Judgment summary
This is a decision of the Tax Appeals Tribunal at Nairobi in an appeal by Transfleet (EPZ) Limited against an Agency Notice issued by the Commissioner of Investigations and Enforcement to recover Kshs. 389,812,700.00 arising from additional tax assessments for the period 2016 to 2021.
The Tribunal considered three issues: whether the appeal was properly before it, whether the Appellant's notice of objection dated 6th June 2023 had been allowed by operation of law under Section 51(11) of the Tax Procedures Act, and whether the Agency Notice dated 3rd April 2025 was justified.
The Tribunal found that the Agency Notice was an appealable decision and that the appeal was not shown to be time-barred. However, it held that the Appellant had not proved that its notice of objection was received by the Respondent, so the deeming provision under Section 51(11) never operated. The assessments therefore crystallised into taxes due and payable, and the Agency Notice was properly issued. The appeal was dismissed.
Background
The Appellant, Transfleet (EPZ) Limited, is a company incorporated in Kenya that owns go-downs at the Export Processing Zone Authority, Athi River, with declared activities including property investments, sale of quarry aggregates, concrete excavation and transport (paras 1).
The Respondent, the Commissioner of Investigations and Enforcement, carried out an investigation into the Appellant's tax affairs for 2016 to 2021, including an iTax analysis, correspondence with five tenants, and an analysis of deposits into four Stanbic Bank accounts into which rent was received in United States dollars (para 3).
By letter dated 22nd May 2023, the Respondent communicated tax investigation findings arriving at a total tax due of Kshs. 389,812,700.00, exclusive of penalties and interest, comprising estimated additional assessments on business and rental income (para 4).
By letter dated 6th June 2023, the Appellant purported to object to the findings in full; the Respondent denied ever receiving this letter (para 5). The Respondent raised additional estimated assessments in iTax and, treating the taxes as due and payable, issued an Agency Notice dated 3rd April 2025, reference RC No. 58310, under Section 42 of the Tax Procedures Act, 2015, addressed to New Wide Garments (K) EPZ Ltd, requiring payment of the sum of Kshs. 389,812,700.00 held for the Appellant (paras 6-7).
The Appellant lodged a Notice of Appeal dated 19th May 2025 against the Agency Notice (para 8).
Core dispute
The Appellant contended that the Agency Notice sought to enforce recovery of taxes that had not lawfully crystallised, because its notice of objection dated 6th June 2023 had never been determined within sixty days and was therefore deemed allowed under Section 51(11) of the Tax Procedures Act. It also challenged the substance of the assessments, arguing that the Respondent's banking analysis disregarded its returns, audited accounts and tax computations, failed to allow deductions and reliefs including withholding tax and advance tax, and that the process breached its right to fair administrative action.
The Respondent maintained that it never received the Appellant's objection, that the assessments therefore crystallised, and that the appeal itself was filed out of time. It relied on the banking analysis as a recognised method for determining tax payable, on its power to use best judgment under Section 31 of the Tax Procedures Act, and on the Appellant's failure to keep or supply supporting documentation under Section 23 of the Tax Procedures Act.
The Tribunal distilled the appeal into three issues: whether the appeal was properly before it, whether the objection dated 6th June 2023 was allowed by operation of law, and whether the Agency Notice dated 3rd April 2025 was justified (para 36).
Court findings
On competence, the Tribunal held that an agency notice issued under Section 42 of the Tax Procedures Act is an appealable decision within Section 3(1) of the Act, relying on Krystalline Salt Limited v Kenya Revenue Authority [2019] KEHC 6939 (KLR) and Commissioner of Domestic Taxes v Pevans East Africa Limited & 6 others [2022] KEHC 10392 (KLR) (paras 39-44). It also found that the Respondent had not substantiated that the appeal was filed late, since it had not proved the date the Appellant received the Agency Notice, and the preliminary objection on limitation failed (paras 45-48).
On the objection, the Tribunal found a direct conflict of fact: the Appellant produced a letter dated 6th June 2023 with a handwritten 'OBJECTED 06/06/2023' endorsement, while the Respondent denied receiving it. The Tribunal found no receipt stamp, acknowledgment or delivery record evidencing service, and noted that an email of 5th June 2023 from the Respondent's own officer confirmed non-receipt of any response, with no evidence of subsequent transmission (paras 51-53).
Applying Section 56(1) of the Tax Procedures Act, Section 30 of the Tax Appeals Tribunal Act and Section 107 of the Evidence Act, the Tribunal held that the burden lay on the Appellant to prove service, which it failed to discharge. It therefore found that the objection was never received, that time under Section 51(11) never began to run, and that the deeming provision did not operate (paras 54-56).
Consequently, the additional assessments communicated on 22nd May 2023 crystallised into taxes due and payable, and the Appellant could not raise the merits of the assessments through a challenge to the recovery measure having bypassed the objection machinery (paras 57-58).
On the Agency Notice, the Tribunal held that the conditions under Section 42(1) of the Tax Procedures Act were met, as the taxes were unpaid and the Respondent had reasonable grounds to believe they would not be paid, and that Section 42(14) was properly invoked since the Appellant had not proved it had objected within the prescribed period (paras 59-61). The Tribunal declined to adjudicate standalone fair administrative action and constitutional arguments, noting these fall within the High Court's judicial review jurisdiction (para 62). It clarified that its conclusions turned on the failure to prove service of the objection, not on a conclusive vindication of the Respondent's computations, and left open the Appellant's option to seek an extension of time to lodge an objection under Section 51(6) of the Tax Procedures Act (para 63).
Outcome
The Tribunal found that the appeal lacked merit and dismissed it. It upheld the Agency Notice dated 3rd April 2025, reference RC No. 58310, and ordered that each party bear its own costs (paras 65-66).
Major issues / areas of contention
- Whether the Appeal is properly before the Tribunal
- Whether the Appellant's notice of objection dated 6th June 2023 was allowed by operation of law under Section 51(11) of the Tax Procedures Act
- Whether the Respondent was justified in issuing the Agency Notice dated 3rd April 2025 to recover the sum of Kshs. 389,812,700.00