The Tax Appeals Tribunal has upheld a decision by the Kenya Revenue Authority (KRA) demanding Sh45 million in tax arrears from Businessman Caroli Omondi.
The five-member Tribunal led by Robert Mutuma said Caroli failed to provide the relevant supporting documents to buttress his objection to the assessment by KRA.
This, they said, made his notice of objection baseless.
“That in the absence of these documents, the Respondent was left with no option but to issue a Notice of Invalidation of Objection which was dated 14 February 2022,” said the Tribunal.
KRA in documents filed in court said it came across a transaction indicating that Bukeri Holdings Limited had acquired property valued at Sh150,000,000 on July 16, 2018. They conducted a search establishing Caroli was the majority shareholder of the company owning 99 per cent of the equity.
Further review revealed that Bukeri Holdings Limited had filed nil returns for the years of income 2018 and 2019.
Between 2013 (when the Company was incorporated) and 2018, it did not file any returns.
KRA said it assumed the company was either not trading or had no income.
This led them to conclude that that the property acquisition could only be funded by a loan facility or director’s capital injection.
In December 2020, KRA wrote to the Company and Caroli seeking an explanation and inquiring into the source of funds used to purchase the property.
Caroli responded stating that the property was purchased with a loan facility and that the Company did not have any income-generating activities.
But KRA said Caroli did not provide any evidence to support the existence of the loan facility or any other information that contradicted their assumptions.
“Consequently, we concluded that the property was purchased through capital injection by Caroli and proceeded to assess him for undeclared income of Kshs 150,000,000.00 for the year 2017 which assessment resulted in an individual income tax liability of Kshs 44,782,594.00,” said KRA.
It subsequently issued him with an Income tax additional assessment of Sh44,782,594 exclusive of penalty and interest which Caroli objected to.
He asked the Tribunal to set aside that decision on grounds that KRA acted illegally by demanding taxes from him instead of the Company, a corporate legal entity with its own PIN.
He also argued that the Respondent did not exhaust all avenues available to it before demanding taxes from him.
The tribunal however dismissed his appeal saying he did not file his notice of objection on time.
