This comes after the Tax Appeal Tribunal ruled in the authority’s favor in a case lodged by three companies to dispute a move by KRA commissioner for investigations and enforcement to present them with notices of tax investigations.
â€œIt 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,â€ ruled the tribunal.
The Tax Appeals Tribunal gave the ruling on April 1, 2021, based on the Tax Procedures Act which hinders the appeal of the Notice of Tax Investigation.
Mobile Galary Limited, Anand Kenya Trading limited, and Smartphone stores limited stated that the notices issued to them were unconstitutional and against the law.
The court statements indicated that preliminary findings into the three companiesâ€™ tax affairs proved that Mobile Galary Limited owed Ksh781,573,257, Anand Trading Kenya Limited owed Ksh109, 686, 655, and Smart Phone Stores Limited owed Ksh273,338,150 to KRA.
This was a clear indication of tax bypass in form of undisclosed wealth. The companies accused KRA of illegally demanding payment without conducting an assessment and used the upcoming prosecution as a scapegoat.
But the authority maintained that the notices were to inform them of the investigations as well as giving them time to shed light on the deposits in their bank accounts.
KRA has a department that does tax investigations. The investigations involve inquiries into the tax affairs of a taxpayer where the Commissioner has reasonable cause to believe that a taxpayer is involved in tax evasion and violation of revenue laws.
Once investigations commence, the department obtains the facts and evidence needed to establish the elements of criminal activity with a view to prosecuting the perpetrators and recover the taxes.
Preliminary investigations are conducted upon receipt of information in order to ascertain the veracity of the allegations of tax evasion. If satisfied that the information is sufficient to warrant investigation, a case is registered for investigations.
After preliminary investigations, a notice is issued to the taxpayer informing them that he/ she/they are under investigation and outlining the reasons for such investigations as well as the potential amounts of taxes lost.