Judgment summary
Kaka Gas Limited, an operator of an LPG refill plant, appealed against a VAT objection decision confirming additional assessments of KShs 33,349,259.05 comprising principal tax, penalties and interest. The assessments arose from a verification exercise at the Appellant's premises covering July 2021 to January 2022, which the Respondent said showed under-declared VAT sales.
The Appellant argued that the Respondent's officers had taken its original invoices, delivery notes and sales records during the verification exercise and never returned them, making it impossible to produce the primary documents later demanded for the objection. It relied instead on excel schedules and bank statements. The Respondent rejected the objection for lack of primary documents and disallowed certain input VAT on the basis that some suppliers, including UBG Limited, had not declared the relevant invoices or were non-filers.
The Tribunal found that the Respondent had failed to address the Appellant's objection-stage assertion that the original documents were in its possession, and had not engaged with the bank statements or excel schedules beyond stating they could not be verified. The Tribunal allowed the appeal, set aside the objection decision, and remitted the matter to the Respondent for fresh re-examination and determination within sixty days.
Background
The Appellant is a Kenyan company operating an LPG refill plant. The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act, CAP 469, the KRA being an agency mandated under Section 5 of that Act to assess and collect revenue (2).
The Appellant was bonded by the Respondent for failure to issue proper tax invoices, contrary to section 42 of the VAT Act, 2013, as read with Legal Notice 189 of 2020 (VAT-ETI Regulations) (3).
The Respondent analysed the Appellant's sales records at its premises for July 2021 to January 2022 and found under-declared VAT sales, assessing the Appellant on variances between self-assessed and Respondent-computed sales (4)-(5). The Respondent fully rejected the Appellant's objection, resulting in tax payable of KShs 33,349,259.05 comprising principal tax, penalties and interest (6).
The Appellant objected by notice dated 13th January 2023 (7). The Respondent issued an Objection decision dated 14th March 2023, amending the assessment (8). The Appellant filed a Notice of Appeal dated 22nd January 2026, served on the Respondent on 23rd January 2026 (9).
Core dispute
The Appellant contended that the assessments arose from a verification exercise during which the Respondent's officers seized and retained its original accounting records, purchase invoices, sales invoices and other primary documents, which were never returned (12)-(14). It argued this made it impossible to comply with the Respondent's demand for primary documents at the objection stage, and that it instead submitted excel schedules of input VAT claims and sales, supported by bank statements evidencing payments to suppliers (16)-(18).
The Appellant argued that the Objection Decision dated 14th March 2023 rejected the objection solely for lack of primary documents such as invoices, ETR receipts and delivery notes, without addressing its explanation about the seizure or the probative value of the secondary evidence (19). It also argued that input VAT had been unjustly disallowed because certain suppliers, including UBG Limited, were non-filers or had not declared specific invoices, a matter outside its control (20), (94)-(101).
The Appellant further complained of an Agency Notice issued on 9th October 2025 demanding KShs 31,728,560 while the appeal was pending, despite a good-faith payment of KShs 2,500,000 made on 7th September 2023 (17), (21), (43).
The Respondent maintained that it had not seized any documents, having only reviewed them at the Appellant's premises, and that the Appellant's assertion of seizure was a new ground raised for the first time on appeal contrary to section 56(3) of the Tax Procedures Act (122)-(127). The Respondent argued that the burden of proof under section 56(1) of the Tax Procedures Act and section 30 of the Tax Appeals Tribunal Act rested on the Appellant, who had failed to provide purchase invoices, ETR receipts, delivery notes and supplier confirmations to substantiate its objection (117)-(119). The Respondent also relied on section 17(2)(b) of the VAT Act, 2013 to disallow input VAT where suppliers had not declared sales invoices (101), (114).
Court findings
The Tribunal held that the central question was whether the Respondent was justified in confirming the assessment without substantively addressing the Appellant's contemporaneous assertion, made at the objection stage, that the primary documents required for verification were in the Respondent's possession (130).
The Tribunal confirmed that the statutory burden of proof under section 56(1) of the Tax Procedures Act and section 30 of the Tax Appeals Tribunal Act rests on the taxpayer, and that this burden is not discharged by mere assertions (131)-(133). However, it found that the Appellant's assertion about the seized documents was a material issue that the Respondent was required to address once raised in the objection (135)-(137).
The Tribunal found that the Objection Decision acknowledged the excel schedules and bank statements supplied but rejected the objection for lack of primary documents without addressing the Appellant's explanation for their absence, and without confirming or denying whether the Respondent held the originals (138). It noted that the Respondent's denial that it had seized documents was a bare assertion unsupported by any contemporaneous record, verification report or inventory (139).
The Tribunal observed that the Objection Decision itself referred to assessments based on "the original documents verified in their premises," raising the question of what became of those documents, which the Respondent had not explained (142). It found that the Respondent's Objection Decision did not engage with the bank statements at all beyond stating it could not confirm correctness of the invoices in the absence of primary documents, which was not a reasoned finding on the evidence tendered (144).
The Tribunal held that the Appellant's assertion did not automatically discharge its burden under section 56(1), nor did the bank statements and excel schedules alone conclusively prove the claimed input VAT or sales adjustments (145)-(146). It concluded that the proper course was not to set aside the assessment outright but to remit the matter to the Respondent for fresh review, to determine whether it holds any of the Appellant's original records and to consider them in evaluating the objection (148). The Tribunal found the Respondent was not justified in confirming the VAT assessment without addressing this issue (149).
Outcome
The Tribunal allowed the Appeal. It set aside the Respondent's objection decision (referred to in the final orders as dated 12th September 2025) and referred the matter back to the Respondent for re-examination and fresh determination of the Appellant's Objection. The Respondent was directed to issue a fresh Objection decision within sixty (60) days of the judgment. Each party was ordered to bear its own costs (150)-(151).
Major issues / areas of contention
- Whether the Respondent's Objection Decision was unlawful, unreasonable and procedurally unfair for demanding, as a condition of a successful objection, primary documents that its own officers had allegedly seized and retained.
- Whether the Respondent's Objection Decision was vitiated by its failure to accord due evidential weight to secondary evidence (excel schedules and bank statements) tendered by the Appellant, and by its failure to discharge the evidential burden said to have shifted to it.
- Whether the Respondent misapplied the law on input VAT under section 17 of the VAT Act by disallowing input tax on the basis of suppliers' non-compliance (including UBG Limited being a non-filer) without any finding that the Appellant knew or ought to have known of irregularity in the supply chain.
- Whether the Respondent's failure to accord the Appellant access to its own allegedly seized records infringed the Appellant's right of access to information under Article 35 of the Constitution and the Access to Information Act, 2016.
- Whether the Respondent was entitled to raise, as a new point on appeal, the objection that the Appellant's assertion about seizure of documents was not raised at the objection stage under section 56(3) of the Tax Procedures Act.
- Whether the Respondent was justified in confirming the additional VAT assessments given the parties' dispute over custody of the primary records.