Matrix Logistics Limited v Commissioner of Legal Services & Board Coordination [2024] KETAT 619 (KLR)

Matrix Logistics Limited v Commissioner of Legal Services & Board Coordination (Appeal 240 of 2023) [2024] KETAT 619 (KLR) (5 April 2024) (Judgment)

Neutral citation: [2024] KETAT 619 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Appeal 240 of 2023

E.N Wafula, Chair, Cynthia B. Mayaka, RO Oluoch, AK Kiprotich & T Vikiru, Members

April 5, 2024

Between

Matrix Logistics Limited

Appellant

and

Commissioner of Legal Services & Board Coordination

Respondent

Judgment

1. The Appellant is a company incorporated in Kenya under the Companies Act and is a registered taxpayer whose principal business activity is general supplies.

2. The Respondent is a principal officer appointed under and in accordance with Section 13 of the Kenya Revenue Authority (KRA) Act, and KRA is charged with the responsibility of among others, assessment, collection, accounting and the general administration of tax revenue on behalf of the Government of Kenya.

3. On 8th August 2022 the Respondent issued the Appellant with additional assessments for VAT amounting to Kshs. 25. 481,813. 36 inclusive of penalties and interest.

4. The Appellant objected to the assessment through a letter dated 23rd September 2022.

5. On 17th November 2022 the Respondent made its Objection decision confirming the entire assessment.

6. Aggrieved by the Objection decision, the Appellant filed its Notice of Appeal at the Tribunal on 16th December 2022.

The Appeal 7. The Appeal is premised on the following grounds as stated in the Appellant’s Memorandum of Appeal dated 17th March 2023 and filed on 21st March 2023:-i.That the Respondent erred in law and in facts by purporting to charge VAT on all the banking deposits without allowing for the necessary adjustments for non-revenue items.ii.That the Respondent erred in law and in fact by arbitrarily increasing the revenue figures in the Appellant's VAT returns and erroneously assessing additional VAT.iii.That the Respondent erred in law and in facts by disregarding the VAT returns filed by the Appellant and all explanations and documentation provided by the Appellant in support of its objection and proceeding to confirm the VAT assessments.iv.That the Respondent erred in law and in facts by assessing additional VAT on the Appellant based on arbitrary and unreasonable estimates while disregarding the actual sales and purchases made and declared in the VAT returns filed by the Appellant.v.That the Respondent erred in law and in facts by using grossed up withholding income tax as a basis in establishing taxable income in this particular additional assessment while the invoices involved had different tax points and the income accrued for the purpose of income tax cannot be used as a basis to charge additional VAT.vi.That the Respondent erred in law and in facts by assessing additional VAT on invoices which are exempt for VAT purposes.vii.That the Respondent erred in law and in fact by disallowing the input VAT incurred and claimed by the Appellant in making of taxable supplies, thereby assessing additional VAT on the Appellant based on erroneously disallowed invoices.

Appellant’s Case 8. The Appellant’s case is premised on the following documents:i.Its Statement of Facts dated 17th March 2023 and filed on 21st March 2023 together with the documents attached thereto.ii.The Appellant’s Written submissions dated 17th October 2023 and filed on 18th October 2023.

9. The Appellant averred that it filed all its VAT returns and paid the VAT due for the period under assessment.

10. The Appellant averred that the Respondent without any basis or justification adjusted the turnover of the Appellant upwards for the period under review and thereafter erroneously assessed additional taxes on the difference between the adjusted turnover and what the Appellant had declared and partly disallowed some of the input VAT incurred and claimed by the Appellant during that period.

11. The Appellant averred further that the assessment issued by the Respondent was based on arbitrary figures which appear to have been plucked from the air and not the actual sales or supplies made by the Appellant during the period under review.

12. The Appellant contended that by adding the banking's to the data extracted from the accounting software of the Appellant amounts to double charge of tax on the same income as the sales made through the software are the same sales banked in the Appellants bank accounts.

13. The Appellant averred that some of the sales were lumped up as sales under taxpayers without PlNs and as such, assessing taxes based on the input VAT claimed by these customers would amount to double taxation of the same income since VAT for the sales was declared and paid.

14. The Appellant posited that the differences between the deemed income declared and the income reported during the period under review can be explained by reconciliations and assessing additional taxes on these deemed variances is erroneous.

15. The Appellant averred that it had claimed valid input VAT fully supported by valid tax invoices in compliance with the provisions of the VAT Act and the VAT Regulations in force at the time.

16. The Appellant asserted that it had correctly claimed the input VAT as per the provisions of the VAT Act, 2013 since all the invoices claimed are proper invoices containing all the mandatory features of valid tax invoices prescribed in law and having been claimed within 6 months from the date of issuance.

17. The Appellant averred that it submitted to the Respondent all the invoices (with ETR Receipts) as well as supporting documentation such as evidence of payment but the Respondent disregarded these explanations and documentation and proceeded to disallow the input VAT and confirm the assessment.

18. The Appellant averred that some of the invoices charged VAT were exempt supplies in line with the first schedule to the VAT Act, 2013 and the Respondent was mistaken to assess additional tax on these invoices.

19. The Appellant submitted that it filled its VAT returns and paid the VAT due for the period under assessment but the Respondent, without conducting an audit or review of the Appellant's books amended the Appellant's VAT returns for the period under review by increasing sales value and partly disallowing some of the input VAT incurred and claimed by the Appellant during that period.

20. It was the Appellant’s submission that it rightfully claimed input VAT supported with valid tax invoices and copies of other documents as stipulated in section 17(1)(,2) & (3)(a) of the VAT Act which states that: -“17. Credit for input tax against output tax(1)Subject to the provisions of this Act and the regulations, input tax on a taxable supply to, or importation made by, a registered person may, at the end of the tax period in which the supply or importation occurred, be deducted by the registered person in a return for the period, subject to the exceptions provided under this section, from the tax payable by the person on supplies by him in that tax period, but only to the extent that the supply or importation was acquired to make taxable supplies.(2)If, at the time when a deduction for input tax would otherwise be allowable under subsection (1) –(a)the person does not hold the documentation referred to in subsection (3), or(b)the registered supplier has not declared the sales invoice in a return, the deduction for input tax shall not be allowed until the first tax period in which the person holds such documentation:Provided that the input tax shall be allowable for a deduction within six months after the end of the tax period in which the supply or importation occurred.(3)The documentation for the purposes of subsection (2) shall be –(a)an original tax invoice issued for the supply or a certified copy”

21. The Appellant relied on the case of Commissioner of Domestic Taxes v Trical and Hard Limited (Tax Appeal E146 of 2020) {2022] KEHC 9927 (KLR) {Commercial and Tax) wherein Justice Majanja held: -“The burden of proof in tax matters is not stationary but is like a pendulum swinging between the taxpayer and taxman at different points but more times than not swings towards the taxpayer. The uniqueness of our tax system in placing the evidential burden of proof on the tax payer is neither a mistake nor is it unconstitutional. The evidential burden of proof rests with the taxpayer to disprove the Commissioner and that once competent and relevant evidence is produced, then this burden now shifts to the Commissioner. I have emphasized and underlined 'competence' and 'relevance' because it is only evidence that meets these two tests that demolishes presumption of correctness and swings the burden to the Commissioner. "

22. The Appellant submitted that it had produced competent and relevant evidence and the input tax ought to be allowed as the Respondent has not proven why the same should not be granted to the Appellant.

23. The Appellant noted that the explanations provided by the Respondent for the rejection of the input VAT are invalid and unreasonable and implored this Tribunal to review the invoices provided to confirm that they are proper invoices.

24. The Appellant submitted that the acts of the Respondent of disallowing the input VAT and recovering the tax there-from would impose an unfair financial burden on its operations. That it is trite law that our tax system should be fair and no citizen ought to bear an unfair and an unequal tax burden.

25. To further buttress its submissions, the Appellant relied on Keroche Industries Limited V Kenya Revenue Authority & 5 Others [2007] Eklr where the court held: -“it is no good answer for the taxman to proclaim that Kshs1 billion (appx) is intended to swell the public treasury because due to the application of the above principles that money is not lawfully due... Applying the same reasoning, to the matter before this court, it does not matter that the respondents say and think they are owed over a billion Kenya shillings - what matters is whether the amount is lawfully due and whether the law allows its recovery. It is not a question of impression or perception of what is owed, instead it is what if anything, is owed under the relevant law and whether its assessment and recovery is permitted by the applicable law. If rightly due, the huge amount notwithstanding the court must uphold the right of recovery regardless of its consequence to the applicant and if not due under the law it must not hesitate to disallow it and must disallow it to among other things to uphold both the law the integrity of the rule of law."

26. The Appellant averred that the charge of VAT heavily draws impetus on the input-output principle, and if the formulae is distorted, the taxpayer unfairly suffers a heavy pecuniary burden, that VAT being a consumption tax, its burden should be borne by the final consumer of the supplies.

27. The Appellant posited that the input-output principle allows for the intermediaries in the supply chain to pass on the VAT burden to the final consumers. That it would be prejudicial if the pecuniary burden is borne by the intermediaries in the chain of supply.

28. The Appellant reiterated that it is without a doubt that it incurred the Input VAT and the Respondent does not have any evidence to the contrary.

29. The Appellant averred that it furnished the actual invoices (with ETR receipts) supporting the expenses it incurred to the Respondent which ought to be sufficient reason to prove that the Appellant did incur those expenses.

30. The Appellant submitted that it concurs with Justice Mativo's judgment in Kenya Revenue Authority v Man Diesel & Turbo Se, Kenya [20211 eKLR where the learned judge held: -“The shifting of the burden of proof in tax disputes flows from the presumption of correctness which attaches to the Commissioner's assessments or determinations of deficiency. The commissioner's determinations of tax deficiencies are presumptively correct. Although the presumption created by the above provisions is not evidence in itself, the presumption remains until the taxpayer produces competent and relevant evidence to support his position. If the taxpayer comes forward with such evidence, the presumption vanishes and the case must be decided upon the evidence presented, with the burden of proof on the taxpayer.The Supreme Court of Canada in Johnston v Minister of National Revenue decided that the onus is on the taxpayer to "demolish the basic fact on which the taxation rested." Also, the Supreme Court of Canada provided guidance on this issue in Hickman Motors Ltd. v Canada that the onus is met when a Taxpayer makes out at least a prima facie case. Prima facie is another legal term that literally means "on its face." To prove a case "on its face" you must provide evidence that, unless rebutted, would prove your position. According to the said decision, a prima facie case is made when the taxpayer can produce unchallenged and uncontradicted evidence. Once the taxpayer has made out a prima facie case to prove the facts, the onus then shifts to the Revenue Authority to rebut the prima facie case. If the Revenue Authority cannot provide any evidence to prove their position, the taxpayer will succeed.''

31. The Appellant submitted that it had discharged its burden of proof by providing the various invoices and documents required to claim input VAT.

32. The Appellant posited that it had produced unchallenged and uncontradicted evidence to proof its case, it contended that the burden of proof ought to shift to the Respondent to proof its allegations.

33. To buttress its submission, the Appellant relied on the case of George v Federal Commissioner of Taxation, {1952} HCA 21“the burden lies upon the taxpayer of establishing affirmatively that the amount of taxable income for which he has been assessed exceeds the actual taxable income which he has derived during the year of income"And that:"...in order to carry that burden he must necessarily exclude by his proof all sources of income except those which he admits. His case must be that he did not derive from any source taxable income to the amount of the assessment."

34. That the amount assessed as derived income by the Respondent is erroneous given the factual and substantive proof and arguments by the Appellant that illustrate that the taxable income assessed exceeds the actual taxable income derived during the period under review.

35. The Appellant submitted that some of the invoices charged VAT were exempt supplies in line with the first schedule to the VAT Act, 2013 and the Respondent erroneously assessed additional tax on these invoices.

36. The Appellant further relied on Kilburn v Bedford (H.M. Inspector of Taxes) 1955 Chancery Division, 36, p.262. where it was held that: -“... As regards the extra tax imposed upon those figures it was for the appellant to show that there was some reason why on the agreed figures tax should not be paid..."

37. That it was clear that the Respondent who is aptly equipped and mandated to collect and assess taxes was committing an illegality by imposing unfair, excessive and unjust taxes to a committed and diligent taxpayer who has been at the forefront in submitting tax returns.

38. The Appellant submitted that it filed all its tax returns (VAT) due for the period under assessment. That the Respondent without any basis or justification adjusted the turnover of the Appellant upwards for the period under review and thereafter erroneously assessed additional taxes on the difference between the adjusted turnover and what the Appellant had declared and partly disallowed some of the input VAT incurred and claimed by the Appellant during that period.

39. The Appellant reiterated that in accordance to Sections 108 and 109 of the Evidence Act it had discharged its burden of proof on the erroneous assessment of VAT on the Appellant. That Section 108 read together with Section 109 of the Evidence Act provide that: -“The burden of proof in a suit or proceeding lies on that person who would fail if no evidence at all were given on either side."And that;“The burden of proof as to any particular fact lies on the person who wishes the court to believe in its existence, unless it is provided by any law that the proof of that fact shall lie on any particular person"

40. That in adherence to the Section 43 of the VAT Act, the Appellant ensured to keep all records in the course of its business and produced the requisite documents during the audit carried out by the Respondent.

41. The Appellant averred that Section 23 of the TPA buttresses the requirement to keep records and provides: -“…a.that a person shall maintain any document required under a tax law, in either of the official languages;b.maintain any document required under a tax law so as to enable the person's tax liability to be readily ascertained; andc.subject to section (3), retain the document for a period of five years from the end of the reporting period to which it relates or such shorter period as may be specified in a tax law.”

42. The Appellant relied on the case of Republic v Commissioner of Domestic Taxes large Tax Payer's Office Ex Parte Barclays Bank of Kenya ltd[2012] eKLR where the court held that the decision to tax must have a legal basis and that Section 56(1) does not empower the Respondent to make speculative assessments (citing Johnson v Scott (Inspector of Taxes) nor was it the intention of the Legislature to put the taxpayer in a position where he would be required to produce any documents that the taxman requires. (Citing Peter Bonde Nielson v Commissioner of Domestic Tax {2016} eKLR).

43. To further buttress its submission on this issue, the Appellant relied on the court’s holding in Kenya Revenue Authority v Man Diesel & Turbo Se, Kenya [2021] eKLR which held in its analysis of the appeal from the Tribunal that:“the TAT was persuaded by the Respondent's evidence. It was persuaded that the Respondent discharged the burden of proof but more important, in auditing a taxpayer the Commissioner is required to properly consider the documentation provided and to understand the information. It is not sufficient for the Commissioner to merely request information and then disregard it and to issue an assessment as it sees fit. Where the Commissioner issues an assessment based on the taxpayer's accounts and records but has misconstrued those records then it will be sufficient for the taxpayer to explain the nature of the Commissioner's misconception, point out the flaws in the analysis and to explain how those records and accounts should be properly understood."

44. The Appellant averred that the Respondent misconstrued the Appellant's documents and did not provide any justifiable basis as to why it disregarded the Appellant’s documentation and explanation in its attempt to reconcile the various variances alleged.

45. The Appellant submitted that it had dutifully produced all the records as required and the reconciliation of accounts should have been done accordingly by the Respondent and not proceed to erroneously assess the Appellant with the glaring evidence provided.

46. The Appellant averred that the Respondent had not only disregarded the Appellant's supporting documentation but made an excessive assessment and that the tax decision should have been made differently.

47. The Appellant relied on the case of Keroche Industries Limited V Kenya Revenue Authority & 5 Others (2007) EKLR where it held that: -“It is no good answer for the taxman to proclaim that Kshs 1 billion (appx) is intended to swell the public treasury because due to the application of the above principles that money is not lawfully due... Applying the same reasoning, to the matter before this court, it does not matter that the respondents say and think they are owed over a billion Kenya shillings - what matters is whether the amount is lawfully due and whether the Jaw allows its recovery? It is not a question of impression or perception of what is owed, instead it is what if anything, is owed under the relevant law and whether its assessment and recovery is permitted by the applicable law. If rightly due, the huge amount notwithstanding the court must uphold the right of recovery regardless of its consequence to the applicant and if not due under the Law it must not hesitate to disallow it and must disallow it to among other things to uphold both the Jaw the integrity of the rule of law."

The Appellant’s Prayers 48. The Appellant prayed that the Tribunal finds and : -i.Allows this Appeal;ii.Annuls the Respondent’s objection decision dated 17th November 2022. iii.Awards costs of this Appeal to the Appellant.

Respondent's Case 49. The Respondent’s case is premised on the hereunder filed documents and proceedings before the Tribunal: -i.Its Statement of Facts dated and filed on 20th April, 2023 together with the documents attached thereto.ii.The Respondent’s written submissions dated and filed on 16th October 2023.

50. The Respondent submitted that it established variances between the Appellant's turnovers declared and purchases claimed for the period 2018 to 2020 charged VAT.

51. The Respondent submitted that as a result, on 25th August 2022 it issued VAT assessment orders of Kshs. 20,894,256. 47 to the Appellant.

52. That on 23rd September 2022 the Appellant objected to the assessments and that on 28th September 2022, the Respondent wrote to the Appellant acknowledging receipt of objection application and requested documentation for review.

53. That on 24th October 2022 and on 11th November 2022 the Respondent sent reminder emails to the Appellant to provide documentation in support of its objection.

54. That the Appellant failed to provide documents for review as a result of which the Respondent issued its objection decision dated 17th November 2022 which forms the basis of the instant Appeal dated 16th December, 2022.

55. The Respondent submitted that Section 24 of the Tax Procedures Act, 2015 allows a tax payer to submit tax returns in the approved form and manner prescribed by the Respondent but the Respondent is not bound by the information provided therein and can assess for additional taxes based on any other available information.

56. The Respondent submitted that it conducted a returns review on the Appellant's returns and established inconsistencies in turnovers declared and purchases claimed.

57. The Respondent averred that the additional VAT assessments for the period 2018 - 2020 were based on variances in VAT declarations.

58. The Respondent contended that the Appellant raised an objection to the additional VAT assessments but failed to provide documentation in support of its objection despite continuous reminders from the Respondent.

59. The Respondent averred that the Appellant's objection was invalidated on the basis that the documentation in support of the objection were not availed despite having been sought for.

60. The Respondent submitted that it was guided by Section 56(1) of the Tax Procedures Act which provides that:“In any proceedings under this Part, the burden shall be on the taxpayer to prove that a tax decision is incorrect."

61. The Respondent cited Section 17 (2) and (3) of the VAT Act, 2013 which provides for the period and documentation required for allow-ability of Input VAT claims.

62. It was the Respondent's submission that the Appellant failed to fully support its objection by providing all the relevant information. Further that, the Appellant had not provided evidence before the Tribunal to show that at any point, the said documents requested were presented to the Respondent.

63. The Respondent submitted that the Appellant was duty bound to keep and maintain proper records for purposes of computation of tax. That Section 23 of the TPA provides that:“a person shall –i.maintain any document required under a tax law in either of the official languages;ii.maintain any document required under a tax law so as to enable a person’s tax liability to be readily ascertained; andiii.subject to subsection (3) retain the document for a period of five years from such from the end of the reporting period to which it relates or such a shorter time as may be specified in a tax law.”

64. The Respondent relied on the Judgment in Commissioner of Domestic Taxes v Structural International Kenya Ltd (Income Tax Appeal No. E089 of 2020) [2021] KEHC 152 (KLR) where the High Court held as follows at paragraph 48:“For the avoidance of doubt, the Tribunal is reminded that in matters where the issue is supply of goods, be it for VAT purposes or Corporation Tax, the burden is always on the trader/tax payer to show that, the documentation set out in the statute and in which he relies on arose out of a commercial transaction. Period. If additional documents, which would be reasonably expected to be in his possession is requested for to verify the alleged transactions, he should produce the same to the commissioner. That is what is expected of a keen and diligent trader."

65. The Respondent averred that since the Appellant failed and/or did not properly declare income, the Respondent had no choice but to issue an assessment based on available documents and best judgement.

66. The Respondent submitted that since the Appellant had not presented any evidence to show that the Respondent's assessment was incorrect, erroneous or excessive, the Appellant had not discharged its burden of proof.

67. The Respondent relied on Kenya Revenue Authority v Man Diesel &Turbo Se, Kenya [2021] eKLR Nairobi High Court Income Tax Appeal No. E125 of 2020, where while upholding the above position, the High Court held as follows at paragraph 32 of the Judgment:“32. The shifting of the burden of proof in tax disputes flows from the presumption of correctness which attaches to the Commissioner's assessments or determinations of deficiency. [10] The commissioner's determinations of tax deficiencies are presumptively correct. Although the presumption created by the above provisions is not evidence in itself, the presumption remains until the taxpayer produces competent and relevant evidence to support his position. [11] If the taxpayer comes forward with such evidence, the presumption vanishes and the case must be decided upon the evidence presented, with the burden of proof on the taxpayer."

68. The Respondent averred that the Appellant failed to provide supporting primary documents to establish the expenditure. That Section 56 of the TPA and Section 30 of the TAT Act place the burden of proof upon the taxpayer. Section 56 of the TPA provides as follows:“In any proceedings under this Part, the burden shall be on the taxpayer to prove that a tax decision is incorrect”

69. While Section 30 of the Tax Appeals Tribunal Act provides as follows:“In a proceeding before the Tribunal, the Appellant has burden of proving –a.where an appeal relates 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."

70. The Respondent further relied on the case of Commissioner of Domestic Taxes vs Golden Acre Limited (2021) eKLR where the learned judged cited Sheria Sacco Society Limited V Commissioner of Domestic Taxes (2019) eKLR where it was observed as follows:“The SACCO did not meet that burden of proof In the Australian case of Mulheim v Commissioner of Taxation 1201-1I FCAFC the Full Federal Court of Australia (PFC) ruled:''A taxpayer must satisfy the burden of proof to successfully challenge income tax assessments. The PFC held that it is not enough for a taxpayer to simply demonstrate that the assessment issued by the Commissioner is incorrect. Rather, the onus is on the taxpayer in proving that an assessment issued by the Commissioner is excessive can only be discharged by the taxpayer by adducing positive evidence which demonstrates the taxable income on which tax ought to have been levied. That onus requires the taxpayer to positively prove his or her 'actual taxable income' and in doing so, must show that the amount of money for which tax is levied by the assessment exceeds the actual substantive liability of the taxpayer."On the foregoing, it was upon the respondent to prove that the assessment was wrong...In this regard, the Tribunal erred in shifting the burden of proof to the Appellant."

71. As to whether the Appellant was entitled to exempt supply, it was the Respondent’s position that Section 62 of the VAT Act, 2013 provides that;“62. Burden of proofIn any civil proceedings under this Act, the burden of proving that any tax has been paid or that any goods or services are exempt from payment of tax shall lie on the person liable to pay the tax or claiming that the tax has been paid or that the goods or services are exempt from payment of tax."

72. The Respondent submitted that in the present case, the documents and literature presented did not provide any additional information, which would have led to the change on the assessment resulting from supply of exempt goods.

73. The Respondent posited that since the Appellant had failed to show that the assessments were incorrect, the allegations are just but mere statements as opposed to grounds of objection and thus the Respondent’s decision retains its presumption of correctness.

The Respondent’s Prayers 74. The Respondent prays that this Honourable Tribunal:-i.Upholds the Respondent's Objection decision dated 17th November, 2022. ii.That this Appeal be dismissed with costs to the Respondent as the same is devoid any merit.

Issues For Determination 75. The Tribunal has evaluated the pleadings, submissions and documentation filed by both parties and is of the view that the issue for its determination in this matter is whether the Respondent's assessments were justified

Analysis And Determination 76. The Tribunal having ascertained the issue for determination as set out above proceeds to analyse it as hereunder.

77. The dispute at hand is as a result of the Respondent’s action of raising additional VAT assessments based on variances established in the Appellant’s declared turnovers and purchases claimed.

78. The Appellant contended that it had filed its returns and paid the VAT due for the period yet the Respondent without conducting an audit or review amended its returns.

79. Section 24(1) of the TPA provides that the Respondent is not bound by the Appellant’s self-assessments. Further Section 24(2) of the TPA empowers the Respondent to raise additional assessments using any information available to it. It provides as follows:“24. Submission of tax returns(1)A person required to submit a tax return under a tax law shall submit the return in the approved form and in the manner prescribed by the Commissioner.(2)The Commissioner shall not be bound by a tax return or information provided by, or on behalf of, a taxpayer and the Commissioner may assess a taxpayer's tax liability using any information available to the Commissioner”

80. The courts have also pronounced themselves with regard to the powers bestowed upon the Respondent in making assessments, in Commissioner of Domestic Taxes v Altech Stream (E.A) Limited [2021]eKLR the Court held that: -“Section 31(1) of the TPA allows the Commissioner to make an assessment based on such information as may be available and to the best of his judgment.”

81. The Respondent stated that upon establishing variances during a review of the Appellant’s returns, it requested the Appellant to avail supporting documents but it failed to do so.

82. The law is clear that once the Respondent makes an assessment, the burden of proof is on the taxpayer to show that the tax decision is erroneous, excessive or should have been made differently. Sections 30 of the TAT Act and Section 56 of the TPA place the burden of proof squarely upon the Appellant. Section 30 of the TAT Act provides as follows regarding budget proof:“In a proceeding before the Tribunal, the Appellant has burden of proving –a.where an appeal relates 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."

83. While Section 56 of the TPA also provides as follows regarding burden of proof:“In any proceedings under this Part, the burden shall be on the taxpayer to prove that a tax decision is incorrect”

84. The Tribunal noted that upon lodging its objection on 23rd September 2022, the Appellant was required to provide specific documents to aid the Respondent in reviewing its claim for input tax and determining its actual tax liability. On 24th October 2022 and 11th November 2022 the Respondent sent reminder emails to the Appellant to provide documentation in support of its objection.

85. Whereas it was the Appellant’s submission that it supported its VAT claim with valid tax invoices and copies of other documents as stipulated in Section 17(1), (2), & (3)(a) of the VAT Act, the Tribunal’s perusal of the documents filed by the Appellant reveals that there is no evidence to show that the Appellant provided primary supporting documents as alleged. The only documents sighted by the Tribunal are the Appellant’s trial balances for the period and a schedule of purchases.

86. The Appellant not only failed to provide the documents specifically required by the Respondent but it also failed to supply the documents that are prescribed in Section 17(3) of the VAT Act. The Appellant thus failed to show that the Respondent erred in its assessment.

87. The Tribunal is guided in this regard by its decision in TAT 538 of 2021 Green road Kenya Limited v Commissioner of Domestic Taxes where it cited the holding in the case of Trust Bank Limited vs Paramount Universal Bank Limited and 2 others (2009) eKLR wherein it was observed that: -“It is trite that where a party fails to call evidence in support of its case, the party's pleadings remain mere statements of facts since in so doing the party fails to substantiate its pleadings.”

88. On the issue of the Appellant’s duty to discharge its burden of proof, the Tribunal is guided by its decision in Ushindi Exporters Limited V Commissioner of Investigation and Enforcement (Tax Appeals Tribunal No. 7 of 2015) where it 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:Where an appeal related to an assessment, that the assessment is excessive; orIn 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 made different the Appellant failed in discharging the burden, placed upon it by law”

89. Accordingly, the Tribunal finds and holds that the Appellant did not discharge its burden of proof to demonstrate that the Respondent’s assessments were incorrect as required under Section 56 (1) of the Tax Procedures Act, 2015, and Section 30 of the TAT Act.

90. The Tribunal therefore finds that the Respondent’s additional assessments were justified.

Final Decision 91. The upshot of the above analysis is that the Tribunal finds that the Appeal is devoid of merit, and accordingly proceeds to make the following Orders:-a.The Appeal be and is hereby dismissed.b.The Respondent’s objection decision dated 17th November 2022 be and is hereby upheld.c.Each party to bear its own costs.

92. It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 5TH DAY OF APRIL, 2024ERIC NYONGESA WAFULACHAIRMANCYNTHIA B. MAYAKA DR. RODNEY O. OLUOCHMEMBER MEMBERABRAHAM K. KIPROTICH TIMOTHY B. VIKIRUMEMBER MEMBER