Vaicom Oil (K) Limited v Commissioner of Domestic Taxes [2024] KETAT 1046 (KLR)

Vaicom Oil (K) Limited v Commissioner of Domestic Taxes (Tax Appeal E288 of 2023) [2024] KETAT 1046 (KLR) (12 July 2024) (Judgment)

Neutral citation: [2024] KETAT 1046 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal E288 of 2023

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

July 12, 2024

Between

Vaicom Oil (K) Limited

Appellant

and

Commissioner of Domestic Taxes

Respondent

Judgment

Background 1. The Appellant is a limited liability company duly incorporated in Kenya and whose principal business activity is oil business at a petrol station.

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. The Respondent vide a letter dated 18th August 2022, informed the Appellant of a tax audit.

4. On 22nd December, 2022 the Respondent issued the Appellant with a notice of assessment.

5. The Appellant replied through an objection letter dated 28th February 2023. The parties subsequently held a Meeting at the Respondent’s offices on 5th April 2023.

6. The Respondent issued its objection decision on 28th April 2023 confirming Kshs 57,925,519. 00 as the amount due and payable.

7. Being dissatisfied with the Respondent’s decision, Appellant filed this Appeal on 7th June 2023.

The Appeal 8. The Appellant’s Appeal is premised on the grounds:a.That the Respondent erred in fact and in law by considering that all bank credits are sales contrary to known tax statutes and provisions therein.b.That the Respondent erred in fact in its objection decision dated 28th April 2023 by failing to consider non-trade receipts, which included inter-banking, reversals/cancellations, and adjustments for debtors' balances.c.That the Respondent erred in law and fact in its objection decision on 28th April 2023 which is based on inaccurate findings and the conclusion that non-taxable levies on fuel prices were categorised as zero-rated.d.That the Respondent erred in law and fact in its objection decision that inaccurately seeks to disallow input VAT claimed as an expense in the process wholly and exclusively incurred in the process of making income.e.That it out rightly contravenes the doctrine of legitimate expectation that rests a presumption on the commissioner to follow certain procedures at arriving at the tax liability and the benefits that accrue from it.

Appellant’s Case 9. The Appellant’s case is premised on its Statement of Facts filed on 7th June, 2023 together with the documents attached thereto.

10. The Appellant stated that vide a letter dated 18th August 2022, the Commissioner initiated a tax audit focused on sales declarations of income tax returns and tax computations, sales declarations of Value-Added tax returns and tax computations, expenses claimed in the income tax returns and double-claimed invoices.

11. That on the 22nd of December 2022, the Appellant received a notice of assessment for Kshs 60,069,198. 43.

12. That subsequently, vide a letter dated 28th February 2023, the Appellant replied and objected to the aforesaid demand and requested for review of the tax computation.

13. That the Respondent then issued an Objection decision on 28th April 2023 confirming Kshs 57,925,519. 00 as the amount due and payable.

14. The Appellant submitted that there was no basis in law to demand additional tax as the failure by the proper officer of the Respondent to execute its mandate as provided by law should not be visited upon the Appellant.

15. That the Respondent erred in fact and in law by considering that all bank credits were sales contrary to known tax statutes and provisions therein.

16. It further averred that the Respondent erred in fact in its objection decision dated 28th April 2023 by failing to consider non-trade receipts, which included inter-banking, reversals/cancellations, and adjustments for debtors' balances.

17. The Appellant submitted that the Respondent erred in law and fact in its objection decision on 28th April 2023 which was based on inaccurate findings and the conclusion that non-taxable levies on fuel prices were categorized as zero-rated.

18. That the Respondent erred in law and fact in its objection decision that inaccurately seeks to disallow input VAT claimed as an expense in the process wholly and exclusively incurred in the process of making income.

19. That the assessment outrightly contravened the doctrine of legitimate expectation that rests a presumption on the Commissioner to follow certain procedures at arriving at the tax liability and the benefits that accrue from it.

20. That by and large, the Respondent had subjected the Appellant to unfair and improper computations to arrive at unlawful taxes for the Appellant.

21. The Appellant stated that it had a legitimate expectation that tax issues should be handled fairly, and the Respondent still needed to meet this expectation.

Appellant’s Prayers 22. The Appellant prayed that:a.The Respondent's demand for additional Corporation tax and VAT and objection decision dated 28th April 2023 for the years of income 2019-2022, be struck out in its entirety.b.The Respondent's action to demand additional taxes despite logical and cogent explanations being given to them be declared arbitrary, capricious, unreasonable, unfair and contrary to the administration of justice and legitimate expectation of a taxpayer.c.The Respondent, its employees, agents and/ or other persons purporting to act on its behalf be barred and/or estopped from demanding or taking any further steps towards enforcement or recovery of principal tax, penalties and interest on the Respondent's demand.d.The costs of this Appeal.e.Any other remedies that the Tribunal deems just and reasonable.

Respondent’s Case 23. The Respondent’s case is premised on the hereunder filed documents before the Tribunal: -i.The Respondent’s Statement of Facts dated and filed on 14th July, 2023 together with the documents attached thereto.ii.The Respondent’s written submissions dated and filed on 9th April 2024.

24. The Respondent stated that it conducted tax investigations into the business affairs of the Appellant for the tax period years 2019 to 2022 based on substantial VAT credits of Kshs 2,195,970. 00 as at July 2022.

25. That the Respondent reviewed the Appellant's income tax returns for the tax period years 2019 to 2021, VAT returns for the tax period years 2019 to 2022, expenses claimed in the Income tax returns and the double claimed invoices.

26. The Respondent averred that a sales variance was established between financial statement's turnover and VAT returns turnover tabulated as follows;FY Total sales perVAT returns Sales as per FinancialStatements Variance Tax@30%

2021 329,635,890. 7 329,635,891 0. 34

2020 253,284,414. 3 253,284,414 0. 26

2019 209,434,263. 4 109,913,854 99,520,409. 00 29,856,122. 82

27. That the tax review established a sales variance between financial statements turnovers and adjusted deemed sales derived from bank deposits tabulated below;FY Total sales perbankstatements Sales as perfinancialstatements Variance Tax @30%

2021 387,079,986. 38 329,635,891. 00 57,444,095. 38 17,233,228. 61

2020 317,432,995. 23 253,284,414. 00 64,148,581. 23 19,244,574. 37

2019 272,366,263. 76 209,434,263. 39 62,932,000. 37 18,879,600. 11

Totals

55,357,403. 09

28. The Respondent averred that there was a variance between VAT turnover and adjusted deemed sales derived from bank deposits. That the variances showed that the bank credits were higher than the turnover declared in income tax for the years 2019, 2020, 2021 and 2022. That the Appellant did not avail reconciliation on the variances thus the same were charged to VAT at 8% as follows;FY Total sales perbank statement Sales as perVAT returns Variance Tax @ 8%

2022 305,402,289. 32 186,340,305. 00 119,061,984. 32 9,524,958. 75

2021 387,079,986. 38 329,635,891. 00 57,444,095. 38 4,595,527. 63

2020 317,432,995. 23 253,284,414. 00 64,148,581. 23 5,131,886. 50

2019 272,366,263. 76 209,434,263. 39 62,932,000. 37 5,034,560. 03

29. The Respondent stated that in it analysis the Appellant's VAT declarations for the tax period years 2019 to 2022 were as follows;FY Sales atGeneral rate Sales at otherrate 8% Zero ratedsales Total salesdeclared

2022 25,037,850. 37 161,302,466. 73 9,270. 00 186,349,576. 10

2021 11,268,479. 19 312,700,467. 87 5,666,943. 60 329,635,890. 66

2020 5,091,761. 38 203,522,211. 83 44,670,441. 05 253,284,414. 26

2019 9,296,179. 68 165,637,497. 61 34,500,586. 10 209,434,263. 39

30. The Respondent averred that the Appellant indicated that the zero-rated sales were also fuels which the Respondent understood to imply wrong categorization of items and the same was brought to charge to VAT at 8% as follows;Tax period Sales Tax @8%

2022 9,270. 00 741. 60

2021 5,666,943. 60 453,355. 49

2020 44,670,441. 05 3,573,635. 28

2019 34,500,586. 10 2,760,046. 89

Total 84,847,240. 75 6,787,779. 26

31. The Respondent further averred that the Appellant had double claimed invoices as follows;Tax period Taxable Input claimed Tax due

July 2020 403,796. 88 32,303. 75

June 2020 1,382,824. 13 77,488. 15

March 2021 4,473,055. 50 871,575. 53

June 2021 1,370,092. 51 109,607. 40

Total 7,629,769. 02 1,090,974. 83

32. That the Respondent issued a manual demand notice dated 22nd December, 2022. That on the 24th and 25th January, 2023 and 1st February, 2023 the Respondent issued additional VAT and Income tax assessments for the tax period year 2019 to 2021.

33. The Respondent averred that the Appellant amended the self-assessment for the tax period year 2019 on 10th January, 2023 while the assessment was issued on 25th January, 2023. That the amendment evened out the variance of Kshs 99,520,409. 00 thus the iTax assessment was dropped.

34. That the Appellant objected to the additional Income tax and VAT assessments vide letters dated 28th February, 2023 and on iTax on 2nd March, 2023.

35. The Respondent averred that several meetings were held at the Respondent's offices where the Appellant was requested to avail additional documents namely; certified bank statements highlighting non-trade receipts, inter bankings cancellations and reversals, bank reconciliations, detailed sales and purchases ledgers, debtors listing and select customer and supporting documentation and monthly ETR Z reports.

36. That on the 20th April, 2023 the Appellant availed certified bank statements, EPRA's breakdown of fuel costs and audited accounts for years 2020 and 2021.

37. The Respondent averred that the certified bank statements were analyzed and non-trade receipts identified as follows;Banks/FY 2019 2020 2021

COOP 11,699,588. 00 664,310. 00 15,399,820. 00

EQUITY 1,108,446. 00 2,913,064. 00 93,691,920. 00

TOTALS 12,808,034. 00 3,577,374. 00 109,091,749. 00

38. The Respondent averred that the VAT output were adjusted from the established total bank credits as follows;VAT output per IRO

2019 14,738,388. 56

2020 17,064,672. 23

2021 26,818,994. 10

39. The Respondent submitted that the Appellant failed to provide ledger which could have indicated the correct categorization of its product sales.

40. The Respondent averred that the debtor balances were adjusted from established bank credits as tabulated below;FY 2019 2019 2020 2021

Closingdebtors 23,451,422. 35 11,468,979. 00 14,053,178. 10 15,916,853. 00

41. That the Appellant did not avail any documentary evidence to support the cash sales.

42. The Respondent averred that the Appellant failed to produce ETR Z report alleging that the ETR machine broke down on 7th January, 2021 and the memory lost.

43. The Respondent submitted that a list of the double claimed invoices was shared with the Appellant vide an email of 5th April, 2023. That the Appellant availed two copies each of invoices 92013675, IN112220, 31005957 and 9733 detailed below;Supplier PIN Supplier Inv No. Inv date Amountbefore tax VAT VATperiodclaimed Rate Purchasetype Descriptionof goods

P051157899V OryxEnergiesKenyaLtd IN112220 23 Jan 20 693,093 55,447 30 Jun 20 other Local fuel

Po51157899V Oryx EnergiesKenyaLtd IN112220 23 Jan 20 693,093 55,447 31 Mar 20 other Local fuel

P051157899V OryxEnergiesKenya Ltd IN112508 30 Jan 20 275,509 22,041 30 Jun 20 other Local fuel

P051157899V OryxEnergiesKenyaLtd IN112508 30 Jan 20 275,509 22,041 31 Mar 20 other Local fuel

P051830456H Gulf Energy HoldingsLtd 31005957 28 May21 843,704 67,496 30 Jun21 other Local fuel

P051830456H GulfEnergyHoldings Ltd 31005957 28May21 843,704 67,496 31 May21 other Local fuel

P051830456H GulfEnergyHoldingsLtd 92013675 26May21 526,389 42,111 31 May21 other Local fuel

P051830456H GulfEnergyHoldingsLtd 92013675 26May21

42,111 30 Jun21 other Local fuel

P051165427W FirstJogoo StationLtd 9733 30Mar21 4,473,056 357,844 31Mar21 other Local fuel

Po51165427W FirstJogoo StationLtd 9733 30Mar21 4,473,056 357,844 30 Apr21 other Local fuel

44. The Respondent averred that the Appellant's contention was that the suppliers issued two invoices for consignments delivered in different months thus the Appellant had no option but to claim the purchase invoices as issued. That it however noted that the suppliers declared the invoice once.

45. The Respondent averred that the Appellant contended that the ETR machine was configured to pick non-taxable portions of sales as zero rated which were fed into the VAT returns as such. It stated that a detailed sales and purchase ledger, ETR Z reports and sales invoices were not provided for verification.

46. The Respondent submitted that the Appellant availed a listing showing bulk supplies of fuel by suppliers without breaking down into the various product quantities. That the Appellant also availed EPRA breakdowns and applicable rates.

47. The Respondent stated that it reviewed the Appellant's zero-rated sales (non -taxable element of sales) which revealed that the Appellant did not follow the EPRA's Regulations where an average of 30% of sales in year 2019 were not taxable. It supported its argument with the table below;FY Sales atGeneral rate Sales at otherrate 8% Zero ratedsales Total salesdeclared Percentage of zero rate sales to fuel sales only Percentage of zerorate sales to total sales

2022 25,037,850. 37 161,302,455. 73 9,270. 00 186,349,576. 10 0. 00575% 0. 0050%

2021 11,268,479. 19 312,700,467. 87 5,666,943. 60 329,635,890. 66 1. 81226% 1. 7192%

2020 5,091,761. 38 203,522,211. 83 44,670,441. 05 253,284,414. 26 21. 94868% 17. 6365%

2019 165,637,497. 61 165,637,497. 61 34,500,586. 10 209,434,263. 39 20. 82897% 16. 4732%

48. The Respondent averred that the Income tax additional assessment were adjusted as follows;BANKS/FY 2019 2020 2021

EQUITY 268,235,659. 86 333,046,220. 32 379,511,569. 51

COOP 25,919,905. 00 9,781,414. 53 38,534,815. 78

Total Bank credits 294,155,564. 86 342,827,634. 85 418,046,385. 29

Less Interbankings &cancellations/reversals 12,808,034. 00 3,577,374. 00 109,091,749. 00

Less output tax 14,738,389. 00 17,064,672. 23 26,818,994. 10

Less opening debtors 23,451,422. 35 11,468,979. 00 14,053,178. 00

Add closing debtors 11,468,979. 00 14,053,178. 10 15,916,853. 00

Expected sales from bankings 254,626,698. 51 324,769,787. 72 283,999,317. 19

Sales as per financial statements 209,434,263. 39 253,284,414. 00 329,635,891

Variance 45,192,435. 12 71,485,373. 72 -45,636,573. 81

Principal tax @30% 13,557,730. 54 21,445,612. 12

Penalty 677,887 1,072,281

Interest 4,880,783 5,146,947

Total 19,116,400 27,664,840

49. That the Respondent reviewed the objections together with the documents and issued the objection decision dated 28th April, 2023.

50. The Respondent was of the view that the Appeal evokes one issue for determination namely; whether the Respondent's Objection decision dated 28th April, 2023 was proper in law?

51. The Respondent stated that Section 24 and 28 of the Tax Procedures Act, 2015 allows a taxpayer to file returns but further provides that the Commissioner is not bound by the information provided therein and can assess the tax liability based on any other available information.

52. That Section 77 of the Income Tax Act and Section 31 of the Tax Procedures Act,2015 allows the Respondent to issue additional tax assessments where a taxpayer has been assessed of a lesser amount based on any additional available information and to the best of its judgement.

53. The Respondent averred that the Appellant's tax agent visited the Respondent's offices and together with the assessing officer went through the bank statements for identification of the non-trade receipts which were factored in computation as illustrated in the objection decision.

54. The Respondent posited that the Appellant failed to counter the basis of the assessments being that the zero rate items were a misclassification of the Appellant's sales.

55. The Respondent averred that the Appellant classified its sales into general @ 16%, zero rate @ 0% and fuel rate @ 8%.

56. The Respondent submitted that the Appellant failed to avail the documentary evidence to support the zero-rate classification of its sales. That the Appellant did not set out the input VAT that was disallowed.

57. The Respondent averred that the Appellant had not stated how the Respondent contravened its legitimate expectation.

58. The Respondent insisted that the Appellant was given the opportunity to dispute the additional assessments and provide documentary evidence in support.

59. The Respondent explained that several meetings were held between the Appellant and Respondent where discussions were held and the Appellant's documents reviewed and considered.

60. The Respondent averred that the burden of proof lies upon the Appellant to prove its case by adducing supporting arguments with documentary evidence not just mere averments.

61. The Respondent submitted that the Appellant failed to avail a detailed sales and purchase ledger, ETR Z reports and sales invoices thus the zero rate figures could not be reviewed.

62. The Respondent averred that the Appellant double claimed invoices on the basis that the suppliers issued two invoices yet the suppliers only declared one invoice.

63. The Respondent stated that the objection decision dated 28th April, 2023 considered the Appellant's objection together with the documents availed before the additional taxes were confirmed.

64. It was the Respondent’s contention that it is empowered under Section 31 of the Tax Procedures Act, 2015 to amend original assessments based on available information and its best judgement.

65. The Respondent averred that the objection decision dated the 28th April, 2023 was proper based on the information available to the Commissioner and was issued within the statutory timelines.

Respondent’s Prayers 66. The Respondent prayed that the Tribunal finds:-a.That the Objection decision dated 28th April, 2023 confirming the additional taxes of Corporation tax of Kshs 46,781,240. 00 for the years 2019 and 2020 and VAT of Kshs 11,144,279. 00 be upheld.b.That this Appeal be dismissed with costs to the Respondent as the same is without merit.

Issue For Determination 67. The Tribunal has gleaned through the pleadings of both parties and the submissions by the Respondent and is of the considered view that the only issue falling for its determination is: Whether the assessment of the Appellant based on bank deposit analysis was proper and justifiable?

Analysis And Determination 68. The Tribunal having ascertained the issue for determination as set out above proceeds to analyse the same as hereunder.

69. The genesis of this dispute is the Respondent’s assessment and the subsequent objection decision dated 28th April, 2023 wherein it confirmed VAT and Income tax assessments. It was not in dispute that the Respondent made comparison of the Appellant’s sales as per the bank statements and financial statements and further comparison of sales as per the financial statements and sales as per VAT returns in coming up with the assessments.

70. It was the Appellant’s case that the Respondent erred in fact and law by considering that all bank credits were sales contrary to known tax statutes and provisions therein.

71. It further averred that the Respondent erred in fact in its objection decision dated 28th April 2023 by failing to consider non-trade receipts, which included inter-banking, reversals/cancellations, and adjustments for debtors' balances.

72. The Appellant submitted that the Respondent erred in law and fact in its objection decision on 28th April 2023 which was based on inaccurate findings and the conclusion that non-taxable levies on fuel prices were categorized as zero-rated.

73. That the Respondent erred in law and fact in its objection decision that inaccurately seeks to disallow input VAT claimed as an expense in the process wholly and exclusively incurred in the process of making income.

74. The Respondent on the other hand stated that the Appellant's contention was that the suppliers issued two invoices for consignments delivered in different months thus the Appellant had no option but to claim the purchase invoices as issued. That it however noted that the suppliers declared the invoice once.

75. The Respondent averred that the Appellant contended that the ETR machine was configured to pick non-taxable portions of sales as zero rated which were fed into the VAT returns as such. It stated that a detailed sales and purchase ledger, ETR Z reports and sales invoices were not provided for verification.

76. The Respondent submitted that the Appellant availed a listing showing bulk supplies of fuel by suppliers without breaking down into the various product quantities.

77. The Respondent further submitted that the Appellant failed to avail the documentary evidence to support the zero-rate classification of its sales. That the Appellant did not set out the input VAT that was disallowed.

78. The Tribunal perused through the documents presented and noted that the Respondent in its objection decision dated 28th April, 2023 it allowed part of the Appellant’s objection as relates to non-trade receipts, VAT output and debtor balances on the basis of the reasons disclosed on the face of the letter which stated as follows;“… 2. 1Certified Bank statements- KCB, Family Bank, Equity and Cooperative bank.-During the meetings held with you, you explained that substantial sums of money were moved between your banks in order to purchase the fuels from suppliers and such movements ought to have been omitted from sales computation.-Initially the Commissioner had analyzed Cooperative and Equity Bank statements only but during the last meeting on 26th April 2023, you introduced Family and KCB bank statements.-Non-trade receipts such as inter-bank credit transfers, cancellations and reversals from supplier payments were established.-The summary of established non-trade receipts is below:…-These credits have been adjusted from established total bank credits.

2. 2VAT OutputFrom your VAT return declarations, the VAT output is as below:…-The VAT output have been adjusted from established total bank credits”

79. From the above cited contents of the objection decision the Tribunal noted that part of the VAT assessments was adjusted from the bank credits analysed by the Respondent while the whole of the income tax was confirmed.

80. The Tribunal has previously considered and substantively expressed itself with regard to the Respondent’s use and application of the bank deposit analysis in determining the taxable income and assessment of tax liability for a taxpayer. The Tribunal reiterates its decision in Digital Box Limited =Vs= Commissioner of Investigation & Enforcement [TAT No. 115 of 2017] when it stated as thus:-“Further, the courts have in the past held that the banking analysis test (also known as bank deposit analysis) is an assessment. This was held to be so in the case of Bachmann –Vs- The Queen, 2015 TCC where the Court stated that:-“This court has recognised that in an appropriate case a bank deposit analysis is an acceptable method to compute income.”Once it is established that the method is allowed, the question is whether the method was applied in arriving at a reasonable assessment in the case at hand.”

81. The Respondent manifestly resorted to the bank deposit analysis when the Appellant failed to provide the necessary documents and appropriate information for the proper ascertainment of its taxable income and its appropriate tax liability. The Tribunal noted that in the objection decision the Respondent stated that some of the documents and information the Appellant failed to provide include;a.Sales and purchase ledgers for purpose of establishing correct categorization of its product sales.b.Documentary evidence to support its cash sales.c.ETR Z reports.d.Breakdown of its bulk supplies.e.Documentation in support of zero rate sales and double claimed invoices identified by the Respondent.

82. The Respondent in the absence of a taxpayer providing the desired information and documentation to facilitate in the assessment and/or verification of the appropriate tax liability is empowered both under Sections 29(1) and 31(1) of the Tax Procedures Act to use its best judgment in making the tax assessment. The Tribunal in the Digital Box Limited case (Supra) affirmed this legal position in the following terms:-“In both instances, the Respondent is allowed to use any information that is available to it and to use the best of his or her judgment in making the assessment.The Respondent submitted………………………..…………………………..The Tax Procedures Act in granting the Respondent powers to assess taxpayers does not specify the methods that may be used instead the law provides that the best judgment must be exercised.”

83. A taxpayer served with an assessment arrived at based on an indirect method, where information is secured from alternative sources, is enjoined to provide the necessary documents and information that suggest that such an assessment is erroneous, misplaced and not justifiable in the circumstances. Section 56(1) of the Tax Procedures Act and Section 30 of the Tax Appeals Tribunal Act squarely places the burden of proof upon a taxpayer to discredit any tax assessment or decision.

84. Section 56(1) of the Tax Procedures Act reads as follows:-“In any proceedings under this Part, the burden shall be on the taxpayer to prove that a tax decision is incorrect.”

85. Section 30 of the Tax Appeals Tribunal Act provides as follows:-“In any proceeding before the Tribunal the Appellant has the 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.”

86. The Respondent’s objection decision was an unequivocal as to the Appellant’s default in providing material documents and verifiable information that prompted the Respondent to resort to the alternative method. The Appellant in the instant case has not addressed these specific information and documents mentioned by the Respondent in the objection decision in its pleadings.

87. The Appellant had an evidential burden to discharge in demonstrating that the Respondent in disregarding any material documents and information made available on its part inappropriately applied the bank analysis in arriving at an assessment that was excessive and unreasonable. This was the position arrived in Hole Vs The Queen, 2016 TCC 55 when the court stated as thus:-“There are two primary ways in which a taxpayer can challenge a bank deposit analysis. The first is to prove that his or her records were adequate and thus that his or her income should have been determined using those records. The second and more common method is to challenge the actual determination of income made by the Minister under the bank deposit analysis.”

88. The Tribunal further reiterates its position in in the case of TAT Appeal No. 537 of 2019 Mugo Macharia Kigo Vs Commissioner of Domestic Taxes where it held as follows;“52. The Tribunal equally notes that the Appellant failed to specifically address the identified variances between the disclosed sources of income and the bank deposits as highlighted in the Objection Decision during the proceedings for the determination of the Appeal before the Tribunal but rather opted to generally challenge the Respondent’s use and application of the bank deposit analysis test in its situation.

53. The Tribunal finds that the Appellant failed to discharge the burden of proof placed upon it in demonstrating that the Respondent’s use and application of the bank deposit analysis yielded in an unfair and unreasonable tax assessment based on the documents made available by the Appellant both at the objection and appeal processes. There is no evidence adduced on the part of the Appellant to demonstrate that the tax assessment was incorrect and/or excessive. The Respondent’s use of officers from a different branch to carry out investigation was entirely an administrative decision within its exclusive prerogative and no discernible procedural prejudice was thereby occasioned to the Appellant in the manner the investigation was carried out and the tax assessment made and confirmed.”

89. The Tribunal on the basis of the available documentation presented finds that the Appellant failed to demonstrate any manner the Respondent could have misapplied the bank analysis.

90. In the circumstances, the Tribunal finds that the Respondent was justified in applying the bank deposit analysis in determining the Appellant’s taxable income and in confirming the assessment.

Final Decision 91. In view of the foregoing, the Tribunal finds that the Appeal lacks merit and accordingly makes the following Orders: -a.The Appeal be and is hereby dismissed.b.The objection decision dated 28th April, 2023 be and is hereby upheldc.Each party to bear its own costs.

92. It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 12TH DAY OF JULY, 2024ERIC NYONGESA WAFULA - CHAIRMANCYNTHIA B. MAYAKA -MEMBERDR RODNEY O. OLUOCH -MEMBERDR. TIMOTHY B. VIKIRU -MEMBERABRAHAM K. KIPROTICH -MEMBER