[2025] KETAT 175 (KLR)

Panorama Technical Services Limited v Commissioner of Domestic Taxes (Tax Appeal E449 of 2024) [2025] KETAT 175 (KLR) (Commercial and Tax) (21 March 2025) (Judgment)

Neutral citation: [2025] KETAT 175 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Commercial and Tax

Tax Appeal E449 of 2024

CA Muga, Chair, BK Terer, EN Njeru, E Ng'ang'a & SS Ololchike, Members

March 21, 2025

Between

Panorama Technical Services Limited

Appellant

and

Commissioner of Domestic Taxes

Respondent

Judgment

1. The Appellant is a limited liability Company incorporated in Kenya under the Companies Act, CAP 486 of the Laws of Kenya.

2. The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act, CAP 469 of Kenya’s Laws (hereinafter “the Act”). Under Section 5 (1) of the Act, the Kenya Revenue Authority is an agency of the Government for the collection and receipt of all tax revenue. Further, under Section 5(2) of the Act with respect to the performance of its functions under subsection (1), the Authority is mandated to administer and enforce all provisions of the written laws as set out in Part 1 and 2 of the First Schedule to the Act for the purposes of assessing, collecting and accounting for all revenues in accordance with those laws.

3. The Respondent issued the Appellant with additional assessments for VAT and Income Tax vide assessment orders dated 11th August, 2021. The Appellant filed a notice of objection to the assessments on 26th August, 2021.

4. After some correspondence, the Respondent issued an invalidation decision dated 22nd October 2021. The Respondent also issued a Confirmation of Assessment Notice dated 18th March 2022 wherein it confirmed Kshs 13,599,656. 10 in respect of income tax and Kshs 6,233,683. 52 in respect of VAT.

5. The Appellant being dissatisfied with the Respondent’s decision, filed the instant Appeal through the notice of appeal dated 22nd April 2024 and filed on 23rd April 2024.

The Appeal 6. The Appellant lodged its Memorandum of Appeal dated 19th April 2024 and filed on 26th April 2024 highlighting the following grounds of appeal:a.That the Respondent erred in law and in fact by issuing its objection invalidation decision together with the Confirmation of Assessment in violation of Section 51(11) of the Tax Procedures Act, CAP 469B of the Laws of Kenya (hereinafter “TPA”).b.That the Respondent erred in law and in fact by disallowing expenses which were wholly and exclusively incurred in making the income in violation of Section 15 of Income Tax Act, CAP 470 of the Laws of Kenya (hereinafter “ITA”).c.That the Respondent erred in law and in fact by failing to credit input tax against the output tax in violation of Section 17 of Value Added Tax Act, CAP 476 of the Laws of Kenya (hereinafter “VAT Act”).d.That the Respondent erred in law by relying on customs import data curtailing the Appellant's right to a fair hearing as enshrined in Section 4(3)(b) and 4(4)(b) of the Fair Administrative Actions Act, CAP 7L of the Laws of Kenya (hereinafter “FAAA”) and Article 47 of the Constitution of Kenya,2010 (hereinafter “Constitution”).e.That the Respondent erred in law and fact by disregarding the supporting information and documents provided by the Appellant in making its decision.

Appellant’s Case 7. In support of the Appeal, the Appellant filed its Statement of Facts dated 26th February 2024 on 26th April 2024. The Appellant did not file written submissions even after the Tribunal directed it to do so on or before 22nd January 2025.

8. The Appellant stated that the Respondent issued income tax and VAT assessments to which it objected to the said Assessment on 26th August 2021.

9. The Appellant stated that it provided the Respondent with documents and bank statements in support to its objection but the Respondent subsequently issued Confirmation of Assessment Notice dated 18th March 2022 in respect of income tax for the 2019 period of assessment (01/01/2019-31/12/2019) of Kshs 13,599,656. 10 and VAT of Kshs 6,233,683. 52.

10. It stated its director was diagnosed with a Kidney failure and that was again infected by the COVID-19 pandemic which worsened already worse health. Therefore, the Appellant stated that its director was bedridden for more than a year as a result of the above medical condition and continues to be unwell to date.

11. The Appellant averred that this medical condition made it unable to attend to most of its day to day business that includes attending to its tax matters.

12. The Appellant asserted that it was of the view that the objection had been allowed since the Respondent never issued him with an objection decision within the statutory period of 60 days.

13. The Appellant asserted that the Respondent erred in law and in fact by disallowing expenses which were wholly and exclusively incurred in making the income in violation of section 15 of ITA. It averred that costs incurred wholly or exclusively in the production of income on a person is tax deductible. The Appellant contended that the specific expenses that it claimed met this threshold.

14. According to the Appellant, the Respondent erred in law and in fact by failing to credit input tax against the output tax in violation of Section 17 of Value Added Tax Act, CAP 476 of the Laws of Kenya (hereinafter “VAT Act”).

15. The Appellant further stated that the Respondent erred in law and in fact by issuing its objection invalidation decision together with the Confirmation of Assessments late in violation of section 51 (11) of the TPA. It submitted that having objected to the assessment on 26th August 2021, the Respondent's decision dated 18th March 2022 was late by more than 6 months. The Appellant therefore, maintained that the objection ought to be allowed by operation of the law.

16. The Appellant stated that the Respondent erred in law and fact by disregarding the supporting information and documents provided by the Appellant in making its decision.

17. The Appellant sought the following reliefs:a.That this appeal be allowed.b.That the Respondent's Confirmation of Assessments dated 18th March, 2022, be set aside.c.That the principal tax and attendant penalties and interest demanded by the Respondent amounting to Kshs. 13,599,656. 10 and VAT for Kshs. 6,233,683. 52 be vacated.d.That the costs of and incidental to this Appeal be awarded to the Appellant; ande.Any other orders that the Tribunal may deem fit.

Respondent’s Case 18. In response to the appeal, the Respondent lodged a Statement of Facts dated and filed on 19th July 2024. The Respondent also relied on its written submissions dated 4th December 2024 and filed on even date.

19. The Respondent asserted that it issued the Appellant with additional assessments for VAT and Income Tax on 11th August, 2021 then the Appellant objected on 26th August 2021.

20. The Respondent averred that on 2nd September 2021 informed the Appellant through electronic mail that the objection had been received however supporting documents had not been provided. It stated that through the said electronic mail, it requested the Appellant to provide documents on or before 9th September 2021 to enable it review the objection. It stated that it sent a reminder electronic mail to the Appellant on 14th October 2021 to provide supporting documents pursuant to the provisions of Section 51(3) of the TPA.

21. It also contended that on 19th October 2021 it had telephone conversation with a Mr. Moffart and a Mr. Danson, representatives of the Appellant, who confirmed that the Appellant had agreed to provide documents supporting objection by 22nd October 2021.

22. It stated that on 22nd October 2021, it issued an objection decision dated 22nd October 2021. The Appellant being aggrieved, filed this appeal. In response to the Appeal, the Respondent stated that the section 31 of TPA allows it to use the information within its reach to compute the tax liability.

23. As to whether the objection decision was late, the Respondent averred that the Appellant objected to the assessments however the same was not valid as guided by Section 51(3) of TPA. The Respondent further averred that through various email correspondences it informed the Appellant that the objection was invalid and gave the Appellant an opportunity to validate the same. Therefore, the Respondent asserted that it complied with section 51 (4) of the TPA.

24. The Respondent averred that the decision invalidating the Appellant's objection was issued within timelines.

25. As to whether the Appellant discharged its burden of proof, the Respondent relied on the sections 56 of the TPA and 30 of the Tax Appeals Tribunal Act, CAP 469A of the Laws of Kenya (hereinafter “TATA”) which state that the burden of proof lies on the Appellant to demonstrate that the Respondent’s decision is incorrect. The Respondent also cited section 107 of the Evidence Act, CAP 80 of the Laws of Kenya (hereinafter “Evidence Act”) to submit that the Appellant has the burden to prove that its decision was incorrect.

26. The Respondent averred that the Appellant ought to have provided all relevant documents to support its objection or to demonstrate that the assessment was wrong or excessive. The Respondent also averred that the Appellant ought to keep records as provided for under section 23 of the TPA and section 54A of Income Tax Act, CAP 470 of the Laws of Kenya (hereinafter “ITA”) to ensure that its objection meets the conditions set out in the law.

27. The Respondent averred that the Appellant did not provide documents to support the objection and therefore failed to discharge burden of proof.

28. In its written submissions, the Respondent submitted that it raised additional assessments in accordance with the law and based on available information. It cited the cases of Digital Box Ltd v Commissioner of Investigation & Enforcement (2019) eKLR and Commissioner of Domestic Taxes v Altech Stream (EA) Limited [2021] eKLR to support the position that the Respondent can use the available information to make assessment.

29. The Respondent also submitted that the Appellant filed an invalid objection since it did not avail required documents. It cited the case of Boleyn InternationalLimited versus Commissioner of Investigations & Enforcement (Tax Appeal Tribunal No 55 of 2019) and Rongai Tiles and Sanitary Ware Limited versus Commissioner of Domestic Taxes (Tax Appeals Tribunal No 163 of 2017) to submit that a taxpayer has to avail documents in support of the objection for the objection to be valid.

30. It relied on the case of Simon Kahinga Mburav Commissioner of Domestic Taxes Tat No.561 of 2020 to submit that under section 51(8) of the TPA, an objection decision cannot be issued unless the notice of objection is valid. It submitted that the objection decision invalidating the Appellant's objection was issued within timelines.

31. The Respondent finally submitted that the Appellant failed to discharge burden of proof. In this regard, it relied on the case of Ushindi Exporters Limited v Commissioner of Investigation and Enforcement (Tax Appeals Tribunal No 7 of 2015) wherein it was held that the taxpayer has to demonstrate that the Respondent erred but the Appellant allegedly failed to do so.

32. Therefore, the Respondent urged the Tribunal to uphold the invalidation Letter dated 22nd October 2021 and dismiss the appeal with costs.

Issues For Determination 33. The Tribunal having carefully considered parties’ pleadings documents and submissions, is of the respectful view that the issues that call for its determination are as hereunder:a.Whether the Respondent erred in invalidating the Appellant’s notice of objection.b.Whether Confirmation of Assessment are time barred under section 51(11) of the TPA.Analysis And Findingsa.Whether the Respondent erred in invalidating the Appellant’s notice of objection.

34. The Respondent issued additional assessments dated 11th August 2021. The Appellant filed a notice of objection to the assessments on 26th August 2021 which the Respondent acknowledged vide objection application acknowledgment notice dated 26th August 2021.

35. The Tribunal notes that for some reason, Respondent issued a letter dated 22nd October 2021 invalidating the Appellant’s notice of objection pursuant to the provisions of Section 51(7) of the TPA. The Respondent in the said letter stated as follows:‘‘We note with regret that despite the email requests you have failed to provide supporting documentation.”“In light of the above, your application is declared invalid as it fails to meet the requirements of section 51(7) of the Tax Procedures Act 2015 which states:7. The Commissioner shall consider and may allow an application under subsection (6) 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.’’

36. Section 51(2) of the TPA provides as follows:‘‘(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.’’

37. The Tribunal notes that the assessment is dated 11th August 2021. The Appellant filed a notice of objection to the assessments on 26th August 2021. Therefore, the Appellant lodged the objection within 30 days as required pursuant to the provisions of Section 51(2) of the TPA. The validity of the notice of objection was is not in dispute. The Tribunal is of the view that the basis of the Respondent’s invalidation of the notice of objection renders the invalidation of the notice of objection irregular.

38. The Respondent invalidated the notice of objection pursuant to the provisions of Section 51(7) of the TPA which provides as follows:7. The Commissioner shall consider and may allow an application under subsection (6) 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.”

39. The Tribunal notes that the Appellant filed its notice of objection within the requisite statutory timelines and that therefore the rejection of the notice of objection by the Respondent pursuant to the provisions of Section 51(7) of the TPA was contrary to the law since the Appellant did not file any application pursuant to the provisions of Section 51(6) of TPA which provides as follows:6. A taxpayer may apply in writing to the Commissioner for an extension of time to lodge a notice of objection.”

40. The findings of the Tribunal in the instant appeal are distinguishable from the findings of the Tribunal in the case Elle Kenya Limited TAT Appeal No. 1402 of 2022 where the Tribunal found that the Respondent’s decision to invalidate the notice of objection was correct, the Tribunal’s decision in TAT Appeal No. 1402 of 2022 was upheld by the High court in Elle Kenya Limited v Commissioner of Investigations and Enforcement Department (Income Tax Appeal E024 of 2024) [2025] KEHC 2783 (KLR) (Commercial and Tax) (10 March 2025) (Judgment).

41. In the instant appeal, the finding of the Tribunal is that the Respondent erred in invalidating the Appellant’s notice of objection.b.Whether Confirmation of Assessment is time barred pursuant to the provisions of section 51(11) of the TPA.

42. The Tribunal notes the Respondent’s case that since it invalidated the Appellant’s notice of objection, no objection decision could be issued pursuant to the provisions of Section 51(8) of the TPA. The Tribunal having found that the Respondent unlawfully invalidated the notice of objection further finds that the Respondent cannot rely on Section 51(8) of the TPA. The Tribunal must therefore consider whether the Respondent acted within the law when it issued its notice of confirmation of assessment.

43. The Tribunal notes that the Appellant filed a notice of objection on 26th August 2021 and the Respondent having acknowledged receipt of the objection vide its objection application acknowledgment notice dated 26th August 2021 was under statutory obligation to issue its objection decision within 60 days. Instead, the Respondent issued Confirmation of Assessment Notice after 235 days 18th March 2022.

44. The Tribunal notes that at time of lodging of the notice of objection, Section 51(11) of TPA provided as follows:‘‘51(11) The Commissioner shall make the objection decision within sixty days from the date of receipt of—a.The notice of objection; orb.Any further information the Commissioner may require from the taxpayer, Failure to which the objection shall be deemed to be allowed.’’

45. In Equity Group Holdings Limited v Commissioner of Domestic Taxes (Civil Appeal E069 & E025 of 2020) [2021], the High Court held that it is statutorily mandatory for the Respondent to issue its objection decision within a period of 60 days and where the Respondent so fails to do so, the Appellant’s notice of objection is deemed to be allowed by operation of the Law. failure to which the notice of objection stands allowed.

46. The Tribunal notes that the operation and application of Section 51 (11) of the TPA was further reiterated in the case Eastleigh Mall Limited v Commissioner of Investigations & Enforcement (Income Tax Appeal E068 of 2020) [2023] KEHC 20000 (KLR) (Commercial and Tax) (17 July 2023) (Judgment) where the High Court held as follows:“It is clear from the forgoing that the provisions of section 51(11) of the Tax Procedures Act are mandatory. They are not cosmetic. Parliament in its wisdom knew that in matters tax, time is very crucial as those in commerce need to make informed decisions. If the Commissioner is allowed to exercise his discretion and stay ad-infinitum before issuing an objection decision, the tax payer would be unable to make crucial decisions and plan his/her business properly. The timelines set are mandatory and not a procedural technicality.’’

47. The Respondent issued the confirmation assessment notices on 18th March 2022 in spite of the Appellant having lodged its notice of objection on 26th August 2021. The period was 235 days, 175 days beyond the statutorily mandated timeline of 60 days pursuant to provisions of Section 51(11) of the TPA. Consequently, the Appellant’s notice of objection stood as allowed by operation of the law.

Final Decision 48. The upshot to the foregoing is that the Tribunal finds and holds that the Appeal is meritorious and makes the following Orders:a.The Appeal be and is hereby allowed.b.The assessments and the resultant confirmation notices dated 18th March 2022 be and are hereby set aside.c.Each party to bear its own cost.

49. It is so Ordered.

DATED AND DELIVERED AT NAIROBI ON THIS 21ST DAY OF MARCH, 2025. ………………………………….CHRISTINE A. MUGACHAIRPERSON………………………….. …………….……………..BONIFACE K. TERER ELISHAH N. NJERUMEMBER MEMBER………….…..…………… …….……..…………….EUNICE N. NG’ANG’A OLOLCHIKE S. SPENCERMEMBER MEMBER