1. The exparte applicant filed the notice of motion dated 4.11.24 seeking that ;
a. The Honourable Court be pleased to grant an Order/Writ of Judicial Review, in the nature of Certiorari to bring unto this Honourable Court and Quash the Assessment Order made by the Respondents on the 6th day of May 2024 vide Assessment Number KRA202432533468 demanding for additional payment of Kshs.895, 999.99 only and/or other sums, on account of VAT for the month of February 2023, contrary to the provisions of the Income Tax Act, Chapter 470, Laws of Kenya. the Value Added Tax Act 2013 and without complying with and/or observing the principle of Fair Hearing and the Doctrine of Natural Justice, whatsoever and/or howsoever.
b. The Honourable Court be pleased to grant an Order/Writ of Judicial Review, in the nature of Certiorari to bring unto this Honourable Court and Quash the Objection Decision of the Respondents, contained vide Letter dated the 23rd October 2024 directed to the Ex-parte Applicant rejecting the Notice of Objection and confirming the Assessment Order made by the Respondents on the 6 th day of May 2024 vide Assessment Number KRA202432533468 demanding for additional payment of Kshs.895, 999.99 only and/or other sums, on account of VAT for the month of February 2023, contrary to the provisions of the Income Tax Act. Chapter 470. Laws of Kenya. the Value Added Tax 2013 and without complying with and/or observing the principle of Fair Hearing and the Doctrine of Natural Justice, whatsoever and/or howsoever.
c. The Honourable Court be pleased to grant an Order/Writ of Judicial Review, in the nature of Prohibition, to issue prohibiting the Respondents from demanding and/or further demanding for additional payment of Kshs.895, 999.99 only and/or other sums, on account of VAT for the month of February 2023, pegged on the Assessment Order vide Assessment Number KRA202432533468, contrary to the provisions of the Income Tax Act. Chapter 470, Laws of Kenya, the Value Added Tax. 2013 and without Regard to the Due process of the Law, the Constitution, 2010, the Fair Administrative Actions Act, 2015 and the Doctrine of Natural Justice.
d. Costs of this Application be borne by the Respondents jointly and severally.
e. Such further and/or other Orders be made as the Court may deem fit and expedient
2. The application is based the Statement of Facts, the Verifying Affidavit all dated the 4th November 2024 and the annextures, attached thereto and the grounds on t6he face of it .
a) The applicant basically contests Assessment of VAT vide Assessment Number KRA202432533468 in relation to VAT for the month of February 2023 regarding an alleged income of Kshs.5, 600, 000/= which monies were paid to the Ex-parte Applicant by Kisii County Government on the said month. The exparte applicant said they filed on objection and documents in support of the same as per the4 request of the respondents . The exparte applicant decried that the respondents demanded documents to enable them assess Vat for the entire year 2023 only and not February 2023 only which it objected to . The exparte applicant said it was subjected to unfair hearing in contravention to Articles 27, 47 and 50 of the Constitution. Also that it disclosed the information required by the respondents vide letter dated 22nd October 2024 explaining the source of the said monies. Further that on the 23rd day of October 2024 the Respondents rendered an Objection Decision whereby the Notice of Objection was rejected and proceeded to confirm the additional assessment vide Assessment Number KRA202432533468 in relation to VAT for the month of February 2023 without interrogating the source of the funds with respect to the documents supplied and/or furnished to support the grounds of the Objection.
Preliminary objection
3. The respondents filed a notice of preliminary objection dated December 2025.The objection was filed by the respondent on the ground that the court lacks jurisdiction to hear and determine the Judicial review proceedings herein by dint of the provisions of Section 52 of the Tax Procedures Act. Also that the Applicant has failed to exhaust the internal mechanisms available under Section 52 of the Tax Procedures Act by proffering an appeal to the Tax Appeals Tribunal. Further the Application for Judicial Review offends Section 9(2) of the Fair Administrative Action Act and no exceptional circumstances has been warranted to exempt the Applicant from the requirement of exhausting internal mechanisms for appeal and review. That the substratum of the Application being the decision of the Commissioner of Domestic Taxes, the proper forum for the adjudication of this matter is the Tax Appeals Tribunal as provided for under Section 52 of the Tax Procedures Act .The Respondent thus prayed that the Notice of Motion Application seeking Judicial Review 3. orders dated 4th November 2024 be struck out with costs to the Respondent.
4. The court directed that the objection be canvassed by way of written submissions and the parties complied .
Respondents submissions
5. The Respondents submitted that it’s preliminary objection raises pure points of law and from the pleadings before the Honourable Court the Court should clearly find that the facts are uncontested as to the relationship between the parties. It is the Respondent’s submission that its relationship and the Applicant was guided by the Tax Procedures Act leading to the issuance of assessments and the objection decision. They further submits that as per the pleadings it was exercising its mandate as provided for under Section 29 of the Tax Procedures Act when it raised assessments on the Applicant and that the Applicant being dissatisfied with the said decision for assessment raised an objection pursuant to Section 51 of the Tax Procedures Act. It therefore follows that if dissatisfied by the Respondent’s decision then the Applicant ought to have invoked the procedure provided under Section 52 of the Tax Procedures Act. Further, the Respondent submits that what is complained for by the Applicant is the Respondents performance of duties which are public in nature and thus Administrative in nature and the performance of the said functions by the Respondent is further guided by the Fair Administrative Actions Act. The Respondent submits that Section 9 of the Fair Administrative Actions Act dictates a procedure applicable to anyone who is aggrieved by a decision of an administrative body. The Respondent submits that a perusal from the pleadings before the Court would only lead to the conclusion that the issues and facts as presented are uncontested and clear that the preliminary objection is properly raised by the Respondent and thus the same is merited.
6. Whether this court is divested of jurisdiction on grounds that the suit offends the doctrine of exhaustion of Administrative remedies, The Respondents submitted that the Applicant's suit offends the doctrine of exhaustion of statutory provided dispute resolution mechanisms and as such this Honourable Court is divested of jurisdiction to determine the Applicant's suit. They further contended that The Applicant's application flows from the Respondent's decision with regards to assessment notice and objection decision dated the 6th May 2024 and 23rd October 2024 respectively. The Applicant aggrieved by the assessment notice issued to them objected to the said assessments as provided for under Section 51 of the Tax Procedures Act. The Respondent considered the said objection and rendered its objection decision on 23rd October 2024 pursuant to 51(11) of the Tax Procedures Act confirming the issued assessments. Further that the applicant ought to have invoked the provisions of Section 51(12) of the Tax Procedures Act is that the Applicant if dissatisfied with the decision issued under Section 51(11) and have appealed in the the Tax Appeals Tribunal. Also that the High court only comes in to hear Appeals from the Tax Appeals Tribunal. The Respondent submitted that the Applicant's suit fails on two statutory fronts namely on the Tax Procedures Act, 2015 (TPA) front and the Fair Administrative Actions Act (FAA) .The Respondent placed reliance on the case of Geoffrey Muthiga Kabiru & 2 others-us-Samuel Munga Henry & 1756 others [2015] eKLR, where the Court of Appeal held that:
"....It is imperative that where a dispute resolution mechanism exists outside Courts, the same be exhausted before the jurisdiction of the Courts is invoked. Courts ought to be fora of last resort and not the first port of call the moment a storm brews...The exhaustion doctrine is a sound one and serves the purpose of ensuring that there is a postponement of judicial consideration of matters to ensure that a party is first of all diligent in the protection of his own interest within the mechanisms in place for resolution outside the Courts. The Ex Parte Applicants argue that this accords with Article 159 of the Constitution which commands Courts to encourage alternative means of dispute resolution."
7. The Respondents placed reliance on Section 9 of the Act which provides;
9(1) Subject to subsection (2), a person who is aggrieved by an administrative action may, without unreasonable delay, apply for judicial review of any administrative action to the High Court or to a subordinate court upon which original jurisdiction is conferred pursuant to Article 22(3) of the Constitution.
(2) The High Court or a subordinate court under subsection (1) shall not review an administrative action or decision under this Act unless the mechanisms including internal mechanisms for appeal or review and all remedies available under any other written law are first exhausted.
(3) The High Court or a subordinate Court shall, if it is not satisfied that the remedies referred to in subsection (2) have been exhausted, direct that applicant shall first exhaust such remedy before instituting proceedings under subsection (1).
(4) Notwithstanding subsection (3), the High Court or a subordinate Court may, in exceptional circumstances and on application by the applicant, exempt such person from the obligation to exhaust any remedy if the court considers such exemption to be in the interest of justice.
(5) A person aggrieved by an order made in the exercise of the judicial review jurisdiction of the High Court may appeal to the Court of Appeal.
8. The Respondent submitted that even though this Honourable Court has jurisdiction to issue judicial review orders in instances where a party is aggrieved of an administrative action, Section 9(2) is instructive to the extent that mechanisms available under any other written law are first exhausted before moving this Honourable Court. The Respondent further provides that the Applicant has not complied with Section 9(4) of the Fair Administrative Actions Act as the Applicant has failed to provide any exceptional circumstances to exempt them from exhausting any remedy and As such the Applicant’s suit offends the exhaustion doctrine. The Respondent to this end submits that the Applicant cannot be allowed to by-pass statutorily provided processes to directly move this Honourable Court in the absence of any proper explanation or exceptional circumstances. The Respondent seeks to place reliance in the case of Speaker of National Assembly v Karume [1992] KLR 21 where the Court of Appeal held as follows; “Where there is a clear procedure for redress of any particular grievance prescribed by the Constitution or an Act of Parliament, that procedure should be strictly followed. Accordingly, the special procedure provided by any law must be strictly adhered to since there are good reasons for such special procedures” Also the case of Night Rose Cosmetics (1972) Ltd v Nairobi County Government & 2 others [2018] eKLR where Justice Mativo as he then was held that;
“Our jurisprudential policy is to encourage parties to exhaust and honour alternative forums of dispute resolution where they are provided for by statute. It is also settled that the exhaustion doctrine is only applicable where the alternative forum is accessible, affordable, timely and effective. A remedy is considered available if the Petitioner can pursue it without impediment, it is deemed effective if it offers a prospect of success and is found sufficient if it is capable of redressing the complaint [in its totality]
...a remedy is considered available only if the applicant can make use of it in the circumstances of his case.”
9. The Respondent submitted that the Applicant has not provided any evidence to exceptional circumstances to this Court that the alternative forum the Tax Appeals Tribunal is inaccessible, unaffordable, untimely and ineffective to allow the Court exempt them from the exhaustion doctrine.
10. It was submitted that the motion offends the Sections 51 (12) and Section 52(1) of the Tax Procedures Act and thus their Preliminary Objection dated 11th December 2024 ought to be allowed.
Ex-parte applicant’s submissions.
11. The e-xparte applicant it’s submissions raised four issues for determination and condensed them in limbs which are ; Whether the Income Tax Act Chapter 470 Laws of Kenya prescribes Decretal Sum awarded by Courts of Law as income under the Act? & whether the Respondents usurped their statutory mandate and/or powers when same purported to fax Decretal sum awarded to a client vide court proceedings?
12. The Ex-parte Applicant had raised an issue that the decretal amount awarded to it’s client vide various court proceedings were not income provided for under the Income Tax Act (hereinafter referred to as the Act). It was argued that the issue of jurisdiction to tax decretal sum is serious and ought to have been considered by the respondents one it was raised . Once this issue was raised with the Respondents, it behooved the Respondents to ascertain whether the Act gave them the mandate or powers to tax decretal amount. It was submitted that this was an issue that took center stage during the objection proceedings and despite the Ex-parle Applicant raising an issue of statutory mandate of the Respondents to subject decretal amount to tax, the Respondents turned a blind eye to these serious jurisdictional and/or administrative issues.
13. It was submitted that in their Affidavit of Verification at page 27 , annexture WO 4 (a).WO 5 at page 29, annexture WO 7 (a), (b), (c), (d) and (e) al pages 35-42 the applicant annexed the Certificates of Costs and Ruling on Costs in various Courts dealing with the dispute between the Ex-parte Applicant's client and Kisii County Government. Also Annextures WO 9 (α). (b), (c), (d), (e). (1), (g) and (h) at pages 46-59 which are the various communications between the Parties to the court proceedings negotiating on mode of payment of the decretal amount. All these documents were supplied to the Respondents but despite the fact that the Act did not expressly apply to decretal sum as income, the Respondents usurped t powers and subjected the decretal sum to tax contrary to law.. The Respondents failed to consider material facts placed before them which in law he was bound to consider in the case of AM BAHAJI & COMPANY LIMITED VS KENYA PORTS AUTHORITY [2020] eKLR, the Court when dealing with a similar issue held that;
...perhaps to shine more light, the Court outlines what would amount to an income. The same is defined under the Black's Law Dictionary as 'the return in money from one's business, labour, or capital invested", Therefore, it cannot be gainsaid that a decretal sum is a form of income and it would be a travesty to include it as income to fit within the gloves of the Applicant. This is why I agree with the finding in the case of IBRAHIM MANYARA VS REGISTERED TRUSTEES OF AGRICULTURAL SOCIETY OF KENYA than.... The offshoot of my finding on this subject is that there is no known law that subjects decrees of court to taxation. The Income Tax afore cited is silent on this and we should so far read that path. If the tax man wishes to rethink his position on this we shall not disallow same.”
14. The exparte applicant also cited the case of MUEMA KITULU T/A MUEMA KITULU & COMPANY ADVOCATES V THE COUNTY SECRETARY COUNTY GOVERNMNET OF KITUI [2020] eXLR, the leamed Judge held that.
.... a Decretal amount has neither been included as an exempt service neither does it fit within the definition of a service and placing reliance on the case in Paragraph & above, it would be a travesty to Include it as a service to as to force it within the gloves of the Respondent, in the case of CIT V VEGETABLE PRODUCT LTD (1973) ITR 192, it was held,...if the court finds that the language of the laxing provision is ambiguous or capable of more meaning than one, then the court has to adapt the interpretation that favors the assessee (taxpayer)...... In the result, I direct that any deductions of VAT by the Respondent is not supported by any law and therefore the same is illegal and that any sum so deducted ought I be refunded to the applicant within 14 days of the date of this ruling....
15. It was further submitted that it therefore follows that the Respondents could only tax what is provided for in law and it was their duty to exercise their administrative duties pursuant to the law and not any other. Also that the respondents exceeded their powers an thus acted on an illegal provisions not anchored in law. The Value Added Tax No. 35 of 2013 provides for what ought to be subjected to tax at Section 5. Part Il there of provided for services that are exempted from fax. The Courts herein after perusing the Income Tax and Value Added Tax come to a finding that Decretal Sum is not an income under the two Acts. Thus, the Respondents in failing to consider the facts before them, acted outside the ambit of law and purported to invoke and/or act on a non-existing law, It was their own creation hence same abused their powers. One can only tax an income that is provided by law. The decision to subject decretal amount to lax was thus an illegal and arbitrary decision not known in law.
ISSUE NUMBERS 3 AND 4
16. Whether the Tribunal Tax Appeal has mandate to supervise the administrative powers of the Respondents when same exceeds their statutory mandate? & Whether the Tax Appeals Tribunal has the statutory power to hear and adjudicate issues pertaining to breach and/or infringement of fundamental rights as enshrined in the Constitution? It was submitted that the Ex-parte Applicant is raising issues of violation of the Constitution by the office of Commissioner of Income Tax which the High court has Jurisdiction to supervise under Article 165 (6) of the Constitution which prescribes that-
... The High Court has supervisory jurisdiction over the Subordinate Courts and over any person, body or authority exercising a judicial or quasi-judicial function...”
17. It was further submitted that the Respondents cannot usurp a mandate which is not provided for in law .
18. On what amounts to a preliminary objection counsel submitted that in the case of Mukisa Biscuits Manufacturing Ltd v West End Distributors (1969) EA 696 the Court clearly stated what constitutes a preliminary objection in the following words;
“.... a preliminary objection consists of a point of law which has been pleaded or which arises by clear implication out of pleadings and which if argued as a preliminary point may dispose of the suit.”
The Court went further in to state interalia that;
“A preliminary objection is in the nature of what used to be a demurrer. It raises a pure point of law which is argued on the assumption that all the facts pleaded by the other side are correct. It cannot be raised if any fact has to be ascertained or if what is sought is the exercise of judicial discretion”
19. The Respondent submitted that its preliminary objection raises pure points of law and from the pleadings before the Honourable Court the Court should clearly find that the facts are uncontested as to the relationship between the parties. It is the Respondent’s submission that it’s relationship to the Applicant was guided by the Tax Procedures Act leading to the issuance of assessments and the objection decision. They further submitted that as per the pleadings it was exercising its mandate as provided for under Section 29 of the Tax Procedures Act when it raised assessments on the Applicant and that the Applicant being dissatisfied with the said decision for assessment raised an objection pursuant to Section 51 of the Tax Procedures Act. It therefore follows that if dissatisfied by the Respondent’s decision then the Applicant ought to have invoked the procedure provided under Section 52 of the Tax Procedures Act. Further, the Respondent submitted that what is complained for by the Applicant is the Respondents performance of duties which are public in nature and thus Administrative in nature and the performance of the said functions by the Respondent is further guided by the Fair Administrative Actions Act. The Respondent submits that Section 9 of the Fair Administrative Actions Act dictates a procedure applicable to anyone who is aggrieved by a decision of any administrative body. The Respondent submits that a quick perusal from the pleadings before the Court would only lead to the conclusion that the issues and facts as presented are uncontested and clear that the preliminary objection is properly raised by the Respondent and thus the same is merited.
20. it was also submitted that the Tax Procedures Act provides as follows;
(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. The Respondent further submits that Section 52(1) of the Tax Procedures Act provides that; (1) 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, 2013 (No. 40 of 2013). The Respondent submits that the Applicant failed to invoke the special procedures provided for under Section 51(12) and 52(1) of the Tax Procedures Act and has indeed moved this Court in utter disregard of the statutory
Ex-parte applicant’s submissions
20. The exparte applicant in her submissions raised four issues to be addressed and discussed them in two limbs which are ; Whether the Income Tax Act Chapter 470 Laws of Kenya prescribes Decretal Sum awarded by Courts of Law as income under the Act & Whether the Respondents usurped their statutory mandate and/or powers when same purported to tax Decretal sum awarded to a client vide court proceedings.
21. The Ex-parte Applicant raised an issue that the decretal amount awarded to her Client vide various court proceedings were not income provided for under the Income Tax Act (hereinafter referred to as the Act) and that once this issue was raised with the Respondents, it was upon them the to ascertain whether the Act gave them the mandate or powers to tax decretal amount or not and that this issue was the core of the objection proceedings . The applicant referred this court to its Affidavit of Verification at pages 27 also annexture WO 4 (a). Annexture WO 5 at page 2, annexture WO 7 (a), (b), (c), (d) and (e) at pages 35-42 ( Certificates of Costs and Ruling on Costs in various Courts dealing with the dispute between the Ex-parte Applicant's client and Kisii County Government. ) Also annextures WO 9 (α). (b), (c), (d), (e). (1), (g) and (h) at pages 46-59 which it termed the various communications between the Parties to the court proceedings negotiating on mode of payment of the decretal amount AM BAHAJI & COMPANY LIMITED VS KENYA PORTS AUTHORITY [2020] eKLR, the Court when dealing with a similar issue held that
...perhaps to shine more light, the Court outlines what would amount to an income. The same is defined under the Black's Law Dictionary as 'the return in money from one's business, labour, or capital invested", Therefore, it cannot be gainsaid that a decretal sum is a form of income and it would be a travesty to include it as income to fit within the gloves of the Applicant. This is why I agree with the finding in the case of IBRAHIM MANYARA VS REGISTERED TRUSTEES OF AGRICULTURAL SOCIETY OF KENYA than.... The offshoot of my finding on this subject is that there is no known law that subjects decrees of court to taxation. The Income Tax afore cited is silent on this and we should so far read that path. If the tax man wishes to rethink his position on this we shall not disallow same.”
Also MUEMA KITULU T/A MUEMA KITULU & COMPANY ADVOCATES V THE COUNTY SECRETARY COUNTY GOVERNMNET OF KITUI [2020] eKLR, the leamed Judge held that.
.... a Decretal amount has neither been included as an exempt service neither does it fit within the definition of a service and placing reliance on the case in Paragraph & above, it would be a travesty to Include it as a service to as to force it within the gloves of the Respondent, in the case of CIT V VEGETABLE PRODUCT LTD (1973) ITR 192, it was held,...if the court finds that the language of the laxing provision is ambiguous or capable of more meaning than one, then the court has to adapt the interpretation that favours the assessee (taxpayer)...... In the result, I direct that any deductions of VAT by the Respondent is not supported by any law and therefore the same is illegal and that any sum so deducted ought I be refunded to the applicant within 14 days of the date of this ruling....
22. It therefore follows that the Respondents could only tax what is provided for in law and it was their duty to exercise their administrative duties pursuant to the law and not any other. It is this excess of powers exercised against the Ex-parte Applicant that is being complained of in the instant proceedings. The applicant stated that the Respondents usurped powers they did not have ad decretal sum is not listed for taxation under the Value Added Tax No. 35 of 2013 . Further that the courts have since held that Decretal Sum is not an income under the two
Acts.
23. On whether the Tribunal Tax Appeal has mandate to supervise the administrative powers of the Respondents when same exceeds their statutory mandate & Whether the Tax Appeals Tribunal has the statutory power to hear and adjudicate issues pertaining to breach and/or infringement of fundamental rights as enshrined in the Constitution? It has been posited by the Respondents that the proceedings herein contravene the doctrine of exhaustion. The applicant told this court that the office of commissioner of Income tax is a creature of stature and cannot Act ultra vires its powers and that the issues herein are those of violation of the constitution which are within the Jurisdiction of this court Under Article 165(6) of the constitution and not the tax Appeals Tribunal . Counsel submitted that Article 165 (6) of the Constitution prescribes that-
... The High Court has supervisory jurisdiction over the Subordinate Courts and over any person, body or authority exercising a judicial or quasi-judicial function...”
Also Article 165( 2) (d) (ii) of the Constitution is to the effect that the high court shall have jurisdiction to determine the question whether anything said to be done under the authority of the constitution or of any law is consistent with or in contravention of the constitution...
24. The Ex-parte contended that the assessment in question was in respect of the month of February 2023 with regards to a decretal award or sum of Kshs. 5,600,000/= and suddenly after responding to the Respondent vide the Objection raised, The Respondents suddenly demanded that the Ex-parte Applicant do furnish them with returns of the whole year 2023 (see Annexture WO & at page 31 of the substantive Nolice of Motion). The Ex-parte Applicant raised a concern in the manner the Respondents were administering their mandate and this was captured in annexture WO 7 (a) at page 32 of the Application herein, For clarity, the Ex-parte Applicant staled vide the sold annexture that,
...’’however as pertains to the request for assorted documents for verification for the year 2023, we find your decision to request for same as arbitrary and/or deviation from the issues raised in the additional assessment (see Annexture WO 3 at page 23) the subject of the Notice of Objection. Besides same is also contrary to the provisions of Article 10 of the Constitution 2010’’
In the case of REPUBLIC V COMMISSIONER OF DOMESTIC TAXES LARGE TAX PAYER'S OFFICE EX-PARTE BARCLAYS BANK OF KENYA LTD 2012), where the Respondent had raised a jurisdictional issue that the Court had no jurisdiction to hear the said suit as the proper forum was the Local Commiltee dealing with appeals, the late Majanja, J held.
‘’Mr Ontweka counsel for the Respondent argued that the bank should have appealed to the local Committee against the decision of the Respondent and hence this court should decline jurisdiction... the Respondent's argument was settled in the Republic v Commissioner of Income Tax ex-parte SDV Transami (Kenya) Limited HC Misc. App No. 212 of 2004 (Unreported) where Hon, Justice Ojwang in response to the same argument raised by the respondent in that case stated that. What the Applicant is questing is the exercise of a public power by a public body, and on this account judicial review is an eminently appropriate course. The issue in this case is whether the respondent's decision falls within the confines of the tax statute. The bank, as a party aggrieved by the exercise of this public power, is entitled to move the court and the court has the authority to consider whether the (respondent has acted within or outside its jurisdiction. This inquiry may involve the examination of facts to determine whether the transaction is captured by the statute, this inquiry does not lake the matter outside the purview of judicial review’’.
The approa
[...truncated]
a. The Honourable Court be pleased to grant an Order/Writ of Judicial Review, in the nature of Certiorari to bring unto this Honourable Court and Quash the Assessment Order made by the Respondents on the 6th day of May 2024 vide Assessment Number KRA202432533468 demanding for additional payment of Kshs.895, 999.99 only and/or other sums, on account of VAT for the month of February 2023, contrary to the provisions of the Income Tax Act, Chapter 470, Laws of Kenya. the Value Added Tax Act 2013 and without complying with and/or observing the principle of Fair Hearing and the Doctrine of Natural Justice, whatsoever and/or howsoever.
b. The Honourable Court be pleased to grant an Order/Writ of Judicial Review, in the nature of Certiorari to bring unto this Honourable Court and Quash the Objection Decision of the Respondents, contained vide Letter dated the 23rd October 2024 directed to the Ex-parte Applicant rejecting the Notice of Objection and confirming the Assessment Order made by the Respondents on the 6 th day of May 2024 vide Assessment Number KRA202432533468 demanding for additional payment of Kshs.895, 999.99 only and/or other sums, on account of VAT for the month of February 2023, contrary to the provisions of the Income Tax Act. Chapter 470. Laws of Kenya. the Value Added Tax 2013 and without complying with and/or observing the principle of Fair Hearing and the Doctrine of Natural Justice, whatsoever and/or howsoever.
c. The Honourable Court be pleased to grant an Order/Writ of Judicial Review, in the nature of Prohibition, to issue prohibiting the Respondents from demanding and/or further demanding for additional payment of Kshs.895, 999.99 only and/or other sums, on account of VAT for the month of February 2023, pegged on the Assessment Order vide Assessment Number KRA202432533468, contrary to the provisions of the Income Tax Act. Chapter 470, Laws of Kenya, the Value Added Tax. 2013 and without Regard to the Due process of the Law, the Constitution, 2010, the Fair Administrative Actions Act, 2015 and the Doctrine of Natural Justice.
d. Costs of this Application be borne by the Respondents jointly and severally.
e. Such further and/or other Orders be made as the Court may deem fit and expedient
2. The application is based the Statement of Facts, the Verifying Affidavit all dated the 4th November 2024 and the annextures, attached thereto and the grounds on t6he face of it .
a) The applicant basically contests Assessment of VAT vide Assessment Number KRA202432533468 in relation to VAT for the month of February 2023 regarding an alleged income of Kshs.5, 600, 000/= which monies were paid to the Ex-parte Applicant by Kisii County Government on the said month. The exparte applicant said they filed on objection and documents in support of the same as per the4 request of the respondents . The exparte applicant decried that the respondents demanded documents to enable them assess Vat for the entire year 2023 only and not February 2023 only which it objected to . The exparte applicant said it was subjected to unfair hearing in contravention to Articles 27, 47 and 50 of the Constitution. Also that it disclosed the information required by the respondents vide letter dated 22nd October 2024 explaining the source of the said monies. Further that on the 23rd day of October 2024 the Respondents rendered an Objection Decision whereby the Notice of Objection was rejected and proceeded to confirm the additional assessment vide Assessment Number KRA202432533468 in relation to VAT for the month of February 2023 without interrogating the source of the funds with respect to the documents supplied and/or furnished to support the grounds of the Objection.
Preliminary objection
3. The respondents filed a notice of preliminary objection dated December 2025.The objection was filed by the respondent on the ground that the court lacks jurisdiction to hear and determine the Judicial review proceedings herein by dint of the provisions of Section 52 of the Tax Procedures Act. Also that the Applicant has failed to exhaust the internal mechanisms available under Section 52 of the Tax Procedures Act by proffering an appeal to the Tax Appeals Tribunal. Further the Application for Judicial Review offends Section 9(2) of the Fair Administrative Action Act and no exceptional circumstances has been warranted to exempt the Applicant from the requirement of exhausting internal mechanisms for appeal and review. That the substratum of the Application being the decision of the Commissioner of Domestic Taxes, the proper forum for the adjudication of this matter is the Tax Appeals Tribunal as provided for under Section 52 of the Tax Procedures Act .The Respondent thus prayed that the Notice of Motion Application seeking Judicial Review 3. orders dated 4th November 2024 be struck out with costs to the Respondent.
4. The court directed that the objection be canvassed by way of written submissions and the parties complied .
Respondents submissions
5. The Respondents submitted that it’s preliminary objection raises pure points of law and from the pleadings before the Honourable Court the Court should clearly find that the facts are uncontested as to the relationship between the parties. It is the Respondent’s submission that its relationship and the Applicant was guided by the Tax Procedures Act leading to the issuance of assessments and the objection decision. They further submits that as per the pleadings it was exercising its mandate as provided for under Section 29 of the Tax Procedures Act when it raised assessments on the Applicant and that the Applicant being dissatisfied with the said decision for assessment raised an objection pursuant to Section 51 of the Tax Procedures Act. It therefore follows that if dissatisfied by the Respondent’s decision then the Applicant ought to have invoked the procedure provided under Section 52 of the Tax Procedures Act. Further, the Respondent submits that what is complained for by the Applicant is the Respondents performance of duties which are public in nature and thus Administrative in nature and the performance of the said functions by the Respondent is further guided by the Fair Administrative Actions Act. The Respondent submits that Section 9 of the Fair Administrative Actions Act dictates a procedure applicable to anyone who is aggrieved by a decision of an administrative body. The Respondent submits that a perusal from the pleadings before the Court would only lead to the conclusion that the issues and facts as presented are uncontested and clear that the preliminary objection is properly raised by the Respondent and thus the same is merited.
6. Whether this court is divested of jurisdiction on grounds that the suit offends the doctrine of exhaustion of Administrative remedies, The Respondents submitted that the Applicant's suit offends the doctrine of exhaustion of statutory provided dispute resolution mechanisms and as such this Honourable Court is divested of jurisdiction to determine the Applicant's suit. They further contended that The Applicant's application flows from the Respondent's decision with regards to assessment notice and objection decision dated the 6th May 2024 and 23rd October 2024 respectively. The Applicant aggrieved by the assessment notice issued to them objected to the said assessments as provided for under Section 51 of the Tax Procedures Act. The Respondent considered the said objection and rendered its objection decision on 23rd October 2024 pursuant to 51(11) of the Tax Procedures Act confirming the issued assessments. Further that the applicant ought to have invoked the provisions of Section 51(12) of the Tax Procedures Act is that the Applicant if dissatisfied with the decision issued under Section 51(11) and have appealed in the the Tax Appeals Tribunal. Also that the High court only comes in to hear Appeals from the Tax Appeals Tribunal. The Respondent submitted that the Applicant's suit fails on two statutory fronts namely on the Tax Procedures Act, 2015 (TPA) front and the Fair Administrative Actions Act (FAA) .The Respondent placed reliance on the case of Geoffrey Muthiga Kabiru & 2 others-us-Samuel Munga Henry & 1756 others [2015] eKLR, where the Court of Appeal held that:
"....It is imperative that where a dispute resolution mechanism exists outside Courts, the same be exhausted before the jurisdiction of the Courts is invoked. Courts ought to be fora of last resort and not the first port of call the moment a storm brews...The exhaustion doctrine is a sound one and serves the purpose of ensuring that there is a postponement of judicial consideration of matters to ensure that a party is first of all diligent in the protection of his own interest within the mechanisms in place for resolution outside the Courts. The Ex Parte Applicants argue that this accords with Article 159 of the Constitution which commands Courts to encourage alternative means of dispute resolution."
7. The Respondents placed reliance on Section 9 of the Act which provides;
9(1) Subject to subsection (2), a person who is aggrieved by an administrative action may, without unreasonable delay, apply for judicial review of any administrative action to the High Court or to a subordinate court upon which original jurisdiction is conferred pursuant to Article 22(3) of the Constitution.
(2) The High Court or a subordinate court under subsection (1) shall not review an administrative action or decision under this Act unless the mechanisms including internal mechanisms for appeal or review and all remedies available under any other written law are first exhausted.
(3) The High Court or a subordinate Court shall, if it is not satisfied that the remedies referred to in subsection (2) have been exhausted, direct that applicant shall first exhaust such remedy before instituting proceedings under subsection (1).
(4) Notwithstanding subsection (3), the High Court or a subordinate Court may, in exceptional circumstances and on application by the applicant, exempt such person from the obligation to exhaust any remedy if the court considers such exemption to be in the interest of justice.
(5) A person aggrieved by an order made in the exercise of the judicial review jurisdiction of the High Court may appeal to the Court of Appeal.
8. The Respondent submitted that even though this Honourable Court has jurisdiction to issue judicial review orders in instances where a party is aggrieved of an administrative action, Section 9(2) is instructive to the extent that mechanisms available under any other written law are first exhausted before moving this Honourable Court. The Respondent further provides that the Applicant has not complied with Section 9(4) of the Fair Administrative Actions Act as the Applicant has failed to provide any exceptional circumstances to exempt them from exhausting any remedy and As such the Applicant’s suit offends the exhaustion doctrine. The Respondent to this end submits that the Applicant cannot be allowed to by-pass statutorily provided processes to directly move this Honourable Court in the absence of any proper explanation or exceptional circumstances. The Respondent seeks to place reliance in the case of Speaker of National Assembly v Karume [1992] KLR 21 where the Court of Appeal held as follows; “Where there is a clear procedure for redress of any particular grievance prescribed by the Constitution or an Act of Parliament, that procedure should be strictly followed. Accordingly, the special procedure provided by any law must be strictly adhered to since there are good reasons for such special procedures” Also the case of Night Rose Cosmetics (1972) Ltd v Nairobi County Government & 2 others [2018] eKLR where Justice Mativo as he then was held that;
“Our jurisprudential policy is to encourage parties to exhaust and honour alternative forums of dispute resolution where they are provided for by statute. It is also settled that the exhaustion doctrine is only applicable where the alternative forum is accessible, affordable, timely and effective. A remedy is considered available if the Petitioner can pursue it without impediment, it is deemed effective if it offers a prospect of success and is found sufficient if it is capable of redressing the complaint [in its totality]
...a remedy is considered available only if the applicant can make use of it in the circumstances of his case.”
9. The Respondent submitted that the Applicant has not provided any evidence to exceptional circumstances to this Court that the alternative forum the Tax Appeals Tribunal is inaccessible, unaffordable, untimely and ineffective to allow the Court exempt them from the exhaustion doctrine.
10. It was submitted that the motion offends the Sections 51 (12) and Section 52(1) of the Tax Procedures Act and thus their Preliminary Objection dated 11th December 2024 ought to be allowed.
Ex-parte applicant’s submissions.
11. The e-xparte applicant it’s submissions raised four issues for determination and condensed them in limbs which are ; Whether the Income Tax Act Chapter 470 Laws of Kenya prescribes Decretal Sum awarded by Courts of Law as income under the Act? & whether the Respondents usurped their statutory mandate and/or powers when same purported to fax Decretal sum awarded to a client vide court proceedings?
12. The Ex-parte Applicant had raised an issue that the decretal amount awarded to it’s client vide various court proceedings were not income provided for under the Income Tax Act (hereinafter referred to as the Act). It was argued that the issue of jurisdiction to tax decretal sum is serious and ought to have been considered by the respondents one it was raised . Once this issue was raised with the Respondents, it behooved the Respondents to ascertain whether the Act gave them the mandate or powers to tax decretal amount. It was submitted that this was an issue that took center stage during the objection proceedings and despite the Ex-parle Applicant raising an issue of statutory mandate of the Respondents to subject decretal amount to tax, the Respondents turned a blind eye to these serious jurisdictional and/or administrative issues.
13. It was submitted that in their Affidavit of Verification at page 27 , annexture WO 4 (a).WO 5 at page 29, annexture WO 7 (a), (b), (c), (d) and (e) al pages 35-42 the applicant annexed the Certificates of Costs and Ruling on Costs in various Courts dealing with the dispute between the Ex-parte Applicant's client and Kisii County Government. Also Annextures WO 9 (α). (b), (c), (d), (e). (1), (g) and (h) at pages 46-59 which are the various communications between the Parties to the court proceedings negotiating on mode of payment of the decretal amount. All these documents were supplied to the Respondents but despite the fact that the Act did not expressly apply to decretal sum as income, the Respondents usurped t powers and subjected the decretal sum to tax contrary to law.. The Respondents failed to consider material facts placed before them which in law he was bound to consider in the case of AM BAHAJI & COMPANY LIMITED VS KENYA PORTS AUTHORITY [2020] eKLR, the Court when dealing with a similar issue held that;
...perhaps to shine more light, the Court outlines what would amount to an income. The same is defined under the Black's Law Dictionary as 'the return in money from one's business, labour, or capital invested", Therefore, it cannot be gainsaid that a decretal sum is a form of income and it would be a travesty to include it as income to fit within the gloves of the Applicant. This is why I agree with the finding in the case of IBRAHIM MANYARA VS REGISTERED TRUSTEES OF AGRICULTURAL SOCIETY OF KENYA than.... The offshoot of my finding on this subject is that there is no known law that subjects decrees of court to taxation. The Income Tax afore cited is silent on this and we should so far read that path. If the tax man wishes to rethink his position on this we shall not disallow same.”
14. The exparte applicant also cited the case of MUEMA KITULU T/A MUEMA KITULU & COMPANY ADVOCATES V THE COUNTY SECRETARY COUNTY GOVERNMNET OF KITUI [2020] eXLR, the leamed Judge held that.
.... a Decretal amount has neither been included as an exempt service neither does it fit within the definition of a service and placing reliance on the case in Paragraph & above, it would be a travesty to Include it as a service to as to force it within the gloves of the Respondent, in the case of CIT V VEGETABLE PRODUCT LTD (1973) ITR 192, it was held,...if the court finds that the language of the laxing provision is ambiguous or capable of more meaning than one, then the court has to adapt the interpretation that favors the assessee (taxpayer)...... In the result, I direct that any deductions of VAT by the Respondent is not supported by any law and therefore the same is illegal and that any sum so deducted ought I be refunded to the applicant within 14 days of the date of this ruling....
15. It was further submitted that it therefore follows that the Respondents could only tax what is provided for in law and it was their duty to exercise their administrative duties pursuant to the law and not any other. Also that the respondents exceeded their powers an thus acted on an illegal provisions not anchored in law. The Value Added Tax No. 35 of 2013 provides for what ought to be subjected to tax at Section 5. Part Il there of provided for services that are exempted from fax. The Courts herein after perusing the Income Tax and Value Added Tax come to a finding that Decretal Sum is not an income under the two Acts. Thus, the Respondents in failing to consider the facts before them, acted outside the ambit of law and purported to invoke and/or act on a non-existing law, It was their own creation hence same abused their powers. One can only tax an income that is provided by law. The decision to subject decretal amount to lax was thus an illegal and arbitrary decision not known in law.
ISSUE NUMBERS 3 AND 4
16. Whether the Tribunal Tax Appeal has mandate to supervise the administrative powers of the Respondents when same exceeds their statutory mandate? & Whether the Tax Appeals Tribunal has the statutory power to hear and adjudicate issues pertaining to breach and/or infringement of fundamental rights as enshrined in the Constitution? It was submitted that the Ex-parte Applicant is raising issues of violation of the Constitution by the office of Commissioner of Income Tax which the High court has Jurisdiction to supervise under Article 165 (6) of the Constitution which prescribes that-
... The High Court has supervisory jurisdiction over the Subordinate Courts and over any person, body or authority exercising a judicial or quasi-judicial function...”
17. It was further submitted that the Respondents cannot usurp a mandate which is not provided for in law .
18. On what amounts to a preliminary objection counsel submitted that in the case of Mukisa Biscuits Manufacturing Ltd v West End Distributors (1969) EA 696 the Court clearly stated what constitutes a preliminary objection in the following words;
“.... a preliminary objection consists of a point of law which has been pleaded or which arises by clear implication out of pleadings and which if argued as a preliminary point may dispose of the suit.”
The Court went further in to state interalia that;
“A preliminary objection is in the nature of what used to be a demurrer. It raises a pure point of law which is argued on the assumption that all the facts pleaded by the other side are correct. It cannot be raised if any fact has to be ascertained or if what is sought is the exercise of judicial discretion”
19. The Respondent submitted that its preliminary objection raises pure points of law and from the pleadings before the Honourable Court the Court should clearly find that the facts are uncontested as to the relationship between the parties. It is the Respondent’s submission that it’s relationship to the Applicant was guided by the Tax Procedures Act leading to the issuance of assessments and the objection decision. They further submitted that as per the pleadings it was exercising its mandate as provided for under Section 29 of the Tax Procedures Act when it raised assessments on the Applicant and that the Applicant being dissatisfied with the said decision for assessment raised an objection pursuant to Section 51 of the Tax Procedures Act. It therefore follows that if dissatisfied by the Respondent’s decision then the Applicant ought to have invoked the procedure provided under Section 52 of the Tax Procedures Act. Further, the Respondent submitted that what is complained for by the Applicant is the Respondents performance of duties which are public in nature and thus Administrative in nature and the performance of the said functions by the Respondent is further guided by the Fair Administrative Actions Act. The Respondent submits that Section 9 of the Fair Administrative Actions Act dictates a procedure applicable to anyone who is aggrieved by a decision of any administrative body. The Respondent submits that a quick perusal from the pleadings before the Court would only lead to the conclusion that the issues and facts as presented are uncontested and clear that the preliminary objection is properly raised by the Respondent and thus the same is merited.
20. it was also submitted that the Tax Procedures Act provides as follows;
(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. The Respondent further submits that Section 52(1) of the Tax Procedures Act provides that; (1) 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, 2013 (No. 40 of 2013). The Respondent submits that the Applicant failed to invoke the special procedures provided for under Section 51(12) and 52(1) of the Tax Procedures Act and has indeed moved this Court in utter disregard of the statutory
Ex-parte applicant’s submissions
20. The exparte applicant in her submissions raised four issues to be addressed and discussed them in two limbs which are ; Whether the Income Tax Act Chapter 470 Laws of Kenya prescribes Decretal Sum awarded by Courts of Law as income under the Act & Whether the Respondents usurped their statutory mandate and/or powers when same purported to tax Decretal sum awarded to a client vide court proceedings.
21. The Ex-parte Applicant raised an issue that the decretal amount awarded to her Client vide various court proceedings were not income provided for under the Income Tax Act (hereinafter referred to as the Act) and that once this issue was raised with the Respondents, it was upon them the to ascertain whether the Act gave them the mandate or powers to tax decretal amount or not and that this issue was the core of the objection proceedings . The applicant referred this court to its Affidavit of Verification at pages 27 also annexture WO 4 (a). Annexture WO 5 at page 2, annexture WO 7 (a), (b), (c), (d) and (e) at pages 35-42 ( Certificates of Costs and Ruling on Costs in various Courts dealing with the dispute between the Ex-parte Applicant's client and Kisii County Government. ) Also annextures WO 9 (α). (b), (c), (d), (e). (1), (g) and (h) at pages 46-59 which it termed the various communications between the Parties to the court proceedings negotiating on mode of payment of the decretal amount AM BAHAJI & COMPANY LIMITED VS KENYA PORTS AUTHORITY [2020] eKLR, the Court when dealing with a similar issue held that
...perhaps to shine more light, the Court outlines what would amount to an income. The same is defined under the Black's Law Dictionary as 'the return in money from one's business, labour, or capital invested", Therefore, it cannot be gainsaid that a decretal sum is a form of income and it would be a travesty to include it as income to fit within the gloves of the Applicant. This is why I agree with the finding in the case of IBRAHIM MANYARA VS REGISTERED TRUSTEES OF AGRICULTURAL SOCIETY OF KENYA than.... The offshoot of my finding on this subject is that there is no known law that subjects decrees of court to taxation. The Income Tax afore cited is silent on this and we should so far read that path. If the tax man wishes to rethink his position on this we shall not disallow same.”
Also MUEMA KITULU T/A MUEMA KITULU & COMPANY ADVOCATES V THE COUNTY SECRETARY COUNTY GOVERNMNET OF KITUI [2020] eKLR, the leamed Judge held that.
.... a Decretal amount has neither been included as an exempt service neither does it fit within the definition of a service and placing reliance on the case in Paragraph & above, it would be a travesty to Include it as a service to as to force it within the gloves of the Respondent, in the case of CIT V VEGETABLE PRODUCT LTD (1973) ITR 192, it was held,...if the court finds that the language of the laxing provision is ambiguous or capable of more meaning than one, then the court has to adapt the interpretation that favours the assessee (taxpayer)...... In the result, I direct that any deductions of VAT by the Respondent is not supported by any law and therefore the same is illegal and that any sum so deducted ought I be refunded to the applicant within 14 days of the date of this ruling....
22. It therefore follows that the Respondents could only tax what is provided for in law and it was their duty to exercise their administrative duties pursuant to the law and not any other. It is this excess of powers exercised against the Ex-parte Applicant that is being complained of in the instant proceedings. The applicant stated that the Respondents usurped powers they did not have ad decretal sum is not listed for taxation under the Value Added Tax No. 35 of 2013 . Further that the courts have since held that Decretal Sum is not an income under the two
Acts.
23. On whether the Tribunal Tax Appeal has mandate to supervise the administrative powers of the Respondents when same exceeds their statutory mandate & Whether the Tax Appeals Tribunal has the statutory power to hear and adjudicate issues pertaining to breach and/or infringement of fundamental rights as enshrined in the Constitution? It has been posited by the Respondents that the proceedings herein contravene the doctrine of exhaustion. The applicant told this court that the office of commissioner of Income tax is a creature of stature and cannot Act ultra vires its powers and that the issues herein are those of violation of the constitution which are within the Jurisdiction of this court Under Article 165(6) of the constitution and not the tax Appeals Tribunal . Counsel submitted that Article 165 (6) of the Constitution prescribes that-
... The High Court has supervisory jurisdiction over the Subordinate Courts and over any person, body or authority exercising a judicial or quasi-judicial function...”
Also Article 165( 2) (d) (ii) of the Constitution is to the effect that the high court shall have jurisdiction to determine the question whether anything said to be done under the authority of the constitution or of any law is consistent with or in contravention of the constitution...
24. The Ex-parte contended that the assessment in question was in respect of the month of February 2023 with regards to a decretal award or sum of Kshs. 5,600,000/= and suddenly after responding to the Respondent vide the Objection raised, The Respondents suddenly demanded that the Ex-parte Applicant do furnish them with returns of the whole year 2023 (see Annexture WO & at page 31 of the substantive Nolice of Motion). The Ex-parte Applicant raised a concern in the manner the Respondents were administering their mandate and this was captured in annexture WO 7 (a) at page 32 of the Application herein, For clarity, the Ex-parte Applicant staled vide the sold annexture that,
...’’however as pertains to the request for assorted documents for verification for the year 2023, we find your decision to request for same as arbitrary and/or deviation from the issues raised in the additional assessment (see Annexture WO 3 at page 23) the subject of the Notice of Objection. Besides same is also contrary to the provisions of Article 10 of the Constitution 2010’’
In the case of REPUBLIC V COMMISSIONER OF DOMESTIC TAXES LARGE TAX PAYER'S OFFICE EX-PARTE BARCLAYS BANK OF KENYA LTD 2012), where the Respondent had raised a jurisdictional issue that the Court had no jurisdiction to hear the said suit as the proper forum was the Local Commiltee dealing with appeals, the late Majanja, J held.
‘’Mr Ontweka counsel for the Respondent argued that the bank should have appealed to the local Committee against the decision of the Respondent and hence this court should decline jurisdiction... the Respondent's argument was settled in the Republic v Commissioner of Income Tax ex-parte SDV Transami (Kenya) Limited HC Misc. App No. 212 of 2004 (Unreported) where Hon, Justice Ojwang in response to the same argument raised by the respondent in that case stated that. What the Applicant is questing is the exercise of a public power by a public body, and on this account judicial review is an eminently appropriate course. The issue in this case is whether the respondent's decision falls within the confines of the tax statute. The bank, as a party aggrieved by the exercise of this public power, is entitled to move the court and the court has the authority to consider whether the (respondent has acted within or outside its jurisdiction. This inquiry may involve the examination of facts to determine whether the transaction is captured by the statute, this inquiry does not lake the matter outside the purview of judicial review’’.
The approa
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