[2025] KETAT 40 (KLR)

Style Industries Limited v Commissioner of Domestic Taxes (Tax Appeal E134 of 2024) [2025] KETAT 40 (KLR) (24 January 2025) (Judgment)

Neutral citation: [2025] KETAT 40 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal E134 of 2024

RO Oluoch, Chair, G Ogaga, AK Kiprotich & Cynthia B. Mayaka, Members

January 24, 2025

Between

Style Industries Limited

Appellant

and

Commissioner of Domestic Taxes

Respondent

Judgment

Background 1. The Appellant is a company incorporated in Kenya whose principal business activity is manufacture of synthetic hair additions like weaves, braids and bulk crotchet braids which are sold in the domestic market as well the export market.

2. The Respondent is a principal officer appointed under and in accordance with Section 13 of the Kenya Revenue Authority (KRA) Act, and KRA is charged with the responsibility of among others, assessment, collection, accounting and the general administration of tax revenue on behalf of the Government of Kenya.

3. The Respondent raised additional assessments for Corporation tax and Value Added Tax that resulted in a reduction of the Corporate tax loss brought forward by the Appellant from Kshs. 464,231,026. 00 to Kshs. 14,514,497. 88 and a VAT charge of Kshs. 120,410,289. 00 inclusive of penalties and interest.

4. The Appellant objected to the assessment through a letter dated 25th October, 2023.

5. The Respondent via a letter dated 22nd December, 2023, confirmed the assessment in full by issuing an objection decision.

6. Thereafter, the Appellant being dissatisfied with the Respondent’s decision lodged a Notice of Appeal dated and filed on 19th January, 2024, to the Tribunal.

The Appeal 7. The Appeal is premised on the following grounds as stated in the Appellant’s Memorandum of Appeal dated and filed on 2nd February, 2024:-i.That the Respondent erred in law by failing to vacate assessments for the year of income 2018 as these assessments were based on unverifiable, incomplete, and thus considered erroneous data.ii.That the Respondent has erred in law and in fact by failing to take into account information and data availed to Respondent for purposes of affirming the Appellant's true tax position even after the Appellant provided additional verifiable data to the respondent.iii.That notwithstanding and without prejudice to the foregoing, the Respondent has erred in law and in fact by seeking to reduce the Corporation tax losses on the alleged variance of Kshs. 449,716,528. 00 between the sales declared in the Corporation tax return and the recomputed sales as per stock reconciliation workings for the year of income 2018. iv.That the Respondent erred in law and in fact by seeking to charge VAT on the alleged underdeclared sales of Kshs. 449,716,528. 00 translating to a VAT liability of Kshs. 71,954,644. 50 for the year of income 2018.

Appellant’s Case 8. The Appellant’s case is premised on the following documents:i.Its Statement of Facts dated and filed on 2nd February, 2024 with the documents attached thereto.ii.Its written submissions filed on 3rd September, 2024. iii.Its supplementary submissions dated and filed on 14th October, 2024

9. The Appellant submitted that there are two (2) issues for determination in this Appeal which include:i.Whether the Respondent was justified to cherry-pick the source data from the signed stock reconciliation data that was availed to the Respondent on 22nd September, 2023 when performing the stock reconciliation for purposes of deriving the sales and comparing these derived sales to the declared sales and thereafter assessing the apparent variance of the sales quantities under CIT and VAT by deeming such variances as under declarations of sales.ii.Whether the Respondent was justified in confirming an assessment and issuing objection decision without considering all the explanations and data availed by the Appellant.

a. Whether the Respondent was justified to cherry-pick the source data from the signed stock reconciliation data that was availed to the Respondent on 22nd September 2023 when performing the stock reconciliation for purposes of deriving the sales and comparing these derived sales to the declared sales and thereafter assessing the apparent variance of the sales quantities under CIT and VAT by deeming such variances as under declarations of sales. 10. That the apparent variances arising from the stock reconciliation that were derived from various support documents are unreliable and unverifiable given that the Respondent derived the workings from incomplete data.

11. That the Appellant put in significant effort to reconcile the variances and provided its workings to the Respondent both via email and even reviewing the workings jointly with the Respondent at a working meeting held at the Appellant's premises on 14th September 2023, where the two parties agreed to rely on the signed data as the final set. That conversely, the Respondent failed to take into account the signed data availed for purposes of affirming the Appellant's true tax position. That therefore, the Respondent instead cherry picked the data sets that were in their favour in determining the final assessment.

12. The Appellant stated that in reconciling the Respondent's workings to the final assessment issued, the Appellant noted variances resulting from missing stock data units and sales units' values as tabulated below:Variance (Units) Particulars As per KRA workings As per SIL records (A-B)

Production 44,250,816 44,642,945 (392,129)

Opening Stock 6,369,097 6,402,237 (33,140)

Closing stock 5,353,649 5,383,728 (30,079)

Expected sales (Computed) 45,266,264 45,661,454 (395,190)

Declared sales 43,357,898 45,252,817 (1,894,919)

13. The Appellant averred that the Respondent's workings show an underestimation of units produced due to the reliance on secondary data modules specifically the inter-branch transfers (IBTs) to derive the production data, that was also used in the Respondent's analysis to derive sales. That additionally, the Respondent combined the different IBTs in a spreadsheet to derive production values without cross checking whether all the data was included.

14. The Appellant further averred that the variance was sufficiently reconciled and that it attached the reconciliation, stock sheets and other supporting documents to its pleadings.

b. Whether the Respondent was justified in confirming an assessment and issuing objection decision without considering all the explanations and data availed by the Appellant. 15. That the Appellant engaged the Respondent and was in the process of providing additional information so as to provide clarity on the matters in contention.

16. The Appellant averred that the parties were actively engaged and working towards agreeing the stock reconciliations to the audited financial statements as supported by meeting notes to a meeting held on 14th September, 2023. That further, the parties agreed to share an array of data in a subsequent meeting, but the Respondent cancelled the meeting scheduled for the 28th September, 2023 and instead shared updated workings vide an email of 26th September, 2023.

17. That on reviewing the workings, the Appellant noted that the alleged variance had now increased from Kshs. 233,361,550. 07 to Kshs. 449,716,528. 00. The Appellant stated that it attached, to its pleadings, the initial and subsequent workings shared by the Respondent.

18. That the Appellant noted that the increase highlighted was contributed by the Respondent's updating of its June 2023 workings, which it had earlier shared with the Appellant. That the Respondent updated the opening stock and closing stock after receiving the Appellant's workings.

19. That this purported increase in the variance clearly shows that the Respondent had not fully reviewed the workings before proceeding to issue the assessment; rather, the Respondent cherry picked the data that favored its position and disregarded the rest of the data.

20. The Appellant provided the below table to demonstrate the initial workings shared by the Respondent and the subsequent workings shared:KRA Workings KRA Workings Variance (Units) Particulars September June (A-B)

Production 44,250,816 44,250,816

Opening Stock 6,369,097 1,363,787 5,005,310

Closing stock 5,353,649 1,204,662 4,148,987

Expected sales (Computed) 45,266,264 44,409,941 856,323

Declared sales 43,357,898 43,357,898

21. That the Appellant reached out to the Respondent and highlighted the inconsistencies in the workings on 27th September 2023 only for the Appellant to realize that the Respondent had already raised assessments on iTax. That therefore, aggrieved by the Respondent's action, the Appellant's only recourse was to object to the assessments.

22. The Appellant submitted that it objected to the assessments through a letter dated 25th October, 2023. That the Appellant sought audience with the Respondent and provided additional information including workings to reconcile the amounts included in the assessment vis-à-vis the amounts in Appellant's audited financial statements.

23. That The Respondent did not seem to consider any additional information provided and went ahead to issue the objection decision.

24. That the Respondent applied the law and looked at the facts selectively by cherry-picking only those instances where the apparent variance favored its case in total disregard to all the facts. That further, the Respondent ignored incontrovertible facts while issuing the objection decision.

25. That the Tax Appeal Tribunal in Asea Brown Boveri (ABB) Limitedv Commissioner of Investigations & Enforcement (Tribunal Appeal 854 of 2021)[2023] emphasized the importance of considering all the information availed by a taxpayer in arriving at the final tax position. That in the instant case, the Respondent ignored the negative amounts while arriving at its variance between the reported sales and bankings. That additionally, the Tribunal agreed with the Appellant that the Respondent erred in cherry-picking on apparent variances between estimated turnovers derived from bank deposits and the actual turnovers.

26. The Appellant averred that the objection decision therefore contravenes the Appellant's right to fair administrative action as provided for under Article 47 of the Constitution of Kenya 2010 as read together with Section 4(1)of the Fair Administrative Action Act of 2015 which stipulates as follows:“Every person has the right to administrative action that is expeditious, efficient, lawful, reasonable and procedurally fair.”

27. That the Respondent failed to interrogate the reconciliation that was provided by the Appellant. That as stated earlier, nothing in law bars the Respondent from considering clarifications provided by a taxpayer before it issues an objection decision.

28. That since the Appellant was certain that the apparent variances were reconcilable, the Appellant sought to resolve the issue with the Respondent by contacting the Respondent even after the objection was lodged. That the additional reconciliation workings provided after the objection was lodged show the significant effort that the Appellant continued to put in a bid to resolve the matter based on facts. The Appellant stated that it included sample email correspondences to its pleading for reference.

29. It was the Appellant's contention that the Respondent by issuing the objection decision while ignoring some of the reconciling items is unlawful, unfair, unreasonable and prejudicial.

30. That the law is clear when stating that it is the mandate of the Respondent to confirm its assessment in a form and manner that gives clear reasons to its decisions with supporting material facts. That the above requirement is in line with the provisions of Section 51(10) of the Tax Procedures Act (TPA) which provides as follows:“An objection decision shall include a statement of findings on the material facts and the reasons for the decision.”

31. That the Respondent in confirming the assessment did not provide a clear basis in making such a determination, instead the objection decision simply highlighted matters discussed and thereafter, confirmed the assessment without providing any substantive detail on how those matters discussed gave rise to the objection decision.

32. The Appellant asserted that it provided significant factual data and representations that highlighted the inaccuracy of the Respondent's data, which clearly showed that the Respondent ought to have interrogated the data provided more keenly prior to confirming the assessment.

33. That the Respondent, in arriving at the objection decision failed to take cognisance of the additional documentation provided by Appellant, such as production data extracted from the Appellant's accounting system. That furthermore, the Appellant's reconciliations on the opening stock, closing stock and sales as per the financial statements were pertinent in determining whether the Respondent's claims of under declaration of sales as alleged hold water.

34. That the Appellant was therefore of the considered view that the assessments by the Respondent had no basis in law or fact and should be vacated.

35. The Appellant in its rejoinder to the false allegations raised in the Respondent's submissions asserted that Internal Batch Transfers (IBTs), contrary to the Respondent’s submissions, were indeed provided.

36. That as a matter of fact, the same IBTs that the Respondent claims that were not provided are the ones that the Respondent relied on in its assessment workings to determine production quantity.

37. The Appellant wished to clarify to this Honorable Tribunal that the Appellant in fact highlighted the shortcomings of the Respondent's reliance on IBTs under Paragraph 2. 2 of its objection and Paragraph 18 of its Statement of Facts. That the Respondent's clear reliance on IBTs in coming up with its assessment is irrefutable evidence that it had access to the same. That consequently, any assertions to the contrary are wholly without merit and should be disregarded.

38. That support for cycle counts was not requested by the Respondent at the time of assessment. The appellant also noted that Section 51 (4) of the Tax Procedures Act, 2015 ("TPA”) requires the Respondent to, within 14 days upon receipt of an objection, notify the taxpayer of any additional information that may be required for purposes of review of that objection.

39. That the Appellant received the request for cycle counts support during a working meeting held on 22nd December ,2023 with the Respondent's Independent Review of Objections ("IRO") team, the 60th day of the objection review process.

40. That per the Appellant, this is well outside the 14 day window within which the Respondent ought to request for additional information to facilitate the objection review process as guided by Section 51(4) of the TPA. That it is worth noting that the objection decision was rendered on the same day, leading to the conclusion that even, bar the timelines statutorily provided for under Section 51(4), the Appellant was not granted a reasonable opportunity to act on the request. That nonetheless, the Appellant directed the attention of the Tribunal to Appendix E of its Appeal papers wherein the support for cycle counts was annexed.

41. That while Respondent asserted that the Appellant failed to furnish them with stock takes, this is indeed absurd as the Respondent in the assessment notice confirmed that it relied on stock and reconciliations shared by the Appellant. The Appellant directed the Honorable Tribunal to Page 2, Paragraph 1 of the assessment, annexed to the Appeal papers, wherein the Respondent confirmed its review of this documentation. That the stock takes are also provided under Appendix II and Appendix II(a) of the objection.

42. That in relation to movement of goods, the Respondent contended that records pertaining to movement of goods in and out of the warehouse were not provided. The Appellant asserted that movement of goods from one warehouse to another is actually processed through use of the IBTs, which, as confirmed earlier, were duly provided to the Respondent. That therefore, the Respondent's disingenuous claims are without foundation and ought to be dismissed.

43. That in regard to stock takes, Appendix II of the objection clearly reconciles the variance between the stocks captured in the Audited Financial Statements (“AFS”) and those in the signed off inventory, contrary to the Respondent's assertion in this paragraph.

44. That additionally, while the Respondent states that the resulting variances led to “under-declaration” of “cost of sales”, the Appellant posited to the Tribunal that an under-declaration of cost of sales would mean the Appellant over-declared its “taxable profit”, which is contrary to the Assessment that portrays under-declaration of sales. That as such, it ought to be evident to this Honorable Tribunal that the Respondent's assertions are erroneous, misleading and devoid of any merit.

45. That in relation to SKU Codes, the Respondent asserted that the initial sales ledger shared by the Appellant did not make reference to the SKU Codes cited and that the selling prices are different for the referenced SKU Codes. The Appellant clarified to the Tribunal that the SKU Codes being referenced were used by the Appellant to demonstrate the shortcomings in the Respondents workings, as a result of the Respondent relying on its own concocted dataset, ignoring the agreed and signed workings.

46. That at no point was the Appellant required by the Respondent to make any reference in the sales ledger of the said SKU Codes as this was just an example. That on the issue of different selling prices, the Respondent failed to appreciate that prices of products do not remain constant. That prices changes regularly in alignment to various factors including forces of demand and supply, general economic cycles and other trends.

47. That additionally, for exports, price varies depending on the USD to KES conversion rates. That as it depicts in these allegations, the Respondent clearly shows lack of understanding of the Appellant's business and the data provided. That this has led to erroneous interpretation and baseless allegations as portrayed herein which we request this Honorable Tribunal to repudiate in toto.

48. That Paragraph 21 of the Respondent's Submissions purports that the Respondent reviewed the documents provided by the Appellant. That from where the Appellant sits, it is manifestly evident that no such review was properly conducted, as illustrated by the Respondent's erroneous averments explained above. That the clear failure of the Respondent to review the documentation that was already provided resulted in the mischaracterization of facts, which this Honorable Tribunal should not place reliance on.

49. That given the foregoing submissions and the facts at hand, there is no iota of doubt that the Appellant dispensed with its evidentiary burden per Section 56(1) of the TPA and provided the Respondent with all the requisite documentation. That any averments by the Respondent to the contrary are not only fallacious and misleading but also entirely without merit. That such baseless claims ought to be wholly disregarded by this Honorable Tribunal.

Appellant’s Prayers 50. The Appellant prayed that:i.The objection decision be set aside and vacated.ii.This Appeal be allowed in full.iii.The cost of the Appeal be awarded to the Appellant.iv.This Honourable Tribunal to grant any other remedy it may deem fit.

Respondent’s Case 51. The Respondent’s case is premised on the hereunder filed documents and proceedings before the Tribunal:-i.The Respondent’s Statement of Facts dated 1st March, 2024 and filed on 22nd May, 2024 together with the documents attached thereto.ii.The Respondent’s written submissions dated and filed on 18th September, 2024 together with the legal authorities filed therewith.iii.The Respondent’s Supplementary submissions dated 25th October, 2024 and filed on the 28th October, 2024.

52. That the Appellant is a company incorporated in Kenya whose principal business activity is manufacture of synthetic hair additions like weaves, braids and bulk crotchet braids which are sold in the domestic market as well the export market.

53. That the Appellant is a subsidiary of Darling Group Holdings II (DGH II), a company incorporated in Mauritius holding 99. 9% shareholding while the remaining 0. 1% is held by Godrej East Africa Holdings Limited (GEAHL).

54. That the Respondent undertook tax return review of the Appellant for the period 2017 to 2021. That on 15th September, 2023 the Appellant herein was issued with audit findings requesting the Appellant to pay Kshs. 120,410,289. 00 as the tax due.

55. That on 26th September, 2023, the Appellant was issued with an assessment order. That further, That the basis of the aforementioned assessment was hinged on Section 31 of the Tax Procedures Act which gives the Respondent leeway to issue additional assessments based on the available information and best of judgment.

56. That the Appellant lodged notices of objection on 26th October, 2023 wherein the Respondent acknowledged the objection applications.

57. That upon receipt of the said notices of objection, the Respondent herein requested the Appellant to validate its notices of objection so as to comply with the provisions of Section 51(3) of the Tax Procedures Act 2015. That particularly, the Appellant was required to provide statutory required documents in support of the objection failure to which its objection would be invalidated.

58. That in the absence of satisfactory explanation from the Appellant, the Respondent proceeded to issue an objection decision dated 22nd December, 2023.

59. The Respondent averred that the issues for determination can be summarized as:a.Whether the Appellant discharged its burden of proofb.Whether the assessment is proper in law.

i. Whether the Appellant discharged its burden of proof 60. That the Respondent upon review of Appellant's grounds of objection and evidence adduced, noted Appellant's explanation on its business operations as follows:i.The Appellant alleged that goods are manufactured at the production site and the finished goods transferred to finished goods site/warehouse;ii.That the transfer of the goods is captured manually and in the system through the internal batch transfer (IBT) order however the manual records are not available;iii.That goods are packed in cartons consisting of 200 units, however at the selling point the orders are done per unit and invoices raised on an order;iv.That cycle counts are carried out whereby a comparison is done between physically available goods against what is in the system and where necessary adjustments done:v.That the basis for the variances during the cycle count are;a.Employee theftb.Errors at the packing point(production) and at the selling pointc.Classification under the wrong SKUd.Damaged goods during productionvi.That the cycle counts are done manually then entered into the system however the manual records are not available due to various changes within the Company as well as transfer of staff;vii.That stock takes are carried out monthly and annually, however the manual records are not available;viii.That the Appellant is willing to identify slow moving/obsolete stock which would be reconverted;ix.That the gate at the warehouse is for security control and no records are kept in relation to movement of goods in and out and that the reliance is made on the IBT/transfer orders as well as the invoices to customers at the point of dispatch.

61. That based on the above narrative, the Respondent notes that the Appellant was unable to provide the source documents that would enable the Respondent review the correctness of the stock captured in the system.

62. That worthy to note, the Appellant conceded on the cycle counts since the same could not be supported. That the Respondent further noted that there is a variance between the stocks captured in audited financial statements and those shared in the signed off inventory.

63. The Respondent noted that the Appellant disregarded Section 23(b) of the Tax Procedures Act, 2015. “A person shall-…(b)maintain any document required under a tax law so as to enable the person's tax liability to be readily ascertained;”

64. Further, the Appellant was assessed in accordance with Section 31(1) of the Tax Procedures Act that provides:“Subject to this section, the Commissioner may amend an assessment (referred to in this section as the "original assessment") by making alterations or additions, from the available information and to the best of the Commissioner's judgement, to the original assessment of a taxpayer for a reporting period to ensure that-(a)......·;(b)in the case of an excess amount of input tax under the Value Added Tax Act,2013 (No. 35 of 2013), the taxpayer is assessed in respect of the correct amount of the excess input tax carried forward for the reporting period; or(c)In any other case, the taxpayer is liable for the correct amount of tax payable in respect of the reporting period to which the original assessment relates.”

65. That in the light of the foregoing. Appellant's objection application was disallowed and tax payable summarised as captured in the objection decision.

66. The Respondent averred that therefore the Appellant did not satisfy the above criteria for the Respondent to render a meritorious decision in the circumstance.

ii. Whether the assessment is proper in law 67. That whereas Section 24 of the Tax Procedure Act, 2015 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 judgment.

68. The Respondent stated that pursuant to Sections 56 of the TPA and Section 30 of the Tax Appeals Tribunal Act, the burden of proof lies on the Appellant to demonstrate that it had discharged its tax liability. The Respondent states 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.

69. The Respondent relied on the provisions of Section 109 of the Evidence which provides thus:“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.”

70. That in light of the foregoing, the Appellant's assertions that they were denied a chance to review the substance of the case is incorrect and misleading. That on the contrary, the Appellant was granted ample time to avail documentation in support of their objection.

71. The Respondent relied on The Commissioner for Her Majesty's Revenue and Customs TC/2017/02292 Saima Khalid Appellant vs. The Commissioners for Her Majesty's Respondents Revenue & Customs to demonstrate requirements for a decision to be to the best of HMRC's judgment.

72. That Section 56(1) of the TPA provides:“In any proceedings under this Part, the burden shall be on the taxpayer to prove that a tax decision is incorrect.”

73. That the Respondent relied on Commissioner of Domestic Services vs. Galaxy Tools Limited [2021] eKLR where the Court quoted the case of Metcash Trading Limited vs. Commissioner for The South African Revenue Service and Another Case CCT 3/2000 to demonstrate where the burden of proof rests in tax cases.

74. That in this instant Appeal, the Appellant had been granted more than sufficient time to produce documents that would address the issues raised in the assessment.

75. The Respondent placed reliance on Section 51(8) of the Tax Procedures Act which provides that:“Where a notice of objection has been validly lodged within time, the Commissioner shall consider the objection and decide to either allow the objection in whole or in part, or disallow it, and Commissioner's decision shall be referred to as an "objection decision”

76. That the failure to provide the Commissioner with complete records as requested, crippled the Appellant's objection. That the Respondent reviewed the documents provided and only allowed what could be ascertained.

77. The Respondent submitted that the Appellant had been granted sufficient time to ensure that it provided all the necessary documents to support its objection fully.

Respondent’s Prayers 78. The Respondent prayed:i.That the objection decision dated 22nd December, 2023 be upheld.ii.That this Appeal be dismissed with costs to the Respondent as the same lack merit

Issue for Determination 79. The Tribunal upon due consideration of the pleadings and the written submissions of the parties was of the considered view that the Appeal raises the following issue for its determination:

Whether the Respondent was justified in confirming the assessments. Analysis and Determination 80. The Tribunal having established the issue for its determination proceeds to analyse the same as hereunder.

81. The crux of this dispute is additional assessments for Corporation tax and Value Added Tax raised by the Respondent after conducting a tax return review of the Appellant for the period 2017 to 2021.

82. The Appellant averred that it put in significant effort to reconcile the variances and provided its workings to the Respondent both via email and even reviewing the workings jointly with the Respondent where the two parties agreed to rely on the signed data as the final set. The Appellant asserted that conversely, the Respondent failed to take into account the signed data availed for purposes of affirming the Appellant's true tax position. That therefore, the Respondent instead cherry picked the data sets that were in its favour in determining the final assessment.

83. The Respondent rebutted the Appellant’s position by stating that the Appellant was unable to provide the source documents that would enable the Respondent review its position. That further, the Appellant’s burden of proof was never discharged as no satisfactory documentary evidence was availed to the Respondent to enable it render a meritorious decision in the circumstances.

84. The Tribunal having evaluated the parties’ pleadings notes that the Appellant provided the following documents:i.Reconciliation workings.ii.Internal emails dated 29th November, 2018; 26th February, 2018; 27th February, 2018; 1st April, 2018; submitting adjustments workings to the Respondent.iii.An email dated 14th November, 2017 submitting stock take details showing and explaining inaccuracies in the stock numbers and requesting for approval for system adjustments.iv.An email dated 18th September, 2017 submitting stock take details showing and explaining inaccuracies in the stock numbers.v.An email dated 28th October, 2017 submitting stock take details showing and explaining inaccuracies in the stock numbers.vi.An email dated 18th October, 2017 submitting stock take details showing and explaining inaccuracies in the stock numbers.vii.An email dated 28th October, 2017 submitting stock take details showing and explaining inaccuracies in the stock numbers and requesting for approval for system adjustments.viii.An email dated 22nd November, 2017 submitting stock values and explaining stocks that were stolen that were subject to insurance claims that were in the final phases of payment.ix.An email dated 22nd November, 2017 showing stock details of gifts given to the Appellant’s workforce for Christmas and the adjustments thereof.x.Various emails on various dates in 2018 showing stock take details in various company warehouses in Kenya.xi.Minutes of a meeting held between the parties on 14th September, 2023 to discuss KRA audit findings. In this meeting, and from the meeting notes, the company was to provide to the Respondent the following by Thursday, 21st September, 2023:a.A breakdown of 2021 asset disposals amounting to Kshs. 125,177,726. 00. b.Export ledgers for 2018 to 2021 showing Customs entry numbers.c.Further clarity on invoice “ENTINV145027” whose credit note “ENTCRN016371” was issued a year later.d.Back-end transactions for the 5 sample credit notes shared by KRA to demonstrate their validity.e.Breakdown of all credit notes for each year (2017-2021) to ascertain amounts relating to discounts.f.All the appendices relating to credit notes (shared during the meeting).g.Sample emails and any other available attestations to demonstrate that issue of free goods is usually authorised and procedural.h.Engagement contracts with “Prudent” and “Takataka” companies.i.Further proof that services were indeed offered to the above named companies – for instance, training conducted and a list of trainees who attended the training.j.Final inventory workings.k.Support for stock provisions treatment.l.Final inventory base files for each year.xii.Initial workings as well as the subsequent workings shared by the Respondent.xiii.An email dated 15th December, 2023 submitting an analysis of workings between KRA data on opening stock, closing stock and sales; and minutes of a meeting held with the assessing team where the parties were said to have discussed the stock analysis.xvi.An email dated 28th September, 2023 from the Respondent to the Appellant stating that a reconciliation submitted by the Appellant on 27th September, 2023 was taking the Respondent back to where it started and informing the Appellant to expedite the production of documents requested by the Respondent.

85. As evidenced by the documents attached to the Appeal as listed above as well as a perusal of the emails between the parties, the Tribunal notes that the specific documents requested for by the Respondent, and agreed to by the parties in the meeting of 14th September, 2023, were not submitted by the Appellant; and if they were, the Appellant has not provided evidence to prove that it submitted the same.

86. It is the considered view of the Tribunal that the Appellant ought to have provided the specific documents requested for and that it agreed to provide in the Minutes of the meeting held between the parties on 14th September 2023 which were presented by the Appellant as evidence, in accordance with Section 54A of the Income Tax Act and Section 43 of the VAT Act, in support of its averments and in rebutting the Respondent’s position, failure to which means its arguments remain mere averments.

87. The provision of documents as evidence is well stated under Section 30 of the Tax Appeals Tribunal Act which provides thus:“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;orb)in any other case, that the tax decision should not have been made or should have been made differently.”

88. The Tribunal therefore finds that the Appellant failed to meet the obligation placed on it under Section 30 of the Tax Appeals Tribunal Act to discharge its burden of proof by providing supporting documents.

89. The Tribunal reiterates its decision in TAT 1296 of 2022 James Finlay (Kenya) Limited vs Commissioner Legal Services And Board Coordination where it held as follows at paragraph 83;“In the instant case the Tribunal found that the Appellant failed to address the specific documents mentioned by the Respondent in the objection decision and therefore failed to discharge the burden of proof.”

90. Consequently, the Tribunal concludes that the Appellant failed to discharge the burden of proof placed upon it to demonstrate that the Respondent was not justified in confirming the assessments.

Final Decision 91. The Tribunal in the circumstances finds that the Appeal is not merited and accordingly makes the following Orders:-a.The Appeal be and is hereby dismissed.b.The Respondent’s Objection decision dated December 22, 2023 be and is hereby upheld.c.Each party to bear its own costs.

92. It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 24TH DAY OF JANUARY, 2025. DR. RODNEY O. OLUOCH - CHAIRPERSONGLORIA A. OGAGA - MEMBERABRAHAM K. KIPROTICH - MEMBERCYNTHIA B. MAYAKA - MEMBER