The High Court has referred a Sh6.6 million tax dispute between the Kenya Revenue Authority (KRA) and Prexidis N. Muasya, trading as Prexx Ventures, back to the Tax Appeals Tribunal (TAT).
The decision comes after Justice Rhoda Rutto, who presided over the appeal, found that the Tribunal had erred by deciding on an issue not properly before it, thereby depriving KRA a fair opportunity to be heard.
The dispute stems from a tax assessment covering the period between January 2016 and December 2017 totaling Sh6,621,971.
The tax authority had issued the assessments, prompting Prexidis N. Muasya, the taxpayer, to appeal to the TAT, contesting the assessments.
The Tax Appeals Tribunal had partially upheld the assessment for the year 2017 but quashed the income tax assessment for 2016.
In its appeal, the KRA challenged the Tribunal’s decision, arguing that the issue of the 2016 tax assessment had not been properly raised during the hearing.
The Appellant (KRA) argued that the Tribunal had no jurisdiction to address the 2016 assessment, which was not part of the original dispute brought before it.
“The Tribunal erred in adjudicating on an issue related to the income tax assessment for the year 2016, contrary to Section 29 of the Tax Procedures Act 2015,” the KRA argued in its appeal.
“It is a well-established legal principle that a tribunal can only determine matters that have been properly pleaded,” the commissioner of investigation added
The court agreed with KRA, stating that the Tribunal had exceeded its jurisdiction by raising and ruling on an issue that was not included in the formal Notice of Objection or the Appeal documents.
Judge Rutto noted that the tax authority had not been given the opportunity to address the issue of statutory timelines during the Tribunal’s hearing
The issue in question was whether the 2016 tax assessments had been issued within the legally prescribed time frame, an issue not raised by Prexidis N. Muasya in the original appeal.
“The Tribunal erred in determining an issue that had not been pleaded by the parties in the original appeal,” Justice Rutto stated in her ruling.
The High Court also criticized the Tribunal for not allowing both parties to address this new issue, thereby violating the constitutional right to a fair hearing.
Lady Justice Rutto, in her ruling, said: “The Tribunal’s finding on the suo moto basis relating to the income tax assessment for the year 2016 is hereby set aside.”
She further directed that the matter be remitted back to the Tax Appeals Tribunal for a fresh determination, emphasizing the need for both parties to be heard on the merits of the case
The case revolves around a contentious interpretation of the Tax Procedures Act, specifically Section 29, which restricts tax assessments to a period of five years.
The Tribunal had quashed the 2016 assessment on the grounds that it fell outside the statutory timeline, a position the KRA disagreed with.
“The issue of whether the 2016 income tax assessment was issued beyond the statutory five-year limit was not part of the appeal, and the Tribunal had no jurisdiction to make a ruling on this,” the KRA’s legal team emphasized during the hearing.
In response, Prexidis Muasya’s counsel, Mr. Bosire, argued that the Tribunal was justified in quashing the 2016 assessment, asserting that the law prevented such assessments beyond the prescribed five-year period.
He also argued that the KRA had ample opportunity to address this issue but failed to do so during the hearing.
Despite the disagreement, the High Court has now paved the way for a fresh hearing of the case.
Justice Rutto concluded, “The matter shall be remitted back to the Tax Appeals Tribunal for determination on the merits of the dispute.”
Both parties are expected to present their cases afresh before the Tribunal, with the KRA maintaining that the original assessment was valid.
