https://new.kenyalaw.org/akn/ke/judgment/ketat/2026/237

 REPUBLIC OF KENYA IN THE TRIBUNAL OF KENYA AT NAIROBI COUNTY COURT NAME: TAX APPEALS TRIBUNAL CASE NUMBER: TATC/E373/2025 RYNUS NJIRU KINJA VS KENYA REVENUE AUTHORITY JUDGMENT # BACKGROUND 1. The Appellant is operating a sole proprietor business within the Republic of Kenya and collects and resells drums sourced from informal traders. 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. On 3rd October 2024, the Respondent issued a pre- assessment notice and shortly thereafter issued its tax assessment. Subsequently on 8th November 2024, the Respondent issued an additional income tax assessment for the periods 2019 to 2023, totalling to Kshs 32,893,930. On 18th October 2024, the Respondent issued an additional VAT assessment for the periods 2019 to 2024, totaling Kshs 26,482,401.17. 4. The Appellant on 20th January 2025 filed an objection to the assessments in relation to income tax while it filed an objection against VAT assessments on 21st January 2025. 5. Upon considering the objection, the Commissioner vide a letter dated 20th March 2025 issued an objection decision rejecting the Appellant’s objection in full. 6. The Appellant being dissatisfied with the Objection decision preferred this Appeal vide Notice of Appeal dated and filed on 18th April 2025, having sought leave of the Tribunal leave to file and serve his amended Memorandum of Appeal, Supplementary Statement of Facts, and any other additional document. # THE APPEAL 1. The Appellant is premised on the Memoranda of Appeal dated 18th April 2025 and further amended and filed on 21st September 2025 raising the following grounds of appeal: 1. That the Respondent erred in law and fact by adopting a turn over based model, that is an affront to general accounting principles and the provisions of Section 3(2) and 15 of the Income Tax Act, Cap 470 (ITA), which taxes gains or profits of a business. 2. That the Respondent erred in fact and in law by treating the gross receipts inferred from withholding VAT (2%) certificates as the Appellant’s taxable consideration, disregarding the fact that these receipts included pass through/agency disbursements made on behalf of the Appellant’s customers, which under Section 13 (5) of the Value Added Tax Act Cap 476(VATA), are excluded from the taxable value. 3. That the Respondent erred in fact and in law by misapplying Sections 3(2), 6 and 15 of the ITA, by taxing gross receipts and by failing to test expenses against the statutory ‘wholly and exclusively’ standard of deduction. 4. That the Respondent erred in law and in fact by failing to engage with the Appellant’s intermediary business model and, without prejudice, in the face of imperfect records, failing to make a reasonable best judgment through reconstruction of turnover and profit from the available data, thereby offending its duty of lawful, reasonable and procedurally fair administrative action under Article 47 of the Constitution. 5. That the Respondent failed to properly consider the Appellant’s objection, issuing a decision with inadequate reasons while requesting further documents notwithstanding the fact that the Appellant has already furnished audited accounts, loan and bank statements which were sufficient to substantiate a reasoned decision. # THE APPELLANT’S CASE 1. The Appellant lodged his Amended Statement of facts dated 19 th September 2025 and filed on 22nd September 2025. The Appellant did not file submissions. 2. Regarding income tax, on 3rd October 2024, the Respondent issued a pre- assessment notice and shortly thereafter issued its tax assessment. Subsequently on 8th November 2024, the Respondent issued an additional income tax assessment for the periods 2019 to 2023, totalling to Kshs 32,893,930. 3. The Appellant stated that on 20th January 2025 it filed an objection, which was accepted on 4th February 2025 and that it provided the following documents: Audited accounts; loan statements; and bank statements. 4. On 20 th March 2025, the Commissioner issued a decision rejecting the Appellant’s objection in full on the basis that the withholding tax certificates should reflect the income that the Appellant received and is taxable. 5. As concerns VAT, the Appellant stated that on 18 th October 2024, the Commissioner issued an additional VAT assessment for the periods 2019 to 2024, totalling Kshs 26,482,401.17. The assessment was based on the Appellant’s declared sales and withholding tax certificates provided by Synresins Limited. 6. On 21 st January 2025, the Appellant filed an objection to the VAT assessment. The Commissioner accepted the objection on 4th February 2025 and requested the Appellant to provide supporting documents. The Appellant stated that it complied with the request and submitted all available documents, including audited accounts, loan statements and bank statements. 7. On 20 th March 2025, the Commissioner issued a decision rejecting the Appellant’s objection in full on basis that the withholding tax certificates should reflect the income that the Appellant received and is taxable for VAT purposes. 8. It was the Appellant’s position that the assessment was primarily based on third party certificates from Synresins Limited, one of the Appellant’s customer, which the Respondent treated as taxable income. Further that Respondent’s presumed position that the WHT VAT certificates amounted to taxable income assumes an abnormally high profit margin, with no due regard to allowable expenses allowed under section 15 of the ITA thereby taxing gross receipts. 1. The Appellant asserted that the WHT VAT certificates/credit notes issued by Synresins do not constitute as income as the Respondent failed to consider the following: 2. Some of the receipts were client disbursements paid to small-scale traders on behalf of Synresins Limited under the Appellant’s intermediary model; such pass-through funds do not comprise income and ought not to have been brought to charge as revenue. 3. The Appellant was used as a passthrough, on behalf of Synresins, in due regard of the informal business sector. 4. The funds from Synresins constitute taxable supplies and should not be used to anchor turnover; and 5. The WHT -VAT credits cannot replace the profit-based computation under sections 3(2) of the ITA. 6. The Appellant averred that the Assessment was based on the difference between the Appellant’s declared sales and the withholding VAT tax certificates provided by Synresins Limited. It stated that the Respondent treated the withholding VAT tax certificates as evidence of taxable income, which the Appellant contests. 7. The Appellant asserts that these certificates represent tax withheld at source by Synresins Limited and are not income for the purposes of income tax. Additionally, the Commissioner incorrectly included disbursement funds as taxable income. The Appellant’s business model involves making payments to small-scale traders on behalf of Synresins Limited. These funds are client- specific payments, passed through the Appellant’s business, and are not income. The Appellant argues that these payments should not be subject to income tax. 8. The Appellant further stated that the Commissioner’s findings were based on misunderstanding of the business model. The Appellant contended that it does not earn income directly from the small-scale traders but only acts as an intermediary to facilitate the transaction between Synresins Limited and the traders. Therefore, the payments made to the traders on behalf of Synresins Limited should not be classified as taxable income. 1. The Appellant pointed out that it consistently made efforts to comply with the Respondent’s requests and has provided all available and requisite supporting documents. 2. It asserted that the decision made by the Commissioner was based on misinterpretation of the facts and the applicable law. The Appellant requested that the Tribunal review the decision and provide a fair and just determination based on the correct interpretation of the income tax obligations. 3. It contended that certificates represent tax withheld at source by Synresins Limited and does not take into account the fact that the full amount comprises disbursements as required under Section 13(5) of the VATA. 4. According to the Appellant, its business model involves making payments to small-scale traders on behalf of Synresins Limited. These funds are client- specific payments, passed through the Appellant’s business, and are not income. The Appellant argued that these payments should not be subject to income tax. The Appellant further submitted that the Commissioner’s findings were based on a misunderstanding of the business model. 5. The Appellant reiterated that it has consistently made efforts to comply with the Respondent’s requests and has provided all available and requisite supporting documents. It maintained that the decision made by the Commissioner was based on a misinterpretation of the facts and the applicable law. # Appellant’s prayers 1. The Appellant prayed for the following reliefs: 2. The appeal be allowed; 3. Decisions issued by the Commissioner on 20th March 2025 be set aside; 4. The Respondent bears the costs of the suit; and 5. The Tribunal be pleased to grant further relief as deems just and equitable. # THE RESPONDENT’S CASE 1. The Respondent did not file Statement of facts. However, it filed preliminary objection dated 11th March 2026 on grounds among others that the purported Amended memorandum of Appeal and Statement of facts filed on 22nd September 2025, are invalid, null and void abinitio, having offended the mandatory provisions of Section 13(2) (c) of the Tax Appeals Tribunal Act Cap 469A(TATA). 1. The Respondent therefore sought to have the Appeal struck out, with costs. # ISSUES FOR DETERMINATION 1. Having carefully evaluated parties’ pleadings the Tribunal identified the following issues for determination. (a Whether the Preliminary Objection dated 11th March 2026 is merited; and (b Whether the Objection Decision dated 20th March 2025 was justified. # ANALYSIS AND FINDINGS 1. Having identified the issues for determination, the Tribunal proceeds to analyse the same as hereunder: - # Whether the Preliminary Objection dated 11 th March 2026 is merited 1. The Respondent raised preliminary objection on the basis that the purported Amended memorandum of Appeal and Statement of facts dated 19th September 2025 are invalid, null and void abinitio, having offended the mandatory provisions of Section 13(2) (c) of the TATA. The Respondent having raised a preliminary objection in its pleadings the Tribunal examined its merit before making further steps. 2. Section 13(2) (c) of the TATA provides as follows: ***13. Procedure for appeal*** *(2) 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—* *(c) the appealable decision.* 1. The Respondent indicated that amended pleadings were fatally defective for failure to comply with the statutory procedure governing the filing and amendment of pleadings before the Tribunal. The Respondent argued that the non-compliance rendered the amended documents incompetent and incapable of sustaining the Appeal urging the Tribunal to strike out the purported Amended Memorandum of Appeal and Statement of Facts in their entirety with costs and to either dismiss the Appeal for want of competent pleadings or, in the alternative, confine the proceedings to the original pleadings filed in accordance with the law. 1. The Tribunal has considered the Preliminary Objection and observed that it raised a pure point of law concerning the competence of the amended pleadings and the Appellant’s compliance with the provisions of the Tax Appeals Tribunal Act as in the case of **Mukisa Biscuit Manufacturing Co.** **Ltd v West End Distributors Ltd [1969] EA 696*,*** where the Court held that a preliminary objection consists of a pure point of law which, if argued successfully, may dispose of the suit without the need for the ascertainment of facts. 1. The Tribunal further notes that the Appellant had lodged the Appeal by filing the Notice of Appeal and the accompanying pleadings on 19th April 2025 within the statutory timelines as prescribed under the Act. 2. The Tribunal further observed that the purported Amended Memorandum of Appeal and Statement of Facts dated 19th September 2025 were filed after the Appeal had been filed and that the Respondent challenged the amendments on the basis that they had not complied with the applicable statutory requirements. 3. The Tribunal notes that the Respondent’s objection was directed specifically at the amended pleadings and not at the original Memorandum of Appeal and Statement of Facts that had been properly lodged by the Appellant. 4. The Tribunal has considered whether any defect affecting the amended pleadings was sufficient to invalidate the entire Appeal or whether such defect only affected the validity of the impugned amended documents. 5. The Tribunal finds that even if the purported amended pleadings had been improperly filed, the original pleadings remained on record and continued to constitute the basis of the Appeal before the Tribunal as guided in the decision of **D.T. Dobie & Company (Kenya) Ltd v Muchina [1982] KLR** **1***,* where the Court emphasized that courts should exercise caution before striking out proceedings and should sustain matters where a cause of action or a competent suit is disclosed. 1. The Appellant adduced the Objection decision dated 20 th March 2025 therefore, the Respondent did not demonstrate how the Appellant breached Section 13(2) (c) of the TATA. Consequently, the Tribunal finds that the Preliminary Objection lacks merit and is hereby dismissed. # b. Whether the Objection Decision dated 20th March 2025 was justified. 1. The Appellant argued that the Respondent erred in confirming the income tax assessment on the basis that the Respondent presumed that the WHTVAT certificates amounted to taxable income leading to high profit margin. It argued that the Respondent did not consider allowable expenses allowed under Section 15 of the ITA thereby taxing gross receipts. 2. The Appellant also contended that the assessment was based on the difference between the Appellant’s declared sales and the withholding VAT tax certificates provided by Synresins Limited. He contested that the Respondent treated the withholding VAT tax certificates as evidence of taxable income. Further, the Appellant pointed out that the certificates represent tax withheld at source by Synresins Limited and does not take into account the fact that the full amount comprises of disbursements as required under Section 13(5) of the VATA. 3. Section 50(1)(a) of the TPA provides a rebuttable presumption that the Respondent’s decision is conclusive and correct. The said section provides 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. The Appellant has a duty to prove all claims against the Respondent. It has to rebut the presumption that the Respondent’s decision is correct. 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.’’* 1. The taxpayer has to keep records to facilitate determination of tax liability and for the purposes of discharging the burden of proof. To this end, Section 23 (1)(b) of the TPA 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, the VAT Act Section 43 mandates the taxpayer to keep records. It provides as follows: ***‘‘43. Keeping of records*** ***(1)****A person shall, for the purposes of this Act, keep in the course of his business, a full and true written record, whether in electronic form or otherwise, in English or Kiswahili of every transaction he makes and the record shall be kept for a period of five years from the date of the last entry made therein.’’* 1. Similarly, Section 54A of the ITA also mandates the taxpayer to keep records. It provides that: - ***‘‘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.’’* 2. As noted above, the Tax procedure Act, Value Added tax and Income Tax Act mandate the taxpayer to keep records to aid in determining tax liability. 3. The Appellant argued that it supplied the Respondent with documents but the Respondent ignored them. It is vital to recall that the duty to adduce documentary evidence and to discharge the burden of proof does not terminate at objection stage. The taxpayer upon filing an Appeal to this Tribunal, has to prove that the Respondent’s decision was incorrect. Section 30 of the TATA provides that: *“ 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 **Eldama Technologies Limited v Commissioner of** **Customs & Border Control (Tax Appeal E200 of 2021) [2023] KEHC 20762 (KLR)** stated as follows at paragraph 31: *‘’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...’’* 1. Based on the foregoing analysis, the issue then is whether the Appellant demonstrated that the Respondent erred in confirming the assessments. 2. The Tribunal notes that the Appellant did not file documentary evidence to support the Appeal. It only filed objection decision dated 20th March 2025. 3. Whereas the Appellant stated that it supplied the Respondent with audited accounts, loan statements; and Bank Statements, the Appellant did not file any of these documents to support this Appeal. 4. The Tribunal takes note of provision of Section 13(2)(d) of the TATA mandates the taxpayer to adduce documents that may assist this Tribunal to make a just decision. It provides: 5. *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—* 6. *a memorandum of appeal;* 7. *statements of facts; and* 8. *the appealable decision; and* 9. ***such other documents as may be necessary to enable the Tribunal to make a decision on the appeal.*** # In Rongai Furniture Centre Limited v Commissioner of Domestic Taxes (Income Tax Appeal E048 of 2023) [2025] KEHC 1124 (KLR) (Commercial and Tax) (27 February 2025) (Ruling), the Court asserted that the taxpayer has a duty to adduce documents to support the objection. 1. Further, in the case of **Darwine Wholesalers Limited v Commissioner of Investigations and Enforcement (Income Tax Appeal E051 of 2021) [2023] KEHC 23537 (KLR)** the Court held that the burden of proof lies on a taxpayer who has to prove that the Respondent’s decision is wrong. 1. Considering the foregoing, the Tribunal did not have basis to disturb the Objection decision dated 20th March 2025. 2. Consequently, the Tribunal finds and hold that the Appellant failed to demonstrate that the Respondent erred in confirming the assessments. # FINAL DECISION 1. The upshot to the foregoing is that the Appeal lacks merit and the Tribunal proceeds to make the following Orders: 1. The Appeal be and is hereby dismissed; 2. The Objection decision dated 20 th March 2025 be and is hereby upheld 3. Each party to bear its own cost. 2. 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 14:31:14