Judgment summary
The Tribunal considered an appeal by KRM Commodities Ltd, a rice importer and distributor, against an objection decision of the Commissioner confirming corporation tax and withholding tax assessments totalling Kshs 132,968,499, inclusive of penalties and interest, for the period 2021 to 2023 (paragraph 5).
The Appellant argued that duties and taxes had already been captured in its audited financial statements as direct expenses and were wrongly added a second time, that the Respondent had applied an unjustified 20% gross profit margin, and that it had not been given a fair opportunity to be heard (paragraph 7).
The Respondent maintained that the Appellant failed to provide the full set of requested supporting documents, that unreconciled variances existed between customs import data and the Appellant's purchase ledgers, and that withholding tax had not been deducted on audit fees, legal fees and quota fees (paragraphs 15 to 20, 29).
The Tribunal found that the Appellant had not discharged its burden of proof under section 30 of the Tax Appeals Tribunal Act, Cap 469A, and dismissed the appeal, upholding the Respondent's objection decision (paragraphs 42 to 43).
Background
The Appellant is a limited liability company engaged in the importation and distribution of rice (paragraph 1). The Respondent is the principal officer appointed under Section 13 of the Kenya Revenue Authority Act, responsible for collecting and administering tax revenue (paragraph 2).
On 31st July 2025, the Respondent issued an assessment against the Appellant (paragraph 3). The Appellant objected to the amended assessment on 29th August 2025 (paragraph 4). On 24th October 2025, the Respondent issued its objection decision for income tax and withholding tax of Kshs 132,968,499, inclusive of penalties and interest, for the period between 2021 and 2023 (paragraph 5).
Being dissatisfied, the Appellant lodged the present appeal, with its undated Notice of Appeal recorded on the CTS on 27th July 2026 at 1923 hours (paragraph 6).
Core dispute
The Appellant contended that the Respondent erred by double-counting duties and other taxes already reflected in its direct expenses, failed to explain how it arrived at a figure of Kshs 156,841,283 for duties and taxes for 2023, and arbitrarily applied a 20% gross profit margin to unaccounted imports without justification (paragraph 7).
The Appellant also argued that certain import entries not captured in its financial statements belonged to another company to which quota allocation had been assigned, and that it was not given an adequate opportunity to be heard during the objection process (paragraph 7).
The Respondent's case was that the Appellant failed to provide the full range of requested documents, including proof of payments and complete ledgers, despite reminders (paragraph 16). It stated that the figure of Kshs 156,841,283 comprised duties and taxes paid on 2023 imports, added to the CIF value to determine cost of sales, and that unreconciled variances of Kshs 11,267,629 (2021) and Kshs 184,573,622 (2023) existed between imports recorded in customs data and the Appellant's declared purchases (paragraph 29).
The Respondent further asserted that the Appellant had not deducted withholding tax on audit fees (Kshs 350,000), legal fees (Kshs 400,000) and quota fees (Kshs 6,000,000), applying a 5% rate under section 35(3) of the Income Tax Act, Cap 470 (paragraph 20).
The issue identified by the Tribunal for determination was whether the Respondent erred in confirming the corporation tax and withholding income tax assessments (paragraph 31).
Court findings
The Tribunal noted that the Respondent applied its best judgment on the basis that it was not provided with sufficient documents by the Appellant to justify a different assessment model, while the Appellant asserted the documents had been provided (paragraph 32).
Citing section 30 of the Tax Appeals Tribunal Act, Cap 469A, the Tribunal held that the Appellant bore the burden of proving that the assessment was excessive, and that once this burden is discharged, the Respondent must justify why it did not vary the assessment (paragraphs 33 to 34).
The Tribunal reviewed the documentary record, including the decision of 29th August 2025 which had no documents attached, an email of 15th September 2025 from info@kellyauditors.com to james.nyambu@kra.go.ke attaching several documents, and the objection decision of 24th October 2025, which stated the documents provided did not account for all imports and did not address the withholding tax issue (paragraph 35).
The Tribunal found that the Appellant had not specified which documents it provided, which tax issues those documents addressed, or how the Respondent had ignored specific documents (paragraph 36). It found the 15th September 2025 email lacked any covering explanation of what it was responding to (paragraph 37).
The Tribunal concluded that it was unclear whether the Appellant had provided some, most, or all requested documents, and that the burden of establishing this clarity lay with the Appellant, which it failed to discharge (paragraph 38). Relying on Mburu v Commissioner of Domestics Taxes [2026] KECA 1606 (KLR) and Commissioner of Domestic Taxes vs Jakoline Enterprises Limited [2026] KEHC 11141 (KLR), the Tribunal held that general, unindexed document submissions do not amount to compliance capable of displacing the Commissioner's assessment (paragraphs 39 to 41).
The Tribunal found that the Respondent did not err in applying its best judgment to determine the Appellant's tax liability (paragraph 42).
Outcome
The Tribunal held that the appeal lacked merit and dismissed it (paragraph 43(a)).
The Respondent's objection decision dated 24th October 2025 was upheld (paragraph 43(b)).
Each party was ordered to bear its own costs (paragraph 43(c)).
Major issues / areas of contention
- Whether the Respondent erred in confirming the corporation tax and withholding income tax assessments (paragraph 31).
- Whether the Appellant discharged its burden of proof under section 30 of the Tax Appeals Tribunal Act, Cap 469A (paragraphs 33 to 38).
- Whether duties and other taxes had already been captured as direct expenses in the Appellant's audited financial statements and were double-counted (paragraph 7(a), (b)).
- Whether the Respondent adequately explained the basis of the Kshs 156,841,283 figure for duties and taxes for 2023 (paragraph 7(g)).
- Whether the Respondent's application of a 20% gross profit margin to unreconciled imports was justified (paragraph 7(i), 19, 27).
- Whether the Appellant had properly deducted withholding tax on audit fees, legal fees and quota fees (paragraph 20).
- Whether the Appellant was given adequate opportunity to be heard during the objection process (paragraph 7(m)).