Judgment summary
The Tribunal considered an appeal by a rental property taxpayer against Monthly Rental Income tax assessments for the periods 2019, 2020, 2021, 2023 and 2024, raised on the basis of Section 31 of the Tax Procedures Act (TPA).
The Respondent had partially allowed the taxpayer's objection, confirming tax of Kshs 995,700 in an objection decision dated 17th April 2025. The taxpayer appealed, arguing he had discharged his evidentiary burden by supplying emails, excel sheets, invoices, petty cash vouchers, bank statements and through meetings with the Respondent's representatives.
The Tribunal found that the documents the taxpayer claimed to have supplied were not on record before it, and that only the assessment order and the objection decision had been filed. It held that the taxpayer had failed to discharge his burden of proof under Section 56(1) of the TPA and Section 30 of the Tax Appeals Tribunal Act (TATA), and dismissed the appeal.
Background
The Appellant is a registered taxpayer engaged in the business of rental property [1]. The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act, responsible for administering and enforcing tax laws under Sections 5(1) and 5(2) of that Act [2].
On 24th October 2024, the Respondent issued the Appellant with Monthly Rental Income tax assessments for the periods 2019, 2020, 2021, 2023 and 2024, on the basis that the Appellant was under-declaring rental income. The assessments were made under Section 31 of the TPA [3].
The Appellant lodged a Notice of objection dated 21st February 2025. The Respondent requested the Appellant to validate the objection to comply with Section 51(3) of the TPA [4]. In the absence of satisfactory explanation, the Respondent issued an Objection decision dated 17th April 2025, partially allowing the objection and confirming tax amounting to Kshs 995,700 [5].
The Appellant, aggrieved, filed a Notice of appeal dated 19th September 2025, having obtained leave from the Tribunal to file out of time [6].
Core dispute
The central issue was whether the Respondent erred in confirming the assessment [53].
The Appellant argued that he had only three rental properties, with rental income per unit ranging between Kshs 2,500 and Kshs 7,000, and that he had discharged his burden of proof by providing emails, excel sheets, invoices, petty cash vouchers and bank statements, and by holding meetings with the Respondent's accountants. He further alleged that the assessment and objection decision were arbitrary, unsupported by evidence, and breached his legitimate expectation of fair tax administration and his right to fair administrative action under Article 47 of the Constitution and Section 4(1) of the Fair Administrative Action Act.
The Respondent maintained that the Appellant failed to attend a requested interview and did not provide sufficient documentation to verify his tax position. Using its best judgment, the Respondent identified 36 rental units across the Appellant's properties, with gross rent between Kshs 2,700 and Kshs 7,000, and found discrepancies between actual earnings and declared amounts on iTax. The Respondent submitted that the burden of proof lay on the Appellant under Section 56 of the TPA, Section 30 of the TATA and Section 109 of the Evidence Act, and that this burden was not discharged.
Court findings
The Tribunal held that Section 50(1)(a) of the TPA creates a rebuttable presumption that the Respondent's assessment is correct, and that Section 56(1) of the TPA places the burden of proof on the taxpayer to show that a tax decision is incorrect [57, 58].
The Tribunal noted that the Appellant was statutorily required to maintain records under Section 23(1)(b) of the TPA and Section 54A(1) of the Income Tax Act, and that he was expected to adduce documentary evidence in relation to his monthly rental income, which he did not do [59-61].
Although the Appellant asserted that he had supplied emails, excel sheets, invoices, petty cash vouchers and bank statements, the Tribunal found that these documents were not on record and it therefore had no opportunity to examine them. The Appellant had filed only the assessment order dated 24th October 2024 and the objection decision dated 17th April 2025 [65].
The Tribunal referred to Section 13(2)(d) of the TATA, which requires an appellant to submit documents necessary to enable the Tribunal to make a decision, and to Section 30 of the TATA, which places the burden of proving that an assessment is excessive on the appellant [62, 66]. Relying on Katambo v Attorney General & another, Eldama Technologies Limited v Commissioner of Customs & Border Control, and Singapore Motors Limited v Commissioner of Domestic Taxes, the Tribunal concluded that the Appellant failed to comply with Section 56(1) of the TPA and Section 30 of the TATA [63, 64, 67].
The Tribunal held that the Respondent did not err in confirming the assessment [68].
Outcome
The Tribunal found that the Appeal lacked merit and dismissed it. The Objection Decision dated 17th April 2025 was upheld, confirming tax of Kshs 995,700. Each party was ordered to bear its own costs [69, 70].
Major issues / areas of contention
- Whether the Respondent erred in confirming the Monthly Rental Income tax assessment for the periods 2019, 2020, 2021, 2023 and 2024.
- Whether the Appellant discharged the burden of proof under Section 56(1) of the TPA and Section 30 of the TATA to show the assessment was excessive.
- Whether documentary evidence allegedly supplied by the Appellant (emails, excel sheets, invoices, petty cash vouchers, bank statements) was properly placed before the Tribunal.
- Whether the Respondent properly exercised its best judgment under the TPA in raising the assessment given the Appellant's alleged failure to attend an interview and provide requested documents.
- Whether the Respondent's actions breached the Appellant's legitimate expectation and right to fair administrative action under Article 47 of the Constitution and the Fair Administrative Action Act.