Judgment summary
The Tribunal considered an appeal by Golden Genesis Company Limited, a retailer of timber and hardware, against additional Corporation Tax and Value Added Tax assessments of Kshs 14,946,858.00 for the period 2020 to 2023, issued by the Commissioner of Domestic Taxes following a desk review.
The Respondent had identified unaccounted stock valued at Kshs 59,180,088.00 from customs data that was not declared in the Appellant's returns, and applied a 20% mark-up derived from the Appellant's own historical profit margins to compute additional tax.
The Tribunal found that the Appellant failed to provide requested supporting documents, such as sales ledgers, invoices, import schedules, Z-reports and reconciliation statements, both at the review and objection stage and at the appeal stage, and therefore failed to discharge its burden of proof under Section 56(1) of the Tax Procedures Act. The appeal was dismissed and the Objection Decision dated 29th July 2025 was upheld.
Background
Golden Genesis Company Limited is a private limited company principally engaged in retailing timber and hardware. The Commissioner of Domestic Taxes conducted a desk review of the Appellant and, by letter dated 22nd May 2025, issued additional assessments of Kshs 14,946,858.00 for Corporation Tax and Value Added Tax covering the period 2020 to 2023 (para 3).
The Appellant objected to the assessments through Notices of Objection filed via i-Tax on 4th June 2025. The Respondent issued its Objection Decision on 29th July 2025 (para 4). Aggrieved, the Appellant filed its Notice of Appeal on 25th August 2025 (para 5).
Core dispute
The Appellant argued that the Respondent erred in law and fact by amending its self-assessment returns for Income Tax and VAT, contending that the additional assessments were incorrect, excessive, and based on non-existent sales added from unknown sources, with an erroneous 20% mark-up applied. It maintained that it had availed all documents requested and that the Objection Decision was rushed and did not consider all material information (para 6).
The Respondent contended that its desk review revealed unaccounted stock of Kshs 59,180,088.00 based on customs data not declared in the Appellant's returns, justifying application of a 20% mark-up derived from the Appellant's own historical profit margins under its best judgment powers. It argued that the Appellant failed to provide critical documents requested on 9th and 16th June 2025, including sales ledgers, invoices, import schedules, Z-reports and reconciliation statements, and therefore failed to discharge the statutory burden of proof under Section 56(1) of the Tax Procedures Act (paras 17 to 24).
Court findings
The Tribunal identified a single issue for determination: whether the Respondent's assessment was justified (para 51).
The Tribunal found that the documents requested by the Respondent during the review and objection stage were relevant to the dispute, which arose from analysis of the Appellant's import data against customs records. It noted that the Appellant only provided bank statements and audited accounts, without source documents to explain the amounts (para 56).
The Tribunal referred to Section 23 of the Tax Procedures Act, which obliges a taxpayer to maintain documents to enable ascertainment of tax liability, and noted the Appellant lodged its Notice of Objection without documentary evidence, despite being prompted on 9th and 16th June 2025 (paras 57 to 58).
Relying on its earlier decision in TAT No. 55 of 2018, Boleyn International Limited vs Commissioner of Investigations & Enforcement, the Tribunal held that failure to provide documents meant there was no conceivable way the Respondent could have considered the objection within the parameters of Section 51(3) of the Tax Procedures Act (para 59).
The Tribunal observed that although the Appellant claimed in its Statement of Facts to possess the requisite documentation of imports, purchases invoices and entry declarations, it did not avail these documents either when requested or at the appeal stage (para 60).
Applying Section 56(1) of the Tax Procedures Act, which places the burden of proof on the taxpayer to disprove a tax decision, and citing Primarosa Flowers Ltd vs Commissioner of Domestic Taxes HCITA No. 19 of 2017 and Mulherin vs Commissioner of Taxation (2012) FCAFC115, the Tribunal held that the Appellant made mere averments without evidentiary backing, which could not assist its case (paras 61 to 64).
The Tribunal concluded that the Respondent was justified in raising the assessment in the manner that it did (para 65).
Outcome
The Tribunal dismissed the appeal, finding it bereft of merit. The Respondent's Objection Decision dated 29th July 2025 was upheld, and each party was ordered to bear its own costs (para 66).
Major issues / areas of contention
- Whether the Respondent erred in law and fact by amending the Appellant's self-assessment returns for Income Tax and Value Added Tax through additional assessments.
- Whether the additional assessments were primarily incorrect and led to demands for unsubstantiated and non-existent taxes.
- Whether the assessments were highly erroneous and excessive.
- Whether the Respondent erroneously added non-existent sales to the Income Tax and Value Added Tax returns.
- Whether the Respondent applied a 20% mark-up on exaggerated sales from unknown sources.
- Whether the Appellant availed all documents required as requested by the Respondent.
- Whether the Respondent issued a rushed objection decision without considering all material information and facts of the tax dispute.
- Whether the Respondent's assessment was justified, framed by the Tribunal as the single issue for determination.