KRA’s duty to give reasons for its Objection Decisions: Ndirangu Hardware -Vs- Commissioner of Domestic Taxes

Background

The case involves a tax dispute arising from additional tax assessments conducted on the Appellant by KRA. The assessment was for Value added tax amounting to Kshs 8,532,219.63 for the period of November 2015 to December 2016.

The Kenya Revenue Authority communicated to the Appellant that they had conducted a verification exercise and came to the realization that the latter had made some vatable supplies to the Kenya Forestry Service, which they did not declare.

The Appellant responded by objecting to the assessment, insisting that they had filed all documents in support of their declared tax returns. They also asserted that the taxman had failed to thoroughly consider the documents they had submitted which would prove their position that they had paid all their dues.

The KRA further responded to the Objection via a brief letter titled “Objection Decision” dated 12^th April 2018. The contents of the letter read:

Dear Sir/Madam, With reference to your objection decision to the assessments dated February 12, 2018 made upon you for VAT-Nov 2015 & Dec 2016, we hereby give you notice that the assessment is confirmed as we are not prepared to amend in accordance with your objection.

Signed

Station Manager – Nakuru Station

The Appellants then unsuccessfully appealed the decision at the Tax Appeals Tribunal in 2021, arguing that there was no Objection Decision had been issued by the Kenya Revenue Authority.

The Tax Appeals Tribunal Decision

The Tax Appeals Tribunal dismissed the Appellants case stating that the Objection Decision dated 12^th April was issued within 60 days of the Appellants Objection dated 12^th February.

Dissatisfied with this finding, the Appellant filed an appeal at the High Court at Milimani.

The High Court’s Findings

The High Court allowed the Appeal finding that although the stated Objection Decision was tendered within the prescribed 60 days, its contents were contrary to the form prescribed under the law.

The court relied on section 51(10) of the Tax Procedures Act which mandates that objection decisions give reasons for their conclusions. The court also invoked the provisions of Article 47 of the Constitution and the Fair Administrative Action Act which require that adequate reasons be given for all administrative decisions.

Conclusion

The Kenya Revenue Authority is not only mandated to supply Objection Decisions to objectors of their tax assessment within 60 days, but also required to provide clear and justifiable reasons for the same.