Case Reference:Yarde Park Lounge Ltd v Commissioner for Domestic Taxes (Tax Appeal E1208 of 2025) [2026] KETAT 308 (KLR) (7 August 2026) (Judgment)
The Background
Yarde Park Lounge Limited, a limited liability company incorporated in Kenya, was engaged in the supply of dry maize for milling to Kingmall Flour Millers Limited. The company maintained that its supplies fell under Chapter 10 of the tariff schedule, excluding seeds of tariff heading 1002, and were therefore exempt from VAT.
On 16th May 2025, the Commissioner for Domestic Taxes issued Yarde Park with a Notice of Intention to audit the company’s tax affairs for the period January 2020 to December 2021. The audit was subsequently completed on 23rd June 2025, resulting in additional tax assessments totaling Kshs. 593,481,355 for corporation income tax and VAT, inclusive of interest and penalties.
On 18th July 2025, Yarde Park filed its objection to the additional tax assessments. Following email correspondences and meetings where KRA invited Yarde Park to validate its objection by providing supporting documents, the Commissioner issued an Objection Decision on 15th September 2025 upholding the additional assessments. Aggrieved by this decision, Yarde Park lodged an appeal on 14th October 2025.
The Composition of the Kshs 593,481,355 Assessment
The assessment of Kshs. 593,481,355 comprised two primary components. The first component was corporation income tax, which arose from the disallowance of 40% of the company’s purchases due to lack of supporting invoices. The second component was VAT, arising from disputed VAT treatment of maize supplies that Yarde Park maintained were exempt. Interest and penalties were subsequently added to both principal amounts, resulting in the total figure demanded.
It is noteworthy that KRA’s decision to disallow 40% of purchases significantly increased the company’s taxable income, thereby directly inflating the corporation tax liability. This aspect of the assessment was particularly contentious, as Yarde Park argued that buying maize directly from farmers during harvest presented practical challenges in obtaining formal purchase invoices.
Yarde Park’s Case
Yarde Park raised several grounds of appeal before the Tribunal. The company contended that KRA erred in law and fact by raising taxes on incorrect reconciled banking variance and by incorrect computation of additional VAT amounts from exempt sales. Yarde Park maintained that it was contracted to supply dry maize for milling to Kingmall Flour Millers Limited, which falls under Cereals of Chapter 10, excluding seeds of tariff heading 1002, and that the income was properly declared.
Yarde Park further argued that KRA erred by disallowing 40% of purchases due to the fact that the company did not provide receipts. The company submitted that buying maize from farmers during harvest—or generally buying agricultural products directly from farmers—poses challenges in obtaining purchase invoices. It would therefore be unfair, Yarde Park argued, for the cost of production to be disallowed on the basis of missing invoices.
Additionally, Yarde Park asserted that KRA contravened Section 3(2)(i) as read with Section 4 of the Income Tax Act, used a speculative approach in raising additional tax even after being given documentary evidence, and acted unreasonably and capriciously. The company also invoked the doctrine of legitimate expectation, arguing that KRA was required to follow certain procedures in arriving at a tax liability.
In its written submissions, Yarde Park reiterated these contentions and cited various case law in support of its appeal. The company maintained that it provided various documents and explanations during KRA’s audit and following the issuance of the Pre-Assessment Notice, which sufficiently explained the variances identified by KRA.
KRA’s Position
The Commissioner for Domestic Taxes defended the objection decision on several grounds. KRA submitted that the additional income tax assessments were based on disallowed unsupported expenses and undeclared income from variances in Yarde Park’s VAT and income tax company declarations.
Crucially, KRA averred that at the objection stage, Yarde Park provided only bank statements, audited accounts, and a contract, but failed to provide additional documents sought. This failure meant Yarde Park did not fully support its objection as required under the Tax Procedures Act to enable ascertainment of its tax liability.
KRA further noted that on 12th August 2025, the Commissioner sent an email to Yarde Park requesting specific documents, including bank statements, audited accounts for the period under audit, expenses ledgers and schedules, expense records, details of sales and purchases ledgers, sample sales invoices and agreements, and any other supporting evidence. KRA explicitly stated the relevance of these documents in validating Yarde Park’s objection, noting that their provision could have led to variation of the additional assessments.
The Commissioner asserted that the additional income tax and VAT assessments were proper based on information available to it and its best judgment.
The Documents Requested by KRA
On 12th August 2025, KRA sent an email to Yarde Park requesting the following documents to validate the objection:
- Bank Statements
- Audited accounts for the period under audit
- Expenses ledgers and schedules for the period under audit
- Expense records for the period under audit
- Details of sales and purchases ledgers
- Sample of sales invoices and agreements
- Any other supporting evidence
KRA explicitly stated the relevance of these documents in validating Yarde Park’s objection and noted that providing them could have led to a variation of the additional assessments.
Yarde Park provided only its bank statements, audited accounts, and the contract with the miller. The detailed ledgers, expense schedules, sales invoices, and purchase records that could have validated the objection were never produced. There was nothing on record to show that Yarde Park provided the said documents in accordance with the applicable law.
The Tribunal’s Analysis
The Tribunal carefully reviewed the rival pleadings and annextures. From the record before the Tribunal, KRA had, via email on 12th August 2025, sought specific documents from Yarde Park. KRA had explicitly stated the relevance of these documents in validating Yarde Park’s objection, which could have led to variation of the additional assessments. However, there was nothing on record to show that Yarde Park provided the said documents in accordance with the applicable law.
The Tribunal noted that Section 59 of the Tax Procedures Act empowers the Commissioner to require any person to produce documents relating to tax liability. The law is clear that for the purposes of obtaining full information in respect of the tax liability of any person, the Commissioner may require any person by notice in writing to produce for examination any documents relating to the tax liability of any person, furnish information relating to such liability, or attend for the purpose of giving evidence.
The Tribunal also considered that under Section 56(1) of the Tax Procedures Act, the burden shall be on the taxpayer to prove that a tax decision is incorrect. Similarly, Section 30 of the Tax Appeals Tribunal Act provides that in a proceeding before the Tribunal, the appellant has the burden of proving that the assessment is excessive or that the tax decision should not have been made or should have been made differently.
The Tribunal further recalled its previous decision in Abyssinia Iron and Steel Ltd v Commissioner of Customs and Border Control (TAT No. 435 of 2022), where it held that once the Appellant has provided evidence that KRA’s assessment was wrong, then KRA must push back and show that its assessment was not arbitrary, capricious, or imagined. The onus will then shift back to the Appellant once KRA has discharged its burden.
Having considered the pleadings and records before it, the Tribunal was constrained to find and hold that Yarde Park did not sufficiently support its objection to KRA’s additional VAT and corporation tax assessments, and thus it did not discharge its burden of proof. KRA’s additional assessments as contained in the Objection Decision dated 15th September 2025 were therefore justified.
Key Takeaways for Taxpayers
Documentation is everything. Yarde Park lost because it did not have the documents. The difference between victory and defeat in tax disputes often comes down to a single document – a proof of payment, a signed wage sheet, a ledger entry. When KRA asks for documents, produce them.
The burden of proof is on the taxpayer. The law places a clear legal obligation on the taxpayer to demonstrate that KRA’s assessment is wrong. It is not enough to simply assert that the assessment is incorrect—the taxpayer must provide evidence to support that assertion.
Respond to all document requests. When KRA requests documents, taxpayers must respond comprehensively. Providing only bank statements and audited accounts is not enough when expense ledgers, sales records, and purchase invoices are specifically requested.
Best judgment has limits – but only when documents are provided. The Commissioner cannot invoke and apply best judgment arbitrarily. This method can only be applied where the taxpayer has failed to provide relevant documents. Where documents are not provided, the Commissioner is entitled to use best judgment.
The agricultural sector faces unique challenges. Yarde Park’s argument about the difficulty of obtaining invoices from small-scale farmers is valid and sympathetic. However, the law requires proof. Taxpayers in the agricultural sector must develop robust record-keeping systems, even when dealing with informal suppliers.
Raise all issues at the objection stage. The Tribunal’s mandate is limited to analyzing evidence and material produced before the Commissioner. Issues not raised at the objection stage cannot be introduced for the first time on appeal.
Timing matters. From the audit notice in May 2025 to the final judgment in August 2026, every date in this story was a missed opportunity. Yarde Park had the chance to save itself when KRA asked for documents on 12th August 2025, but it let that chance slip away.
Conclusion
This case serves as a cautionary tale for all taxpayers. The law places a clear burden on taxpayers to prove that an assessment is incorrect. That burden cannot be discharged through explanations alone – it requires concrete documentary evidence. When KRA asks for documents, produce them. When KRA requests ledgers, provide them. When KRA seeks invoices, produce them. The failure to do so can have severe financial consequences, as Yarde Park discovered to its detriment.
The story of Yarde Park is a reminder that in tax disputes, what is documented is what matters. What is not documented simply does not exist in the eyes of the law. And when a taxpayer fails to back their claims with credible evidence, the assessment stands. That is a six-hundred-
