Automated Summary
Key Facts
Jarinta (K) Limited appealed against a tax assessment of Kshs 188,319,871 by the Commissioner of Investigations and Enforcement. The assessment arose from an audit alleging the company participated in a 'missing trader' VAT fraud scheme by claiming input tax from blacklisted suppliers. The tribunal dismissed the appeal in 2020, and the High Court upheld this decision on 31 March 2023, finding the appellant failed to provide documentary evidence to support its purchase claims. The court emphasized the taxpayer's burden to prove transactions occurred through required documentation under the VAT Act and Tax Procedures Act.
Tax Type
Value-Added Tax and Corporation Tax
Issues
- The first issue concerns the validity of the respondent's assessment and objection decision under the Tax Procedures Act, specifically whether the objection decision complied with section 51(10) by including a statement of findings on material facts and reasons for the decision.
- The second issue examines whether the tribunal correctly upheld the assessment of Corporation Tax and VAT at Kshs 188,319,870.56, considering the missing trader scheme and the appellant's failure to provide documentary evidence to substantiate input tax claims under sections 17(1) and 43 of the VAT Act.
Tax Years
2018
Holdings
- The court found that the respondent's objection decision was valid and legal, as the appellant failed to provide supporting documents for its objection. This decision was in accordance with the Tax Procedures Act, and the tribunal's findings were upheld.
- The court dismissed the appeal, determining that the appellant did not discharge the burden of proof by failing to produce necessary documentation to verify the alleged purchases. The tribunal's decision to uphold the Corporation Tax and VAT assessment of Kshs 188,319,870.56 was affirmed.
Remedies
The court dismissed the appeal filed by Jarinta (K) Limited against the Commissioner of Investigations and Enforcement, upholding the original tax assessments. The judgment also awarded costs to the respondent due to the appellant's failure to provide required documentation to support its claims.
Tax Issue Category
Input Vs. Output Vat
Legal Principles
The court applied the principle that the burden of proof in tax disputes lies with the taxpayer to demonstrate the validity of claimed transactions. Under sections 56 of the Tax Appeals Procedures and 30 of the Tax Appeals Tribunal Act, the taxpayer must provide documentary evidence to substantiate claims of input tax deductions. The tribunal and this court found that the appellant failed to produce such evidence, leading to the dismissal of the appeal.
Disputed Tax Amount
188319871.00
Precedent Name
- Republic v KRA Ex-parte Funan Construction Limited
- Selle & another v Associated Motor Boat Co Ltd & others
- Commissioner of Domestic Taxes v Structural International Kenya Ltd
Cited Statute
- Tax Appeals Procedures
- Tax Procedures Act 2015
- Value Added Tax Act 2013
- Tax Appeals Tribunal Act
Judge Name
A. Mabea
Passage Text
- "... Pursuant to section 51(3) of the Tax Procedures Act, we wish to inform you that your notice of objection was not properly lodged as you did not provide evidence to support your objection. Your grounds of objection as set out in your letter remain unsupported..."
- "In its decision, the tribunal stated that to discharge the burden of proof the appellant was supposed to show that actual purchases were done. However, the tribunal found that the appellant had not provided to the tribunal the documents relied on to claim the input tax."
- "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."