Judgment summary
The Tribunal considered an appeal by Bluestream Investment Company Limited against a decision of the Commissioner of Domestic Taxes rejecting the Appellant's late notice of objection to a VAT assessment.
The Respondent argued that the Tribunal lacked jurisdiction because its decision was a rejection of a late objection application under Section 51(7) of the Tax Procedures Act, not an objection decision, and could only be challenged by judicial review.
The Tribunal agreed, finding that since the Appellant's application to lodge a late objection had been rejected, no objection decision was ever made, and therefore there was no basis for an appeal under the Tax Appeals Tribunal Act. The Appeal was struck out for want of jurisdiction, with each party bearing its own costs.
Background
The Appellant is a limited liability company incorporated in Kenya whose principal activity is in construction (para 1).
The Respondent assessed the Appellant for taxes amounting to Kshs. 984,000 for the year 2017 via i-Tax after noting that the Appellant was a non-filer (para 3).
The Appellant lodged a notice of objection on 12th March 2020 (para 4). On 1st July 2022, the Respondent issued the Appellant with a late objection rejection notice and confirmed the assessments (para 5).
Dissatisfied with the Respondent's Decision, the Appellant filed a notice of appeal dated and filed on 31st October 2025 (para 6).
Core dispute
The Appellant argued that the Respondent's decision, contained in the late rejection notice dated 1st July 2022, was issued late in violation of Section 51(11) of the Tax Procedures Act, and that its objection ought to be allowed by operation of law (paras 7(a), 10-11).
The Appellant further argued that the Respondent erred by failing to credit input tax against output tax in violation of Section 17 of the Value Added Tax Act, 2013, and by disregarding supporting information and documents it had provided (paras 7(b)-(c), 12-13).
The Respondent contended that its decision of 1st July 2022 was a rejection of the Appellant's application for an extension of time to object under Section 51(7) of the TPA, and not an objection decision, and that this could only be challenged by judicial review, not by appeal to the Tribunal (paras 18-19, 50-51). The Respondent also maintained that the Appellant had failed to provide sufficient documentation under Section 17(3) of the VAT Act to support its input VAT claim (paras 22-38).
Court findings
The Tribunal identified two issues for determination: whether it had jurisdiction to determine the Appeal, and whether the Appellant discharged its burden of proving the Respondent's decision of 1st July 2022 was incorrect (para 48).
The Tribunal noted that neither party had attached the impugned assessment or stated its date, so it could not independently verify whether the notice of objection was lodged late (para 54). It found that the decision under appeal was the rejection of a late objection issued pursuant to Section 51(7) of the TPA, on the basis that the Appellant had not demonstrated reasonable cause for its delay (para 54).
The Tribunal held that where an application for extension of time to object is rejected under Section 51(7) of the TPA, the taxpayer's objection is unsuccessful, and there is consequently no basis for the Respondent to issue an objection decision (para 58). Section 51(1) of the TPA requires a taxpayer to first lodge an objection before proceeding under any other written law, and there being no objection to the assessment, the Tribunal held it lacked jurisdiction to entertain the Appeal (paras 58-59).
The Tribunal relied on Commissioner of Investigations & Enforcement v Vyas t/a Rocon Enterprises (Income Tax Appeal E144 of 2021) [2022] KEHC 16027 (KLR), which held that a decision declining a late objection application is not an objection decision and can only be challenged by judicial review, not by appeal to the Tribunal (paras 60, referencing paras 13 and 16 of that case).
Having found that it lacked jurisdiction, the Tribunal did not proceed to determine the second issue regarding whether the Appellant had discharged its burden of proving the Respondent's decision was incorrect (para 61).
Outcome
The Tribunal found and held that it lacked jurisdiction to hear and determine the Appeal, and that the Appeal was incompetent (paras 61-62).
The Tribunal ordered that the Appeal be struck out, with each party bearing its own costs (para 62).
Major issues / areas of contention
- Whether the Tribunal has jurisdiction to determine the Appeal.
- Whether the Appellant discharged its burden of proving that the Respondent's decision dated 1st July 2022 was incorrect (not determined due to the jurisdiction finding).
- Whether the Respondent's late objection rejection notice dated 1st July 2022 was issued in violation of Section 51(11) of the Tax Procedures Act.
- Whether the Respondent erred by failing to credit input tax against output tax under Section 17 of the VAT Act.
- Whether a decision declining an application for extension of time to lodge a notice of objection under Section 51(7) of the TPA constitutes an appealable objection decision.