?In absence of evidence of expenses(documents), KRA is at the liberty of charging income tax on the entire sales

Case Study:Beta_Solutions_Limited-Vs-_Commissioner_of_Domestic_Taxes_Tat_No._122_Of_2020_

BSL received a withholding tax certificate for an income worth KES 32,000,000 in the year 2016, however, the company did not claim the withholding tax nor declare the said income.

BSL did not file its income tax returns for the year 2016

On 04/03/2018, KRA raised an additional assessment

On 03/07/2018, BSL raised an objection alleging that its auditor was sick and incapacitated during the year 2016.

BSL did not support its objection with documents, as such KRA confirmed an assessment of KES 9,669,830 on 05/02/2019

BSL appealed to TAT on?02/04/2020 on the following grounds:

• ???The assessment was erroneous since KRA did not consider expenses.
• ·????KRAs assessment ?was based on estimates.

BSL did not do written submissions nor attend TAT hearings

KRA argued that:

• ??BSL did not provide proof of expenses
• ??In absence of evidence of expenses, KRA was at the liberty of charging income tax on the entire turnover.
• With the absence of documentary evidence, BSL could not challenge the assessment

In its ruling on ?15/12/2021, the TAT observed that:

• ?BSL objection was not proper; it was not supported with evidence, the reason for the late submission was not supported too.
• ?As per the provisions of the Income Tax Act and the Tax Procedure Act, proof of expenses must be provided by the taxpayer

Income Tax Act

?54A. Keeping of records of receipts, expenses, etc.

(1) A person carrying on a business shall keep records of all receipts and expenses, goods purchased and sold and accounts, books, deeds, contracts and vouchers which in the opinion of the Commissioner, are adequate for the purpose of computing tax.

?Tax Procedure Act

56. General provisions relating to objections and appeals (1) In any proceedings under this Part, the burden shall be on the taxpayer to prove that a tax decision is incorrect.

As such , BSL lost