An electronics firm will pay the Kenya Revenue Authority (KRA) over Sh700 million after failing to convince the Tax Appeals Tribunal (TAT) that the taxman’s assessment on undeclared tax, was flawed.
Digital Box Ltd had appealed, challenging KRA’s decision to assess and demand for the undeclared tax liabilities.
This included Sh481 million in income tax and Sh219 million in value added tax for sales. “The facts were objectively gathered, we did not find any errors in the arithmetic computations and the sampling technique did not indicate any bias,” noted the judgment.
KRA submitted that its investigation process involved conducting court sanctioned searches to obtain vital transaction records at the company and at the director’s residence for examination and analysis.
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KRA’s position was that it carried out a test to check on whether all sales were banked through a comparative analysis of the banking with the sales from the delivery notebooks.
Digital Box Ltd challenged KRA’s assessment, alleging that it had misapplied the banking analysis test to establish the company’s tax liabilities.
KRA said it discovered a huge variance between the sales declared by the firm for tax purposes and the amounts banked as proceeds of sales. Its investigations showed the company purchases for the 2011 to 2013 were lower than the figures stated in the taxpayer’s accounts.
The firm, in disputing the tax assessment, argued that KRA based its decision on extraneous considerations to arrive at the tax assessments. TAT said the firm failed to prove that KRA had misapplied bank analysis test and ruled that KRA did not err.
The Judgment emphasised that all bank deposits are subject to taxation unless the account holder explains why they should not be taxed.