The Kenya Revenue Authority (KRA) has won a Kes3.8 billion tax dispute against Nakuru Cement Supplies Ltd after the High Court rejected a bid by the taxpayer to overturn the demand made in 2017.

Justice Alfred Mabeya rejected the appeal by the supplies company to overturn the tax demand, saying the firm was given time to table evidence supporting claims that it had paid the tax.

According to the evidence tabled in court, KRA investigated the firm and noticed that it had not filed returns from 2011 to 2015.

KRA then gave the company time to file the returns, even though it was late.

Upon filing, the KRA noticed inconsistencies and demanded clarification but was not forthcoming.

Further, the taxman then sourced information from suppliers to the firm and concluded that the firm did not file returns for the said period.

The taxman then raised a tax assessment of Kes 3.83 billion for corporate tax and VAT.

“From the foregoing, it is evident that the appellant was given a reasonable opportunity to present its case. The appellant (Nakuru Cement Supplies Ltd), being the custodian of the necessary documents, was required by law under Section 58 of the Tax Procedures Act 2015 to keep records and submit them to the commissioner if and when called upon to do so,” said the judge.

The Tax Procedures Act allows the KRA to seek taxpayer information and business transactions from third parties such as suppliers, vendors, purchasers and other individuals in its bid to nab tax cheats.

Additionally, by law, KRA is also allowed to search the premises of taxpayers and third parties, seize goods, records and documents, and gather other information that may assist in establishing the taxes payable by particular taxpayers and aiding tax fraud investigations.

The KRA said investigations on the company were caused by the firm’s failure to file tax returns for the said period.

The investigations allegedly revealed that the supplier had received bonuses and discounts, which were not accounted for.

Further, the purchase data received from the suppliers showed that the company had been overstating the purchases in the financial account, thereby reducing its tax liability.

Despite the law requiring the taxpayers to keep records, the taxman said the firm withheld records, forcing the KRA to source them from Nakuru Cement Supplies Ltd.

The KRA told the court that the burden of proving the incorrectness of a tax assessment lies with the taxpayer.

The firm was accused of acquiring data from third parties in coming up with its assessment and failing to share it with the same company.

The supplies company also faulted the tax appeals tribunal, which upheld KRA’s assessment.

The tribunal had also ruled that the firm was accorded an opportunity to present its case to the KRA.

“From the chronology of events as set out above, I find no error in the Tribunal’s holding that the appellant was accorded a fair hearing,” the judge ruled.

The judge also stated that the period of five years started to run from the date the company submitted its returns and not from 2011, when it had deliberately failed to submit the same.