Judgment summary
The Tax Appeals Tribunal at Nairobi heard an appeal by Khalalio General Trading Company against additional income tax and VAT assessments raised by the Kenya Revenue Authority (KRA). The Appellant argued it had been wrongly treated as a supplier when it was in fact a commission agent earning low-tier commissions.
The Tribunal found that the Appellant had not filed a Statement of Facts or Submissions and had produced no documentary evidence, such as agency agreements or transaction records, to support its position. The Tribunal held that the burden of proof lay with the Appellant under Section 56(1) of the TPA and Section 30 of the TAT Act, and that this burden had not been discharged.
The Appeal was dismissed and the Respondent's Objection Decision dated 19th December 2025 was upheld, with each party bearing its own costs.
Background
The Appellant is a limited liability company. The Respondent is the principal officer appointed under Section 13 of the Kenya Revenue Authority Act, mandated to collect and administer tax revenue (paragraphs 1-2).
On 23rd July 2025, the Respondent issued the Appellant with additional income and VAT assessments (paragraph 3). On 28th November 2025, the Appellant filed its Objection Application against these assessments (paragraph 4). On 19th December 2025, the Respondent issued its Objection Decision confirming the additional assessments (paragraph 5).
Aggrieved, the Appellant lodged this Appeal by way of a Notice of Appeal dated 22nd January 2026 (paragraph 6). The Appellant did not file a Statement of Facts and Submissions in support of its appeal (paragraph 8). The Respondent filed its Statement of Facts on 5th March 2026 and its Written Submissions on 24th April, 2025 (paragraph 9).
Core dispute
The Appellant contended that the Respondent erroneously assessed it as a presumed supplier of goods and services, when it was in fact a commission agent earning low-tier commissions on an agency basis (paragraph 7a-b). It argued that supplier payments passing through its bank account did not reflect its true earnings, and that the Respondent should have conducted due diligence to uncover its actual status as a commission agent (paragraph 7c-d). The Appellant claimed the Objection Decision of 22-12-2025 was against the weight of evidence, erroneous, and financially oppressive (paragraph 7e-g).
The Respondent maintained that the characterisation of the Appellant as a supplier was a lawful and reasonable inference from bank credits inconsistent with commission earnings, and that agency must be proved, not presumed (paragraphs 10-13). It submitted that the Appellant's declared turnover bore no reasonable relationship to bank credits over three consecutive tax years (2019-2021), and that no commission agreements, transaction records, client statements, reconciliations, or Central Bank of Kenya licensing had been provided to support the agency claim (paragraphs 14-17). The Respondent asserted the additional assessments for Corporation Tax and Value Added Tax totalling Kshs. 248,545,784 were lawfully raised, procedurally fair, and substantiated by verified banking data (paragraph 20).
Court findings
The Tribunal framed the sole issue for determination as whether the Respondent's Additional Assessments of the Appellant were justified and proper in law (paragraph 23).
The Tribunal noted that the Appellant did not present any document before it to prove that it had provided documents to support its objection, and there was nothing on record showing that the objection had been supported with relevant documents (paragraphs 24-25).
The Tribunal reiterated that the burden of proof in tax matters rests with the Appellant in the first instance, under Section 56(1) of the TPA and Section 30 of the TAT Act, citing Commissioner of Investigations and Enforcement vs Kidero (Income Tax Appeal E028 of 2020 eKLR) on the self-assessment tax regime and the taxpayer's duty to keep records (paragraphs 26-27).
The Tribunal found that the Appellant failed to provide evidence showing that it had supported its objection with relevant documents or that the Respondent had erred in affirming its assessments (paragraph 28). Citing Commissioner of Domestic Taxes v Trical and Hard Limited (Tax Appeal E146 of 2020) [2022] KEHC 9927 (KLR), the Tribunal held that the Respondent's assessment carries a presumption of correctness which persists until displaced by competent and relevant evidence from the taxpayer (paragraph 29). As the Appellant failed to provide such evidence, the assessment remained undisturbed and justified (paragraph 30).
Outcome
The Tribunal held that the Appeal lacked merit and dismissed it in its entirety (paragraph 31a).
The Respondent's Objection Decision dated 19th December 2025 was upheld (paragraph 31b).
Each party was ordered to bear its own costs (paragraph 31c).
Major issues / areas of contention
- Whether the Respondent erroneously assessed the Appellant's tax payable on the basis that it was a presumed supplier, whereas it claimed to be a commission agent.
- Whether the Appellant's personal earnings were a derivation of low-tier commissions earned on an agency basis.
- Whether due diligence on the part of the Respondent could have revealed that the Appellant earned income as a commission agent rather than as a supplier of goods and services.
- Whether the Appellant was the victim of an erroneous tax assessment amounting to financial oppression.
- Whether the Respondent's Objection Decision of 19th December 2025 was against the weight of evidence.
- Which party bore the burden of proof in the appeal, and whether that burden had been discharged.