Judgment summary
The Appellant, a sole proprietor who collects and resells drums sourced from informal traders, appealed against a VAT additional assessment of Kshs. 26,482,401.1 raised by the Kenya Revenue Authority (para 3).
The Appellant objected late on 21st January 2025, and the Commissioner accepted the late objection on 4th February 2025, later issuing an Objection decision on 20th March 2025 (paras 4-5). The Appellant filed a Notice of appeal on 18th April 2025 (para 6).
The Tribunal first dealt with a preliminary objection raised by the Respondent regarding an Amended Memorandum of Appeal and Statement of Facts dated 22nd September 2025, which the Respondent argued contravened Section 13(2)(c) of the Tax Appeals Tribunal Act, 2013 (para 18). The Tribunal found the amended pleadings irregularly filed and incapable of reliance, but declined to dismiss the entire Appeal, holding that the original pleadings filed on 18th April 2025 remained valid and competent (paras 24-30).
On the substantive issue of whether the Objection decision was justified, the Tribunal found that the Appellant had not discharged the statutory burden of proof under Section 56(1) of the Tax Procedures Act and Section 30 of the Tax Appeals Tribunal Act, and dismissed the Appeal, upholding the Objection Decision (paras 46-49).
Background
The Appellant operates a sole proprietor business in Kenya, collecting and reselling drums sourced from informal traders (para 1). The Respondent is the Kenya Revenue Authority, a principal officer appointed under Section 13 of the Kenya Revenue Authority Act, CAP 469, mandated under Section 5(1) and 5(2) of the Act to collect and administer tax revenue (para 2).
The Respondent raised a VAT additional assessment of Kshs. 26,482,401.1 (para 3). The Appellant lodged a late objection on 21st January 2025, which the Commissioner accepted on 4th February 2025, requesting supporting documents (para 4). The Respondent issued an Objection decision on 20th March 2025 (para 5), against which the Appellant filed the present Appeal by Notice of Appeal dated and filed 18th April 2025 (para 6).
Core dispute
The Appellant raised three grounds of appeal: that the Commissioner erred in law and fact by contravening Section 13(5) of the Value Added Tax Act, 2013 in charging VAT on disbursements made to a third party as an agent of his client; that the Commissioner failed to consider the Appellant's plea that records requested had been lost through fire in his office; and that the Commissioner erred by considering repeated withholding certificates on one invoice, leading to double charging of VAT (para 7).
The Appellant contended that he collected drums from small-scale traders who could not issue invoices, that the principal sent money which was passed on to these traders, and that he merely issued receipts to the principal to support payments, acting as an agent rather than a seller (paras 9-13). He also stated that records were lost in a fire and that other 2024 records were taken by his former accountant, whom he was attempting to trace (para 15). He further alleged duplication of withholding certificates against the same invoice (para 16).
The Respondent raised a preliminary objection challenging the competence of the Appellant's Amended Memorandum of Appeal and Statement of Facts dated 22nd September 2025, contending this contravened Section 13(2)(c) of the Tax Appeals Tribunal Act, 2013, and sought to strike out the amended pleadings and dismiss the Appeal or confine proceedings to the original pleadings (paras 18-20).
Court findings
The Tribunal held that the preliminary objection raised a pure point of law per Mukisa Biscuit Manufacturing Co. Ltd v West End Distributors Ltd [1969] EA 696 (para 23). It found that the Amended Memorandum of Appeal and Statement of Facts dated 22nd September 2025 were irregularly filed and could not be relied upon, but that the original pleadings filed on 18th April 2025 remained valid and disclosed a competent Appeal, citing D.T. Dobie & Company (Kenya) Ltd v Muchina [1982] KLR 1 and Nicholas Kiptoo Arap Korir Salat v Independent Electoral and Boundaries Commission & 7 Others [2014] eKLR (paras 25-30).
On the merits, the Tribunal found that under Section 13(5) of the Value Added Tax Act, the burden rests on the Appellant to prove an agency relationship and that amounts received were disbursements (para 34). The Appellant produced no agency agreement, contractual documents, payment schedules, M-Pesa statements or bank records, and mere assertions of agency were insufficient, per Republic v Kenya Revenue Authority Ex Parte Shake Distributors Limited [2012] eKLR and Commissioner of Domestic Taxes v Total Kenya Limited [2018] eKLR (paras 36-37).
On the claimed loss of records, the Tribunal noted the taxpayer's obligation under Section 23 of the Tax Procedures Act to maintain records for at least five years, and found no independent evidence (such as police abstracts, fire reports or insurance claims) of the alleged fire (paras 38-39). Distinguishing TAT Appeal No. E193 of 2025 - Dadia and Sons Limited v Commissioner of Domestic Taxes, where independent corroborated evidence supported the taxpayer's account of an errant accountant, the Tribunal found no comparable evidence here (paras 40-41), and cited Tatu City Limited v Commissioner of Domestic Taxes [2020] eKLR on the non-transferability of record-keeping obligations (para 42).
On the alleged duplicated withholding certificates, the Tribunal found the Appellant did not produce the promised reconciliation or supporting schedules, and cited Commissioner of Investigations and Enforcement v Pearl Industries Limited [2021] eKLR on the taxpayer's burden to rebut an assessment (paras 43-44). The Tribunal applied Section 56(1) of the Tax Procedures Act and Section 30 of the Tax Appeals Tribunal Act, concluding the Appellant had not discharged the burden of proof (paras 45-47).
Outcome
The Tribunal found that the Objection Decision issued by the Respondent on 20th March 2025 was properly founded and justified (para 48). The Appeal was dismissed, the Objection Decision dated 20th March 2025 was upheld, and each party was ordered to bear its own costs (para 49).
Major issues / areas of contention
- Whether the Objection decision issued on 20th March 2025 was justified.
- Whether the Respondent's preliminary objection to the Amended Memorandum of Appeal and Statement of Facts dated 22nd September 2025 warranted striking out the pleadings or dismissal of the entire Appeal.
- Whether amounts received by the Appellant constituted disbursements to a third party as an agent under Section 13(5) of the Value Added Tax Act, 2013, excluding them from taxable value.
- Whether the alleged loss of records through fire excused the Appellant's failure to produce documentary evidence.
- Whether repeated withholding VAT certificates on a single invoice resulted in double charging of VAT.
- Where the burden of proof lay under Section 56(1) of the Tax Procedures Act and Section 30 of the Tax Appeals Tribunal Act.