https://new.kenyalaw.org/akn/ke/judgment/ketat/2026/232

 REPUBLIC OF KENYA IN THE TRIBUNAL OF KENYA AT NAIROBI COUNTY COURT NAME: TAX APPEALS TRIBUNAL CASE NUMBER: TATC/E977/2025 SAGA (E.A.) COMPANY LIMITED VS KENYA REVENUE AUTHORITY JUDGMENT # BACKGROUND 1. The Appellant is a private limited company is a duly incorporated entity in Kenya and a registered taxpayer 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 stated that it reviewed the Appellant’s tax returns and raised additional assessments and disallowed input tax amounting to KES 3,904,634.48 4. The Appellant objected to the said assessment on 23rd May 2025. 5. The Respondent issued the Objection decision on 18th July 2025. 6. The Appellant, being dissatisfied with the Respondent’s Objection decision on 18th July, 2025, lodged a notice of appeal filed 18th August, 2025. # THE APPEAL 1. The Appellant lodged its Memorandum of appeal dated 1st September 2025 and filed on 8th September, 2025 raising the following grounds of appeal; 1. THAT The Respondent erred in law and fact in disallowing input VAT of Kshs. 3,904,634.48 despite the Appellant holding valid tax invoices and supporting documents, contrary to Section 17(2) of the VAT Act, 2013. 2. THAT The Respondent failed to properly consider invoices, delivery notes, payment confirmations, and petty cash vouchers tendered by the Appellant, contrary to Article 47 of the Constitution and Section 4(3) of the Fair Administrative Action Act, 2015. 3. THAT The Respondent erred by shifting the entire burden of proof to the Appellant contrary to Section 56(1) of the Tax Procedures Act, 2015, which obliges both parties to substantiate their claims. 4. THAT The Respondent unlawfully demanded third-party confirmations from suppliers, despite the fact that the VAT Act requires only retention of valid tax invoices and related records by the taxpayer. 5. THAT The Respondent disregarded the true economic substance of the Appellant’s transactions and instead relied on procedural technicalities, contrary to established Tribunal jurisprudence such as **Ridgeways Estates** # Ltd v. Commissioner of Domestic Taxes TAT No. 185 of 2020. * 1. THAT The Respondent violated the doctrine of legitimate expectation by departing from past administrative practice of accepting invoices and delivery notes as proof of taxable supplies without justification. 2. THAT The Respondent failed to provide clear and sufficient reasons for rejecting the Appellant’s documents, contrary to Section 51(10) of the Tax Procedures Act, 2015 and the decision in **Republic v. Kenya Revenue** # Authority Ex parte Fintel Ltd [2019] eKLR. * 1. THAT By disallowing legitimate input tax without legal justification, the Respondent imposed tax not authorized by law, in violation of Article 210(1) of the Constitution of Kenya, 2010. 2. THAT The Respondent acted unreasonably, arbitrarily, and capriciously by ignoring material evidence and issuing assessments unsupported by law or fact, contrary to the principles of natural justice. 3. THAT The Respondent’s conduct contravened principles of certainty, fairness, and transparency in taxation as envisaged under the Preamble to the Tax Procedures Act, 2015 and international best practice under the OECD Guidelines on Taxpayer Rights. 4. THAT The Objection Decision violated the Appellant’s rights under Article 47 of the Constitution by being procedurally unfair, unreasonable, and issued without affording the Appellant proper consideration of its evidence. 5. THAT The Respondent misapplied the provisions of the VAT Act, 2013, by failing to recognize that input tax is allowable so long as the taxpayer holds a valid tax invoice and has made or intends to make payment. 6. THAT The assessments are excessive, disproportionate, and punitive, contrary to the principle of proportionality in tax administration under Article 24 of the Constitution and Tribunal precedent in **Highlands** # Mineral Water Ltd v. Commissioner of Domestic Taxes TAT No. 236 of 2019. * 1. THAT The Respondent failed to consider the Appellant’s business operations and normal industry practices, instead applying rigid standards that ignore practical realities, leading to unjust enrichment of the tax authority. 2. THAT The Respondent ignored Tribunal decisions, such as **Total Touch Cargo Holland v. Commissioner of Domestic Taxes TAT No. 17 of 2018,** which held that disallowance of input VAT cannot be sustained where valid invoices and delivery evidence are available. # THE APPELLANT’S CASE 1. The Appellant case was premised on its Statement of facts dated on 1 st September 2025 and filed 8th September 2025 2. The Appellant Stated that for the tax periods of May and June 2024, it duly filed VAT returns declaring both output tax and input tax, and that the input tax claims were supported by valid tax invoices, delivery notes, payment vouchers, and bank transfer confirmations relating to supplies received in the ordinary course of business, with annexures including VAT returns for May and June 2024, tax invoices, delivery notes , and bank statements highlighting 3. The Appellant Stated that on subsequent review, the Respondent, issued VAT assessments disallowing input tax amounting to KES 3,904,634.48 on the allegation that some suppliers either did not remit VAT or were flagged as “non-compliant” in the KRA system. 4. The Appellant stated that it lodged a Notice of Objection under ***Section 51(2) of the Tax Procedures Act (TPA)*** within the prescribed timelines and submitted all relevant documentation to substantiate its claims. 5. The Appellant Stated that by way of an Objection Decision dated 18th July 2025, the Respondent upheld the assessments and in doing so disregarded the primary evidence submitted by the Appellant, introduced fresh grounds not contained in the initial assessment notice contrary to ***Section 51(8) of the Tax Procedures Act***, and provided vague and blanket reasons that did not specifically address the Appellant’s evidence, as contained in the Objection Decision dated 18th July 2025. 6. The Appellant Stated that it complied with ***Section 17(1) and (2) of the Value Added Tax Act, 2013***, which entitles a registered person to deduct input VAT where they are in possession of a valid tax invoice and the supply has been made in the course of business, and further contended that the Respondent’s decision improperly penalized it for alleged failures of third-party suppliers contrary to established legal principles. 7. The Appellant Stated that the Tribunal has consistently held that once a purchaser discharges its burden by producing proper invoices and proof of payment, the burden shifts to the Commissioner, relying on **Alpha Fine Foods Ltd** # v. Commissioner of Domestic Taxes, TAT No. 150 of 2020 and Doshi Ironmongers Ltd v. Commissioner of Domestic Taxes, TAT No. 49 of 2019. 1. The Appellant averred that the Respondent failed to comply with ***Section 59 of the Tax Procedures Act (TPA)***, which obligates reliance on third-party information such as suppliers’ tax filings and iTax records to verify discrepancies before raising assessments. 2. The Appellant stated that by ignoring the Appellant’s evidence and issuing a blanket rejection, the Respondent acted contrary to ***Article 47 of the Constitution of Kenya, 2010*** and ***Section 4 of the Fair Administrative Action Act, 2015***, which require administrative bodies to issue lawful, reasonable, and procedurally fair decisions. 3. The Appellant Stated that the Objection Decision contravenes ***Article 210 of the Constitution of Kenya, 2010*** by failing to ensure lawful taxation and by effectively subjecting the Appellant to double taxation through disallowance of legitimate input VAT claims. 4. The Appellant Stated that it invokes the doctrine of legitimate expectation, having reasonably expected that its input VAT claims supported by valid invoices would be allowed in line with prior treatment of similar claims and established Tribunal precedent. 5. The Appellant Stated that the Respondent’s actions amounted to arbitrariness, abuse of power, and selective application of the law, thereby violating ***Article 27 of the Constitution of Kenya, 2010*** on equality and non-discrimination. 6. The Appellant Stated that the assessments for May and June 2024 are therefore unlawful, excessive, unconstitutional, and unsustainable in law. # Appellant’s Prayers 1. The Appellant prayed for**:** 2. **AN ORDER** Allowing this Appeal in its entirety. 3. AN ORDER Setting aside the Objection Decision dated 18th July 2025; 4. **AN ORDER** Vacating the additional VAT assessments totaling Kshs. # 3,904,634.48; 1. AN ORDER Restoring the Appellant’s full input tax credits as claimed; 2. The costs of this matter, or any other pecuniary compensation as deemed appropriate; and 3. Any other or further relief(s) as this Honourable Tribunal would deem just and reasonable to grant. # THE RESPONDENT’S CASE 1. In response to the appeal, the Respondent filed its Statement of facts dated 13th December 2025 and filed on 16th December, 2025 2. The Respondent stated that it reviewed the Appellant’s tax returns and raised additional assessments. 3. The Respondent stated that the Appellant objected to the said assessment on 23rd May 2025. 4. The Respondent stated that it issued the objection decision on 18th July 2025. 5. The Respondent stated that the Appellant, being dissatisfied with the objection decision, filed the present Appeal before the Tribunal. 6. The Respondent stated that the assessments were issued from unsupported VAT input tax claimed in the second amendment return and that the Appellant failed to avail delivery notes and evidence of payment. 7. The Respondent stated that on 30th May 2024, the Appellant was allowed to file a late objection and to adduce supporting documents. 8. The Respondent stated that the requested documents were not submitted within the set timelines, and therefore it was unable to verify the extent to which purchases were acquired to make taxable supply. 9. The Respondent stated that ***Section 17(3) of the Value Added Tax Act*** provides mandatory documentation requirements for input tax claims, including original tax invoices, customs entries, receipts, and other specified documents. 10. The Respondent stated that the law provides mandatory requirements under the VAT Act and that it did not err in law or fact in confirming the VAT tax assessments due to lack of supporting documentation. 11. The Respondent stated that it is empowered under ***Section 31(1)(b) and Section 29 of the Tax Procedures Act*** to amend assessments based on available information and to the best of its judgment. 12. The Respondent stated that it is further allowed under ***Section 24(2) of the Tax Procedures Act*** to assess a taxpayer’s liability using any information available and confirms that it acted within the confines of the law by relying on data obtained through return review. 13. The Respondent stated that ***Section 51(3) of the Tax Procedures Act*** provides that a notice of objection must state precise grounds, required amendments, reasons, payment status where applicable, and be accompanied by all relevant documents. 14. The Respondent stated that the Appellant’s objection was rejected pursuant to ***Section 51(3) of the Tax Procedures Act*** because it failed to support its objection with all relevant documents. 15. The Respondent stated that the onus is on the Appellant to demonstrate that the Respondent acted contrary to ***Article 47 of the Constitution of Kenya, 2010*** and ***Section 4(3) of the Fair Administrative Action Act, 2015***. 1. The Respondent stated that the Appellant failed to comply with ***Section 51(3) of the Tax Procedures Act***, leaving the Respondent with no choice but to reject the objection application. 2. The Respondent stated that there is no evidence that it failed to review documents provided and that the Appellant has not demonstrated that it submitted the required evidence. 3. The Respondent stated that it is guided by ***Section 56(1) of the Tax Procedures Act***, which places the burden on the taxpayer to prove that a tax decision is incorrect. 4. The Respondent stated that it reserves the right to adduce further oral and/or documentary evidence at the hearing. 5. The Respondent stated that all actions were taken in accordance with ***Section 51 and 56 of the Tax Procedures Act, 2015*** and ***Sections 24, 29 and 31(1) of the Tax Procedures Act***. 6. The Respondent stated that the Appellant was granted an opportunity to respond to audit findings and object to the assessment in line with due process. 7. The Respondent stated that the tax assessment issued was properly founded in fact and law, and that the objection decision was fair, reasonable, and made in accordance with statutory provisions. 8. The Respondent Prayed that the 9. Tribunal dismisses the appeal in its entirety, 10. upholds the tax assessment as confirmed in the objection decision, and 11. orders the Appellant to pay the costs of the appeal. # PARTIES’ WRITTEN SUBMISSIONS 1. On the 1st April 2025, the date of the hearing, The Appellant’s submissions were not on record, however the Respondents Submissions dated 26th March 2026 and filed on 27th March 2026 were adopted as the case of the Appellants proceeds on the basis of pleadings as filed with directions of the Appellant to be served. # Respondent’s Submissions 1. The Respondent submitted that it is not bound by the tax returns filed by a taxpayer and may assess a taxpayer’s liability using any information available to it in accordance with ***Section 24(2) of the Tax Procedures Act, 2015 (TPA)***. 2. The Respondent submitted that it is empowered under ***Section 31 of the Tax Procedures Act, 2015 (TPA)*** to amend original assessments using available information and its best judgment in order to determine the correct tax payable. 3. The Respondent submitted that in exercising this statutory mandate under ***Section 31 of the Tax Procedures Act, 2015 (TPA)***, it relied on available information and acted within the law, and further relied on the holding in # Commissioner of Domestic Taxes v Altech Stream (EA) Limited [2021] **eKLR**, where the Court affirmed that the Commissioner may assess tax based on available information and best judgment. 1. The Respondent submitted that the Appellant’s failure to explain or rebut the discrepancies identified necessitated the issuance of additional assessments by the Respondent 2. The Respondent submitted that the assessments arose from unsupported VAT input tax claimed in the second amended return and that the Appellant failed to provide delivery notes and proof of payment. 3. The Respondent submitted that the Appellant was granted an opportunity on 30th May 2024 to file a late objection and to submit supporting documentation. 4. The Respondent submitted that despite being granted time, the Appellant failed to submit the requested documents within the set timelines, thereby preventing verification of whether the purchases were incurred for taxable supplies. 5. The Respondent submitted that the objection was rejected because the Appellant failed to provide proper documentation in support of the grounds raised as required under the law. 6. The Respondent submitted that in **Mulherin v Commissioner of Taxation [2013] FCAFC 115**, the Court held that the burden of proof lies on the taxpayer to demonstrate that an assessment is excessive by adducing positive evidence. 7. The Respondent submitted that in **Intime Stone Age Limited v Commissioner of Domestic Taxes (Appeal 714 of 2022) [2024] KETAT 44**, the Tribunal emphasized that taxpayers must provide relevant and specific documentation to support grounds of objection. 1. The Respondent submitted that it specifically requested the Appellant to provide certain documents for verification of the claimed input tax. 2. The Respondent submitted that the Appellant failed to produce documents sufficient to explain the variances identified in the assessment. 3. The Respondent submitted that its decision to reject the objection was proper and supported by law, and relied on the holding in **Osho Drapers Limited v Commissioner of Domestic Taxes [2022] eKLR**, where the Court affirmed the Commissioner’s power under ***Section 59 of the Tax Procedures Act, 2015*** ***(TPA)*** to request additional information for verification purposes. 1. The Respondent submitted that the Appellant is obligated under ***Section 23 of the Tax Procedures Act, 2015 (TPA)*** to maintain proper records for a period of five years to enable tax liability to be ascertained. 2. The Respondent submitted that a reading of ***Sections 23 and 59 of the Tax Procedures Act, 2015 (TPA)*** confirms that the Appellant is required to maintain and produce records when called upon by the Commissioner. 3. The Respondent submitted that under ***Section 51(3) of the Tax Procedures Act, 2015 (TPA)***, a notice of objection is only valid if it is supported by all relevant documents relating to the objection. 4. The Respondent submitted that in **Boleyn International Limited v Commissioner of Investigations & Enforcement (TAT No. 55 of 2019)**, the Tribunal held that failure to submit documents renders an objection invalid under ***Section 51(3) of the Tax Procedures Act, 2015 (TPA)***. 1. The Respondent submitted that in **Rongai Tiles and Sanitary Ware Limited v Commissioner of Domestic Taxes (TAT No. 163 of 2017)**, the Tribunal affirmed that compliance with the conditions under Section 51(3) is mandatory for a valid objection. 1. The Respondent submitted that it made efforts to follow up with the Appellant and requested the necessary documentation in support of the objection. 2. The Respondent submitted that under ***Section 56(1) of the Tax Procedures Act, 2015 (TPA)***, the burden of proof lies on the taxpayer to demonstrate that a tax decision is incorrect. 3. The Respondent submitted that under ***Section 30 of the Tax Appeals Tribunal Act, 2013 (TATA)***, the Appellant bears the burden of proving that an assessment is excessive or that a tax decision was wrongly made. 4. The Respondent submitted that the Appellant has failed to discharge the burden of proof under ***Section 56(1) of the Tax Procedures Act, 2015 (TPA)*** and ***Section 30 of the Tax Appeals Tribunal Act, 2013 (TATA)***, and therefore the rejection of the objection was justified. 5. The Respondent submitted that the Appellant cannot allege failure of consideration of documents when no such documents were submitted for consideration. 6. The Respondent submitted that the tax assessment was properly founded in fact and law and that the objection decision was fair, reasonable, and compliant with statutory provisions. 7. The Respondent submitted that the Tribunal should dismiss the appeal in its entirety, uphold the tax assessment as confirmed in the objection decision, and award costs to the Respondent. # ISSUE FOR DETERMINATION 1. The Tribunal having carefully evaluated parties’ pleadings it is of the respectful view that the issue(s) that call for its determination is as hereunder: # Whether the Appellant discharged its burden of proof to demonstrate that **the Objection decision was incorrect.** **ANALYSIS AND FINDINGS** 1. Having identified the issues for determination, the Tribunal proceeds to analyse the same as hereunder; **Whether the Appellant discharged its burden of proof to demonstrate that the Objection decision was incorrect** 1. The Tribunal have reviewed the context of the dispute which arose from the Respondent’s review of the Appellant’s VAT returns for May and June 2024, following which additional assessments were raised disallowing input VAT on the basis of alleged non-compliance and lack of supporting documentation. 2. The Appellant, maintaining that it had duly filed its returns and supported its input tax claims with valid invoices, delivery notes, and proof of payment, lodged a Notice of Objection on 23rd May 2025 pursuant to Section 51(2) of the Tax Procedures Act, 2015 (TPA). The Respondent subsequently issued an Objection Decision on 18th July 2025 upholding the assessments, citing failure by the Appellant to provide sufficient documentation within the prescribed timelines, despite being granted an opportunity, including on 30th May 2024, to submit supporting evidence. 3. Aggrieved by that decision, the Appellant filed the present appeal on 1st September 2025, asserting that the objection was validly lodged and that the Respondent acted unlawfully in disregarding the evidence presented. 4. This determination necessarily implicates the allocation of the burden of proof under Section 56(1) of the Tax Procedures Act, 2015 (TPA), and frames the central question as to whether the Objection Decision was justified. 5. The Tribunal makes the following findings arising from the Objection Decision, the evidentiary record, and the conduct of the proceedings before it. The Respondent’s assessment was triggered by identified deficiencies in the Appellant’s input VAT claims amounting to Ksh 24,223,965.52, particularly the absence or insufficiency of delivery notes and proof of payment necessary to substantiate the claims. This initial position was grounded on clear verification gaps in the Appellant’s tax records and not on conjecture. 6. The Tribunal finds that the Appellant was afforded procedural fairness when it was granted an opportunity on 30th May 2024 to regularise its objection and submit comprehensive supporting documentation. The request made on that date was specific and detailed, requiring purchase invoices for each disputed transaction, delivery notes where available, proof of payment for each invoice, bank statements for the relevant period, and a reconciliation demonstrating how the input VAT related to the taxable supplies. 7. The Tribunal further finds that the Appellant did not comply with the said request within the stipulated timelines. The documentation provided was incomplete and insufficient to enable reconciliation of the claimed input VAT against underlying transactions. This failure is substantive, not merely procedural, as it goes to the evidentiary foundation of the claim. 8. The Tribunal also finds that the Respondent acted within its statutory mandate under Sections 23, 24, 31, 51 and 59 of the Tax Procedures Act in requesting additional information and relying on available material where the Appellant failed to furnish complete supporting records. The process adopted by the Respondent was therefore lawful and consistent with proper tax administration. 1. The Tribunal finds that the decisive issue before it is not merely whether invoices existed in principle, but whether the Appellant discharged its statutory burden by producing a complete, reconciled, and verifiable documentary trail linking the claimed input VAT to actual taxable supplies and corresponding payments. The Tribunal finds that this burden was not discharged. 2. The Tribunal is guided by Section 56(1) of the Tax Procedures Act, 2015 which provides that in proceedings under a tax law, the burden shall be on the taxpayer to prove that a tax decision is incorrect. Equally, Section 30 of the Tax Appeals Tribunal Act, 2013 places the burden upon the Appellant to prove that a tax decision ought not to have been made or should have been made differently. 3. The Tribunal is persuaded by the holding in *Mulherin v Commissioner of Taxation [2013] FCAFC 115* where the Court held at paragraph 40 that: “The taxpayer bears the burden of proving that the assessment is excessive and what the correct assessment should be.” The Court emphasized that the burden is discharged through positive and credible evidence and not by mere assertions. 4. The Tribunal further adopts the reasoning in *Intime Stone Age Limited v Commissioner of Domestic Taxes (Appeal 714 of 2022) [2024] KETAT 44* where the Tribunal held that: “A taxpayer must provide relevant and specific documentation to support the grounds raised in an objection.” The Tribunal emphasized that production of coherent and verifiable supporting records is a substantive statutory obligation and not a procedural technicality. 5. The Tribunal also relies on *Boleyn International Limited v Commissioner of Investigations & Enforcement (TAT No. 55 of 2019)* where the Tribunal held that failure to provide all relevant supporting documents renders an objection invalid under Section 51(3) of the Tax Procedures Act since the Commissioner cannot verify a taxpayer’s claims in the absence of supporting evidence. 6. The Tribunal is guided by the cases of **Ushindi Exporters Ltd v Commissioner of Investigation & Enforcement (TAT No. 7 of 2015) the** Tribunal held that the burden of proving an assessment is excessive never shifts to the Commissioner; the taxpayer must produce documents and prove the assessment is wrong. 1. In **Muasya v Commissioner of Domestic Taxes (TAT, 22 Mar 2024) reiterates Ushindi Exporters Ltd** (supra) and finds the taxpayer did not discharge the burden under Section 56 Tax Procedures Act when documents were insufficient to reconcile claimed input VAT. 1. These Tribunal decisions are directly on point where the Respondent requested invoices, delivery notes, bank statements and reconciliations and the Appellant produced incomplete material. They support the Tribunal’s conclusion that non production is substantive and justifies upholding the Objection Decision. 2. The Tribunal finds that the Respondent’s Objection Decision clearly records that the Appellant failed to submit the required documents within the stipulated timelines, thereby preventing verification of whether the purchases were incurred in making taxable supplies. This finding is consistent with both the factual record and the statutory framework governing VAT claims and tax objections. 3. The Tribunal further finds that **Section 56 of the Tax Procedures Act** lawfully places the burden of proof on the taxpayer to demonstrate that a tax decision is incorrect. In this case, the Appellant failed to discharge that burden by not providing sufficient, coherent, and verifiable documentation to substantiate the disputed input VAT. 1. The Tribunal consequently finds that the Appellant failed to discharge the burden imposed under Section 56(1) of the Tax Procedures Act, 2015 and Section 30 of the Tax Appeals Tribunal Act, 2013 to demonstrate that the Respondent’s Objection Decision dated 18th July 2025 was incorrect. # FINAL DECISION 1. The upshot to the foregoing is that the Tribunal finds and holds that the Appeal fails and makes the following Orders: 1. The Appeal be and is hereby dismissed. 2. The Respondent’s Objection Decision on 18th July 2025 be and is hereby upheld 3. Each party to bear its own cost. 2. It is so Ordered. **DATED** and **DELIVERED** at **NAIROBI** on this 19TH MAY of **2026.** SIGNED BY/FOR: HON. ROBERT MUGAMBI MUTUMA (CHAIRPERSON) HON. EUNICE NJERI NGANGA HON. BONIFACE KIBIY TERER HON. BILLY GRAHAM OKUMU MIJUNGU **★ TH E JUDICIAR Y O F KENY A ★** **HON. ROBERT MUGAMBI MUTUMA (CHAIRPERSON) HON. EUNICE NJERI NGANGA HON. BONIFACE KIBIY TERER HON. BILLY GRAHAM OKUMU MIJUNGU** Tax Appeals Tribunal Tribunal Date: 2026-05-19 16:15:43