https://new.kenyalaw.org/akn/ke/judgment/ketat/2026/126

**REPUBLIC OF KENYA** **IN THE TAX APPEALS TRIBUNAL AT NAIROBI** **TAX APPEAL NO. E1331 OF 2025** **TLT CONNECTED LIMITED……...….…...……………...…………...…….….... APPELLANT** VS **COMMISSIONER OF DOMESTIC TAXES...……………………….……….....RESPONDENT** **JUDGMENT** BACKGROUND 1. The Appellant is a resident company duly registered under the laws of Kenya. Its principal business activity is the B2B sales and distribution of high-quality Internet of Things ("loT") devices. The Appellant strives for innovation and generates new ideas on developing disruptive technologies in Telematics, Networking Solutions, Telemedicine, EV Charging and Electronics Manufacturing that have an everlasting value and aspires to become one of the global leaders in providing unique loT solutions. 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. From May 2024, the Appellant lodged various VAT refund applications to claim excess input VAT incurred in making of zero-rated supplies which included exportation of goods. The refund applications were for the tax periods September 2023 to December 2023 and May 2024 to June 2024 amounting to Kshs 21,534,984 4. Following Audit Notices dated 20th June 2024, 23rd July 2024 and 24th October 2024, the Respondent undertook various in-depth VAT refund audits on the Appellant’s VAT refund applications. Vide VAT rejection orders dated 7th and 8th November 2024; the Respondent rejected the refund applications. 5. Upon rejection of the initial applications, *vide* refund applications dated 5th February 2025 and 10th April 2025, the Appellant re-lodged its refund applications for the tax periods September 2023 to December 2023 and May 2024 to June 2024 amounting to Kshs 21,534,984. The Respondent then issued another Notice of Intention to Audit. The Appellant objected to the Notices vide an email dated 13th May 2025. 6. The Respondent issued VAT Claim Rejection Orders dated 23rd September 2025 and 29th September 2025. Being dissatisfied with the Respondent’s rejection orders, the Appellant filed the instant Appeal *vide* notice of appeal dated 5th November 2025. **THE APPEAL** 1. The Appellant lodged memorandum of appeal dated and filed on 21st November 2025 on the following grounds: 2. That the Respondent erred in fact and in law by rejecting the Appellant's application for Value Added Tax ("VAT") refund for the months of September to December 2023 and May to June 2024 which were validly lodged under provisions of Section 17 (5) of the VATA and Section 47(1)(b) of the TPA. 3. That the Respondent erred in fact and in law in disallowing refund claims that had already been allowed by operation of the law when it failed to ascertain and determine the VAT refunds application within the statutory timelines as provided for under Sections 47(3) of the TPA (Now amended vide Finance Act 2025), thereby deeming the said applications ascertained and approved. 4. That the Respondent erred in fact and in law by failing to provide valid reasons for rejecting the Appellant's refund applications contrary to Section 49 of the Tax Procedures Act Cap 469B (TPA). 5. That the Respondent erred in law and fact by creating a legitimate expectation that in its initial Audit, its only finding was that the Appellant erroneously classified its zero-rated sales as exempt sales in some months' VAT returns, and that it would approve the refunds applications once the Appellant amended the affected VAT returns. As such. the Respondent has failed to appreciate that its actions and decisions constitute a breach of the Appellant's right to fair administrative action as enshrined under Article 47 of the Constitution of Kenya 2010 as read together with Section 4(1) of the Fair Administrative Action Act of 2015. 6. That the Respondent erred in fact and in law in undertaking multiple VAT refund audits, having previously audited the exact same tax refunds. tax periods and matter on which it subsequently issued its audit findings and refunds decision. 7. That the Respondent's iTax systems are similarly erroneously configured not to allow for the application of VAT refunds based on the formula set forth in the VAT Regulations 2017 as amended *vide* Legal Notice 86 of 2019, as opposed to the VAT credits contained in the monthly VAT returns. This is despite the law setting that where a supplier makes both zero rated and standard rated supplies, a specified formula is to be applied in arriving at the actual VAT refund amount. **The Appellant’s Case** 1. In support of the appeal, the Appellant relied on its Statement of Facts dated and filed on 21st November 2025 2. The Appellant’s case was that from May 2024, it lodged various VAT refund applications to claim excess input VAT incurred in making of zero-rated supplies which included exportation of goods as stipulated under Paragraph l, Part l of the Second Schedule to the VATA. 3. Pursuant to the provisions of Section 17 (5) (a) & (d) of the VATA and Regulation 13(2) of the Value Added Tax Regulations, 2017 ("the Regulations"), the Appellant lodged VAT refunds application for the tax periods September 2023 to December 2023 and May 2024 to June 2024 amounting to KSHS 21,534,984. 4. Following Audit Notices dated 20th June 2024, 23rd July 2024 and 24th October 2024, the Respondent undertook various in-depth VAT refunds audits on the Appellant’s VAT refunds application, asking for 100% documentation as far as the sales and purchases documents are concerned. The Appellant pointed out that the Respondent *vide* an email dated 17th October 2024 brought to the attention of the Appellant that the Appellant had misclassified its March to December 2023 and January 2024 zero-rated supplies as exempt sales in its VAT returns. The Respondent further instructed the Appellant to amend the affected returns to allow the Appellant to successfully process the refunds. 5. The Appellant stated that it amended the returns on 25th October 2024 and duly notified the Respondent vide an email dated 30th October 2024 and subsequently delivered a formal letter dated 8th November 2024 notifying the Respondent of the amendments. It stated that on 7th November 2024, the Respondent rejected the Appellant's refund applications citing the following reason: *The refund claim cannot be processed at this point in light of a pending Return Amendment issue, to enable taxpayer, rectify misclassified sales from exempt to zero rated. Taxpayer may re-lodge once the Return Amendment issue is resolved.* 1. The Appellant, relying on the above grounds of rejection, coupled with various discussions with the Respondent facilitated through the Alternative Dispute Resolution framework, proceeded to re-lodge its refund applications for the tax periods September 2023 to December 2023 and May 2024 to June 2024 amounting to Kshs 21.534,984. 2. The Appellant stated that on 30th April 2025, it received a fresh Notice of Intention to Audit the same refunds, to which the Appellant objected in a meeting with the Respondent. It stated that the Respondent's Audit Team clarified that its refunds counterparts needed a revised Audit report, and that the said Notice was an internal procedure meant to allow them to write another report to enable them to recommend an approval of the Appellant's refunds applications to the Respondent's Refunds Team. The Appellant asserted that these discussions were confirmed on email correspondences. 3. It stated that in the said email correspondences, the Respondent went further to confirm that it will neither undertake another audit nor expect any action from the Appellant, and that all the information required to draft the report were already in its custody. However, after various follow-ups by the Appellant, the Respondent issued another set of notices of Intention to Audit, further expanding the scope of audit to cover periods to March 2025 and additional tax heads aside from VAT. 4. It averred that no sooner had it acted on the said Notice, than the Respondent issued yet another Notice of Intention to Audit, this time adding a list of additional information required, including a customs sales reconciliation, and asking the Appellant to reconcile between sales in its books and sales in the Respondent's customs records. It stated that it received from the Respondent seven different Notices of intention to audit its VAT tax head by four different teams. 5. The Appellant stated that it objected to the notices vide an email dated 13th May 2025, and demanded that a centralized audit team be appointed by the Respondent to carry out the audit for the additional tax periods and tax heads. The Appellant asserted that the Respondent did not act on its request. Nevertheless, it stated that it still proceeded to share the necessary information with the various Respondent's audit teams, as well as the team that requested for specific information. 6. According to the Appellant, on 23rd and 29th September 2025 the Respondent notified the Appellant of its rejection of the two sets of VAT refund reapplications citing the following reasons respectively: *Rejected as per Audit report dated 23/10/2024 which recommended rejection of the claim. The taxpayer had misclassified sales in the returns for the claim periods, which requires to be rectified.* *The refund claim cannot be processed at this point in light of the Audit report recommendations from your RAC (Regional Audit Center), which indicated that it should be rejected*. 1. The Appellant, being dissatisfied with the Respondent's refund decisions, filed this appeal on the following grounds: **Whether the Respondent's ascertainment and determination of the Appellant's VAT refunds application was invalid and outside the statutory timelines as provided for under Section 47(3) and 47(4A) of the TPA, deeming the refunds application approved by the operation of law** 1. The Appellant argued that the Respondent's refunds rejection was done out of the statutory timelines since its refund decisions came more than one hundred and twenty (120) days from the date the same were lodged. The Appellant insisted that the Respondent had only between 90 to 120 days to ascertain and determine the refund reapplications. 2. The Appellant averred that the Respondent erred in disallowing refund claims that had already been allowed by operation of the law when he failed to ascertain and determine for VAT refunds application within the statutory timelines as provided for under Sections 47(3) of the TPA (Now amended), thereby deeming the said applications ascertained and approved. In view of the lapse of the statutory time, the Appellant marked the matter as closed and by extension. the expectation was that the Respondent had agreed with the Appellant’s computation of refunds owed under its refund application letter. 3. It averred that it was surprised that the Respondent issued a decision over the same matter more than seven months later. The Appellant maintained that the TPA establishes a clear and unambiguous statutory time limit within which the Respondent must issue refund decisions which is a fundamental requirement designed to ensure timely resolution and clarity for taxpayers. 4. It stated that the law concerning refunds of overpaid tax is to be found in Section 47 of the TPA which underpins the taxpayers' statutory right to apply to the Commissioner for a refund. It imposes on the Respondent the duty to consider the application, audit the claim if necessary, and thereafter make a decision on it within 90 days or, where an audit is conducted, 120 days of application, failure to which the application is deemed approved as provided in Sections 47(2) and 47(3) of the TPA. 5. The Appellant therefore contended that the said Respondent's refund decisions are time-barred. invalid, null and void ab initio having been issued beyond the statutory time limit prescribed. The Appellant argued that the Respondent's failure to issue its Refund Decision within the stipulated ninety or one hundred and twenty days meant that the Appellant's application for refund had been ascertained and approved by operation of law. 6. The Appellant relied on the High Court decision in the case of **Eastleigh Mall Limited v Commissioner of Investigations & Enforcement Appeal No. EO686 of 2020 eKLR**, where the learned Judge in his judgement observed that: *"If the commissioner is allowed to exercise his discretion and stay without limit before issuing an objection decision, then the taxpayer would be unable to make crucial decisions and plan his/her business properly.’’* 1. The Appellant insisted that allowing the Respondent to issue its refunds decision at its discretion and especially in disregard to the statute of limitations provisions would be in complete disregard to the provisions of the TPA; aid a party who has exhibited scant respect for the tax procedure rules: amount to shifting goal posts by the Respondent at will; amount to abuse of powers by the Respondent; and result in gross injustice to an innocent taxpayer seeking the protection of the law. 2. It relied on the case of **Commissioner of Domestic Taxes v Sony Holdings Limited [2021] eKLR**, where the Court stated as follows: *Despite communicating to the Respondent, the Refund audit findings by the letter dated 25th January2017, the Commissioner failed to make the decision within 90 days as provided by sections 47(3) of the TPA. I therefore hold that since the refund claim was neither denied nor rejected the Respondent was entitled to claim the refund in its returns in subsequent years until the matter was resolved.* 1. The Appellant asserted that the attempt by the Respondent to operate outside the statute of limitation provisions has further been estopped by various courts before in other tax decisions, the courts upholding the law to protect taxpayer rights. It cited **Application No. 599 of 2017 Republic v Kenya Revenue Authority Ex Parte M-Kopa Kenya Limited** wherein the Court found that the Respondent in that case had defaulted in making a determination within a timeline prescribed in statute. The Court stated as follows: *"Accordingly. the Respondent was required to make a decision in respect thereof within sixty (60) days under section 5(11) of the said Act. As the Respondent defaulted in making a determination thereon within the prescribed time, the said objection was deemed to have been allowed. As the law deems the objection to have been allowed, there is no reason why the applicant should have appealed in the premises the question of existence of an alternative remedy does not arise in the circumstances."* 1. The Appellant maintained that the Respondent must operate within the confines of the law, and any action taken outside the prescribed time limits is invalid, null and void. As such, it is the Appellant's prayer that the refunds application relating to the periods July 2022 to June 2024 be considered approved. **Whether the Respondent's grounds of rejection of the Appellant's VAT refunds applications were valid** 1. The Appellant stated that in its rejection notices dated 23rd and 29th September 2025, the Respondent premised its decision on Audit report dated 23/IO/2024 which recommended rejection of the claim on the basis that the taxpayer had misclassified sales in the returns for the claim periods which required to be rectified; and that the refund claim could not be processed at this point in light of the Audit report recommendations from RAC(Regional Audit Center), which indicated that it should be rejected. 2. The Appellant contended that the Respondent's reliance on the Audit Report dated 23/10/2024 was fundamentally flawed because the refund applications in question were lodged in February 2025 and the said audit report related to the old applications that were already closed. Besides, the Appellant noted that it had already amended the relevant VAT returns on 25th October 2024, fully rectifying the purported misclassifications, and duly notified the Respondent of the same by written email communication dated 30th October 2024. The Appellant therefore, asserted that it was absurd for the Respondent to have issued refund rejection grounds premised upon alleged misclassifications contained in returns that no longer existed in the form reviewed by the audit team. 3. The Appellant averred that the Respondent's reliance on an outdated audit report prepared before the Appellant's amendments demonstrates a stubborn and deliberate intention to frustrate the Appellant's efforts to accessing its legitimate refunds and a clear failure to consider relevant and material facts, rendering its decision defective. 4. Further, it argued that the Respondent's assertion that the refund "cannot be processed in light of audit recommendations" was incurably vague, preposterous and lacked any particularity. The Appellant stated that it was left without the faintest understanding of what the audit report recommendations allegedly justified rejection. 5. It stated that the law requires the Respondent to give clear, reasoned, and intelligible grounds for its tax decisions. It opined that a sweeping assertion citing unspecified "audit report recommendations" cannot, by any legal standard, constitute a valid reason. According to the Appellant, it was not enough for the Respondent to wave at the existence of an audit report but it must identify the precise factual and legal basis for its decision. 6. The Appellant relied on the High Court's decision in **Joseph Muriithi Ndirangu t/a Ndirangu Hardware v Commissioner of Domestic Taxes** which affirmed a similar decision by the Tribunal in **Local Productions Kenya Limited v Commissioner of Domestic Taxes (Tax Appeals Tribunal. Tax Appeal No. 50 of 2017)**, where it was held that taxpayers have a constitutional right to be given valid reasons for tax decisions made by the Respondent in line with the Constitution and the TPA. 7. It cited the case of the case of **Joseph Murithi Ndirangu t/a Ndirangu Hardware v Commissioner of Domestic Taxes (2023) KEHC 19357 (KLR)** wherethe learned Judge, J. Majanja stated as follows: *By providing a detailed and reasoned decision as required by the Constitution and the law, a taxpayer is better equipped to challenge such a decision whether through an appeal to the Tribunal or by way of an application to the High Court for judicial review of the decision. However, these statutory avenues to challenge KRA's decisions are meaningless in circumstances where taxpayers do not understand the basis or reasoning for tax assessments.* 1. The Appellant also cited the case of **Ndirangu t/a Ndirangu Hardware v Commissioner of Domestic Taxes (Tax Appeal E070 of 2021) [20231KEHC 19357(KLR) (30 June 2023)** where it was held that the duty to give reasons is not a trifling requirement. It is a constitutional mandate embedded in the right to fair administrative action guaranteed by Article 47 of the Constitution which provides in part, that, every person has the right to administrative action that is expeditious, efficient, lawful, reasonable and procedurally fair. 2. Consequently, the Appellant prayed that the Respondent's rejection of the Appellant's refunds applications be set aside. **Whether the total amounts of refunds considered by the Respondent are accurate** 1. The Appellant stated that as per the Respondent's notices of VAT refunds application rejections the amounts reflected are in fact, incorrect. 2. The Appellant contended that its workings on the excess input tax available for VAT refunds as a result of the making of zero-rated supplies, the total VAT refundable amount for the periods in dispute amounts to Kshs. 21.534,984. The Appellant averred that it based its workings on the formula provided under the Regulations, which restricts the input tax claimable to input tax proportional to the amount of export sales made in relation to the total sales where a supplier makes both zero rated and standard rated supplies. That the formula is as follows: *R= Z/T \*i where:* *R, is the value of input tax relating to zero rated supplies* *Z. is the total value of zero-rated supplies* *T. is the total value of taxable supplies* *i, is the deductible input tax for the month* 1. The Appellant contended that the Respondent must be compelled to operate within the provisions of the law and to uphold the rule of law. The Appellant argued that the Respondent disregarded the application of the above formula therefore, the Respondent acted ultra vires. 2. The Appellant quoted the case of **Republic v Kenya Revenue Authority Exparte Bata Shoe Company (Kenya) Limited [20O14JeKLR** wherein the Court held that Payment of tax is an obligation imposed by the law, that it is not a voluntary activity. That being the case, a taxpayer is not obliged to pay a single coin more than is due to the taxman. 3. It also relied on the case of **Republic v Kombo & 3 others ex parte Waweru (2008) 3 KLR (EP) 478** the Court explained the principle of rule of law as follows: *The rule of law has a number of different meanings and corollaries. Its primary meaning is that everything must be done according to law. Applied to the powers of government, this requires that every government authority which does some act which would otherwise be a wrong (such as taking a man's land), or which infringes a man's liberty (as by refusing him planning permission), must be able to justify its action as authorized by law – and nearly in every case this will mean authorized directly or indirectly by Act of Parliament. Every act of government power that is to say, every act which affects the legal rights, duties or liberties of any person, must be shown to have a strictly legal pedigree. The affected person may always resort to the Courts of law. and if the legal pedigree is not found to be perfectly in order the Court will invalidate the act, which he can safely disregard.* 1. The Appellant therefore prayed that this Honourable Tax Appeals Tribunal considers the amounts in issue in determining this case and per the apportionment formula provided in law, and not the understated figures presented by the Respondent. It contended that the Respondent's refund decision has no basis in law or in fact and prayed this Honourable Tribunal sets it aside. **Whether the Respondent erred in subjecting the Appellant's refunds applications to multiple audits and whether the Respondent's first refunds decision created a legitimate expectation; and whether the Respondent's second refund decision was in contravention of the Appellant's legitimate expectation and right to fair administrative action as protected under Article 47 of the Constitution of Kenya 2010 as read together with Section 4(1) of the Fair Administrative Action Act of 2015** 1. The Appellant asserted that the Respondent subjected the Appellant to seven different audit processes in a year, four of which targeted VAT refunds and the rest targeting other tax heads. However, on 7th November 2024, the Respondent issued its refunds decision for one, some or all of its refund audits rejecting the Appellant's refund applications, and citing the following reason; *‘The refund claim cannot be processed at this point in light of a pending Return Amendment issue, to enable taxpayer rectify misclassified sales from exempt to zero rated. Taxpayer may re-lodge once the Return Amendment issue is resolved.’* 1. The Appellant averred that the Respondent, having previously audited the exact same tax refunds, tax periods and matter on which it subsequently issued its audit findings and refunds decision as outlined above, created a legitimate expectation that the Appellant's refunds application had only one corrigible and inconsequential mistake that in some months the Appellant misclassified its zero-rated sales as exempt. 2. According to the Appellant, in advising that the Appellant, having corrected this misclassification, could reapply for the VAT refunds, the Respondent created a legitimate expectation that it would approve the refunds once the returns were amended and the applications relodged as this was the only matter standing between him and the approval. 3. Further, the Appellant stated that the Respondent, in its email dated 30th April 2025 clarified that the Respondent was not to conduct additional audits on the relodged refund applications, but that the said Notice was an internal procedure meant to allow in writing a fresh report to facilitate approval of the Appellant's refund applications by the Respondent's Refunds Team. The Appellant contended that the Respondent went further to confirm that it did not expect any action from the Appellant, and that all the information needed to draft the report were in its custody. 4. According to the Appellant, these representations cemented the legitimate expectations by the Appellant that its refunds would not undergo another audit and that the same would be approved expeditiously. 5. It cited De Smith Woolf & Jowell in "Judicial Review of Administrative Action" 6th Edn. Sweet & Maxwell page 609 as follows: *"A legitimate expectation arises where a person responsible for taking a decision has induced in someone a reasonable expectation that he will receive or retain a benefit of advantage."* 1. The Appellant relied on the Court of Appeal in **Kenya Revenue Authority & 2others v Darasa Investments Limited [2018] eKLR** where the Court explained what is meant by legitimate expectation as follows: *Legitimate expectation refers to the principle of good administration or administrative fairness that, if a public authority leads a person or body to expect that the public authority will in the future, continue to act in a way either in which it has regularly (or even always) acted in the past or on the basis of a past promise or statement which represents how it proposes to act, then. Prima facie. the public authority should not, without an overriding reason in the public interest. Resale from that representation and unilaterally cancel the expectation of the person or body that the state of affairs will continue. This is of particular importance if an individual has acted on the representation to his or her detriment* 1. It also cited the case of **Communications Commission of Kenya & 5 others V. Royal Media Services Limited & 5 others [2014] eKLR**, where the Supreme Court, after acknowledging that a public body can create legitimate expectation stated that. *"for legitimate expectation to arise, there must be an express, clear and unambiguous promise given by a public authority: that the expectation itself must be reasonable; that the representation must be one that the decision maker was competent to make; and that there cannot be a legitimate expectation against clear provisions of the law or the Constitution."* 1. The Appellant asserted that its expectation that the Respondent would approve its relodged refund applications was based on the understanding that its financial records were cleared from a tax compliance perspective and that the only reason the Respondent did not proceed to approve its refunds was the misclassified export sales, which expectation. in the Appellant's view, are reasonable. 2. The Appellant further averred that the Respondent's decision to overrule and retract its own decision after the Appellant had relied on the same as confirmation that the matter was closed is illegal, unconstitutional, unfair, unreasonable, capricious, un-procedural, irrational and a violation of the Appellant's right to administrative action and right to legitimate expectation. 3. It asserted that the Respondent, in subjecting the reapplied refunds to multiple other audits, acted in a manner that was procedurally unfair, unjust, in bad faith, malicious and that amounts to violation of the Appellant's rights to fair administrative action as protected under Article 47 of the Constitution of Kenya 2010 as read together with Section 4(1) of the Fair Administrative Action Act No. 4 of 2015. 4. In support of the appeal, the Appellant filed written submissions dated 23rd March 2026. The Appellant submitted that the Respondent's ascertainment and determination of the Appellant's VAT refund application was invalid and outside the statutory timelines as provided for under Section 47(3) and 47(4A) of the TPA; that the Respondent's grounds of rejection of the Appellant's VAT refund applications were not valid; that the Appellant had amended the VAT returns prior to lodging the refund applications; and that the Appellant provided sufficient information to support approval of refunds. 5. The Appellant also submitted that the Respondent's Statement of Facts was not validly lodged and whether the Respondent did not discharge its evidential burden in its statement of facts. It also submitted that the Respondent's Statement of Facts was not consistent with and coherent to the matters before this Honourable Tribunal. 6. The Appellant also submitted that the total amounts of refunds considered by the Respondent are accurate and that it discharged its evidential burden in this Appeal. **Appellant’s Prayers** 1. The Appellant prayed as follows: 2. That the Appeal be allowed: 3. That the Refund Decisions dated 23rd September 2025 and 29th September 2025 be set aside; 4. The VAT refunds applications be allowed in entirety; and 5. That costs of this appeal be borne by the Respondent. **THE RESPONDENT’S CASE** 1. In response to the appeal, the Respondent lodged a Statement of facts dated 12th February 2026 filed on the even date. The Respondent did not file written submissions. 2. The Respondent stated that the taxpayer's Tax Agent lodged VAT refund applications in May 2024, with an audit notice issued on 20th June 2024, requesting for necessary documentation for the amount Kshs 40,651,683 for the tax periods May 2022 to June 2024. 3. It stated that a refund audit was conducted to verify the validity of the refund claims. It noted that the refunds arose from excess input tax incurred from making zero-rated supplies, including exportation of goods, as provided for under Paragraph 1, Part I of the Second Schedule to the VAT Act. 4. The Respondent averred that the taxpayer failed to submit the required documents within the stipulated timelines. Therefore, several follow-up telephone calls were made to the tax agent requesting submission of the outstanding audit documents; however, these efforts were unsuccessful. Consequently, Audit officers visited the taxpayer's premises to obtain the documents. 5. It stated that during the visit, the taxpayer expressed surprise at the request for documents and indicated that the tax agent had not formally communicated the refund audit requirements. The taxpayer requested additional time to compile the documents and submit them to our offices, which was subsequently done after some delay. The Respondent contended that the last batch of requested documents as per the Audit Notice were received on 18th October 2024. 6. The Respondent argued that the tax agent failed to comply with the refund audit notice dated 20th June 2024, which required the timely submission of supporting documents. It stated that the law is explicit that a refund claim may be rejected where a claimant fails to produce complete and necessary documentation to substantiate the claim. In this case, the Respondent asserted that the tax agent delayed the provision of the required documents, and as of October 2024, the documents had still not been submitted sufficiently, resulting in delays to the audit process. It asserted that failure to adhere to the timelines stipulated in the audit notice dated 20th June 2024, resulted to the delay in the audit process. 7. Upon review and verification of VAT Returns, the Respondent stated that it was discovered that the taxpayer had erroneously classified sales as exempt instead of zero-rated. On 17th October 2024, the taxpayer was notified via email of the misclassification of zero-rated supplies as exempt sales in its VAT returns. according to the Respondent, the parties agreed to reject the original refund application to facilitate the submission of new applications. 8. According to the Respondent, through an email dated 18th October 2024, the taxpayer acknowledged the error of misclassified sales and agreed that the refund application on iTax be rejected to enable the taxpayer amend affected VAT-3 returns so that the process could restart. Subsequently, in agreement with the Tax Agent, the Respondent rejected the refund application claim. 9. It stated that the refund application was thus rejected on 24th October due to misclassification of sales and that the taxpayer immediately sought redress through the Alternative Dispute Resolution (ADR) mechanism, contending that the Commissioner erred in fact and in law by rejecting the Taxpayers application for VAT refund for the months of July 2022 to March 2024. 10. The Respondent contended that following the ADR discussions, it was agreed that the taxpayer would reapply for the refunds and submit all the required supporting documents within the prescribed timelines to facilitate smooth processing of the refund claims. 11. The Respondent contended that it expressed its willingness to review the documents and to engage with the Taxpayer's representative with a view to resolving the dispute. It asserted that the entire ADR process was conducted amicably, during which the Tax Agent agreed to furnish the required documents within the agreed timelines. 12. It noted that after the ADR process was concluded on 25th February 2025, the Tax Agent proceeded and applied refund for the periods, July 2022 to December 2022, May 2023 to July 2023, September 2023 to December 2023 and March 2024 to June 2024 totalling to a refund of Kshs. 39,012,003. 13. It stated that all refund applications were submitted by the taxpayer by 10th April 2025. On 30th April 2025, an Audit Notice Commencement letter and a follow-up email were issued to the taxpayer, requesting submission of supporting documentation for the VAT refund claim. It pointed out that the taxpayer was required to provide the requested documents within seven (7) days. 14. The Respondent stated that the audit commenced immediately. Verification of the Taxpayers Sales, as declared in the Income Tax Returns, VAT Returns was done using the submitted books of records. On 14th May 2025, the file was submitted to the Deputy Commissioner, Audit & Risk for review of the refund application. It stated that the Deputy Commissioner reviewed the report and made the following recommendations: 15. The submission to cover exports, because exports form the basis of the refund since they are zero-rated. 16. It was essential to confirm whether the goods were exported and left the company's premises. 17. There was need to audit for corporation tax. 18. The Respondent asserted that verification on the taxpayer's sales, as declared in the Income Tax Returns, VAT Returns, and export data, were analysed, and variances were identified. Following the identification of these variances, the taxpayer was contacted via email dated 22nd May 2025 and by telephone and was requested to provide a reconciliation for the noted discrepancies. 19. It noted that despite repeated follow-ups, including several telephone calls and emails, the tax agent failed to provide the requested reconciliation. It stated that although the taxpayer repeatedly indicated that the reconciliation would be submitted, this was never done, resulting in significant delays in the audit process. 20. According to the Respondent, after a thorough review of the available documents and records, it was determined that the taxpayer was ineligible for the refund due to discrepancies identified between the export data and the income declared in the VAT Returns. 21. The Respondent reiterated that the tax agent did not comply with multiple audit notices requiring timely submission of supporting documents. Despite repeated follow-ups by email, telephone calls, and company visit, key documents were delayed, causing prolonged audit delays and non-compliance with statutory requirements. 22. It stated that there were errors and inconsistencies in VAT return declarations. The Respondent stated that the taxpayer incorrectly classified zero-rated supplies (exports) as exempt sales in the VAT returns, rendering the original refund applications inaccurate. It asserted that this misclassification necessitated rejection of the initial refund claims to allow amendment of VAT-3 returns, confirming that the refund applications were not supported by correctly filed returns at the time of audit. 23. The Respondent asserted that the Appellant failed to reconcile export data with declared income. It asserted that the refund claims were based on zero-rated exports, yet discrepancies were identified between export data and income declared in VAT and income tax returns. it contended that the taxpayer failed to provide reconciliations or sufficient evidence confirming that the goods were exported, despite repeated requests. As a result, the audit team could not validate the eligibility of the refund claims. 24. The Respondent relied on Section 17 VATA and Paragraph 1, Part I of the Second Schedule to the VATA. **Respondent’s prayers** 1. The Respondent prayed that this Honourable Tribunal be pleased dismiss the Appeal. **ISSUES FOR DETERMINATION** 1. Having examined the pleadings, the Tribunal identified the following issues for determination: 2. Whether the Refunds Applications lodged on 5th February 2025 and 10th April 2025 were deemed allowed by operation of law. 3. Whether the Respondent was justified in rejecting the Appellant’s VAT refund applications. **ANALYSIS AND FINDINGS** 1. Having identified the issues for determination, the Tribunal proceeds to analyse the same as hereunder. 2. **Whether the Refunds Applications lodged on 5th February 2025 and 10th April 2025 were deemed allowed by operation of law.** 3. The Appellant relodged VAT claim refund applications which the Respondent acknowledged receipt *vide* refund application acknowledgment receipts dated 5th February 2025 and 10th April 2025. The Respondent issued VAT claim rejection orders dated 23rd September 2025 and 29th September 2025. 4. The Appellant submitted that the Respondent's ascertainment and determination of the Appellant's VAT refund application was invalid and outside the statutory timelines as provided for under Section 47(3) and 47(4A) of the TPA. Further, that the Respondent's grounds of rejection of the Appellant's VAT refund applications were not valid; that the Appellant had amended the VAT returns prior to lodging the refund applications; and that the Appellant provided sufficient information to support approval of refunds. 5. The Respondent rejected the first VAT refund application *vide*VAT claim rejection orders dated 7th and 8th November 2024. Those rejection notices were not in issue in this appeal. What was in issue was VAT claim rejection orders dated 23rd September 2025 and 29th September 2025 against which the Appellant lodged this appeal. 6. The Respondent carried out multiple audits on the Appellant’s claims. The Respondent’s role was to ascertain the validity of the Appellant’s VAT refund application, and had a duty in law to issue the decision on the refund within ninety (90) days upon receipt of the applications for refund, failure to which the application would be deemed ascertained and approved, according to Section 47(2) and (3) of the TPA which provided as follows: - *“47. (1)…* *(2) The Commissioner shall ascertain and determine an application under subsection (1)* ***within ninety days*** *and where the Commissioner ascertains that there was an overpayment of tax—* *(a) in the case of an application under subsection (1)(a), apply the overpaid tax to such outstanding tax debts or future tax liability; and* *(b) in the case of an application under subsection (1)(b), refund the overpaid tax within a period of six months from the date of ascertainment and, if the Commissioner fails to refund, the overpaid tax shall be applied to offset the taxpayer’s outstanding tax debt or future tax liabilities.* *(3)Where the Commissioner fails to ascertain and determine an application under subsection (1)* ***within ninety days, the same shall be deemed ascertained and approved****.* 1. The Respondent under Section 47(4) of the TPA is empowered to conduct audits for purposes of ascertaining the validity of a refund application, and issue a refund decision within specified timelines according to Section (4A) of the TPA which provides as follows: *“47 (4) The Commissioner may, for purposes of ascertaining the validity of an application under subsection (1), subject the application to an audit.* *(4A) Where an application under subsection (1) has been subjected to an audit under subsection (4), the Commissioner shall ascertain and determine the application within* *one hundred- and twenty-days failure to which, the application shall be deemed to have been ascertained and approved.”* 1. Where the Respondent does not subject a refund application to audit, the Respondent has an obligation to issue its decision within ninety days. On the other hand, where the Respondent subjects a refund application to audit, the Respondent has to issue the decision within one hundred- and twenty-days. In both scenarios, the application is deemed to have been ascertained and approved if the Respondent fails to issue the decision within those timelines. 2. The Respondent issued VAT claim rejection orders dated 23rd September 2025 and 29th September 2025 in respect of the Appellant’s refund applications lodged on 5th February 2025 and 10th April 2025 . The VAT rejection orders dated 23rd and 29th September 2025 were issued beyond one hundred- and twenty-days after receipt of the refund applications. 3. In **Multicolor Corporation Kenya Limited v Commissioner of Domestic Taxes [2025] KETAT 330 (KLR)** this Tribunal observed as follows: *103. According to Section 47 (4), the Commissioner has discretion to audit refund applications; upon exercising this discretion, Section 47 (4A) obliges the Commissioner to determine the application within 120 days* 1. Further, in **Associated Battery Manufacturers (EA) Limited v Commissioner of Domestic Taxes [2025] KETAT 339 (KLR)**, this Tribunal observed inter alia: *Tribunal noted the provisions of Sections 47 (2), 47 (3) and 47 (4) of the TPA which are couched in mandatory terms. Of particular importance to the matter at hand was the requirement for the Respondent to ascertain and determine a refund application within 90 days, or within 120 days if subjected to an audit.* 1. Section 56(1) of the TPA and Section 30 of the Tax Appeals Tribunal Act CAP 469B places the burden of proof upon the taxpayer. The Appellant discharged the burden. It managed to demonstrate that the VAT Claim Rejection Orders dated 23rd September 2025 and 29th September 2025 were time barred. 2. Accordingly, the Tribunal finds and holds that the Appellant’s refund applications lodged on 5th February 2025 and 10th April 2025 were deemed allowed by operation of law upon the lapse of one hundred and twenty (120) days from the date of application, and that the Respondent’s rejection of the refund applications on 23rd September 2025 and 29th September 2025 is null and void by operation of law. 3. Having established the foregoing, the Tribunal shall not delve into the other matter listed for determination as it has been rendered moot. **FINAL DECISION** 1. The upshot to the foregoing is that the Tribunal finds and holds that the Appeal is meritorious and makes the following orders:- 1. The Appeal be and is hereby allowed; 2. The VAT Claim Rejection Orders dated 23rd and 29th September 2025 be and are hereby set aside; 3. The Respondent is hereby directed to refund the Appellant Kshs. 21,534,984 for the periods of September 2023 to December 2023 and May 2024 to June 2024 within ninety (90) days of the date of this Judgment in accordance with the provisions of Section 47 of the TPA; and 4. Each party to bear its own cost. 2. It is so ordered. **DATED AND DELIVERED AT NAIROBI THIS 2ND DAY OF JUNE 2026.** **……………………………..….** **ROBERT M. MUTUMA** **CHAIRMAN** **……………………………… ……..….……..……………..** **JIMMY M. MALLA. GLORIA A. OGAGA MEMBER MEMBER** **………………………………** **DR. TIMOTHY B. VIKIRU** **MEMBER**