https://new.kenyalaw.org/akn/ke/judgment/ketat/2026/108

Sultana 53 Ltd v Kenya Revenue Authority (Tax Appeal E1153 of 2023) [2026] KETAT 108 (KLR) (30 June 2026) (Judgment) Neutral citation: [2026] KETAT 108 (KLR) Republic of Kenya In the Tax Appeal Tribunal Tax Appeal E1153 of 2023 RM Mutuma, Chair, JM Malla, T Vikiru & G Ogaga, Members June 30, 2026 Between Sultana 53 Limited Appellant and Kenya Revenue Authority Respondent Judgment Background 1.The Appellant is a company registered in Kenya under the Companies Act and operates hardware business. 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.The Respondent profiled the Appellant as being an income tax loss filer for 2022 & 2023, the Respondent carried out return review to ascertain validity of the losses claimed. 4.The Respondent established that there were unreconciled variances relating to VAT, opening stock, purchases and PAYE. The Respondent brought the variances to charge and assessed a total income tax liability of Kshs. 9,801,981 and VAT of Kshs. 65,305. 5.The Appellant made an objection application on 24th July 2025, the Respondent proceeded to confirm the assessments vide an objection decision dated 19th September 2025. 6.Being dissatisfied with the Respondent’s objection decision, the Appellant filed the instant Appeal on 15th October 2025. The Appeal 7.The Appellant lodged a memorandum of appeal dated 15th October 2025 raising the following grounds of appeal:a.This is an appeal against the decision of Kenya Revenue Authority dated 19th September 2025.b.The Petitioner seeks a reversal of the said decision and prays that the dispute be referred to ADR in line with the Constitution of Kenya, the Arbitration Act (Cap 49), and other relevant laws. The Appellant’s Case 8.In support of the appeal, the Appellant filed its statement of facts dated 15th October 2025. 9.The Appellant averred that a letter from the Kenya Revenue Authority (KRA) dated 11th June, 2025 was received, demanding Income tax liability of Kshs 9,801,981 and VAT Liability of Kshs 65,305 for the period 2022 to 2025. 10.That on 12th June 2025, the auditors submitted a written objection to the pre-assessment raised in the KRA's letter dated 11th June 2025. 11.The Appellant averred that a detailed explanation was provided against the variance of purchases declared in VAT returns and Income tax return filed with supporting documentation. 12.That the variance was due to Pre-VAT purchases. 13.That the same applied to the variance on sales between sales declared as per VAT and income tax return. 14.It averred that variance on salaries and wages was due to Director's bonus, schedule was attached analysing the variance. 15.The Appellant maintained that all the supporting documents were provided to the officer doing the compliance check audit. 16.The Appellant did not file written submissions despite having been directed to do by the Tribunal on 5th March 2026. Its case proceeded on the basis of its pleadings on record. Appellant’s Prayers 17.The Appellant prayed for a reversal of the said decision and that the dispute be referred to ADR in line with the Constitution of Kenya, the Arbitration Act (Cap 49), and other relevant laws. The Respondent’s Case 18.In response to the appeal, the Respondent lodged a Statement of facts dated 2nd December 2025. 19.The Respondent averred that the Appellant failed to avail the requested documents in support of their grounds of objection and failed to sufficiently reconcile the variances established by the Respondent. 20.The Appellant has thus failed to discharge their onus of proof that the Respondent's assessments were incorrect. 21.The Respondent relied on Section 23 of the Tax Procedures Act, 2015 which imposes the responsibility on the Appellant to maintain and provide all material documents required by the Respondent in order to ascertain what taxes were due and payable by the Appellant who ought to have been paying taxes for the years under review. 22.The Respondent stated that it is empowered by Section 24(2) of the TPA to assess a taxpayer's liability using any information available to commissioners. The Section states that:“'The Commissioner shall not be bound by a tax return or information provided by, or on behalf of, a taxpayer and the Commissioner may assess a taxpayer's tax liability using any information available to the Commissioner.' 23.The Respondent averred that the determination of the tax liability depends on submission of necessary records by the Appellant. That the Respondent is allowed to make additional assessments based on the available information to the best of his judgment pursuant to Section 31 of the Tax Procedures Act. 24.The Respondent stated that Section 54A (1) of the Income Tax Act requires that any 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. 25.That the onus was upon the Appellant to prove that the assessments were erroneous and inexpensive as provided in Section 56(1) of the Tax Procedures Act, which places the burden of proof upon the Appellant in tax matters. 26.The Respondent asserted that Section 30 of the Tax Appeals Tribunal Act places the burden of proving an assessment excessive on the Appellant. Respondent’s Prayers 27.The Respondent prayed that this Tribunal:a.Upholds and affirms the Respondent's Objection Decision dated 19th September 2025 for income tax liability of Kshs. 9,801,981 and VAT of Kshs. 65,305.b.Dismiss the appeal for lack of merit. Issues for Determination 28.The Tribunal having carefully evaluated parties’ pleadings is of the respectful view that the main issue that calls for its determination is Whether the Respondent erred in confirming the assessment. Analysis and Findings 29.The Appellant argued that the Respondent erred by disregarding its audited financial statements and basing the assessment on incorrect estimates. It argued that the Respondent failed to take into account the full disclosures as entailed in the audited financial statements and supporting documentation. On the other hand, the Respondent stated that despite reminders, the Appellant failed to provide documents to support the notice of objection therefore, it confirmed the assessment. 30.Section 50(1)(a) of the TPA provides a rebuttable presumption that the Respondent’s decision is conclusive and correct. It then follows that the Appellant has to prove that the decision is incorrect. In particular, the said section provides as follows:“50.Conclusiveness of tax decisions(1)Except in proceedings under this Part—(a)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.’’ 31.To rebut the presumption under section 50(1)(a) of the TPA, and in cases where the Appellant is appealing on matters of fact, the Appellant has a duty to adduce relevant documentary evidence to prove those facts so as to discharge the burden of proof. 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.’’ 32.The Taxpayer has to keep and adduce documents to support notice of objection to discharge the burden of proof. In this regard, the TPA mandates the taxpayer to keep records to facilitate determination of tax liability. In particular, Section 23 (1)(b) of the TPA stipulates that,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. 33.The Respondent raised income tax default assessment on the basis that the Appellant had not filed income tax returns. The expectation was for the Appellant to adduce documents to demonstrate that the Respondent erred. The ITA mandates the Taxpayer to keep records. Section 54A (1) thereof provides that:54A.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. 34.The Respondent also noted that the Appellant had declared sales in VAT returns for the period but it failed to declare any sales under income tax returns. The Respondent then raised assessment concerning VAT. Value Added Tax Act Cap. 476 (hereinafter referred to as VATA) mandates the taxpayer to keep records. In particular, section 43(1) of the VATA 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. 35.Section 43(2) of the VATA provides some of the documents that the Taxpayer has to keep as follows:(2)The records to be kept under subsection (1) shall include—(a)copies of all tax invoices and simplified tax invoices issued in serial number order;(b)copies of all credit and debit notes issued, in chronological order;(c)purchase invoices, copies of customs entries, receipts for the payment of customs duty or tax, and credit and debit notes received, to be filed chronologically either by date of receipt or under each supplier’s name;(d)details of the amounts of tax charged on each supply made or received and in relation to all services to which section 10 applies, sufficient written evidence to identify the supplier and the recipient, and to show the nature and quantity of services supplied, the time of supply, the place of supply, the consideration for the supply, and the extent to which the supply has been used by the recipient for a particular purpose;(e)tax account showing the totals of the output tax and the input tax in each period and a net total of the tax payable or the excess tax carried forward, as the case may be, at the end of each period;(f)copies of stock records kept periodically as the Commissioner may determine;(g)details of each supply of goods and services from the business premises, unless such details are available at the time of supply on invoices issued at, or before, that time; and(h)such other accounts or records as may be specified, in writing, by the Commissioner. 36.When the Respondent issues an assessment, the expectation is that the taxpayer will file a notice of objection and file documents in support of the objection. Section 51(3)(c) of the TPA mandates the taxpayer to file documents when objecting. It provides that;-(3)3) A notice of objection shall be treated as validly lodged by a taxpayer under subsection (2) if—(c)all the relevant documents relating to the objection have been submitted. 37.The provisions mandating the Taxpayer to provide documentary evidence are countless. Section 13 (2) (d) of the Tax Appeals Tribunal Cap. 469A (hereinafter referred to as TATA) mandates the taxpayer to provide documents to enable this Tribunal to make an informed decision. It provides that:“(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—(d)such other documents as may be necessary to enable the Tribunal to make a decision on the appeal.” 38.The foregoing provisions of the law were enacted to guide taxpayers on how to discharge burden of proof. The burden to adduce documentary evidence is continuous until the matter is heard and determined with finality. The burden does not terminate at objection stage. This is so because upon filing an appeal to this Tribunal, the Appellant has a statutory obligation to prove that the Respondent’s decision was incorrect or should have been made differently. Section 30 of the TATA postulates 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; or(b)In any other case, that the tax decision should not have been made or should have been made differently. 39.The question then is whether the Appellant fulfilled its statutory duty to prove that the assessments should not have been confirmed. 40.The Appellant averred that a detailed explanation was provided against the variance of purchases declared in VAT returns and Income tax return filed with supporting documentation. That the same applied to the variance on sales between sales declared as per VAT and income tax return. It averred that variance on salaries and wages was due to Director's bonus, schedule was attached analysing the variance. The Appellant asserted that all the supporting documents were provided to the officer doing the compliance check audit. 41.The Tribunal noted that while the Appellant asserted that it had supported its case with documents, the record of appeal shows that the Appellant did not attach any of the documents purported. As such, the Appellant did not demonstrate that the Respondent erred in confirming the assessment. 42.The Appellant did not make sufficient effort as would be expected of a diligent taxpayer to support its position. It failed to discharge its burden of proof. 43.Courts have pronounced themselves on the role of the taxpayer in tax matters. In the case of Kenya Revenue Authority v Maluki Kitili Mwendwa [2021] eKLR, Mativo J (as he then was) held:“The pertinent issue in this appeal as I see it is the question of the taxpayer's burden of proof in tax cases. The party with the obligation of persuasion - what Wigmore termed the risk of non-persuasion - is said to bear the burden of proof. [14] The effect of non-persuasion on a party with the burden of proof is that the particular issue at stake in the litigation will be decided against the party. Generally, the taxpayer has the burden of proof in any tax controversy. The taxpayer must demonstrate that the commissioner's assessment is incorrect. The taxpayer has a significantly higher burden. The taxpayer must prove the assessment is incorrect. This position enjoys statutory backing courtesy of 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. As if to underscore the import of the above provision, the legislature deployed the word “shall'' in the said section meaning that the provision is couched in peremptory terms.” 44.In the case of Singapore Motors Limited v Commissioner of Domestic Taxes (Income Tax Appeal E039 of 2021) [2024] KEHC 2443 (KLR) the High Court held that,“This Court has remained emphatic that under section 30 of the Tax Appeals Tribunal Act (TATA) and section 56 of the Tax Procedures Act (TPA), the burden of proving that an assessment is wrong or excessive remains upon the taxpayer.’’ 45.Consequently. The Tribunal finds and holds that the Appellant failed to demonstrate that the Respondent erred in confirming the assessment. Determination 46.The upshot to the foregoing is that the Tribunal finds and holds that the Appeal is not meritorious and makes the following ordersa.The appeal be and is hereby dismissed;b.The Respondent’s Objection decision dated 19th September 2025 be and is hereby upheld; andc.Each party to bear its own cost. 47.It is so ordered. DATED AND DELIVERED AT NAIROBI THIS 30TH DAY OF JUNE 2026.……………………………..….ROBERT M. MUTUMACHAIRMAN……………………………… ……..….……..……………..JIMMY M. MALLAMEMBER……………………………… ……..….……..……………..DR. TIMOTHY B. VIKIRUMEMBER……………………………..….GLORIA A. OGAGAMEMBER