Judgment summary
The Appellant, a registered taxpayer in the medical and health services industry, was issued additional Corporation Tax assessments for 2021 to 2023 totaling Kshs. 6,978,192.64, based on alleged under-declared income when compared to bankings from NHIF and other sources (para 3). The Appellant objected on 17th April 2025, and the Respondent issued an Objection Decision on 5th June 2025 fully disallowing the objection (para 4).
On appeal, the Tribunal identified the sole issue for determination as whether the Respondent was justified in invalidating the Appellant's objection (para 80). The Tribunal found that the Respondent's letter of 5th June 2025, though titled an objection decision, was in substance a determination under Section 51(4) of the Tax Procedures Act that the objection had not been validly lodged (para 96).
The Tribunal held that the Appellant had not submitted all relevant documents as required by Section 51(3)(c) of the TPA despite being given the opportunity and reminders to do so, and therefore failed to discharge its burden under Section 56(1) of the TPA (paras 98 to 101). The appeal was dismissed and the Respondent's decision dated 5th June 2025 was upheld (para 104).
Background
The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act, CAP 469, which under Section 5(1) makes the Kenya Revenue Authority an agency of Government for collection and receipt of tax revenue, with mandate under Section 5(2) to administer written laws for assessing, collecting and accounting for revenues (para 2).
The Appellant was issued additional assessments with respect to Corporation Tax for the years 2021 to 2023, totaling Kshs. 6,978,192.64, allegedly on the basis of under-declared income when compared to actual bankings from NHIF and other sources (para 3).
The Appellant lodged Objections on 17th April 2025, described in the judgment as a late Objection against income tax assessment orders issued by the Respondent on 31st January 2025 (paras 4, 82). The Respondent issued its Objection Decision on 5th June 2025, fully disallowing the Appellant's Objection and confirming the assessment order at principal taxes of Kshs. 4,978,193 (paras 4, 92).
Core dispute
The Appellant appealed on five grounds: that the Respondent overstated revenues based on erroneous summation of bank credits; that the Respondent wrongly asserted inadequate documentation had been supplied; that the Respondent confirmed the assessment without due regard to records and information provided; that the Respondent wrongly disallowed deductible expenses; and that the assessments raised were speculative, excessive and erroneous (para 6).
The Appellant argued that NHIF payments were reimbursements for medical services and did not necessarily equate to gross turnover, that it had supplied bank statements, financial statements, sales ledgers and purchases ledgers, and that the Respondent applied a blanket 40% expense rate without proper consideration (paras 8 to 36).
The Respondent maintained that the NHIF banking analysis was accurate and lawfully derived under Section 31 of the Tax Procedures Act, 2015, that the Appellant's original objection lacked sufficient grounds and supporting documentation, that it had requested specific documents by email dated 2nd May 2025 with reminders on 19th May 2025 and 27th May 2025, and that no substantive response was received (paras 39 to 62).
The Tribunal framed the issue for determination as whether the Respondent was justified in invalidating the Appellant's objection, rather than the substantive correctness of the assessment (para 80).
Court findings
The Tribunal found that the Respondent, by letter dated 2nd May 2025 (recorded elsewhere as 2nd May 2026), requested specific documents including a detailed breakdown of sales ledgers, sales invoices and contractual agreements, certified copies of mpesa and bank statements, Z reports, and reconciliation of withholding certificates, to be submitted by 9th May 2025 (para 89).
The Appellant responded on 15th May 2025 stating that staff who managed the relevant email account had left and that it could not access the passwords, but did not provide the requested documents (para 90). The Respondent issued a final reminder on 4th June 2025 noting that the deadline had expired and no documents had been received, and that the tax remained due absent a valid objection (para 91).
The Tribunal held that under Section 51(3) of the Tax Procedures Act, 2015, the requirements for a validly lodged objection are cumulative, comprising precise grounds of objection with amendments and reasons sought, payment or extension request for undisputed tax, and submission of all relevant documents (para 97).
The Tribunal found that the Appellant's explanation of operational difficulty in accessing emails did not amount to compliance with Section 51(3)(c), and that the Appellant had not shown evidence of subsequently submitting the requested documents before the impugned decision (paras 98 to 99). The Tribunal held that unsupported assertions in pleadings do not discharge the statutory burden of proof under Section 56(1) of the TPA (para 100 to 101).
Relying on the Court of Appeal decision in Geo Chem Middle East v Commissioner for Domestic Taxes (Civil Appeal No. E581 of 2024) [2026] KECA 1531 (KLR), the Tribunal treated the Respondent's letter of 5th June 2025 as a determination under Section 51(4) of the TPA that the objection was invalid, distinct from a merits decision under Section 51(11) (paras 95 to 96). The Tribunal accordingly made no pronouncement on the substantive correctness or quantum of the assessment (para 103).
Outcome
The Tribunal held that the Appeal lacked merit and dismissed it. The Respondent's decision dated 5th June 2025 was upheld. Each party was ordered to bear its own costs (para 104).
Major issues / areas of contention
- Whether the Respondent was justified in invalidating the Appellant's objection under Section 51(4) of the Tax Procedures Act, 2015.
- Whether the Appellant's notice of objection satisfied the cumulative requirements of Section 51(3) of the Tax Procedures Act, 2015, including submission of all relevant documents.
- Whether the Appellant discharged its burden of proof under Section 56(1) of the Tax Procedures Act, 2015.
- Whether the Respondent's use of NHIF banking data as a basis for additional Corporation Tax assessments was lawful under Section 31 of the Tax Procedures Act, 2015.
- Whether the Tribunal's mandate extended to determining the substantive correctness of the assessment where the objection had not been validly lodged.