https://new.kenyalaw.org/akn/ke/judgment/ketat/2026/91

Premier Caterers and Events Ltd v Commissioner of Domestic Taxes (Tax Appeal E1047 of 2025) [2026] KETAT 91 (KLR) (26 June 2026) (Judgment) Neutral citation: [2026] KETAT 91 (KLR) Republic of Kenya In the Tax Appeal Tribunal Tax Appeal E1047 of 2025 RO Oluoch, Chair, AM Diriye & E Komolo, Members June 26, 2026 Between Premier Caterers and Events Limited Appellant and Commissioner of Domestic Taxes Respondent Judgment Background 1.The Appellant is a limited company incorporated in Kenya engaged in the business of catering and events management. 2.The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act Cap 469 Laws of Kenya, and is responsible for the administration and enforcement of domestic taxes in Kenya. 3.The Respondent conducted a tax audit on the Appellant focussing on the Appellant’s VAT returns for the periods December 2023, February 2024, April 2024, September 2024, October 2024, November 2024 and December 2024, as well as its Income Tax (company) returns for the financial years 2023 and 2024. 4.Vide a letter dated 27th May 2025, the Respondent issued an additional VAT assessment for Kshs 1,287,013.29 which was excluding March 2025, which the Appellant had agreed to pay. It also demanded additional Income Tax (Company) for Kshs 3,136,754.85 for the years 2023 and 2024. 5.The Appellant objected to this demand vide its letter dated 27th June 2025, and the Respondent, vide a letter dated 21st August 2025, issued an objection decision partially allowing the objection. 6.The Appellant submitted additional documents on 28th August 2025 which the Respondent could not consider as they were being availed after the Objection Decision had been issued. 7.Aggrieved by the Respondent’s decision, the Appellant filed its Notice of Appeal dated 16th September 2025 on 23rd September 2025 The Appeal 8.The Appeal is premised on the following grounds of appeal as stated in the Appellant’s Memorandum of Appeal dated 16th September 2025 and filed on 23rd September 2025;a.That the additional tax assessment of Kshs 4,432,079.36 is excessive, erroneous and unfounded as it unfairly disallows genuine business expenses.b.That the Respondent unlawfully disallowed expenses totalling to Kshs 6,920,498.88 which were wholly and exclusively incurred for the production of income in accordance with the Income Tax Act (Cap 470).c.That the Respondent failed to consider reconciliations and concessions duly made and acknowledged by the Appellant, resulting in an unfair inflation of tax liability.d.That the objection decision disregarded clear supporting documentation (including invoices, expense schedules, lease and rental agreements, and petty cash vouchers) previously submitted, which substantiate the allowability of the expenses.e.That the Respondent acted contrary to the principles of fairness, proportionality, and legitimate expectation under the Constitution of Kenya, 2010, and the Tax Procedures Act, 2015.f.That the objection decision was arbitrary, unreasonable, and contrary to the principles of sound tax administration. The Appellants Case 9.The Appellant’s case is premised on its Statement of Facts dated 16th September, 2025 and filed on 23rd September, 2025, together with the documentation attached thereto. The Appellant did not file its written submissions. As such, its case will be considered on the basis of its pleadings on record. 10.The Appellant averred that the Respondent issued an Objection Decision on 21st August, 2025 for Kshs 4,432,079.36 for the tax periods December 2023-December 2024.It stated that the said decision was formally communicated to it in an email dated 9th September, 2025. 11.It averred that the additional assessment arose from the Respondent’s disallowance of various expenses including:a.Purchase of Kshs 1,406,257.44 (which the Appellant conceded only Kshs 271,202.58 was ineligible)b.Operating expenses for 2023 totalling Kshs 1,629,780.00c.Operating expenses for 2024 totalling Kshs 2,400,000 12.The Appellant maintained that these expenses were genuine, necessary, and wholly and exclusively incurred in the production of income as required under the Income Tax Act (Cap. 470). 13.It asserted that in order to support its position, it furnished the Respondent with invoices, purchase receipts, lease agreements, rental agreements, petty cash vouchers, ledgers, and detailed expense schedules. However, despite the submission of the documentation, it averred that the Respondent proceeded to uphold the assessment in its entirety, thereby disregarding the evidence provided and inflating the Appellant’s tax liability unfairly. 14.It therefore asserted that the assessments as confirmed by the Respondent were excessive, erroneous, and not reflective of the actual taxable position of the company. It contended that the Respondent’s decision was without proper consideration of the facts, applicable law, and the supporting evidence it provided. The Appellant’s Prayers 15.The Appellant prayed that this Tribunal:a.Sets aside the Objection Decision dated 21st August 2025 in its entirety;b.Reinstates the disallowed expenses totally Kshs 6,920,498.88 as deductible;c.Nullifies the additional Income Tax assessment of Kshs 4,432,079.36.d.Orders the Respondent to amend the assessment to reflect the true and fair taxable position of the Appellant.e.Award costs of this Appeal to the Appellant.f.Grants such other or further relief as this Honourable Tribunal may deem just and expedient. The Respondent’s Case 16.The Respondents case is premised on its;a.Statement of Facts dated 26th October 2025 and filed on 29th October, 2025 together with the documentation attached thereto.b.Written Submissions dated and filed on 30th April 2026. 17.The Respondent averred that the VAT assessment was based on disallowed input VAT claims deemed unsupported by adequate documentation while the Income Tax (company) assessments arose from:a.Under declared income identified through banking analysis, revealing discrepancies between bank credits and declared turnover.b.Disallowed storage expenses claimed in the returns lacking substantiation as wholly and exclusively incurred for income production under Section 15 of the Income Tax Act.c.Disallowed unsupported input tax computation. 18.The Respondent stated that it requested the same documents from the Appellant on 10th July 2025, where the Appellant availed some documents which helped the Respondent in partially allowing the Appellant’s objection by accepting input VAT claims for the month of November 2024 amounting to Kshs 322,139.25. 19.The Respondent contended that its decision was evidence-based, lawful, and aligned with statutory requirements, and cited the case of Mobisol Kenya Limited vs Commissioner of Domestic Taxes (Tax Appeal No 1763 of 2024 where the Tribunal held that the taxpayer must adduce cost evidence to rebut assessments. It further cited the case of Rae vs Commissioner of Domestic Taxes (Tax Appeal E343 of 2024) where the Tribunal affirmed that deductible expenses and input VAT must be supported by documentary evidence and that the onus is always on the taxpayer. 20.The Respondent asserted that the objection Decision was issued pursuant to Section 51 of the TPA following a meticulous review of the submitted documents. It stated that it revised the assessment documents where they were supported, reflecting only verifiable transactions. 21.It was the Respondent’s assertion that banking analysis revealed undeclared income and disallowed items stemmed from insufficient evidence, not arbitrariness. It argued that the decision was neither inflated liability nor in error, as it was grounded in facts and law. 22.On the issue of the disallowed expenses, totalling Kshs 6,920,498.88, the Respondent stated that while it received some invoices, deductibility under Section 15 of the Income Tax Act and Section 17 of the VAT Act 2013 requires expenses to be wholly and exclusively for income production, supported by verifiable proof such as delivery notes, payment evidence, and suppliers’ declarations. 23.It stated that the Appellant failed to provide these documents for most of the claims, and that the storage expense also lacked business necessity substantiation. It referenced the case of Osho Drapers vs Commissioner of Domestic Taxes (Tax Appeal No.159 of 2018 where the Tribunal disallowed input VAT for non-compliance with documentation requirements, holding that mere invoices were insufficient without corroboration. 24.It was the Respondent’s assertion that input VAT claims must be backed by proof of purchases and that partial submissions alone do not suffice. It therefore asserted that the disallowance was lawful and that it only targeted the unsupported portions. 25.The Respondent refuted the Appellant’s claim that the decision failed to consider concessions and reconciliations already acknowledged by the Appellant. It averred that all timely submitted documents, including bank statements and cash analysis, were reviewed and that the decision acknowledged and allowed supported November 2024 VAT inputs. 26.It asserted that the Appellant did not provide complete reconciliations of bank credits to declared income, or highlight non-business credits with evidence, as requested on 10th July, 2025.It argued that the documents that were availed post-decision could not be considered, as objections must be resolved within statutory timelines. 27.In response to ground(e) of the Appellant’s ground of Appeal, the Respondent stated that the process adhered to Article 47 of the Constitution and Section 4 of the Fair Administrative Action Act, providing the Appellant ample opportunity to respond, submit evidence, and engage via correspondence. 28.It was the Respondent’s assertion that the decision was issued within 60 days under Section 51(8) of the Tax Procedures Act,2015, with partial allowances demonstrating proportionality. It stated that legitimate expectation does not override statutory evidence requirements and cited the case of Tata Chemicals Magadi Ltd vs Commissioner of Domestic Taxes, where procedural fairness was upheld despite disallowance due to evidentiary shortfalls. 29.The Respondent also refuted the Appellant’s allegation that the decision was arbitrary and contrary to the principles of good tax administration by arguing that the process followed the Tax Procedures Act framework, with each disallowance justified by specific evidentiary gaps. It stated that notification of requirements and timelines ensured transparency and accountability. It averred that the balance outcome of allowing supported claims while disallowing unsupported ones embodied good tax administration principles. 30.The Respondent averred that the Appellant’s failure to meet the burden of proof validated the assessments and that its actions were reasonable, evidence-driven and lawful. 31.In its submissions, the Respondent refuted the Appellant’s assertion that it provided full documentation and submitted that its correspondence of 10th July 2025 speaks for itself in that it specifically requested proof of payment, delivery notes, reconciliations, sales ledgers, and non-business credit evidence. 32.It submitted that it sent a reminder on 15th August 2025.However, the Appellant only provided bank statements and monthly Z-reports for two months but did not provide;a.Proof of payment for disputed purchases.b.Delivery notesc.Reconciliation of credits (Kshs 3,643,460.00 in 2023, Kshs 12,878,.06 in 2024) to declared turnover.d.Schedule or receipts for Kshs 2,400,000 storage expenses. 33.The Respondent submitted that invoices alone were not sufficient and that the Appellants’ cash in drawer schedules were self-serving, unaudited, and did not explain the bank credit variances, as they were not proof of payment to third-party suppliers. 34.It was the Respondent’s submission that the Appellant claimed Kshs 2,400,000.00 as storage expense in 2024.However, when asked for a schedule and supporting documents, the Appellant provided nothing; that is, not a single receipt, lease for a warehouse, or payment confirmation. It submitted further that, under Section 15 of the Income Tax Act, an expense without any supporting document is not deductible; hence the Commissioner was entitled to disallow it entirely. 35.The Respondent asserted that the fact that it actually allowed input VAT for November 2024 for Kshs 322,139.25, because the Appellant provided invoices and the supplier declaration showed that the Respondent was not arbitrary, as it allowed what was supported and disallowed what was not. 36.The Respondent submitted that the Appellant’s bank statements showed the following variances, and that the Appellant was given multiple opportunities to reconcile the said variances but failed to do so;a.2023: Gross banking 3,643,460.00Declared VAT turnover only 358,000.00Variance 2,722,569.00b.2024: Gross banking 12,878,188.00Declared VAT turnover 6,435,324.00Variance 4,545,873.00 37.The Respondent submitted that the non-provision of the bank reconciliation by the Appellant left the Respondent with no option but to lawfully treat the unexplained bank credits as taxable income. 38.On the issue of procedural fairness,the Respondent stated that Article 47 of the Constitution and Section 4 of the Fair Administrative Act require an administrative action to be expeditious, efficient, lawful, reasonable, and procedurally fair. It submitted that the records show the process and timelines from the first date of Notice of findings on 10th April 2025 to the date of the objection decision on 21st August 2025.It averred that the Appellant was heard, given extensions, and partially succeeded in the objection where the November 2024 VAT was allowed.It therefore stated that there was no breach of fairness. 39.The Respondent highlighted that the Appellant submitted additional documents on 28th August 2025 after the Objection Decision was issued on 21ST August 2025.It stated that it correctly responded to the Appellant on 9th September 2025 and informed the Appellant that those documents could not retroactively alter a concluded decision. Further that Section 51(1) of the TPA empowers the Commissioner to make a decision within 60 days of receiving a valid objection, and that there is no provision for reopening a decision based on late admission. 40.It submitted that the Appellant failed to discharge its burden of proof as it failed to provide reconciliations, proof of payment, delivery notes, or supporting documents for key expenses. As such, its appeal is based on general assertions and incomplete records. It reiterated that the Respondent acted within the law, followed procedure, and issued a reasoned Objection Decision that partially allowed the objection where evidence was provided. Respondent’s Prayers 41.The Respondent prayed that the Tribunal would: -a.Dismiss the Appeal with costsb.Confirm the additional assessments as per the Objection Decisionc.Order the Appellant to pay the confirmed taxes, penalties and interestd.Grant any other relief as the Tribunal deems just. Issues for Deterimation 42.The Tribunal has carefully considered the parties’ pleadings, documentation, and the Respondent’s submissions and is of the view that the appeal raises one issue for determination: Whether the Respondent’s additional Assessments were justified. Analysis and Findings 43.Having identified a single issue for determination, the Tribunal will proceed to analyse it as hereinunder. 44.The genesis of the dispute is the Respondent’s audit on the Appellant’s tax affairs, which resulted in a tax demand of Kshs 4,923,780.00 being principal income tax and VAT inclusive of penalties and interest. The Appellant argued that it received the objection decision dated 21st August, 2025 late through an email of 9th September, 2025. However, it has not availed this document to support its assertion. 45.The Appellant had stated that the disallowed expenses were genuine and necessary and claimed that it furnished the Respondent with invoices, receipts, lease & rental agreements, petty cash vouchers, and detailed expense schedules. However, the Respondent upheld the assessment. 46.The Respondent, on its part, stated that it requested for specific documents vide its communication of 10th July 2025 and that the Appellant submitted partial documentation, which it reviewed and partially allowed some expenses for November 2024. 47.The Tribunal notes that the Appellant’s bank statements it provided had a total variance of Kshs 7,268,442.00 for the years 2023 and 2024 which was the variance between the gross banking’s and the amounts declared in the VAT turnover. The Appellant neither provided a reconciliation to the Respondent to explain the variances nor offered any explanation and reconciliation before the Tribunal. In the absence of such evidence to explain the variance, the Respondent cannot be faulted for treating these bank credits as taxable income. 48.On the issue of the disallowed expenses, it is the Tribunal’s view that one of the evidence that may be adduced is proof of payment. This is because proof of payment signifies that a party actually incurred the expense. Such proof can then easily corroborate one’s assertions, hence making the said expense(s) deductible. 49.The Tribunal notes that the Appellant had been requested to provide the following documents to disprove the Respondent’s assessments:a.Reconciliation of bank credits to declared incomeb.Proof of payment for disputed purchasesc.Delivery notes or supplies declarationsd.Schedules and supporting documents for storage expenses of Khs 2.4 millione.Sales ledgers and non-business credit evidence. 50.It is the Tribunal’s considered view that the requested documents were not out of the ordinary in the course of the Appellant’s business and should ordinarily be easily available. The Tribunal notes that the Respondent had stated that the Appellant provided some documents on 28th August 2025 after the Objection Decision had been issued on 21st August 2025. The Tribunal further notes that there is no provision under the Tax Procedures Act that can accommodate these documents post the Objection Decision. 51.It is worth noting that the Appellant had recourse to apply to the Tribunal vide a Notice of Motion to seek consideration of these documents even before the hearing of the Appeal, a recourse it failed to take advantage of. 52.Section 54(A) of the Income Tax Act mandates the keeping of records for any person carrying out a business so as to easily ascertain one’s tax affairs. It provides as follows:“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” 53.Section 23(1) of the Tax Procedures Act further reinforces the importance of keeping records for any one carrying out a business so as to easily ascertain one’s tax affairs. It provides as follows:“A person shall –a.Maintain any document required under a tax law, in either of the official languages.b.Maintain any document required under a tax law so as to enable the person’s tax liability to be readily ascertained; andc.Subject to subsection 3, retain the documents for a period of five years from the end of a reporting period to which it relates or such shorter period as may be specified in a tax law.” 54.The Tribunal relies on the case of Grace Njeri Githua vs Commissioner of Investigations and Enforcement (TAT No. 102 of 2018) where it held:“In this Appeal, the Appellant has not provided the Tribunal with enough evidence to show that the net income the Respondent has based the tax assessment was not income or is subject to further cost deductions in arriving at a net profit…” 55.The Tribunal further relied on the High Court holding in the case of Commissioner of Domestic Taxes vs Structural International Kenya Ltd (Income Tax Appeal No E089 of 2020(2021) KEHC 152 (KLR) where the High Court held at paragraph 48:“For the avoidance of doubt the Tribunal is reminded that in matters where the issue is supply of goods, be it for VAT purposes or Corporation tax, the burden is always on the trader /taxpayer to show that the documentation set out in the statute and which he relies on arose out of commercial transactions, period. If additional documents which would be reasonably expected to be in his possession is requested for to verify the alleged transactions, he should produce the same to the Commissioner. This is what is expected of a keen and diligent trader” 56.In view of the foregoing, the Tribunal finds that the Respondent’s additional assessments were justified. 57.The upshot of the foregoing is that the Appeal lacks merit and the Tribunal proceeds to issue the following orders:a.The Appeal be and is hereby dismissed.b.The Respondent’s Objection Decision dated 21st August 2025 be and is hereby upheld.c.Each party to bear its own costs. 58.It is so ordered. DATED AND DELIVERED AT NAIROBI THIS ………26TH ...……. DAY OF ……JUNE..…… 2026................................................................DR. RODNEY ODHIAMBO OLUOCHCHAIRMAN……………………………. ……………………………ABDULLAHI M. DIRIYEMEMBER……………………………. ……………………………DR. ERICK K’MOLLOMEMBER