Judgment summary
The Appellant, an individual taxpayer, appealed against a decision of the Respondent dated 11th March 2025, which the Respondent contended was a determination that the Appellant's notice of objection had not been validly lodged under Section 51(3)(c) of the Tax Procedures Act, due to failure to submit relevant clearance documents from the Directorate of Criminal Investigations (DCI) (paras 1-7, 73).
The dispute arose from tax investigations covering Income Tax, VAT and customs duties for the years of income 2016 and 2017, following intelligence that the Appellant had grossly under-declared income. Assessments were confirmed at a principal domestic tax liability of Kshs. 1,065,903,897 together with penalties and interest (paras 3-4, 29).
The Tribunal considered two issues: whether there was a valid appeal before it, and whether the Respondent erred in invalidating the notice of objection and confirming the assessment (para 67). Having found that the Respondent's letter of 11th March 2025 was not an objection decision on the merits but a determination under Section 51(4) of the TPA that the objection was invalid, the Tribunal held it lacked jurisdiction to entertain the appeal and did not proceed to the second issue (paras 73, 79, 82).
The Tribunal struck out the appeal as incompetent, with each party bearing its own costs (para 83).
Background
The Appellant is an individual taxpayer. The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act, CAP 469, tasked with administering and enforcing tax laws under Sections 5(1) and 5(2) of that Act (paras 1-2).
The Respondent conducted investigations against the Appellant for the years of income 2016 and 2017 following intelligence that the Appellant grossly under-declared income. The investigations covered Income Tax, VAT and customs duties. The Respondent issued a notice of assessment dated 25th September 2024 and a tax demand dated 26th November 2024 (paras 3-4).
On 20th February 2025, the Respondent allowed the Appellant to file a late application for review. On 24th February 2025, the Appellant objected to the assessments. The Respondent, via review decision dated 11th March 2025, confirmed the assessment. Aggrieved, the Appellant filed the present appeal by notice of appeal dated 11th April 2025 (paras 5-7).
The Appellant's case centred on an alleged fraud, identity theft and impersonation scheme involving an entity named Apcon Developers, which he claimed used his identity documents (stolen from his vehicle in 2019 and reported under OB No. 28/23/2019 at Kilimani Police Station) without his authorisation. He referred to ongoing DCI investigations, a forensic document examination report dated 3rd February 2026, and findings implicating one Kavit Shah in fraudulently operating bank accounts and drawing cheques in the Appellant's name (paras 10-37).
Core dispute
The Appellant sought to have the Respondent's objection decision of 11th March 2025 set aside as unlawful, unfair, and issued in breach of Article 47 of the Constitution of Kenya, 2010, and the Fair Administrative Action Act, 2015, on the basis that the Respondent failed to consider DCI clearance and forensic documents allegedly exonerating him from ownership and control of the bank accounts linked to Apcon Developers (paras 8, 42-46).
The Respondent maintained that despite being given several opportunities and extensions, the Appellant failed to submit documents from any court or investigative body clearing him of ownership or control of the accounts, as required under Section 51(3)(c) of the Tax Procedures Act, 2015, and that the objection was therefore correctly invalidated (paras 49, 56, 62).
A preliminary issue arose as to whether the Tribunal had jurisdiction to hear the appeal at all, given the nature of the Respondent's letter of 11th March 2025 (paras 67, 73).
Court findings
The Tribunal found that the Respondent had, on 14th January 2025, invalidated an earlier notice of objection for non-compliance with Section 51(3)(c) of the TPA, and had subsequently granted the Appellant further extensions to validate the objection, which the Appellant failed to do (paras 70-71).
The Tribunal held that the Respondent complied with its mandate under Section 51(4) of the TPA by notifying the taxpayer that the notice of objection was invalid and specifying what was required to rectify the problem (para 72).
Examining the decision letter of 11th March 2025, the Tribunal found that the Respondent did not confirm, vary or reject the objection on its merits, but declared it invalid for failure to meet Section 51(3)(c) requirements, namely submission of a DCI clearance report on the bank accounts under investigation (para 73).
The Tribunal cited Section 51(1) of the TPA, which requires a taxpayer to first lodge a valid objection before proceeding under any other written law, and Sections 51(3) and 51(4), which govern validity of objections and the Commissioner's power to determine validity (paras 74-75).
Relying on Commissioner of Investigations & Enforcement v Vyas t/a Rocon Enterprises (Income Tax Appeal E144 of 2021) [2022] KEHC 16027 (KLR), the Tribunal held that a decision invalidating an objection, as opposed to an objection decision on the merits under Section 52, is not an appealable decision, and any grievance regarding such invalidation must be ventilated by judicial review before the High Court, not by appeal to the Tribunal (paras 78-80).
The Tribunal concluded that the decision appealed against was not an appealable decision within the meaning of the Tax Procedures Act and the Tax Appeals Tribunal Act, and that there was consequently no valid appeal upon which its jurisdiction could be founded (para 81). Having found it lacked jurisdiction, the Tribunal declined to determine the merits of the assessments (para 82).
Outcome
The Tribunal held that the Appeal was incompetent and struck it out. Each party was ordered to bear its own costs (para 83).
Major issues / areas of contention
- Whether there was a valid appeal before the Tribunal.
- Whether the Respondent erred in invalidating the notice of objection and confirming the assessment.
- Whether a decision invalidating a notice of objection under Section 51(4) of the Tax Procedures Act constitutes an appealable decision before the Tax Appeals Tribunal.