https://new.kenyalaw.org/akn/ke/judgment/ketat/2026/138

Sondu Steel and Cement Ltd v Commissioner of Legal Services and Board Coordination (Appeal E1027 of 2025) [2026] KETAT 138 (KLR) (2 June 2026) (Judgment) Neutral citation: [2026] KETAT 138 (KLR) Republic of Kenya In the Tax Appeal Tribunal Appeal E1027 of 2025 RM Mutuma, Chair, G Ogaga, T Vikiru & JM Malla, Members June 2, 2026 Between Sondu Steel and Cement Limited Appellant and Commissioner of Legal Services and Board Coordination Respondent Judgment Background 1.The Appellant is a registered taxpayer. Its principal activity is wholesale and retail in the hardware business. 2.The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act, Cap 469 Laws of Kenya (KRA Act). Under Section 5 (1) of the Act, KRA is an agency of the Government for the collection and receipt of all revenue. For the performance of its function under Subsection (1), the Authority is mandated under Section 5(2) of the Act to administer and enforce all provisions of the written laws as set out in Parts I and II of the First Schedule to the KRA Act to assess, collect, and account for all revenues under those laws. 3.The Respondent issued the Appellant with Value Added Tax (VAT) additional assessments for the periods November 2024 to March 2025. 4.The Appellant objected to the assessments on 23rd June 2025. 5.The Respondent issued an Objection decision on 21st August 2025 confirming the assessments. 6.The Appellant, being dissatisfied with the Respondent’s Objection decision, filed its Notice of Appeal dated 16th September 2025 and field on 17th September 2025. The Appeal 7.The Appeal is premised on the Memorandum of Appeal dated 17th September 2025 and filed on the same date which raised the following grounds: -a.That the Respondent erred in law and fact by raising an assessment based on a variance between declared sales on iTax and transmitted sales through the eTIMS platform.b.That the Respondent erred in law and fact by placing a demand notice on very unfair grounds and based on the wrong data. That the variances highlighted are very unrealistic and they are wrong.c.That the Respondent erred in law and fact by ignoring the fact that the Appellant made the proper declarations of sales as required by the VAT Act 2013 and the ETR Z reports capturing the total sales raised for the respective months were matching.d.That the Respondent erred in law and fact by dismissing the fact that the payment received in cash and bank matched the sales declared in the VAT returns.e.That the Respondent erred in law and fact by ignoring the fact that the confirmation emails sent to the said customers who claimed the said sales confirmed that they did not do business with the Appellant and neither do they know the Appellant.f.That the Respondent erred in law and fact as data from the new VSCU machine, bearing the serial number KRACU03xxxxxxxx print date 15th May 2025 a close look at the 13th January 2025 and prestigiously, there are no reports generated for December 2024 yet the Respondent claims the same machine generated the sales invoice for the months of November and December 2024. That this signifies the wrong data that the Respondent is using to victimize you.g.That the Respondent erred in law and fact by denying the fact that the original invoice on the respective dates have the correct sales and VAT values. The Respondent’s data used in the assessments has incorrect values and customer names.h.That the Respondent erred in law and fact by denying the fact that the iTax platform cannot allow you to file the return if your sales are more. How did the Appellant file the respective returns?i.That the Respondent erred in law and fact by denying the fact that the Appellant’s original auto-populated transmitted sales agree with the VAT return filed. That the Respondent is not providing the proof of how the extra sales were generated.j.That the Respondent erred in law and fact in failing as a public officer under obligation to accord all taxpayers fair administrative action in accordance with Article 47 of the Constitution of Kenya 2010, which expect him to take action among others, that is lawful, reasonable and procedurally fair so as to give the taxpayer a fair and reasonable opportunity to explain himself before any action can be taken since the same is likely to affect a taxpayer adversely.k.That this Honourable Tribunal has jurisdiction to hear this Appeal pursuant to Section 13(2) of the Tax Appeals Tribunal Act. Appellant’s Case 8.The Appellant’s case is premised on its Statement of Facts dated 17th September 2025 and filed on even date. The Appellant did not file written submissions and its case proceeded on the basis of the pleadings already on record. 9.The Appellant stated that the Respondent issued an assessment order on 19th June 2025, against which the Appellant objected on 23rd June 2025. 10.That the Respondent issued an Objection decision on 21st August 2025. Appellant’s Prayer 11.The Appellant prayed that the decision aforesaid be set aside and annulled or varied in such a manner as may appear just and reasonable. Respondent’s Case 12.The Respondent’s case is premised on the following documents filed before the Tribunal:a.The Respondent’s Statement of Facts dated 16th October 2025 and filed on the same date; andb.Its Written Submissions dated 30th March 2026 and filed on the same date. 13.The Respondent stated that it issued additional assessments upon review of returns. That the Appellant objected to the assessment on 23rd June 2025, and on 21st August 2025, the Respondent issued an Objection decision, which the Appellant appealed in this Appeal. 14.The Respondent averred that upon review, it noted the Appellant’s under declaration of sales amounting to Kshs. 130,402,267, which was not controverted with evidence to the contrary. 15.The Respondent asserted that the Appellant’s Z reports provided were not complete and receipts were faded thus could not be verified for an amendment of the assessment. 16.The Respondent stated that during the Objection process, it noted invoices from the VSCU machine KRACU03xxxxxxxx, and that the Appellant had made sales in December 2024, creating a contrast to the Appellant’s position of no sales in the period. That the Respondent therefore was justified in its decision demanding tax due as Kshs. 23,255,504. 17.The Respondent submitted that the law has provided mandatory requirements for taxpayers to keep records. The Respondent averred that it did nor err in law or fact in confirming the VAT assessments due to lack of supporting documentation. 18.The Respondent further submitted that it is empowered by Section 31(1) (b) and Section 29 of the Tax Procedures Act (TPA) to amend an assessment based on the information available to it and to the best of its judgement. 19.That further, the Respondent is allowed by Section 24(2) of the TPA to assess a taxpayer’s liability using any information available to him. That to this extent, the Respondent confirmed that it operated within the confines of the law by using the data available following a return review. 20.The Respondent averred that the Appellant’s Objection was rejected pursuant to Section 51(3) of the TPA as the Appellant failed to support its objection by providing all the relevant documents relating to the Objection. 21.The Respondent stated that it is guided by Section 56(1) of the TPA which provides that “in any proceedings under this Part, the burden shall be on the taxpayer to prove that a tax decision is incorrect.” 22.The Respondent submitted on the following issues:-a.Whether the Respondent’s additional assessments were justified; andb.Whether the Objection decision was proper. On whether the Respondent’s Assessments were Justified 23.The Respondent submitted that is not bound by the tax returns of the Appellant. That the Respondent may assess a taxpayer’s tax liability using any information available to the Respondent. 24.That it is clear that the Respondent relied on its best judgement based on information available to it in compliance with Section 31 of the TPA while raising the assessments. 25.The Respondent referred to Commissioner of Domestic Taxes v Altech Stream (EA) Limited [2021] eKLR citing that the Court stated that Section 31(1) of the TPA allows the Commissioner to make an assessment based on such information as may be available and to the best of his judgement. 26.The Respondent submitted that the failure of the Appellant to debunk the discrepancies noted caused the Commissioner to issue additional assessments. On whether the Objection Decision was Justified 27.The Respondent further submitted that the Appellant failed to object as guided in Section 51 (2), (3) and (7) of the TPA. 28.The Respondent maintained that the Objection of the Appellant was rejected on the basis that the Appellant did not provide proper documents in support of the grounds raised in the Objection. 29.That the Courts have abided by the provisions of Section 51(3)(c) of the Tax Procedures Act in the following cases: -a)Boleyn International Limited versus Commissioner of Investigations & Enforcement (Tax Appeal Tribunal No 55 of 2019)b)Rongai Tiles and Sanitary Ware Limited versus Commissioner of Domestic Taxes ( Tax Appeals Tribunal No 163 of 2017) 30.The Respondent cited Mulherin vs Commissioner of Taxation [2013] FCAFC 115 that the Federal Court of Australia held that “in tax disputes, the taxpayer must satisfy the burden of proof to successfully challenge income tax assessments. The onus is on the taxpayer in proving that assessment was excessive by adducing positive evidence which demonstrates the taxable income on which tax ought to have been levied.” 31.That the Tribunal in the case of Intime Stone Age Limited v Commissioner of Domestic Taxes (Appeal 714 of 2022) [2024] KETAT 44 (KLR) (26 January 2024) (Judgment) emphasised the need of the taxpayer to provide relevant and specific documents to support its grounds of objection. 32.The Respondent submitted that it was right in its conclusion that the Objection of the Appellant fell short. That the Court in Osho Drapers Limited versus Commissioner of Domestic Taxes [2022] eKLR, held that Section 59 of the Tax Procedures Act empowers the Commissioner to request for more and additional information to satisfy himself on the taxable income declared. 33.The Respondent averred that it requested the Appellant to provide a specific set of documents for review, and that the Appellant failed to avail documents to sufficiently explain the variances noted in the assessment. 34.The Respondent submitted that a reading of Sections 23 and 59 of the TPA depict that the Appellant has an obligation to keep records and produce them when called upon to do so by the Commissioner. 35.The Respondent further submitted that the Appellant has not discharged its burden of proof under Section 56(1) of the TPA and Section 30 of the Tax Appeals Tribunal Act. That owing to the failure of the Appellant to avail proper documentation, it was right to fully reject the Objection. 36.It was the Respondent’s submission that the Appellant thus cannot purport to allege that the Respondent disregarded its documents when considering the objection when they never brought the documents. Respondent’s Prayers 37.The Respondent prayed that the Tribunal:a.Dismisses the Appeal in its entirety;b.Upholds the tax assessment as confirmed by the Objection decision; andc.Orders the Appellant to pay the costs of the appeal. Issue for Determination 38.The Tribunal has considered the pleadings and the submissions made by the Parties, and considers the issue for determination as follows:Whether the Respondent was justified in confirming the VAT additional assessments in the Objection decision dated 21st August 2025 Analysis and Findings 39.Having identified the issue for determination, the Tribunal proceeds to analyse the same as hereunder. 40.The Respondent confirmed VAT additional assessment for the periods November 2024 to March 2025 on the basis that the Appellant failed to provide requested supporting documentations to sufficiently explain the turnover variances established by the Respondent between the sales declared and the sales allegedly derived from sales transmitted through the eTIMS platform. 41.The Appellant, in contention, averred the following as its grounds of Appeal:a.That it made the proper declarations of sales as required by the VAT Act 2013 and the ETR Z reports,b.That the Respondent dismissed the fact that the payment received in cash and bank matched the sales declared in the VAT returns,c.That the Respondent ignored the fact that the confirmation emails sent to the said customers who claimed the said sales confirmed that they did not do business with the Appellant and neither do they know the Appellant,d.That there are no reports generated for December 2024 in the VSCU machine, bearing the serial number KRACU03xxxxxxxx,e.That the Respondent denied the fact that the original invoice on the respective dates have the correct sales and VAT values and that the Respondent’s data used in the assessments has incorrect values and customer names,f.That the Respondent denied the fact that the iTax platform cannot allow you to file the return if your sales are more, andg.That the Respondent denied the fact that the Appellant’s original auto-populated transmitted sales agree with the VAT return filed. 42.The Tribunal notes that the crux of the dispute is whether the Appellant discharged its burden of proof to demonstrate that the Respondent’s VAT assessment was incorrect. 43.The Tribunal observes that according to the Objection decision, the Respondent appears to have requested the Appellant to provide the following documents during the review of the Objection. The Appellant did not controvert that this request was made:a.Bank statement for the period under reviewb.Sales reports for the period November 2024 to March 2025c.eTIMS/ETR invoicesd.Z reports for the period under review. 44.The Tribunal further observes that the Respondent in its Objection decision acknowledged receipt of some of the documents it requested, however, that the Respondent established that the documents presented did not rebut the Respondent’s findings. Specifically, the Respondent stated:a.That the sales summaries from the Z reports provided were not completeb.That the receipts provided were faded and not visible, therefore, the Respondent could not verify the authenticity of the claims. 45.The burden of proof lies on the taxpayer to prove that a tax decision is incorrect or excessive under Section 56(1) of the Tax Procedures Act and Section 30 of the Tax Appeals Tribunal Act which provide as follows: -Section 56(1) of the Tax Procedures Act“56.(1)In any proceedings under this Part, the burden shall be on the taxpayer toprove that a tax decision is incorrect.”Section 30 of the Tax Appeals Tribunal Act:“30.In a proceeding before the Tribunal, the appellant has the burden of proving—(a)where an appeal relates to an assessment, that the assessment is excessive; or(b)in any other case, that the tax decision should not have been made or should have been made differently.” 46.The Tribunal is further guided by Section 43 of the VAT Act which provision requires a person in the course of his business to keep a full and true written record of every transaction he makes, and details the records to be kept. The person shall avail the records to the Commissioner for inspection. 47.It was thus the onus of the Appellant to prove with substantive documentation that it had complied with Section 43 of the VAT Act to prove the completeness of the sales it declared in its VAT returns for the periods of December 2024 to March 2025. 48.The burden of proof further lied on the Appellant to prove that it had provided the documents and information it alluded to in its pleadings and alleged to have provided to the Respondent at the Objection stage which the Respondent allegedly ignored in arriving at the Objection decision. 49.The Tribunal perused the Appellant’s record of appeal and notes that the Appellant did not attach any document to support any of its elaborate grounds of appeal. The Appellant only submitted the impugned Objection decision. 50.The Tribunal is guided by the case of CMC Aviation Ltd V Cruisair Ltd (1) [1978] KLR 103 where Madan J. held that: -“Pleadings contain the averments of the parties concerned. Until they are proved or disproved, or there is an admission of them or any of them, by the parties, they are not evidence and no decision could be founded upon them. Proof is the foundation of evidence. Evidence denotes the means by which an alleged matter of fact, the truth of which is submitted for investigation. Until their truth has been established or otherwise, they remain un-proven. Averments in no way satisfy, for example, the definition of “evidence” as anything that makes clear or obvious; ground for knowledge, indication or testimony; that which makes truth evident, or renders evident to the mind that it is truth.” 51.The Tribunal observes that the Appellant failed to present substantive documents to the Tribunal to prove that the Respondent issued an incorrect or excessive assessment, as such, the Appellant did not discharge its burden of proof. 52.Due to the Appellant’s failure to discharge its burden of proof, the Tribunal finds that the Respondent was justified in confirming the VAT additional assessments in the Objection decision dated 21st August 2025. Final Decision 53.The upshot of the above analysis is that the Tribunal finds that the Appeal is not merited. The Tribunal accordingly proceeds to issue the following Orders:a.The Appeal be and is hereby dismissed.b.The Objection decision dated 21st August 2025 be and is hereby upheld.c.Each party to bear its own costs. 54.It is so ordered. DATED AND DELIVERED AT NAIROBI THIS 2ND DAY OF JUNE 2026.……………………………..….ROBERT M. MUTUMACHAIRMAN……………………………… ……GLORIA A. OGAGAMEMBER……………………………DR. TIMOTHY B. VIKIRUMEMBER……………………………JIMMY M. MALLAMEMBER