Judgment summary
The Appellant, a businessman providing brokerage services, was assessed by the Kenya Revenue Authority for VAT and corporation tax in the sum of Kshs 103,972,741 on 27th February 2025. He objected, but the Respondent confirmed the assessment in its objection decision.
The Appellant appealed, arguing that he was a commission agent rather than a presumed supplier, and that his earnings were low-tier commissions that had been correctly taxed. The Respondent maintained that undeclared income had been identified through banking records and that the Appellant had not provided sufficient supporting documentation during the objection process.
The Tribunal held that the Appellant had failed to discharge his burden of proof under section 30 of the Tax Procedures Act (as referenced in the judgment) and dismissed the appeal, upholding the Respondent's objection decision.
Background
The Appellant is a businessman operating a business providing brokerage services. The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act, Cap 469 Laws of Kenya, responsible for assessment, collection and administration of tax revenue (para 1-2).
On 27th February 2025, the Respondent issued the Appellant with a tax assessment of Kshs 103,972,741 for VAT and corporation tax (para 3). The Appellant lodged a Notice of Objection on 26th August 2025, and the Respondent issued its objection decision on 18th October 2025, confirming the assessment (para 4). Aggrieved, the Appellant filed a Notice of Appeal dated 18th February 2025 (para 5).
Core dispute
The Appellant contended that the Respondent erroneously assessed him as a presumed supplier when he was, in fact, a commission agent, and that his personal earnings derived from low-tier commissions earned on an agency basis (para 6a-b). He argued that although supplier payments were remitted through his bank account, due diligence by the Respondent could have revealed his true status as a commission agent (para 6c-d).
The Respondent asserted that it reviewed banking activity on the Appellant's ABSA bank account and found undeclared income of Kshs 174,636,465 for 2019, Kshs 56,900,000 for 2020, and Kshs 3,600,000 for 2021, despite the Appellant not filing individual income tax returns (para 11-12). It issued income tax of Kshs 67,488,911 and VAT of Kshs 36,483,834 based on banking variances, invoking Section 24(2) and 29 of the Tax Procedures Act to make a default assessment using its best judgment (para 13-14).
The Respondent stated it had requested additional documents, including financial statements, customer schedules, expense invoices and receipts, bank statements, and tax computations, but the Appellant provided only financial statements, bank statements and copies of rent receipts (para 15-16). The Appellant also contended his commission business was not subject to VAT, though it was not listed as exempt under the 1st Schedule of the VAT Act (para 19).
Court findings
The Tribunal framed the issue for determination as whether the Respondent's Objection Decision dated 18th October 2025 was justified (para 21).
The Tribunal noted the Appellant was required under section 30 of the TAT Act to discharge the burden of proving that the assessment was excessive or that the tax decision should not have been made or should have been made differently (para 25).
The Tribunal found that the Appellant failed to prove that he had provided all documents requested, including schedules of customers, invoices, receipts and proof of payment for expenses, and the tax computation, or to give a plausible explanation for his failure to do so (para 26). Only financial statements, bank statements and rent receipts had been provided, while expenses such as internet, telephone, audit fees and bank charges lacked supporting documentation (para 18, 24).
Citing Abyssinia Iron and Steel Ltd v Commissioner of Customs and Border Control (TAT No. 435 of 2022), the Tribunal held that once an appellant shows an assessment is wrong, the Respondent must show its assessment was not arbitrary, capricious or imagined (para 27). As the Appellant had not discharged his burden, the Respondent's assessment, presumed correct unless proved otherwise, was not displaced (para 28).
Outcome
The Tribunal found that the Appeal lacked merit and dismissed it. The Respondent's Objection Decision dated 18th October 2025 was upheld. Each party was ordered to bear its own costs (para 29).
Major issues / areas of contention
- Whether the Appellant should have been assessed as a commission agent rather than as a presumed supplier of goods and services.
- Whether the Appellant's commission income was subject to VAT given it was not listed as exempt under the 1st Schedule of the VAT Act.
- Whether the Appellant provided sufficient documentation, including customer schedules, expense invoices and tax computations, to support his objection.
- Whether the Respondent's Objection Decision dated 18th October 2025 was justified.
- Whether the Appellant discharged the burden of proof under section 30 of the TAT Act to show the assessment was excessive or wrongly made.