Section 51(11) of the Tax Procedures Act (TPA) imposes mandatory timelines (60 days) for the Commissioner to issue an objection decision. These timelines are not procedural formalities but critical safeguards to ensure taxpayer rights and business certainty. Delays undermine commerce, as taxpayers cannot plan effectively without timely resolutions.
Case study: Panari Centre Limited v Commissioner of Legal Services & Board Coordination Tax Appeal E863 of 2024
- KRA in June 2021 issued an additional tax assessment, rejecting Panari Centre’s claim for Sh33 million in tax credits for the 2015 financial year.
- Panari Centre objected to the assessment a month later, arguing that the credits stemmed from overpaid income taxes from 2012 to 2014 and should be carried forward under tax law.Panari Centre waited for 35 months for a response from KRA response, which came on June 26, 2024 by issuing a Confirmation of Assessment Notice.
- KRA in the Confirmation of Assessment Notice formally confirmed its rejection of the objection, citing that the credits were wrongly claimed under Section 42 of the Income Tax Act rather than Section 47 of the Tax Procedures Act.
Panari Centre Limited’s Case
- Panari averred that the Confirmation of Assessment Notice was issued outside the 60 days’ statutory period offending section 51(11) of the Tax Procedures Act.
KRA’s Case
- KRA submitted that Panari sought credit under Section 42 of the ITA instead of Section 47 of the Tax Procedures Act.
- KRA did not in its filings address the issues of section 51(11) of the Tax Procedures Act regarding the statutory period to issue an objection decision.
Tribunal’s Decision
- The Tribunal noted and observed that KRA never explained the circumstances under which it took 35 months to issue its objection decision.
- The Tribunal reiterates that the provisions of Section 51(11) of the TPA are mandatory, requiring KRA to issue its objection decision within 60 days of receipt of Panari’s objection.
- The consequence of the failure by KRA to comply with the provisions of Section 51 (11) of the TPA is that the notice of objection is deemed to be allowed by operation of the law.
- The Tribunal found and held that the Confirmation of Assessment Notice issued by KRA was time barred pursuant to Section 51(11) of the TPA and the Panari’s notice of objection stood allowed by operation of law.
Conclusion
- It is imperative for the stakeholders involved in tax appeals to follow the law and its provisions to the full extent.
- This will help in curbing undue delays and frustrations to all the parties involved.
- The provisions set in the relevant tax laws are mandatory and not a procedural technicality.
Recommendations
- It is vital that taxpayers and tax authorities alike to gain a proper understanding of the relevant tax laws governing tax appeals.
- If in doubt on the interpretation of the said laws, it would be in their best interests for the parties involved to engage the services of a professional tax consultant and expert.
- At Intelpoint Consulting, our professional tax advisory services offer solutions to manage and walk you seamlessly through the resolution of tax appeals that may arise for businesses and individuals alike.