On 18th July 2018, the commissioner issued an objection decision confirming an assessment amounting to Kshs.1,698,702.00 for VAT and Kshs.3,210,651.00 for Corporation Tax against the respondent, Galaxy Tools Limited.
The respondent appealed to the Tax appeals tribunal indicating that they had produced all invoices, delivery notes, and payment schedules as required under Section 17 of the VAT act. The commissioner informed the tribunal that 10 of the suppliers that had issued the invoices were not trading in the goods supplied or were not trading at all. The commissioner proceeded to suspend the PINs of the said traders but they did not come forth to complain or seek reinstatement of their PINs. The traders did not have physical addresses from where they traded or stored their wares.
The Tribunal however found the documents produced under section 17 of the VAT act satisfactory proof of trading thereby overturning the commissioner’s objection decision. Aggrieved by the tribunal’s decision the appellant took the matter to the high court.
The court considered section 56 of the tax procedures act, which shifts the burden of proof to the taxpayer. Further, the court affirmed the commissioner’s powers to seek additional information under section 59 of the Tax procedures act and Section 43 of the VAT act.
The burden of proof starts with the taxpayer to produce the required evidence, then shifts to the commissioner to consider the documents, then eventually shifted to the taxpayer to prove the authenticity and validity of the documents. It was upon the respondent to prove the legitimacy of the documents which they couldn’t.
The tribunal had erred in law by shifting the burden of proof to the appellant which is contrary to the law
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