Case Study:Anper Ltd v Commissioner of Legal Services and Border Cordination (Tax Appeal E679 of 2025) [2026] KETAT 87 (KLR) (26 June 2026) (Judgment)
The Background of the Dispute
Anper Limited is a limited liability company incorporated in Kenya under the Companies Act, operating a business engaged in the importation and sale of second-hand items and clothing, mainly sourced from the United Kingdom. The company maintained bank accounts, prepared financial statements, and filed tax returns in compliance with its statutory obligations. However, in the course of a routine audit, the Kenya Revenue Authority, through the Commissioner of Legal Services and Border Coordination, identified discrepancies in the company’s tax declarations.
The audit covered Value Added Tax for the period from December 2020 to December 2021 and income tax for the years 2020 and 2021. Using bank credits, customs data from the Integrated Customs Management System, and iTax returns, KRA concluded that Anper Limited had under-declared its income and claimed expenses without adequate supporting documentation. Specifically, KRA estimated a profit margin of 25% based on industry margins, allowed the cost of sales represented by customs value and import taxes, plus 50% of gross profit as allowable expenses, and charged tax on interest income earned in the company’s savings account, yielding Kshs. 724,742.
The company objected to the assessment through notices dated February 26, 2025, and March 7, 2025, arguing that it had provided relevant documentation to support its claims. However, KRA was not satisfied and issued a formal Objection Decision on April 25, 2025, disallowing the objection entirely. Aggrieved by this decision, Anper Limited lodged an appeal before the Tax Appeal Tribunal on June 25, 2025.
The Issue for Determination
The central issue in this case was whether the Respondent’s assessment was justified, and whether the Appellant had discharged its burden of proof under Section 56(1) of the Tax Procedures Act.
Anper Limited’s position was that they had provided relevant documentation, including bank statements and financial statements, and that KRA had unfairly disregarded these documents. The company argued that under Section 17(2) of the VAT Act, they only needed to furnish relevant documentation OR show that the supplier declared the sales, and they had satisfied the first condition by submitting invoices and receipts. The company further contended that the 50% rate on gross profit was unrealistic and far above market value, that KRA had failed to consider interbank credits and transactions involving transfers between directors and the company, and that the director was outside the country, limiting their ability to provide evidence.
The Commissioner’s position was that Anper Limited had failed to provide critical documents requested during the audit, including sales ledgers, receipts, invoices, purchase ledgers, expense records, employee records, and contracts. Without these primary records, the company could not prove that the claimed expenses were actually incurred in generating taxable income. KRA maintained that the company had only provided bank statements and financial statements for 2021 and 2022, and no primary records—sales and purchase invoices, receipts, and evidence of payments—were availed to support the company’s contention.
The Respondent also raised a preliminary objection, arguing that the Tribunal lacked jurisdiction because the Appellant’s objections were filed late. KRA claimed the assessment was issued on August 28, 2024, meaning the company had until September 28, 2024, to object under Section 51(2) of the Tax Procedures Act. The objections were filed in February and March 2025, and the company had not sought leave to file late under Sections 51(6) and (7) of the TPA.
The Objection Process
On February 26, 2025, and again on March 7, 2025, Anper Limited lodged objection notices with KRA, contending that:
- They had provided relevant documentation to support their claims for input VAT and expenses
- The Respondent failed to appreciate the use of the coordinating conjunction “or” in Section 17(2) of the VAT Act
- The 50% rate on gross profit was unrealistic and far above market value
- KRA had failed to consider interbank credits and transactions involving transfers between directors and the company
- The director was outside the country, limiting their ability to provide evidence
- KRA had violated their constitutional right to fair administrative action under Article 47
The company argued that they had satisfied the condition set out in Section 17(2)(a) of the VAT Act through the submission of relevant invoices as evidence of commercial transactions. They also submitted that Section 17(2) of the VAT Act outlines conditions to be fulfilled for a taxpayer to be eligible for a deduction of their input VAT, namely that the taxpayer furnishes the relevant documentation, OR the registered supplier declares the corresponding sales in their tax returns. The company contended that these two conditions have mutual exclusivity, and they had satisfied the first condition.
However, the Commissioner was not persuaded by these arguments. The taxman maintained that during the audit, they had requested specific documents and the company had only provided bank statements and financial statements for 2021 and 2022. The rest of the documents were never produced, and no primary records—sales and purchase invoices, receipts, and evidence of payments—were availed to support the company’s contention. The company had also not provided any analysis of the correct bank reconciliation to sales.
On April 25, 2025, the Commissioner issued its Objection Decision, confirming the VAT assessment and disallowing the company’s objection. The decision was based on the finding that the Appellant had failed to provide adequate documentation to support its claims for input VAT deductions and business expenses.
The Tax Appeal Tribunal’s Decision
Anper Limited appealed to the Tax Appeal Tribunal, which reviewed the records and ruled against the taxpayer. The Tribunal’s key findings were as follows:
On the Preliminary Objection (Jurisdiction)
The Tribunal examined the letter KRA relied on, dated August 28, 2024, and found that it was titled “pre-assessment notice” and explicitly stated that an assessment would be issued within seven days. The Tribunal noted that a pre-assessment notice is not an assessment or a tax decision under Section 51(2) of the Tax Procedures Act. KRA had not even filed the actual assessment, making it impossible to verify whether the objections were truly late. The Tribunal ruled that it had jurisdiction to hear the appeal, stating:
“It is thus clear that the letter dated 28th August 2024 was a pre-assessment notice. It was not an assessment. A pre-assessment notice is not an assessment, nor is it a tax decision as envisaged in Section 51(2) of the TPA.“
On the Burden of Proof
The Tribunal applied Section 56(1) of the Tax Procedures Act and Section 30 of the Tax Appeals Tribunal Act, finding that the taxpayer bears the burden of proving that an assessment is excessive or incorrect. The Tribunal noted that Section 59 of the TPA requires the taxpayer to produce documents and records as may be sought by the Respondent.
The Tribunal found that Anper Limited had only provided bank statements and financial statements, failing to provide sales ledgers, purchase invoices, expense records, employee records, and contracts—all specifically requested by KRA under Section 59 of the TPA. The company had not provided evidence to show that these documents were provided, nor had it provided its reason for failing to supply these documents.
The Tribunal stated:
“The Appellant’s failure to prove that it had provided the documents that had been requested of it, or that the documents requested of it were not relevant, means that it has failed to discharge the burden of proof that has been placed on it under Section 56(1) of the TPA.“
The Tribunal cited the case of Mugo v Commissioner of Domestic Taxes (TAT E918 of 2024) KETAT 374 (KLR), which established the precedent that taxpayers must adduce positive documents to demonstrate that a tax assessment is wrong.
On the Fair Administrative Action Argument
The Tribunal found that Anper Limited had not provided evidence to show that it had provided the requested documents or that the documents were irrelevant. The company’s argument that KRA had violated Article 47 of the Constitution was therefore not supported by evidence and lacked merit.
On the VAT Technical Argument
The Tribunal did not address the Appellant’s argument regarding the interpretation of “or” in Section 17(2) of the VAT Act, as the fundamental issue was the lack of supporting documentation. Without primary records to substantiate the claimed transactions, the technical argument was rendered moot.
The Final Result
The Tribunal dismissed the appeal, upheld the Commissioner’s Objection Decision dated April 25, 2025, and ordered each party to bear its own costs.
