The Kenya Revenue Authority (KRA) has moved to the High Court to appeal a ruling against the taxman issued by the Tax Appeals Tribunal (TAT) in a case involving the authority and Mombasa based hardware dealer Roshina Timber Mart Limited.
On 26th February 2020, TAT delivered a judgment in favour of KRA agreeing with the authority that the plaintiff had failed to keep, retain or maintain records with the intention of defrauding the taxman.
The TAT concluded that KRA was justified in seeking additional documentation to prove that transactions with specific suppliers took place and in instances where proof had been provided, the authority was still within its rights to establish whether input tax incurred was for business purposes in order to allow or disallow discovery.
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 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 Ksh4.8 billion 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 to the High Court on grounds that the Tribunal has failed 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.
KRA also feels hard bone by the fact 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.
The taxman also believes the Tribunal erred in failing to take into account and/ or disregarding evidence adduced by the witness of the KRA that the taxpayer allegedly procured steel worth Ksh4.8 billion on cash basis and the cash books were not available for perusal.
KRA also believes the Tribunal erred in holding that a stamp on an invoice is sufficient evidence of a transaction and 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.