The Kenya Revenue Authority (KRA) mishandled a KSh 53.3 million tax assessment against Nairobi-based Manchester Outfitters Limited, after relying on an unverifiable system entry and wrongly treating a timely objection as late, the Tax Appeal Tribunal has ruled.
- •In September 2024, KRA notified the company that it had not filed its 2023 income tax return, warning that a default assessment would follow within seven days.
- •Manchester Outfitters, citing an ongoing ownership and management dispute that left critical accounting records inaccessible, informed KRA of the change in control and supplied court orders documenting the shift.
- •Despite the notification, a tax liability of KSh 53.3 million appeared on the company’s iTax portal on 6th November 2024, without a clear explanation of how the figure was calculated.
KRA later referenced a written assessment dated 25th November 2024, but treated the company’s objection on 17th December as late, insisting the operative assessment had been issued earlier. Under the tax procedures, a taxpayer has 30 days from the date of an assessment to lodge an objection.
The tribunal rejected KRA’s position and found that only the written assessment on 25th November was valid, making the company's objection timely. It also erred in requiring the company to apply for an extension of time when none was necessary.
According to the ruling, a numerical entry on iTax does not meet statutory requirements for a default assessment. It must specify the amount, components of tax, penalties, interest, and a clear objection procedure.
“The Tribunal is persuaded that a mere system‑generated tax liability figure, unsupported by a written notice disclosing the factual and computational basis of the assessment, does not meet the statutory threshold of a valid assessment,” the ruling stated.
By relying on the system entry, KRA deprived the company of the ability to formulate its objection. KRA argued the tribunal lacked jurisdiction, saying a denial of extra time to file a late objection couldn’t be appealed. The tribunal rejected that claim by ruling that KRA’s confirmation that the tax remained due was a formal decision affecting the company’s rights.
“The Tribunal reiterates its long‑standing position that while it does not substitute its discretion for that of the Commissioner, it is empowered to interrogate whether such discretion was exercised lawfully, rationally, and in accordance with statutory and constitutional standards,” the ruling said.
“The Tribunal has consistently held that where a communication has the effect of affirming or enforcing a tax liability, such communication constitutes a tax decision irrespective of the label attached to it,” it added.
The tribunal also took account of the company’s operational disruptions. Based on court orders in April 2024 that had transferred management control, the company presented unrefuted evidence that attempts to file returns via iTax were thwarted by system errors.
