Commissioner of Investigation & Enforcement v Hanqing Zhao

4. Following the lodgment of the objection on the i-tax, the Commissioner thereafter issued its Objection Decision, confirming the tax liability, on 29th January 2024, slightly reviewing downwards the tax assessed to Kshs. 1,129,243,870 5. Dissatisfied with the Commissioner’s decision, the Respondent, on 20th February 2024, filed an appeal at the Tax Appeals Tribunal, challenging the same. The Tribunal considered the Appeal and delivered its judgment on 22nd November 2024 in favour of the Taxpayer/Respondent. 6. The Tribunal found the date objection to be 29th September 2023 and not 30th November 2023 as had been argued by the Commissioner. Accordingly, the Tribunal held that the Commissioner’s Objection decision of 29th January 2024 was issued outside the 60-day period prescribed under section 51(11) of the Tax Procedures Act, with the consequence that the whole of the taxes assessed (Kshs. 1,129,243,870) was set aside. 7. Aggrieved by the Tribunal’s judgment, the Appellant/Commissioner filed this instant appeal vide a memorandum of appeal dated 17th January 2025, raising the following seven (7) grounds of appeal: i. That the Tribunal erred in law in finding that the Respondent's objection decision dated 29th January 2024 was late by around 60 days. ii. That the Tribunal erred in Law in finding that the Respondent, having failed to lodge the objection on i-tax on time, was not required to seek leave to file Appeal out of time contrary to section 51(6) of the Tax Procedures Act. iii. That the Tribunal erred in law in failing to consider the Appellant’s evidence on record on the exact date the Respondent lodged the application for late objection. iv. That the Tribunal erred in law in failing to find that the Respondent, having lodged the objection on 30th November 2023 and the Appellant having issued the decision on 29th January 2024, the same was issued within the stipulated statutory timelines of 60 days. v. That the Tribunal erred in Law in finding that the Respondent’s Objection dated 29th September 2023 stood allowed as a matter of law on the 28th of October 2023 when the Appellant failed to render its decision within 60 days. vi. That the Tribunal erred in law in failing to find and determine the other issues that the burden of proof was on the Respondent to explain all the income in their Bank statement. vii. That the Tribunal erred in failing to consider the evidence and Appellant’s submissions placed before it, violated the Appellant’s right to fair hearing granted under Article 50(1) and 50(2) of the Constitution of Kenya. 8. The Taxpayer, having been successful before the Tribunal on the preliminary issue of timeliness, opposes this Appeal vide a Statement of Facts dated 10th February 2025. 9. Pursuant to the directions of this Court, the Appeal was canvassed by way of written submissions. The Appellant, through Ms. Winnie Otieno – Advocate, filed its submissions dated 12th June 2025. The Respondent’s Advocates, Maero & Company Advocates, filed submissions dated 9th April 2025 on behalf of the Respondent. Analysis and Determination 10. Having carefully considered the memorandum and record of appeal, the parties' submissions, and the applicable law, I find the following two issues as requiring this Court’s determination: - https://new.kenyalaw.org/akn/ke/judgment/kehc/2025/16297/eng@2025-10-27 2

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i. Whether the Tribunal erred in finding that the Objection Decision was made outside the statutory period. ii. Whether the Tribunal erred in deeming the Objection as allowed. Whether the Objection Decision was made outside the statutory period 11. The law governing objection to tax assessments is Section 51(11) of the Tax Procedures Act, 2015, which provides that the Commissioner shall make an objection decision within sixty (60) days from the date of receipt of a valid notice of objection. Where no decision is made within that period, the objection shall be deemed to have been allowed by operation of law. 12. Section 51(11) provides that: “ The Commissioner shall make the objection decision within sixty days from the date of receipt of a valid notice of objection failure to which the objection shall be deemed to be allowed.” 13. In the present case, it is not disputed that the Respondent first lodged its Objection to the Appellant’s assessment vide a physical letter dated 29th September 2023, sent to the Appellant's officers through their mail. The Respondent contends that this is the operative date from which the 60 days provided under Section 51 (11) of the TPA is to be reckoned. Accordingly, it is the Respondent’s position that the timeline within which the Commissioner was to issue its Objection decision expired on 28th November 2023, and therefore the Commissioner’s Objection Decision of 29th January 2024 was made beyond the statutory timelines, with the consequence that its Objection was allowed by operation of the law. 14. The Appellant, on the other hand, maintains that the 60-day period prescribed under Section 51(11) of the Act is to be reckoned from 30th November 2023, when the Respondent formally lodged its Objection on the i-tax. According to the Appellant, the letter of 29th September 2023 did not amount to a valid lodgment of Objection. The Commissioner, therefore, argues that the Objection Decision, having been made on 29th January 2024, was well within the time limits provided under the law. 15. The Tribunal in the impugned decision held that the objection decision dated 29th January 2024 was issued out of time. The Appellant contests this finding, submitting that the Respondent’s objection was validly lodged through the iTax system on 30th November 2023, and that the decision rendered on 29th January 2024 fell within the statutory sixty (60) days. 16. From the above, it is apparent that the key question for consideration before this Court is whether the physical letter dated 29th September 2023, which the taxpayer transmitted to the personal email addresses of certain officers of the Appellant, constituted a valid notice of objection within the meaning of Section 51 of the Tax Procedures Act, 2015, or whether the Objection only became valid on 30th November 2024 upon lodgment of the same on the i-tax Platform. 17. Having considered the facts of this case, I am persuaded that the date from which the sixty (60) day period provided under section 51(11) ought to be reckoned is 30th November 2023, when the Respondent formally lodged the Objection on the i-tax platform. The reasoning is simple: just as a tax assessment not generated through the iTax system cannot be deemed a valid assessment under the law, this Court is equally of the view that an objection to a tax assessment must likewise be lodged through the same iTax system to acquire legal validity. https://new.kenyalaw.org/akn/ke/judgment/kehc/2025/16297/eng@2025-10-27 3

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18. The i-tax, being the prescribed electronic platform, serves a critical statutory and administrative function as it ensures that each objection is linked to a specific assessment, assigned a unique reference number, and bears an official time stamp indicating the precise date and time of lodgment. These features provide the necessary transparency and certainty in the computation of timelines and tracking of objections under Section 51(11) of the Act. 19. By contrast, an objection transmitted through other means, such as personal or departmental email (as is the case herein), lacks these essential attributes. It is incapable of generating an auditable trail and exposes the process to ambiguity, dispute, and potential abuse. 20. In the present case, evidence on record indicates that the taxpayer subsequently lodged a formal objection through the iTax system on 30th November 2023. That is the operative date from which the sixty (60) days contemplated under Section 51(11) of the Tax Procedures Act must be reckoned. 21. Having taken the deliberate step to re-lodge its objection through the i-tax platform, the Respondent was estopped from reverting to and relying on the earlier correspondence of 29th September 2023 as the basis for the computation of time. In John Mburu v Consolidated Bank of Kenya [2018] KECA 796 (KLR), the Court of Appeal, referring to Lord Denning, M.R. in D & C Builders vs Sidney Rees (1966) 2 QB 617 stated that: “ ‘It is the first principle upon which all courts of equity proceed, that if parties, who have entered into definite and distinct terms involving certain legal results, afterwards by their own act or with their own consent enter upon a course of negotiation which has the effect of leading one of the parties to suppose that the strict rights arising under the contract will not be enforced, or be kept in suspense, or held in any event, the person who otherwise might have enforced those rights will not be allowed to enforce them when it would be inequitable having regard to the dealings which have taken place between the parties.’” 22. Based on the foregoing, it is the finding of this Court that the Commissioner’s Objection Decision issued on 29th January 2024 was made well within the statutory time limits. The Tribunal therefore erred in finding that the decision was issued out of time. 23. Accordingly, I find and hold that the Tribunal erred in law and in fact in determining that the Commissioner’s Objection Decision was issued outside the statutory period. The proper computation of time commenced on 30th November 2023, being the date on which the Respondent validly lodged its objection through the iTax system, and the decision rendered on 29th January 2024 fell within the sixty (60) days prescribed under Section 51(11) of the Tax Procedures Act, 2015. Whether the Tribunal erred in deeming the Objection allowed 24. Having found that the Hon. Tribunal erred in finding that the Objection Decision was not made outside the statutory timelines, it follows that the Tribunal equally erred in law in deeming the Respondent’s Objection as allowed under Section 51(11) of the TPA. 25. That said, despite this Court’s finding that the decision of the Tax Appeals Tribunal cannot stand, I am persuaded that it would be unjust and contrary to the dictates of Article 159(2)(d) and Article 210 of the Constitution to simply uphold the Commissioner’s Objection Decision and thereby trigger enforcement of the entire tax demand of over Kshs. 1.1 billion, without allowing the taxpayer to have its substantive objections ventilated and determined on their merits. https://new.kenyalaw.org/akn/ke/judgment/kehc/2025/16297/eng@2025-10-27 4

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26. Justice in tax administration must balance legality with fairness. The object of this appeal was to determine the legality and timeliness of the Commissioner’s decision, not to foreclose the taxpayer’s right to be heard on the merits of its case. 27. Accordingly, while I set aside the judgment of the Tax Appeals Tribunal delivered on 22nd November 2024, I decline to uphold the Commissioner’s Objection Decision as final. Instead, I direct that the matter be remitted to the Tax Appeals Tribunal for a fresh hearing and determination on the merits of the taxpayer’s appeal, in accordance with the law and procedure. Disposition 28. 29. In the result, this Court makes the following orders: i. The letter dated 29th September 2023, transmitted by the Respondent through personal email, did not constitute a valid notice of objection under Section 51 of the Tax Procedures Act, 2015. ii. The Respondent’s valid notice of objection was lodged through the iTax system on 30th November 2023. iii. The Commissioner’s Objection Decision dated 29th January 2024 was issued within the statutory timelines prescribed under Section 51(11) of the Act. iv. The decision of the Tax Appeals Tribunal delivered on 22nd November 2024 is hereby set aside in its entirety. v. However, in the interests of fairness and substantive justice, the matter is remitted to the Tax Appeals Tribunal for a fresh hearing and determination on the merits of the Respondent’s objection, in accordance with the law. vi. Each party shall bear its own costs of this appeal. It is so ordered. SIGNED, DATED, AND DELIVERED IN VIRTUAL COURT THIS 27TH OCTOBER 2025 ADO MOSES JUDGE In the presence of: C/A – Moses Ms. Otieno…………..for the Appellant Maero………..... for the Respondent https://new.kenyalaw.org/akn/ke/judgment/kehc/2025/16297/eng@2025-10-27 5

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