[2025] KETAT 201 (KLR)

Nyanyuki v Commissioner of Domestic Taxes (Tax Appeal E572 of 2024) [2025] KETAT 201 (KLR) (28 February 2025) (Judgment)

Neutral citation: [2025] KETAT 201 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal E572 of 2024

E.N Wafula, Chair, G Ogaga, RO Oluoch, AK Kiprotich & Cynthia B. Mayaka, Members

February 28, 2025

Between

Justus Mutinda Nyanyuki

Appellant

and

Commissioner Of Domestic Taxes

Respondent

Judgment

Background 1. The Appellant is a Kenyan citizen, a registered taxpayer and a scrap metal broker.

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 to the Appellant additional Income tax assessments for years 2016, 2017, 2019 and 2020 on 17th February 2022.

4. The Appellant objected to the assessments on iTax on 10th May 2022.

5. The Respondent in a letter to the Appellant dated 17th May 2022, declared the Appellant’s Objection as invalid and requested the Appellant to provide information and documents within 7 days from the date of the letter.

6. Following reminders by the Respondent to the Appellant in emails dated 22nd July 2022 and 20th June 2023 to provide requisite documents to validate his Objection, the Respondent subsequently confirmed the assessments in a letter dated 23rd June 2023 followed by iTax confirmations of assessment dated 26th June 2023.

7. The Appellant, being dissatisfied with the Respondent’s decision to confirm the assessments, filed his Notice of Appeal on 30th May 2024.

The Appeal 8. The Appeal is premised on the Memorandum of Appeal dated and filed on 30th May 2024 which raised the ground that the Income tax assessments are not valid in law and have contravened Section 51(11) of the Tax Procedures Act as they are out of the timelines.

Appellant’s Case 9. The Appellant’s case is premised on the following documents filed before the Tribunal:a.The Appellant’s Statement of Facts dated and filed on 30th May 2024 and the documents attached to it; andb.The Appellant’s written Submissions dated and filed on 6th January 2025.

10. The Appellant stated that the Respondent raised Income tax assessments dated 17th February 2022 for the years 2016, 2017, 2018, 2019 and 2020 totaling a principal tax of Kshs. 95,166,357. 00.

11. The Appellant averred that the assessments were sent to the wrong email address and that the Respondent had the wrong telephone number for contact on iTax. That the Appellant’s phone number is 0729xxxxxx and not 0728xxxxxx as per the Respondent’s letter dated 6th May 2024.

12. The Appellant stated that being aware of the assessments, he objected to the same on 10th May 2022.

13. The Appellant averred that the Respondent made an Objection decision on 26th June 2023, 12 months later, confirming the assessments contrary to Section 51(11) of the Tax Procedures Act and rejecting the entire Objection.

14. The Appellant submitted that the Respondent contravened the law as per Section 51(11) of the Tax Procedures Act by not responding to the Objection notice within 60 days even after being furnished with documents to arrive at a tax decision. He buttressed his submission by referring to the holdings in cases of: -a.Farmers Wells Ltd vs Commissioner of Domestic Taxes Case No. 179 of 2021; andb.TAT No. 255 of 2020 ESL Forwarders v Commissioner of Domestic Taxes.

Appellant’s prayers 15. The Appellant prayed for the following orders:-a.The Respondent should vacate the assessments.b.The Respondent should accept the self-assessment.

Respondent’s Case 16. The Respondent’s case is premised on the following documents:a.The Respondent’s Statement of Facts dated 7th July 2024 and filed on 11th July 2024, and the documents attached thereto; andb.The Respondent’s written Submissions dated 11th August 2024 and filed on 29th August 2024.

17. The Respondent stated that on 17th February 2022, it issued the Appellant with additional Income tax assessments amounting to Kshs. 95,166,357. 00 for the period 2016 - 2020.

18. That the basis of the aforementioned assessment was hinged on Section 31 of the Tax Procedures Act which gives the Respondent leeway to issue additional assessments based on the available information and best judgement.

19. That the Appellant’s objection dated 10th May 2022 was declared invalid vide a letter dated 11th May 2022 as it failed to meet the requirements of Section 51(3) of the Tax Procedures Act, 2015.

20. That the Respondent sent reminders dated 22nd July 2022 and 20th June 2023 requesting the Appellant to provide relevant supporting documents to validate his Objection.

21. The Respondent stated that, vide a letter dated 23rd June 2023, it wrote to the Appellant confirming the assessment and later invalidating the Objection due to non-compliance with the provisions of Section 51(3) of the Tax Procedures Act.

22. That the Appellant, aggrieved by the Respondent’s objection invalidation filed this Appeal with the Tribunal.

23. The Respondent analysed its issues for determination under the following headings:a.Whether there is a valid appeal.b.Whether the Appellant lodged a valid objection.c.Whether the Respondent’s assessment is proper in law.

a. Whether there is a valid appeal 24. It was the Respondent’s submission that the Appellant’s Appeal is incompetent for the reason that the Appellant had not lodged the Notice of Appeal as required under Sections 12 and 13 of the Tax Appeals Tribunal Act which provide as follows:-“12. A person who disputes the decision of the Commissioner on any matter arising under the provisions of any tax law may, subject to the provisions of the relevant tax law, upon giving notice in writing to the Commissioner, appeal to the Tribunal:Procedure for appeal13. (1)A notice of appeal to the Tribunal shall—(a)be in writing;(b)be submitted to the Tribunal within thirty days upon receipt of the decision of the Commissioner.”

25. The Respondent submitted that Section 13(1) of the Tax Appeals Tribunal Act, cited above, is couched in mandatory terms and therefore a taxpayer must comply. That it is the Notice of Appeal that invokes the Tribunal’s jurisdiction, without it the Tribunal has no jurisdiction to determine the dispute.

26. The Respondent averred that from the documents served to it and uploaded in the CTS platform by the Appellant, there is no attached Notice of Appeal. That it thus follows that the Appellant has not invoked the jurisdiction of the Tribunal to hear this Appeal. That there is thus no proper Appeal before the Tribunal.

27. The Respondent referred to the holding in the case of Commissioner of Domestic Taxes [TAT Case No. 247 of 2020], where it was held at Paragraph 70 while reiterating the holding in Krystalline Salt Ltd vs KRA [2019] eKLR that: -“Where there is a clear procedure for redress of any particular grievance prescribed by the constitution or an Act of Parliament, that procedure should be strictly followed. Accordingly, the special procedure provided by any law must be strictly adhered to since there are good reasons for such special procedures. The relevant procedure here is the process of opposing an assessment by the Commissioner.”

28. That in the case of The Owners of the Motor Vessel ―Lillian S -vs-Caltex Oil (Kenya) Ltd (1989) KLR (as reported in Peter Lai Muthoka-vs Standard Group [2017] eKLR), Nyarangi J.A., held as follows with regard to jurisdiction : -“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.”

29. It was the Respondent’s submission that the Appeal filed by the Appellant is thus defective and the same should be dismissed.

b. Whether the Appellant lodged a valid objection 30. The Respondent placed reliance on the provisions of Section 51(3) of the Tax Procedures Act, 2015 which provides thus: -“(3)A notice of objection shall be treated as validly lodged by an Appellant 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 an1endments; and(b)in relation to an objection to an assess1nent, the Appellant has paid the entire amount of tax due under the assessment that is not in dispute(c)all the relevant documents relating to the objection have been submitted.”

31. The Respondent stated that the Appellant did not provide the requisite documents for proof despite several reminders to provide the same and therefore failed to validate his Objection pursuant to Section 51(3) of the Tax Procedures Act. That as such, the Objection was accordingly invalidated.

32. The Respondent asserted that the invalidation of the Appellant’s Objection was executed within the prescribed timelines, therefore, the Appellant’s allegation that the Respondent contravened Section 51(11) of the Tax Procedures Act is unfounded and without merit.

33. The Respondent submitted that Section 51(4) of the Tax Procedures Act states that: -“Where the Commissioner has determined that a notice of objection lodged by a taxpayer has not been validly lodged, the Commissioner shall immediately notify the taxpayer in writing that the objection has not been validly lodged.”

34. The Respondent averred that the Appellant was notified of the invalidation and requested to provide documents within the proper timelines to which the Appellant disregarded to validate his Objection.

35. That Section 51(8) of the Tax Procedures Act states that: -“Where a notice of objection has been validly lodged within time, the Commissioner shall consider the objection and decide either to allow the objection in whole or in part, or disallow it, and Commissioner's decision shall be referred to as an "objection decision".”

36. The Respondent argued that it cannot be deemed to have violated Section 51(11) of the Tax Procedures Act by not issuing an Objection decision within timelines, as the Appellant’s Objection was invalid and did not meet the required criteria for consideration.

37. That the Respondent’s invalidation notice was a decision made pursuant to Section 51(4) of the Tax Procedures Act, therefore, the provisions of Section 51(8) - (11) of the Tax Procedures Act do not apply since there was no valid objection for the Respondent to consider.

38. The Respondent further submitted that in light of this, the sixty days’ statutory timeline applicable to objection decisions does not apply to the impugned decision herein as the Appellant may want to imply, thus the Appellant’s ground lacks merit and fails.

c. Whether the assessment is proper in law 39. The Respondent submitted that whereas Section 24 of the Tax Procedures Act allows a taxpayer to submit tax returns in the approved form and manner prescribed by the Respondent, the Respondent is not bound by the information provided therein and can assess for additional taxes based on any available information and to the best of the Commissioner’s judgement.

40. The Respondent asserted that its assessment was in accordance with Section 31 of the Tax Procedures Act which gives it leeway to issue additional assessments based on the available information and best judgement.

41. The Respondent further submitted that there is a rebuttable presumption in tax matters that an assessment by the Respondent is correct. The Respondent referred to the Tax Procedures Act Section 50(1)(a): -“the production of a notice of assessment or a document under the hand of the Commissioner shall be conclusive evidence of making of the assessment and the amount and the particulars of the assessment are correct.”

42. The Respondent stated that the taxes arose from under-declared income for the years of income 2016 to 2020.

43. The Respondent averred that the Appellant failed to provide any primary records and/ or explanation in support of his Objection, and that in the circumstances, the Respondent was constrained to invalidate the Objection and uphold the assessment.

44. It was the Respondent’s submission that Section 51(3)(c) Tax Procedures Act clearly states that all the relevant documents relating to the objection have been submitted. That therefore, the Appellant did not meet the burden of proof required by Section 51(3)(c) of the Tax Procedures Act.

45. The Respondent further clarified that instead of claiming errors on the part of the Respondent, the Appellant has a positive duty to show what amounts were actually taxable.

46. The Respondent further submitted that pursuant to Section 56(1) of the Tax Procedures Act and Section 30 of the Tax Appeals Tribunal Act (Rev. 2023), the burden of proof lies on the Appellant to demonstrate that he has discharged his tax liability. It relied on the holdings in the following cases to support its submission:a.Kenya Revenue Authority v Man Diesel & Turbo Se, Kenya [2021] eKLR;b.PZ Cussons East Africa Limited v Kenya Revenue Authority [2013] eKLR;c.Osho Drappers Ltd vs Commissioner of Domestic Taxes, TAT No. 159 of 2018]; andd.Kenya Revenue Authority v Man Diesel & Turbo Se, Kenya [2021] eKLR.

47. The Respondent stated that this burden was never discharged as no documentary evidence was availed to the Respondent to enable it render a meritorious decision in the circumstances.

48. That based on the above, this Appeal is unfounded and should be dismissed with costs.

Respondent’s prayers 49. The Respondent prayed that the Tribunal finds:a.That the invalidation decision is valid and ought to be upheld.b.That this Appeal lacks merit and does not conform to an Appeal before this Tribunal and same should be dismissed with costs to the Respondent.

Issues for Determination 50. The Tribunal has considered the facts of the matter and the submissions made by the parties, and considers the issues for determination as follows:a.Whether there is a valid Appeal on record.b.Whether the Respondent was justified in confirming the additional Income tax assessments for the years 2016, 2017, 2018, 2019 and 2020.

Analysis and Findings 51. The Tribunal has analysed the issues that call for its determination as hereunder, having reviewed all the pleadings, information and documents adduced by the Appellant and the Respondent concerning the impugned decision.

a. Whether there is a valid Appeal on record 52. It was the Respondent’s submission that the Appellant’s Appeal is incompetent for the reason that the Appellant had not lodged the Notice of Appeal as required under Sections 12 and 13 of the Tax Appeals Tribunal Act.

53. The Respondent submitted that Section 13(1) of the Tax Appeals Tribunal Act is couched in mandatory terms and therefore a taxpayer must comply. That it is the Notice of Appeal that invokes the Tribunal’s jurisdiction, without it the Tribunal has no jurisdiction to determine the dispute.

54. The Respondent averred that from the documents served to it and uploaded in the CTS platform by the Appellant, there is no attached Notice of Appeal. That it thus follows that the Appellant has not invoked the jurisdiction of the Tribunal to hear this Appeal. That there is thus no proper Appeal before the Tribunal as the Appeal is defective and the same should be dismissed.

55. The record of appeal at the Tribunal shows that on 30th May 2024, the Appellant indeed filed his Notice of Appeal at the Tribunal, both on the Judiciary Case Tracking System (CTS) and at the Tribunal’s registry, contrary to the Respondent’s assertion that the Notice of Appeal was not filed.

56. Based on the foregoing, the Tribunal finds that this Appeal is validly lodged before the Tribunal.

b. Whether the Respondent was justified in confirming the additional Income tax assessments for the years 2016, 2017, 2018, 2019 and 2020. 57. The Appellant claimed that the assessments were sent to the wrong email address and that the Respondent had the wrong telephone number for contact on iTax. That the Appellant’s phone number is 0729xxxxxx and not 0728xxxxxx as per the Respondent’s letter dated 6th May 2024.

58. The Tribunal perused the Respondent’s evidence and notes that the Respondent presented to the Tribunal email communication dated 22nd June 2022 sent to the email address justusmutindxxxx@gmail.com by the Respondent’s Independent Review and Objections (IRO)/Investigations & Enforcement Department which stated as thus: -“Good Afternoon,We note that you are yet to provide documents to support your objection. Kindly do so within 7 days to enable the commissioner to review it. Failure to comply will necessitate the commissioner to confirm the assessment without further reference to you…”

59. The Tribunal also refers to the second email correspondence provided by the Respondent dated 20th June 2023 and sent by the Respondent’s Independent Review and Objections (IRO)/Investigations & Enforcement Department to the email address justusmutindxxxx@gmail.com which stated as thus:-“Good Morning,The email thread refers.Kindly note that you are yet to provide us with the requisite documents to enable us validate your objection and undertake review.Further note that a considerable amount of time has lapsed and let this act as a final reminder.You are hereby advised to provide the same by Friday 23rd June 2023 failure to which the Commissioner will confirm the assessments as issued to you without further reference to you…”

60. The Tribunal takes note that the Appellant attached as evidence his PIN registration certificate dated 23rd February 2022 which shows that his email address is justusmutindxxxx@gmail.com, which the Tribunal observes is the same email address to which the Respondent sent its communications to the Appellant.

61. It is the Tribunal’s considered view that the Appellant’s claim that the Respondent sent its communications to the wrong email is not plausible as the Appellant made this averment regarding a demand notice for tax arrears issued to him by the Respondent on 6th May 2024, which was sent to it subsequent to the decision that the Appellant appealed against. Moreover, the Appellant failed to present for the Tribunal’s consideration any document to prove the relevance of his averment including how the averment prejudiced his Objection to the Respondent’s assessments which he filed on 10th May 2022.

62. Having established that the Appellant received the Respondent’s notices of assessments and objected to the same, the Tribunal delved into determining whether the Respondent was justified in confirming the additional assessments of Income tax for the years 2016, 2017, 2018, 2019 and 2020.

63. The Respondent stated that the Appellant did not provide the requisite documents for proof despite several reminders to provide the same and therefore failed to validate his Objection pursuant to Section 51(3) of the Tax Procedures Act. That as such, the Objection was accordingly invalidated.

64. The Respondent asserted that the invalidation of the Appellant’s Objection was executed within the prescribed timelines under Section 51(4) of the Tax Procedures Act, therefore, the Appellant’s allegation that the Respondent contravened Section 51(11) of the Tax Procedures Act is unfounded and without merit.

65. The Respondent further argued that it cannot be deemed to have violated Section 51(11) of the Tax Procedures Act by not issuing an Objection decision within the sixty-day timeline, as the Appellant’s Objection was invalid and did not meet the required criteria for consideration under Section 51(8) of the Tax Procedures Act.

66. The Appellant, on the other hand, averred that the Respondent made an Objection decision on 26th June 2023, 12 months later, confirming the assessments contrary to Section 51(11) of the Tax Procedures Act rejecting the entire Objection. The Appellant submitted that the Respondent contravened the law as per Section 51(11) of the Tax Procedures Act by not responding to the notice of objection within 60 days even after being furnished with documents to arrive at a tax decision.

67. The Tribunal notes that the Respondent notified the Appellant that his Objection dated 10th May 2022 was not valid in the letter dated 17th May 2022. In that same letter, the Respondent requested the Appellant to provide information and documents relating to the Objection within 7 days from 17th May 2022. The Respondent then sent the Appellant reminders to provide documents to validate his Objection via emails dated 22nd July 2022 and 20th June 2023.

68. The Tribunal refers to Section 51(8) of the Tax Procedures Act wherein the meaning of the term “Objection decision” is provided as guided by the interpretative Section 3 of the Tax Procedures Act: -“Where a notice of objection has been validly lodged within time, the Commissioner shall consider the objection and decide either to allow the objection in whole or in part, or disallow it, and Commissioner's decision shall be referred to as an "objection decision".”

69. The Tribunal also refers to Section 51(11) of the Tax Procedures Act as it read on 10th May 2022 when the Appellant lodged his notice of objection: -“The Commissioner shall make the objection decision within sixty days from the date of receipt of—(a)the notice of objection; or(b)any further information the Commissioner may require from the taxpayer, failure to which the objection shall be deemed to be allowed.”

70. A validly lodged Objection is the precursor to an Objection decision processed by the Commissioner under Section 51(8) of the Tax Procedures Act which decision must be made by the Commissioner within the timelines provided under Section 51(11) of the Tax Procedures Act.

71. Section 51(3) of the Tax Procedures Act specifies the parameters of a validly lodged objection as follows: -“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 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.”

72. The Tribunal, however, observes that despite the Appellant’s obligation under Section 51(3) of the Tax Procedures Act to submit all the relevant documents to his Objection, the Appellant failed to present to the Tribunal any evidence to prove that he had duly submitted the documents to the Respondent which could have demonstrated if he had validly lodged his Objection. Therefore, the Appellant failed to discharge his burden of proof under Section 56(1) of the Tax Procedures Act and Section 30 of the Tax Appeals Tribunal Act.

73. The Tribunal refers to the case of Commissioner of Domestic Taxes v Trical and Hard Limited (Tax Appeal E146 of 2020) [2022] KEHC 9927 (KLR) where the Court held at Paragraph 26 that: -“From the above, it is clear that the evidential burden of proof rests with the taxpayer to disprove the Commissioner and that once competent and relevant evidence is produced, then this burden now shifts to the Commissioner. I have emphasized and underlined ‘competence’ and ‘relevance’ because it is only evidence that meets these two tests that demolishes presumption of correctness and swings the burden to the Commissioner. This means that even if one avails evidence but then it is found that the same is incompetent or irrelevant, then the burden continues to remain with the tax payer.”

74. Based on the foregoing, the Tribunal finds that the Respondent had no obligation to issue an Objection decision under Section 51(8) of the Tax Procedures Act within the sixty days provided in Section 51(11) of the Tax Procedures Act since the Respondent had already invalidated the Objection.

75. Consequently, the Tribunal finds that the Appellant’s Objection was not allowed by operation of law, and that the Respondent was justified in confirming the additional Income tax assessments for the years 2016, 2017, 2018, 2019 and 2020.

Final Decision 76. The upshot of the above analysis is that the Tribunal finds that the Appeal lacks merit and accordingly proceeds to make the following Orders:a.The Appeal be and is hereby dismissed.b.The Respondent’s confirmation of assessments dated 26th June 2023 be and are hereby upheld.c.Each party to bear its own costs.

77. It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 28TH DAY OF FEBRUARY, 2025. ERIC NYONGESA WAFULA - CHAIRMANGLORIA A. OGAGA - MEMBERDR. RODNEY O. OLUOCH - MEMBERABRAHAM K. KIPROTICH - MEMBERCYNTHIA B. MAYAKA - MEMBER