' Introduction
1. This is an appeal against the judgment of the Tax Appeals Tribunal delivered on 9th May 2024 in TAT Appeal No. 134 of 2023, in which the Tribunal dismissed the Appellant’s appeal and upheld the Respondent’s Objection Decisions dated 3rd November 2022, which confirmed additional Corporation Tax and VAT assessments amounting to KShs. 75,701,401.62.
2. The factual history is largely undisputed. The Respondent, in the exercise of its powers provided under Section 31(1) of the Tax Procedures Act, issued various assessment orders against the Appellant on 3rd August 2021, 31st August 2022, and 1st September 2022 for both Income Tax and VAT.
3. The Appellant lodged objections to these assessments on 27th October 2022, 2nd November 2022, and 28th October 2022. The Respondent considered these objections and, on 3rd November 2022, issued two Objection Decisions confirming a total additional principal tax liability of Kshs. 75,701,401.62.
4. Dissatisfied with the decisions, the Appellant appealed to the Tax Appeals Tribunal. Upon hearing the submissions of both parties, the Tribunal rendered its judgment on 9 May 2024, dismissing the appeal.
The Appeal
5. Aggrieved by the Tribunal’s decision, the Appellant preferred an appeal to this Court vide its memorandum of appeal dated 26th June 2024, raising eight (8) grounds that: -
i. The Tribunal erred in law and in fact by failing to appreciate that the entire process leading to the Objection Decision grossly violated Article 47 of the Constitution.
ii. The Tribunal erred in law and in fact by failing to appreciate that once it had established that the Respondent’s tax assessment and Objection Decision violated the five (5) year statutory period under Section 31(4) of the Tax Procedures Act, the only logical decision would have been to refer the matter back to the Respondent for re-assessment and reconsideration pursuant to Section 29(2)(c)(ii) of the Tax Appeals Tribunal Act.
iii. The Tribunal erred in law and in fact in its application of Section 56(1) of the Tax Procedures Act by failing to appreciate that the Appellant had furnished the Respondent with all relevant documents, which fact is admitted by the Respondent at paragraph 20 of the Judgment
iv. The Tribunal further erred in law and in fact by failing to appreciate that the burden of proof under Section 56(1) of the Tax Procedures Act could only be discharged in a process that fully complies with Article 47 of the Constitution.
v. The Tribunal erred in law and in fact by failing to explain in its ratio decidendi in what ways the Appellant had failed to discharge the burden of proof under Section 56(1) of the Tax Procedures Act and Section 30 of the Tax Appeals Tribunal Act.
vi. The Tribunal erred in law and in fact by failing to appreciate that the Respondent had misapplied Section 31 of the Tax Appeals Tribunal Act by failing to explain the reason for the additional assessments and, as such, violated Article 47 of the Constitution on the right to fair administrative action.
vii. The Tribunal erred in law and in fact by failing to appreciate that the Appellant in its Objections dated 27th October 2022 and 2nd November 2022 had decried the Respondent’s failure to disclose the basis of the assessment which had hampered its ability to respond adequately to the assessments.
viii. The Tribunal misapplied the law and facts and therefore arrived at the wrong decision.
6. In opposition to the Appeal, the Respondent filed its Statement of Facts dated 19th May 2025, wherein it essentially supported the judgment of the Tribunal and urged the Court to uphold the impugned tax assessment.
7. The Appeal was thereafter canvassed through written submissions. The Appellant, through Learned Counsel, Maero & Company Advocates, filed submissions dated 23rd April 2025, while the Respondent, through its Learned Counsel, Lemiso, filed submissions dated 19th May 2025.
Appellant’s Submissions
8. The Appellant argued that the Tribunal erred in finding that it had not furnished sufficient documents to support its objection. It was submitted that reconciliatory workings and bank statements were provided and ought to have been considered.
9. According to the Appellant, if the Respondent’s allegation that no documents were submitted is to be believed, then the proper course would have been for the Respondent to invalidate the Objection under Section 51(3) of the Tax Procedures Act, and not to make an Objection Decision in haste, as was the case herein.
10. Counsel contended that the Respondent failed to request any further documentation at the objection stage, yet proceeded to issue an Objection Decision only six days later. This, it was urged, was in violation of Article 47 of the Constitution and the Fair Administrative Action Act.
11. The Appellant further contended that it was illogical for the Respondent to admit its objection as valid, only to subsequently allege that the Taxpayer had failed to furnish any documents in support of the grounds of objection. It was submitted that such conduct offended the principles of fair play as articulated by Lord Denning MR in Selvarajan v Race Relations Board [1976] 1 All ER, and amounted to a breach of the Appellant’s right to fair administrative action guaranteed under Article 47 of the Constitution.
12. The Appellant further submitted that the Tribunal wrongly upheld VAT assessments for September 2017–December 2017 and Corporation Tax for 2017–2019 despite records having been provided.
13. Reliance was placed on Primarosa Flowers Ltd v Commissioner of Domestic Taxes [2019] eKLR, where the Court emphasized that the Commissioner is duty-bound to fairly consider all documents presented, and Nizaba International Trading Co. Ltd v KRA [2000] eKLR where it was held that failure to consider material facts presented by a party against whom an assessment had been raised amounts to an abuse of legislative provisions and such an assessment cannot stand.
14. The Appellant therefore prayed that the appeal be allowed, the Tribunal’s decision set aside, and the tax assessments be vacated.
Respondent’s Submissions
15. The Respondent, on the other hand, opposed the appeal and submitted that the assessments were properly raised after it identified unsupported VAT credits and sales variances.
16. It was contended on behalf of the Respondent that the Appellant failed to provide mandatory documents under Section 17(3) of the VAT Act, including tax invoices and receipts, and instead relied only on reconciliatory schedules. Counsel cited Commissioner of Investigations & Enforcement v Dr. Evans Kidero [2022] eKLR, arguing that the workings are not a primary document to prove a claim for tax credits, Input VAT, and/or sales variances.
17. The Respondent further argued that under Section 56 of the Tax Procedures Act, the burden of proof lies on the taxpayer, a principle restated in Republic v KRA ex parte Proto Energy Ltd [2022] eKLR. According to the Respondent, it is not sufficient to provide documentation listed in the various tax legislations; the documentation provided must be relevant to the items subject to taxation and for the relevant tax period, which was lacking in this case. Accordingly, the Respondent asserted that the presumption of correctness of the tax assessment had not been dispelled by the Appellant.
18. Finally, the Respondent argued that the allegation of violation of Article 47 is a new ground raised for the first time in this appeal, contrary to Section 56(3) of the Tax Procedures Act. In support of this argument, reliance was placed on among others, the case of Dakianga Distributors (K) Ltd v Kenya Seed Co. Ltd [2015] eKLR and IEBC v Stephen Mule & 3 Others [2014] eKLR.
19. On those grounds, the Respondent prayed that the appeal be dismissed with costs.
Analysis and Determination
20. Having carefully considered the pleadings, the submissions of the parties, and the applicable law, the following issues arise for determination:
i. Whether the Appellant discharged the burden of proof by providing sufficient documentation to support its objection.
ii. Whether the process leading to the Objection Decision violated Article 47 of the Constitution.
Whether the Appellant discharged the Burden of Proof
21. Section 51(3) of the Tax Procedures Act provides that a valid notice of objection must state precisely the grounds and be supported by “all relevant documents.” Where such documents are absent, the Commissioner may invalidate the objection.
22. The Section is explicit that: -
“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) …………
(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 has 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.
23. In the present case, it is common ground that the objection was accepted by the Respondent as valid. However, from the architecture of the Act, it is obvious that the mere acceptance of an objection as valid does not of itself equate to sufficiency of evidence. The Commissioner’s role is limited to examining the documents provided by the taxpayer, and then draw his conclusions based on such documents. It is not the duty of the Commissioner to ensure that the tax assessments are reconciled to nil. That, is the work of the taxpayer as provided under Section 56(1) of the Tax Procedures Act, which places the burden of proving that an assessment is excessive on the taxpayer.
24. The requirement under section 51(3) (c) of the Tax Procedures Act that the taxpayer produce all the documents relating to the Objection stems from Section 23 of the same Act, which obliges taxpayers to keep records. Section 23 of the Tax Procedures Act provides as follows: -
“23. Record-keeping
(1) A person shall—
(a) maintain any document required under a tax law, in either of the official languages;
(b) maintain any document required under a tax law so as to enable the person''s tax liability to be readily ascertained; and
(c) subject to subsection (3), retain the document for a period of five years from the end of the reporting period to which it relates or such shorter period as may be specified in a tax law.”
25. The Appellant’s central contention, as captured at paragraph 19 of its submissions, is that the Respondent did not, during the objection process, call for any further documentation to reconcile the assessment. The Appellant therefore argues that, the Respondent having accepted the documents initially provided as sufficient, there was no lawful basis for raising additional taxes. In the Court’s view, this argument is misconceived. The requirement of sufficiency of documentation under Section 53(3)(c) of the Tax Procedures Act is directed at enabling the Commissioner to consider and determine the objection; it does not imply that the assessment must automatically be reconciled to nil.
26. The Appellant, in its submissions (paragraph 13 thereof), simply averred that it “provided relevant documentation to support its financial position and its returns”. The Appellant, however, fails to outline the said documents and specify how the documents explained the transactions, the subject of this current tax assessment.
27. In Kinyua v Commissioner of Investigations & Enforcement [2022] KEHC 15353 (KLR), Majanja J observed that: -
“Every taxpayer is required to maintain proper and relevant records and documents for purposes of ascertaining their tax liability and produce them when required by the Commissioner. This position reverberates throughout tax statutes including the TPA and the ITA. Section 59 (1) of the TPA provides that a tax payer shall produce records when required to do so by the Commissioner. Section 3(1) of the TPA provides that the documents a tax payer is expected to maintain include, ‘a book of account, record, paper, register, bank statement, receipt, invoice, voucher, contract or agreement, tax return, Customs declaration, or tax invoice; or any information or data stored on a mechanical or electronic data storage device’. In essence, a tax payer is supposed to maintain primary documents meaning a schedule or table summary of expenses and income cannot be deemed to be a document or record capable of ascertaining one’s tax liability (see Commissioner Investigations and Enforcement v Kidero (Income Tax Appeal E028 of 2020) [2022] KEHC 52 (KLR) (Commercial and Tax) (4 February 2022) (Judgment))”
28. The Assessment in this case was largely based on the fact that records held with the Respondent indicated that the Appellant was in constant VAT credit position since the year 2015. It therefore follows that the Appellant was expected to produce the documents specified under Section 17(3) of the Value Added Tax Act to explain its constant VAT credit position.
29. Section 17(3) of the VAT Act requires that the following documentation be provided for the purposes of supporting a claim for input VAT –
“(3) The documentation for the purposes of subsection (2) shall be—
(a) an original tax invoice issued for the supply or a certified copy;
(b) a customs entry duly certified by the proper officer and a receipt for the payment of tax;
(c) a customs receipt and a certificate signed by the proper officer stating the amount of tax paid, in the case of goods purchased from a customs auction; and
(d) a credit note in the case of input tax deducted under section 16(2);
(e) a debit note in the case of input tax deducted under section 16(5); or
(f) in the case of a participant in the Open Tender System for the importation of petroleum products that have been cleared through a non-bonded facility, the custom entry showing the name and PIN of the winner of the tender and the name of the other oil marketing company participating in the tender:
Provided that the input tax that may have been incurred by an oil marketing company participating in the Open Tender System before the coming into force of this provision shall be claimed within twelve months after this provision comes into force.”
30. The Respondent, in its submissions, contended that while the Appellant provided a “working of the variances,” it failed to furnish the primary documents necessary to substantiate those workings. I agree with the Respondent. In the absence of such primary documentation, the Appellant cannot be said to have discharged its burden of proof as required under Section 56(1) of the Tax Procedures Act, read together with Section 17(3) of the VAT Act. Mere workings or reconciliations, without supporting source documents such as invoices, receipts, or ledgers, amount to unverified assertions and fall short of the evidentiary threshold imposed by the law. See Kinyua v Commissioner of Investigations & Enforcement [supra].
31. Section 56(1) of the Tax Procedure Act and Section 30 of the Tax Appeals Tribunal Act are explicit that the burden of proof rests squarely on the taxpayer to demonstrate that a tax decision is incorrect. It is a well-established principle in tax law that the Commissioner’s assessments are "presumptively correct" until the taxpayer provides competent and relevant evidence to the contrary. See the case of Republic v Kenya Revenue Authority; Proto Energy Limited (Exparte) [2022] KEHC 5 (KLR) where Mativo J (as he then was), stated as follows: -
“For starters, a significant factor adding to the taxpayer''s burden in tax cases is the presumption of correctness which attaches to the Commissioner''s assessments or determinations of deficiency.34 The commissioner''s determinations of tax deficiencies are presumptively correct. Although the presumption created by the above position is not evidence in itself, the presumption remains until the taxpayer produces competent and relevant evidence to support his position.35 If the taxpayer comes forward with such evidence, the presumption vanishes and the case must be decided upon the evidence presented, with the burden of proof on the taxpayer.”
32. In the present case, the Appellant was required to produce primary documents as specified under, among others, Section 17(3) of the VAT Act. The record confirms, through the Respondent’s communications, that the Appellant was afforded an opportunity to provide the requisite documentation but failed to do so.
33. In these circumstances, this Court finds, as the Tribunal correctly held, that reconciliations and bank statements alone were insufficient. The absence of the necessary primary documents to substantiate the Appellant’s position left the presumption of correctness of the Respondent’s assessments intact.
34. Accordingly, I uphold the Tribunal’s finding on this issue.
Alleged violation of Article 47
35. The Appellant argued that the Respondent issued the Objection Decision in undue haste and thereby contravened Article 47 of the Constitution as well as Sections 4(2), 6(1), and 6(2) of the Fair Administrative Action Act, 2015 (FAAA). According to the Appellant, these provisions required the Respondent to interrogate the documents supplied and to accord the taxpayer an opportunity to be heard before taking the impugned administrative action.
36. At paragraph 24 of its submissions, the Appellant faulted the Respondent for failing to notify it, before issuing the Objection Decision, that additional documentation was required. The Appellant stated:
“Between 31st August 2022 and 3rd November 2022 (during the objection stage), there were no email communication from the Respondent requesting for any documents. The Appellant submitted a valid objection, which means it was supported by the necessary documentation.”
37. I have carefully gone through the record of appeal and do not agree with the Appellant’s assertions. Evidence on record reveals that the Assessment, the subject of these proceedings, was issued on 31st March 2022, and the Appellant objected to the same on 28th October 2022, with the Commissioner issuing its objection decision on 3rd November 2022. I do not find anything untoward in the way the Commissioner dealt with the Appellant’s Objection.
38. I have carefully reviewed the record of appeal and do not agree with the Appellant’s assertions. The evidence on record shows that the assessment giving rise to these proceedings was issued on 31st March 2022, the Appellant lodged its objection on 28th October 2022, and the Commissioner rendered the objection decision on 3rd November 2022, which was well within the statutory timelines. I find nothing irregular or procedurally improper in the manner in which the Commissioner dealt with the Appellant’s objection.
39. As pointed out elsewhere in this judgment, once the Respondent issued its assessment, the burden of proving that the same was excessive shifted to the Appellant. The Appellant, being the party with custody and peculiar knowledge of the transactions in question, bore the statutory duty to provide all supporting records. It was not for the Respondent to argue the Appellant’s case at the objection stage. That task squarely fell on the Appellant. Section 23(1) of the Tax Procedures Act expressly obliges taxpayers, the Appellant herein included (and not the Respondent), to maintain records. The Respondent cannot be faulted for proceeding to make an objection decision based on the documents which had then been provided by the Appellant.
40. As pointed out elsewhere in this judgment, once the Respondent issued its assessment, the burden of proving that the same was excessive shifted to the Appellant. The Appellant, being the party with custody and peculiar knowledge of the transactions in question, bore the statutory duty to provide all supporting records. It was not the role of the Respondent to advance or supplement the Appellant’s case at the objection stage; that duty rested squarely with the Appellant. The Respondent cannot, therefore, be faulted for proceeding to render an objection decision on the basis of the documentation that had been furnished by the Appellant.
41. Further, this question of an alleged breach of Article 47 of the Constitution was not among the issues raised before the Tribunal. Section 56(3) of the Tax Procedures Act is explicit that a taxpayer cannot introduce new grounds on appeal unless with leave of the Court. No such leave was sought or obtained in this case.
42. In IEBC v Mule & 5 Others [2014] eKLR, the Court of Appeal, citing the Nigerian Supreme Court decision in Adetoun Oladeji (Nig) Ltd v Nigeria Breweries Plc SC 91/2002, emphasized that parties are bound by their pleadings, and new issues cannot be introduced on appeal except where they are matters of pure law. The Court stated: -
“..it is now a very trite principle of law that parties are bound by their pleadings and that any evidence led by any of the parties which does not support the averments in the pleadings, or put in another way, which is at variance with the averments of the pleadings goes to no issue and must be disregarded.”
43. Consequently, I find that the ground based on alleged violation of Article 47 is improperly before this Court and, in any event, the Appellant has not demonstrated any breach of its constitutional or statutory rights.
44. In the result, I find this appeal unmeritorious and it is hereby dismissed. The judgment of the Tax Appeals Tribunal dated 9th May 2024 is accordingly upheld in its entirety.
45. Costs of the appeal shall be borne by the Appellant.
46. It is so ordered.
SIGNED, DATED, and DELIVERED IN VIRTUAL COURT THIS
11TH SEPTEMBER 2025
ADO MOSES
JUDGE
In the presence of: -
C/A – Moses
Ms, Koskei
h/b for Maero…………..for the Appellant
Lemiso………….…..... for the Respondent
'
1. This is an appeal against the judgment of the Tax Appeals Tribunal delivered on 9th May 2024 in TAT Appeal No. 134 of 2023, in which the Tribunal dismissed the Appellant’s appeal and upheld the Respondent’s Objection Decisions dated 3rd November 2022, which confirmed additional Corporation Tax and VAT assessments amounting to KShs. 75,701,401.62.
2. The factual history is largely undisputed. The Respondent, in the exercise of its powers provided under Section 31(1) of the Tax Procedures Act, issued various assessment orders against the Appellant on 3rd August 2021, 31st August 2022, and 1st September 2022 for both Income Tax and VAT.
3. The Appellant lodged objections to these assessments on 27th October 2022, 2nd November 2022, and 28th October 2022. The Respondent considered these objections and, on 3rd November 2022, issued two Objection Decisions confirming a total additional principal tax liability of Kshs. 75,701,401.62.
4. Dissatisfied with the decisions, the Appellant appealed to the Tax Appeals Tribunal. Upon hearing the submissions of both parties, the Tribunal rendered its judgment on 9 May 2024, dismissing the appeal.
The Appeal
5. Aggrieved by the Tribunal’s decision, the Appellant preferred an appeal to this Court vide its memorandum of appeal dated 26th June 2024, raising eight (8) grounds that: -
i. The Tribunal erred in law and in fact by failing to appreciate that the entire process leading to the Objection Decision grossly violated Article 47 of the Constitution.
ii. The Tribunal erred in law and in fact by failing to appreciate that once it had established that the Respondent’s tax assessment and Objection Decision violated the five (5) year statutory period under Section 31(4) of the Tax Procedures Act, the only logical decision would have been to refer the matter back to the Respondent for re-assessment and reconsideration pursuant to Section 29(2)(c)(ii) of the Tax Appeals Tribunal Act.
iii. The Tribunal erred in law and in fact in its application of Section 56(1) of the Tax Procedures Act by failing to appreciate that the Appellant had furnished the Respondent with all relevant documents, which fact is admitted by the Respondent at paragraph 20 of the Judgment
iv. The Tribunal further erred in law and in fact by failing to appreciate that the burden of proof under Section 56(1) of the Tax Procedures Act could only be discharged in a process that fully complies with Article 47 of the Constitution.
v. The Tribunal erred in law and in fact by failing to explain in its ratio decidendi in what ways the Appellant had failed to discharge the burden of proof under Section 56(1) of the Tax Procedures Act and Section 30 of the Tax Appeals Tribunal Act.
vi. The Tribunal erred in law and in fact by failing to appreciate that the Respondent had misapplied Section 31 of the Tax Appeals Tribunal Act by failing to explain the reason for the additional assessments and, as such, violated Article 47 of the Constitution on the right to fair administrative action.
vii. The Tribunal erred in law and in fact by failing to appreciate that the Appellant in its Objections dated 27th October 2022 and 2nd November 2022 had decried the Respondent’s failure to disclose the basis of the assessment which had hampered its ability to respond adequately to the assessments.
viii. The Tribunal misapplied the law and facts and therefore arrived at the wrong decision.
6. In opposition to the Appeal, the Respondent filed its Statement of Facts dated 19th May 2025, wherein it essentially supported the judgment of the Tribunal and urged the Court to uphold the impugned tax assessment.
7. The Appeal was thereafter canvassed through written submissions. The Appellant, through Learned Counsel, Maero & Company Advocates, filed submissions dated 23rd April 2025, while the Respondent, through its Learned Counsel, Lemiso, filed submissions dated 19th May 2025.
Appellant’s Submissions
8. The Appellant argued that the Tribunal erred in finding that it had not furnished sufficient documents to support its objection. It was submitted that reconciliatory workings and bank statements were provided and ought to have been considered.
9. According to the Appellant, if the Respondent’s allegation that no documents were submitted is to be believed, then the proper course would have been for the Respondent to invalidate the Objection under Section 51(3) of the Tax Procedures Act, and not to make an Objection Decision in haste, as was the case herein.
10. Counsel contended that the Respondent failed to request any further documentation at the objection stage, yet proceeded to issue an Objection Decision only six days later. This, it was urged, was in violation of Article 47 of the Constitution and the Fair Administrative Action Act.
11. The Appellant further contended that it was illogical for the Respondent to admit its objection as valid, only to subsequently allege that the Taxpayer had failed to furnish any documents in support of the grounds of objection. It was submitted that such conduct offended the principles of fair play as articulated by Lord Denning MR in Selvarajan v Race Relations Board [1976] 1 All ER, and amounted to a breach of the Appellant’s right to fair administrative action guaranteed under Article 47 of the Constitution.
12. The Appellant further submitted that the Tribunal wrongly upheld VAT assessments for September 2017–December 2017 and Corporation Tax for 2017–2019 despite records having been provided.
13. Reliance was placed on Primarosa Flowers Ltd v Commissioner of Domestic Taxes [2019] eKLR, where the Court emphasized that the Commissioner is duty-bound to fairly consider all documents presented, and Nizaba International Trading Co. Ltd v KRA [2000] eKLR where it was held that failure to consider material facts presented by a party against whom an assessment had been raised amounts to an abuse of legislative provisions and such an assessment cannot stand.
14. The Appellant therefore prayed that the appeal be allowed, the Tribunal’s decision set aside, and the tax assessments be vacated.
Respondent’s Submissions
15. The Respondent, on the other hand, opposed the appeal and submitted that the assessments were properly raised after it identified unsupported VAT credits and sales variances.
16. It was contended on behalf of the Respondent that the Appellant failed to provide mandatory documents under Section 17(3) of the VAT Act, including tax invoices and receipts, and instead relied only on reconciliatory schedules. Counsel cited Commissioner of Investigations & Enforcement v Dr. Evans Kidero [2022] eKLR, arguing that the workings are not a primary document to prove a claim for tax credits, Input VAT, and/or sales variances.
17. The Respondent further argued that under Section 56 of the Tax Procedures Act, the burden of proof lies on the taxpayer, a principle restated in Republic v KRA ex parte Proto Energy Ltd [2022] eKLR. According to the Respondent, it is not sufficient to provide documentation listed in the various tax legislations; the documentation provided must be relevant to the items subject to taxation and for the relevant tax period, which was lacking in this case. Accordingly, the Respondent asserted that the presumption of correctness of the tax assessment had not been dispelled by the Appellant.
18. Finally, the Respondent argued that the allegation of violation of Article 47 is a new ground raised for the first time in this appeal, contrary to Section 56(3) of the Tax Procedures Act. In support of this argument, reliance was placed on among others, the case of Dakianga Distributors (K) Ltd v Kenya Seed Co. Ltd [2015] eKLR and IEBC v Stephen Mule & 3 Others [2014] eKLR.
19. On those grounds, the Respondent prayed that the appeal be dismissed with costs.
Analysis and Determination
20. Having carefully considered the pleadings, the submissions of the parties, and the applicable law, the following issues arise for determination:
i. Whether the Appellant discharged the burden of proof by providing sufficient documentation to support its objection.
ii. Whether the process leading to the Objection Decision violated Article 47 of the Constitution.
Whether the Appellant discharged the Burden of Proof
21. Section 51(3) of the Tax Procedures Act provides that a valid notice of objection must state precisely the grounds and be supported by “all relevant documents.” Where such documents are absent, the Commissioner may invalidate the objection.
22. The Section is explicit that: -
“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) …………
(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 has 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.
23. In the present case, it is common ground that the objection was accepted by the Respondent as valid. However, from the architecture of the Act, it is obvious that the mere acceptance of an objection as valid does not of itself equate to sufficiency of evidence. The Commissioner’s role is limited to examining the documents provided by the taxpayer, and then draw his conclusions based on such documents. It is not the duty of the Commissioner to ensure that the tax assessments are reconciled to nil. That, is the work of the taxpayer as provided under Section 56(1) of the Tax Procedures Act, which places the burden of proving that an assessment is excessive on the taxpayer.
24. The requirement under section 51(3) (c) of the Tax Procedures Act that the taxpayer produce all the documents relating to the Objection stems from Section 23 of the same Act, which obliges taxpayers to keep records. Section 23 of the Tax Procedures Act provides as follows: -
“23. Record-keeping
(1) A person shall—
(a) maintain any document required under a tax law, in either of the official languages;
(b) maintain any document required under a tax law so as to enable the person''s tax liability to be readily ascertained; and
(c) subject to subsection (3), retain the document for a period of five years from the end of the reporting period to which it relates or such shorter period as may be specified in a tax law.”
25. The Appellant’s central contention, as captured at paragraph 19 of its submissions, is that the Respondent did not, during the objection process, call for any further documentation to reconcile the assessment. The Appellant therefore argues that, the Respondent having accepted the documents initially provided as sufficient, there was no lawful basis for raising additional taxes. In the Court’s view, this argument is misconceived. The requirement of sufficiency of documentation under Section 53(3)(c) of the Tax Procedures Act is directed at enabling the Commissioner to consider and determine the objection; it does not imply that the assessment must automatically be reconciled to nil.
26. The Appellant, in its submissions (paragraph 13 thereof), simply averred that it “provided relevant documentation to support its financial position and its returns”. The Appellant, however, fails to outline the said documents and specify how the documents explained the transactions, the subject of this current tax assessment.
27. In Kinyua v Commissioner of Investigations & Enforcement [2022] KEHC 15353 (KLR), Majanja J observed that: -
“Every taxpayer is required to maintain proper and relevant records and documents for purposes of ascertaining their tax liability and produce them when required by the Commissioner. This position reverberates throughout tax statutes including the TPA and the ITA. Section 59 (1) of the TPA provides that a tax payer shall produce records when required to do so by the Commissioner. Section 3(1) of the TPA provides that the documents a tax payer is expected to maintain include, ‘a book of account, record, paper, register, bank statement, receipt, invoice, voucher, contract or agreement, tax return, Customs declaration, or tax invoice; or any information or data stored on a mechanical or electronic data storage device’. In essence, a tax payer is supposed to maintain primary documents meaning a schedule or table summary of expenses and income cannot be deemed to be a document or record capable of ascertaining one’s tax liability (see Commissioner Investigations and Enforcement v Kidero (Income Tax Appeal E028 of 2020) [2022] KEHC 52 (KLR) (Commercial and Tax) (4 February 2022) (Judgment))”
28. The Assessment in this case was largely based on the fact that records held with the Respondent indicated that the Appellant was in constant VAT credit position since the year 2015. It therefore follows that the Appellant was expected to produce the documents specified under Section 17(3) of the Value Added Tax Act to explain its constant VAT credit position.
29. Section 17(3) of the VAT Act requires that the following documentation be provided for the purposes of supporting a claim for input VAT –
“(3) The documentation for the purposes of subsection (2) shall be—
(a) an original tax invoice issued for the supply or a certified copy;
(b) a customs entry duly certified by the proper officer and a receipt for the payment of tax;
(c) a customs receipt and a certificate signed by the proper officer stating the amount of tax paid, in the case of goods purchased from a customs auction; and
(d) a credit note in the case of input tax deducted under section 16(2);
(e) a debit note in the case of input tax deducted under section 16(5); or
(f) in the case of a participant in the Open Tender System for the importation of petroleum products that have been cleared through a non-bonded facility, the custom entry showing the name and PIN of the winner of the tender and the name of the other oil marketing company participating in the tender:
Provided that the input tax that may have been incurred by an oil marketing company participating in the Open Tender System before the coming into force of this provision shall be claimed within twelve months after this provision comes into force.”
30. The Respondent, in its submissions, contended that while the Appellant provided a “working of the variances,” it failed to furnish the primary documents necessary to substantiate those workings. I agree with the Respondent. In the absence of such primary documentation, the Appellant cannot be said to have discharged its burden of proof as required under Section 56(1) of the Tax Procedures Act, read together with Section 17(3) of the VAT Act. Mere workings or reconciliations, without supporting source documents such as invoices, receipts, or ledgers, amount to unverified assertions and fall short of the evidentiary threshold imposed by the law. See Kinyua v Commissioner of Investigations & Enforcement [supra].
31. Section 56(1) of the Tax Procedure Act and Section 30 of the Tax Appeals Tribunal Act are explicit that the burden of proof rests squarely on the taxpayer to demonstrate that a tax decision is incorrect. It is a well-established principle in tax law that the Commissioner’s assessments are "presumptively correct" until the taxpayer provides competent and relevant evidence to the contrary. See the case of Republic v Kenya Revenue Authority; Proto Energy Limited (Exparte) [2022] KEHC 5 (KLR) where Mativo J (as he then was), stated as follows: -
“For starters, a significant factor adding to the taxpayer''s burden in tax cases is the presumption of correctness which attaches to the Commissioner''s assessments or determinations of deficiency.34 The commissioner''s determinations of tax deficiencies are presumptively correct. Although the presumption created by the above position is not evidence in itself, the presumption remains until the taxpayer produces competent and relevant evidence to support his position.35 If the taxpayer comes forward with such evidence, the presumption vanishes and the case must be decided upon the evidence presented, with the burden of proof on the taxpayer.”
32. In the present case, the Appellant was required to produce primary documents as specified under, among others, Section 17(3) of the VAT Act. The record confirms, through the Respondent’s communications, that the Appellant was afforded an opportunity to provide the requisite documentation but failed to do so.
33. In these circumstances, this Court finds, as the Tribunal correctly held, that reconciliations and bank statements alone were insufficient. The absence of the necessary primary documents to substantiate the Appellant’s position left the presumption of correctness of the Respondent’s assessments intact.
34. Accordingly, I uphold the Tribunal’s finding on this issue.
Alleged violation of Article 47
35. The Appellant argued that the Respondent issued the Objection Decision in undue haste and thereby contravened Article 47 of the Constitution as well as Sections 4(2), 6(1), and 6(2) of the Fair Administrative Action Act, 2015 (FAAA). According to the Appellant, these provisions required the Respondent to interrogate the documents supplied and to accord the taxpayer an opportunity to be heard before taking the impugned administrative action.
36. At paragraph 24 of its submissions, the Appellant faulted the Respondent for failing to notify it, before issuing the Objection Decision, that additional documentation was required. The Appellant stated:
“Between 31st August 2022 and 3rd November 2022 (during the objection stage), there were no email communication from the Respondent requesting for any documents. The Appellant submitted a valid objection, which means it was supported by the necessary documentation.”
37. I have carefully gone through the record of appeal and do not agree with the Appellant’s assertions. Evidence on record reveals that the Assessment, the subject of these proceedings, was issued on 31st March 2022, and the Appellant objected to the same on 28th October 2022, with the Commissioner issuing its objection decision on 3rd November 2022. I do not find anything untoward in the way the Commissioner dealt with the Appellant’s Objection.
38. I have carefully reviewed the record of appeal and do not agree with the Appellant’s assertions. The evidence on record shows that the assessment giving rise to these proceedings was issued on 31st March 2022, the Appellant lodged its objection on 28th October 2022, and the Commissioner rendered the objection decision on 3rd November 2022, which was well within the statutory timelines. I find nothing irregular or procedurally improper in the manner in which the Commissioner dealt with the Appellant’s objection.
39. As pointed out elsewhere in this judgment, once the Respondent issued its assessment, the burden of proving that the same was excessive shifted to the Appellant. The Appellant, being the party with custody and peculiar knowledge of the transactions in question, bore the statutory duty to provide all supporting records. It was not for the Respondent to argue the Appellant’s case at the objection stage. That task squarely fell on the Appellant. Section 23(1) of the Tax Procedures Act expressly obliges taxpayers, the Appellant herein included (and not the Respondent), to maintain records. The Respondent cannot be faulted for proceeding to make an objection decision based on the documents which had then been provided by the Appellant.
40. As pointed out elsewhere in this judgment, once the Respondent issued its assessment, the burden of proving that the same was excessive shifted to the Appellant. The Appellant, being the party with custody and peculiar knowledge of the transactions in question, bore the statutory duty to provide all supporting records. It was not the role of the Respondent to advance or supplement the Appellant’s case at the objection stage; that duty rested squarely with the Appellant. The Respondent cannot, therefore, be faulted for proceeding to render an objection decision on the basis of the documentation that had been furnished by the Appellant.
41. Further, this question of an alleged breach of Article 47 of the Constitution was not among the issues raised before the Tribunal. Section 56(3) of the Tax Procedures Act is explicit that a taxpayer cannot introduce new grounds on appeal unless with leave of the Court. No such leave was sought or obtained in this case.
42. In IEBC v Mule & 5 Others [2014] eKLR, the Court of Appeal, citing the Nigerian Supreme Court decision in Adetoun Oladeji (Nig) Ltd v Nigeria Breweries Plc SC 91/2002, emphasized that parties are bound by their pleadings, and new issues cannot be introduced on appeal except where they are matters of pure law. The Court stated: -
“..it is now a very trite principle of law that parties are bound by their pleadings and that any evidence led by any of the parties which does not support the averments in the pleadings, or put in another way, which is at variance with the averments of the pleadings goes to no issue and must be disregarded.”
43. Consequently, I find that the ground based on alleged violation of Article 47 is improperly before this Court and, in any event, the Appellant has not demonstrated any breach of its constitutional or statutory rights.
44. In the result, I find this appeal unmeritorious and it is hereby dismissed. The judgment of the Tax Appeals Tribunal dated 9th May 2024 is accordingly upheld in its entirety.
45. Costs of the appeal shall be borne by the Appellant.
46. It is so ordered.
SIGNED, DATED, and DELIVERED IN VIRTUAL COURT THIS
11TH SEPTEMBER 2025
ADO MOSES
JUDGE
In the presence of: -
C/A – Moses
Ms, Koskei
h/b for Maero…………..for the Appellant
Lemiso………….…..... for the Respondent
'