Judgment summary
Grayan Investments Limited, a construction company, appealed against an Objection Decision of the Commissioner for Domestic Taxes dated 17th September 2025, which confirmed additional VAT and corporation tax assessments of Kshs. 84,580,437.00 (para 25).
The assessments arose from an analysis of the Appellant's bank statements, which the Respondent said revealed undeclared or under-declared income (para 26).
The Tribunal held that the Appellant did not provide the loan agreements, schedules or reconciliations requested by the Respondent, and thus failed to discharge its burden of proof under Section 56(1) of the Tax Procedures Act and Section 30 of the Tax Appeals Tribunal Act. The Appeal was dismissed and the Objection Decision was upheld (paras 28, 33, 34).
Background
The Appellant is a limited liability company incorporated in Kenya, whose principal activity is in the construction sector (para 1).
The Respondent is the principal officer appointed under Section 13 of the Kenya Revenue Authority Act, responsible for the collection, receipting and administration of tax revenue (para 2).
On 26th June 2025, the Respondent issued the Appellant with a Notice of Tax Assessment for income tax (company) and VAT (para 3).
On 22nd July 2025, the Appellant lodged an objection via iTax. The Respondent notified the Appellant on 25th July 2025 that the objection was invalid, and the Appellant validated its objection on 29th July 2025 by providing supporting documents (para 4).
On 17th September 2025, the Respondent issued its Objection Decision. Dissatisfied, the Appellant lodged this Appeal by Notice of Appeal dated 24th November 2025 (paras 5, 6).
Core dispute
The Appellant argued that the Respondent erred by treating all bank deposits as income, when the additional credits included loan facilitations for a related party and a friend's company, loan repayments from related party companies, and transactions with KeRRA Bungoma (Kshs. 4,643,741 on 2nd November 2022) and the National Cereal Board (Kshs. 568,050 in March 2023) already declared in monthly returns (para 7).
The Appellant contended that the additional assessment was punitive and unfair, and did not correspond with the Income Tax Act, given that the construction industry relies heavily on bank loans and friendly loans to fund operations (paras 9, 10, 11).
The Respondent averred that during the objection review it requested loan agreements, a schedule showing when loans were advanced, and links between loans and repayments, but the Appellant failed to provide this information (para 14).
The Respondent maintained that the burden of proof lay with the taxpayer, that its assessment enjoyed a presumption of correctness in the absence of supporting documents, and that bank credits relating to reversals and account-to-account transfers had already been adjusted at the investigation stage (paras 15, 17).
The Respondent also stated it had taken into account the Appellant's self-assessments by netting them off against expected income and by applying vatable versus non-vatable profit ratios from those self-assessments (para 19).
Court findings
The Tribunal identified the issue for determination as whether the Respondent's Objection Decision dated 17th September 2025 was justified (para 24).
The Tribunal reviewed the pleadings and annexures and found no evidence that the Appellant had provided the documents sought by the Respondent, which documents would have led to a variation of the additional VAT and corporation tax assessments (para 28).
The Tribunal referred to Section 59 of the Tax Procedures Act (cap 469B) regarding the duty to produce documents and records, Section 56(1) of the Tax Procedures Act on the taxpayer's burden of proof, and Section 30 of the Tax Appeals Tribunal Act (cap 469A) on the appellant's burden of proof in tribunal proceedings (paras 29, 30, 31).
The Tribunal cited its earlier decision in Abyssinia Iron and Steel Ltd -vs- Commissioner of Customs and Border Control (TAT No. 435 of 2022), regarding the shifting burden of proof once a taxpayer has shown an assessment to be wrong (para 32).
The Tribunal held that the Appellant did not sufficiently support its objection to the additional VAT and corporation tax assessments, and therefore did not discharge its burden of proof. It found the Respondent's additional assessments as per the Objection Decision dated 17th September 2025 to be justified (para 33).
Outcome
The Tribunal found that the Appeal lacked merit and dismissed it (para 34(a)).
The Respondent's Objection Decision dated 17th September 2025 was upheld (para 34(b)).
Each party was ordered to bear its own costs (para 34(c)).
Major issues / areas of contention
- Whether the Respondent's Objection Decision dated 17th September 2025, confirming additional VAT and corporation tax assessments of Kshs. 84,580,437.00, was justified (paras 24, 25).
- Whether bank credits identified in the Appellant's bank statements represented undeclared or under-declared income, or instead represented loans and loan repayments from related parties and a friend's company (paras 7, 26, 27).
- Whether the Appellant discharged its burden of proof under Section 56(1) of the Tax Procedures Act and Section 30 of the Tax Appeals Tribunal Act by failing to produce loan agreements, schedules and reconciliations requested by the Respondent (paras 14, 28, 33).