Damasa Wholesalers Ltd v Commisssioner of Investigations and Enforcement [2024] KETAT 939 (KLR) | Vat Registration | Esheria

Damasa Wholesalers Ltd v Commisssioner of Investigations and Enforcement [2024] KETAT 939 (KLR)

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Damasa Wholesalers Ltd v Commisssioner of Investigations and Enforcement (Tax Appeal E418 of 2023) [2024] KETAT 939 (KLR) (12 July 2024) (Judgment)

Neutral citation: [2024] KETAT 939 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal E418 of 2023

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

July 12, 2024

Between

Damasa Wholesalers Ltd

Appellant

and

Commisssioner of Investigations and Enforcement

Respondent

Judgment

Background 1. The Appellant is a limited liability company duly incorporated under the Companies Act of the laws of Kenya, and whose principal business activity is trading as wholesalers in consumer goods.

2. The Respondent is the principle officer appointed under the Kenya Revenue Authority Act, and mandated with the responsibility for the assessment, collection and accounting for all tax revenue as an agent of the Government of Kenya. The Respondent is also mandated with the responsibility for the administration and enforcement of the statues set out under the schedule to the Act.

3. The Respondent undertook investigations on the Appellant for the period January 2014 to December 2022, through an analysis of major customers of Transmara Sugar Company, and indicated that its analysis revealed that the Appellant was amongst the highest purchasers of sugar from the said factory. The Respondent further indicated that further verification of its tax data revealed the company was a nil-filer.

4. The Appellant was sent a letter requesting for information on 19th October 2022, and thereafter the Respondent sent the investigation findings to the Appellant on 19th December 2022.

5. The Respondent assessed the Appellant for income tax and VAT and issued an assessment made up as hereunder; Income tax ……………………………… Kshs. 22,424,635. 00

VAT ………………………………………. Kshs. 142,224,835. 00

Total ……………………………………… Kshs. 164,649,471. 00

6. The Appellant lodged an objection notice against the said assessment on 1st May 2023, and upon further review, the Respondent issued its Objection Decision on 30th June 2023 and confirmed the assessment of the principal taxes, together with penalties and interest in the total sum of Kshs. 20,472,581. 00.

7. The Appellant dissatisfied with the Respondent’s Objection Decision instituted the Appeal herein at the Tribunal vide the Notice of Appeal dated 30th June 2023 and filed on 28th July 2023.

The Appeal 8. The Appellant filed its Memorandum of Appeal dated and filed on 28th July 2023 and set out the following grounds of appeal;a.That the Respondent erred in law and fact by charging VAT for the year 2019, and January 2020 to October 2020, and contended that VAT is a consumption tax only payable by persons who are registered in Kenya in accordance with Section 5 (1) (a) of the VAT Act.b.That the Appellant applied for registration of VAT on 16th January 2021 and was issued with the registration certificate in the prescribed form on 19th January 2021, with an effective date of 1st November 2020, therefore the Appellant was not liable for payment of VAT in the period 2019 to October 2020. c.The Appellant relies on Section 34 (7) of the VAT Act.d.That the Appellant has attached the application for registration of VAT, and the certificate of registration that was issued to the Appellant by the Respondent on the said date.e.That the VAT tax being demanded by the Respondent for the period 2019 to October 2020 is erroneous and cannot be enforced by the Respondent.f.That the Appellant has attached sales ledger for the period January 2019, and January 2020 to October 2020 for the Honourable Tribunal’s perusal to note there was no VAT collected during that period.g.That for the period 2021, the VAT tax being demanded by the Respondent is inaccurate and excessive. This can make the Appellant discouraged and close its business. The Appellant further argued that it could not have generated such sums as the Respondent would wish the Tribunal to believe and if allowed to stand, will completely bankrupt the Appellant.h.That the Respondent charged the VAT on the 2021 sales without due regard to all records that the Appellant furnished him with, which included copies of purchases invoices annexed to the Statement of Facts.i.That from the analysis the Appellant ought to have received from the Respondent tax amounting to Kshs. 225,363. 00. j.That the Appellant cites the case of Boleyn International vs. Commissioner of I & E TAT NO 55 of 2018, which stresses that the Appellant at all times bear the burden of proving that the Respondent decisions are wrong, and the main reason it has annexed its invoices for the Tribunal to peruse.

The Appellant’s Case 9. The Appellant has set out its case on its;a.Statement of Facts dated 30th June 2023 and filed on 28th July 2023 together with the documents attached thereto; and,b.Written submissions dated 9th April 2024 and filed on 11th April 2024.

10. The Appellant stated that on 19th October 2022, it received a letter from the Respondent that informed him that they wanted to carry out investigation into its tax affairs for the period July 2018 to October 2022. The Appellant engaged with the Respondent until its tax findings on 19th December 2022.

11. It stated that upon receiving the tax findings, there more engagement with the Respondent over their findings and reconciliation between them and the Appellant, and after the last meeting, additional assessments were done on 4th April 2023, and it objected to the same on 1st May 2023, for the following reasons:a.The sales figures that VAT has been charged on were purely exempt sales thus do not attract VAT.b.The income tax assessments were excessive and incorrect based on the judgement used in calculating margins by the Respondent and expenses should also be taken into consideration.

12. It stated that the Respondent partially allowed the additional VAT and income tax assessment objection application on 30th June 2023, and confirmed an assessment in the sum of Kshs. 20,472,581. 00.

13. The Appellant submitted that it is trite law that the Commissioner shall notify in writing the taxpayer of the Objection Decision and shall take all necessary steps to give effect to the decision, including, in the case of an objection to an assessment, making an amended assessment. It submitted that in the instant case, the Respondent did not adhere to the procedure as required by law under Section 51 (9) of the Tax Procedures Act.

14. The Appellant cited the case of W.E.C Lines Ltd vs. Commissioner of Domestic Taxes TAT 247 of 2020, on the issue of statutory timelines where it was held, reiterating the holding in Krystalline Salt Ltd vs. Kenya Revenue Authority [2019] eKLR;“Where there is a clear procedure for redress of any particular grievance prescribed by the constitution or an act of parliament, that procedure should strictly be followed. Accordingly, the special procedure provided by any law must be strictly adhered to since there are good reasons for such special procedures.”

15. The relevant procedure being the process of effecting the contents of the Objection Decision.

16. The Appellant submitted failure by the Respondent to amend the assessment as per Section 51 (9) of the Tax Procedures Act rendered the Objection Decision dated 30th June 2023 invalid. The reason being that the Appellant was still receiving demand notices for taxes as they were on the assessment stage, which were received on 27th July 2023, 19th September 2023, 29th September 2023, and 16th November 2023.

17. The Appellant cited Section 31 (8) of the Tax Procedures Act, which provides for amendment of assessment, and notification of the taxpayer, and stated that the provision was not followed frustrating fair administration of justice.

18. The Appellant also submitted that the VAT for the period July 2019 to October 2020 was not chargeable in law, thus not enforceable by the Respondent. The Appellant contended that VAT is a consumption tax only payable by persons who are registered in Kenya- in accordance with Section 5 (1) (a) of the VAT Act.

19. The Appellant averred that it applied for registration of VAT on 16th January 2021, and was issued with the registration certificate in the prescribed form on 19th January 2021, with an effective date of 1st November 2020. It therefore stated that it was not liable for VAT payment in the period July 2019 to October 2020.

20. The Appellant further cited the provisions of Section 34 (7) of the VAT Act, and submitted that the VAT being demanded by the Respondent for the period January 2019 to October 2020 is erroneous and cannot be in law enforceable by the Respondent. The Appellant annexed the application for VAT registration, the registration certificate, and the sales ledger for the period January 2019 to October 2020.

21. It was submitted for the Appellant that the VAT demanded by the Respondent for the period 2021 is inaccurate and excessive, which can make the Appellant discouraged and close its business. The Appellant contended that it could not have generated such sums as the Respondent would wish the Tribunal to believe and if allowed to stand, will completely bankrupt the Appellant.

22. The Appellant cited the case of Silver Chain Ltd vs. Commissioner for Income Tax & 3 others (2016) eKLR, where it was held;“The task of collecting taxes should not lead to discouraging taxpayers from carrying on with their business. If the taxpayer’s close shop, there will be no taxes to be collected. On the other hand, if no taxes are paid, there will be no funds to run Government operations. This calls for a balance between tax collectors and taxpayers whereby the process becomes inclusive as opposed to being unilateral. There must be fairness in the process of tax assessment.”

23. It was further submitted that the Respondent charged VAT on the 2021 sales without due regard to all records that the Appellant furnished him with, which included copies of purchase invoices.

24. The Appellant submitted that from these records, it had paid the input tax in excess and all this could be accounted for by the Respondent thus no revenue has been lost by the Respondent, and it is the Appellant who still stands to lose the input tax that has been paid as he was making the supplies.

25. The Appellant further submitted that from the analysis it ought to have received from the Respondent tax amounting to Kshs. 225,363. 00 in form of credit on the VAT as hereunder.Tax Obligation Output Tax Input Tax Tax Due2021 7,642,474 7,867,837 ( 225,363).

Appellant’s Prayers 26. By reason of the foregoing, the Appellant prayed that;a.This Appeal be allowed.b.The decision by the Respondent be annulled or varied in such manner as is just and reasonable.

The Respondent’s Case 27. The Respondent’s case is premised on its;a.Statement of Facts dated and filed on 17th August 2023 together with the documents attached thereto; and,b.Written submissions dated 26th February 2024 and filed on 28th February 2024.

28. The Respondent stated that it carried out investigations into the Appellant’s tax affairs, whose principal activity is as trading as wholesalers in consumer goods for the period a January 2014 to December 2022. It stated that its analysis of major customers to Transmara Sugar Company revealed that the Appellant was amongst the highest purchasers of sugar from the factory.

29. The Respondent stated that upon verification of the tax data, it found out that the company was a nil-filer. The Respondent sent a letter to the Appellant requesting for information on 19th October 2022, and thereafter shared the investigation findings through a letter dated 19th December 2022.

30. It stated that it obtained bank statements of the company and undertook an analysis of the banking deposits. A summary of the analysis is as follows;Expected gross sales Kshs. 1,103,343,014. 00LESS Expected output VAT Kshs. 142,224,835. 00Expected sales Kshs. 961,118,179. 00.

31. The Respondent stated that analysis of payments made through the bank statements showed that the Appellant made payments to various suppliers including Transmara Sugar, Sukari Industries for supply of sugar and cooking oil. The Respondent stated that it therefore allowed the purchases paid through the bank as cost of sales as follows;Gross purchases ……………………………...Kshs 414,688,407. 00Net purchase …………………………………Kshs 357,490,006. 00

32. The Respondent further stated that as per the information obtained from the Appellant’s bankers as well as the purchases analysis, the Respondent computed the taxes payable as follows;Income tax ……………………………………... Kshs 22,424,635. 00VAT ……………………………………………. Kshs 142,224,835. 00Total ……………………………………………... Kshs 164,649,471. 00

33. The Respondent stated that the Appellant objected to the said assessment by lodging its objection notice on 1stmay 2023. During the objection review stage, the Appellant provided copies of its financial statements for the years under review, purchase ledgers, purchase invoices, among other documents.

34. The Respondent stated that from the review of the Appellant’s bank account statements, it noted that adjustments for non-income items including transfers from the director, internal transfers and monies deposited for purchase of land were not made at the assessment stage. It stated that in view of that it adjusted in the total sum of Kshs. 10,504,912. 00.

35. It also stated that upon review of the tax computation at the assessment stage, it was noted that the Appellant was allowed cost of sales based on the purchases in the bank account analyzed. However according to the Appellant, it had disregarded some of its expenses.

36. The Respondent averred that in view of the Appellant’s representations, as well as the records availed including; purchase ledgers, invoices etc, it adjusted the cost of sales to reflect the actual cost of sales established, as follows;Total purchases as per taxpayer’s ledgers/invoices …. Kshs 1,117,656,034. 00Purchases exclusive of VAT …………………………... Kshs 1,099,590,598. 00

37. The Respondent stated that it had extended a profit margin based on the Appellant’s declarations, that is; 49. 91 % in 2019, and 8. 62 % 2for the years 2020 and 2021, noting that the 1,46 % declared in 2021 was too low hence the 2020 margin was applied.

38. The Respondent stated that consequently it recomputed the taxes payable on the basis of the margins established as follows;Gross Deposits Kshs 1,103,343,014. 00Banking net of VAT Kshs 1,082,911,391. 00Less banking adjustments Kshs 10,504,912. 00Les total cost of sales Kshs 1,099,590,598. 00Variance (undeclared) Kshs 121,968,994. 00Taxable income Kshs 10,925,626. 00Tax @ 30 % & 25 % Kshs 40,956. 00

39. It was further averred by the Respondent that the Appellant’s position was that in the period under review, it dealt largely with non-vatable goods and therefore it was erroneous for the Respondent to charge VAT on the established sales. From documents availed by the Appellant, the Respondent stated that it noted that it is indeed correct that the Appellant dealt in assorted products including vatable such as sugar, cooking oil, and non-vatable/zero rated goods such as maize & wheat flour. It noted further from the Appellant’s purchase ledgers and invoices, the proportion of vatable and non-vatable products in each year under review, as follows;VatableYear purchases proportion of total2019 24,917,160 100 %2020 66,055,134 9. 72%2021 46,919,773 11. 35 %.

40. The Respondent averred that in view of the foregoing it revised the Appellant’s VAT tax computation in view of the vatable proportions from Kshs. 135,699,428. 18 to Kshs. 20,431,625. 00, and therefore established the total taxes as follows;Income tax …………………………. Kshs. 40,956. 00VAT …………………………………. Kshs. 20, 431,625. 00TOTAL ………………………………… Kshs. 20,472,581. 00.

41. The Respondent stated that the Appellant having failed to prove the remainder of the tax assessment excessive or erroneous, with the documents submitted, it confirmed the principal taxes together with the penalties and interest amounting to Kshs. 20,472,581. 00.

42. In its submissions, the Respondent stated that the Appellant was required to register for VAT since his business had met the required threshold stipulated under Section 34 of the VAT Act, which provides;“34 (1)A person who in the course of a business –a.has made taxable supplies or expects to make taxable supplies, the value of which is five million shillings or more in any period of twelve months; orb.is about to commence making taxable supplies the value of which is reasonably expected to exceed five million shillings in any period of twelve months, shall be liable for registration under this Act and shall, within thirty days of becoming so liable, apply to the Commissioner for registration in the prescribed form.”

43. The Respondent also submitted that Section 34 (6) of the VAT Act provides;“If the Commissioner is satisfied that a person eligible to apply for registration has not done so within the time limit specified in subsection (1), the commissioner shall register the person.”

44. It submitted that the Appellant for the period July 2019 and January – October 2020, had met the limit specified under subsection (1), and thus by dint of Section 34 (6) of the VAT Act, the Appellant was liable for VAT registration.

45. The Respondent further submitted that Section 34 (7) of the Act stipulates that;“The registration of a person under subsection (1) and (6) shall take effect from the beginning of the first tax period after the person is required to apply for registration, or such later period as may be specified in the person’s tax registration certificate.”

46. On the basis of this provision, the Respondent submitted that the Appellant cannot disclaim liability for VAT payment during the period spanning from July 2019 to October 2020, as the findings distinctly indicate that the Appellant’s business had surpassed the required threshold.

47. The Respondent further referred to Section 50 (1) (a) of the TPA, which provides;“The production of a notice of an assessment or a document under the hand of a Commissioner shall be conclusive evidence of the making of the assessment and that the amount and particulars of the assessment are correct.”

48. It also cited the case of Kenya Revenue Authority vs. Man, Diesel Turbo Se Kenya (2021) eKLR, in which the burden of proof in tax disputes was held flows from the presumption of correctness which attaches to the Respondent’s assessments or determinations of deficiency, and that the presumption remains until the taxpayer produces competent and relevant evidence to support his position.

49. It was submitted that the Appellant failed to to provide sufficient documents or records to support their objection to the assessment. It was stated that the TPA places the onus of proof in the tax objections on the taxpayer, who in this case failed to avail evidence that would support a contrary assessment or that would have guided the Respondent at arriving to a different Objection Decision.

50. The Respondent also cited Section 56 (1) of the TPA;“In any proceedings under this part, the burden is on the taxpayer to prove that a tax decision is incorrect.”

51. It cited the following cases to buttress the provision;i.Trust Bank Ltd vs. Paramount Universal Bank Ltd & 2others [2009] eKLR;ii.Osho Drapers Ltd vs. Commissioner of Domestic Taxes TAT 159 /2018;iii.Miao Yi vs. Commissioner of I & E TAT 441 / 2029; and,iv.PZ- Cussons East Africa Ltd vs KRA [2013] eKLR.

52. The Respondent submitted that in the light of the foregoing cases on the burden of proof, it is evident that the Respondent did not err in determining the tax assessments as the Appellant has failed to discharge its burden of proof and challenge the Respondent’s assessment with unchallenged and uncontroverted evidence to prove the incorrectness of the tax assessments.

53. The Respondent also submitted that the Appellant stated that it submitted all its supporting records and the Respondent failed to consider those records. It submitted that on the contrary it gave the Appellant ample time to avail documentation in support of its objection, and upon submission it reviewed the same and adjusted the cost of sales to reflect the actual cost of sales.

54. The Respondent further submitted that the Appellant did not provide sufficient evidence such as agreements, invoices, proof of payment, or delivery notes to satisfy the Respondent in making further adjustments hence made the assessments based on the availed information, and upon the documentary evidence provided, encompassing financial statements for the relevant years, purchase ledgers, purchase invoices and bank records. The Appellant did not provide compelling evidence to contest the findings presented.

55. It stated that the Appellant did discharge the burden of proof and reiterated the holdings in the cases of Osho Drapers Ltd (supra), Miao Yi vs. Commissioner of I & E (supra) and KRA vs. Man Diesel Turbo Se (k) Ltd (supra) on burden of proof.

56. The Respondent submitted that in light of the foregoing, it was evident that the Respondent did not err in assessing the tax payable, as it considered all the documents produced as the Appellant has failed to discharge its burden of proof to prove the incorrectness of the tax assessments.

Respondent’s Prayers 57. By reason of the foregoing the Respondent prayed that;a.The Honourable Tribunal upholds the Respondent’s decision to charge VAT, Income Tax amounting to Kshs. 20,472,581. 00; and,b.The Honourable Tribunal dismisses the Appeal with costs to the Respondent.

Issues For Determination 58. The Tribunal having carefully considered the pleadings and submissions made by the parties is of the considered view that the Appeal herein raises two triable issues which commend for determination as follows:i.Whether the Respondent erred in assessing the Appellant for VAT in the period July 2019 to October 2020; and,ii.Whether the Respondent’s additional assessments against the Appellant for the period 2021 was justified.

Analysis And Determination 59. The Tribunal wishes to analyses the issues as hereunder.

i. Whether the Respondent erred in assessing the Appellant for VAT in the period July 2019 to October 2020. 60. In this issue which is subject of the Appeal, the Appellant has laid out as a substantive ground of its Appeal the contention that the Respondent erred in law and fact by charging VAT for the period January 2019 to October 2020, on the basis that VAT is a consumption tax on payable by persons who are registered in Kenya in accordance with Section 5 (1) (a) of the VAT Act, and having first applied for registration of VAT on 16th January 2021, and issued with a certificate with an effective date of 1st November 2020, it was not liable for VAT for the period 2019 to October 2020 .

61. The Appellant cited the provisions of Section 34 (7) of the VAT Act, and submitted that the VAT being demanded by the Respondent from the period January 2019 to October 2020 is erroneous and cannot be in law enforceable by the Respondent. The Appellant submitted evidence of the VAT registration application form, the VAT registration certificate, and the sales ledger for the period January 2019 to October 2020.

62. The Appellant therefore submitted that the VAT assessed and demanded by the Respondent for the period in question is not chargeable in law and thus it was inaccurate and excessive and not enforceable by the Respondent.

63. On its part, the Respondent submitted that Section 34 (6) & (7) of the VAT Act stipulates that if the Commissioner is satisfied that a person eligible to apply for registration has not done so within the time limit specified in subsection (1) of, the Commissioner shall register the person.

64. The Respondent further averred that the Appellant for the periods January 2019 to October 2020 had met the limit specified under sub-section (1) and thus by dint of Section 34 (6) of the VAT Act was eligible for VAT registration.

65. It further submitted that Section 34 (7) of the VAT Act stipulates that the registration of a person under sub-section (1) and (6) shall take effect from the beginning of the first tax period after the person is required to apply for registration, or such later period as may be specified in the person’s tax registration certificate.

66. It was submitted that the Appellant cannot disclaim VAT liability during the period spanning January 2019 to October 2020 as the Respondent’s findings distinctly indicate that the Appellant’s business had surpassed the required threshold.

67. The Respondent further averred that the Appellant was liable for payment of VAT for the period January 2019 to October 2020, and it failed to prove its position with documents requested thereby leading the Respondent to confirm the assessments. It averred that it was carefully guided by all relevant laws and followed due procedure, and afforded the Appellant adequate opportunity to defend its position but it failed to do so.

68. By dint of the provisions of Section 34 (6) of the VAT Act, there is no doubt that the Respondent is empowered to register for VAT tax obligation a person who has become eligible for registration and has not done so. Under subsection 7, the registration of a person either under subsection 1 or 6 takes effect from the beginning of the first tax period after the person is required to apply for registration, or such as later period as may be specified in the Person’s tax registration certificate.

69. The Appellant has averred that it applied for the registration of VAT obligation on 16th January 2020 and was issued with a registration certificate on 19th January 2020, with an effective date of 1st November 2020, thus the basis for its contention that it was not liable for VAT payment in the stated period of 2019 to October 2020.

70. The Appellant having applied for VAT obligation on its own volition would be subject to Section 34 (1), and not Section 34 (6) of the VAT Act. It was issued with a registration certificate whose effective date was stated as 1st November 2020. In this regard therefore, subsection (7) applies to this registration. The parties have taken converse positions on the application of this provision.

71. However, the Tribunal takes the view that the Respondent having registered the Appellant in January 2020 and issuing the registration certificate the same Month but with a later effective period of November 2020, intended the Appellant’s VAT obligation to be subject to part of Section 34 (7) of the VAT Act which reads;“the registration of a person either under subsection (1) or (6) takes effect from the beginning of the first tax period after the person is required to apply for registration, or such as other later period as may be specified in the person’s tax registration certificate.”

72. For the foregoing reason the Tribunal finds and holds that the Respondent erred in assessing and demanding for VAT from the Appellant retrospectively beyond the effective period of its registration, contrary to the provisions of Section 34 (7) of the VAT Act.

73. In view of the foregoing the Tribunal finds and holds that the VAT for the period January 2019 to October 2020 was not chargeable in law, and the Respondent’s assessment and demand thereto was thus erroneous in law.

ii. Whether the Respondent’s additional assessments on the Appellant for the period 2021 was justified. 74. The Tribunal having dispensed with issue of period 2019 to October 2020 on account of the VAT registration, the issue that remains outstanding is the period November 2020 to December 2021.

75. Regarding this period, the Appellant has submitted that the VAT assessed and demanded by the Respondent was inaccurate and excessive, and argued that it could not have generated such sums as the Respondent had asserted, stating that the Respondent charged and assessed the amount for VAT on the 2020 and 2021 sales without due regard to all the records which it submitted which included copies of purchases invoices annexed to the Appellant’s Statement of Facts.

76. The Appellant submitted that from its own analysis the assessment for VAT ought to have amounted to an excess tax in the sum of Kshs. 225,363. 00 for the period, as it had an output tax of Kshs. 7,642,474. 00 and an input tax of Kshs. 7,867,837. 00 leading to excess of Kshs. 225,363. 00 which it expected from the Respondent.

77. On its part, the Respondent submitted that upon verification of the tax data it found the Appellant was a Nil-filer, and obtained bank statements of the company and undertook an analysis of the banking deposits, which showed that it had made payments to various suppliers including Transmara sugar, sukari industries for supply of sugar and cooking oil, and therefore the purchases paid for through the bank formed the cost of sales.

78. The Respondent further averred that from the information obtained from the Appellant’s bankers as well as the purchases analysis it computed taxes in the sum of Kshs. 164,649,471. 00.

79. It was averred that upon objection application, the Appellant provided copies of its financial statements for the year under review, purchase ledgers, purchase invoices, amongst other documents, which were thereby reviewed and the assessment amended to Kshs. 20,472,625. 00 for VAT and Kshs. 40,956. 00 for Income Tax.

80. The Respondent submitted that the Appellant having failed to prove the remainder of the of the tax assessment excessive or erroneous, with the documents submitted, it was justified in confirming the principal taxes together with the penalties and interest amounting to Kshs. 20,472,581. 00.

81. From the forgoing, having taken account of the amount of the assessment covered under issue number 1, the relevant amount that remains outstanding for the period 2020 to 2021 is stated as Kshs. 7,642,581. 00 in VAT, and Kshs. 40,956. 00 for Income Tax.

82. The Tribunal takes note that the Respondent took into consideration all the relevant documents submitted by the Appellant, when it reviewed and considered its assessment against the Appellant, which consequently led to the amendment of the assessment from Kshs. 164,649,471. 00 to Kshs. 20,472,581. 00.

83. The Respondent averred that the Appellant did not submit any additional documentation to support the balance of the assessment, consequently leading to its confirmation.

84. In the case of Kenya Revenue Authority vs. Man Diesel Turbo Se (K) Ltd eKLR, the High court has stated that the burden of proof in tax matters flows from the presumption of correctness which attaches to the Commissioner’s assessments or determination of deficiency, and the presumption remains until the taxpayer produces competent and relevant evidence to support its position.

85. The Tax Procedures Act under Section 56 (1), similarly provides;“In any proceedings under this part, the burden is on the taxpayer to prove that a tax decision is incorrect.”

86. It has been submitted that the Appellant failed to submit further requested documents such as agreements, invoices, proof of payments, or delivery notes, to satisfy the Respondent in making further adjustments to the balance of the assessment. Hence the Appellant failed to provide the Respondent with compelling evidence to change its position, therefore it did not discharge its burden of proof.

87. In view of the foregoing, the Tribunal is satisfied that the Respondent did not err in assessing the Appellant for the additional VAT in the period 2021.

88. Consequently, the Tribunal finds and holds that the Respondent was justified in assessing the Appellant for additional VAT in the period 2021.

89. The upshot of the foregoing is that the Appellant’s Appeal partially succeeds.

FINAL DETERMINATION 90. The Appellant’s Appeal having partially succeeded, the Tribunal proceeds to issue the following orders;a.The Appellant’s Appeal be and is hereby partially allowed.b.The Respondent’s Objection Decision issued on 30th June 2023 be and is hereby varied in the following terms;i.The Respondent’s assessment in the sum of Kshs. 40,956. 00 for income tax be and is hereby upheld.ii.The Respondent’s assessment in the sum of Kshs. 12,789,151. 00 for additional VAT in the period 2019 to 2020 be and is hereby set aside.iii.The Respondent’s assessment in the sum of Kshs. 7,642,474. 00 for additional VAT in the period 2020 to 2021 be and is hereby upheld.c.The parties to meet their own costs.

91. It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 12TH DAY OF JULY 2024ROBERT M. MUTUMA CHAIRPERSONMUTISO MAKAU - MEMBERELISHA N. NJERU- MEMBERBERNADETTE M. GITARI - MEMBERABDULLAHI M. DIRIYE- MEMBER