Samara Construction Limited v Commissioner of Investigation & Enforcement [2024] KETAT 358 (KLR)

Samara Construction Limited v Commissioner of Investigation & Enforcement (Tribunal Appeal 930 of 2022) [2024] KETAT 358 (KLR) (8 March 2024) (Judgment)

Neutral citation: [2024] KETAT 358 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tribunal Appeal 930 of 2022

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

March 8, 2024

Between

Samara Construction Limited

Appellant

and

Commissioner Of Investigation & Enforcement

Respondent

Judgment

BACKGROUND 1. That the Appellant is a limited liability Company incorporated in Kenya under the Companies Act and whose principal activity is that of Civil Construction and building.

2. The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act, 1995. Under Section 5 (1) of the Act, the Kenya Revenue Authority (the Authority) is an agency of the Government for the collection and receipt of all revenue. Further, under Section 5(2)of the Act concerning the performance of its function under subsection (1), the Authority is mandated to administer and enforce all provisions of the written laws as set out in Parts 1 & 2 of the First Schedule to the Act to assess, collect and account for all revenues in accordance with those laws.

3. The Respondent carried out the tax investigation into the affairs of the Appellant whereupon variances were reported occasioning issuance of additional tax assessments.

4. On the 6th of December 2021, the Respondent issued the Appellant with additional tax assessments for Corporate tax Kshs. 504,331,945. 00, VAT Kshs. 303,651,460. 00 and PAYE Kshs. 23,744,700. 00, total tax demanded inclusive of interest being Kshs. 1,250,080,087. 00

5. The Appellant objected to the additional assessments on 16th December 2021.

6. On 21st December 2021, the Appellant requested the Respondent to extend the time frame for availing the requested documents to 30 days.

7. On 5th August 2022, the Respondent issued an objection decision confirming the additional assessments amounting to Kshs. 821,728,105. 00

8. The Appellant, being dissatisfied with the Respondent’s objection decision dated 5th August 2022, lodged the instant Appeal at the Tribunal on the 24th August 2022.

The Appeal 9. The Appeal is premised on the Memorandum of Appeal dated 31st August 2022 and filed on even date raising the following grounds: -i.That the Respondent while raising additional estimated assessment output VAT of Ksh.303,651,461. 00 made a substantial error or defect in the procedure provided by the VAT ACT. 2013 Section 17 and Rules made thereunder.ii.That the aforesaid additional estimated output VAT assessments being based on estimates are invalid as being contrary to the requirement of Section 17 of the VAT ACT. 2013. iii.That the Respondent while raising an additional estimated assessment amount of Kshs. 509,594,321. 00 made a substantial error in the procedure provided by the Income Tax Act, Cap 470 of the laws of Kenya.iv.That Section 15 deductions allowed and the rules made thereunder which may have produced error in the decision of the case upon merit by not deducting all expenditure incurred in that year of Income which is expenditure wholly and exclusively incurred by the Appellant in the production of that Income is erroneous, unlawful, punitive, and against fair administrative action.v.That the Respondent erred in failing to allow purchases that the Appellant legally incurred in the production of income in those respective years of income.vi.That the Respondent erred by failing to consider the purchase invoices presented to it a professional deficiency on his part.vii.That the Appellant demonstrated to the Respondent and presented all the invoices in question.viii.That all the documents requested by the Commissioner were availed to him as provided by the provisions of Section 30 of the Tax Appeal Tribunal Act, 2013 as read together with Section 62 of the VAT Act, 2013 and was satisfied.ix.That the Respondent erred in law and fact not to accord the Appellant a fair hearing.

Appellant’s Case 10. The Appellant’s case is premised on: -i.Its Statement of Facts dated 31st August 2022 and filed on the same date.ii.Its Written submissions dated and filed on 29th March 2023.

11. The Appellant averred that the additional assessment numbers: KRA202122XXXX, KRA2021224XXXX, KRA20212245XXXX, KRA202122456XXXX, KRA202122456379, KRA202122XXXX, and KRA20212XXXX of Kshs 1,267,984,877. 74 were excessive because of some error or mistake of fact in the alleged or purported income.

12. The Appellant averred that the Respondent denied the taxpayer access to information and hence raised estimated additional assessments from unknown information.

13. That the Respondent while raising the additional estimated assessments on Corporation tax of Kshs.1. 123,487,120. 00 as per its letter dated 21st June 2021, made a substantial error in the procedure provided by Section 15 of the VAT Act.

14. The Appellant averred that the Respondent ignored the deductions allowed while ascertaining the total Income. That Sections 15 and 16 of the VAT Act must be taken into account while computing or ascertaining the total income of a person.

15. The Appellant contended that the Respondent took wages earned by "Low-income employees" and taxed "corporation rate" while ignoring Section 5(4) (f) of the Income Tax Act Cap. 470.

16. The Appellant submitted that the additional estimated assessment for the years of income 2015 and 2016 had already been covered by the Commissioner of Domestic Taxes as per its demand notice to compliance check for the period January 2015 to June 2017, dated 6th May 2019. That the case went to the Tax Appeal Tribunal and was resolved in ADR per TAT No. 358 of 2019 hence the Commissioner of l&E made a substantial error by redoing what had been done by the Commissioner of Domestic Taxes.

17. The Appellant identified the issues for determination as follows: -i.Whether the Objection decision was validly issuedii.Whether the Respondent erred in fact and law in issuing additional tax assessmentsi.Whether the Objection decision was validly issued

18. The Appellant averred that the Respondent is enjoined under Section 51 (11) of the Tax Procedures Act (TPA) to make an objection decision within 60 days from the date of receipt of a valid notice of objection failure to which the objection shall be deemed to be allowed.

19. The Appellant averred that upon receipt of the notice of assessment dated 6th December 2021, it validly lodged a notice of objection dated 20th December 2021 challenging the Income tax and VAT assessments for the periods 2018, 2017, 2016 and 2015.

20. That the Commissioner was obligated to render the objection decision by around February 2022. However, the Commissioner issued its objection decision 9 months later contrary to the stipulated times as provided in the TPA.

21. It was the Appellant’s position that the objection decision dated 5th August 2022 was invalid as it was a product of a flawed process as the Commissioner never rendered any decision within the statutory timelines, thus the same ought to have been allowed by operation of law and by dint of Section 51(11) of the TPA.

22. The Appellant relied on Section 51 (11) of the TPA which provides as follows:“The Commissioner shall make the objection decision within sixty days from the date of receipt of-i.the notice of objection: orii.any further information the Commissioner may require from the taxpayer, failure to which the objection shall be deemed to be allowed.”

23. The Appellant submitted that from a plain interpretation of Section 51(11) above, once an objection has been made, the Respondent's actions are limited; it may allow the objection in whole or in part or disallow it and that if the Respondent does not act on it, the objection is deemed allowed.

24. That by the clear provisions of Section 51 (11) of the TPA, the Respondent is deemed to have allowed the Appellant's objection. The Appellant relied on the case of Republic v Commissioner of Customs Services Ex­ Parte Unilever Kenya Limited Misc Application No. 152 of 2019 in which the Court stated that: -“If the Commissioner does not render a decision within the stipulated period, the objection is deemed as allowed by operation of the law. The act requires that where the Commissioner has not made an objection decision within 60 days from the date the taxpayer lodged the notice of objection, the objection shall be allowed. This means that the issues that the taxpayer had raised in the notice of objection will be accepted. In case of a tax assessment, it will be vacated. On this ground alone, the applicant's application succeeds."

25. It was the Appellant's submission that from the same provision, the Respondent cannot extend the timelines by ordering a fresh investigation. That the 60-day timeline is cast on stone and cannot be extended either by mutual consent or by acquiescence and once the 60 days lapse, the Commissioner has no jurisdiction to issue an additional assessment based on an original assessment which becomes inoperable by passage of the statutory timelines.

26. The Appellant relied on the case of Republic vs. Kenya Revenue Authority Ex Parte Mkopa Kenya Limited (2018) eKLR where Justice Odunga stated, inter alia, that: -“In my view, since there is no format for making an objection, what is required is the substance rather than the form. What the law frowns at is an objection that is framed in such an ambiguous manner as not to be certain whether the taxpayer is seeking further particulars or indulgence to enable it pay the taxes demanded. In this case, the applicant had clearly made what was in substance an objection as envisioned under section 51 of the Tax Procedures Act, 2015. Accordingly. the Respondent was required to make a decision in respect thereof within sixty (60) days under section 51(11) of the said Act. As the Respondent defaulted in making a termination thereon within the prescribed time, the said objection was deemed to have been allowed."

ii. Whether the Respondent erred in fact and in law in issuing additional tax assessments 27. Further, the Appellant submitted that the Respondent erred in raising additional assessments for the years of income 2015 and 2016 vide a letter dated 6th December 2021 totalling Kshs. 145,054,794/- in contravention of Section 31(4) of the TPA which provides that: -“The Commissioner may amend an assessment-i.In the case of gross or willful neglect, evasion or fraud by or on behalf of the taxpayer at any time; orii.In any other case. within five years of a self-assessment, the date that the self-assessment taxpayer submitted the self­ assessment return to which the self-assessment relates: oriii.(ii) for any other assessment, the date the Commissioner notified the taxpayer of the assessment.”

28. The Appellant averred that the said additional assessments were conducted in 2021 which is way over the 5 years provided under Section 31(4)(i) of the TPA. The Appellant relied on the case of R v OPP & 2 Others Exparte Nomoni Saisi in which it was held that:-“The court can interfere with exercise of discretion where there is an abuse of discretion: where the decision-maker exercises discretion for an improper purpose; where decision-maker is in breach of the duty to act fairly; or if the decision-maker has failed to exercise statutory discretion reasonably; or if the decision-maker acts in a manner to frustrate the purpose of the Act donating the power; or if the decision-maker fetters the discretion given or fails to exercise discretion and where the decision is irrational and unreasonable."

29. The Appellant averred that the Respondent created a legitimate expectation that the assessments would be amended in accordance with the provisions of Section 31 (4) (i) of the TPA. That the Appellant relied on the case of Communications Commission of Kenya & 5 Others v Royal Media Services & 5 Others where the Supreme Court stated that: -“Legitimate expectation would arise when a body, by representation or by past practice, has aroused an expectation that is within its power to fulfil. Therefore, for an expectation to be legitimate, it must be founded upon a promise or practice by public authority that is expected to fulfil the expectation. "

30. The Appellant submitted that the Respondent was in flagrant breach of the expectation that the amendment of the assessment would be done in accordance with the law.

31. To buttress its position, the Appellant also relied on the following cases:-i.Republic v Commissioner of Customs Services Ex-Parte Unilever Kenya Limited eKLRii.Republic vs. Kenya Revenue Authority Ex Parte Mkopa Kenya Limited [2018] eKLRiii.Communications Commission of Kenya & 5 Others v Royal Media Services & 5 Others

Appellant’s Prayers 32. The Appellant made the following prayers to the Tribunal: -i.The aforesaid estimated additional assessments be annulled and thatii.The Appellant be permitted to pay the tax leviable on its true income ascertainable from evidence.

RESPONDENT’S CASE 33. The Respondent’s case is premised on the following documents filed with the Tribunal: -a.The Respondent’s Statement of Facts dated 30th September 2022 and filed on 4th October 2022 together with the documents attached thereto.b.The Respondent’s written submissions dated 31st March 2023 and filed on the same date.

34. The Respondent submitted that it carried out tax investigations into the affairs of the Appellant for the period 2015 to 2018 and issued the findings on 21st June 2021.

35. The Respondent submitted that during the period under review, the Appellant's main clients were Government institutions and Ministries, which included: the County Government of Kiambu, Kenya Rural Roads Authority, Kenya Ports Authority, Kenya Power and Lighting Company, China Road and Bridges Corporation, Kenya National Highway Authority and Kenya Ferry Services among others.

36. The Respondent submitted that the Appellant's clients/customers revealed that the Appellant had received Kshs 3. 6 Billion over the period under review.

37. The Respondent averred that while determining the Appellant's income, variances amounting to Kshs 1. 1 Billion and Kshs 877 Million for VAT and Income tax, respectively were established from the contract analysis.

38. The Respondent stated that it analyzed bank statements and account documents from Consolidated Bank and Standard Chartered Bank in a bid to corroborate the above findings, it noted that there were variances amounting to Kshs 1. 7 Billion and Kshs. 1. 5 Billion between the Appellant's income tax returns and VAT returns, respectively, vis-a-vis the Appellant's bankings.

39. The Respondent averred that it issued the Appellant with additional income tax, VAT and PAYE assessments on 6th December 2021 for the period 2015 to 2018 amounting to Kshs. 831,728,105. 00 exclusive of penalties and interest.

40. That the Appellant objected to the additional assessments on 16th December 2021.

41. The Respondent averred that on 26th November 2021, it declared the Appellant's objection application invalid for failing to meet the requirements of Section 51(3) of the Tax Procedures Act and requested the Appellant to provide documents in support of its objection.

42. The Respondent submitted that on 21st December 2021, the Appellant replied that the time frame for availing the requested documents was too short and requested for 30days to provide the documents.

43. The Respondent averred that the Appellant having failed to provide supporting documents, on 5th August 2022 issued a decision confirming the additional income tax, VAT and PAYE assessments amounting to Kshs. 831,728,105. 00.

44. The Respondent averred that the Appellant did not discharge its burden of proving that the Respondent's income tax, VAT and PAYE assessment were incorrect since it did not adduce any documentation to support its objection. The Respondent relied on Section 17 of the VAT Act, subsections 2 and 3.

45. The Respondent averred that the additional assessments are valid based on the documentary evidence that was availed by the Appellant and corroborated by its clients.

46. The Respondent averred that it based its banking reconciliations on the date from the banking receipts. That the banking analysis was adopted as the basis for establishing taxable income since it gives higher expected incomes for VAT and Income tax.

47. The Respondent averred that the Appellant did not provide any evidence in support of its objection and the Commissioner was right in confirming the Income tax, VAT and PAYE assessments amounting to Kshs. 831,728,105. 00.

48. The Respondent identified the main issues for determination as:-a.Whether the additional assessments were justified?b.Whether there was a valid objection?

a. Whether the additional assessments were justified 49. The Respondent submitted that the decision to arrive at the additional assessments was justified and had basis in law as required under the TPA Act, 2015.

50. The Respondent highlighted that the Appellant's clients had revealed that it had received Kshs 3. 6 Billion over the period under review while the Respondent’s investigation further revealed significant variances of Kshs 1. 1 Billion and Kshs 877 Million for VAT and income tax, respectively.

51. The Respondent submitted that it also analyzed the Appellant's PAYE returns and noticed that there were variances between the Appellant's PAYE declarations and the staff cost claimed by the Appellant in its income tax returns.

52. The Respondent submitted that it was at liberty to make assessments based on information available to it in accordance with Section 24(2) of the TPA which provides that: -“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."

53. The Respondent submitted that Section 31 of the TPA empowers it to make alterations or additions to original assessments from available information for a reporting period based on the Commissioner's best judgment. This Section provides:-“Subject to this section, 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-a.In the case of a deficit carried forward the Income Tax Act (Cap 470), the taxpayer is assessed with respect of the correct amount of the deficit carried forward for the reporting periodb.In the case of an excess amount of input tax under the Value Added Tax Act, 2013 (No35 of 2013), the taxpayer is assessed with respect to the correct amount of the excess input tax carried forward for the reporting period; orc.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."

54. The Respondent asserted that it relied on its best Judgment based on information available to it in compliance with Section 31 of the TPA while raising the additional Income tax, VAT and PAYE assessments.

55. The Respondent relied on the case of Commissioner of Domestic Taxes v Altech Stream (Ea) Limited [2021] eKLR where the court stated 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.

b. Whether there was a valid objection 56. The Respondent submitted that the Appellant's objection did not meet the requirements of Section 51 (3) of the Tax Procedures Act.

57. The Respondent submitted that where an Appellant makes an objection to the assessments issued by the Commissioner, the Appellant is obligated to provide all the relevant documentation it relies on in making the objection. That Section 51 (3) of the Tax Procedures Act provides that: -"A notice of objection shall be treated as validly lodged by an Appellant under subsection (2) if-a.............b............(c)all the relevant documents relating to the objection have been submitted.”

58. The Respondent relied on the following decisions of the Tribunal on the issue of application of Section 51(3) (c) of the TPA: -a.Boleyn International Limited versus Commissioner of Investigations & Enforcement (Tax Appeal Tribunal No 55 of 2019), where the Appellant failed to provide documents and the Tribunal held that there was no conceivable way the Respondent would have considered the objection as the same did not place itself within the parameters of Section 51(3) of the Tax Procedures Actb.Rongai Tiles and Sanitary Ware Limited versus Commissioner of Domestic Taxes (Tax Appeals Tribunal No 163 of 2017) where the Tribunal found that the wording of Section 51 (3) of the Tax Procedures Act was clear that a notice of objection was valid if the conditions given are met.

59. The Respondent submitted that it used the banking analysis test in arriving at the Income tax and VAT assessments in this particular case as a result of the insufficient records and documents availed by the Appellant despite several requests to provide the same.

60. The Respondent relied on the cases of TAT 115 of 2017: Digital Box Limited versus Commissioner of Domestic Taxes.

61. The Respondent contended that the Appellant had the onus of demonstrating that the deposits in its bank accounts do not entirely constitute its business income by providing credible information on the sources of the amounts of the deposits. That further, since the Appellant failed to provide relevant documentation to prove that the deposits were not business income, the Respondent was justified in confirming the Income tax and VAT assessments.

62. The Respondent relied on the case of TAT No. 25 OF 2016: Family Signature Limited vs. Commissioner of Investigations & Enforcement where the Tribunal while relying on the case of A. Govindarajulu Mudaliar vs. Commissioner of Hyderabad 1958-LL- 0924 stated that: -“....... there is ample authority for the position that where an assessee fails to prove satisfactorily the source and nature of certain amount of cash received during the accounting year, the Income tax Officer is entitled to draw the inference that the receipts are of an assessable nature."

63. The Respondent submitted that the Appellant did not discharge its burden of proof under Section 56 (1) of the TPA and Section 30 of the TAT Act. That these Sections place the burden on the taxpayer to prove that a tax decision is incorrect, excessive or in any other case, the tax decision should not have been made or should have been made differently.

64. To buttress its submission on the burden of proof, the Respondent relied on the cases of:a.Ushindi Exporters Limited versus Commissioner of Investigation and Enforcement (Tax Appeals Tribunal No7 of 2015)b.Tumaini Distributors Company (K) Limited and Commissioner of Domestic Taxes [2020] eKLR

65. The Respondent submitted that the Appellant did not discharge its burden of proving that the Income tax, VAT and PAYE assessments were erroneous since it did not adduce any evidence to support its objection and therefore, the Commissioner was right in confirming the Income tax, VAT and PAYE assessments.

Respondent’s prayers. 66. The Respondent prayed that the Tribunal: -a.Upholds the Respondent's objection decision as proper and in conformity with the law.b.Dismisses this Appeal with costs to the Respondent as it lacks merit.

Issues for Determination 67. The Tribunal has considered the facts of the matter and the submissions made by the parties, and identified the following to be the issues for determination in this matter: -a.Whether the Respondent’s Invalidation decision was justifiedb.Whether the Respondent erred in fact and in law in confirming the Income Tax, VAT and PAYE assessments of the Appellant.

Analysis and Findings 68. Having identified the issues that falls for its determination, the Tribunal proceeds to analyze them as hereunder.

a. Whether the Respondent’s Invalidation decision was justified 69. The genesis of this Appeal is the additional assessments raised by the Respondent based on variances established on the basis of investigations and analysis conducted by the Respondent.

70. The Respondent explained that it conducted investigations into the Appellant’s tax affairs and also carried out banking analysis and confirmation of the Appellant’s income from its clients. That the investigations revealed variances in the Appellant’s VAT, PAYE and Income tax returns leading to the additional assessments.

71. The Tribunal noted that both parties raised matters of procedure and timelines besides making their submissions on the substance of the dispute at hand. While the Appellant questioned the timing of the objection decision, the Respondent questioned the validity of the objection.

72. In view of the foregoing, it behoves the Tribunal to determine whether the parties complied with the statutory procedures and timelines before delving into the substance of the Appeal. To do this, a rehash of events leading to the instant Appeal would be necessary. The chronology of the events was as follows: -a.On the 6th of December 2021, the Respondent issued the Appellant with additional tax assessments for Corporate tax, VAT and PAYE.b.The Appellant objected to the additional assessments on 16th December 2021. c.On 26th November 2021, the Respondent declared the Appellant's objection invalid for failing to meet the requirements of Section 51(3) of the TPA and requested the Appellant to provide supporting documents.d.On 5th August 2022, the Respondent issued an objection decision confirming the additional assessments.

73. The chronology of events shows that the Appellant's objection dated 16th of December 2021 was done within the stipulated time considering that the assessment was issued on the 6th December 2021.

74. This objection was invalidated vide a letter dated 26th November 2021 which read as follows in the relevant part:“… your application is declared invalid as it fails to meet the requirements of Section 51(3) of the Tax Procedures Act that states:….You are required to provide all relevant documents in support of your objection to enable the Commissioner to determine the validity of the objection.”

75. The Respondent thereafter proceeded to confirm its assessment vide a letter dated 5th August 2022 on the premise that the Appellant had failed to validate its objection by supplying the relevant documents.

76. The Tribunal notes that in the instant case, the Respondent had stated that the Appellant's objection was not validly lodged. Section 51(4) of the Tax Procedures Act provides as follows regarding the action that the Commissioner ought to take in cases where it determines that an objection has not been validly lodged by a taxpayer;“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.”

77. The date of invalidation was thus crucial in this Appeal. As it would have helped the Tribunal to decide on whether the invalidation was lawful.

78. The invalidation letter was dated 26th November 2021 and the objection was lodged by the Appellant on the 16th December 2021. This meant that the invalidation preceded the objection. In other words, the invalidation decision in this Appeal was issued 20 days earlier than the objection. Which in itself is an absurdity.

79. The parties in this Appeal did not file an oral or written application to explain the documents that they had admitted into evidence, to amend these dates, if at all there was a typographical error or to proffer any explanation as to how the invalidation notice was issued before the objection had been lodged.

80. The pleadings filed by the parties did not explain the reason for this illogical occurrence. Instead, both parties proceeded with the Appeal on the premise and position that the documents as filed by both parties reflected the accurate facts of this Appeal.

81. The Tribunal is thus obliged to take and consider the documents submitted by the parties as they are because it lacks the juridical authority to amend parties' pleadings and or ignore the evidence that has been presented to it.

82. It was the obligation of the parties to pray for amendment, correction, expunging and or to provide any other clarification on such documents. This was not done, meaning that the parties are content with their documents and the Tribunal is thus obliged to consider them as they are.

83. The Tribunal is a neutral third party, it can never get into the arena of correcting, amending, explaining or taking any other related action to explain documents that have been admitted into evidence before it. Taking such actions, however well intended, may lead a reasonable man to impute bias or judicial misconduct on the Tribunal.

84. It is for this reason, that the Tribunal shall proceed to make its determination based on the documents presented before it.

85. Pursuant to Section 51(4) of the TPA, the Respondent was behoved to immediately notify the Appellant of its invalidation immediately after it had determined that the said notice was not validly lodged.

86. The Respondent, instead opted to notify the Appellant of the said invalidation 20 days before the objection was lodged. This action was not only unprecedented but also unlawful as it contravened the dictates of Section 51(4) of the TPA as to which document should precede the other.

87. In light of the foregoing, the Tribunal finds that the Respondent’s invalidation decision dated 26th November 2021 was not justified. The Respondent was thus required under Section 51(11) of the TPA to issue its decision within 60 days of receipt of the Appellant’s Objection.

88. The Respondent is also enjoined under Section 51(11) of the Tax Procedures Act to make an objection decision within 60 days from the date of receipt of:-“a)the notice of objection; orb)any further information the Commissioner may require from the taxpayer, failure to which the objection shall be deemed to be allowed.” (Emphasis added)

89. The Tribunal has notes that it was not in dispute that the Appellant lodged its notice of objection on 16th December 2021. Going by the respective provisions of Section 51(11) as read with Section 51(4) of the TPA, the Respondent ought to have issued its invalidation decision immediately after this date. This was not done, it instead issued the invalidation before the objection was lodged.

90. Alternatively, and considering that the Appellant lodged its objection on 16th December 2021, it was required to issue its objection decision on or before 15th February 2022. Its letter confirming the tax assessment was issued on the 5th of August 2022. This decision confirming the assessment, and against which the Appellant has filed this Appeal was issued late by about 173 days.

91. Accordingly, and as provided for under Section 51(11) of the Tax Procedures Act, the Tribunal finds that the Respondnet’s decision contained in its letter confirming assessment dated 5th August 2022 was invalid. Consequently, the Appellant’s Objection dated 16th December 2021 was deemed allowed by operation of the law.

92. This conclusion is aligned with the decision of the High Court in Rongai Tiles & Sanitary Wares Limited v Commissioner of Domestic Taxes (Tax Appeal E011 of 2020) [2023] KEHC 18546 (KLR) (Commercial and Tax) (16 June 2023) (Judgment) where Justice D.S Majanja stated as thus in Paragraph 16 of the Judgment:“The Commissioner’s delay in delivering the Objection Decision within sixty days of receiving the objection meant that the objection was allowed by operation of law. Failure to render the Objection Decision in time was fatal and the Commissioner could not demand any taxes therein.

93. Having entered the above finding, the Tribunal did not delve into the other issue for determination namely; Whether the Respondent erred in fact and in law in confirming the Income Tax, VAT and PAYE assessments of the Appellant as it had been rendered moot.

Final Decision 94. The upshot of the foregoing is that the Appeal is merited and consequently, the Tribunal makes the following Orders: -a.The Appeal be and is hereby allowed.b.The Respondent’s invalidation letter dated 26th November 2021 be and is hereby set aside.c.The Respondent’s decision contained in its letter dated 5th August 2022 be and is hereby set aside.d.Each Party is to bear its own costs.

95. It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 8TH DAY OF MARCH, 2024. ERIC NYONGESA WAFULA - CHAIRMANDR. RODNEY O. OLUOCH - MEMBERABRAHAM K. KIPROTICH - MEMBERCYNTHIA B. MAYAKA - MEMBERTIMOTHY B. VIKIRU - MEMBER