(Being an appeal arising from the Judgment of the Tax Appeals Tribunal delivered in Nairobi on 20th September 2024 in Tax Appeals Tribunal Appeal No. 349 of 2023)
JUDGMENT
1. The appeal arises from the decision of the tax tribunal dated 20th September 2024.
2. Briefly the appellant carried out an investigation of the appellant tax affairs and issued an assessment dated 2nd December 2022 and an additional assessment on 1st January 2023
3. On 31st December 2022 The respondent objected to the assessment which objection was acknowledged by the appellant through a later dated 11th January 2023 declaring the respondent’s objection as invalid and requesting for additional documentation. The appellant issued its objection decision on 24th February 2023 and confirmed the assessment in the sum of Ksh 10,807, 609 shillings.
4. The respondent was dissatisfied with the appellant’s objection decision and lodged appeal through a notice of a pill dated 17th may 2023 and filed on 18th may 2023 with leave of the tribunal granted on the 26th may 2023.
5. The grounds of appeal were that The appellant had had in fact and law by failing to follow the proper procedure for objection to assessment are set up by the law; failed to review the grounds for objection raised by the appellant; Failed to review and take into consideration the documentation in support of the objection ;Fail to take into account the audited financial statements and income revenue tax returns filed on iTAX by the respondent In relation to income tax returns while conducting the income tax additional assessment for the years of income 2020 ;by violating the appellants legitimate expectations and the right to fair Administrative action; And that the appellant had demanded an amount that was excessive punitive and beyond the ability of their appellant to pay Contrary to the canons of taxation.
6. The respondent’s prayers in their appeal whether the objection decision was communicated out of time and thus the objection had been allowed automatically; the impugned decision contained the respondents later dated 24th February 2023 demanding Ksh 10,800,769 for income tax from the appellant Be vacated and the appeal be allowed.
7. The appellant’s position was at it had relied on section 59 (1) of the tax procedures act Which required the respondent to provide records to enable the appellant to determine the Respondents tax liability on account of their respondent’s failure to avail its records to the appellant The appellant to reject the objection application
8. The appellant further relied on sections 31(1) and 56 of the tax procedures act and section 30 of the tax Tribunals Act Proposition that the burden was upon the respondent to demonstrate that it had discharged its burden and that the appellant.
9. The tribunal framed two issues for determination: whether the respondent’s decision was valid and competent in accordance with the law and Whether the respondent’s decision issued on 24th February 2023 was justified.
10. The Tribunal found that an assessment order was made on 2nd December 2022 and an additional assessment dated 1st January 2023 by the appellant to the respondent and the respondent lodged the notice of objection detailed 31st December 2022. Tribunal also found that the appellant deemed the appellant’s objection as invalid and read correspondence dated 11th January 2023 notified the respondent and requested it to validate the objection by providing supporting documents.
11. The Tribunal weighed the evidence provided by the parties where the respondents stated that it provided documents on 16th of January 2023 While the appellant stated that the responded did not validate its objection, Leading the respondent to invalidate the objection, and found that The decision subject of the appeal was titled and rendered as an Objection Decision. That the decision was issued within the period provided for in law. That the appellant opted to issue an objection decision Instead of a Notice of Invalidation. The Tribunal stated that where the appellant elects to issue an objection decision in place over notice of invalidation Then it is deemed in law that the taxpayer’s objection has been deemed as validated by the appellant’s action.
12. It also found that the decision did not comply with section 51(10 )of the tax procedures act as it did not contain the statement of finding or the reasons for the decision It was the view of the tribunal That that statutory proviso is crafted in strict and mandatory terms to the effect that noncompliance thereof would deem such a decision incompetent And an enforceable .relying on Equity Group Holdings Limited versus Commissioner of Domestic Taxes civil appeal E 069 and E025 of 2020 [2021] KEHC 25(KLR) (Commercial and Tax), and Ndirangu T/A Ndirangu Hardware v Commissioner of domestic taxes (tux appeal E070 of 2021) [2023]KEHC 19357 found that the objection decision was not proper, adequate or in conformity with the provisions of section 51(10) of the Tax Procedures Act ,found it incompetent and fatally, defective allowed the appeal and set aside the Objection Decision dated 24th February 2023
13. Aggrieved with the entire Judgement of the Honourable Tax Appeals Tribunal THE COMMISSIONER OF DOMESTIC TAXES, the Appellant filed this appeal on the following grounds
a. THAT the Honourable Tribunal erred in law in finding that the Appellant’s Objection Decision dated 24th February 2023 was fatally defective.
b. THAT the Honourable Tribunal erred in finding that the Appellant’s Objection Decision dated 24th February 2023 did not comply with the provisions of section 51 (10) of the Tax Procedures Act.
c. THAT the learned Tribunal erred in law and fact in finding that the Respondent’s notice of objection was valid.
14. The appellant filed written submissions. Non were filed by the respondent
15. The appellant set out two issues for determination: Whether the Objection was valid and Whether the Objection Decision was valid.
16. On the first limb it is argued that the respondent failed to lodge a valid objection as required by section 51(4) of the TPA. It is submitted that a valid notice of objection has to precisely state the grounds and the taxpayer has to pay all the taxes not in dispute and provide all the relevant documents in support of the objection as provided for in section 51(3) of the TPA. The appellant proceeds to argue issues of fact as to whether or not the respondent provided sufficient documents to support the objection.
17. On the second issue the appellant cites e section 51 (10) the TPA and proceeds to submit that although the respondent lodged a notice of objection, it is issued its objection for the reason that the appellant failed to provide sufficient documents to evidence the advance payment.
18. Section 53 of the TPA provides for Appeals to High Court:
A party to proceedings before the Tribunal who is dissatisfied with the decision of the Tribunal in relation to an appealable decision may, within thirty days of being notified of the decision or within such further period as the High Court may allow, appeal the decision to the High Court in accordance with the provisions of the Tax Appeals Tribunal Act (Cap. 469A)
19. Section 56. Provides the General provisions relating to objections and appeals, and states inter alia that the dispute
(1) In any proceedings under this Part, the burden shall be on the taxpayer to prove that a tax decision is incorrect.
(2) An appeal to the High Court or to the Court of Appeal shall be on a question of law only
20. By a letter dated 11th January 2023 The appellant wrote to the respondent stating that ‘…in light of the above your application is declared invalid as it fails to comply with the requirements of section 51(3) TPA 2015.’
21. Then on 24th of February 2023 The applicant the appellant brought to the respondent and let ahead dead objection decision IMCO Holdings Limited and stated.
We make reference to the notice of assessment issued to you and the objection to the same on 1st January 2023. We further make reference to our letter invalidating your objection for failing to meet the requirements set out in our letter dated 1st January 2023 and the engagement with you culminating in the provision of that documents on 16th January 2023. Guided by the provisions of section 51 of the TPA and after carefully considering your grounds of objection the commissioner’s decision is as communicated as herein below;
22. The appellant in its Objection Decision lays the out grounds of objection of the respondent and in what is headed as commissioner’s responses to the grounds of objection, then the Commissioner proceeds to confirm the principal taxes of Kenya shillings 10,807, 609 and reminds the taxpayer of its right of appeal.
23. The issue for determination is whether the TAT erred in finding that this decision was not in compliance with s. 51(10) of the TPA.
24. The dispute before me was governed whole by the provisions of s. 51 of the TPA both before the Appellant and before he TAT. It states:
51. Objection to tax decision
(1) A taxpayer who wishes to dispute a tax decision shall first lodge an objection against that tax decision under this section before proceeding under any other written law.
(2) A taxpayer who disputes a tax decision may lodge a notice of objection to the decision, in writing, with the Commissioner within thirty days of being notified of the decision.
(3) A notice of objection shall be treated as validly lodged by a taxpayer under subsection (2) if—
(a) the notice of objection states precisely the grounds of objection, the amendments required to be made to correct the decision, and the reasons for the amendments;
(b) in relation to an objection to an assessment, the taxpayer has paid the entire amount of tax due under the assessment that is not in dispute or has applied for an extension of time to pay the tax not in dispute under section 33(1); and
(c) all the relevant documents relating to the objection have been submitted.
(4) Where the Commissioner has determined that a notice of objection lodged by a taxpayer not been validly lodged, the Commissioner shall within a period of fourteen days notify the taxpayer in writing that the objection has not been validly lodged and request the taxpayer to submit the information specified in the notice within seven days after the date of the notice.
(4A) Despite subsection (3), where a taxpayer fails to provide the information required under subsection (4) or fails to provide the information within the specified period, the Commissioner may make an objection decision within sixty days after the date on which the notice of objection was lodged.
(5) Where the tax decision to which a notice of objection relates is an amended assessment, the taxpayer may only object to the alterations and additions made to the original assessment.
(6) A taxpayer may apply in writing to the Commissioner for an extension of time to lodge a notice of
objection. (7) The Commissioner shall consider and may allow an application under subsection (6)
if—
(a) the taxpayer was prevented from lodging the notice of objection within the period specified in subsection (2) because of an absence from Kenya, sickness or other reasonable cause; and
(b) the taxpayer did not unreasonably delay in lodging the notice of objection.
(7A) The Commissioner shall notify the taxpayer of the decision made under subsection (7) fourteen days after receipt of the application, within
(8) Where a notice of objection has been validly lodged within time, the Commissioner shall consider the objection and decide either to allow the objection in whole or in part, or disallow it, and Commissioner’s decision shall be referred to as an "objection decision".
(9) The Commissioner shall notify in writing the taxpayer of the objection decision and shall take all necessary steps to give effect to the decision, including, in the case of an objection to an assessment, making an amended assessment.
(10) An objection decision shall include a statement of findings on the material facts and the reasons for the decision.
(11) The Commissioner shall make the objection decision within sixty days from the date of receipt of a valid notice of objection failure to which the objection shall be deemed to be allowed.
(12) A person who is dissatisfied with the decision of the Commissioner under subsection (11) may
appeal to the Tribunal within thirty days after being notified of the decision
25. I have carefully considered the record and the submissions.
26. It is clear to me what is for consideration is whether the so called Objection Decision of the appellant in this matter complied with the law.
27. I have reproduced it herein above. The appellant’s decision speaks on its face. It does not contain any statement of findings or the material facts. It merely sets down the grounds of objection, and what the appellant refers to as the Commissioner response. Evidently that does not amount to an objection decision as envisaged by the law and the TAT did not err in its finding.
28. Considering that by the end of 60 days the appellant had not issued a proper Objection Decision, then the only outcome envisaged by the law is what s. 51(11) provides for; the objection shall be deemed to be allowed kicked in.
29. In the circumstances I find that the appeal is not merited and dismiss it accordingly.
Dated, signed and delivered via CTS this 30th June 2025
Mumbua T Matheka
Judge
N/A
JUDGMENT
1. The appeal arises from the decision of the tax tribunal dated 20th September 2024.
2. Briefly the appellant carried out an investigation of the appellant tax affairs and issued an assessment dated 2nd December 2022 and an additional assessment on 1st January 2023
3. On 31st December 2022 The respondent objected to the assessment which objection was acknowledged by the appellant through a later dated 11th January 2023 declaring the respondent’s objection as invalid and requesting for additional documentation. The appellant issued its objection decision on 24th February 2023 and confirmed the assessment in the sum of Ksh 10,807, 609 shillings.
4. The respondent was dissatisfied with the appellant’s objection decision and lodged appeal through a notice of a pill dated 17th may 2023 and filed on 18th may 2023 with leave of the tribunal granted on the 26th may 2023.
5. The grounds of appeal were that The appellant had had in fact and law by failing to follow the proper procedure for objection to assessment are set up by the law; failed to review the grounds for objection raised by the appellant; Failed to review and take into consideration the documentation in support of the objection ;Fail to take into account the audited financial statements and income revenue tax returns filed on iTAX by the respondent In relation to income tax returns while conducting the income tax additional assessment for the years of income 2020 ;by violating the appellants legitimate expectations and the right to fair Administrative action; And that the appellant had demanded an amount that was excessive punitive and beyond the ability of their appellant to pay Contrary to the canons of taxation.
6. The respondent’s prayers in their appeal whether the objection decision was communicated out of time and thus the objection had been allowed automatically; the impugned decision contained the respondents later dated 24th February 2023 demanding Ksh 10,800,769 for income tax from the appellant Be vacated and the appeal be allowed.
7. The appellant’s position was at it had relied on section 59 (1) of the tax procedures act Which required the respondent to provide records to enable the appellant to determine the Respondents tax liability on account of their respondent’s failure to avail its records to the appellant The appellant to reject the objection application
8. The appellant further relied on sections 31(1) and 56 of the tax procedures act and section 30 of the tax Tribunals Act Proposition that the burden was upon the respondent to demonstrate that it had discharged its burden and that the appellant.
9. The tribunal framed two issues for determination: whether the respondent’s decision was valid and competent in accordance with the law and Whether the respondent’s decision issued on 24th February 2023 was justified.
10. The Tribunal found that an assessment order was made on 2nd December 2022 and an additional assessment dated 1st January 2023 by the appellant to the respondent and the respondent lodged the notice of objection detailed 31st December 2022. Tribunal also found that the appellant deemed the appellant’s objection as invalid and read correspondence dated 11th January 2023 notified the respondent and requested it to validate the objection by providing supporting documents.
11. The Tribunal weighed the evidence provided by the parties where the respondents stated that it provided documents on 16th of January 2023 While the appellant stated that the responded did not validate its objection, Leading the respondent to invalidate the objection, and found that The decision subject of the appeal was titled and rendered as an Objection Decision. That the decision was issued within the period provided for in law. That the appellant opted to issue an objection decision Instead of a Notice of Invalidation. The Tribunal stated that where the appellant elects to issue an objection decision in place over notice of invalidation Then it is deemed in law that the taxpayer’s objection has been deemed as validated by the appellant’s action.
12. It also found that the decision did not comply with section 51(10 )of the tax procedures act as it did not contain the statement of finding or the reasons for the decision It was the view of the tribunal That that statutory proviso is crafted in strict and mandatory terms to the effect that noncompliance thereof would deem such a decision incompetent And an enforceable .relying on Equity Group Holdings Limited versus Commissioner of Domestic Taxes civil appeal E 069 and E025 of 2020 [2021] KEHC 25(KLR) (Commercial and Tax), and Ndirangu T/A Ndirangu Hardware v Commissioner of domestic taxes (tux appeal E070 of 2021) [2023]KEHC 19357 found that the objection decision was not proper, adequate or in conformity with the provisions of section 51(10) of the Tax Procedures Act ,found it incompetent and fatally, defective allowed the appeal and set aside the Objection Decision dated 24th February 2023
13. Aggrieved with the entire Judgement of the Honourable Tax Appeals Tribunal THE COMMISSIONER OF DOMESTIC TAXES, the Appellant filed this appeal on the following grounds
a. THAT the Honourable Tribunal erred in law in finding that the Appellant’s Objection Decision dated 24th February 2023 was fatally defective.
b. THAT the Honourable Tribunal erred in finding that the Appellant’s Objection Decision dated 24th February 2023 did not comply with the provisions of section 51 (10) of the Tax Procedures Act.
c. THAT the learned Tribunal erred in law and fact in finding that the Respondent’s notice of objection was valid.
14. The appellant filed written submissions. Non were filed by the respondent
15. The appellant set out two issues for determination: Whether the Objection was valid and Whether the Objection Decision was valid.
16. On the first limb it is argued that the respondent failed to lodge a valid objection as required by section 51(4) of the TPA. It is submitted that a valid notice of objection has to precisely state the grounds and the taxpayer has to pay all the taxes not in dispute and provide all the relevant documents in support of the objection as provided for in section 51(3) of the TPA. The appellant proceeds to argue issues of fact as to whether or not the respondent provided sufficient documents to support the objection.
17. On the second issue the appellant cites e section 51 (10) the TPA and proceeds to submit that although the respondent lodged a notice of objection, it is issued its objection for the reason that the appellant failed to provide sufficient documents to evidence the advance payment.
18. Section 53 of the TPA provides for Appeals to High Court:
A party to proceedings before the Tribunal who is dissatisfied with the decision of the Tribunal in relation to an appealable decision may, within thirty days of being notified of the decision or within such further period as the High Court may allow, appeal the decision to the High Court in accordance with the provisions of the Tax Appeals Tribunal Act (Cap. 469A)
19. Section 56. Provides the General provisions relating to objections and appeals, and states inter alia that the dispute
(1) In any proceedings under this Part, the burden shall be on the taxpayer to prove that a tax decision is incorrect.
(2) An appeal to the High Court or to the Court of Appeal shall be on a question of law only
20. By a letter dated 11th January 2023 The appellant wrote to the respondent stating that ‘…in light of the above your application is declared invalid as it fails to comply with the requirements of section 51(3) TPA 2015.’
21. Then on 24th of February 2023 The applicant the appellant brought to the respondent and let ahead dead objection decision IMCO Holdings Limited and stated.
We make reference to the notice of assessment issued to you and the objection to the same on 1st January 2023. We further make reference to our letter invalidating your objection for failing to meet the requirements set out in our letter dated 1st January 2023 and the engagement with you culminating in the provision of that documents on 16th January 2023. Guided by the provisions of section 51 of the TPA and after carefully considering your grounds of objection the commissioner’s decision is as communicated as herein below;
22. The appellant in its Objection Decision lays the out grounds of objection of the respondent and in what is headed as commissioner’s responses to the grounds of objection, then the Commissioner proceeds to confirm the principal taxes of Kenya shillings 10,807, 609 and reminds the taxpayer of its right of appeal.
23. The issue for determination is whether the TAT erred in finding that this decision was not in compliance with s. 51(10) of the TPA.
24. The dispute before me was governed whole by the provisions of s. 51 of the TPA both before the Appellant and before he TAT. It states:
51. Objection to tax decision
(1) A taxpayer who wishes to dispute a tax decision shall first lodge an objection against that tax decision under this section before proceeding under any other written law.
(2) A taxpayer who disputes a tax decision may lodge a notice of objection to the decision, in writing, with the Commissioner within thirty days of being notified of the decision.
(3) A notice of objection shall be treated as validly lodged by a taxpayer under subsection (2) if—
(a) the notice of objection states precisely the grounds of objection, the amendments required to be made to correct the decision, and the reasons for the amendments;
(b) in relation to an objection to an assessment, the taxpayer has paid the entire amount of tax due under the assessment that is not in dispute or has applied for an extension of time to pay the tax not in dispute under section 33(1); and
(c) all the relevant documents relating to the objection have been submitted.
(4) Where the Commissioner has determined that a notice of objection lodged by a taxpayer not been validly lodged, the Commissioner shall within a period of fourteen days notify the taxpayer in writing that the objection has not been validly lodged and request the taxpayer to submit the information specified in the notice within seven days after the date of the notice.
(4A) Despite subsection (3), where a taxpayer fails to provide the information required under subsection (4) or fails to provide the information within the specified period, the Commissioner may make an objection decision within sixty days after the date on which the notice of objection was lodged.
(5) Where the tax decision to which a notice of objection relates is an amended assessment, the taxpayer may only object to the alterations and additions made to the original assessment.
(6) A taxpayer may apply in writing to the Commissioner for an extension of time to lodge a notice of
objection. (7) The Commissioner shall consider and may allow an application under subsection (6)
if—
(a) the taxpayer was prevented from lodging the notice of objection within the period specified in subsection (2) because of an absence from Kenya, sickness or other reasonable cause; and
(b) the taxpayer did not unreasonably delay in lodging the notice of objection.
(7A) The Commissioner shall notify the taxpayer of the decision made under subsection (7) fourteen days after receipt of the application, within
(8) Where a notice of objection has been validly lodged within time, the Commissioner shall consider the objection and decide either to allow the objection in whole or in part, or disallow it, and Commissioner’s decision shall be referred to as an "objection decision".
(9) The Commissioner shall notify in writing the taxpayer of the objection decision and shall take all necessary steps to give effect to the decision, including, in the case of an objection to an assessment, making an amended assessment.
(10) An objection decision shall include a statement of findings on the material facts and the reasons for the decision.
(11) The Commissioner shall make the objection decision within sixty days from the date of receipt of a valid notice of objection failure to which the objection shall be deemed to be allowed.
(12) A person who is dissatisfied with the decision of the Commissioner under subsection (11) may
appeal to the Tribunal within thirty days after being notified of the decision
25. I have carefully considered the record and the submissions.
26. It is clear to me what is for consideration is whether the so called Objection Decision of the appellant in this matter complied with the law.
27. I have reproduced it herein above. The appellant’s decision speaks on its face. It does not contain any statement of findings or the material facts. It merely sets down the grounds of objection, and what the appellant refers to as the Commissioner response. Evidently that does not amount to an objection decision as envisaged by the law and the TAT did not err in its finding.
28. Considering that by the end of 60 days the appellant had not issued a proper Objection Decision, then the only outcome envisaged by the law is what s. 51(11) provides for; the objection shall be deemed to be allowed kicked in.
29. In the circumstances I find that the appeal is not merited and dismiss it accordingly.
Dated, signed and delivered via CTS this 30th June 2025
Mumbua T Matheka
Judge
N/A