[2023] KETAT 169 (KLR)

Uni-Truck World Limited v Commissioner of Domestic Taxes (Appeal 579 of 2021) [2023] KETAT 169 (KLR) (10 February 2023) (Judgment)

Neutral citation: [2023] KETAT 169 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Appeal 579 of 2021

E.N Wafula, Chair, Cynthia B. Mayaka, Grace Mukuha, AK Kiprotich & Jephthah Njagi, Members

February 10, 2023

Between

Uni-Truck World Limited

Appellant

and

Commissioner Of Domestic Taxes

Respondent

Judgment

1. The Appellant is a limited Company incorporated in Kenya under the Companies Act. Its main principal activity is manufacture of motor vehicle trailers and semi-trailers.

2. The Respondents is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act, Cap 460 laws of Kenya. 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) with respect to the performance of its function under subSection (1), the Authority is mandated to administer and enforce all provisions of the written laws as set out in Part 1 & 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 carried out a returns review and during the process, it performed an analysis of purchases claimed by purchasers and sales declared by the Appellant for January 2018.

4. During the said review, it was discovered that there were inconsistencies between the returns filed by the Appellant's suppliers and invoices claimed by the company for the months of January, February, April and May 2018.

5. As a result, the Respondent raised additional assessments on 15th November, 2019 for VAT for the month of January, February, April and May 2018 totaling to Kshs. 193,412. 99. 00

6. The Appellant lodged an objection on 13th December, 2019 on iTax which was duly acknowledged by the Respondent on the same day.

7. On 28th April 2021, the Respondent sent an email to the Appellant informing it that the objection application was under review. The Respondent further indicated that the proof of payment provided does not match the invoices amount claimed and the Appellant was asked to provide proof of payments in support of its objection in order for the Respondent to conclude the review.

8. After back and forth communication with the Respondent, the Appellant submitted the required details on 30th June 2021.

9. On 19th August 2021, the Appellant received an Objection Decision from the Respondent indicating that the Commissioner had agreed to partially accept the objection by allowing input tax that was fully supported while disallowing input tax that was not fully supported.

10. The Appellant being dissatisfied with the objection decision, filed a Notice of Appeal at the Tribunal on the 30th August, 2021.

The Appeal 11. The Appeal is premised on the following grounds as stated in the Memorandum of Appeal dated 20th September 2021 and filed on 22nd September, 2021:-a.The objection decision is illegal null and void as the same was made outside of the statutorily required period of 60 days in contravention of Section 51(11) of the Tax Procedures Act.b.That the objection decision specifically on all the assessment numbers is unwarranted illegal null and void as the same was arrived at without taking into consideration all the information and documentation provided by the taxpayer.c.That the objection decision dated 19th August, 2021 in totality is unwarranted illegal null and void as the same does not provide proper reasons as to why the same was disallowed partially.d.That the decision is unreasonable and procedurally unfair and against Article 47(1) of the Constitution of Kenya 2010 as read together with Section 4(3) (g) and 6(2)(b) of the Fair Administrative Actions Act, Act No. 4 of 2015. e.That the objection decision is unwarranted illegal null and void as the same failed to take into account all the documents and records provided.f.That the objection decision is unwarranted illegal null and void as the same does not provide:i.That the decision does not indicate the proper reasons for disallowing the objection partially.ii.That the decision arbitrarily quotes that the claims stipulated did not qualify under Section 17 of the VAT Act, 2013 without quoting the specific sub• Section as a justification of the decision.iii.That the decision is unreasonable and procedurally unfair and against Article 47(1) of the Constitution of Kenya 2010 as read together with Section 4(3) (g) and 6(2) (b) of the Fair Administrative Actions Act, Act No. 4 of 2015. iv.That the Commissioner further stated that the decision was made based on the facts and documents submitted yet he clearly failed to consider and disregarded some of the documents provided.

Appellant’s Case 12. The Appellant’s case is premised on the Appellant’s Statement of Facts dated 20th September 2021 and filed on 22nd September 2021 together with the documents attached thereto and the written submissions dated 16th May, 2022 and filed on 30th May, 2021 together with the authorities filed therewith.

13. That on the 15th November, 2019, four emails that had attached additional assessments on VAT were sent to the Appellant’s company email by the Respondent.

14. That there were four additional assessments whose assessment numbers were KRAxxxx for the period of 1st January, 2018 to 31st January, 2018; KRAxxxx for the period of 1st February, 2018 to 28th February, 2018; KRAxxxx for the period of 1st April, 2018 to 30th April, 2018 and KRAxxxx for the period of 1st May, 2018 to 31st May, 2018.

15. That the Appellant acknowledged receipt of the additional assessments on the 15th November, 2019 and immediately lodged what it believed was an objection given the clear facts and circumstances of my case.

16. That the Appellant believed its objection letters were very clear as the facts of its case were very simple and any additional information required was promptly provided.

17. That after sending the objection letters to the Commissioner on his additional assessments on the 13th December, 2019, the Appellant received the objection application acknowledgement receipts on the same day.

18. That thereafter, it never heard and/or received any communication from the Respondent for a period of over 60 days.

19. That on the 28th of April, 2021 an email from the Respondent was sent to the Appellant informing it that its objection application was still under review and asking for more documents in support of the objection on the basis that the proof of payment provided did not match to the amount claimed.

20. That further, the email, gave the Appellant a period of 7 days within which to provide the supporting documents, that is on or before the 5th May, 2021.

21. That it received the aforementioned email on the 28th April, 2021 and responded to it on the 5th June, 2021 by asking for a further 14 days to provide the requested documents because it had to look for the highlighted payment details and petty cash vouchers.

22. That on 24th June, 2021, the Appellant received another email from the Respondent stating that it should furnish the remaining supportive documents by 28th June, 2021.

23. That on the 30th June, 2021 the Appellant forwarded to the Commissioner an updated sheet depicting all the relevant details required through an email.

24. That thereafter, it received no further communication from the Respondent till the 19th August, 2021 when it received an objection decision from the Respondent's office and which decision indicated that the aforementioned assessments had been confirmed and the four objections had been partially confirmed.

25. That the objection further indicated that only the input tax that was fully supported was allowed and that some of the invoices provided did not qualify for claim under Section 17 of the VAT Act, 2013.

26. That consequently, the Appellant lodged a Notice of Appeal against the said objection decision on 30th August, 2021 indicating that all the information required had already been provided for as earlier requested and asking them to update and review the same.

27. That from the foregoing set of facts, the Appellant believes that the objection decision was made in bad faith and devoid of any legal and procedural backing, this is borne from the fact that:i.As evidenced hereinabove, the objection decision was made ultra vires as it was made outside the stipulated period of 60 days as required under Section 51(11) of the Tax Procedure Act No 29 of 2015. ii.That the objection decision was arrived at in a span of approximately 20 months, out of the statutorily required period of 60 days and the Respondent in an act of legalizing his illegal and void actions was pretending to be asking for additional documents from the Appellant in an effort to legalize his objection decision.iii.That even by the time the Respondent sought for more documents from the Appellant, the stipulated 60 days had already lapsed which meant that the objection was allowed by default.iv.That even despite the fact that the Appellant provided the Respondent with all the information that they had requested for, the Respondent failed to take some of the information into consideration and proceeded to disallow the objection partially.v.That the actions of the Respondent pretending to ask the Appellant for additional documents while disregarding some of the information in order to ratify their objection decision is an affront to the spirit of the Constitution and specifically the provisions of Article 10(2) of the Constitution.vi.That the objection decision is also ambiguous as it arbitrarily quotes that the claims stipulated did not qualify under Section 17 of the VAT Act, without quoting the specific sub-Section as a justification of the decision.

28. That further the Respondent is mandated by law specifically Section 58(10) of the Tax Procedures Act in his objection decision to include a statement of finding on the material facts and the reasons he made the decision.

29. That in the Appellant’s instant case and as has been demonstrated supra, the Respondent did not provide any material information that led to his additional assessment and also the objection decision.

30. That instead, the Respondent indicated as a side note that the Appellant failed to provide sufficient documentary evidence as requested by the Respondent.

31. That it is evident that the Appellant produced sufficient evidentiary records enough to make the Respondent to make an objection decision.

32. That further the Respondent has not charged the Appellant and/or put the Appellant under investigation for any fraudulent activities in line with my tax obligations and as such, the documents the Appellant produced to the Respondent ought to have sufficed as the relevant documentary evidence for the said period.

33. That from the foregoing, it is evident if the Respondent was under the impression that there was more relevant evidentiary evidence, the Respondent would have informed the Appellant and/or given the Appellant sufficient information that the Respondent used as the basis of the additional assessment to enable rhe Appellant give the Respondent any appropriate information and/or relevant documentary evidence as is a pre-requisite of the Constitution of Kenya 2010.

34. That this principle was espoused in the case of P2 Customs EA Ltd Vs KRA (Petition 309 of 2012) whereby it was opined that the KRA should not arbitrarily charge tax on the basis of information that is in its sole possession.

35. That further and from the foregoing it is evident that the objection decision was also made in violation of the basic tenets of natural justice.

36. That on the 15th November,2019, the Respondent sent the Appellant emails that had attached additional assessment on VAT whose assessment numbers were KRAxxxx for the period of 1st January, 2018 to 31st January, 2018; KRAxxxx for the period of 1st February, 2018 to 28th February, 2018; KRAxxxx for the period of 1st April, 2018 to 30thApril, 2018 and KRAxxxx for the period of 1st May, 2018 to 31st May, 2018.

37. That the Appellant acknowledged receipt of the additional assessments on the 15th November, 2019 and immediately lodged an objection promptly providing all the additional information required.

38. Thereafter, the Respondent acknowledged receipt of the objection application on the 13th December, 2019 and no further communication was received from the Respondent for a period of over 60 days.

39. That in the case of Republic v Commissioner of Domestic Taxes Ex Parte Fleur Investments Limited [2020] eKLR the Honorable Judge John M. Mativo stated;“I find backing in Republic v Commissioner of Customs Services Ex-Parte Unilever Kenya Limited in which the court stated that if the Commissioner does not render a decision within the stipulated period, the objection is deemed as allowed by operation of the law. The Act requires that where the Commissioner has not made an objection within 60 days from the date the taxpayer lodged the notice of objection, the objection shall be allowed. This means that the issues that the taxpayer had raised in the objection will be accepted”.

40. That despite the requisite timelines having lapsed on the 28th of April, 2021 an email from the Respondent was sent to the Appellant informing it that the objection application was still under review and asking for more documents in support of the objection on the basis that the proof of payment provided did not match the invoices amount claimed.

41. That the afore-mentioned supporting documents were to be provided within a period of 7 days, that is on or before the 5th May, 2021. The Appellant sought for more time of a further 14 days to provide the requested documents because it had to look for the highlighted payment details and petty cash vouchers.

42. That on the 24th of June, 2021, the Respondent asked the Appellant to furnish the remaining supportive documents by 28th June, 2021 and by the 30th June, 2021 the Appellant had forwarded to the Commissioner an updated sheet depicting all the relevant details required through an email.

43. That no further communication was received from the Respondent till the 19th August, 2021 when the Appellant received an objection decision from the Respondent. The decision indicated that the aforementioned assessments had been confirmed and the four objections had been partially confirmed.

44. That the objection further indicated that only the input tax that was fully supported was allowed and that some of the invoices provided did not qualify for claim under Section 17 of the VAT Act, 2013.

45. That as evidenced hereinabove the objection decision was made ultra vires as it was made outside the stipulated period of 60 days as required under Section 51(11) of the Tax Procedure Act No 29 of 2015.

46. That the objection decision was arrived at in a span of approximately 20 months, out of the statutorily required period of 60 days and the Respondent in an act of legalizing his illegal and void actions was pretending to be asking for additional documents in an effort to legalize his objection decision.

47. That even by the time the Respondent sought for more documents from the Appellant, the stipulated 60 days had already lapsed which meant that the objection was allowed by default.

48. Furthermore, that despite being provided with all the information that they had requested for, the Respondent failed to take some of the information into consideration and proceeded to disallow the objection partially.

49. That the actions of the Respondent pretending to ask for additional documents while disregarding some of the information in order to ratify their objection decision is an affront to the spirit of the Constitution and specifically the provisions of Article 10(2) of the Constitution of Kenya 2010.

50. That in the case of PZ Cussons East Africa Limited v Kenya Revenue Authority [2013] eKLR it was rightly stated that:"Just like any other state organs, KRA is bound by the provisions of the Constitution to respect and uphold the bill of rights. Its mandate is not only confined to statutory frameworks but to the higher values of the Constitution such as the national values and principles of good governance enunciated under Article 10. "

51. That moreover, the objection decision was ambiguous to say the least as it arbitrarily quotes that the claims stipulated did not qualify under Section 17 of the VAT Act, 2013 without quoting the specific sub-Section as a justification of the decision.

52. That the Respondent did not include a statement of finding on the material facts and the reasons for his decision as mandated by law specifically Section 58(10) of the Tax Procedures Act.

Appellant’s Prayers 53. The Appellant made the following prayers:-a.A declaration be made that the actions of the Respondent were made ultra vires the Tax Procedures Act.b.A declaration be made that the objection decision is illegal null and void and or in the alternative.c.The Tribunal to wholly quash the objection decision made on the 19th August, 2021. d.The costs of the Appeal be borne by the Respondent.

Respondent’s Case 54. The Respondent’s case is premised on the hereunder filed documents and proceedings before the Tribunal:-i.The Respondent’s Statement of Facts dated 4th November, 2021 and filed on 5th November, 2021 together with the documents attached thereto.ii.The Respondent’s written submissions dated 27th June, 2022 and filed on 29th June 2022 together with the legal authorities filed therewith.

55. The Respondent stated that it carried out a returns review and during the process, it performed an analysis of purchases claimed by purchasers and sales declared by suppliers for the month of January 2018.

56. That during the said review, it was discovered that there were inconsistencies between the returns filed by the Appellant's suppliers and invoices claimed by the company for the months of January, February, April and May 2018.

57. That further to the review, the Appellant was informed on the inconsistency of the VAT3 returns invoices for the Appellant to resolve the same. The Appellant failed to resolve the said inconsistencies within the stipulated timeframe.

58. That in addition to the review, a review of the taxpayer's records and iTax returns for the taxpayer and its suppliers revealed the following causes of inconsistencies:i.Most suppliers such as Amirs Auto Spares Ltd, Waka Electrical Services, Farm parts Kenya Limited among others lumped their sales while doing their monthly VAT returns whereas the Appellant claimed individual invoices.ii.Non-compliant supplier (non and nil filers) such as Prime Mattresses Traders, who filed nil returns for the months under review and the Appellant failed to provide all supportive documents such as supplier statement and written confirmation to ascertain that supply took place.iii.Some of the suppliers, such as Doshi Enterprises Limited failed to declare the sale to the Appellant and no proof that the same took place was provided.

59. That as a result, the Respondent based on the existing inconsistencies raised additional assessments on 15th November, 2019 for VAT for the months of January, February, April and May for year 2018 totaling to Kshs. 193,412. 99. 00.

60. That the Appellant lodged an objection on 13th December, 2019 on iTax which was duly acknowledged by the Respondent.

61. That in light of the above, the Respondent issued a demand for documents in line with the objection lodged through email for delivery notes, invoices, purchase invoices, delivery notes, supplier statements and proof of payment.

62. That the Appellant however failed to provide the relevant supporting documents of records and invoices for the month of January, February, April and May for year 2018 in support of its objection. The Appellant's VAT was therefore estimated, as this was the only reasonable basis of assessing the VAT tax and Objection decision issued.

63. The Respondent avers that the assessments were correctly issued and conform to the Tax Procedures Act. The Respondent submits that the Appellant lodged the objection on 13th December, 2019 on iTax. The same was received and acknowledged. The Respondent submits that the {{>/akn/ke/act/2015/29 Tax Procedures Act} empowers the Respondent to notify a taxpayer where an objection as lodged is invalid and the Appellant was notified via email and requested to provide documents. However, no evidence was provided to address issues raised hence the said assessment was confirmed vide objection decision. That the relevant Section 51(4) of the Tax Procedures Act provides as follows :-“Where the Commissioner has determined that a notice of objection lodged by a taxpayer has not been validly lodged, the Commissioner shall immediately notify the taxpayer in writing that the objection has not been validly lodged.”

64. That the Respondent further submits that the tax was reached at based on the information available and provided by the Appellant and the Commissioner is empowered by the Tax Procedures Act to make decisions. The assessment was based on the information provided. The relevant Section 29(1) of the Tax Procedures Act provides as follows:-“Where a taxpayer has failed to submit a tax return for a reporting period in accordance with the provisions of a tax law, the Commissioner may, based on such information as may be available and to the best of his or her judgement, make an assessment (referred to as a "default assessment.”

65. That the taxpayer underdeclared the income for the period under review contrary to the provisions of the Income Tax Act. The Respondent avers that according to the Income Tax Act, it is the responsibility of any person carrying on business to maintain records of all transactions. The relevant Section of the Act provides as follows:“54A (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 and:55(2) A person carrying on a business shall preserve every book of account and every document, which is essential to the explanation of any entry in any book of account, relating to the business for a period of not less than ten years after the year of income to which that book of account or document relates.”

66. That the Tax Procedures Act further provides at Section 97 thereof that providing false or misleading information during a tax period is an offence under the Act. The Section states as thus:“Any person who, in relation to a tax period knowingly-(a)omits from his or her return any amount which should have been included; orc.makes any incorrect statement which affects his or her liability to tax;d.prepares false books of accounts or other records relating to that other person or falsifies any such books of account or other records; ore.deliberately defaults on any obligation imposed under a tax law Commits an offence.”

67. Further, the Respondent insists that the Appellant failed to provide signed financial statements and books of accounts to support its allegations. The Tax Procedures Act empowers the Respondent to carry out assessments based on information available. The Respondent avers that the assessment was issued based on information provided. The relevant Section provides as follows:“24 (1) A person required to submit a tax return under a tax law shall submit the return in the approved form and in a manner prescribed by the Commissioner.(2)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.”

68. The Respondent asserts that the Appellant supplied insufficient documents and the Respondent has embraced the self-assessment regime through trust and facilitation and only verifies information when in doubt of the declarations made in the tax returns. That the Respondent deals with each taxpayers' matter independently and based on available information. The Respondent relied on Sections 15 and 16 of the Income Tax Act which state that:“15(1) For the purpose of ascertaining the total income of a person for a year of income there shall subject to Section 16, be deducted all expenditure incurred in that year of income which is expenditure wholly and exclusively incurred by him in the production of that income, and where under Section 27 any income of an accounting period ending some day other than the last day of that year of income is for the purpose of ascertaining total income for a year of income taken to be income for a year of income then the expenditure incurred during that period shall be treated as having been incurred during that year of income.16. Save as otherwise expressly provided, for purposes of ascertaining the total income of a person for a year of income, no deduction shall be allowed in respect of –a.expenditure or loss which is not wholly and exclusively incurred by him in the production of the income;b.Capital expenditure, or any loss, diminution or exhaustion of capital.”

69. The Respondent submits that the Tribunal should be guided by the following considerations:a.Were any documents provided to justify the Appellant’s objection?b.Were the annual taxation returns of income as done by the Appellant from time to time correct and complete?c.Were any transactions omitted from or incorrectly recorded in the Appellant's books of accounts /bankings?1. The Respondent insists that Section 23(1) (b) of the Tax Procedures Act makes it an obligation for a taxpayer to maintain any document required under a tax law to enable the person's tax liability to be readily ascertained.2. Further to that, that the Appellant's Objection was devoid of substance and failed to include any supporting records to validate the Appellant's claims as required under Section 51 of the Tax Procedures Act. This left The Respondent no option but to issue an Objection Decision confirming the assessment pursuant to Section 51(9) of the Tax Procedures Act in order to comply with timelines.3. That the Court in Commissioner of Domestic Taxes vs Altech Stream (EA) Limited [2021] eKLR stated that both Sections 29(1) and 31(1) of the Tax Procedures Act allow the Respondent, to make an assessment based on such information as may be available and to the best of his judgment.4. That in Monaco Engineering Limited-V- Commissioner of Domestic Taxes TAT Appeal No.67/2017, the Tribunal stated that:“The Tribunal has indubitably been clear on the burden on tax payers to have documents in disputing tax assessments. This responsibility is precisely provided for in Section 54 A (1) of the Income Tax Act which provides thus; "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.In addition, Section 56 (1) of the Tax Procedures Act-, 2015 provides as follows; In any proceedings under this Part, the burden shall be on the taxpayer to prove that a tax decision is incorrect.The burden of proof was on the Appellant lo raise the specific items and/ or aspects of the assessment that were manifest errors, wrongfully imposed or not liable to be paid as tax. More particularly, the burden was on the Appellant to demonstrate that it did not under declare itsincome in its self-assessed returns. However, that was not the case with this Appellant"

74. That in Jolin Githua Nioqu vs Commissioner Investigation & Enforcement TAT 101/2018 the Honorable Tribunal stated that:-"The Tribunal has considered the provisions of the law and more particularly Section 30 0f the Tax Appeals Tribunal which provides that:-In a proceeding before the Tribunal, the Appellant has the burden of proving-a.an appeal relates to an assessment, that the assessment is excessive; orb.in any other case, that the tax decision should not have been made or should have been made differently”."In this Appeal, the Tribunal did not find enough evidence to show that the net income the Respondent has based the tax assessment was not income or is subject to further cost deduction in arriving at a net profit."

75. The Respondent urged the Tribunal to borrow guidance from the case of Commissioner of Domestic Taxes vs Metoxide Limited [2021} where the Court held that:"Section 56(1) of the Tax Procedures Act provides that, the taxpayer has the burden of proving that a tax decision is incorrect. It is common knowledge that, the Kenyan system of taxation is based on self- assessment. The taxpayer assesses self and remits what he/it considers to be the tax due to the tax authorities. In this regard) the tax laws mandate the Appellant to later on assess the tax payer in order to ascertain whether the tax remitted was proper or not. Ordinarily, the assessment is made years after the tax has fallen due and been paid or the economic activity or commercial transaction for which the tax arises has been undertaken. It is for this reason that the tax laws in this country shoulder the tax payer with the burden of disproving the correctness of the Appellant's tax decision.''

Respondent’s Prayers 76. The Respondent prays that The Tribunal considers the case and finds that:a.That the Respondent's objection decision be upheld.b.The outstanding tax arrears of Kshs. 193,412. 99. 00 are due and payable by the Appellant.c.The confirmed assessments dated 15th November, 2019 were proper in law.d.That the Appeal herein be dismissed with cost to the Respondent.

Issues For Determination 77. The Tribunal having carefully studied the pleadings and documentation together with the submissions of both parties is of the respectful view that the issues falling for its determination are as follows:-a.Whether the objection filed by the Appellant on 13th December 2019 was allowed by operation of the law.b.Whether the objection decision made by the Respondent on 19th August 2019 was proper in law.c.Whether the Respondent erred in fact and in law in issuing additional tax assessments.Analysis And Findingsa)Whether the objection filed by the Appellant on 13th December 2019 was allowed by operation of the law.

78. On 15th November 2019, the Appellant received four additional assessments on VAT whose assessment numbers were KRAxxxx for the period of 1st January, 2018 to 31st January, 2018; KRAxxxx for the period of 1st February, 2018 to 28th February, 2018; KRAxxxx for the period of 1st April, 2018 to 30th April, 2018 and KRAxxxx for the period of 1st May, 2018 to 31st May, 2018 from the Respondent.

79. The Appellant objected to the assessments on 13th December 2019 and received objection application acknowledgements on the same day.

80. On 14th February, 2020 which was 73 days later, the Appellant received an email on the four objections stating that:-“In order to review your objection, the Commissioner requires you to produce proof of purchase against the disallowed invoices, including evidence of delivery of goods and services and payment for the same. The Proof of payment shall include the details of your bank account as well as the suppliers bank account, paybill and or till number through which the payment was made”.

81. The Appellant provided the required information and on 28th April, 2020 received an email informing it that:-“Your objection application is under review. However, the proof of payment provided does not match to the invoices amount claimed. Please let us have proof of payments in support of your objection in order for us to conclude the review.”

82. The Appellant was given 7 days to provide the required documents but asked for additional time and provided the required documents on 30th June 2021.

83. Based on these documents, the Respondent made an Objection Decision on 19th August 2021. Out of the total amount of Kshs. 4,310,593. 98 objected to a sum of Kshs. 4,117,180. 99 was allowed and the Appellant was required to pay Kshs. 193,412,99 which was not allowed.

84. The Tribunal finds that Section 51(11) of the Tax Procedures Act states with regard to the timeline for the issuance of an Objection decision as follows;“The Commissioner shall make the objection decision within sixty days from the date of receipt of-a.the notice of objection; orb.any further information the Commissioner may require from the taxpayer,failure to which the objection shall be deemed to be allowed.”

85. The Tribunal has established that the Appellant filed an objection on 13th December 2019 and the same was acknowledged on the same date. The Respondent did not respond to the objection within sixty days and the objection was therefore allowed by operation of the law.

86. The Court, in the case of Republic vs Commissioner of Domestic Taxes Ex Parte Fleur Investments Limited [2020] eKLR the Honorable Judge John M. Mativo held that:“I find backing in Republic v Commissioner of Customs Services Ex- Parte Unilever Kenya Limited in which the court stated that if the Commissioner does not render a decision within the stipulated period, the objection is deemed as allowed by operation of the law. The act requires that where the Commissioner has not made an objection within 60 days from the date the tax payer lodged the notice of objection, the decision objection shall be allowed. This means that the issues that the tax payer had raised in the objection will be accepted”.

87. The Tribunal also finds that while the issue of the Tax Decision being made after the statutory period of sixty days was raised by the Appellant in the Memorandum of Appeal, the Statement of Facts and in the submissions, the Respondent chose not to address it in all the documents filed before the Tribunal on its part.

88. In the Case, TAT 127 of 2020, BIC East Africa Ltd vs Commissioner of Customs & Border Control, the Tribunal held that;“Additionally, the Tribunal finds the Respondent's late response to the review application to be in gross violation of Section 229 (5) of the EACCMA 2004 which stipulates that the where the Respondent had not communicated his or her decision within the specified time of 30 days, the review application shall be deemed to have been allowed by the Respondent. To contextualize this, as of 7th June 2019 the Appellant's review application was deemed allowed meaning that it had not tax liability in the eyes of the law. It also meant that the Appellant was well within its right to apply for a refund of the taxes paid earlier under protest. Our resolve in this regard is further cemented in light of the fact that Section 229 (4) & (5) of the EACCMA are cushioned in mandatory terms, hence the Respondent was not allowed to extend the same timelines. (See Associated Battery Manufacturers limited versus Respondent of Customs Services (TAT Appeal No 1 of 2015)

89. The Tribunal is further guided by the holding of Korir J in Republic vs. Tetra Pak limited (2012) eKLR where the Judge held that:“non-communication of the Respondent's decision within the statutory period of 30 days meant that the Applicant's application for review had been allowed by operation of the law (Section 229 (5)) and that the tax payer did not thereafter owe taxes that had been demanded by the Respondent. By making her decision on the Applicant's application slightly over the two months after receiving it and in communicating her decision six months later, the Respondent grossly violated the provisions of Section 229 (4) of the Act and under Section 229 (5), the Respondent was in law presumed to have accepted the Applicant's application for review”

90. Having found that the objection by the Appellant was allowed by operation of the law, the Tribunal did not delve into the other issues that fell for its determination as they have been rendered moot.

Final Decision 91. The upshot of the foregoing analysis is that the Appeal is merited and consequently the Tribunal proceeds to make the following Orders: -a.The Appeal be and is hereby upheld.b.The Respondent’s Objection Decision dated 19th August 2021 be and is hereby set aside.c.Each party to bear its own costs.

92. It is so ordered.

DATED AND DELIVERED AT NAIROBI ON THIS 10TH DAY OF FEBRUARY, 2023ERIC N. WAFULA CHAIRMANCYNTHIA B. MAYAKA GRACE MUKUHA MEMBER MEMBERABRAHAM KIPROTICH JEPHTHAH NJAGI MEMBER MEMBER