https://new.kenyalaw.org/akn/ke/judgment/ketat/2026/127

Sundown Homes Services Ltd v Commissioner of Domestic Taxes (Tax Appeal E238 of 2025) [2026] KETAT 127 (KLR) (Appeals) (2 June 2026) (Judgment) Neutral citation: [2026] KETAT 127 (KLR) Republic of Kenya In the Tax Appeal Tribunal Appeals Tax Appeal E238 of 2025 RM Mutuma, Chair, Jimmy M. Malla, G Ogaga & T Vikiru, Members June 2, 2026 Between Sundown Homes Services Limited Appellant and Commissioner Of Domestic Taxes Respondent Judgment 1.The Appellant is a Company duly incorporated under the provisions of the Companies Act which Company was involved in the business of selling land on behalf of clients. 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 audited the Appellant’s tax affairs and issued the Appellant with additional Income Tax and VAT assessments of Kshs. 22,078,834.34 for the period 2018 to 2022 vide an additional assessment notice dated 15th February 2024. 4.The Appellant objected to the assessments on 12/11/2024. Since the Objection was made out of time, the Appellant made an application to object late and the Appellant’s application to lodge a late Objection was allowed on 26/11/2024. 5.The Respondent issued an Objection decision dated 24th January 2025 upholding its additional assessments entirely. 6.Being dissatisfied with the Respondent’s Objection decision, the Appellant lodged its Notice of Appeal dated 24th February 2025 and filed on the same date. The Appeal 7.The Appellant lodged the memorandum of appeal dated 7th March 2025 and filed on 10th March 2025 raising the following grounds of appeal:a.That the dispute be adequately addressed through Alternative Dispute Resolution.b.That the Respondent erred in law and in fact by basing the additional VAT assessment for 2018 and 2019 on bank deposits notwithstanding that the proceeds were from sale of land on behalf of the Appellant’s director where all credits were thereafter transferred to his account.c.That the Respondent erred in law and in fact in arriving at erroneous VAT assessments for 2020 and 2021 yet the Appellant was undergoing tough economic times as a result of the Coronavirus pandemic.d.That the Respondent erred in law and in fact in arriving at erroneous Income Tax assessments for the years 2020, 2021 and 2022 yet the tax payable as per the sales made was remitted to the Respondent.e.That the Respondent erred in law and in fact by omitting vital information supplied by the Appellant, which information if factored will have accounted for the variations reflected in the Respondent’s assessment.f.That the Appellant is apprehensive that the actions of the Respondent lack in merit, are unlawful and gravely unjust and that unless the orders sought are granted, the Appellant risks being unjustly required to pay the alleged taxes to their prejudice. The Appellant’s Case 8.In support of its Appeal, the Appellant relied on its statement of facts dated 7th March 2025 and filed on 10th March 2025. 9.The Appellant averred that on 24th January 2025, the Respondent herein made an assessment of Value Added Tax and Income Tax for the years 2018 to 2022 with respect to the Appellant in the cumulative sum of Kes. 22,078,834.34/-. 10.The Appellant stated that the Respondent claimed that the assessment had established significant variances between sales declared in the VAT returns and the expected sales from the bankings accrued. 11.The Appellant pointed out that the Respondent further claimed that it had established significant variances between the expected sales from bank reconciliations conducted and turnovers declared in the Income Tax Returns and submitted audited financial statements. 12.Additionally, the Appellant stated that the Respondent averred that it had also established variances between the sales declared in the Income Tax Returns and applicable turnovers and expected turnovers for the period 2018 to 2022. 13.The Appellant averred that it visited the Respondent’s offices and was advised that it needed to submit all documents that will assist the Respondent to remove the additional assessments. The Appellant stated that it thereafter began the process of providing supporting documentation for verification and halfway through in its submission of supporting documentation when the Respondent issued them with an Objection decision. 14.The Appellant asserted that it is tax compliant and has all the supporting documentation to justify their income tax and VAT assessments for the year 2018 to 2022. 15.It averred that the act by the Respondent of confirming the additional assessment for income tax and VAT without due regard to all documents/records, explanation and information provided is unfair, irrational, malicious, capricious and against the principles of fair administrative action as provided in Article 47 and 50 of the Constitution of Kenya, 2010. 16.The Appellant stated that it raised bona fide and valid grounds for which the Honourable Tribunal ought to consider and allow in the Appellant’s favor. The Appellant’s prayers 17.Based on the foregoing, the Appellant prayed for the following reliefs:a.That the Appeal herein be allowedb.That the Respondent’s decision, confirming its assessment for the Appellant’s Income Tax and VAT additional assessments issued for the years 2018 to 2022 with Principal Tax Amounting to Kes. 22, 078, 834.34/- be set aside and be substituted with an order allowing the Appellant’s objection and vacate the said assessments.c.That costs of this Appeal be awarded to the Appellant. The Respondent’s Case 18.In opposition to the appeal, the Respondent filed statement of facts dated 10th July 2025 and filed on even date and written submissions dated 27th March 2026 and filed on even date. 19.The Respondent audited the Appellant’s tax affairs and issued the Appellant with additional Income Tax assessment and VAT assessments of Kshs. 22,078,834.34 for the period 2018 to 2022 vide an additional assessment notice dated 15th February 2024. 20.The Respondent averred that, a review of sales declared in the Income Tax returns for the period under review established significant variances between sales declared in the VAT returns and the expected sales from the bankings accrued in the period. 21.The Respondent further averred that the analysis established significant variances between the expected sales from the bank reconciliations conducted and turnovers declared in the Income Tax returns and submitted amended audited financial statements. 22.The Respondent conducted an analysis to determine the applicable turnovers for the period under review. 23.The above analysis established variances between the sales declared in the Income Tax returns and applicable turnovers/expected turnovers for the period under review. 24.It stated that the variance established of Kshs. 43,606,117 was treated as undeclared income and additional principal income tax of Kshs. 11,537,779 was computed and demanded together with resulting interest and penalties. 25.In regard to VAT, a review of sales declared in the VAT returns for the period established significant variances between sales declared and the applicable turnovers established. The established variances of Kshs. 48,810,475 was subjected to VAT and additional principal VAT of Kshs. 7,166,694 was demanded together with resulting interest and penalties. 26.The Respondent stated that during the Objection review process the Appellant availed a banking analysis showing that the bulk of the deposits relate to sale of land which they construe to be disbursement income thus not taxable on the Appellant. Further the Appellant alleged that it made adjustments for other non-sales credits which ought not to be included as part of their income. 27.However, the Respondent pointed out that the Appellant failed to avail sufficient sales agreements to back up their assertion of the credits being of disbursement nature and therefore not taxable on the company. 28.Further, the Respondent stated that the Appellant failed to avail sales ledgers and commission computation schedules to show the basis of their declared income which they contended to be correctly and fully declared. 29.The Respondent argued that in the Appellant’s Statement of Facts, the Appellant admitted that it failed to supply all the requested documents before the Respondent issued its Objection decision. 30.The Respondent contended that the Appellant requested for extension of time to be able to avail further information to support their objection. 31.It was however not possible to grant the Appellant request for extension of time to supply further information bearing in mind that the Respondent is statute bound to issue an Objection decision within 60 days from the date of Objection. 32.The Respondent pointed out that, as already stated, the Appellant’s late Objection was admitted on 26th November 2024. The Respondent had up to 25th January 2025 to issue an Objection decision. The Respondent issued Objection decision on 24th January 2025. The Respondent’s failure to allow the Appellant more time to supply further documents was therefore not unreasonable. 33.The Respondent maintained that in failing to provide all the relevant documents to support the Objection, the Appellant failed to discharge the burden of proof placed upon it by Section 30 of the Tax Appeals Tribunal Act and Section 56(1) of the Tax Procedures Act, Section 56(1) of the Tax Procedures Act provides that;“The burden shall be on the taxpayer to prove that a tax decision is wrong/incorrect.” 34.In its submissions, the Respondent submitted that the assessment was correct until otherwise proven, though documentary evidence by the Appellant. 35.It submitted that Section 56(1) of the Tax Procedures Act provides that in any proceedings that relate to tax Decisions, the Objection and Appeals, the burden shall be on the taxpayer to prove that a tax decision is incorrect. 36.It relied on section 30 of the Tax Appeals Tribunal Act which provides that:“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 37.The Respondent reiterated the contents of its Statement of Facts and relied on the following authorities to emphasize that the burden of proof rests upon the Appellant to demonstrate that the impugned tax decision is incorrect.a.Republic V Kenya Revenue Authority: Proto Energy Limited (2022) eKLRb.Ushindi Limited v Commissioner of Investigation and Enforcement Kenya Revenue Authority [2020] eKLR.c.Republic V KRA: Proto Energy Limitedd.Mbuthia Macharia v Annah Mutua Ndwiga & another [2017] eKLR. Respondent’s prayers 38.The Respondent prayed as follows:a.That the Respondent’s Objection decision dated 24th January 2025 was proper in law and the same be upheld.b.That the Appeal be dismissed as it lacks merit.c.That costs be awarded to the Respondent. Issue For Determination 39.The Tribunal identified the following issue for determination. Whether the Respondent was justified in confirming the Income tax and VAT assessments. Analysis And Findings 40.It is to this issue that the Tribunal will turn within as hereunder: - 41.The Appellant argued that it visited the Respondents offices and was advised that it needed to submit all documents that will assist the Respondent to remove the additional assessments. The Appellant thereafter began the process of providing supporting documentation for verification and halfway through in its submission of supporting documentation when the Respondent issued them with an objection decision. 42.The Respondent on the other hand explained that the Appellant’s late objection was admitted on 26th November 2024. That the Appellant requested for extension of time to be able to avail further information to support their objection. That it was not possible to grant the Appellant the request for extension of time to supply further information bearing in mind that the Respondent is statute bound to issue an objection decision within 60days from the date of Objection. 43.Under section 51(11) of the Tax Procedures act, the respondent is required to issue an Objection Decision within 60 days and provides as follow:“51 Objection(11)The Commissioner shall make the objection decision within sixty days from the date of receipt of a valid notice of objection failure to which the objection shall be deemed to be allowed.” 44.The Respondent had up to 25th January 2025 to issue the decision and issued it on 24th January 2025, within the statutory timeframe. 45.The Tribunal finds that the Respondent acted within the statutory timeline prescribed by law. The respondent cannot be faulted for issuing the Objection decision within the mandatory 6o day period, even though the Appellant had not completed its submission of documents. 46.Consequently, the Tribunal finds that the Respondent did not err in issuing the Objection decision dated 24th January 2025. 47.The Respondent contended that a review of sales declared in the Income Tax returns for the period under review established significant variances between sales declared in the VAT returns and the expected sales from the bankings accrued in the period. It further averred that a review of the sales declared in the VAT returns for the period established significant variances between sales declared and the turnovers established. 48.On the other hand, the Appellant argued that it was tax compliant and had all the supporting documentation to justify their income tax and VAT assessments for the year 2018 to 2022 and that the act by the Respondent of confirming the additional assessment for Income Tax and VAT without due regard to all documents/ records, explanation and information provided is unfair, irrational, malicious and capricious. 49.The Tribunal observes that the starting point in any appeal against a tax assessment is the rebuttable legal presumption that the Respondent’s decision is correct and conclusive. In this regard, section 50(1)(a) of the TPA provides as thus:‘‘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.’’ 50.The Tribunal further observes that the Appellant has a duty in law to adduce relevant documentary evidence to rebut the presumption that the Respondent’s decision is correct. In adducing relevant documents, the Appellant would be discharging the burden of proof that is provided for under 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.’’ Suffice to point out that the burden of proof commences at the objection stage all the way to the appellate stage. 51.It is expected that once the Taxpayer files the Appeal to this Tribunal, it will demonstrate whether the assessment was wrong or right. The Tribunal reiterate that the burden to adduce documentary evidence is continuous until the matter is heard and determined with finality. The Tribunal’s position is informed by the provisions of section 30 of the Tax Appeals Tribunal Act Cap. 469A (hereinafter referred to as TATA) which postulates that: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. 52.Indeed, the High Court in the case of Commissioner of Domestic Taxes v Block International Limited [2024] KEHC 8889 (KLR) had the following to say about the burden of proof:‘‘To his end, I agree with the appellant that pursuant to the provisions of Section 30 of the Tax Appeals Tribunal Act and Section 56(1) of the Tax Procedures Act, the respondent bears the burden of proving that a tax assessment and/or decision is incorrect.’’ 53.Turning to the present case, the Appellant contended that the bank deposits in question arose from the sale of land on behalf of the Appellant’s director and that all credits were thereafter transferred to his account. 54.However, the Tribunal notes that the Respondent requested the Appellant to provide sales agreements to back up their assertions that the credits were of a disbursement nature and therefore not taxable on the company. The Respondent also requested sales ledgers and commission computation schedules to show the basis of the Appellant’s declared income. 55.The Appellant admitted in its statement of facts that it had not supplied all the requested documentation before the Respondent issued its Objection decision. 56.Upon review of the Appeal documents on record, the Tribunal notes that the Appellant only filed the memorandum of appeal and statement of facts and did not avail any supporting documents to justify its dispute against the income tax assessments for the years 2018 to 2022, neither did it avail to this Tribunal the bank statements, sales ledgers and commission computations which were earlier requested by the Respondent during the objection review. 57.The Tribunal observes that in this particular case, no documentary evidence was attached to the statement of facts. The Tribunal had no material to work with in support of the contentions by the Appellant. The Appellant has not discharged its burden of proof. While the Appellant made averments regarding the nature of the bank deposits and reconciliations performed, these remained mere assertions without the supporting documentary evidence required to prove that the Respondent’s assessment was incorrect. 58.Without any evidence by way of documents or other materials including bank statements to rebut the assessments that are the subject of this dispute, the Tribunal cannot arrive at a different decision. The Respondent cannot be faulted for having applied the banking analysis test. It was upon the Appellant to prove that the banking analysis was not correctly applied. Without placing the bank statements and all other relevant documents before the Tribunal, the Appellant failed to discharge its burden of proof. 59.Consequently, the Tribunal finds and holds that the Respondent was justified in confirming the Income Tax and the VAT assessments. Final Decision 60.The upshot of the foregoing 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 Respondent’s Objection decision dated 24th January 2025 be and is hereby upheld.c.Each party to bear its own cost. 61.It is so ordered. DATED AND DELIVERED AT NAIROBI THIS 2ND DAY OF JUNE 2026......................................ROBERT M. MUTUMACHAIRMAN.....................................JIMMY M. MALLA.MEMBER.....................................GLORIA A. OGAGAMEMBER MEMBER.....................................DR. TIMOTHY B. VIKIRUMEMBER