Centralfood Industries Limited v Commissioner of Domestic Taxes [2024] KETAT 639 (KLR)

Centralfood Industries Limited v Commissioner of Domestic Taxes (Appeal E065 of 2023) [2024] KETAT 639 (KLR) (26 April 2024) (Judgment)

Neutral citation: [2024] KETAT 639 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Appeal E065 of 2023

RM Mutuma, Chair, B Gitari, M Makau, AM Diriye & EN Njeru, Members

April 26, 2024

Between

Centralfood Industries Limited

Appellant

and

Commissioner Of Domestic Taxes

Respondent

Judgment

Background 1. The Appellant is a limited liability Company duly incorporated in Kenya. The company is in the manufacturing sector majoring in the production of tomato sauce (Ken Tomato Sauce) and chilli sauce (Ken Chilli sauce) and minor production of mineral water (Joy Mineral Water) and fruit juice (Joy Fruit Juice).

2. The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act and the Kenya Revenue Authority is responsible for the administration and enforcement of various revenue laws among them the Income Tax and the Tax Procedures Act

3. The Respondent received information from its intelligence that the Appellant and its Directors were involved in a tax evasion scheme where the company had received payments that were not reflected in the tax returns.

4. On 2nd February 2018 the Respondent carried out investigations into the tax affairs of the Appellant for Corporation tax and Value added Tax for the period 2014 to 2017.

5. The investigations included an in-depth analysis of the Appellant's income records including the bank statements with the aim of determining the correct taxable income from the Appellant.

6. The Respondent established that there were variances between the net income as per bank deposits compared to declarations made by the Appellant in its returns for both Income tax and VAT turnover.

7. The Appellant attributed the variances identified by the Respondent of Kshs. 64,755,555. 00 to export sales but it did not provide documentary evidence to proof that the same were export sales.

8. In the Respondent’s analysis of the Appellant’s records from Simba/ICMS for the period under review the Appellant did not indicate any exports and as a result the Respondent established a principal tax of Kshs. 10,360,889. 00.

9. Subsequently on 9th March 2022, the Respondent assessed the Appellant for additional Value Added Tax for the years 2014, 2015, 2016 and 2017 in the sum of Kshs. 19,309,825. 00 inclusive of principal VAT Interest and penalties.

10. On 25th March 2022 the Appellant lodged a notice of objection against the assessments and attached the relevant documents

11. On 6th April, 2022 the Respondent invalidated the Appellant’s notice of objection 25th March 2022 as it failed to meet the requirements of Section 51 (3) of the TPA

12. On 19th April 2022 the Appellant requested for more time to provide the documents and the Respondent granted the Appellant 14 days to submit the relevant supporting documents

13. Upon receipt and perusal of the documents the Respondent observed that the Appellant had not objected to the assessments for the year 2014 amounting to a principal amount of Kshs. 11,091,593. 00 inclusive of interest and penalties and thereby invalidating the Objection through an email dated 3rd August 2022.

14. On 18th January 2023 the Respondent issued a confirmation of assessment of the principal tax together with interest and penalties amounting to Kshs. 19,309,825. 00 as the Appellant had not made payment of the undisputed tax for year 2014.

15. The Appellant being dissatisfied with the confirmation of the assessment dated 18th January 2023 of Kshs. 19,309,825. 00 appealed against the said decision to the Tribunal pursuant to the provision of Section 13 (2) of the Tax Appeals Tribunal Act 2013 on 15th February 2023.

The Appeal 16. The Appeal is premised on the following grounds as stated in the Memorandum of Appeal dated and filed on 2nd March 2023 together with the documents attached thereto:-a.That the Respondent erred in law and fact by imposing VAT additional assessment on the Appellant of Kshs. 19,309,825. 00 which was the tax not allowed in the under Objection.b.That the Respondent erred in fact by failing to take into account and to consider that the system generated assessment number KRA202203229471 relating to 2014 was not assessed via the iTax system and it was not possible to lodge a Notice of Objection through the iTax system.c.That the Respondent failed to issue an Objection decision within the timelines stipulated in law and issued a confirmation of assessment on 18th January 2023. d.That the Respondent erred in fact by providing VAT additional assessment on 9th March 2022 for 2014, November 2015, January 2016, and November 2017 which is more than 5 years from the time when the self-assessment was filed, hereby against Tax Procedural Act.e.That in all circumstances of the case, the Appellant is willing to provide the export invoices for proof that the additional assessments are not payable as per the confirmation of the assessment.

Appellant’s Case 17. The Appellant’s case is premised on the following documents: -i.Statement of Facts dated 24th January 2023 and filed on 16th March 2023 together with the documents attached thereto;

18. The Appellant stated that on 9th March 2022 the Respondent made a decision to effect VAT additional assessment on the Appellant for the periods November 2014, November 2015, January 2016, and November 2017.

19. That on 25th March 2022 the Appellant lodged an objection to the Respondent’s decision, acknowledgment receipt of the said Objections.

20. The Appellant averred that the system generated assessment number KRA202203229471 issued by KRA relating for the period 2014 was not done in the iTax portal hence it was impossible to lodge a notice of objection through the iTax.

21. The Appellant stated that on 6th April 2022 the Respondent replied to the Objection by declaring the Appellant’s application invalid for failure to meet the requirement of Section 51 (3) of the Tax Procedure Act 2015, However the Appellant stated that it objected to the full amount of Kshs. 19,309,825. 00 and there was no tax due that was not in dispute.

22. That the Appellant was dissatisfied with the Respondent’s confirmation of assessment dated 18th January 2023 and filed a Notice of Appeal on 15th February 2023

23. That in view of the foregoing facts and information, the Appellant implored that the Tribunal to allow the Appeal as prayed in the Memorandum of Appeal.

Appellant’s Prayers 24. The Appellant prayed that the Tribunal:-a.Allows this Appeal;b.Annuls the Respondent’s confirmation of assessment dated 18th January 2023 based on the grounds above; and,c.Sets aside the Respondent's additional assessments in respect to acknowledgment No. "KRA202203229471 ''. "KRA202203230236, "KRA20220323004T', "KRA202203230664"; and,d.Awards costs of this Appeal to the Appellant.

Respondent’s Case 25. The Respondent’s case is based on its;a.Statement of Facts dated and filed on 31st March 2023 together with the documents attached thereto; andb.Written submissions dated and filed on 3rd November 2023.

26. The Respondent stated that on 9th March 2022, the Appellant was assessed for additional Value Added Tax for the years 2014, 2015, 2016 and 2017 in the sum of Kshs. 19,309,825. 00 for the company.

27. The Respondent averred that it conducted an in-depth analysis of the Appellant's records including the bank statements with the aim of determining the correct taxable income from the Appellant. The Respondent compared net bank deposits to declarations made by the Appellant in its returns for both Income tax and VAT.

28. The Respondent stated that the Appellant had attributed the variance of Kshs. 64,755,555. 00 to export sales without submitting documentary evidence but the Respondent's analysis did not indicate any exports for the period under review, and as a result the Respondent established a principal tax of Kshs. 10,360,889. 00 as tabulated in the Respondent’s Statement of Facts.

29. The Respondent stated that it analysed the Appellant’s Excise returns, PAYE returns, import and export customs data from the simba system, financial statements and finally bank statements analysis from the Appellant’s bank statements held at KCB A/c No. 1102086878, NCBA A/c No. 1000159189 and Bank of Baroda A/c NO. 95840200000218.

30. The Respondent stated that the Appellant lodged an objection against the assessment dated 25th March 2022 but the Appellant had not validated its Objection by providing supporting documentation. The Appellant therefore sought for more time to submit the export documentation.

31. The Respondent upon receipt of this request, communicated to the Appellant on 19th April 2022 granting the extension of 14 days.

32. The Respondent further stated that upon receipt of the documentation, it observed that the Appellant had not objected to the assessments of the year 2014 amounting to a principal amount of Kshs. 11,091,593. 00 inclusive of interest and penalties thereby invalidating the Objection through its email of 3rd August 2022 for non­compliance with Section 51 (3) of the Tax Procedures Act.

33. The Respondent averred that the Appellant failed to pay the undisputed taxes despite several reminders from the Respondent, which is a pre-condition to validate the Appellant’s Objection.

34. The Respondent posited that the Appellant having failed to validate the Objection; the Respondent confirmed the assessment of the sum of Kshs. 19,309,825. 00 being the principal sum of the tax assessed along with resultant penalties and interest.

35. The Respondent submitted that in response to the Appellant’s contentions as contained in the Memorandum of Appeal and accompanying Statement of Facts the Respondent reiterated its position as stated in the Objection decision communicated to the Appellant that whereas Section 24 of the Tax Procedures Act, 2015 allows a taxpayer to submit tax returns in the approved form and manner prescribed by the Respondent, the Respondent is not bound by the information provided therein and can assess for additional taxes based on any other available information.

36. That the Respondent averred that in response to ground one of MOA, Section 31 (1) (c) of the Tax Procedures Act grants the Respondent the power to amend a taxpayer’s assessment to the best of the Respondent’s judgement. The provision states that;“... the Commissioner may amend an assessment (referred to in this section as the "original assessment") by making alterations or additions, from the available information and to the best of the Commissioner’s judgement, to the original assessment of a taxpayer for a reporting period to ensure that ... in any other case, the taxpayer is liable for the correct amount of tax payable in respect of the reporting period to which the original assessment relates.”

37. The Respondent averred that it was within its rights to bring forth an estimated undeclared income for the respective period based on the information available.

38. In response to ground two, the Respondent averred that the assessment number KRA202203229471 for the year 2014 had been raised on the system and the same was communicated to the Appellant vide the tax assessment letter dated 9th March 2022. However, the Appellant did not inform the Respondent of any problems experienced regarding lodging an Objection through the iTax system. Furthermore, the Appellant had manually objected to the assessments for the years 2015 to 2017, which were indicated in the tax assessment letter. Therefore, the Respondent submitted that the Appellant had raised this ground as an afterthought due to its failure to object to the additional assessments for the year 2014.

39. The Respondent submitted that in response to ground three that the Invalidation notice was issued on 6th April 2022 and that the Respondent was engaging the Appellant and requesting it to provide documents so as to ascertain its tax liability, the Appellant failed to provide the same therefore the confirmation of assessment was issued.

40. The Respondent submitted that the investigations began in the year 2018 therefore the five-year rule does not apply in this case. Section 51 (3) (b) of the Tax Procedures Act, states that; -“In relation to an objection to an assessment, the taxpayer has paid the entire amount of tax due under the assessment that is not in dispute, or has applied for an extension of time to pay the tax not in dispute under section 33 (1).”

41. The Respondent averred that there is no valid Objection by the Appellant owing to the Respondent’s invalidation vide the email of 3rd August 2022, invalidating the Appellant’s Objection for failure to pay taxes in dispute.

42. The Respondent submitted that having invalidated the Objection, it did not consider the Objection on its merits as the Appellant failed to validate the objection by providing documents within fourteen (14) days as requested by the Respondent in the aforementioned letter dated 3rd August, 2022.

43. The Respondent stated that Section 51 (8) of the Tax Procedures Act obligates the Respondent to consider only the validly lodged Objection. Since the Appellant did not lodge a valid Objection, the Respondent did not render an Objection decision under Sections 51 (9), (10) and (1. ) of the Tax Procedures Act but only confirmed the assessment since there was no valid objection.

44. The Respondent averred that without prejudice to the foregoing, the Respondent exercised its best judgment in making the assessments in full consideration of the documentation and information available pursuant to Section 31 of the Tax Procedures Act.

45. The Respondent submitted that upon receipt of the Objection by the Appellant, it made a request for additional documentation to support the Appellant’s objection, which request was not responded to by the Appellant and the Objection was declared invalid since the Appellant was not able to adduce any evidence to support the Objection as per the provisions of Section 51 (3) (c) of the Tax Procedures Act which states that;“(3)A notice of objection shall be treated as validly lodged by a taxpayer under subsection (2) if-“ (a)... .(b)….(c)All the relevant documents relating to the objection have been submitted."

46. The Respondent submitted that the Appellant as earlier demonstrated herein, did not support the grounds of its Objection by issuing supporting documentation to prove the export sales, and therefore the Objection to the period of 2015-2017 was not valid and therefore the taxes claimed therein are due and owing.

47. The Respondent submitted that in any event, the Appellant bears the burden to prove that the additional assessments were excessive or improper and from the documents adduced in support of its appeal, the same is not evidence and therefore the Appellant has failed to discharge this burden as required by Section 56 (1) of the Tax Procedures Act and Section 30 of the Tax Appeals Tribunals Act.

48. The Respondent submitted that it has identified the following issues for determination:-a.Whether the Respondent was proper in raising assessments against the Appellant for the period between January 2014 and December 2018. b.Whether the Objection decision was proper and within the confines of the law.

a. Whether the Respondent erred in issuing additional assessments on the Appellant 49. The Respondent submitted that the Appellant in its Statement of Facts had contended that the Respondent erred in assessing VAT for the periods between January 2014 and December 2018 which periods are beyond the five-year time limitation contrary to Section 31 (4) of the Tax Procedures Act.

50. The Respondent argued that the investigations into the tax affairs of the Appellant commenced on 2nd February 2018, for Corporation tax and Value Added Tax after the Respondent had received intelligence that the Appellant and its directors were involved in a tax evasion scheme since the company had received payments that were not reflecting its tax returns

51. The Respondent submitted that pursuant to Section 31 (4) (a) of the Tax Procedures Act, the Commissioner may amend an assessment in the case of self-assessment five years from the date of the self-assessment return. The provision states that;“(4)The Commissioner may amend an assessment-(a)In the case of gross or wilful neglect, evasion, or fraud by, or on behalf of, the taxpayer, at any time; or(b)In any other case. within five years of-(i)for a self-assessment the date that the self-assessment taxpayer submitted the self-assessment return to which the self-assessment relates to(ii)For any other assessment, the date the Commissioner notified the taxpayer of the assessment".

52. The Respondent submitted that in the Tax Appeal No. Eo38 of 2021, Nakuru cement suppliers' limited vs. Commissioner Investigations and Enforcement the High Court reaffirmed that the statutory period of five years begins running from the date that the taxpayer files and amends returns. Justice Mabeya held that;“From section 34( 4)(b)(i), it is clear that the period of 5 years started to run from the date the Appellant submitted its returns" ...

53. The Respondent averred that the Appellant filed its return for the period 2015 and 2016 on 31st May 2017, while the notice of assessment was issued on 9th March 2022. Therefore, from the foregoing, the Respondent was at liberty to review the Appellant’s tax affairs and therefore was proper in raising assessment for the period between 2015 and 2017.

54. The Respondent submitted that for the 2014 assessments, the Appellant failed and or neglected to lodge an Objection amounting to Ksh.11,091,593. 00 and thus the tax assessments are valid.

b. Whether the Objection Decision was proper and within the confines of the law. 55. The Respondent averred that it duly issued its decision as required by the law contrary to the Appellant’s contention in its Statement of Facts that the Respondent did issue its decision within timelines.

56. The Respondent submitted the chronology of events from 2nd February 2018 to 18th January 2023 when it issued a confirmation of assessment as followsa)On 9th March 2022, the Respondent issued the Appellant with the tax assessments with a tax liability of Kshs. 19,309,825. 00. b)On 25th March, 2022 the Appellant issued a notice of objection objecting the tax assessments.c)On 6th April 2022 the Respondent issued an invalidation notice.d)On 19th April 2022, the Appellant requested the Respondent for an extension to lodge a valid Objection and on the same date the Respondent granted the Appellant 14 days to lodge its Objection. The Appellant however, failed and or neglected to furnish the Respondent with a valid objection.e)On 13th June 2022, the Respondent once again informed the Appellant that it was required to provide a notice of objection that was valid and the Appellant equally failed to respond to the email.f)On 3rd August 2022, and 5th December 2022 the Respondent issued another invalidation as the Appellant had failed and or neglected to pay taxes not in dispute and thus had lodged an invalid objection

57. The Respondent submitted that it therefore afforded the Appellant numerous opportunities to lodge a valid Objection as was allowed by Law, with the last being on 5th December 2022 and consequently the Respondent issued a confirmation notice dated 18th January 2023 as per the dictates of Section 51 (4) of the TPA. The Section provides that:-“Where the Commissioner has determined that a notice of objection lodged by a taxpayer has not been validly lodged, the Commissioner shall immediately notify the taxpayer in writing that the objection has not been validly lodged”

58. The Respondent submitted that the Tribunal should bear in mind that the notice of objection was lodged on 25th March 2022 before the amendment to Section 51 (4) of the Tax Procedures Act, by Section 44 of the Finance Act, 2022.

c. Whether the Respondent erred in issuing additional assessments on the Appellant 59. The Respondent submitted that the decision to arrive at the additional assessment was justified and had basis in law as required under the Tax Procedures Act, 2015 in particular Sections 24 and 31 of the TPA.

60. The Respondent submitted that it relied on its own best judgement based on information available to it in compliance with Section 31 of the Tax Procedures Act while raising the additional assessment. The Court in Commissioner of Domestic Taxes vs. Altech Stream (EA) Limited [2021] eKLR stated that Section 31 (1) of the Tax Procedures Act allowed the Commissioner to make an assessment based on such information as may be available and to the best of his judgement.

61. The Respondent submitted that the Appellant did not discharge its burden of proof under Section 56 (1) of the Tax Procedures Act and Section 30 of the Tax Appeals Tribunal Act. Section 56 (1) of the Tax Procedures Act places the burden on the taxpayer to proof that a tax decision is incorrect. The Section provides as follows:-“In any proceedings under this Part, the burden shall be on the Appellant to prove that a tax decision is incorrect.”

62. Further the Respondent submitted that Section 30 of the Tax Appeals Tribunal Act provides that when appealing to the Tribunal, the Appellant has the burden of proving that where an appeal relates to an assessment, that the assessment is excessive or in any other case the tax decision should not have been made or should have been made differently. In Ushindi Exporters Limited vs. Commissioner of Investigation and Enforcement (Tax Appeals Tribunal No 7 of 2015) the Tribunal held that:“The burden of proving that the tax assessment is excessive or should have been made differently never shifts to the Respondent and is placed squarely on the Appellant as Section 30 ( a) and (b) of the Tax Appeals Tribunal Act states,a)Where an appeal related to an assessment, that the assessment is excessive; orb)In any other case, that the tax decision should not have been made or should have been made differently.By purporting to shift the burden of proving that the tax assessment against it was incorrect or should have been different the Appellant failed in discharging the burden, placed upon it by law.”

63. The Respondent submitted that the Appellant did not discharge its burden of proving that the assessment was erroneous and the Commissioner was right in confirming the assessment.

Respondent’s Prayers 64. The Respondent prayed that this Honourable Tribunal:a.The assessments were raised in accordance with the law.b.The Respondent's decisions dated 6th April 2022, 3rd August 2022 and 18th January 2023 amounting to Kshs. 19,309,825. 00 were proper and within the confines of the law.c.This Appeal be dismissed with costs as it lacks merit.

ISSUES FOR DETERMINATION 65. The Tribunal upon due consideration of the pleadings and submissions of the parties is of the considered view that the issues falling for determination are:-a)Whether the Appellant lodged a notice of objection for the 2014 year of income;b)Whether the 2014, 2015, 2016, and 2017 assessments are statutory time barred; and,c)Whether the Respondent was justified in issuing the confirmation of assessment dated 18th January 2023.

Analysis And Findings a) Whether the Appellant lodged a notice of objection for the 2014 year of income. 66. The Tribunal notes that the Appellant is challenging the confirmation of assessment by the Respondent which was issued on 18th January 2023.

67. In the said letter the Respondent stated that the Appellant did not object to the 2014 assessment and therefore the taxes for 2014 which were not objected to are due and payable

68. Further the Respondent stated that for the Appellant to file an Appeal before the Tribunal the Appellant ought to have paid the taxes due for 2014. That consequently, the Appeal before the Tribunal is not validly lodged as per Section 51 (3) of TPA.

69. Section 51 (3) of the Tax Procedures Act provides that;“A notice of objection shall be treated as validly lodged by a taxpayer under subsection (2) if-(a)the notice of objection states precisely the grounds of objection, the amendments required to be made to correct the decision, and the reasons for the amendments;(b)in relation to an objection to an assessment, the taxpayer has paid the entire amount of tax due under the assessment that is not in dispute or has applied for an extension of time to pay the tax not in dispute under section 33(1); and(c)all the relevant documents relating to the objection have been submitted.”

70. The Respondent stated that since the Appellant did not either object to the 2014 assessment nor pay the demanded taxes therefore the Appeal as filed in the Tribunal is not valid.

71. The Tribunal notes that the Respondent in its submissions provided the chronology of events from the date the investigations commenced on 2nd February 2018 to 18th January 2023. In particular the Respondent stated that it issued the assessment notice on 9th March 2022 and the Appellant objected to the taxes demanded on 25th March 2022.

72. The Respondent stated in the submissions that it issued an invalidation notice on 6th April 2022. Subsequently after filing the notice of objection the Appellant vide its letter of 16th April 2022 requested for an extension of time to validate the notice of objection. The Respondent replied on the same date and granted the Appellant 14 days to lodge its Objection and according to the Respondent the Appellant failed and or neglected to furnish the Respondent with a valid objection.

73. The Tribunal notes that the Appellant wrote to the Respondent on 16th April 2022 requesting for more time to provide the export documents from its suppliers. The Respondent gave the Appellant 14 days to submit the documents. The Respondent submitted that it was in constant communication with the Appellant from 6th April 2022 when it issued the invalidation notice up to the date when the confirmation of assessment was issued on 18th January 2023. The correspondences were attached to the bundle of documents except the email of 5th December 2022.

74. The Tribunal has perused all the correspondences attached in the bundle of documents and has noted that on 13th June 2022, the Respondent once again informed the Appellant that it was required to provide a valid notice of objection. The Respondent further sent an email on 3rd August 2022, and 5th December 2022 when the Respondent issued another invalidation as the Appellant had failed and or neglected to pay taxes not in dispute and thus had lodged an invalid objection Finally the confirmation of assessment was issued on 18th January 2023.

75. The Appellant on the other hand stated in its pleadings that it issued a notice of objection on 25th March 2023. Further documents were requested via an email dated 13th June 2022. That the Appellant responded to the email of 13th June 2022 on the same day it was sent by the Respondent stating that it had objected to the assessments and attached the copies of the notice of objection.

76. The Tribunal has perused the documents attached to the Appellant’s bundle of documents and has noted that there are letters attached to the pleadings relating to the notice of objection to the assessment for the period 2014 to 2017. Further the Appellant has also attached documents showing that the VAT demanded for the year 2014 related to exports and that the same were zero rated so there was no tax due to the Respondent for year 2014.

77. The Appellant submitted that its notice of objection which included the 2014 assessment dated 25th March 2022 was deemed to have been allowed by operation of law since the Respondent did not make its objection decision within sixty days from the date it lodged the notice of the objection as was then provided for under Section 51 (11) of the Tax Procedures Act, which Section stated as thus:-“The Commissioner shall make the objection decision within sixty days from the date of receipt of—(a)the notice of objection; or(b)any further information the Commissioner may require from the taxpayer, failure to which the objection shall be deemed to be allowed.”

78. In order to unravel this issue, the Tribunal wishes to delve into the timelines between the date the tax assessment was issued on 9th March 2022 and the date the confirmation of assessment was issued on 18th January 2023.

79. The Tribunal notes the Respondent on various dates wrote to the Appellant to provide further documentation before the issuance of its confirmation of assessment. However, the Appellant did not respond save for an email dated 13th June 2022 in response to the Respondent’s email of the same date where the Appellant stated that it objected to the assessment and provided the grounds of objection

80. The Tribunal has further perused the email of 3rd August 2022 which brings out the following two issues:-a)That the Appellant did not object to the 2014 assessment and therefore there was no valid objection on record with the Respondentb)In the absence of a valid notice of objection the taxes as of the TPA.

81. In relation to an objection to an assessment, the taxpayer has paid the entire amount of tax due under the assessment that is not in dispute or has applied for an extension of time to pay the tax not in dispute under Section 33 (1); and

82. The Tribunal notes that the Respondent issued an assessment notice on 9th March 2022 and the Appellant made its Objection both through iTax and by written communication for 2015, 2016 and 2017 on 25th March 2022 except for the year 2014 where the Appellant sent a Notice of Objection through a letter dated 25th March 2022 as it was not able to file the Objection on the iTax.

83. Further the law provides that if the Respondent requests for further information and the Appellant provides the same, the time of the sixty days within which an Objection decision is to be made is reset. This is provided for under Section 51 (11) (b) of the TPA (now amended) which stated;“(b)any further information the Commissioner may require from the taxpayer, failure to which the objection shall be deemed to be allowed.”

84. The issue before the Tribunal is did the Appellant object to the 2014 tax assessment and also provide the necessary supporting documents.

85. The Tribunal notes that the email from the Appellant dated 13th June 2022 did not indicate the date it sent the documents but in its bundle of documents the copies of the letter of objection are dated 25th March 2022. The email has no reference to the email of 19th April 2022 when the Appellant requested for more time to provide the documents. However, in the bundle of documents submitted to the Tribunal there is a letter dated 25th March 2022 referring to the 2014 notice of objection and the export documents and invoices indicating the exports to Rwanda and Somalia.

86. In the letter of Objection dated 25th March 2022 the Appellant stated that;“We make an Objection to the VAT additional assessment on the grounds that the sales added of kshs 38,512,475 were exports. This is contrary to the 'destination principle' as per the provision of chapter 1. 9 of the Organization for Economic Co-operation and Development, International VAT /GST Guidelines which provides that 'Under the destination principle, exports are not subject to tax with refund of input taxes (that is, "free of VAT" or "zero-rated").We therefore request for remission of the Principal Vat of kshs 6,161,996 and the penalties and interests.”

87. The Tribunal notes that the Respondent in its submissions has not refuted that it did not receive the documents attached to the Appeal relating to the exported items for the same year of income.

88. The Tribunal is guided by the cases of Cape Brandy Syndicate vs. Inland Revenue Commissioners [1921] K.B 64 where it was observed that;“In a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used…... if a person sought to be taxed comes within the letter of the law, he must be taxed. However great the hardship may appear to the judicial mind may be. On the other hand, if the crown, seeking to recover the tax, cannot bring the subject within the letter of the law, the subject is free, however apparently within the spirit of the law the case might otherwise appear to be.”

89. The Tribunal is further guided by the case of Equity Group Holdings Limited vs. Commissioner of Domestic Taxes (Civil Appeal E069 & E025 of 2020) [2021] KEHC 25 (KLR) (Commercial and Tax), where the court held;“A statutory edict is not procedural technicality. It’s a law which must be complied with. Parliament in its wisdom expressly and in mandatory terms provided the consequences of failing to render a decision within 60 days. The Objection is deemed to be allowed. That being the law, the appellant’s Objection stood allowed as a matter of law the moment the Commissioner of Domestic Taxes failed to render his decision within the 60 days. This being the correct legal position, it is my finding that the 1st appeal succeeds”.

90. Consequently, the Tribunal finds that the Appellant duly lodged its notice of objection in respect of the year 2014 and therefore the Respondent was not justified in finding that the amount assessed for the said year of income was undisputed.

91. The Tribunal therefore comes to the inescapable conclusion that the Respondent’s notice of invalidation of the Objection was not proper.

92. The Tribunal having made a finding to the effect that the Respondent’s invalidation of the Appellant’s notice of objection was improper the other issue falling for determination has to that extent been rendered moot.

93. The Tribunal notes that with the invalidation decision made by the Respondent the Appellant was denied an opportunity to have its notice of objection determined on its proper merits with the documents in support appropriately considered.

94. The ends of justice in the circumstances will be best served by having the matter referred back to the Commissioner to render an appropriate objection decision on the Appellant’s notice of objection.

Final Decision 95. The upshot of the foregoing is that the Appeal is found to have merit and the Tribunal accordingly proceeds to make the following orders:a.The Appeal be and is hereby allowed.b.The Respondent’s invalidation decision and confirmation of the tax assessment dated January 18, 2023 be and is hereby set aside.c.The matter is hereby referred back to the Respondent to consider and render an appropriate objection decision in respect of the Appellant’s notice of objection dated March 25, 2022 within Sixty (60) days of the date of delivery of this Judgment.d.Each party to bear its own costs.

96. It’s so ordered.

DATED AND DELIVERED AT NAIROBI THIS 26TH DAY OF APRIL, 2024ROBERT M. MUTUMA....................CHAIRMANBERNADETTE M. GITARI................ MEMBERMUTISO MAKAU..........................MEMBERMOHAMED A. DIRIYE................MEMBERELISHAH N. NJERU...................MEMBER