KRA MOVES TO HIGH COURT AGAINST TAX APPEAL TRIBUNAL JUDGEMENT OVER 4.8B

KRA MOVES TO HIGH COURT AGAINST TAX APPEAL TRIBUNAL JUDGEMENT OVER 4.8B

By Mercyline Omware

Kenya Revenue Authority (KRA) appealed to

the High Court against the Tax Appeals

Tribunal (TAT) judgment in a case between the

Authority and Roshina Timber Mart Limited.

On 26th February 2020, TAT delivered a

judgment in favor of KRA agreeing with the

Authority that failure to keep, retain or maintain

records is as offense under Section 93 of the

Tax Procedures Act and therefore allowing

input tax recovery would amount to aiding

criminal conduct.

In the case between Roshina Timber Mart

Limited vs Commissioner of Domestic Taxes,

the Tribunal found further that the VAT Act

2013 is clear that for input tax to be allowable,

it must have been incurred for the purposes of

the business or to make taxable supplies.

It therefore follows that where the input tax is

not for the purpose of the business or incurred

in the course of making supplies then it is

disallowable.

The TAT concluded that KRA was correct in

seeking additional documentation to prove that

transactions with specific suppliers took place.

And even where proof had been given to show

that the transactions had taken place, the

Authority was still within its right to establish

whether the input tax incurred was for business

purposes in order to allow or disallow its

recovery.

The Tribunal buttressed that the law places the

burden of providing supporting documentation

on the taxpayer and in the absence of such

documentation; the KRA is left with no option

but to assess and apply the law as it did.

A month later and on 25th March 2020 in a

case between Shreeji Enterprises Limited Vs

Commissioner of Investigations and

Enforcement, the Tribunal departed from its

ruling in Roshina Timber Mart Limited case and

found that the taxpayer cannot produce

documents that he does not have.

Shreeji Enterprises Limited had claimed local

purchases from seventeen

Other companies that had allegedly supplied

steel products to Shreeji Enterprises Limited

worth Ksh. 4,821,085,712 where payments for

the steel were made by cash during the period

2014 – 2017 years of income. Shreeji

Enterprises Limited indicated that they did not

maintain the requested documents for cash

transactions for scrutiny by KRA.

KRA is dissatisfied with the TAT judgment and

has appealed the entire judgment before High

Court on grounds that.

Tribunal erred in fact and in law in failing to

appreciate that the dispute before it was based

on Section 59 of the Tax Procedures Act which

expressly gives power to the KRA to request the

production of records and additional

information which can fully satisfy the KRA

where it is of the view that the information

given is insufficient.

THAT the Tribunal failed to appreciate and/or

give due regard to the provisions of Section 43

of the VAT Act 2013 applicable to the dispute

which requires the taxpayer to keep

transactional records for a period of five years.

Tribunal erred in both law and fact in failing to

take into account and/ or disregarding evidence

adduced by the witness of the KRA that the

taxpayer allegedly procured steel worth Ksh.

4,821,085,712 on cash basis and the cash

books were not available for perusal.

Tribunal erred in both law and fact in holding

that a stamp on an invoice is sufficient

evidence of a transaction.

Tribunal erred in fact by failing to appreciate

that in this case there was VAT loss because

there was no exchange of goods or services in

respect of which VAT input was claimed by the

taxpayer.