Taxpayers challenging the tax assessment issued by the Kenya Revenue Authority (KRA) now face a higher threshold because the High Court has placed the burden on them to ensure that their records are indexed and chronologically matched to support their claims.
In a high-implication decision, the High Court said that it is not enough for taxpayers to furnish KRA with documents and data challenging an assessment, adding that such data must be indexed and chronologically matched.
“The law does not require the commissioner to play the role of a forensic accountant. When a taxpayer is asked to explain why their tax declarations do not add up, the taxpayer must provide clear, specific, and indexed reconciliation. Flooding the Kenya Revenue Authority with unindexed and chronologically mismatched files is not an act of compliance; it is evasion of the taxpayer’s evidential duty,” the High Court said.
A tax assessment is an official calculation by the KRA that shows how much a taxpayer owes the government. The system relies primarily on self-assessment when filing returns through the KRA, though the tax authority can issue amended, default, or additional assessments if discrepancies are found.
The directive came as the High Court overturned a November 10, 2023 determination by the Tax Appeals Tribunal, which threw out a Sh29.21 million assessment by KRA against Jakoline Enterprises Ltd. It argued that the Tribunal erred in assessing the data from Jakoline Enterprises Ltd. submitted as a rebuttal challenging the assessment.
The Sh29.21 million assessment by KRA against Jakoline Enterprises Ltd stems from Sh14.48 million in income tax obligations and Sh14.73 million in value-added tax (VAT) obligations for the period from 2017 to 2020.
According to KRA, the figure was arrived at following an audit that revealed inconsistencies between purchases claimed in Jakoline Enterprises Ltd.’s corporate income tax returns and the purchases made in its monthly VAT returns.
The High Court, in its judgement, took the Tax Appeals Tribunal to task over its decision on the data and documents submitted by Jakoline Enterprises Ltd. when challenging the assessment raised by KRA.
The judgement by the High Court finds that the taxpayer’s evidence failed to meet critical thresholds prescribed in both the Tax Procedures Act and the Tax Appeals Tribunal Act.
“Jakoline Enterprises Ltd. failed to discharge its statutory burden under Section 56(1) of the Tax Procedures Act and Section 30 of the Tax Appeals Tribunal Act. By holding that such unstructured data presentation shifted the duty back to the state, the Tax Appeals Tribunal committed a profound error of law. The tribunal’s decision was based on fundamental misapplication of the rules of evidence and cannot be allowed to stand,” the High Court states.
The High Court judgement means that businesses, especially those that are in the small and medium category, will have to place particular attention on their record keeping to ensure that their tax ledger is well regularized and defensible should it trigger an assessment by KRA.
This judgement comes at a time when taxpayer data and its use in compliance have come under sharp scrutiny following the Finance Act 2026’s introduction of a dual assessment income tax regime in the country, which now allows KRA to leverage third-party data in verifying a taxpayer’s compliance.
