Teekay Ltd v Kenya Revenue Authority (Tax Appeal E081 of 2025) [2026] KETAT 228 (KLR) (17 July 2026) (Judgment)

 REPUBLIC OF KENYA IN THE TRIBUNAL OF KENYA AT NAIROBI COUNTY COURT NAME: TAX APPEALS TRIBUNAL CASE NUMBER: TATC/E081/2025 TEEKAY LIMITED VS KENYA REVENUE AUTHORITY JUDGMENT # BACKGROUND 1. The Appellant is a limited liability company incorporated in the Republic of Kenya. 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 issued the Appellant with income tax Additional Assessments dated 30th September, 2024 in respect of Income Tax Company for the for year 2022 for Kshs. 5,069,140 and Income Tax Company for the period December 2021 and January 2022 amounting to Kshs 9,424,500.48. 4. The Appellant objected to the assessments both on itax and manually vide its Notice of objection dated 30th October 2024. 1. The Respondent then issued the Appellant with an Objection Decision dated 23rd December, 2024. 2. Being aggrieved by the said decision, the Appellant filed to this Tribunal its Notice of Appeal dated 8th January, 2025 but was received by the Tribunal on 25th January 2025. 3. The Appellant filed a Notice of Motion dated 3rd May 2025 seeking leave to file the appeal out of time and by consent of both parties the Appellant was granted leave by the Tribunal on 12th September 2025 to file the appeal documents out of time. # THE APPEAL 1. The Appellant lodged the memorandum of appeal dated 25th January 2025 and filed on 27th January 2025 wherein the Appellant raised the following grounds of appeal: 1. That the Respondent erred in law and in fact by levying Additional Assessments based on wrong interpretation of the Income Tax Act Cap 470(ITA). 2. That the Respondent erred in law and in fact by raising assessments that were outside the Tax Procedures Act Cap 469B(TPA), and as such the said assessments were null and void. 3. That the Respondent erred in law and fact by failing to consider the Appellant's grounds for the Objection on merit. 4. That the Respondent erred in law and in fact by raising the assessments that were not correct as the amounts are not reflected in the assessment orders. 5. That the Respondent erred in law in disregarding the documents provided by the Appellant during objection in violation of the Appellant's constitutional right to fair hearing and fair administrative action. 6. That the Respondent erred in law in raising the following additional assessments on income tax and Value Added Tax (VAT) on the basis that Appellant had not done any sale in the months of December 2021 and January 2022 to warrant the issue of the Additional Assessments. The Appellant noticed that the Income tax assessment orders are all NIL yet Kshs 5,069,140.00 appear as a liability in the Appellant's Itax ledger account. The Appellant asserted that it has to date not received a copy of the VAT Additional assessments. # APPELLANT’S CASE 1. In support of the appeal, the Appellant lodged its statement of facts dated 25th January 2025 and filed on even date. 2. The Appellant stated that it supplied the Respondent with the following documents: 3. Bank Statements; 4. Sales banking analysis for the year 2021; 5. Stock sheet as at 31st December 2021; 6. Audited accounts for the year 2021 and 2022; 7. Debtors list for the years 2021 and 2022; 8. Ledgers for the years 2021 and 2022. 9. According to the Appellant, its objection being a reconciliation issue, the above documents were sufficient to support the objection. The Appellant asserted that the Respondent disregarded its explanation with the documents provided despite proof of supporting documents and invoices. 10. It asserted that the Notice of Objection dated 30 th October 2024 it extensively challenged the assessments on the basis of reconciliation such that no documents were required to prove the Appellant's assertions in this particular regard other than the detailed explanations in the Notice of objection as required by Section 51(3) (a) of the TPA. 11. The Appellant therefore asserted that having submitted the above documents, the Appellant effectively discharged its evidential burden of proof as imposed on it by the Section 56(1) of the TPA. 12. The Appellant argued that the Respondent misapplied Section 3(1) of the ITA as to what constitutes income in arriving at its assessment. In view of the foregoing, the Appellant was apprehensive that the demands by the Respondent for the purportedly unpaid tax, if allowed, will occasion a grave injustice and harm to the Appellant's business operations due to the misapplication of the Income Tax Act laws. 13. The Appellant stated that the Respondent acted in a manner that was procedurally unfair and in contravention of the law and prayed that the Respondent's objection decision be vacated accordingly. # Appellant’s Prayers 1. The Appellant prayed for the following orders: a This Appeal is allowed; 2. The Respondent's decision as contained in its letter dated 23 rd December, 2024 be set aside in its entirety; 3. That the principal tax and attendant penalties and interest demanded by the Respondent amounting to Kshs 14,493,640.48 vide the decision contained in the letter dated 23rd December, 2024 be vacated; and 4. The costs of and incidental to this Appeal be awarded to the Appellant; and 5. Any other orders that the Tribunal may deem fit. ***THE RESPONDENT’S CASE*** 1. In response to the Appeal, the Respondent lodged preliminary objection dated 18th August 2025 and filed on 19th August 2025 on the grounds that: 1. that the Notice of Appeal and subsequent purported Memorandum of Appeal and Statement of facts both dated 25th January 2025, are invalid, null and void ab initio, having offended the mandatory provisions of Sections 52 of the Tax Procedures Act, Sections 12 and 13 of the Tax Appeals Tribunal Act Cap 469A(TATA). # Respondent’s prayers 1. The Respondent prayed; 2. The Appeal be struck out 3. Tribunal awards costs to the Respondent. # PRELIMINARY OBJECTION 1. The Respondent having raised a preliminary objection in its pleadings the Tribunal examined its merit before making further steps. 2. The Appellant filed a Notice of Motion dated 3rd May 2025 seeking leave to file the Appeal out of time and by consent of both parties the Appellant was granted leave by the Tribunal on 12th September 2025 to file the Appeal documents out of time. 3. It’s the finding of the Tribunal that the Respondents preliminary objection dated 18th August 2025 is dismissed. # ISSUES FOR DETERMINATION 1. The Tribunal has considered the parties’ pleadings and submissions, and has identified the following issues for determination: # Whether the assessments are statutorily time barred; and 1. **Whether the Respondent erred in confirming the assessment. ANALYSIS AND FINDINGS** 2. Having identified the issues for determination, the Tribunal proceeds to analyse the same as hereunder: - # Whether the as Whether the assessments are statutorily time barred 1. One of the grounds of appeal under the memorandum of appeal was as follows: *‘‘THAT the Respondent erred in law and in fact by raising assessments that were outside the Tax Procedures Act, and as such the said assessments were null and void.’’* 1. This being an additional assessment, Section 31(4) of TPA is the applicable law. It provides *inter alia:* *(4) The Commissioner may amend an assessment—* ***(b) in any other case, within five years of—*** 1. ***for a self-assessment, the date that the self-assessment taxpayer submitted the self-assessment return to which the self- assessment relates; or*** 2. *for any other assessment, the date the Commissioner notified the taxpayer of the assessment.* 3. The impugned assessment comprise additional income tax assessment issued on 30th September 2024 in respect of the years 2021 and 2022. The Tribunal has considered the dates of the relevant tax periods alongside the date when the assessment were issued. 4. Upon examining the said income tax assessment orders in light of the provisions of Section 31(4)(b) of the TPA, the commissioner is permitted to amend an assessment within (5) years from the date the relevant self-assessment return was lodged. The Tribunal notes that the assessments was issued within (5) five years and fall comfortably within the statutory period prescribed by the act. Consequently the Tribunal finds that the Appellant’s failed to demonstrate that the Respondent acted outside the statutory period provided for under the TPA. # Whether the Respondent erred in confirming the assessment 1. The Respondent did not file statement of facts in opposition to this appeal. However, the Tribunal had to examine the merits of the appeal. 2. The Appellant’s case was that the Respondent disregarded the explanations and the documents that it provided in support of the objection. The Appellant asserted that it provided the Respondent with invoices, bank statements, sales banking analysis for the year 2021, stock sheet as at 31st December 2021, audited accounts for the year 2021 and 2022, debtors list for the years 2021 and 2022, ledgers for the years 2021 and 2022. 3. Whereas the Respondent did not file statement of facts, the objection decision indicates that the notice of objection was disallowed on the basis that the Appellant failed to demonstrate that the default assessments were incorrect as it failed to provide documents to support the notice of objection. The objection decision also indicates that the assessment was issued due to variances between the turnover declared in the income tax returns for the year 2021 compared to the expected income as per the banking analysis method. 4. The Objection decision also indicates that the 2022 assessments were issued on the basis that the Appellant had unaccounted stocks in the year 2021 and 2022 therefore, the Respondent applied a markup on the unaccounted stocks to determine the undisclosed income and charged income tax. 5. Tax laws in Kenya create a legal presumption that the decision of the Commissioner is correct and it is upon the taxpayer to rebut the presumption. To this end, Section 50(1) (a) of the TPA provides that: - ***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.* 1. Based on Section 50(1) (a) of the TPA, the Objection decision in issue is deemed to be correct until the Appellant demonstrate otherwise. 2. The taxpayer has a burden to come forth with positive evidence to rebut the presumption under Section 50 of the TPA. Section 56(1) of TPA places the burden of proof upon the taxpayer. The said law provides that, *‘In any proceedings under this Part, the burden shall be on the taxpayer to prove that a tax decision is incorrect.’’* 3. Therefore the Tribunal must determine the Appeal on the basis of the pleadings and the evidence placed before it. 4. The Constitutional and Human Rights Court in the case of **Katambo v Attorney General & another (Petition E532 of 2022) [2023] KEHC 19949 (KLR)** had an opportunity to deliberate upon the provisions on burden of proof in tax matters. The had the following to say at paragraph 19 of the judgment when dealing with constitutionality of Section 56(1) of the TPA: *‘‘Section 56(1) falls within Part VIII which provides for Tax Decisions, Objections and Appeals. The provision is applicable in proceedings where a decision has been made and the taxpayer objects to, or appeals against such decision. This being the case, it then falls upon the tax payer challenging a decision or assessment to provide proof that the assessment is not correct. It cannot therefore be argued that placing the burden of proof contravenes the provisions of Articles 49(1)(b) and (d) and 50(2)(a) and (l) of the Constitution.’’* 1. Further, Section 30 of the TATA expressly places the burden of proof upon the taxpayers’ shoulders. It provides that. *In a proceeding before the Tribunal, the appellant has the burden of proving—* 1. *where an appeal relates to an assessment, that the assessment is excessive; or* 2. *in any other case, that the tax decision should not have been made or should have been made differently.* 3. To discharge the burden of proof, the taxpayer has to adduce documents in support of the Notice of objection at objection stage. Further, the taxpayer is still expected to adduce those same documents to support the appeal so as to counter the legal presumption created under Section 50(1) (a) of the TPA. 4. Section 23 of the TPA requires the taxpayer to keep records. In particular, Section 23 (1)(b) and (c) of the TPA provides that, *a person shall—* 1. *maintain any document required under a tax law so as to enable the person's tax liability to be readily ascertained.* 2. *subject to subsection (3), retain the document for a period of five years from the end of the reporting period to which it relates or such shorter period as may be specified in a tax law.* 3. The assessments in issue involved income tax. In this regard, Section 54A of the ITA requires the taxpayer to keep records to facilitate determination of tax liability. It 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.* 1. Further, the Tribunal noted that the assessment in this appeal touched on VAT though no assessments relating to VAT were attached to the appeal documents. Though the Appellant contended that it was never served with VAT assessments, Section 43 (1) of the VATA provides as follows in relation to keeping records: ***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.* 1. It is upon production of relevant documents that the burden of proof may shift to the Respondent to demonstrate that its decision was justified. In # Commissioner of Domestic Taxes v Bosky Industries Limited (Income Tax **Appeal E049 of 2022) [2025] KEHC 7965 (KLR)** the High Court observed as follows at paragraph 45 of the judgment: *''45. The “burden of proof” is not a static concept in tax litigation. Initially, the taxpayer must challenge an assessment by tendering evidence of legitimate transactions. Once the taxpayer has done so to a* *minimum level by demonstrating that the goods were paid for and ETR invoices exist, the burden shifts to the Commissioner to substantiate its allegations of fraud or fictitious transactions.''* 1. The question then is whether the Appellant has been able to discharge its burden of proof. 2. Pursuant to the objection decision, the assessments were issued on the basis that the Respondent identified variances between the turnover declared in the income tax returns for the year 2021 compared to the expected income as per the banking analysis method. Therefore, the Appellant’s first task was to file a statement of facts demonstrating that there was no variance at all. The second task was to file documentary evidence to support that position. This way, the burden of proof would have been discharged. 3. The Appellant’s statement of facts did not address the reason why the assessments were issued. Secondly, whereas the Appellant asserted that it furnished the Respondent with invoices, bank statements, sales banking analysis for the year 2021, stock sheet as at 31st December 2021, audited accounts for the year 2021 and 2022, debtors list for the years 2021 and 2022, ledgers for the years 2021 and 2022, the Appellant did not file the said documents to support this appeal. For this reason, the Appellant did not discharge its burden of proof. 4. Whereas the Appellant in its statement of facts stated that it has to date not received a copy of the VAT Additional assessments, the Tribunal sought to find out whether the Appellant raised this issue in its notice of objection. The Tribunal noted that in the letters of objection dated 30th October 2024, the Appellant stated as follows: *‘‘3. However, we have noticed that there is a VAT liability of Kshs 6,848,382.08, acknowledgement return number KRA202459700912 dated 30th September 2024, being revenue recognized on output tax payable in original return for the return period 1st January2022 to 31st January2022 for the head office which was filed by your officer.* *This is incorrect as our client has not done any such sale to warrant your office file a VAT return for the same.’’* *‘‘3. However, we have noticed that there is a VAT liability of Kshs 1,812,793.71, acknowledgement return number KRA2024596996772 dated 30th September 2024, being revenue recognized on output tax payable in original return for the return period 1st December 2021 to* *31st December 2021 for the head office, which was filed by your officer.* *This is incorrect as our client has not done any such sale to warrant your office file a VAT return for the same.’’* 1. The Appellant was contending with the VAT default assessment and it even pointed out the acknowledgement return numbers for VAT being KRA202459700912 and KRA2024596996772. Therefore, the Appellant was aware of VAT default assessments. 2. Considering the fact that the Appellant did not adduce documentary evidence to prove that there were no variances, the Appellant failed to discharge the burden of proof contrary to Section 56(1) of the TPA and Section 30 of the TATA. Consequently, the Tribunal finds and holds that the Appellant failed to demonstrate that Respondent erred in confirming the assessment. # FINAL DECISION 1. The upshot to the foregoing is that the Appeal is devoid of merit and the Tribunal proceeds to makes the following Orders; - 2. The Appeal be and is hereby dismissed; 3. Objection decision dated 23 rd December 2024 be and is hereby upheld; and 4. Each party to bear its own costs. 5. It is so ordered. # DATED AND DELIVERED AT NAIROBI THIS 17TH DAY OF JULY, 2026 SIGNED BY/FOR: **★ TH E JUDICIAR Y O F KENY A ★** **HON. EUNICE NJERI NGANGA HON. SANKALE SPENCER OLOLCHIKE** **HON. BERNADETTE MUTHIRA GITARI** **HON. BILLY GRAHAM OKUMU MIJUNGU** Tax Appeals Tribunal Tribunal Date: 2026-07-17 14:22:14