedures Act, an objection notice is considered time-barred only if the notice is lodged after the lapse of 30 days from the time the additional assessment notice was issued. That in the instant case, the Appellant was rightfully within the legal timeframe to lodge a valid objection notice on January 8, 2022 since the Respondent had issued its additional assessment notices on December 9, 2021. The Appellant, averred that it was denied its legal right to validly object the Respondent's additional assessments by invalidating its rightful, timely and valid objection notices.

18. The Appellant submitted that the Respondent was not right in invalidating the Appellant's objection notices without taking all material facts into consideration. That the deliberate action of dismissing the valid objection notices, the Respondent exercised prejudice on the Appellant and that there was no way the Appellant could find justice in the Respondent's hands. That even if the objection notices were lodged earlier than that date, the Appellant still could not have received a fair and just treatment.

19. That the Appellant was denied an opportunity to argue out its case in defense against the Respondent's punitive, excessive and unfair assessments and that such action is both unacceptable and untenable.

20. That according to the notices of objection lodged on 0January 8, 2022 via the iTax portal, the variance in sales/purchases as declared in the VAT returns and income tax returns had exclusive positive correlation to exempted supplies that had been made by the Appellant for the tax periods of December 2016 and December 2018.

21. That according to the provisions laid down in the VAT Act 2013, exempted goods are not subjected to VAT at a general rate of 16%. That therefore, the Respondent contravened the legal provisions laid down in the VAT Act by charging VAT (on imported goods/supplies), on the variance.

22. That the Respondent was at liberty to exercise proper and due inspection on the Appellant's records of transactions in order to determine the correct legal, financial and tax position as provided in law. That by so doing, the Respondent could have established the nature of goods that led to the variance in sales/purchases between declarations made in VAT3 and IT2C returns in the respective years.

23. That it was also prudent for the Respondent to reasonably comprehend that variance in sales as declared in VAT and IT2C returns could have possibly arisen from exempted supplies as per the Customs data, since the information available to it conspicuously showed that nature of goods imported and thereafter disposed.

24. That the Respondent was wrong for subjecting the resultant variance in sales to VAT at a general rate of 16% and yet those supplies were exclusively exempted goods.

25. That the Respondent erred in law and fact by disallowing the resultant variance in purchases (as declared in the VAT and IT2C returns for the years 2016 and 2017), in the income tax company returns for the years 2016 and 2017.

26. That declaration of purchases in the VAT returns did not attain completeness due to the delayed delivery of importation documents and that some purchases were not declared in the VAT returns on the grounds that the goods were not subjected to VAT but they could still have attained complete disclosure in the income tax returns upon completion of an independent audit process and thereafter, an establishment of a correct tax and financial position.

27. That the Respondent, in the spirit of hunting for more tax, deliberately disallowed those purchases which were in variance and subjected the same to corporation tax at a rate of 30%. That the Respondent's decision was not only unfair, excessive and unjust, but was equally illegal and inconsiderate before the law.

28. That the Respondent failed to have a simple understanding that customs duty and other taxes had been remitted to it on the very imports that it was then disallowing in the income tax returns on grounds that they were not declared in the VAT returns.

29. That the Respondent failed to demonstrate practicability in deriving an expenditure margin of 40% on imported goods upon subjecting those goods to a 5% profit margin. That the Responded needs to know that the Appellant is a private limited company and not a parastatal and that in realizing and recognizing revenue, various expenses must be incurred by the Appellant. That among the expenses include but not limited to customs duty and other taxes/charges, shipping charges, port charges, transport charges, F147, direct labor costs and other several incidental costs. That it is, therefore, not right for the Respondent to deliberately assume that the Appellant only incurred 40% expenditure in generating revenue for the year 2018. Furthermore, the Respondent assumed that the gross profit margin realized by the Appellant was 5% without demonstrating how it arrived at that margin.

30. That based on the general operations of the Appellant, it can either generate profit or loss, depending on the existing market conditions and the existing closing stock at the end of the trading cycle. That the Appellant operates on a slim profit mark-up of between 2. 5% to 3%, subject to the prevailing market conditions for a given year. That the Appellant, therefore, does not agree with the Respondent on its estimated gross profit margin of 5% and an expenditure margin of 40% for the year of income 2018.

31. The Appellant averred that the Respondent failed in its duty of reasonableness by disregarding examination of the Appellant's books of accounts but instead making overreliance on the customs data and the iTax data submitted through the VAT and IT2C returns in coming up with the additional assessments. That the law allows the Respondent to perform due examination/inspection on the affairs of a taxpayer in order to determine a fair and just tax position of that taxpayer. That in this case, the Respondent did not make proper and due inspection of the Appellant’s records and financial transactions in ascertaining the correct financial and tax position of the Appellant.

32. The Appellant submitted that the following should be the issues for determination in this matter:-a.Whether the Respondent erred in law by charging Value Added Tax on exempt sales in variance for year 2016. b.Whether the Respondent erred in law by disallowing purchases in variance for the year 2016 and 2017. c.Whether the Respondent erred in law by failing to conduct an inspection and examination on the Appellant's books of accounts before confirmation of the additional assessments.d.Whether the Respondent erred in law by deriving a gross profit margin of 5% and an allowable expenditure of 40% on estimated taxable income in year 2018. e.Whether the Respondent's assumption that all purchases made by the Appellant were completely sold out in the year of purchase is true.

Whether the Respondent erred in law by charging Value Added Tax on exempt sales in variance for year 2016. 33. The Appellant submitted that the Respondent contravened the provisions of the Second Schedule of VAT Act, 2013 by subjecting exempted sales in variance to VAT at the general rate of 16%. That the Respondent failed to understand that the goods that the Appellant trades in are both vatable and exempted in their nature and by subjecting the sales in variance to VAT, the Respondent contravened the provisions of the VAT Act, 2013 which specifies the class of goods or items that should be charged VAT and those that should not be charged VAT.

34. The Appellant, further submitted that purchases as reported in the financial statements have also been summarized as below for ease of reference;Nature of Goods Value in KshsVatable Purchases 78,254,907. 16Exempted Purchases 639,285,573. 43TOTAL 717,540,480. 59

35. The Appellant submitted that despite the fact that some sales were not declared in the VAT returns for year 2016 but were declared in the income tax company return, the Respondent ought to have put into consideration the fact that not all sales realized were vatable. That from the customs data under the custody of the Respondent, it was simple for the Respondent to make proper adjustment to the sales in variance as to what fraction constituted vatable sales and exempted sales.

36. The Appellant submitted that the sales in variance did not constitute vatable sales alone, but significantly constituted exempted sales in larger proportion.

b). Whether the Respondent erred in law by disallowing purchases in variance for year 2016 and 2017. 37. The Appellant submitted that the Respondent erred in law by disallowing purchases in variance for both years 2016 and 2017 which had been incurred and transacted during the years in question. That the Respondent seemed to be ignorant of the fact that purchases as claimed in the income tax company returns, though in excess of those that had been declared in the VAT returns, did not appreciate the fact that those purchases are the ones that led to generation and realization of sales declared in the very return periods.

38. The Appellant submitted that it was totally unacceptable for the Respondent to disallow the purchases in variance between those claimed in the VAT returns and those that had been claimed in the income tax returns.

39. The Appellant submitted that it had actually made purchase of goods in variance and that it deserves to claim the same. That inspite of the fact that the said purchases in variance had not been declared in the VAT returns, that does not guarantee that the same should be allowed on grounds of non-disclosure in the VAT returns. That the Respondent lacked wisdom and fairness in disallowing the purchases in variance.

40. Further, the Appellant submitted that it had made importation of goods/purchases and that the entire information on the importation was available with the Respondent in the customs database and that the Respondent ought not to argue that the Appellant was not at liberty of claiming those purchases even after it was aware that the Appellant had made such importation.

41. The Appellant submitted that all its purchases as disallowed by the Respondent, should be allowed back as the same had been legally incurred and that the resultant taxes had been paid to the Respondent in terms of import duties, RDL and IDF and that the Respondent should not pretend to be unaware of the same as the taxes had already been paid. That the Respondent, should allow the Appellant claim the purchases in the annual returns even though the same had not been claimed/declared in the VAT returns.

42. The Appellant submitted that the Respondent ought to understand that the Appellant operates on profit margin basis and should not expect too much from it in terms of taxes. That the Appellant should be allowed to claim all the purchases in variance without discrimination and excessive taxation aimed at crippling and thwarting the Appellant's efforts of surviving in a highly competitive business environment.

c). Whether the Respondent erred in law by failing to conduct an inspection and examination on the Appellant's books of accounts before confirmation of the additional assessments. 43. The Appellant submitted that Section 59 of the Tax Procedures Act, 2015, requires the Respondent to issue a notice in writing specifying the information required in establishing the correct and fair tax liability of any taxpayer. That the Section states as follows;'59 (I) 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.'

44. The Appellant submitted that the Respondent did not act in good faith while carrying out its assessments as it failed to perform an examination on the Appellant's books of accounts and financial records in determining the correct tax liability. That the Respondent simply relied upon the declarations made in the VAT returns and the income tax company returns in terms of sales and purchases.

45. That the Respondent did not put into consideration the nature of goods that the Appellant dealt in for the years in question. That by simply relying upon iTax declaration, the Respondent left out significant amount of information which could have been of great importance in determining the correct tax liability of the Appellant. That the Respondent did not factor in the availability of customs data in performing relevant adjustments as far as the variances established are concerned.

46. The Appellant submitted that the Respondent limited entire assessment to return declarations made via iTax portal and did not factor in the financial records of the Appellant in determining the correctness of the Appellant's tax liability. That transactions as per the cashbook and bank statements were not factored in by the Respondent in determining proper tax assessment that is fair, just and considerate.

47. That the Respondent can be said to have had a prejudicial mindset while carrying out the assessments on grounds that no extra documents were requested from the Appellant in verifying the information available to it on performing variance analysis between return declarations and customs data. That the entire assessments should be dismissed and the Appellant's self-assessments be upheld.

48. The Appellant relied on the case ofRobert Ayisi v Kenya Revenue Authority and Another NRB Petition No 412 of 2016 [2018] eKLRwhere the court held that:-'A taxing authority must have a rational basis for arriving at the sum demanded from the taxpayer otherwise action would be arbitrary capricious and in bad faith.'

49. The Appellant submitted that it discharged its duty as required by the law by providing all the required documents as requested by the Respondent. That the Appellant delivered documents to the Respondent via email on various dates for review as had been requested. The Appellant submitted that it is upon the Respondent to show the reason with sufficient evidence for the arrival at the sum demanded from the Appellant.

d). Whether the Respondent erred in law by deriving a gross profit margin of 5% and an allowable expenditure of 40% on estimated taxable income in year 2018. 50. The Appellant submitted that the Respondent made wrong assumption of deriving a gross profit margin of 5% on importation made for the year 2018 without demonstrating how it arrived at that margin rate. The Appellant submitted that the profit margin of 5% is not practical and could not be realized based on the competitive nature of the industry and various direct and indirect variables that determine the profitability of business.

51. The Appellant relied on the case ofMinazini Enterprises Limited Vs The Commissioner of Domestic Taxes, Tax Appeal Number 56 of 2016 [2018) eKLR where the Tribunal held that:-'The tribunal is aware that the Respondent under section 77 of the ITA the Commissioner is clothed with the powers to make additional assessments according to the commissioner's best judgement, in this case, the Respondent flagrantly disregarded THE documents presented and adjusted the Appellant's profit margin to I0%. The Tribunal views this to be arbitrary as the Respondent has not tendered before it any evidence nor provided cogent and persuasive argument as to the reason for adjusting the profit margin.'

52. The Appellant protested that the Respondent's computation of the tax charged for the year 2018 of Kshs 17,782,804. 43 was not just and fair and that the expenditure margin allowed of 40% on the estimated value of purchases was not practical and cannot be accepted. That the Respondent should not be seen to be making an expenditure allowance of 40% against the estimated sales when in real sense it is in possession of purchases upon which the estimated sales had been derived.

53. That the direct cost of sales allowable and in the first sight is the purchase/importation value and the Respondent was expected, at the very first point, to make adjustment for the purchases/direct costs if the estimated sales were anything to go by.

54. That the provisions of Section 37A(2) of the Tax Procedures Act, 2015 states as follows:-'Where a person has no documentation to support expenditure, such person shall be allowed a deduction of forty per cent of the expenditure'

55. That the Appellant, in this case, cannot be said to be lacking support for the expenditure because the estimated sales themselves were derived from the purchase documents that were in the hands of the Respondent through the Customs database. That the Respondent should have only asked for the supporting documents for other expenses claimed in the financial statements/income tax return that was to be filed in the amended version.

56. That expenses such as port charges, shipping charges, clearing fees, transport and other incidental costs are common and expected to be reported in the financial statements, based on the nature of business of the Appellant. That this is the truth that the Respondent should be least expected to distance itself from. That in such cases, the Appellant could be expected to provide support for such expenses as might have been claimed in the income tax company return and where such supporting documents couldn't be produced, the provision stated in section 37A(2) of the Tax Procedures Act, 2015, could be invoked.

57. That the Respondent was ignorant of the legal provision that requires that in cases where a taxpayer does not have supporting documents for the expenses claimed in the income tax return, such taxpayer shall be allowed up to 40% expenditure on the taxable income. The Respondent, in this case, is seen to misunderstand the application of this provision, whereby the estimated sales had been derived out of the available purchases; meaning that there was already 100% evidence of the cost of sales that the Respondent was legally bound to allow during tax computation for the year 2018.

58. The Appellant averred that despite the fact that it had not submitted the return for 2018, it was at liberty to submit the amended version of the return upon completion of the independent audit process and that the Respondent's assessment does not display the correct tax position of the Appellant's business operations.

59. The Appellant relied on Paragraph 31 of the case of Minazini Enterprises Limited Vs The Commissioner of Domestic Taxes, [Tax Appeal Number 56 of 2016 [2018] eKLR where the Tribunal held that:-'the tribunal finds it well established in statute that expenses may only be deducted in calculating profits of a business where the expenses have been incurred wholly and exclusively for the purposes of that business. The Tribunal agrees with the Appellant that Section 15(I) of ITA entitles a taxpayer to deduct all expenses incurred wholly and exclusively in the production of income as stated below:-‘For the purpose of ascertaining the total income of a person for a year of income there shall, subject to section 16, be deducted all expenditure incurred in that year of income which is expenditure wholly and exclusively incurred by him in the production of that income’.

e). Whether the Respondent's assumption that all purchases made by the Appellant were completely sold out in the year of purchase is true. 60. The Appellant submitted that the Respondent made the wrong assumption that all the goods purchased in each year under review were exhaustively sold out in the same year of purchase. That this assumption is basically wrong and cannot hold in the real market· economy. The Appellant submitted that not all goods purchased in the years under review were sold out in the same year. At the end of every year, the Appellant reported goods in inventory and the same were not taken into consideration by the Respondent while carrying out the assessments.

61. The Appellant submitted that it was not morally right for the Respondent to assume that the entire stock of goods purchased were fully disposed off in the same year without having reported closing stock. The Appellant submitted that purchases ledgers, stock movement and other ledgers as had been requested were made available to the Respondent alongside the sales ledgers, to demonstrate how goods were received and disposed by the Appellant in the years under review.

62. The Appellant submitted that it discharged its duty as required by the law by providing all the necessary documents as had been requested by the Respondent.

Appellant’s prayers. 63. The Appellant made the following prayers to the Tribunal:-a.Dismiss the Respondent’s decisions on the Appellant’s objections.b.Allow this Appeal.c.Dismiss the Respondent’s demand for taxes.d.Award costs of the Appeal.

Respondent’s Case 64. The Respondent’s case is premised on the hereunder filed documents:-a.The Respondent’s Statement of Facts dated 15th March 2022 and filed on 16th March 2022. b.The Respondent’s written submissions dated and filed on November 10, 2022.

65. The Respondent averred that the Appellant filed self-assessment returns for income tax for the year of income 2016, 2017, and 2018. That the Appellant also filed self-assessment returns for VAT for the months of May 2016, December 2016 and December 2018.

66. That the Respondent furnished the Appellant with a notice of intention to raise additional assessments on November 25, 2021 requesting the Appellant to amend its returns to capture the correct position of its business and pay applicable taxes.

67. That the Respondent raised additional assessments after a review of income tax and VAT returns revealed that the Appellant's declarations and taxes were not commensurate with import and export data received from customs.

68. That assessment orders were sent to the Appellant on December 9, 2021 through iTax system and also via email provided by the Appellant in the iTax profile.

69. That the Respondent issued additional assessments based on customs data and variance between turnover that was declared in income tax and VAT returns for the years of income 2016, 2017 and 2018.

70. That the Appellant lodged a late objection to the assessment on January 8, 2022 through iTax system vide objection acknowledgement numbers KRA xxxx, KRA xxxx, KRA xxxx, KRA xxxx and KRA xxxx.

71. That the Respondent confirmed the assessments on January 25, 2022 and February 28, 2022 vide rejection notices 164171006, 164170918, 164170856, 164170959, and 166805621.

72. That the Appellant failed to provide records to support grounds for late objection as required under Section 51(7) of the Tax Procedures Act.

73. That the thirty-day window period provided for application of objection commences upon the taxpayer being issued with an assessment electronically or via a registered mail. That based on the material facts, the taxpayer's objection was lodged out of time as the 30th day in the instant case was January 7, 2022.

74. That the Appellant’s objection lodged on the January 8, 2022 was invalid pursuant to the provisions of Section 51(2) of the Tax Procedures Act.

75. That where the Appellant is out of time in filing an objection then the Appellant ought to file an application in writing to the Commissioner seeking for extension of time to lodge a late objection. That in this case, the Appellant did not file an application.

76. That the Respondent allowed the Appellant's forty percent deductions pursuant to the provisions of Section 37A (2) of the Tax Procedures Act. That the five percent estimated profit margin was based on analysis of taxpayers operating in the same sector.

77. That the Appellant failed to provide records to support expenses incurred in furtherance of business as per Section 15(1) of Income Tax Act. That Section 31 of the Tax Procedures Act, 2015 allows the Respondent to assess tax based on the available information in case the taxpayer fails to amend returns and provide the documents necessary for the determination of the tax liability.

78. The Respondent submitted that the only issue for determination is:-'Whether the Respondent erred in law and in fact by failing to allow the Appellant's late objection.'

79. The Respondent submitted that Section 51 of the Tax Procedures Act provides for objection to tax decision as follows;-(1)A taxpayer who wishes to dispute a tax decision shall first lodge an objection against that tax decision under this section before proceeding under any other written law(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 shall 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 amendmentsb.In relation to an objection to an assessment, the taxpayer has paid the entire amount of tax due under the assessments that is not in dispute or has applied for an extension of time to pay the tax not in dispute under section 33(1);andc.All the relevant documents relating to the objection have been submitted.'

80. That Section 51(7) provides for extension of time to file a notice of objection as follows;'The Commissioner may allow an application for the extension of time to file a notice of objection if-a.The taxpayer was prevented from lodging the notice of objection within the period specified in subsection (2) because of an absence from Kenya, sickness or other reasonable cause; andb.The taxpayer did not unreasonably delay in lodging the notice of objection.'

81. The Respondent submitted that the Appellant failed to provide records to support grounds for late objection as required under Section 51(7) of the Tax Procedures Act. That the Appellant maintained that it lodged the objection notice within 30 days which is not the case as per the objection application lodged on January 8, 2022.

82. The Respondent submitted that the thirty day window period provided for application of objection commences upon the taxpayer being issued with an assessment electronically or via registered mail. That in the instant case, the Appellant's objection was lodged out of time as the 30th day from the date in which the assessment was issued on December 9, 2021 fell on January 7, 2022.

83. That the Appellant's objection lodged on the January 8, 2022 was invalid pursuant to the provisions of Section 51(2) of the Tax Procedures Act.

84. The Respondent submitted that as the Appellant failed to supply it with evidence to disapprove its position, it was forced to rely on the invoices in its possession. That Section 59(1) of the TPA stipulates that:-'For the purposes of obtaining full information, whether on a data storage devise or otherwise in respect of the tax liability of any person or class of persons, or for any other purposes,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 records, books of account, statements of assets and liabilities or other documents that are in the person's custody or under the person's control relating to the tax liability of any person;b.Furnish such information relating to the tax liability of any person in the manner specified in the notice;c.Attend, at such time and place as may be specified in the notice,for the purpose of giving evidence in respect of any matter or transaction appearing to be relevant to tax liability of any person.'

85. The Respondent submitted that Section 23(1) of the Tax Procedures Act provides for record-keeping and it states as follows:-'23(1) A person shall-a.Maintain any document required under a tax law, in either of the official languagesb.Maintain any document required under a tax law so as to enable the person's tax liability to be readily ascertained; andc.Subject to subsection (3), retain the document for a period of five years from the end of the reporting period to which it relates or such shorter period as may be prescribed in a tax law.'

86. That Section 54 A(1) of the Income Tax Act requires the taxpayer to keep records of all receipts and expenses, goods purchased and sold and accounts, books, deeds and vouchers which in the opinion of the Commissioner are adequate for the purposes of computing tax as stressed in the case of Monaco Engineering Limited vs Commissioner Domestic Taxes TAT Appeal No 67/2017, when the Tribunal stated that;'The Tribunal has indubitably been clear on the burden on taxpayers to have documents in disputing tax assessments. This responsibility is precisely provided for in Section 54 A (1) of the Income Tax Act which provides thus; 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.'

87. he Respondent relied on the case of Commissioner of Investigations and Enforcement vs Evans Odhiambo Kidero (Income Tax Appeal Eo28 Of 2020) where justice Majanja held that:-'The burden imposed on the taxpayer did not exist in a vacuum, it was also buttressed by the obligation on the taxpayer to maintain records. Section 54A of the ITA was augmented by Section 23(1) (B) of the TPA which imposed a duty on the taxpayer to keep records required under any law so as to enable the person's tax liability to be readily ascertained.'

88. The Respondent submitted that Sections 24 and 31 of the TPA empower the Commissioner to make an assessment based on the information available to him in circumstances where the taxpayer fails to produce documentation.

89. The Respondent submitted that Section 56(1) of the TPA places the burden on the taxpayer to prove that a tax decision is incorrect. That in the case of Kilburn vs Bedford (HM Inspector of Taxes)[3] as cited in the case of Kenya Revenue Authority vs Man Diesel & Turbo Se, Kenya (2021) eKLR, it was stated that:'As regards the extra tax imposed upon those figures, it was for the Appellant to show that there was some reason why on the agreed figures tax should not be paid.'

Respondent’s prayers. 90. The Respondent made the following prayers to the Tribunal:-a.That the Respondent’s decision to reject the Appellant’s objections dated January 8, 2022 be upheld.b.That this Appeal be dismissed with costs awarded to the Respondent.

Issues For Determination 91. The Tribunal has carefully studied the pleadings and documentation of both parties and is of the respectful view that that the only issue that calls for its determination is:-'Whether the Respondent erred in law and fact by classifying the Appellant’s objections lodged on the Respondent’s iTax system on January 8, 2022 as late objections.'

Analysis And Findings 92. Having identified the issue for its determination, the Tribunal proceeds to analyze it as hereunder.

93. The parties are in agreement that on December 9, 2021, the Appellant, via the Respondent’s iTax portal was issued with Assessment Orders with numbers KRA xxxx of Value Added Tax for December 2016 with Kshs 130,664,126. 94, KRA xxxx of Value Added Tax for December 2018 with Kshs 10,993,334. 61, KRA xxxx of Income Tax Company 2016 with Kshs 72,969,454. 18, KRA xxxx of Income Tax Company 2017 with Kshs 57,371,648. 12 and KRA xxxx of income Tax Company 2018 with Kshs 17,782,804. 43.

94. The parties also agree that on January 8, 2022, the Appellant objected to the additional assessments on the iTax portal and was issued with the objection acknowledgement receipts.

95. The parties further agree that on January 25, 2022 and on February 28, 2022 the Appellant was notified by the Respondent via the iTax system that the objection notices it lodged on January 8, 2022 were time-barred and were classified as late objections.

96. The Appellant submitted that according to Section 51 of the Tax Procedures Act, a notice of objection is considered time-barred only if the objection is lodged after the lapse of 30 days from the date when the tax assessment was issued.

98. The Appellant submitted that in the instant case, it was rightfully within the legal timeframe to lodge a valid notice of objection on January 8, 2022 since the Respondent had issued its additional assessment notices on December 9, 2021.

99. On the other hand, the Respondent submitted that the thirty day window period provided for application of objection commences upon the taxpayer being issued with an assessment electronically or via registered mail.

100. The Respondent submitted that in the instant case, the Appellant's objection was lodged out of time as the 30th day from the date in which the assessment was issued fell on January 7, 2022.

101. The Respondent submitted that since the thirty days expired on January 7, 2022, the Appellant's objection lodged on the January 8, 2022 was invalid pursuant to the provisions of Section 51(2) of the Tax Procedures Act (TPA).

102. The Tribunal notes that Section 51(2) of the TPA states that:'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.'

103. The Appellant is of the view that the thirty days began to run on the day after the decision was notified to the taxpayer (in the instant case on December 10, 2021), while the Respondent submitted that the days should be counted from the day the decision was notified to the taxpayer (in the instant case on December 9, 2022). The differences in the interpretation seem to be the main issue in this dispute.

104. The Tribunal finds that since the decision of the Respondent was communicated to the Appellant on the iTax portal on December 9, 2021, the first day from when the decision was communicated to the taxpayer was on December 10, 2021. In the Tribunal’s view, this is the first of the thirty days within which an objection should be lodged.

105. Flowing from the above finding, the thirty days after the notification of the decision to the taxpayer ended on January 8, 2022. The Appellant filed its objection on January 8, 2022 which was on the 30th day and therefore within the statutory timeframe stipulated in Section 51(2) of the TPA.

106. The Tribunal relies on the court’s holding in Nicholas Kiptoo Arap Korir Salat v IEBC & 6 Others [2013] eKLR where the court stated as thus:-'This Court, indeed all courts, must never provide succor and cover to parties who exhibit scant respect for rules and timelines. Those rules and timelines serve to make the process of judicial adjudication and determination fair, just, certain and even-handed. Courts cannot aid in the bending or circumventing of rules and a shifting of goal posts for, while it may seem to aid one side, it unfairly harms the innocent party who strives to abide by the rules. I apprehend that it is in the even-handed and dispassionate application of rules that courts give assurance that there is a clear method in the manner in which things are done so that outcomes can be anticipated with a measure of confidence, certainty and clarity where issues of rules and their application are concerned'

107. The Tribunal finds that the Appellant’s objections lodged on the Respondent’s iTax system on January 8, 2022 were lodged within the timeframe specified by Section 51(2) of the TPA and were not time barred. The Respondent therefore erred in fact and in law by classifying the Appellant’s objections filed on the Respondent’s iTax system on January 8, 2022 as late objections.

Final Decision 107. The upshot of the foregoing is that this Appeal is merited and consequently, the Tribunal makes the following Orders: -a.The Appeal be and is hereby allowed.b.The Respondent’s late objection rejection notices dated January 25, 2022 and February 28, 2022 be and are hereby set aside.c.The matter is referred back to the Respondent to make an objection decision within Sixty (60) days of the date of delivery of this Judgment.d.Each party to bear its own costs.

108. It is so ordered.

DATED AND DELIVERED AT NAIROBI ON THIS 26TH DAY OF MAY, 2023. ...............................ERIC N. WAFULACHAIRMAN................................CYNTHIA MAYAKAMEMBER................................GRACE MUKUHAMEMBER................................ABRAHAM KIPROTICHMEMBER................................JEPHTHAH NJAGIMEMBER