Judgment summary
The Appellant, an auctioneering company, appealed against a decision of the Commissioner of Domestic Taxes dated 9th April 2024, which found that the Appellant's objection to assessments issued on 25th and 27th January 2021 had not been validly lodged. The Appellant argued that the objection ought to have been allowed by operation of Section 51(11) of the Tax Procedures Act because the Commissioner failed to issue a decision within sixty days.
The Tribunal distinguished between a validity determination under Section 51(4) of the Tax Procedures Act and a merit decision under Section 51(11), relying on the Court of Appeal decision in Geo Chem Middle East v Commissioner for Domestic Taxes. It found that the sixty-day deemed allowance rule under Section 51(11) applies only where a merits decision has not been made, and does not automatically validate an objection that the Commissioner has determined was not validly lodged.
The Tribunal allowed the Appeal, but instead of annulling the assessments or entering into the merits, it directed the Appellant to submit all relevant supporting documents to the Respondent within 14 days, and directed the Respondent to issue an objection decision within 60 days of receipt of those documents, or within 60 days of the judgment, whichever came earlier. Each party was directed to bear its own costs.
Background
The Appellant is a limited liability company incorporated in Kenya and a registered taxpayer. The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act, Cap. 469, responsible for administering revenue laws under Section 5 of that Act (paras 1 to 2).
On 18th January 2021, the Respondent issued a default assessment by email. The parties agreed that outstanding VAT arising from the Appellant's self-assessment would be paid, and the Appellant deposited Kshs. 300,000.00 as an advance VAT payment on the same day (para 8).
The Respondent issued several assessment orders dated 25th and 27th January 2021. The Appellant objected to the assessments on 1st February 2021 (para 3). While the documents were under review, the Respondent issued additional assessments on 27th January 2021, and the Appellant lodged notices of objection and supplied further supporting documents (para 10).
By a letter dated 9th April 2024, the Respondent notified the Appellant that its objection had not been validly lodged (para 4). That decision related to assessments for the periods January to December in each of the years 2014 to 2019, and stated that Income Tax amounting to Kshs. 21,858,107.70 was payable (para 11).
Dissatisfied with that decision, the Appellant filed the Appeal on 27th October 2025 (para 5).
Core dispute
The Appellant argued that its objection, lodged on 1st February 2021, was allowed by operation of Section 51(11) of the Tax Procedures Act because the Respondent did not communicate a decision until 9th April 2024, some 1,163 days later, well beyond the sixty-day period prescribed by that provision (para 6(i) to (iii)).
The Appellant further argued that the Respondent erred in confirming the Income Tax assessments on the basis that supporting documents had not been provided, when it had in fact supplied audited accounts, bank statements, general ledgers, court warrants issued between 2014 and 2019, purchase invoices and expense receipts (para 6(iv)). It also argued that the Respondent wrongly treated all deposits into its bank account as taxable income, without distinguishing client funds, held as an auctioneer, from its own revenue (para 6(v) and (vii)), and that only about ten per cent of claimed expenses had been allowed despite the information provided (para 6(viii)).
The Respondent maintained that the Appellant had failed to validate its objection by providing requested documents, and that the invalidation decision was therefore properly made under Section 51(3) and (4) of the Tax Procedures Act (paras 14 to 15, 32 to 37). The Respondent relied on Sections 24, 29, 31, 50(1)(a), 56(1) and 59 of the Tax Procedures Act, and on Kenya Revenue Authority v Man Diesel & Turbo SE, Kenya and PZ Cussons East Africa Limited v Kenya Revenue Authority, to argue that assessments carry a rebuttable presumption of correctness which the Appellant had failed to displace (paras 27 to 31, 38 to 39).
Court findings
The Tribunal identified two issues for determination: whether the Respondent was justified in determining that the Appellant's objection had not been validly lodged, and whether the Respondent's additional assessments were justified (para 41).
The Tribunal held that there is a statutory distinction between the validity of an objection under Section 51(3) and (4) of the Tax Procedures Act and a decision on the merits of an objection under Section 51(11). It relied on the Court of Appeal decision in Geo Chem Middle East v Commissioner for Domestic Taxes (Civil Appeal E581 of 2024) [2026] KECA 1531 (KLR), which held that an Objection Decision under subsection (11) is a merits decision, whereas a decision under subsection (4) is not (paras 43 to 45).
The Tribunal found that the sixty-day rule under Section 51(11) cannot be applied as though a disputed invalid objection had already entered the merits stage, and that the Appellant's reliance on Rongai Tiles & Sanitary Wares Limited v Commissioner of Domestic Taxes and Opiyo v Kenya Revenue Authority did not resolve the dispute, given the later controlling authority in Geo Chem (para 46).
The Tribunal found that the objection was not automatically allowed under Section 51(11) merely because more than sixty days passed before the invalidation decision was communicated on 9th April 2024. It noted the chronology was undisputed, the Respondent stating it had requested supporting documents while the Appellant maintained it had supplied them (paras 47 to 48).
Following the approach affirmed in Geo Chem, where the Tribunal could not annul an assessment without first allowing the Respondent to consider the objection on its merits under Section 51 of the Tax Procedures Act, the Tribunal held that the correct course was to remit the matter to the Respondent to issue a merits decision (paras 49 to 50). Given this conclusion, the Tribunal found it unnecessary to determine the substantive correctness of the additional assessments, rendering that issue moot (para 51).
Outcome
The Appeal was allowed. The Appellant was directed to provide the Respondent with all relevant documents supporting its objection within 14 days of the judgment. The Respondent was at liberty to issue an objection decision within 60 days of receipt of the Appellant's documents, or within 60 days from the date of the judgment, whichever came earlier. Each party was ordered to bear its own costs (para 52).
Major issues / areas of contention
- Whether the Respondent was justified in determining that the Appellant's objection had not been validly lodged.
- Whether the Respondent's additional assessments were justified.