Judgment summary
The Tribunal considered an appeal by Inter County Accident Assessors Limited against an objection decision of the Commissioner of Domestic Taxes dated 4th September 2025, which confirmed additional assessments for income tax, PAYE, withholding tax and VAT for the period 2019 to 2023 (paras 3 to 6).
The Respondent had raised the assessments after a compliance check revealed variances between the Appellant's declared income and income derived from grossed-up withholding tax and withholding VAT certificates, as well as inconsistencies between PAYE declared and salaries and wages costs in the financial statements (paras 17 to 18).
The Tribunal found that the Appellant had not provided reconciliations or evidence sufficient to explain the variances, and had therefore failed to discharge its statutory burden of proving the assessment excessive. The appeal was dismissed and the objection decision upheld (paras 65 to 66).
Background
The Appellant is a company engaged in accident assessment and claim valuation (para 1). The Respondent is the principal officer appointed under Section 13 of the Kenya Revenue Authority Act, responsible for administering and enforcing tax laws under Section 5 of that Act (para 2).
The Respondent conducted a compliance check as part of tax compliance verification on data assigned for the period 2019 to 2023. Additional assessments were raised as follows: Income tax - Company Kshs. 14,729,491; Income Tax - PAYE Kshs. 455,681; Withholding Taxes Kshs. 58,907; and VAT Kshs. 9,293,093, totalling Kshs. 24,537,172 (paras 3 and 17).
A tax demand notice was issued on 27th June 2025, and the Appellant lodged a timely objection on 11th July 2025 (para 4). The Respondent issued its objection decision on 4th September 2025 (para 5). The Appellant, aggrieved, lodged a notice of appeal dated and filed on 30th October 2025 (para 6).
Core dispute
The Appellant argued that the Respondent wrongly relied on withholding VAT certificates that could not be traced to its books, and that using such certificates to determine revenue was contrary to the VAT Act. It contended that it had shared its invoices and was following up with customers to reverse the certificates, and that the assessment was punitive because it disregarded costs incurred in its normal operations (paras 7 to 14).
The Respondent maintained that the Appellant had under-declared income compared to the expected income from grossed-up withholding tax and withholding VAT certificates, and that there were inconsistencies between PAYE declared and salaries and wages costs in the financial statements. It stated that it had requested reconciliations and supporting documents, but the Appellant failed to provide them, and that the documents it did provide, being bank statements, payrolls, sales ledgers, rent receipts and loan statements, were not applicable to the matters under review (paras 18 to 23).
The issue for determination was whether the Respondent erred in confirming the taxes assessed upon the Appellant (para 37).
Court findings
The Tribunal held that the Respondent was entitled, under Section 24(2) of the Tax Procedures Act, to assess the Appellant's tax liability using any information available to it, including third-party withholding tax and withholding VAT certificates, and was not bound by the Appellant's own returns (paras 46 and 48).
While such certificates are not, by themselves, conclusive proof of an undisclosed sale, they constitute prima facie third-party evidence of payments made or taxable supplies transacted, and once discrepancies were disclosed, the Appellant was required to provide a credible reconciliation (para 48).
The Tribunal found that the Appellant did not provide a certificate-by-certificate reconciliation identifying the customer, underlying invoice or contract, taxable value and VAT component, relevant accounting period, whether the amount had been declared, or any duplicate, erroneous or reversed certificates (para 49). Its assertion that it was following up customers for reversal of certificates was unsupported by correspondence, reversal requests, credit notes or customer confirmations (para 50).
The Tribunal also found that a general assertion that a business must incur expenses is not evidence of deductible expenditure, and that the Appellant did not demonstrate that expenditure was wholly and exclusively incurred in the production of income, nor reconcile the disputed income to its expenses (para 51).
Applying Section 56(1) of the Tax Procedures Act and Section 30 of the Tax Appeals Tribunal Act, the Tribunal held that the burden lay on the Appellant to prove the assessment excessive or incorrect, and that this burden had not been discharged (paras 52 to 58). It relied on Section 23 of the Tax Procedures Act on record-keeping obligations, Section 54A(1) of the Income Tax Act, and Section 31(1) of the Tax Procedures Act on the Commissioner's power to amend assessments (paras 44, 45, 47).
The Tribunal cited Commissioner of Domestic Taxes v Block International Limited [2024] KEHC 8889 (KLR), Darwine Wholesalers Limited v Commissioner of Investigations and Enforcement [2023] KEHC 23537 (KLR), Trust Bank Limited v Paramount Universal Bank Limited & 2 others (2009) eKLR, Kenya Revenue Authority v Man Diesel & Turbo Se, Kenya [2021] eKLR, and Commissioner of Domestic Taxes v Jakoline Enterprises Limited [2026] KEHC 11141 (KLR), the latter of which was relied upon for the principle that a taxpayer must provide a clear, specific and indexed reconciliation rather than unindexed, mismatched documents (paras 54, 55, 57, 61).
The Tribunal further noted that Section 13(2)(d) of the Tax Appeals Tribunal Act requires an appellant to submit documents necessary to enable the Tribunal to make a decision, which the Appellant failed to do (para 63).
Outcome
The Tribunal held that the Appellant failed to demonstrate that the Respondent erred in confirming the taxes assessed upon it (para 65).
The appeal was dismissed, the objection decision dated 4th September 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 confirming the taxes assessed upon the Appellant.
- Whether the Respondent could lawfully use withholding VAT and withholding tax certificates as a basis for assessing income and VAT liability.
- Whether the Appellant discharged its burden of proving that the assessments were excessive or incorrect under Section 56(1) of the Tax Procedures Act and Section 30 of the Tax Appeals Tribunal Act.
- Whether the documents provided by the Appellant (bank statements, payrolls, sales ledgers, rent receipts and loan statements) adequately reconciled the variances identified by the Respondent.
- Whether inconsistencies between PAYE declared and salaries and wages costs in the financial statements justified the additional PAYE assessment.
- Whether a general assertion that a business incurs costs is sufficient evidence of deductible expenditure.