Judgment summary
Harvway Limited appealed against additional and default assessments for VAT, Corporation Tax and Income Tax-PAYE raised by the Commissioner for Domestic Taxes on 29th September 2025, totalling Kshs. 35,596,967.63 (para 9).
The Tribunal considered whether the Respondent's Objection Decision dated 24th November 2025 was justified (para 32). It found that the Appellant failed to discharge its burden of proof under Section 56(1) of the Tax Procedures Act and Section 30 of the TAT Act, as it did not provide the documents required to substantiate its objection or rebut the Respondent's disallowances.
The Tribunal upheld the disallowance of input VAT relating to non-eTIMS invoices, invoices lacking the Appellant's PIN, duplicate purchase claims, uncertified bank statements, and the passenger car purchase under Section 17(4)(a) of the VAT Act. It also upheld the PAYE assessment on the motor vehicle benefit under Section 8(8) of the TPA and Sections 3(2)(a)(ii) and 5 of the Income Tax Act.
The Appeal was dismissed and the Objection Decision was upheld, with no order as to costs (para 63).
Background
Harvway Limited is a registered taxpayer in Kenya (para 1). The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act, mandated under Section 5 of that Act to administer and enforce tax laws (para 2).
The Respondent issued VAT, Corporation Tax and PAYE additional assessments on 29th September 2025 (para 3). The Appellant objected via notices dated 1st October 2025, 14th October 2025 and 30th September 2025 (para 4). The Respondent issued its Objection Decision on 24th November 2025 (para 5). The Appellant lodged its Notice of Appeal dated 10th December 2025 and filed on 11th December 2025 (para 6).
Core dispute
The Appellant argued that the additional and default assessments for VAT (for periods spanning December 2021 to December 2024), Corporation Tax (2021 to 2024) and PAYE (December 2022) did not truly reflect the company's operations (para 7).
The Respondent maintained that the Appellant had failed to submit required documents during audit and objection, including eTIMS invoices, supplier declarations, certified bank statements, and motor vehicle usage records. It relied on Sections 24(2), 29 and 31(1)(b) of the TPA to justify a best-judgment assessment, and on Section 51(3) of the TPA to argue the objection lacked the necessary supporting documentation (paras 14 to 29).
The issue for determination was whether the Respondent's Objection Decision was justified (para 32).
Court findings
The Tribunal held that the burden of proof lies on the taxpayer under Section 56(1) of the TPA and Section 30 of the TAT Act, and that this burden only shifts to the Respondent once competent and relevant evidence is produced (paras 36 to 40), citing Commissioner of Domestic Taxes v Trical and Hard Limited [2022] KEHC 9927 (KLR).
The Tribunal found the Appellant's mere assertions, unsupported by documentation, insufficient to discharge this burden (para 42). It upheld disallowance of input VAT of Kshs. 2,155,172.41 from Kedge Energy invoices which were not eTIMS invoices and could not be traced to supplier declarations, under Section 17(2) of the VAT Act (para 43). Invoices from Hardware Haus lacking the Appellant's PIN and name were also invalid (para 43).
The Tribunal upheld the disallowance of duplicate purchase claims of Kshs. 900,311.70 for September 2023 already claimed in June 2023, as the Appellant provided no rebuttal evidence (para 48). Uncertified bank statements were disregarded, meaning the Respondent could not reconcile assessed income and purchases (para 49).
The disallowance of input VAT on the Ford Ranger Double Cab purchase (Kshs. 2,714,337.50) was found lawful under Section 17(4)(a) of the VAT Act, as passenger cars are prohibited inputs unless used in a car-dealing business (paras 50 to 51).
On PAYE, the Tribunal found the Respondent lawfully registered the Appellant under Section 8(8) of the TPA following notification on 10th September 2025, and that the motor vehicle benefit to a director was employment income under Sections 3(2)(a)(ii) and 5 of the Income Tax Act. The Appellant's failure to provide a motor vehicle use policy or movement logs meant the PAYE assessment remained undisturbed (paras 52 to 57).
The Tribunal relied on Section 31(1) of the TPA and Commissioner of Domestic Taxes v Altech Stream (Ea) Limited [2021] eKLR in confirming that the Respondent was entitled to assess to the best of its judgment based on available information, given the Appellant's failure to produce sufficient documentation (paras 58 to 60).
Outcome
The Tribunal found the Appeal unmerited and dismissed it. The Respondent's Objection Decision dated 24th November 2025 was upheld, with no order as to costs (paras 63 to 64).
Major issues / areas of contention
- Whether the Respondent's Objection Decision dated 24th November 2025 was justified
- Whether the Appellant discharged its burden of proof to show the assessments were incorrect
- Whether input VAT claims relating to non-eTIMS invoices and invoices lacking the Appellant's PIN were validly disallowed under Section 17(2) of the VAT Act
- Whether duplicate purchase claims for September 2023 were correctly disallowed
- Whether uncertified bank statements could be relied upon to reconcile income and purchases
- Whether input VAT on the purchase of a passenger car (Ford Ranger Double Cab) was correctly disallowed under Section 17(4)(a) of the VAT Act
- Whether the Respondent lawfully registered the Appellant for PAYE in respect of a motor vehicle benefit under Section 8(8) of the TPA and Sections 3(2)(a)(ii) and 5 of the Income Tax Act
- Whether the Respondent was entitled to raise a best-judgment assessment under Section 31(1) of the TPA due to lack of complete records