Judgment summary
This is a decision of the Tax Appeals Tribunal at Nairobi concerning VAT default assessments issued against Silver Building Works and General Suppliers Ltd, a company selling building materials in Busia. The Kenya Revenue Authority raised default assessments after the Appellant failed to file VAT self-assessment returns for December 2024, January 2025 and February 2025.
The Appellant objected to the assessments, and the Respondent partially allowed the objection, amending the December 2024 assessment after the Appellant provided a letter disowning certain transactions, an affidavit and bank statements. The January and February 2025 assessments were confirmed because the Appellant did not provide supporting documents or grounds.
The Tribunal upheld the Objection decision dated 27th June 2025, finding that the Appellant had not discharged its burden of proving that the decision was incorrect.
Background
The Appellant is a private limited company incorporated in Kenya, engaged in selling building materials in Busia (paragraph 1). The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act, mandated under Sections 5(1) and 5(2) of that Act to collect and account for tax revenue (paragraph 2).
The Respondent raised VAT default assessments amounting to Kshs. 4,514,690.48 after establishing that the Appellant had failed to file VAT self-assessment returns for December 2024, January 2025 and February 2025 (paragraph 3).
The Appellant objected in full to the assessment on 25th April 2025. The Respondent considered the objection and issued an Objection decision on 27th June 2025 (paragraph 4). Dissatisfied, the Appellant filed a Notice of Appeal dated 7th August 2025 and filed on 27th August 2025, with leave of the Tribunal (paragraph 5).
Core dispute
The Appellant's Memorandum of Appeal raised grounds including that the Respondent erred by confirming the assessment without considering legitimate VAT inputs for January and February 2025, that the Respondent ignored certified Audited Accounts supplied to it, that the Respondent failed to consider verbal explanations, and that the Respondent contravened Article 47(1) and (2) of the Constitution by not disclosing the basis of the default assessment (paragraph 6).
The Appellant sought orders allowing the appeal, referral to ADR, setting aside the Respondent's assessment of Kshs 1,707,482.48 (exclusive of interest and penalties), setting aside demand notices, a fresh assessment considering legitimate inputs, and setting aside a notice for distress orders (paragraph 12).
The Respondent's case was that the default assessments were issued under Section 29 of the Tax Procedures Act due to the Appellant's failure to file VAT returns. It stated that the December 2024 assessment was amended after the Appellant provided a disowning letter, affidavit and bank statements, but that for January 2025 the Appellant lodged an objection without grounds or documents, and for February 2025 the Appellant's claim that input tax had been excluded was rejected because the relevant suppliers had not declared the sales in eTIMS (paragraphs 14 to 19).
The Objection decision dated 27th June 2025 confirmed tax payable of Kshs. 1,956,485.18 inclusive of interest and penalties (paragraph 19). The Respondent submitted that the Appellant bore the burden of proof under Section 56 of the Tax Procedures Act and Section 30 of the Tax Appeals Tribunal Act, and had failed to produce documentary evidence to discharge that burden (paragraphs 27 to 33). The Respondent relied on several authorities, including Joycott General Contractors Limited v Kenya Revenue Authority, Commissioner of Domestic Taxes v Trical and Hard Limited, Acrowood Imports & Exports Limited v Commissioner of Domestic Taxes, Commissioner of Investigations & Enforcement v Dr. Evans Kidero, and Osho Drapers Limited v Commissioner of Domestic Taxes (paragraphs 36 to 41). The Respondent prayed that the Tribunal uphold the Objection decision and dismiss the Appeal with costs (paragraph 43).
The issue identified by the Tribunal for determination was whether the Appellant discharged its burden of proof that the Objection decision dated 27th June 2025 was incorrect (paragraph 44).
Court findings
The Tribunal found that the Appellant did not dispute that it had failed to file VAT returns for December 2024, January 2025 and February 2025, and that the default assessments arose from this failure (paragraph 46).
Regarding the December 2024 assessment, the Tribunal found that the Respondent had considered the letter disowning transactions, the affidavit and bank statements provided by the Appellant, and had amended the assessment accordingly, demonstrating that documentary evidence, when provided, was considered (paragraph 48).
For January 2025, the Tribunal found that the Appellant had lodged an objection without supporting grounds or documents, and had not placed before the Tribunal any tax invoices, purchase records, sales records, bank statements or accounting records to demonstrate that the assessment was erroneous (paragraph 49).
For February 2025, the Tribunal found that the Appellant did not provide supplier confirmations, eTIMS records, tax invoices or other documentary evidence to show that the excluded input tax was properly claimable (paragraph 50).
The Tribunal found that although the Appellant alleged it had supplied audited accounts and certified financial reports, no such accounts, financial statements or supporting schedules were produced before the Tribunal, and that verbal explanations were not supported by documentary evidence (paragraph 51).
On the Article 47 Constitutional ground, the Tribunal found that the Respondent had explained that the assessments arose from the failure to file VAT returns, and that the Objection decision explained the reasons for confirming the January and February 2025 assessments (paragraph 52).
The Tribunal noted that the Appellant relied solely on its Statement of Facts, did not file written submissions, and did not produce audited accounts, tax invoices, supplier records, eTIMS reports, bank statements or other evidence before the Tribunal (paragraph 54). The Tribunal cited Tyrus Muya t/a Specs Industries v Commissioner of Domestic Taxes, CMC Aviation Limited v Crusair Limited (No. 1), and Trust Bank Limited v Paramount Universal Bank Limited & 2 Others in support of the principle that the burden of proving an assessment incorrect lies with the taxpayer and that pleadings, submissions or verbal assertions are not evidence (paragraphs 56 to 57).
The Tribunal concluded that the Appellant succeeded only in respect of the December 2024 assessment, where documentary evidence had been provided, but failed to discharge the burden under Section 56(1) of the Tax Procedures Act and Section 30 of the Tax Appeals Tribunal Act in respect of the January and February 2025 assessments (paragraphs 58 to 59).
Outcome
The Tribunal found that the Appeal lacked merit and made the following orders: the Appeal is dismissed, the Objection Decision dated 27th June 2025 is upheld, and each party shall bear its own costs (paragraph 60).
Major issues / areas of contention
- Whether the Appellant discharged its burden of proof that the Objection decision dated 27th June 2025 was incorrect (paragraph 44).
- Whether the Appellant provided sufficient documentary evidence to disprove the January 2025 default assessment.
- Whether the Appellant provided sufficient documentary evidence to disprove the February 2025 default assessment, including evidence relating to input tax matched against supplier declarations in eTIMS.
- Whether the Respondent adequately disclosed the basis of the default assessments in compliance with Article 47(1) and (2) of the Constitution.
- Whether verbal explanations and unsupported assertions could discharge the evidentiary burden imposed under Section 56(1) of the Tax Procedures Act and Section 30 of the Tax Appeals Tribunal Act.