[2025] KETAT 79 (KLR)

Vojak Investments Limited v Commissioner of Domestic Taxes (Tax Appeal E927 of 2023) [2025] KETAT 79 (KLR) (31 January 2025) (Judgment)

Neutral citation: [2025] KETAT 79 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal E927 of 2023

CA Muga, Chair, BK Terer, E Ng'ang'a & SS Ololchike, Members

January 31, 2025

Between

Vojak Investments Limited

Appellant

and

Commissioner of Domestic Taxes

Respondent

Judgment

Background 1. The Appellant is a registered taxpayer whose principal activity is construction with two tax obligations, being income tax company and VAT.

2. The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act, CAP 469 of Kenya’s Laws (hereinafter “the Act”) . 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 assessment orders amounting to Kshs 4,893,824. 63 dated 11th March 2022 and 29th March 2022 concerning withholding certificates where the Appellant allegedly claimed withholding tax without corresponding sales. The Respondent rejected the Appellant’s objection to the assessments on 25th September 2022 and 26th September 2022.

4. The Appellant lodged its Notice of Appeal dated 23rd November 2023 and filed on 12th December 2023.

The Appeal 5. The Appeal is premised on the Memorandum of Appeal dated 23rd November 2023 and filed on 12th December 2023 wherein the Appellant raised the grounds of appeal as summarised hereunder:a.That whereas the assessments were based on VAT withholding certificates, the Appellant never did any work with the Ministry of Finance and Planning (the withholder on the mentioned VAT withholding certificates), neither did the Appellant receive any payment from Ministry of Finance and Planning through any method, including but not limited to the bank account of the Appellant.b.That the VAT withholding certificates are false, erroneous and non-existent to the extent that Appellant had no relationship with them, except that the bear the name and pin of Appellant as the withholdee.c.That the Appellant raised the claim of these VAT withholding certificates as fraudulent to the extent of reporting the matter to the Kisumu Central Police station through OB NO. 67/30/5/22 at 1630 hrs with the DCI.d.On fair administration of taxes, taxes should be levied only on where it is due, as the Appellant has clearly demonstrated that in the aforementioned circumstances, there are no taxes due on the Appellant.

Appellant’s Case 6. The Appellant relied on its Statement of Facts dated 23rd November 2023 and filed on 12th December 2023. The Appellant failed to file written submissions.

7. The Appellant stated that it was issued with additional assessments through assessment order numbers: KRA202203348889 and KRA202204230127 on 11th March 2022 and 29th March 2022 with amounts Kshs 1,540,592. 14 and Kshs 4,142,090. 17 respectively.

8. The additional assessments were based on the following VAT withholding certificates:KRAVWKSM00167253120KRAVWKSMO0167761020: on 08/04/2020 of Kshs 900,000. 00KRAVWKSM00167765120: on 08/04/2020 of Kshs 5,400,000. 00KRAVWKSM00167766120: on 08/04/2020 of Kshs 2,700,000. 00KRAVWKSM00167774120: on 08/04/2022 of Kshs 1,415,094. 00

9. The Appellant stated that it objected to these assessments through iTax on 26th September 2022 providing reasons and grounds of objection. Whereas the assessments were based on the above-mentioned VAT withholding certificates, the Appellant alleged that it never did any work with the Ministry of Finance and Planning (the withholder on the mentioned VAT withholding certificates).

10. The Appellant alleged that it did not receive any payment from Ministry of Finance and Planning through the any method, including but not limited to the bank accounts. Consequently, the Appellant maintained that the VAT withholding certificates are false, erroneous and non-existent to the extent that the Appellant had no relationship with them, except that they bear the name and pin of the Appellant as the withholdee.

11. It is the Appellant’s case that it raised the claim of these VAT withholding certificates as fraudulent to the extent of reporting the matter to the Kisumu Central Police station through OB NO. 67/30/5/22 at 1630 hrs with the DCI.

12. It stated that its objection was rejected through an objection decision letter dated 25thNovember 2022. The Appellant reiterated that on fair administration of taxes, taxes should be levied only on where it is due, as the Appellant has clearly demonstrated that in the aforementioned circumstances, there are no taxes due on the Appellant.

13. Finally, the Appellant stated that the assessments and confirmation was done without the Appellant’s involvement and that the decision to reject Appellant’s objection was made without notifying the Appellant the rationale for the decision.

Appellant’s Prayers 14. The Appellant prayed that the Additional Assessments be set aside.

Respondent’s Case 15. The Respondent having obtained leave to file the statement of facts out time, the Respondent filed its Statement of facts on 22nd February 2024 and written submissions dated and filed on 17th September 2024 in response to the Appeal.

16. The Respondent stated that on 19th January 2022, it noted inconsistencies on the Appellant's returns and pre-assessment notice was issued vide an email dated 19th January 2022. The Appellant was requested to amend its returns within 14 days. It stated that the Appellant failed to respond to the pre-assessment notice and the Respondent sent a reminder on 25th February 2022 and 15th March 2022.

17. The pre-assessment notice was based on hanging withholding certificates where the Appellant had allegedly claimed withholding tax without corresponding sales. The Respondent asserted that the Appellant failed to respond to the same and therefore, the Respondent issued assessment orders dated 11th March 2022 and 29th March 2022. The Appellant thereafter, lodged a late objection to the assessments on 26th September 2022.

18. According to the Respondent, the basis of the Appellant's objection was that the Withholding certificates were fraudulent. The Respondent claimed that it requested the Appellant to provide its documents to support the objection but it failed to do so hence the Respondent confirmed the additional assessments amounting to Kshs 4,893,824. 63 on 25th November 2022. The Appellant then filed this appeal on 12th December 2023.

19. The Respondent raised a preliminary objection against the appeal. It contended that the Appeal is fatally defective as it has been filed contrary to Section 13 (1), (2), (3) and (4) of the Tax Appeals Tribunal Act, CAP 469A of the Laws of Kenya (hereinafter “TATA”). The Respondent averred that the Appeal herein is time barred as the same has been filed contrary to Section 13(3) and (4) of the TATA. The Respondent asserted that the Appellant instituted the Appeal herein on 12th December 2023 which was beyond the 30-day statutory period.

20. The Respondent also raised a second point of law under Section 13(2) of the TATA which provides the procedure for filing an Appeal and the said section states that the taxpayer has to file an appealable decision but, in this case, the Appellant failed to do so.

21. Apart from the foregoing preliminary objection, the Respondent contended that the assessment orders dated 11th March and 29th March 2022 did not constitute an appealable decision as defined by Section 3 of the Tax Procedures Act, CAP 469B of the Laws of Kenya (“hereinafter “TPA”). The Respondent relied on Section 52 of the TPA which provides as follows:“A person who is dissatisfied with an appealable decision may appeal the decision to the Tribunal in accordance with the provisions of the Tax Appeals Tribunal Act.”

22. The Respondent averred that an assessment is not an appealable decision. An Appealable decision is defined in Section 3(1) of the TPA. The Respondent contended that the High Court has already pronounced itself on the issue of procedural guidelines as enshrined in the TATA. The Respondent therefore maintained that the Appeal herein is incompetent and ought to be struck out with costs to the Respondent.

23. In addition to the foregoing, the Respondent stated that the additional assessments were issued in accordance with the provisions of the Income Tax Act, CAP 470 of the Laws of Kenya (hereinafter “ITA”) and the Value Added Tax Act, CAP 476 of the Laws of Kenya (hereinafter “VAT Act”) based on available information which indicated that while the Appellant was in receipt of Withholding Income Tax Certificates in period April 2022, it failed to declare the corresponding sales.

24. It stated that the Appellant alleged in its objection that the withholding certificates had been issued fraudulent however, the Appellant failed to provide conclusive evidence to allegations. According to the Respondent, the Withholding Tax Certificates have not been cancelled by the Appellant and remain as credits in its ledger despite contentions that they were issued in error.

25. The Respondent pleaded the doctrine of approbation and reprobation and submitted that the Appellant on one hand contends that the Respondent wrongfully issued additional assessments and on the other hand the Appellant is opposing the additional assessments yet it is utilizing the VAT credits without declaring the sales or income received. The Respondent noted that the Appellant's appeal is muddled with inconsistencies which are not supported by evidence. The Respondent therefore, asserted that the Appellant has failed to discharge its burden of proof as is required by section 56(1) of the TPA and section 30 of TATA.

26. The Respondent also relied on its written submissions wherein the Respondent submitted that the Appeal is competent. The Respondent submitted that the Appellant's supporting affidavit was incompetent for having been filed without a Notice of Motion application. Further, the Respondent submitted that it did see a copy of Notice of Motion Application despite having obtained pleadings from the Tribunal and that no hearing date for any such application was set by the Tribunal.

27. The Respondent cited the cases of Salsa Global Investment Co. Ltd v Commissioner of Domestic Taxes (2023) eKLR; Boss Freight Terminal Ltd v Commissioner of Domestic Taxes (2015) eKLR; and James Mangeli Musoo v Ezeetec Limited [2014] eKLR to support the preposition that leave to file pleadings out of time must be obtained before pleadings are filed.

28. The Respondent submitted that the Appellant failed to file appealable decision therefore, the appeal is incompetent. It relied on the case of Miguna Miguna v Lufthansa Group operating as Lufthansa German Airlines & 6 others; Kenya Nation Commission on Human Rights & another (Interested Parties) [2021l eKLR, where the High Court held that the court could not grant orders sought without evidence being adduced and as such the matter before it was merely speculative. The Court proceeded and dismissed the Applicant's Application.

29. The Respondent also submitted that the assessments orders dated 11th March 2022 and 29th March 2022 does not constitute an appealable decision as the same does not meet the meaning of appealable decision under section 3 (1) of the TPA as read together with section 52 of the TPA. The Respondent also cited the case of Owners of the Motor Vessel “Lillian S" v Caltex Oil (Kenya) Ltd (1989) eKLR to argue that the Tribunal does not have jurisdiction to hear and determine the appeal.

30. The Respondent also cited the case of Fleur Investments Limited v Commissioner of Domestic Taxes & another [2018] eKLR to argue that a litigant has to adhere to the doctrine of exhaustion. The Court of appeal in the said case stated as follows:“Whereas courts of Law are enjoined to defer to specialized Tribunals and other Alternative Dispute Resolution Statutory bodies created by Parliament to resolve certain specific disputes, the court cannot, being a bastion of justice, sit back and watch such institutions ride roughshod on the rights of citizens who seek refuge under the Constitution and other legislations for protection. The court is perfectly in order to intervene where there is clear abuse of discretion by such bodies, where arbitrariness, malice, capriciousness and disrespect of the Rules of natural justice are manifest. Persons charged with statutory powers and duties ought to exercise the same reasonably and fairly."

31. The Respondent further submitted that the decision to arrive at the additional assessments was justified and had basis in Law as required under the TPA. It relied on Section 31 of the TPA which empowers the Respondent to make alterations or additions to original assessments from available information for a reporting period based on the available information and the Commissioner's best judgement. In this regard, the Respondent cited the cases of Digital Box Ltd v Commissioner of Investigation & Enforcement (2019) eKLR and Commissioner of Domestic Taxes V Altechi Stream (Ea) limited [2021] Eklr to support the position that the Respondent is allowed to use any information that is available to it and use the best of his or her judgment in making the assessment.

32. Finally, the Respondent cited multiple cases including Kenya Revenue Authority v Maluki Kitili Mwendwa [2021] eKLR; Tumaini Distributors Company (K) Limited v Commissioner of Domestic Taxes [2020] eKLR; and Prima Rosa Flowers Limited v Commissioner of Domestic Taxes 2019] eKLR to support the position that a taxpayer has a duty to prove that that the Respondent’s decision is incorrect. The Respondent submitted that the Appellant failed to discharge the burden of proof.

Respondent’s prayers 33. The Appellant urged this Tribunal to uphold the Respondent's demand assessment orders issued on 11th and 29th March 2022 and strike out the appeal with costs to the Respondent.

Issues For Determination 34. The Tribunal having considered the Memorandum of Appeal, the parties’ Statements of Facts, and Respondent’s submissions, notes that a singles issue distils for determination:Whether the Appeal is competent;

Analysis And Findings 35. The Tribunal having established a singular issue will proceed to analyze the issue as follows;

Whether the appeal is competent 36. The Tribunal notes that the genesis of this dispute was the assessment orders issued by the Respondent on 11th of March 2022 and on 29th March 2022 amounting to Kshs 4,893,824. 63. The Appellant averred that the basis of assessment was fraudulently issued VAT withholding certificates which it objected to late. The Respondent rejected the objection on 25th September 2022 and 26th September 2022.

37. Section 13(2) of TATA provides as follows:“The appellant shall, within fourteen days from the date of filing the notice of appeal, submit enough copies, as may be advised by the Tribunal, of—a.a memorandum of appeal;b.statements of facts; andc.the appealable decision; andd.such other documents as may be necessary to enable the Tribunal to decide on the appeal.”

38. Both parties averred that there was an objection decision dated 25th November 2022 but the Tribunal did not have sight of it because neither party attached the decision in their pleadings. Accordingly, the Tribunal’s finding is that the Appeal is incompetent and the Tribunal lacks jurisdiction to entertain it as was held in the case of Phoenix of E.A. Assurance Company Limited vs. S. M. Thiga t/a Newspaper Service [2019] eKLR, where the Court of Appeal held as follows:“...Jurisdiction is primordial in every suit. It has to be there when the suit is filed in the first place. If a suit is filed without jurisdiction, the only remedy is to withdraw it and file a compliant one in the court seized of jurisdiction. A suit filed devoid of jurisdiction is dead on arrival and cannot be remedied. Without jurisdiction, the Court cannot confer jurisdiction to itself.”

Final Decision 39. The upshot to the foregoing is that the Tribunal finds and holds that the Appeal fails and it proceeds to make the following Orders:a.The appeal be and is hereby struck out.b.Each party to bear its own cost.

40. It is so Ordered.

DATED AND DELIVERED AT NAIROBI ON THIS 31ST DAY OF JANUARY 2025. ………………………………….CHRISTINE A. MUGACHAIRPERSON………………………….. …………….……………..BONIFACE K. TERERMEMBER……….……..…………….EUNICE N. NG’ANG’AMEMBER……….……..…………….OLOLCHIKE S. SPENCERMEMBER