Case Reference:Mt Longonot Medical Services Ltd v Commissioner of Legal Services & Board Co-ordination (Tax Appeal E1131 of 2025) [2026] KETAT 265 (KLR) (27 July 2026) (Judgment)
The Background
Mt Longonot Medical Services Ltd is a private limited company registered in Naivasha. Its principal activity is providing health and medical services to the local community. Like many small and medium businesses, it focused on operations and patients, but neglected a critical obligation: filing its corporate income tax returns on time.
On 9th October 2024, the Commissioner of Legal Services & Board Co-ordination issued a default assessment of Kshs. 3,678,934.71 for Income Tax Company for the year 2023. The assessment included penalties and interest. The reason? The company had failed to file its self-assessment returns for 2023 within the statutory period.
Under Section 29 of the Tax Procedures Act, the Commissioner is empowered to issue a default assessment when a taxpayer fails to submit a tax return. The assessment is based on available information and made to the best of the Commissioner’s judgment. The taxpayer then bears the burden of proving that the assessment is incorrect.
The Objection Stage
The company lodged a late objection on 2nd May 2025. Surprisingly, the Commissioner admitted the late objection on 15th May 2025 and gave the company an opportunity to prove its true tax position. By email dated 28th May 2025, the Commissioner requested specific documents: audited financial statements, trial balances, general ledgers, sales and expenses ledgers, bank statements for 2023, and detailed tax computations. This was the company’s golden chance to overturn the default assessment.
The company responded, but what it submitted was deeply problematic. It submitted financial reports for the year ended 31st December 2023 that were unsigned and lacked an auditor’s report. Then came the most striking submission: a carton box filled with hardcopy documentation comprising cash requisition forms, imprest requests for various departments, payment vouchers, and assorted receipts. There were no corresponding trial balances, general ledgers, or detailed expense schedules to tie these receipts to the company’s actual books. Despite being specifically requested, the company submitted no detailed tax computation or self-assessment return for the period.
On 30th June 2025, the Commissioner issued its objection decision disallowing the objection in full. The reasons were clear. The financial statements could not be relied upon because they were unsigned and lacked an auditor’s report. The bulk hardcopy documents could not be verified because they were not accompanied by relevant ledgers or schedules. And no detailed tax computation or self-assessment return was submitted despite being specifically requested. The company’s objection was dead on arrival.
The Appeal Before the Tribunal
Aggrieved, the company filed an appeal with the Tax Appeal Tribunal on 9th October 2025. It raised several grounds, arguing that the Commissioner had ignored its documents, acted vindictively, and violated Article 47 of the Constitution on fair administrative action. The company also claimed that the Commissioner had arbitrarily disallowed 70% of its expenses, applied only 30% as allowable costs, and wrongly classified revenue expenditure on stock as capital. It cited case law including Joseph Muriithi Ndirangu v Commissioner of Domestic Taxes, Local Productions Kenya Limited v Commissioner of Domestic Taxes, and the old Indian case of Raghubar Mandal v The State of Bihar to support its position.
The Commissioner defended its decision with clear counterarguments. It clarified that in the default assessment, it had actually allowed 60% of turnover as allowable expenses and disallowed only 40%, not the 70% disallowance the company was alleging. The Commissioner emphasized that the default assessment was issued under Section 29 of the Tax Procedures Act because the company had failed to file its returns. More importantly, the Commissioner pointed to the insufficiency of the company’s documentation, noting that unsigned financials and a box of unverifiable receipts could not discharge the taxpayer’s burden of proof.
The Commissioner invoked Section 56(1) of the Tax Procedures Act and Section 30 of the Tax Appeals Tribunal Act, which place the burden squarely on the taxpayer to prove that an assessment is incorrect or excessive. It cited recent High Court authority including Commissioner of Domestic Taxes v Trical and Hard Limited [2022], where the court held that the taxpayer’s evidence must be competent and relevant, and Commissioner of Investigations & Enforcements v Dr. Evans Kidero [2022], which emphasized that Kenya’s tax system is built on self-assessment and full disclosures.
The Tribunal’s Analysis
When the Tribunal examined the appeal record, it made a critical observation. The company had attached only email correspondence, the late objection letter, and the Commissioner’s objection decision. It had not attached the financial statements, ledgers, tax computations, or even the box of receipts to the appeal file. The Tribunal was therefore unable to authenticate the company’s claim that it had provided sufficient documents.
The Tribunal reaffirmed that tax assessments enjoy a presumption of correctness unless the taxpayer provides evidence to the contrary. It cited the High Court decision in Kenya Revenue Authority v Maluki Kitili Mwendwa [2021], where the court held that the taxpayer must present a minimum amount of information necessary to support its position. The Tribunal emphasized that under Section 56(1) of the Tax Procedures Act, the burden is on the taxpayer to prove that a tax decision is incorrect. While providing primary documents may initially shift the evidential burden to the Commissioner, when discrepancies arise or documents are incomplete, the burden swings back to the taxpayer to clear those doubts. The company had failed to clear the doubts raised by the Commissioner’s assessment.
The Final Decision
On 27th July 2026, the Tribunal delivered its judgment dismissing the appeal in its entirety. It held that the company had failed to discharge its burden of proof under Section 56(1) of the Tax Procedures Act. The unsigned financial statements could not be relied upon because they lacked auditor certification and were not accompanied by foundational ledgers. The bulk hardcopy documents could not be verified because there were no ledgers or schedules to confirm the nature, accuracy, and allowability of the claimed expenses. And despite being specifically requested, the company had submitted no detailed tax computation or self-assessment return for review.
The Tribunal ordered that the objection decision dated 30th June 2025 be upheld, the appeal be dismissed, and each party bear its own costs.
Key Lessons for Taxpayers
This case reinforces critical principles that every taxpayer and professional must understand. If you fail to file your tax returns within the statutory period, the Commissioner is empowered under Section 29 of the Tax Procedures Act to issue a default assessment based on available information and to the best of his or her judgment. The assessment will include penalties and interest, and it will be difficult to overturn without proper documentation.
If you claim expenses, your documents must tell one complete story. Unsigned financial statements, missing auditor’s reports, and bulk hardcopy documents without supporting ledgers will raise red flags. The Commissioner will ask for trial balances, general ledgers, sales and purchases ledgers, bank statements, and detailed tax computations. If you cannot provide them, your objection will fail.
Under Section 56(1) of the Tax Procedures Act, the burden is on the taxpayer to prove that a tax decision is incorrect. While providing primary documents may initially shift the evidential burden to the Commissioner, when discrepancies arise or documents are incomplete, the burden swings back to the taxpayer to clear those doubts. Failure to provide additional documents requested by the Commissioner means you have not discharged your burden.
Section 43 of the VAT Act and other tax laws require you to keep all records for five years. This includes signed financial statements, auditor’s reports, general ledgers, trial balances, sales and purchases ledgers, stock records, bank statements, copies of invoices, and tax computations. If you cannot produce these records, the Commissioner is entitled to draw adverse inferences.
Under Section 59 of the Tax Procedures Act, the Commissioner can request production of additional information if the information given is insufficient. This is not an optional request—failure to comply will be used against you. The Commissioner acted within its powers in requesting the specific documents from Mt Longonot Medical Services Ltd, and the company’s failure to provide competent documentation was fatal to its case.
Mt Longonot Medical Services Ltd fought this case through the objection stage and then to the Tax Appeal Tribunal. The company lost at every level and is now liable for the original Kshs. 3.6 million plus penalties and interest. Early engagement with qualified tax lawyers or consultants could have helped identify the documentation gaps early and potentially resolved the matter before it escalated. A tax health check, rather than waiting until an assessment to discover that the supporting records do not speak to each other, is essential for every business.
Conclusion
Another very instructive decision. What stands out for me is that tax documentation should not merely exist—it should reconcile across the entire transaction trail. An invoice, payment record, bank statement, stock movement, and accounting entry should ultimately tell the same commercial story. Where inconsistencies arise, or where documents are incomplete or unverifiable, producing a box of receipts alone will not be enough to discharge the taxpayer’s burden.
For practitioners, this reinforces the importance of testing the full audit trail during a tax health check, rather than waiting until an assessment to discover that the supporting records do not speak to each other. The Tribunal’s decision in Mt Longonot Medical Services Ltd v Commissioner of Legal Services & Board Co-ordination [2026] KETAT 265 (KLR) is a stark reminder that in Kenya’s self-assessment tax system, the burden rests on the business to keep proper records, file returns on time, and if challenged, present competent, verifiable, and complete documentation.
