The Tax Appeals Tribunal has dismissed a challenge by Jo World Agencies Limited over a disputed tax claim of Sh346.2 million, ruling that the ICT company failed to prove that the Kenya Revenue Authority’s (KRA) assessment was incorrect.
The ruling stemmed from a KRA audit of the company covering 2017 to 2022, during which the authority examined the firm’s filings, bank accounts and financial records.
KRA issued assessments for several taxes, including corporate income tax, PAYE, withholding tax, excise duty, betting tax, and gaming tax.
The company objected to the assessment in September 2024, arguing that KRA ignored crucial explanations and documents.
It argued that KRA disallowed legitimate business expenses and failed to consider exempt income from Official Aid-Funded Projects.
It also contended that KRA’s assessments were based on “mechanical exercises” that did not reflect the nature of its ICT business.
However, the tribunal ruled that the company did not meet the legal burden of proof under Section 56 of the Tax Procedures Act, which requires taxpayers to demonstrate that a tax decision is incorrect.
The tribunal noted that while the company insisted it had provided the Commissioner with supporting documents, it failed to prove that any records were actually submitted during the objection process.
Additionally, the company did not present those documents before the tribunal.
“In any proceedings… the burden shall be on the taxpayer to prove that a tax decision is incorrect,” the tribunal stated, quoting Section 56(I) of the Tax Procedures Act.
Jo World Agencies argued that the tax assessment was erroneous and based on undisclosed income tests.
The company claimed it had been “condemned unheard” because KRA ignored the information it supplied during the objection process.
However, the tribunal rejected this argument, noting that the firm provided no proof that it had submitted any documents to KRA or presented them to the tribunal.
“The appellant neither provided proof that it indeed presented any documents to the respondent nor availed any of the documents to the tribunal at the appeal stage, in accordance with the provisions of Section 30 of the Tax Appeals Tribunal Act,” the ruling stated.
The tribunal emphasised that taxpayers must maintain proper records under the Tax Procedures Act and found that the company had failed to meet this obligation.
Without documentation, the tribunal said it could not overturn KRA’s decision.
“The appellant… failed to discharge the burden of proof placed upon it by statute,” it added.
KRA argued that the law permits it to rely on available information when a taxpayer fails to maintain or submit proper records.
It defended its use of banking analysis and variance tests, citing previous court rulings that deemed bank deposit analysis a reasonable assessment method when applied fairly.
Regarding Jo World’s claim that some of its supplies were exempt under the Official Aid-Funded Projects category, the tribunal found no supporting documentation.
The firm also contested KRA’s use of banking analysis to estimate undeclared income, arguing that cash purchases were wrongly disallowed and that KRA failed to exclude exempt supplies linked to aid-funded projects.
However, the tribunal did not address the merits of these arguments, stating that they lacked documentary evidence.
The ruling stressed that mere pleadings cannot overturn a tax assessment, citing precedent that claims must be substantiated, not just asserted.
The tribunal concluded that Jo World Agencies failed to provide evidence refuting KRA’s figures or demonstrating inaccuracies in the assessment.
It also ruled that the dispute over timelines had been resolved once KRA addressed the objection.
