Judgment summary
The Tribunal considered an appeal by Mt Longonot Medical Services Ltd against an objection decision of the Commissioner confirming an additional income tax assessment of Kshs 19,614,211.83, inclusive of penalties and interest, for the years 2019 to 2022.
The Appellant argued that the Respondent had disregarded records, documents and explanations it had provided, had wrongly included non-business income deposits as taxable income, and had disallowed legitimate business expenses. The Respondent maintained that the documents supplied were incomplete and could not be verified.
The Tribunal found that the Appellant had failed to discharge its burden of proof under section 30 of the TAT Act and dismissed the appeal, upholding the Respondent's objection decision dated 13th June 2025.
Background
The Appellant is a limited liability company incorporated in Kenya operating as a hospital (para 1). The Respondent is the principal officer appointed under Section 13 of the Kenya Revenue Authority Act, an agency mandated with collection and administration of tax revenue (para 2).
On 7th October 2024, the Respondent issued the Appellant with a Notice of Additional Tax Assessment for income tax (para 3). On 18th April 2025, the Appellant lodged its objection to the additional assessment for 2019 to 2022, and the Respondent confirmed the assessments vide its objection decision dated 13th June 2025, confirming the assessment of Kshs 19,614,211.83 inclusive of penalties and interest (para 4).
The Appellant was granted leave to file its appeal out of time by the Tribunal on 31st October 2025 (para 5). Dissatisfied with the objection decision, the Appellant lodged this appeal vide a Notice of Appeal dated 13th October 2025 (para 6).
Core dispute
The Appellant contended that the Respondent had confirmed the assessment without due regard to records, documents and explanations provided, had included non-business income deposits as taxable income contrary to Section 3(2)(a) of the Income Tax Act Cap 470, had disallowed legitimate business expenses, and had violated its rights under Article 47 of the Constitution of Kenya 2010 and Section 4(1) of the Fair Administrative Action Act, No. 4 of 2015 (para 7).
The Respondent asserted that despite repeated requests, the Appellant failed to provide complete documentation. It stated that the financial reports were unsigned and the auditor's report was missing, that trial balances and ledgers were not submitted, that documents such as cash requisition forms and payment vouchers could not be verified without accompanying ledgers, schedules and breakdowns, and that expenses could not be traced to bank statements due to missing schedules (para 14).
The issue for determination was whether the Respondent's Objection Decision dated 13th June 2025 was justified (para 17).
Court findings
The Tribunal noted that the Respondent acknowledged receiving financial statements, bank statements, and a carton box of expense documents from the Appellant, but confirmed the assessment because the financial report was unsigned, the audit report and trial balances/ledgers were not submitted, expenses could not be traced to bank statements, and payment vouchers and receipts could not be verified in the absence of ledgers, schedules and breakdowns (paras 18 to 19).
The Tribunal held that under section 30 of the TAT Act, the Appellant bore the burden of proving that the assessment was excessive or that the tax decision should not have been made or should have been made differently (para 20).
Citing Abyssinia Iron and Steel Ltd -vs- Commissioner of Customs and Border Control (TAT No. 435 of 2022), the Tribunal held that once the Appellant provides evidence that the assessment was wrong, the Respondent must show that its assessment was not arbitrary, capricious, or imagined (para 21).
The Tribunal found that the Appellant had failed to provide evidence showing the assessment was wrong or erroneous, so the presumption of correctness attaching to the Respondent's assessment was not displaced. The additional assessments in the Objection Decision dated 13th June 2025 were accordingly found to be justified (para 22).
Outcome
The Tribunal held that the Appeal lacked merit and dismissed it. The Respondent's Objection Decision dated 13th June 2025 was upheld. Each party was ordered to bear its own costs (para 23).
Major issues / areas of contention
- Whether the Respondent's Objection Decision dated 13th June 2025 was justified.
- Whether the Appellant provided sufficient documents and information to enable the Respondent to amend or set aside the assessment.
- Whether the additional assessment wrongly included non-business income deposits as taxable income.
- Whether the Respondent wrongly disallowed business expenses exclusively used for generating business income.
- Whether the Appellant discharged its burden of proof under section 30 of the TAT Act.