https://new.kenyalaw.org/akn/ke/judgment/ketat/2026/209

 REPUBLIC OF KENYA IN THE TRIBUNAL OF KENYA AT NAIROBI COUNTY COURT NAME: TAX APPEALS TRIBUNAL CASE NUMBER: TATC/E1089/2025 PETER KANIARU NDUNGU VS COMMISSIONER FOR LEGAL SERVICES JUDGMENT # BACKGROUND 1. The Appellant is a registered taxpayer in the Republic of Kenya, engaging in the business of rental property. 2. The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act, CAP 469 of Kenya’s Laws. 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 on 24th October, 2024. issued the Appellant with Monthly Rental Income tax assessments for the period 2019, 2020, 2021, 2023 and 2024. It was established that the Appellant was under-declaring its rental income for the periods under review. The basis of the aforementioned assessment was hinged on Section 31 of the Tax Procedures Act Cap 469(TPA). 4. The Appellant lodged its Notice of objection dated 21 st February 2025. Upon receipt of the said notices of objection, the Respondent requested the Appellant to validate the Notices of objection so as to comply with the provisions of Section 51(3) of the TPA. 5. In the absence of satisfactory explanation from the Appellant, the Respondent issued an Objection decision dated 17th April, 2025 wherein it partially allowed the objection confirmed tax amounting to Kshs 995,700. 6. The Appellant being aggrieved by the decision of the Respondent filed an Appeal vide Notice of appeal dated 19th September 2025 having obtained leave from the Tribunal to file Appeal out of time. # THE APPEAL 1. The Appellant filed the Memorandum of Appeal dated 19th September 2025 and filed on 1st October 2025 wherein the Appellant raised the following grounds: 1. That the Respondent fell into serious error of fact and law by claiming kshs.995,700 being Rental Income Tax from the Appellant for the period from January 2019 to December 2024 despite the Appellant discharging its evidentiary burden of proof by providing the requisite documentary evidence to the Respondent by way of emails, excel sheets, invoices, petty cash vouchers, bank statements and several meetings with their accountants at Respondent’s offices. 2. That the Respondent misguided itself in fact and in law by assessing and demanding from the Appellant the tax amounts in question, despite the claimant proving that the rental properties in question are three, and the rental income per house is barely between the range of Kshs 2,500-2,700 and therefore it cannot be as assessed and alleged by the Respondent herein. 3. That the Respondent misguided itself in fact and in law by assessing and demanding from the Appellant the tax amounts in question, despite the taxes having already been captured on MRI-declarations, and the Appellant furnishing the Respondent with enough evidence. 4. That the Respondent misdirected itself in law and in fact by exercising its powers arbitrarily and with reckless abandon, since they have failed to vacate the confirmation assessment notices issued upon the Appellant, despite the Appellant discharging its burden of proof and proving that the taxes due had already been paid and the returns filed on time. * 1. That the Respondent erred in fact and in law by acting in a manner not befitting of a public administrative body charged with the levying and collection of taxes on behalf of the Ministry of National Treasury and Economic Planning, under the Executive arm of the government, contrary to the Appellant's legitimate expectation of being subjected to fair, just, lawful, and reasonable tax administration and governance. 2. That the Respondent erred in fact and in law by infringing upon the Appellant's legitimate expectation, and therefore the latter's constitutional Right to Fair Administrative Action which is enshrined in Article 47 of the Constitution of Kenya, 2010, as well as Section 4 (1) of the Fair Administrative Action Act, No. 4 of 2015. # THE APPELLANT’S CASE 1. The Appellant relied on its statement of facts dated 19th September 2025 and filed on 1st October 2025, together with written submissions dated 25th May 2026 and filed on 27th May 2026 2. The Appellant stated that the Respondent raised assessment orders against the claimant demanding for the payment of Kshs 1,989,500 being Rental income Tax for the period of January 2019 to December 2024 claiming un declaration of Rental Income which was erroneous and punitive on the part of the claimant. 3. The Appellant stated that on 21 st February 2025, he objected to the assessment wherein the claimant verified that he has only three rental properties, the rental income per unit ranges from between Kshs 2500-7,000, and that there was records to support MRI declarations and the same is erroneous and without basis. 4. The Respondent then raised an objection Decision for Kshs 995,700 claiming rental income. According to the Appellant, the Respondent's wrongful objection decisions continue to hamper the Appellant's operations including massive difficulty in discharging its functions, following the issuance of the wrongful Assessments. 5. The Appellant argued that the right of access to Justice is at risk of infringement by the Respondent. He therefore, urged the Tribunal to determine the appeal and the underlying cause of action fairly, just, lawfully, and expeditiously. 1. The Appellant asserted that his legitimate expectation of being subjected to fair, just, lawful, and reasonable tax administration and governance has been violated by the Respondent, since its unlawful actions in the course of discharging its powers and statutory mandate contradict the widespread public expectation of fair and just tax governance mechanisms and institutions. 2. The Appellant stated that as result of the breach of legitimate expectation, the right to fair administrative action has also been infringed, despite the same being entrenched as a fundamental right under the Kenyan Bill of Rights, in Article 47 of the Constitution of Kenya 2010, and Section 4 of the Fair Administrative Action Act, No. 4 of 2015. 3. The Appellant submitted that the Respondent's assessment and objection decision were excessive, arbitrary, and unsupported by evidence; and that the Appellant discharged the burden of proof under the TPA. 4. The Appellant submitted that the Respondent violated the Appellant's right to fair administrative action under Article 47 of the Constitution and the Fair Administrative Action Act; and that the Respondent acted contrary to the doctrine of legitimate expectation. 5. The Appellant cited the cases of **Commissioner of Investigations and Enforcement v Tows Limited [2018] eKLR**, the Court emphasized that tax assessments must not be arbitrary and must be grounded on reasonable factual foundation. He also relied on the case of **Republic v Kenya Revenue Authority ExParte Lab International Kenya Limited [2011] eKLR** where the High Court held that statutory powers must be exercised fairly, reasonably, and within the confines of the law. 1. The Appellant cited the case of **Kenya Revenue Authority v Man Diesel & Turbo SE, Kenya [2021] eKLR**, to submit that once a taxpayer avails relevant records and explanations, the Commissioner is under a duty to evaluate the same fairly and objectively. The Appellant also cited the case of # Equity Group Holdings Limited v Commissioner of Domestic Taxes **[2021] eKLR** wherein the Court reiterated that tax assessments should be based on proper evaluation of evidence presented by taxpayers. 1. The Appellant relied on the case of **Judicial Service Commission v Mbalu Mutava & Another [2015] eKLR** to submit that the Court of Appeal held that Article 47 codifies every person's right to fair administrative action whenever a public body exercises administrative authority. 1. The Appellant also relied on the cases of **Markets Dry Associates Limited v Capital Markets Authority & Another [2012] eKLR** in which the Court held that public bodies must act lawfully, fairly, and reasonably in exercising statutory mandates. 1. The Appellant relied on the case of **Communications Commission of Kenya & 5 Others v Royal Media Services Limited & 5 Others [2014] eKLR** to point out that the Supreme Court defined legitimate expectation as an expectation arising from representation or consistent conduct by a public authority. Similarly, the Appellant relied on the case of **Republic v Kenya Revenue Authority Ex Parte Shake Distributors Limited [2012] eKLR**, in which the Court held that public authorities are bound to act fairly and consistently in exercise of statutory powers. 1. The Appellant submitted that the impugned assessment and objection decision are unlawful, unreasonable, arbitrary, excessive, and unconstitutional therefore, ought to be set aside. # Appellant’s Prayers 1. The Appellant prayed for the following orders: 2. That Notice of Objection dated 21st February 2025 be allowed; 3. That the Respondent's Objection Decision dated 17th April 2025 be set aside; 4. That an order restraining the Respondent and all its officers, representatives, and agents from issuing a further assessment and demands to the Appellant, and taking any enforcement measures regarding the surrounding set of facts and circumstances and; 5. Costs of this matter, or any other pecuniary compensation as appropriate; and 6. Any other or further relief as this Tribunal would deem just and reasonable to grant. # THE RESPONDENT’S CASE 1. In response to the appeal, the Respondent relied on its Statement of facts dated and filed 3rd November 2025, together with written submissions dated 25th May 2026 and filed on 26th May 2026. 2. The Respondent stated that it received information that Appellant was under-declaring its monthly income rent for the subsequent periods. The Appellant was then served with a notice to attend interview at Respondent's office but failed to attend and therefore no light was shed to the Respondent on Appellant's true and actual tax position. 3. The Respondent therefore, based on its observations and its best judgement as provided in law issued additional assessments based on estimated rent received. 4. The Respondent noted that the Appellant filed its rental income and further averred that Section 52 (B) of the Income Tax Act Cap 470 (ITA) and Section 28 of the Tax Procedures Act Cap 469B (TPA) provides that the Kenyan tax system is a self-assessment system where a taxpayer assesses himself or herself and makes payments to the commissioner. However, the law still empowers the commissioner to interrogate taxpayer's operations and returns on income to ensure the taxpayer has stated the correct tax position and liability. 5. The Respondent further noted that the Appellant did not provide the requested documents and therefore, used its best judgement to estimate the incomes for the respective years and consequently raised the respective assessments and demanded the taxes for the period under review. 6. It stated that the MRI regime provides that the then Monthly Rental Income tax rate was 10% or 7.5% of the gross rent received. It stated that no expenses, losses or capital deductions are allowed for deduction from the gross rent received. 7. The Respondent further averred that the MRI tax applies to residential rental income earned by resident individuals or companies within a specific income range. It averred that taxable amount falls between Kshs. 288.000 and Kshs. 15 million per annum. 8. It stated that landlords must complete a monthly tax return online via i-Tax declaring the gross rent received. The tax payable will be automatically computed at a rate of 10% or 7.5% based on the actual gross declared income. 9. The Respondent averred that the Appellant averred that they have three rental properties located in Zimmerman, Ruiru Thika. 10. Respondent averred that the Appellant provided rent schedules for the period under review in January 2019 to December, 2024. The Respondent further averred that according to the rent schedule provided, it was discernible that the rental units in these rental properties is currently 36 units. 1. The Respondent further noted that from the schedules availed and Appellant's explanation, gross rent for these rental units is between Kshs. 2,700 to Kshs. 7,000. 2. According to the Respondent, the Appellant provided bank statements for the respective period showing rental income earned. 3. The Respondent averred that the Appellant bears the burden of proof and responsibility to prove entries, deductions, and statements made on their respective tax returns. 4. The Respondent pointed out that the Appellant should keep adequate records that will evidence/support the statement/returns. 5. It was the Appellant’s case that the Appellant disregarded section 23(b) of the Tax Procedures Act 2105 which mandates the taxpayer to keep records. 6. The Respondent averred that the rent schedules should shed light to the vital details of the tenant such as phone number/identification number. It asserted that the law does not warrant sloppy record! keeping at any given circumstance. 7. The Respondent further averred that the Appellant should streamline its collection of rent to ensure that the rent collection system is verifiable, efficient and accountable. It averred that the Appellant should have adhered and embraced invitations/summons as issued by the Respondent on discussions concerning its tax position. 8. The Respondent noted that it is prejudicial to fail to cooperate with the Respondent in resolving possible tax disputes. It pointed out that the Appellant should provide relevant records as requested by the Respondent in establishing a tax position as required under Section 59 of the TPA. 9. The Respondents noted as follows: 10. That the Respondent by powers conferred to them under Section 59 of the TPA rightfully requested the Appellant to provide documentation to support rent declared. 11. The Respondent used its best judgment as provided in law by consequently amending Appellant's return. The amendment by the Respondent was done in good faith and within the confines of the law. 12. That from the analysis, the Respondent noticed that there were discrepancies on what was actually earned vis a vis what was actually declared by the Appellant on iTax. The variance was brought to charge accordingly. 13. In light of the foregoing, the Respondent stated that Appellant's objection application was partially disallowed. 14. The Respondent asserted that the assessments were proper in law. It pointed out that whereas Section 24 of the TPA 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 other available information and to the best of the Commissioner' s judgement. 15. It stated that pursuant to Section 56 of the TPA and Section 30 of Tax Appeals Tribunal Act (TATA), the burden of proof lies on the Appellant to demonstrate that it discharged its tax liability. The Respondent stated that this burden was never discharged as no satisfactory documentary evidence was availed to the Respondent to enable it render a meritorious decision in the circumstances. 16. The Respondent relied on the provisions of Section 109 of the Evidence which provides that, ‘the burden of proof as to any particular fact lies on the person who wishes the court to believe in its existence, unless it is provided by any law that the proof of that fact shall lie on any particular person." 17. In light of the foregoing, the Respondent asserted that the Appellant's assertions that Respondent's assessments do not reflect the true tax position is incorrect and misleading. 18. The Respondent submitted that the Appellant failed to discharge its burden of proof. 19. It submitted that the Appellant failed to adduce documents therefore, the Respondent relied on available information and best judgment to make its decision. It cited the case of the **Commissioner For Her Majesty’s revenue** # And Customs Tc/2017/O2292 Saima Khalid Appellant v The commissioners for Her Majesty’s respondents revenue & Customs where it was held that, *"..the very use of the word judgment' makes it clear that the commissioners are required to exercise their powers in such a way that they make a value judgment on the material which is before them...’’* 1. The Respondent also cited the decisions in **Green road Kenya Limited v Commissioner of Domestic Taxes, TAT Appeal No. 538 Of 2021; Nick KIKALOS and Helen Kikalos v United States of America, No. 2:98 CV618.313 F. supp. 2d 876 (2003); Digital Box Ltd v Commissioner of Investigation& Enforcement (2019) EKLR** to submit that where the taxpayer fails to adduce documents, the Respondent may use avail information to make a decision. 1. The Respondent submitted that since the Appellant failed to provide documents to support the objection, it failed to discharge the burden of proof. # Respondent’s prayers 1. The Respondent urged the 2. Tribunal to uphold the Objection Decision dated 17 th April, 2025 and; 3. Dismiss the Appeal with costs to the Respondent. # ISSUE FOR DETERMINATION 1. The Tribunal having considered the parties pleadings and submissions, puts forth the following issue for determination: **Whether Respondent erred in confirming the assessment** # ANALYSIS AND FINDINGS 1. Having identified the issue for determination, the Tribunal proceeds to analyse the same as hereunder: - # Whether Respondent erred in confirming the assessment 1. One of the grounds of appeal was that the Respondent erred by claiming Kshs.995,700 being Rental Income Tax from the appellant for the period from January 2019 to December 2024 despite the Appellant discharging its evidentiary burden of proof by providing the requisite documentary evidence to the respondent by way of emails, excel sheets, invoices, petty cash vouchers, bank statements and several meetings with respondent’s representatives. 2. The Respondent on the other hand, submitted that the Appellant failed to provide documents to support the objection therefore, the Respondent did not allow the entire objection. 3. Having considered the arguments and counterarguments, the Tribunal observes that in tax matters, the taxpayer has a heavier burden to demonstrate that the Respondent’s decision was incorrect. This is so because the law creates a rebuttable presumption that the Respondent’s decision is correct. This legal presumption is established under Section 50(1)(a) of the TPA as follows: ***‘‘50. Conclusiveness of tax decisions*** *(1) Except in proceedings under this Part—* 1. *the production of a notice of an assessment or a document under the hand of the Commissioner shall be conclusive evidence of the making of the assessment and that the amount and particulars of the assessment are correct.’’* 2. Section 56(1) of TPA places the burden of proof upon the taxpayer. It provides that: ‘‘*In any proceedings under this Part, the burden shall be on the taxpayer to prove that a tax decision is incorrect.’’* This position has been upheld by the Constitutional and Human Rights Court in the case of **Katambo** **v Attorney General & another (Petition E532 of 2022) [2023] KEHC 19949 (KLR) (Constitutional and Human Rights) (30 June 2023) (Judgment)** wherein the Court stated as follows at paragraph 19 of the judgement: *‘‘Section 56(1) falls within Part VIII which provides for Tax Decisions, Objections and Appeals. The provision is applicable in proceedings where a decision has been made and the taxpayer objects to, or appeals against such decision. This being the case, it then falls upon the tax payer challenging a decision or assessment to provide proof that the assessment is not correct. It cannot therefore be argued that placing the burden of proof contravenes the provisions of Articles 49(1)(b) and (d) and 50(2)(a) and (l) of the Constitution.’’* 1. To discharge the burden of proof, the taxpayer has a duty to adduce documents to support notice of objection and the appeal. The taxpayer is statutorily mandated to keep records to enable determination of tax liability. In this regard, Section 23 (1)(b) of the TPA is instructive. It provides that, *a person shall—* 1. *maintain any document required under a tax law so as to enable the person's tax liability to be readily ascertained.* 2. Further, Section 54A (1) of the Income Tax Act (ITA) mandates the taxpayer to keep documents. It provides thus: ***54A. Keeping of records of receipts, expenses, etc.*** *(1) 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.* 1. Pursuant to Section 23 of the TPA and Section 54A (1) of the ITA, the Appellant was expected to adduce documentary evidence in relation to his monthly rental income. He did not. 2. The Appellant argued that he discharged his evidentiary burden of proof by providing the requisite documentary evidence to the Respondent by way of emails, excel sheets, invoices, petty cash vouchers, and bank statements. However, those documents were not on record. The Tribunal reiterates that the duty to adduce documentary evidence and to discharge the burden of proof does not terminate at objection stage. The taxpayer on filing an appeal to this Tribunal, the Appellant has a duty to place before this Tribunal, the documents that he placed before the Respondent. Section 30 of the Tax Appeals Tribunal Act Cap 469A (TATA) provides as hereunder: *In a proceeding before the Tribunal, the appellant has the burden of proving—* 1. *Where an appeal relates to an assessment, that the assessment is excessive; or* 2. *In any other case, that the tax decision should not have been made or should have been made differently.* 3. The High Court in the case of **Eldama Technologies Limited v Commissioner of Customs & Border Control (Tax Appeal E200 of 2021) [2023] KEHC 20762 (KLR)** stated as follows at paragraph 31 of the judgment in relation to burden of proof: - *‘’This means that it is the Appellant, as the taxpayer who is expected to surmount the burden of proving that the Commissioner was wrong in its assessment. In this case, the Commissioner raised the assessment due to the failure by the Appellant to produce all documents and records necessary for the audit. I have already found that indeed, the Appellant did not provide all the documents requested by the Commissioner, meaning that it failed to discharge its burden of proof as required by* *section 30 of the Tax Appeals Tribunal Act, 2013.’’* 1. Further, in ***Singapore Motors Limited v Commissioner of Domestic Taxes (Income Tax Appeal E039 of 2021) [2024] KEHC 2443 (KLR),*** the High Court held as follows: *‘‘This Court has remained emphatic that under section 30 of the Tax Appeals Tribunal Act (TATA) and section 56 of the Tax Procedures Act (TPA), the burden of proving that an assessment is wrong or excessive remains upon the taxpayer.’’* 1. The Tribunal has already pointed out above that whereas the Appellant asserted that he supplied the Respondent with excel sheets, invoices, petty cash vouchers, and bank statements, unfortunately, those documents were not on record therefore, the Tribunal did not have an opportunity to examine the evidence. The Appellant filed two categories of documents in support of this appeal: 2. Assessment order dated 24th October 2024; and 3. Objection decision dated 17th April 2025. 4. It is critical to keep in mind that Section 13(2)(d) of the TATA mandates the taxpayer to adduce documents that may assist this Tribunal to make a just and informed decision. It provides that: *The appellant shall, within fourteen days from the date of filing the notice of appeal, submit enough copies, as may be advised by the Tribunal, of—* 1. *A memorandum of appeal;* 2. *Statements of facts;* 3. *The appealable decision; and* 4. ***Such other documents as may be necessary to enable the Tribunal to make a decision on the appeal.*** (emphasis is ours). 5. Considering that the two documents filed by the Appellant could not sufficiently discharge its burden, the Tribunal finds that the Appellant failed to comply with Section 56(1) of the TPA and Section 30 of the TATA. 6. In view of the above analysis the Tribunal finds and holds that the Respondent did not err in confirming the assessment. # FINAL DECISION 1. The upshot to the foregoing is that the Appeal lacks merit and the Tribunal proceeds to make the following Orders: - 2. The Appeal be and is hereby dismissed; 3. The Objection Decision dated 17 th April 2025 be and is hereby upheld; 4. Each party to bear its own cost. 5. It is so ordered. # DATED AND DELIVERED AT NAIROBI THIS 17 TH DAY OF JULY, **2026** SIGNED BY/FOR: **★ TH E JUDICIAR Y O F KENY A ★** **HON. EUNICE NJERI NGANGA HON. BONIFACE KIBIY TERER HON. SANKALE SPENCER OLOLCHIKE** **HON. BILLY GRAHAM OKUMU MIJUNGU** Tax Appeals Tribunal Tribunal Date: 2026-07-17 14:04:50