Commissioner of Domestic Taxes v Airtel Networks Kenya Limited (Income Tax Appeal
E062 of 2022) [2023] KEHC 25059 (KLR) (Commercial and Tax) (10 November 2023) (Judgment)
Neutral citation: [2023] KEHC 25059 (KLR)
REPUBLIC OF KENYA
IN THE HIGH COURT AT NAIROBI (MILIMANI COMMERCIAL COURTS)
COMMERCIAL AND TAX
INCOME TAX APPEAL E062 OF 2022
A MABEYA, J
NOVEMBER 10, 2023
BETWEEN
COMMISSIONER OF DOMESTIC TAXES .......................................... APPELLANT
AND
AIRTEL NETWORKS KENYA LIMITED ........................................ RESPONDENT
JUDGMENT
1. In a letter dated 9/10/2018, the appellant informed the respondent of his intention to audit its aairs
for the years 2013 to 2017. The audit was postponed upon the request of the respondent since the
respondent was in the middle of a custom audit by the Commissioner of Customs and Border Control.
2. The audit was subsequently conducted between March and May 2019. In a letter dated 4/6/2019, the
appellant made a demand on the respondent for taxes which the respondent objected to. After some
engagements, the assessment was adjusted which the respondent still objected to. Subsequently, the
appellant conrmed part of the assessment in his objection decision dated 31/3/2021 for a sum of
Kshs. 791,207,007/13.
3. Being aggrieved by the appellant’s decision, the respondent lodged an appeal at the Tax Appeals
Tribunal (“the Tribunal”) and the appeal was allowed in a judgment delivered on 14/4/2022.
Dissatised with that decision, the appellant has lodged this appeal vide a memorandum of appeal
dated 2/6/2022. The grounds of appeal can be summarized into 2 as follows: -
a. That the Tribunal erred in holding that no proof had been given by the appellant to justify the
assessment beyond the statutory ve-year limit.
b. That the Tribunal erred in failing to hold that the appellant had discharged his burden when
he requested for more documents.
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4. The respondent opposed the appeal vide its statement of facts dated 5/10/2022. It was the
respondent’s case that the appellant had not discharged his burden of proof as to why the assessment
was done beyond the ve-year statutory period. According to the respondent, the returns for the month
of December were led on 20/1/2015 and therefore the appellant could only be allowed to raise an
amended assessment up to 20th January 2020 with respect to VAT, 8/1/2020 with respect to PAYE and
20/1/2020 on withholding Tax.
5. That the appellant had admitted in his objection decision dated 31/3/2021 that the tax assessments
were issued beyond the ve-year statutory time limit. That the delay was caused by the appellant who
failed to respond to the respondent for a period of one year. It was the respondent’s case that it could
only retain documents for a period of ve years and in this case, documents for the year 2013 to 2018
and 2014 to 2019. That despite the time limit the respondent still availed the documents.
6. The appeal was canvassed by way of written submissions which I have considered.
7. The appellant submitted that the respondent was under a duty of care to participate in the audit process
by providing documents and any information sought by the appellant. That the respondent did not
discharge the burden of providing further documents. It was the appellant’s submissions that the
respondent had a duty to ensure that the 2013 to 2017 documents were ready on or before 23rd October
2018. The appellant also stated that the respondent was required to FastTrack the audit process. That
there was willful neglect on the part of the respondent by failing to provide complete records in time.
8. On the other hand, the respondent submitted that the appellant was bound by the strict timelines of
the Tax Procedures Act. That therefore, the Tribunal did not err in holding that the appellant did not
meet the requirements of section 31 of the Tax Procedures Act. That the appellant had introduced the
issue of duty of care at the submissions stage as the same had not been canvassed at the Tribunal.
9. Finally, that the taxpayer could not owe a duty of care to a public body. That the appellant has the
power to issue an estimated assessment within the proper timeline.
10. I have considered the record, the response and the written submissions. The dispute between the parties
is with respect to the additional assessment by the appellant made pursuant to section 31 of the Tax
Procedures Act.
11. The gist of the appellant’s case is that the delay for issuing the assessment outside the statutory period
of 5 years was caused by the respondent. According to the appellant, the respondent had willfully failed
to provide the documents necessary for the audit in good time and therefore responsible for the delay.
12. On its part, the respondent contended that it was well aware of the documents needed for the audit
process and had played its part to ensure that section 59 of the Tax Procedures Act was complied
with. On whether the respondent committed gross or willful neglect, evasion or fraud, the respondent
submitted that the appellant failed to discharge his burden to show that the respondent was guilty of
the things accused of.
13. Section 31of the Tax Procedures Act (“the Act”) gives the appellant the power to issue amended
assessments. Section 31(4) thereof provides: -
“ (4) The Commissioner may amend an assessment—
a. in the case of gross or willful neglect, evasion, or fraud by, or on
behalf of, the taxpayer, at any time; or
b. in any other case, within ve years of—
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i. for a self-assessment, the date that the self-
assessment taxpayer submitted the self-assessment
return to which the self-assessment relates; or
ii. for any other assessment, the date the
Commissioner notied the taxpayer of the
assessment.”
14. On interpretation of tax statutes, the courts have held that the same should be given strict
interpretation with no room for intendment. In Republic vs. Commissioner of Domestic Taxes Large
Tax Payer’s Office Ex-Parte Barclays Bank of Kenya LTD [2012] eKLR, the court held: -
“ The approach to this case is that stated in the oft cited case of Cape Brandy Syndicate v
Inland Revenue Commissioners [1920] 1 KB 64 as applied in T.M. Bell v Commissioner of
Income Tax [1960] EALR 224 where Roland J. stated, “ …in a taxing Act, one has to look
at what is clearly said. There is no room for intendment as to a tax. Nothing is to be read
in, nothing it to be implied. One can only look fairly at the language used… If a person
sought to be taxed comes within the letter of the law he must be taxed, however great the
hardship may appear to the judicial mind to be. On the other hand, if the Crown, seeking
to recover the tax, cannot bring the subject within the letter of the law, the subject is free,
however apparently within the spirit of the law the case might otherwise appear to be.” As
this case concerns the interpretation of the Income Tax Act, I am also guided by the dictum
of Lord Simonds in Russell v Scott [1948] 2 ALL ER 5 where he stated, “My Lords, there is
a maxim of income tax law which, though it may sometimes be overstressed yet ought not
to be forgotten. It is that the subject is not to be taxed unless the words of the taxing statute
unambiguously impose the tax upon him” adopted in Stanbic Bank Kenya Limited v Kenya
Revenue Authority CA Civil Appeal No. 77 of 2008 (Unreported) [2009] eKLR per Nyamu
JA (See also Jafferali Alibhai v Commissioner of Income Tax [1961] EA 610, Kanjee Naranjee
v Income Tax Commissioner [1964] EA 257). Any tax imposed on a subject is dictated by the
terms of legislation and taxing authority must satisfy itself that the transaction ts within
the denition of the statute. In Adamson v Attorney General (1933) AC 257 at p 275 it was
held that, “The section is one that imposes a tax upon the subject, and it is well settled that
in such cases it is incumbent on the Crown to establish that its claim comes within the very
words used, and if there is any doubt or ambiguity this defect-if it be in view of the Crown
a defect can only be remedied by legislation.”
15. In this regard, under section 31(4) of the Tax Procedures Act, an amendment outside the 5 year period
can only be permitted if there is evidence of willful neglect, evasion, or fraud by or on behalf of the
tax payer. In its judgment, the Tribunal found that the appellant had the burden of proving that the
respondent was grossly or willful negligent. The Tribunal further held that gross or willful negligence
relate to substantive tax dispute and not procedural issues.
16. In tax matters the onus of proving that an assessment is wrong always lies with the tax payer. The
justication therefor is that the taxpayer has possession of the documents or evidence for proving or
disproving a tax liability.
17. The legal position is that, all assessments ought to be made within 5 years except when there is evidence
of gross or willful neglect, evasion or fraud on the part of the tax payer. This also goes hand in hand with
the provisions of section 23 of the Tax Procedures Act which requires a tax payer to retain documents
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for the same period. The implication is that, after 5years, since no assessment can be made, the taxpayer
is absolved of his burden of maintaining such records.
18. From the evidence on record, the appellant demanded documents from the respondent but the latter
delayed in producing the same. However, the appellant was not bound to halt his audit and render his
decision on the ground that he was awaiting the production of those documents. He would have made
his assessment and left the respondent to object with appropriate documentation.
19. On what amounts to gross or willful neglect, it would be instances where there is prove of an intentional
gross deviation of what is reasonably accepted on the part of the tax payer. The respondent produced
the requested documents but there was period of delay on the part of the appellant that is unexplained
despite knowing that he was bound by the strict timelines of section 31(4) of the Tax Act.
20. As to the submission that the respondent owed a duty of care, I accept the respondent’s objection that
the same was neither pleaded nor canvassed before the Tribunal. The same cannot be allowed to raised
for the rst time on appeal. This Court is only required to pronounce itself on matters that have been
placed before the Tribunal and the latter has pronounced itself on the same or has failed to do so.
21. In view of the foregoing, the Court nds that the Tribunal did not err in nding that the appellant
did not suciently demonstrate that he had discharged his burden of proving that he was justied to
render his assessment outside the statutory prescribed time limit.
22. Accordingly, the Court nds no merit in the appeal and the same is dismissed with costs. The judgment
of the Tribunal delivered on 14/4/2022 is hereby upheld.
It is so decreed.
DATED AND DELIVERED AT NAIROBI THIS 10TH DAY OF NOVEMBER, 2023.
A. MABEYA, FCI Arb
JUDGE
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