[2024] KETAT 712 (KLR)

Nyota Steel Investments Limited v Commissioner of Legal Services And Board Cordination (Tax Appeal 288 of 2023) [2024] KETAT 712 (KLR) (Commercial and Tax) (17 May 2024) (Judgment)

Neutral citation: [2024] KETAT 712 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Commercial and Tax

Tax Appeal 288 of 2023

RM Mutuma, Chair, EN Njeru, M Makau, B Gitari & AM Diriye, Members

May 17, 2024

Between

Nyota Steel Investments Limited

Appellant

and

Commissioner of Legal Services And Board Cordination

Respondent

Judgment

1. The Appellant is a limited liability company incorporated under the Companies Act of the laws of Kenya, and is in the business of selling steel products.

2. The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act and the Kenya Revenue Authority is mandated with the responsibility for the assessment, collection and accounting for tax revenue as an agent of the Government of the Republic of Kenya. The Respondent is also mandated with the responsibility for the administration and enforcement of the statutes set out in the First Schedule to the said Act.

3. The background forming the basis of the dispute subject of this Appeal were assessments issued by the Respondent against the Appellant arising out of indicated variances from; VAT sales viz a viz account sales, purchases viz a viz inputs per VAT3, and unclaimed purchases obtained from alleged sales (by suppliers) to the Appellant against inputs claimed in the VAT returns.

4. The Respondent arrived at the VAT sales vs Account sales variances by comparing the sales declared in the VAT returns which were compared against what the clients had claimed as purchases from the Appellant, and assessed VAT additional tax liability of Kshs. 3,628,214. 00.

5. The Respondent also reviewed the Appellant’s Purchases vs inputs as per VAT3s’ to establish if inputs were overclaimed by comparing the purchases claimed in the VAT returns and what the sellers had declared as sales to the Appellant, thus arriving at a VAT additional tax liability of Kshs. 17,222,308. 00.

6. The Respondent also reviewed the Appellant’s claims for purchases in its VAT3 returns as compared to the sales declared by its suppliers by comparing the Appellant’s VAT 3 returns against its suppliers declared purchases, and indicated that it noted variances resulting to VAT additional tax liability of Kshs. 4,790,484. 00.

7. The Appellant objected to the said assessments on 21st October 2022, and the Respondent issued its Objection decision on 16th December 2022 confirming the VAT additional tax assessments for the total sum of Kshs. 25,641,005. 00.

8. Being dissatisfied with the Respondent’s Objection decision dated 16th December 2022, the Appellant preferred the Appeal herein on 5th April 2023, pursuant to leave granted by this Tribunal on 24th March 2023.

The Appeal 9. The Appellant filed its Memorandum of Appeal dated 3rd April 2023 and filed on 6th April 2023 and set out the following grounds of appeal;i.That the Respondent erred in law in demanding income tax for the years 2020-2022 as the said demand is excessive and not based on law and any material facts that have been provided by the Appellant.ii.That the Respondent erred in law and in fact by disallowing purchase invoices claimed in computing VAT liability.iii.That the Respondent erred in law and in fact by failing to consider that then undeclared sales of Kshs. 23,363,530. 00 claimed by the purchasers against the Appellant’s PIN.iv.That the Respondent erred in law and fact by insinuating that there were overclaimed purchases without any evidence.v.That the Respondent erred in law and fact by finding that the unclaimed purchase of Kshs. 123,016,488. 00 does not depict the right position to warrant declaration of the purchases as undeclared sales.vi.That the Respondent erred in law and fact by disallowing input VAT as against output VAT.vii.That the Respondent erred in law and fact for not recognizing in its tax computation the fact that sales reported by the Appellant in the VAT returns included sales to unregistered customers.viii.That the Respondent erred in law and fact by breaching the legitimate expectation of the Appellant by failing to afford him a fair hearing as per the provisions of the Fair Administrative Action Act.ix.That the Respondent erred in law and fact in ignoring the evidence, explanations and supporting documentations provided by the Appellant and proceeding to issue its decision dated 16th December 2022.

The Appellant’s Case 10. The Appellant’s case is premised on its;a.Statement of Facts dated 3rd April 2022 and filed on 6th April 2022 together with the documents annexed thereto.

11. The Appellant stated that the Respondent undertook investigations in the Appellant’s affairs which resulted in issuance of a notice of assessments dated 14th September 2022.

12. The Appellant in response thereto lodged a notice of objection upon which the Respondent requested for documents.

13. The Appellant further stated that it provided various documents including audit report, supply and purchase invoices, from various companies who were their suppliers and purchasers on 21st September 2022. In addition, the Appellant averred that it provided a letter containing a breakdown of the inputs and output data of the company on 24th October 2022.

14. The Appellant stated that there was a further exchange of correspondence between the parties including documents in support of the Objection.

15. The Appellant stated that the Respondent issued its Objection decision on 16th December 2022 confirming and demanding a sum of Kshs. 25,641,006. 00 in additional VAT taxes.

16. The Appellant averred that the Respondent did not allow deduction of input tax incurred despite having purchases information on the same from its suppliers disclosed and documents submitted.

17. The Appellant stated that the Respondent appeared to have been in a rush to intimidate the Appellant into submitting and agreeing to, in its view, outrageous assessments which were beyond its capacity to pay but unrealistic demands punctuated by unverified raw data.

18. It further stated that the Respondent was required to allow input tax against output tax in compliance with Section 17 (1) of the VAT Act, as read together with Section 29 of the Tax Procedures Act prior to issuing the assessments dated 14th September 2022.

19. The Appellant averred that the Respondent disallowed purchase invoices from particular suppliers claimed by the Appellant in VAT returns.

20. It further averred that it is the duty of the Respondent to enforce the correct reporting by the selling by reason of the grounds aforesaid the Appellant prayed that the Tribunal; sets said the assessments dated 14th September 2022 and Objection decision dated 16th December 2022; declare the demand for additional taxes as arbitrary, unreasonable, unfair and contrary to the administration of justice and the Appellant’s legitimate expectation; restrain the Respondent, its servants or agents from demanding or enforcing the recovery of the impugned taxes; and allow the Appeal with costs.

21. The Appellant cited Section 15 (1) of the Income Tax Act which provides;“For purposes of ascertaining total income of a person for a year of income shall be deducted all expenditure incurred in that year of income which is expenditure wholly and exclusively incurred by him in production …”.

22. The Appellant stated that it has a legitimate expectation that tax affairs should be handled fairly and the Fair Administrative Actions Act demands that any person being subject of a process be fully aware of what they are up against which was not the case for the Appellant.

23. It posited that it is therefore improper, unfair and unprocedural for the Respondent to arbitrarily apply arithmetically unsound computations in order to arrive at higher taxes for the Appellant.

24. The Appellant further posited that the Respondent ignored the Appellant’s submissions and explanations including but not limited to the tax returns, documents submitted and all relevant information.

25. The Appellant stated that the additional assessment was done after the Respondent disallowed purchases which were allegedly not declared by the suppliers.

26. It stated that Section 42 of the VAT Act envisages a situation where a registered person who makes a taxable supply shall furnish the purchaser with tax invoices containing prescribed details for the supply. The Appellant reiterated that these documents were duly provided by the Appellant to the Respondent.

27. The Appellant also stated that the specific Section cited does not put the tax obligation on the taxpayer to inquire, query, or verify the fact that the suppliers hold a valid PIN when the said registration system is housed by the Respondent (KRA).

28. The Appellant further posited that the investigations in regard to the tax affairs of the Appellant was done by one entity, and a single person cannot act as the judge, jury and executioner.

Appellant’s Prayers 29. That by reason of the submission’s aforesaid, the Appellant prayed that;a.The Respondent’s Objection decision dated 16th December 2022 be set aside; and,b.The Appeal herein be allowed with costs.

The Respondent’s Case 30. The Respondent’s case is premised on its;a.Statement of Facts dated 27th April 2023 and filed on 28th April 2023 together with the documents annexed thereto; and,b.Written submissions dated 7th November 2023 and filed on 8th November 2023.

31. The Respondent stated that the basis of its assessment on the Appellant was as a result of variances between the following;i.VAT Sales vs. Account sales;ii.Purchases vs. Inputs as per VAT3;iii.Unclaimed Purchases obtained from alleged sales (by suppliers) to the Appellant against Inputs claimed in the VAT returns.

32. On the VAT Sales vs Account sales, the Respondent stated that these variances were arrived at by comparing the sales declared in the VAT returns which were compared against what the purchasers had claimed as purchases from the Appellant. The Respondent stated that the resultant variance on this reconciliation was Kshs. 23,363,531. 00, with a resultant VAT tax liability of Kshs. 3,628,214. 00 for the period 2020 – 2022.

33. On Purchases Vs Inputs as per VAT 3s’, the Respondent stated that it carried out a test to establish if inputs were overclaimed and this was established by comparing the purchases claimed in the VAT return and what the sellers had declared as sales to the Appellant. It stated that the resultant variance on this reconciliation was Kshs. 123,016,488. 00 with a resultant VAT tax liability of Kshs. 17,222,308. 00 for the period 2020 - 2022.

34. On unclaimed purchases obtained from alleged sales (by suppliers) to the Appellant against Inputs claimed in the VAT returns, The Respondent stated that it investigated whether the Appellant had claimed more purchases in its VAT3 returns as compared to the sales declared by its suppliers by comparing the Appellant’s VAT3 returns against its suppliers declared purchases. It stated that the resultant variance arising out of this reconciliation was Kshs. 34,556,305. 00 with a resultant VAT tax liability of Kshs. 4,790,484. 00 for the period 2020 -2022.

35. Consequently, the Respondent assessed the Appellant for a VAT additional tax in the sum of Kshs. 25,641,006. 00 for the period 2020 – 2022.

36. The Respondent stated that the Appellant lodged its objection notice against the assessments which was premised on the following grounds;i.That the Officer failed to consider that the undeclared sales of Kshs. 23,363,530. 00 by purchasers who claimed using their PINs.ii.That the summation of the sales not declared as per the demand letter are not additional sales as they are part of the lumped-up sales.iii.That the overclaimed purchases of Kshs. 34,556,305. 00 have evidence.iv.That the unclaimed purchases of Kshs. 123,016,488. 00 does not depict the right position to warrant declaration of the purchases as undeclared sales.

37. The Respondent stated that it reviewed the Objection application and supporting documents and issued an Objection decision confirming the assessments dated 16th December 2022. It stated that it confirmed the VAT additional assessments on the basis that the Appellant had failed to provide evidence in support of its Objection grounds.

38. The Respondent averred that in relation to disallowed inputs, it requested for the following documents from the Appellant;i.Copies of invoices relating to the input tax;ii.Copies of delivery notes attached to the invoice or any other acceptable evidence of delivery;iii.Bank statements highlighting payment for the invoices;iv.For cash payments, petty cash analysis to support the payment made in cash and same linked to bank statementv.For cheque withdrawals indicating in the Bank statements the cheque number and or the invoices that were paid by that sum/amount.vi.Where there was a pay bill/buy goods payment, the M-PESA statement with the particular transactions highlighted for reviewvii.Written confirmations of the purchase by (Nyota Steel Investments Ltd) and supplier statements where applicable.

39. The Respondent averred that the Appellant failed to provide any of the foregoing requested documents.

40. It was further averred by the Respondent that it brought to the attention of the Appellant the provisions of Section 17 (2) (b), which provides;“(2)If, at the time when a deduction for input tax would otherwise be allowable under subsection (1) –a.The person does not hold the documentation referred to in subsection (3), orb.The registered supplier has not declared the sales invoice in a return, the deduction for input tax shall not be allowed until the first tax period in which the person holds such documentation …”.

41. It averred that the Appellant’s suppliers had not declared the specific supplies as a sale and therefore the Appellant was not eligible for deduction of input tax.

42. The Respondent also averred that in regard to the unclaimed purchases obtained from alleged sales to the Appellant against inputs claimed in the VAT return, for the period 2020 -2022, it requested for documents that included but not limited to the following:i.KCB bank accounts;ii.Director’s Bank accounts;iii.Sales records;iv.Purchase records;v.Rental agreements;vi.Trial balance;vii.Copies of logbooks for the two trucks – KCL 277 R & KDH860D;viii.Copies of logbooks for the pick-ups – KBR571S & KCG267S;ix.Loan agreements for the purchase of the vehicles; and,x.Shareholders Accounts.

43. It stated that that the Appellant never provided any of the documents requested for the purpose of determining the true position of the company’s tax affairs. Consequently, the Respondent confirmed the VAT assessments in its entirety as follows: -i.Year 2020 – VAT – Kshs. 5,691,972. 00. ii.Year 2021 – VAT – Kshs. 15,419,252 .00. iii.Year 2022 – VAT – Kshs. 4,529,783. 00. Total VAT - Kshs. 25,641,006. 00.

44. The Respondent stated that the Tax Procedures Act places the burden of proof in tax matters on the Appellant who in this case failed to avail evidence that would support its Objection;“(56)(1) In any proceedings under this part, the burden shall be on the taxpayer to prove that a tax decision is incorrect.”

45. The Respondent further averred that the Appellant failed to produce any further documents in support of its Objection. It stated that the TPA empowers the Respondent to make alterations or additions to original assessments from available information for a reporting period based on the best judgement. It cited Section 31 of the TPA which provides as follows;“(31)Amendment of assessments;Subject to this section, the Commissioner may amend an assessment (referred to in this section as the “original assessment”) by making alterations or additions, from the available information and to the best of the Commissioner ‘s judgement …”.

46. The Respondent in its Submissions stated that Section 30 of the Tax Appeals Tribunal Act on burden of proof provides that;“In a proceeding before the Tribunal, the Appellant has the burden of proving –(a)where an appeal relates to an assessment, that the assessment is excessive; or(b)in any other case, that the tax decision should not have been made or should have been made differently.”

47. The Respondent cited the case of PZ Cussons East Africa Ltd vs. Kenya Revenue Authority (2013) eKLR, where the court referred to the case of Pearson vs. Belcher CH. M Inspector of Taxes, thus;“Where there is an assessment made by the Additional Commissioner upon the Appellant; it is perfectly settled by cases such as Norman vs Galder 267 C 293, that the onus is upon the Appellant to show that the assessment made upon him is excessive and incorrect and of course he has completely failed to do so. That is sufficient to dispose of the appeal, which I accordingly dismiss with costs.”

48. The Respondent also submitted that what constitutes the Commissioner ‘s best judgement was dealt with extensively in the case of The Commissioner for Her Majesty’s Revenue and Customs TC/2017/02292 Saima Khalid Appellant vs. The Commissioners for Her Majesty’s Respondents Revenue & Customs para 29,“the very use of the word “judgement” makes it clear that the Commissioners are required to exercise their powers in such a way that they make a value judgement on the material which is before them …Secondly, clearly there must be some material before the Commissioners on which they can base their judgement. If there is no material at all, it would be impossible to form a judgement as to what tax is due.Thirdly, it should be recognized, particularly bearing in mind the primary obligation, to which I have made reference, of the taxpayer to make a return himself, that the commissioners should not be required to do the work of the taxpayer in order to form a conclusion as to the amount of tax which to the of their judgement is due. In the very nature of things frequently the relevant information will be readily available to the taxpayer, but it will be very difficult for the commissioners to obtain that information without carrying out exhaustive investigations. In my view, the use of the words “best judgement” does not envisage the burden being placed on the commissioners of carrying out exhaustive investigations. What the words “best of their judgement” envisage, in my view, is that the commissioners will fairly consider all material placed before them and, on that material , come to a decision which is one which is reasonable and not arbitrary as to the amount of tax which is due. As long as there is some material on which the commissioners can reasonably act then they are not required to carry out investigations which may or may not result in further material being placed before them.”

49. It was a further submission of the Respondent that Section 54 A (1) of the Income Tax Act provides that;“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.”

50. The Respondent also submitted that Section 23 of the TPA mandates a taxpayer to maintain documents required under any tax law and to provide the same upon request by the Respondent to ensure that tax liabilities can be readily ascertained. It stated that the Appellant failed to provide the relevant supporting documents to discharge the burden of proving the assessments as incorrect.

51. The Respondent also cited the case of TAT 70 OF 2017 Afya X-Ray Centre vs. Commissioner of Domestic Taxes, where the Tribunal held as follows;“From the following chain of events, it is our understanding that the Appellant failed in its duty in providing documents in order that a comprehensive analysis of its affairs is done. Accordingly, the Respondent can hardly be faulted for raising the assessment in accordance with the availed documents …”

52. The Respondent further submitted that Section 56 (1) of 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.”

53. It was a further submission of the Respondent that in the case of Mulherin vs. Commissioner of Taxation (2013) FCAFC 115, the Federal Court of Australia held that in tax disputes, the taxpayer must satisfy the burden of proof to successfully challenge tax assessments. The onus is on the taxpayer in proving that the assessment was excessive by adducing positive evidence which demonstrates the taxable income on which tax ought to have been levied.

54. The Respondent submitted that it relied on its best judgement and confirmed the VAT additional assessments on the basis that the Appellant failed to provide evidence in support of their grounds of objection

55. The Respondent stated that the Appellant is undeserving of the prayers sought due to the aforestated reasons.

Respondent’s Prayers 56. By reason of the foregoing, the Respondent prays that the Tribunal;a.Upholds its Objection decision dated 16th December 2022; and,b.To dismiss the Appeal herein with costs.

Issues for Determination 57. The Tribunal having carefully considered the filings and submissions made by the parties is of the considered view that the Appeal herein distils into one issue for determination:Whether the Respondent’s assessment against the Appellant is justified on the face of the applicable law and material facts provided.

Analyisis and Determination 58. The Appeal herein was filed by the Appellant being dissatisfied with the decision of Respondent issued on 16th December 2022 confirming the VAT assessment of Kshs. 25,641,006. 00. 00. The basis of the assessment as set out by the Respondent as follows;i.VAT sales vs account sales.ii.purchases vs inputs as per VAT3. iii.unclaimed purchases obtained from alleged sales (by suppliers) to the Appellant against inputs claimed in the VAT returns.

59. The Respondent has submitted that the basis of the assessment on VAT sales vs Account sales was a comparison and reconciliation of the sales declared in the VAT returns against what the purchasers had claimed as purchases from the Appellant. The Respondent thus averred that the resultant variance on this reconciliation for the period 2020 -2022 amounted to Kshs. 23,363,531. 00, with a resultant VAT tax liability of Kshs. 3,628,214. 00.

60. The Respondent again submitted that the basis of the assessment on purchases vs inputs as per the VAT3s, was that it carried out a test to establish if inputs were overclaimed and this was established by comparing the purchases claimed in the VAT return and what the sellers had declared as sales to the Appellant. The Respondent thus averred that the resultant variance on this reconciliation was Kshs. 123,016,488. 00 with a resultant VAT tax liability of Kshs. 17,22,308. 00 for the period 2020 -2022.

61. The Respondent further submitted that on the unclaimed purchases obtained from alleged sales (by suppliers) to the Appellant against inputs claimed in the VAT returns, it investigated whether the Appellant had claimed more purchases in its VAT3 returns as compared to the sales declared by its suppliers, by comparing the Appellant’s VAT3 returns against its suppliers’ declared purchases. It averred that the resultant variance arising out of this reconciliation amounted to Kshs. 34,556,305. 00 with a resultant VAT tax liability of Kshs. 4,790,484. 00 for the period 2020 - 2022.

62. The Respondent further submitted that as a consequence thereof, it assessed the Appellant for additional VAT in the total sum of Kshs. 25,641,006. 00 for the period 2020 - 2022, and upon objection, confirmed the assessment on the basis that the Appellant failed to submit the requested documents to support the Objection application.

63. The Respondent averred that in relation to disallowed inputs, it requested for supporting documents such as copies of invoices relating to the input tax, copies of delivery notes, bank statements petty cash analysis, cheques withdrawals details, M-PESA details for pay bill/buy goods transactions, and written confirmations of the purchases by the Appellant with supplier statements.

64. The Respondent averred that the Appellant failed to provide any of the foregoing requested documents.

65. In regard to the unclaimed purchases obtained from alleged sales to the Appellant against inputs claimed in the VAT returns, the Respondent averred that it requested from the Appellant for supporting documentation such as; KCB bank statements, Directors’ bank account statements, sales records, purchase records, rental agreements, trial balance, copies of logbooks for vehicles – KCL277R, KDH860D, KBR571S and KCG267S, loan agreements for the purchase of the vehicles and shareholders accounts statements.

66. The Respondent averred that the Appellant never provided any of the documents requested for purposes of determining the true position of the company’s tax affairs.

67. As a consequence of the foregoing, the Respondent submitted that it confirmed the VAT additional assessments against the Appellant in its entirety as follows:i.Year 2020 – VAT Kshs. 5,691,972. 00. ii.Year 2021 – VAT Kshs. 15,419,252. 00. iii.Year 2022 – VAT Kshs. 4,529,783 .00. Total VAT Kshs. 25,641,006. 00.

68. On the other hand, the Appellant objected to the Respondent’s additional VAT assessments on among others, the grounds;i.That the Respondent erred in law in demanding tax for the years 2020-2022 as the said demand is excessive and not based on law, and any material facts that have been provided by the Appellant.ii.That the Respondent erred in law and fact by disallowing purchase invoices claimed in computing VAT liability.iii.That the Respondent erred in law and fact by disallowing input VAT against output VAT.iv.That the Respondent failed to consider that the undeclared sales of Kshs. 23,363,530. 00 by purchasers who claimed using their PINs.v.That the summation of the sales not declared as per the demand letter are not additional sales as they are part of the lumped-up sales.vi.That the overclaimed purchases of Kshs. 34,556,305. 00 have evidence.vii.That the unclaimed purchases of Kshs. 123,016,488. 00 does not depict the right position to warrant declaration of the purchases as undeclared sales.

69. The Appellant averred that it provided various documents including audit report, supply and purchase invoices, from the various companies who were its suppliers and purchasers on 21st September 2022. In addition, the Appellant averred that it provided a letter containing a breakdown of the inputs data and output data of the company on 24th October 2022.

70. The Appellant also averred that there was a further exchange of correspondence between the parties including documents in support of the Objection.

71. It also averred that the Respondent did not allow deduction of input tax incurred despite having purchases information on the same from its suppliers disclosed, and documents submitted.

72. The Appellant also averred that the Respondent disallowed purchase invoices from particular suppliers claimed by the Appellant in its VAT returns

73. The Appellant further averred that the Respondent was required to allow input tax against output tax in compliance with Section 17 (1) of the VAT Act, and Section 29 of the TPA, prior to issuing the assessments.

74. The Appellant also averred that Section 42 of the VAT Act envisages a situation where a registered person who makes a taxable supply shall furnish the purchaser with tax invoices containing prescribed details for the supply.

75. The Appellant also posited that the particular Section cited does not oblige the taxpayer to inquire, query, or verify the fact that the suppliers hold a valid PIN when the said registration system is housed by the Respondent.

76. It is noteworthy that though the Appellant averred that it submitted certain documents such as supplier’s invoices to the Respondent, the same have not been submitted to this Tribunal, but nevertheless the Respondent has acknowledged submission of some of the mentioned documents, the basis upon which the Objection notice application was reviewed and considered before issuance of the Objection decision by the Respondent.

77. In its grounds of Appeal, the Appellant has argued that the Respondent’s assessment is excessive. The Tribunal is therefore minded of Section 30 of the TAT Act which states as follows;“In a proceeding before the Tribunal, the Appellant has the burden of proving –(a)where an appeal relates to an assessment, that the assessment is excessive; or(b)in any other case, that the tax decision should not have been made or should have been made differently.”

78. Further, the Tax procedures Act places the burden of proof in tax matters on the taxpayer under Section 56 (1) of the TPA, which states;“In any proceedings under this part, the burden shall be on the taxpayer to prove that a tax decision is incorrect.”

79. The Respondent has averred and submitted in detail the specific documents and information it sought from the Appellant in support of its objection, prior to considering the Appellant’s Objection notice, which nevertheless the Appellant failed to provide, thus culminating to the confirmation of the impugned assessment.

80. The Tribunal has had the benefit of reviewing the documents submitted by the Appellant in support of its Appeal, which would ordinarily be the same documents it supported its Objection notice with, and noteworthy is that save for the copies of letters and a table of inputs and outputs, there are no supporting documents such as the invoices, delivery notes, statements, sales and purchases records requested have been provided.

81. The burden of proving that the Respondent’s assessment was excessive is borne by the Appellant, which it ought to have discharged by providing the relevant supporting documentation, which it failed to do.

82. This Tribunal is also alive to the provisions of Section 17 (2) (b) of VAT Act, which provides;“If, at the time when a deduction for input tax would otherwise be allowable under subsection (1)-a.The person does not hold the documentation referred to in subsection (3), or,b.The registered supplier has not declared the sales invoice in a return, the deduction for input tax shall not be allowed until the first tax period in which the person holds such documentation.”

83. The Respondent has averred that the Appellant’s suppliers did not declare the specific supplies to the Appellant as a sale, and therefore in line with the said Section 17 (2) (b), the Appellant was not eligible for deduction of input tax, until such documentation was availed. It was incumbent upon the Appellant to avail such records which it failed so to do.

84. In the case of Afya X-Ray Centre vs. Commissioner of Domestic Taxes TAT No. 70/2017, the Tribunal held:-“From the foregoing chain of events, it is our understanding that the Appellant failed in its duty in providing documents in order that a comprehensive analysis of its affairs is done. Accordingly, the Respondent can hardly be faulted for raising the assessments in accordance with the availed documents …”

85. In the case of Pearson vs. Belcher CH.M Inspector of Taxes (Tax cases vol. 38) referred to by the court in PZ Cussons East Africa Ltd vs. Kenya Revenue Authority (2013) eKLR, it was stated;“Where there is an assessment made by the Additional Commissioner upon the Appellant; it is perfectly settled by cases such as Norman vs. Galder 267C 293, that, ‘the onus is upon the Appellant to show that the assessment made upon him is excessive and incorrect and of course he has completely failed to do so. That is sufficient to dispose off the appeal, which I accordingly dismiss with costs.’ The Appellant in the present appeal has manifestly failed to discharge an onerous burden of proof placed squarely upon it ...”.

86. The Respondent’s case is that the Appellant failed to provide sufficient evidence, in the form of the requested documentation, demonstrating allowability of the disallowed inputs/output taxes as per the statutory provisions, and therefore failed to prove that the assessment was excessive, by adducing positive evidence demonstrating taxable income on which tax ought to have been levied.

87. In view of the foregoing submissions and guided by case law cited hereinabove, the Tribunal comes to the inescapable conclusion that the Appellant has not discharged its burden of proof in proving that the Respondent’s assessment was excessive as per its grounds of Appeal.

88. Consequently, the Tribunal finds and holds that the Respondent was justified in confirming the assessment against the Appellant on the face of the applicable law and the material facts provided.

89. The upshot of the foregoing is that the Appellant ‘s Appeal is found to be devoid of merit and consequently fails.

Final Decision 90. The Appeal having failed, the Tribunal makes the following Orders;a.The Appeal be and is hereby dismissed.b.The Respondent’s Objection decision dated 16th December 2022 be and is hereby upheld.c.Each party to bear its own costs.

91. It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 17THDAY OF MAY, 2024ROBERT M. MUTUMA -CHAIRPERSONELISHAH N. NJERU - MEMBERMUTISO MAKAU - MEMBERBERNADETTE M. GITARI - MEMBERMOHAMED A. DIRIYE -MEMBER