Judgment summary
Alfit Investors Limited appealed to the Tax Appeals Tribunal against an Objection Decision of the Commissioner of Domestic Taxes dated 4th February 2026, which related to additional VAT and Corporation Tax assessments.
The Appellant did not file a Statement of Facts in support of its Memorandum of Appeal, instead relying on a reply to the Respondent's written submissions. The Tribunal found this omission to be a failure to comply with mandatory statutory requirements under Section 13(2) of the Tax Appeals Tribunal Act and Rule 3(2) of the Tax Appeals Tribunal (Procedure) Rules, 2015.
The Tribunal held that the Appeal was not properly instituted and that it therefore lacked jurisdiction to determine the substantive issues raised. The Appeal was struck out, with no order as to costs.
Background
The Appellant is a private limited liability company incorporated in Kenya and registered for tax purposes (para 1). The Respondent is appointed under Section 13 of the Kenya Revenue Authority Act, Cap 469 Laws of Kenya, and is mandated under Section 5(1) of that Act to collect and receive revenue and administer written tax laws (para 2).
The Respondent issued VAT and Corporation Tax additional assessments against the Appellant (para 3). The Appellant objected to the assessments by notices dated 26th September 2025 and 2nd December 2025 (para 4). The Respondent issued its Objection Decision on 4th February 2026 (para 5). Aggrieved by that decision, the Appellant filed the Appeal on 25th February 2026 (para 6).
Core dispute
The Memorandum of Appeal dated 25th February 2026 raised grounds including that the Respondent failed to properly consider the Appellant's objection and supporting documentation, disallowed genuine purchases wholly and exclusively incurred in producing taxable supplies and income, failed to consider documentary evidence, and issued assessments that were excessive and contrary to the VAT Act, 2013 and the Income Tax Act, Cap 470 (para 7).
The Appellant did not file a Statement of Facts, but filed a reply to the Respondent's written submissions. In that reply, it stated it would not pursue the input VAT disallowance and accepted the VAT assessment as raised, leaving only the question of whether the Respondent was justified in wholly disallowing corresponding business expenses for Income Tax purposes (paras 8 to 10).
The Appellant argued that missing invoices resulted from an accountant's administrative oversight rather than non-existence of transactions, and that disallowing expenses while accepting the related sales would tax gross receipts rather than net taxable profit, contrary to Section 15(1) of the Income Tax Act (paras 11 to 20).
The Respondent's case, set out in its Statement of Facts dated 13th April 2026 and Written Submissions dated 24th August 2026, was that the Appellant failed to provide documents supporting its objection, including documents validating purchases of Kshs.5,465,294 claimed from a supplier, Michael Otieno, who the Registrar of Persons confirmed had died on 19th February 2019 (paras 23 to 26). The Respondent also pointed to passenger cars being included as expenses contrary to Section 17(4)(a), and relied on Sections 24(2), 29, 31(1)(b) and 51(3) of the Tax Procedures Act, Section 56(1) of the TPA, Section 30 of the TAT Act, and Section 23 of the TPA on record retention, arguing that the Appellant had not discharged its burden of proof (paras 27 to 51).
Court findings
The Tribunal identified two issues for determination: whether the Appeal was properly before it, and whether the Respondent's Objection Decision was justified (para 52).
On the first issue, the Tribunal noted that the Appellant had not filed a Statement of Facts, relying only on the Memorandum of Appeal and a response to the Respondent's submissions (para 54). It held that Section 13(2) of the TAT Act and Rule 3(2) of the Tax Appeals Tribunal (Procedure) Rules, 2015 use the word 'shall', making the filing of a Statement of Facts a mandatory, not directory, requirement (paras 55 to 60).
The Tribunal relied on Equity Group Holdings Limited v Commissioner of Domestic Taxes [2021] KEHC 25 (KLR) on the effect of the word 'shall' in a tax statute, and found that the requirement to file a Statement of Facts goes to the root of the Appeal (paras 61 to 62). It found that the Appellant did not file a Statement of Facts as prescribed and did not seek leave to regularise the omission, and that the Appeal was therefore not instituted in the manner prescribed by law (paras 63 to 65).
The Tribunal referred to Mayfair Investments Company Limited v Commissioner of Domestic Taxes (Tax Appeal No. 212 of 2020) on the validity of an appeal determining jurisdiction, and to The Owners of the Motor Vessel 'Lillian S' v Caltex Oil (Kenya) Limited [1989] KLR on the primacy of jurisdiction (paras 67 and 71). It held that Article 159(2)(d) of the Constitution cannot cure a jurisdictional defect arising from non-compliance with a mandatory statutory requirement for instituting an appeal (para 70).
The Tribunal concluded that it lacked jurisdiction to entertain the substantive issues raised in the Memorandum of Appeal, and did not proceed to consider whether the Objection Decision was justified, as that issue had become moot (paras 72 to 74).
Outcome
The Tribunal found the Appeal incompetent and untenable in law. It ordered that the Appeal be struck out, with no order as to costs (paras 75 to 76).
Major issues / areas of contention
- Whether the Appeal was properly before the Tribunal, given the Appellant's failure to file a Statement of Facts
- Whether the Respondent's Objection Decision, disallowing input VAT and related business expenses, was justified (not determined as the Tribunal found it lacked jurisdiction)