Judgment summary
The Appellant, Loysons Invesments Ltd, appealed against an Objection Decision of the Commissioner of Domestic Taxes dated 10th July 2025, which confirmed Additional Assessments for VAT and Corporation Tax totalling Kshs 15,595,462.04, inclusive of interest and penalties.
The Respondent had raised the assessments following a review of returns for the period January 2019 to July 2024, identifying variances between declared sales and third-party withholding VAT certificates, and disallowing claimed expenses for lack of supporting documentation.
The Tribunal found that the Appellant had not provided the requested invoices, bank payment schedules or proof of rent payment, and had not controverted the Respondent's assertion that no such documents were ever received. On this basis, the Tribunal held that the Appellant failed to discharge its 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.
Background
The Appellant is a limited company based in Eldoret. The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act, 1995 Cap 469 Laws of Kenya, charged with the administration and enforcement of tax laws in Kenya (paras 1-2).
On 23rd October 2024, the Respondent issued Additional Assessments demanding Kshs 15,595,462.04 for VAT and Corporation Tax, inclusive of interest and penalties (para 3).
The Appellant wrote on 14th May 2025 seeking an extension of time to object, which the Respondent granted. The Appellant lodged its objection on 27th May 2025 (para 4). The Respondent issued its Objection Decision by letter dated 10th July 2025 (para 5). The Appellant filed its Notice of Appeal dated 8th August 2025 (para 6).
Core dispute
The Appellant argued that the Respondent erred in law and fact by issuing additional CIT assessments for 2019 and 2023 without considering legitimate expenses incurred in the generation of income, and by including additional sales in the VAT assessments for December 2021, August 2022, February 2023, June 2023, August 2023, January 2024 and November 2024 without relying on verifiable or substantial evidence (para 7).
The Respondent contended that the assessments were properly raised based on variances between third-party withholding VAT certificates and the Appellant's declared returns, and that despite repeated requests, the Appellant failed to provide verifiable supporting documentation such as invoices, bank statements and rent payment schedules (paras 17-19). It relied on Section 15 of the Income Tax Act and Section 56 of the Tax Procedures Act to argue that the burden of proof lay with the Appellant.
Court findings
The Tribunal identified a single issue for determination: whether the Respondent's Additional Assessments were justified (para 43).
The Tribunal noted that it had sighted the Respondent's communications requesting invoices, bank payment schedules and proof of rent payment from the Appellant, but found no evidence in the Appellant's appeal documents that these had been provided (paras 49-50). The Appellant had also not controverted the Respondent's assertion that it never received the requested documents (para 50).
The Tribunal referred to Section 23(1)(a)(b) of the Tax Procedures Act on record-keeping obligations, and held that although the Appellant claimed to maintain books of accounts, it failed to avail them or the other requested documents (paras 51-52).
The Tribunal applied Section 56(1) of the Tax Procedures Act and Section 30 of the Tax Appeals Tribunal Act, which place the burden on the Appellant to prove that the Respondent's tax decision is incorrect or excessive (paras 53-54). It relied on its own prior holding in Kirim Pipes Limited vs Commissioner Intelligence Strategic Operations Investigations and Enforcement (TAT No. E1116 of 2024) (2025) KETAT 259, and the High Court decision in Eldama Technologies Limited vs Commissioner of Customs & Border Control (Tax Appeal E200 of 2021) (2023) KEHC 20762(KLR), both confirming that failure to produce documents means the taxpayer fails to discharge its burden of proof (paras 55-56).
The Tribunal concluded that the Appellant's failure to provide documentation during the review stage or thereafter meant the Respondent could not be faulted for raising the assessments as it did (para 57), and found that the Respondent's Additional Assessments were justified (para 58).
Outcome
The Tribunal dismissed the Appeal, upheld the Respondent's Objection Decision dated 16th July 2025, and ordered that each party bear its own costs (para 59).
Major issues / areas of contention
- Whether the Respondent erred by issuing additional CIT assessments for 2019 and 2023 without considering the Appellant's legitimate expenses.
- Whether the Respondent erred by including additional sales in the VAT assessments for specified months without relying on verifiable or substantial evidence.
- Whether the Appellant discharged its burden of proof under Section 56 of the Tax Procedures Act.