High court sets new standard for disputing KRA tax bills: What it means for Kenyan taxpayers

The High Court has ruled that taxpayers disputing assessments by the Kenya Revenue Authority (KRA) must provide clear and specific evidence showing why the taxman's assessment is incorrect.

In a judgment delivered on July 21, 2026, the High Court at Nairobi (Milimani Commercial Courts) overturned a decision by the Tax Appeals Tribunal that had set aside a KSh29.2 million tax assessment against Jakoline Enterprises Limited.

The judgment arose from a dispute over Income Tax and Value Added Tax returns filed by Jakoline for the period between 2017 and 2020, after a KRA desk audit identified significant differences between purchases declared in the company's Corporation Tax returns and those declared in its monthly VAT returns.

KRA subsequently issued additional tax assessments totalling KSh29,208,766, comprising KSh14,478,939 in Income Tax and KSh14,729,827 in VAT.

Jakoline challenged the assessment and supplied KRA with financial records, including bank statements, digital invoices and financial statements.

The dispute eventually reached the Tax Appeals Tribunal, which in a judgment delivered on November 10, 2023, allowed Jakoline's appeal and set aside the entire assessment.

The Tribunal held that by providing bulk digital files and bank statements, the company had discharged its burden of proof and that the responsibility had shifted to KRA to trace and establish the discrepancies.

KRA appealed the Tribunal's decision to the High Court.

The High Court was required to determine whether the Tribunal was correct in finding that Jakoline had discharged its statutory burden of proving that the KRA assessment was incorrect.

Justice Benjamin Njoroge noted that under Section 56(1) of the Tax Procedures Act, 2015, the burden in tax proceedings rests on the taxpayer to prove that a tax decision is incorrect.

The judgment further referred to Section 30 of the Tax Appeals Tribunal Act, which similarly places the burden of proof on the taxpayer.

The court explained that the arrangement is linked to Kenya's self-assessment tax system, under which taxpayers hold the records relating to their own tax affairs.

It cited an earlier High Court decision, which stated that a taxpayer must provide the minimum information necessary to support their position before the presumption that a Commissioner's assessment is correct can be displaced.

In the Jakoline case, the High Court found that the company had not done so.

According to the judgment, the KRA audit identified an unreconciled purchase variance of KSh115,049,988 for the 2017 tax period between Jakoline's Corporation Tax return and its VAT returns.

KRA subsequently requested specific invoices and corresponding proof of payment for the period in question.

The High Court found that instead of providing documentation specifically addressing the 2017 discrepancy, Jakoline supplied bulk soft copies of invoices relating to 2020, a different period from the one under review.

The court also considered the company's position regarding exempt supplies.

Jakoline had stated that it did not deal in exempt supplies. However, the court noted that the invoices supplied by the company showed items including rice, maize and wheat flour, which are exempt supplies, forming a significant part of the business reflected in the documents.

The court further noted that Jakoline had not provided schedules matching banking entries to individual transactions.

The judge therefore rejected the argument that simply providing large volumes of financial records had discharged the company's statutory burden.

The judgment drew a distinction between providing records and using those records to specifically address the discrepancy identified by the tax authority.

"The law does not require the Commissioner to play the role of a forensic accountant," part of the ruling states.

The judge said that where KRA identifies a specific and quantifiable difference between two tax declarations made by the same taxpayer, the taxpayer is required to provide evidence capable of explaining that difference.

Further, the judgment stated: "The taxpayer must provide a clear, specific, and indexed  reconciliation."

The court said this was particularly important because the documents supplied by Jakoline included records that did not correspond to the period being examined.

It found that the company's approach did not establish how the documents provided addressed the discrepancies identified by KRA.

The High Court also disagreed with the Tax Appeals Tribunal's finding that the provision of bulk digital files and bank statements had shifted the burden back to KRA.

It further said that the Tribunal had effectively required the revenue authority to examine the unstructured material and identify evidence that could reconcile the taxpayer's own declarations.

The judge stated: "Flooding the revenue authority with unindexed, chronologically mismatched files is not an act of compliance; it is an evasion of a taxpayer’s evidential duty."

The judgment also considered earlier tax cases where courts had found that invoices, ledgers and payment records may not be sufficient where other evidence is necessary to establish that transactions actually occurred.

In one such case, the court had previously held that where discrepancies remained in transaction records, the taxpayer could be required to provide additional documentation to establish the legitimacy of the transactions.

The High Court applied that reasoning to the Jakoline dispute.

The High Court ultimately found that Jakoline had failed to discharge its statutory burden under Section 56(1) of the Tax Procedures Act and Section 30 of the Tax Appeals Tribunal Act.

It therefore allowed KRA's appeal in its entirety and set aside the Tribunal's judgment of November 10, 2023.

The court reinstated KRA's August 29, 2022 Objection Decision, which had confirmed the KSh29,208,766 tax assessment against Jakoline Enterprises Limited.

The judge further held that the Tribunal had erred in treating the company's unstructured presentation of information as sufficient to shift the burden of proof back to KRA.

In the court's words: "The presumption of correctness of the Appellant’s assessments remains completely undisturbed. The Tribunal's decision was based on a fundamental misapplication of the rules of evidence and cannot be allowed to stand."

Each party was ordered to bear its own costs of the appeal and the proceedings before the Tribunal.