Failed burden of proof costs EPZ firm Sh390m tax fight

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The Tax Appeals Tribunal has upheld a Sh389.8 million tax claim against a warehouse and transport firm, Transfleet (EPZ) Limited, after it failed to prove it objected to the demands by the Kenya Revenue Authority (KRA).

The Tribunal said the company could not rely on its June 2023 objection letter without properly proving that KRA received it.

The dispute originated from a KRA investigation of Transfleet’s tax affairs for 2016 to 2021.

KRA's Commissioner of Investigations and Enforcement said that in the course of the investigation, it undertook an iTax analysis of the company's declarations for the period and wrote to five tenants for their contracts, tenancy agreements and payment details.

KRA also analysed the deposits in the company's four bank accounts at Stanbic Bank Kenya Limited, where rent was received in US dollars.

The taxman’s investigation findings dated May 22, 2023 put the additional tax at Sh389.8 million, excluding penalties and interest.

The assessment covered business and rental income, computed after the Commissioner treated the variance between the net income established from its analysis and the turnover declared by the company as undeclared income.

The taxman subsequently issued an agency notice in April 2025 addressed to New Wide Garments (K) EPZ Ltd, requiring it to pay KRA Sh389.8 million held for or on behalf of Transfleet.

Transfleet (EPZ) Limited owns go-downs at the Export Processing Zone Authority in Athi River. Its declared businesses include property investment, sale of quarry aggregates, concrete excavation and related products, and transport.

The company argued that it objected to the additional assessment on June 6, 2023, and that KRA failed to issue an objection decision within 60 days. It said the objection was therefore deemed allowed by law -Tax Procedures Act.

It said KRA disregarded its records and wrongly relied on banking analysis. It said the additional assessment was excessive by reason of error or mistake of fact, punitive, and not reflective of the company's income.

KRA denied receiving the objection and said the tax became due because Transfleet had not challenged the assessment within the statutory period.

The Tribunal found that the company's June 6 objection carried no KRA receipt stamp, official acknowledgment or iTax acknowledgment slip. It also found no delivery email, courier record, postal stamp, affidavit of service or other proof that KRA received the objection.

“The handwritten ‘OBJECTED 06/06/2023’ endorsement is an annotation by the appellant and is not evidence of delivery,” the Tribunal said, ruling that the taxpayer failed to establish that its objection ever reached KRA, allowing the assessment to crystallise.

The panel considered an email from a KRA investigations officer dated June 5, 2023. The officer said KRA had not received a response and asked Transfleet to resend it.

The Tribunal said Transfleet produced no evidence of subsequent transmission or acknowledgment, and had not proved KRA received the objection.

Section 51(11) of the Tax Procedures Act provides that an objection is deemed allowed if KRA fails to decide it within 60 days. The Tribunal said the rule applies only after receipt of a valid objection.

“Receipt not having been proved, time never began to run against the respondent (KRA Commissioner,” the Tribunal said. It held that the 60-day period does not begin simply because a taxpayer says it objected; the taxpayer must first establish receipt of a valid objection.

The assessment therefore crystallised into tax due and payable, allowing KRA to use an agency notice to recover the unpaid amount.

The Tribunal also rejected KRA’s argument that the appeal was filed late. It said the 30-day period runs from receipt, not the decision date, and KRA had not proved when Transfleet received the agency notice.

It further ruled that an agency notice is an appealable decision, allowing a taxpayer to challenge such enforcement before the Tribunal.

The judgment did not conclusively validate KRA’s underlying tax computations. The Tribunal expressly said its decision turned on Transfleet’s failure to prove service of the objection.

“This judgment does not stop the appellant from pursuing other lawful options,” the Tribunal said, including seeking an extension of time to object.

The Tribunal dismissed the appeal and upheld the April 3, 2025 agency notice.

Reporting originally appeared via Business Daily. Read the full source for additional context.