Big win for KRA in Ksh.1.1B tax evasion suit


Big win for KRA in Ksh.1.1B tax evasion suit
Auditor Hand Checking Invoice Using Magnifying Grass. Tax Fraud Investigation Concept

The Kenya Revenue Authority’s position has been upheld by the Tax Appeals Tribunal in a case filed by three taxpayers challenging a move by the KRA’s Commissioner for Investigations and Enforcement to issue them with Notices of Tax Investigations.

Mobile Galary Limited, Anand Kenya Trading Limited, and Smart Phone Stores Limited argued in their appeal to the Tribunal said that Investigations and Enforcement’s Notices of Tax Investigations that the Commissioner issued against them were unconstitutional and unlawful.

According to the court papers, preliminary findings into the three companies’ tax affairs revealed that Mobile Galary Limited owed Ksh. 781,573,257, Anand Trading Kenya Limited owed KRA Ksh. 109, 686, 655, and Smart Phone Stores Limited owed Ksh. 273,338,150.

The Commissioner had invited the three companies to resolve the issue within 14 days or face prosecution for tax evasion in the Notices. 

The three companies contended that the notices amounted to a final decision because of the impending criminal prosecution, and that the demand for payment without first issuing an assessment was not only unreasonable but also illegal.

The KRA, on the other hand, maintained that the notices were intended to inform taxpayers about the investigations.

The preliminary findings indicated that there was undeclared income, which was an indication of tax evasion by the taxpayers.

The Commissioner further contended that the notices were meant to give the taxpayers an opportunity to explain the deposits in their bank accounts.

The Tax Appeals Tribunal issued its decision on April 1, 2021, agreeing with the Commissioner’s preliminary objection that a Notice of Tax Investigation is not an appealable decision under the Tax Procedures Act.

“It is premature for the Appellant to file an appeal to this Tribunal on the basis of an initial Notice of Investigation issued by the Respondent. If the Tribunal was to stop investigations at such an early stage, on the grounds relied upon by the Appellant, such an order will undoubtedly hinder the Respondent in carrying out its statutory mandate,” the Tribunal ruled.

The ruling is a big win for KRA and will boost efforts to curb tax evasion and enhance tax compliance.

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