Judgment summary
This appeal concerns an income tax assessment issued to CMEC Africa Development Ltd, an engineering, procurement and construction company, following an audit by the Commissioner of Domestic Taxes. After an earlier Tribunal judgment set aside the Commissioner's first objection decision and remitted the matter for review of the Appellant's documents, the Commissioner issued a fresh objection decision.
The Appellant appealed again, arguing that the fresh decision did not genuinely reconsider its evidence and merely repeated the earlier decision. The Tribunal agreed, finding that the Commissioner had ignored the documents it had been directed to consider and had based its fresh decision on the original objection of 11 December 2024 rather than on the material before the Tribunal.
The Tribunal allowed the appeal and set aside the fresh objection decision dated 26 January 2026, ordering each party to bear its own costs.
Background
The Appellant is a limited liability company incorporated in Kenya under the Companies Act, No. 17 of 2025, engaged in engineering, procurement and construction services (para 1). The Respondent is the principal officer appointed under Section 13 of the Kenya Revenue Authority Act (para 2).
The Respondent carried out an audit and issued an assessment order dated 12th September 2024 for Kshs 35,089,784 (para 3). The Appellant objected by letter dated 11th December 2024 (para 4), and the Respondent issued its objection decision dated 30th December 2024, confirming the assessment (para 5).
A judgment dated 5th December 2025 set aside the objection decision of 30th December 2024 and directed the Respondent to review the Appellant's documents and issue a fresh objection decision within 60 days (paras 7, 47). The Respondent issued its fresh objection decision on 26th January 2026 (para 8), which the Appellant appealed against by Notice of Appeal dated 27th February 2026 (para 9).
Core dispute
The Appellant contended that the Respondent's fresh objection decision failed to comply with the Tribunal's remittal directions, in form and substance, including by failing to account for tax credits of Kshs 21,893,750.00 and the disappearance of VAT and WHT assessments amounting to Kshs 1,904,332, and by being substantially similar to the earlier decision dated 30th December 2024 (para 17).
The Appellant argued that the fresh decision was not a genuine reconsideration but a procedural exercise, in breach of Article 47 of the Constitution, the Fair Administrative Action Act, and Section 51 of the Tax Procedures Act (paras 20-21). It also raised substantive issues regarding disallowed expenses, the WIP profit margin (2.5% to 6.5%), IFRS 15, Section 15 of the Income Tax Act, and disallowed foreign exchange losses under Section 4A of the Income Tax Act and IAS 21 (paras 25-27).
The Respondent maintained that it had addressed each issue and considered all facts, merit and documentation available, and that the Appellant had failed to discharge its burden of proof under Section 56 of the Tax Procedures Act, 2015 (paras 30-31, 41). The Respondent stated it issued the fresh objection decision on 22nd January 2026 in compliance with the Tribunal's directive, and that documents it reviewed, such as the general ledger for 2019 and audited accounts for 2021, were irrelevant to the 2020 assessment period (paras 32, 35). The Respondent prayed for dismissal of the appeal and upholding of the objection decision of 26th January 2026 for Kshs 38,512,330 (para 42).
Court findings
The Tribunal identified the sole issue for determination as whether the Respondent's Objection Decision dated 26th January 2026 was justified, lawful and aligned with the directions of the Tribunal (para 43).
The Tribunal reviewed its earlier judgment in CMEC Africa Development Limited v Commissioner for Domestic Taxes [2025] KETAT 475 (KLR), noting that the Appellant had filed seventeen categories of documents in that appeal and that the Respondent had been directed to review those documents and issue a fresh objection decision within 60 days (paras 45-47).
The Tribunal examined the fresh objection decision dated 26th January 2026 in detail and found that it repeatedly referred to documents as not having been provided, when in fact those documents, including audited financial statements for 2019 to 2022, invoices, bank statements and contracts, had already been filed with leave of the Tribunal and served on the Respondent (paras 49-50).
The Tribunal concluded that the fresh decision was founded on the Appellant's original objection of 11th December 2024 and the documents attached to it, rather than on the documents the Respondent had been directed to consider, and that the Respondent had not demonstrated any consideration of the material it was ordered to review (paras 50-51).
The Tribunal held that this amounted to a failure to obey the Tribunal's express direction, citing Hadkinson v Hadkinson (1952) P 285 at 288 on the obligation to obey court orders unless and until discharged (para 53). It found that the fresh objection decision was accordingly unlawful for running afoul of the Tribunal's express orders (para 54).
Outcome
The Tribunal held that the Appeal has merit and allowed it. The Respondent's Objection Decision dated 26th January 2026 was set aside. Each party was ordered to bear its own costs (para 55).
Major issues / areas of contention
- Whether the Respondent's fresh objection decision was issued in compliance with the Tribunal's remittal directions
- Whether the Respondent's fresh objection decision was lawful and made in compliance with the judgment and orders of the Tribunal
- Whether the fresh objection decision merely repeated the earlier decision dated 30th December 2024
- Whether the Appellant discharged its burden of proof under Section 56 of the Tax Procedures Act
- Whether the Respondent's Objection Decision dated 26th January 2026 was justified, lawful and aligned with the Tribunal's directions