Judgment summary
The Tribunal considered an appeal by Mseky Holdings Limited against additional VAT assessments issued by the Respondent, which disallowed input VAT claims of Kshs. 40,456,637.53 with a corresponding principal tax of Kshs. 6,448,924.00 for various tax periods between January 2021 and August 2024.
The Respondent's objection decision dated 12th September 2025 confirmed principal tax of Kshs. 6,448,604.75, penalties of Kshs. 323,234.58 and interest of Kshs. 1,854,630.53, aggregating to Kshs. 8,626,469.86.
The Tribunal found it lacked jurisdiction to determine the Appellant's claim of a violation of its right to fair administrative action under Article 47 of the Constitution, and further found that the Appellant had failed to discharge its statutory burden of proving that the tax decision was incorrect. The appeal was dismissed and the objection decision upheld.
Background
The Appellant is a limited liability company incorporated under the Companies Act, 2015, carrying on the business of building and construction, principally the execution of infrastructural and government contracts (para 1).
The Respondent carried out a verification of input VAT claimed by the Appellant for the tax periods January 2021 to August 2024. Vide a notice dated 15th October 2024, the Respondent required the Appellant to provide invoices and proof of payment for its VAT inputs by 29th October 2024 (para 3).
Vide a letter dated 14th November 2024, the Respondent notified the Appellant of its intention to issue an additional assessment, granting a further seven days to avail the requested documents (para 4). On 29th November 2024, the Respondent issued additional VAT assessments for the periods September 2021, April 2022, August 2022, September 2022, November 2022, July 2023, February 2024, March 2024 and May 2024, disallowing input VAT claims of Kshs. 40,456,637.53 with a corresponding principal tax of Kshs. 6,448,924.00 (para 5).
On 17th July 2025, the Appellant applied for extension of time to lodge a notice of objection, citing illness, and was permitted to lodge its objection out of time on 28th July 2025, subject to the requirement to substantiate its grounds with supporting documentation by 5th August 2025 (paras 6-8).
The Respondent issued an objection decision dated 12th September 2025 disallowing the objection and confirming the assessments, comprising principal tax of Kshs. 6,448,604.75, penalties of Kshs. 323,234.58 and interest of Kshs. 1,854,630.53, aggregating to Kshs. 8,626,469.86 (para 10). Aggrieved, the Appellant lodged a Notice of Appeal dated 9th October 2025 (para 11).
Core dispute
The Appellant contended that the Respondent erred in disallowing input VAT claimed contrary to Section 5(3) and Section 17(1) of the VAT Act, and that it had exercised due diligence in confirming the VAT registration status of its suppliers on the iTax portal (para 12).
The Appellant also argued that it had supplied all relevant documentary evidence, including invoices, receipts, bank statements and supplier confirmations, and that the Respondent failed to properly consider such evidence and failed to accord it fair administrative action under Article 47 of the Constitution (paras 12, 20, 26-27).
The Respondent maintained that the Appellant failed to substantiate its input VAT claims despite being given multiple opportunities to do so, that VAT registration of suppliers alone does not validate an input VAT claim, and that the Appellant failed to discharge its burden of proof under Section 56(1) of the Tax Procedures Act (paras 33-42).
Court findings
On jurisdiction, the Tribunal held that it is a creature of statute confined by Section 3 of the Tax Appeals Tribunal Act, CAP 469A, to hearing appeals against decisions of the Commissioner made under the tax laws. It found that the determination of an alleged violation of Article 47 of the Constitution falls within the jurisdiction of the High Court under Article 165(3)(b) of the Constitution and Section 7(1) of the Fair Administrative Action Act, 2015, and that the Tribunal is not so seized (paras 47-50).
On the merits, the Tribunal held that the Appellant bore the burden under Section 56(1) of the Tax Procedures Act and Section 30 of the Tax Appeals Tribunal Act to prove the tax decision incorrect (paras 51-52).
The Tribunal found that the Respondent had called for supporting documentation on three occasions, namely 15th October 2024, 14th November 2024 and 28th July 2025, and that the Appellant proffered nothing on each occasion. No evidence of transmission of the alleged supporting documents to the Respondent was placed before the Tribunal, and the Appellant did not exhibit any invoices, bank statements, delivery notes or supplier confirmations in the proceedings (paras 56-58).
The Tribunal held that VAT registration of suppliers alone does not prove that the specific supplies reflected in the disallowed invoices actually occurred, that payment was made, or that they were acquired to make taxable supplies (para 60). It further held that the Respondent's request for delivery notes, supplier statements and proof of payment was proportionate given the volume of transactions (para 61), and that the case did not concern penalising the Appellant for suppliers' non-compliance, distinguishing the authorities relied upon by the Appellant (paras 62-63).
The plea of legitimate expectation was rejected as it presupposed the very substantiation the Appellant failed to provide, with no promise, practice or representation by the Respondent pleaded or proved (para 64). The Tribunal concluded that the Respondent was entitled to determine the Appellant's liability to the best of its judgement under Sections 24 and 31(1) of the Tax Procedures Act (paras 65-66).
Outcome
The Tribunal dismissed the Appeal, holding it devoid of merit. The Respondent's objection decision dated 12th September 2025 was upheld, and each party was ordered to bear its own costs (para 67).
Major issues / areas of contention
- Whether the Tribunal has jurisdiction to determine a claim of violation of the right to fair administrative action under Article 47 of the Constitution.
- Whether the Respondent was justified in disallowing the Appellant's input VAT claims and confirming the additional VAT assessments.