Kenya Revenue Authority (KRA) has appealed to the High Court against the Tax Appeals Tribunal (TAT) judgment in a case between the Authority and Roshina Timber Mart Limited.
On 26th February 2020, TAT delivered a judgment in favor of KRA agreeing with the Authority that failure to keep, retain or maintain records is as offense under Section 93 of the Tax Procedures Act and therefore allowing input tax recovery would amount to aiding criminal conduct.

In the case between Roshina Timber Mart Limited vs Commissioner of Domestic Taxes, the Tribunal found further that the VAT Act 2013 is clear that for input tax to be allowable, it must have been incurred for the purposes of the business or to make taxable supplies. It therefore follows that where the input tax is not for the purpose of the business or incurred in the course of making supplies then it is disallowable.

The TAT concluded that KRA was correct in seeking additional documentation to prove that transactions with specific suppliers took place. And even where proof had been given to show that the transactions had taken place, the Authority was still within its right to establish whether the input tax incurred was for business purposes in order to allow or disallow its recovery.
The Tribunal buttressed that the law places the burden of providing supporting documentation on the taxpayer and in the absence of such documentation; the KRA is left with no option but to assess and apply the law as it did.

A month later and on 25th March 2020 in a case between Shreeji Enterprises Limited Vs Commissioner of Investigations and Enforcement, the Tribunal departed from its ruling in Roshina Timber Mart Limited case and found that the taxpayer cannot produce documents that he does not have.

Shreeji Enterprises Limited had claimed local purchases from seventeen (17) other companies that had allegedly supplied steel products to Shreeji Enterprises Limited worth Ksh. 4,821,085,712 where payments for the steel were made by cash during the period 2014 - 2017 years of income. Shreeji Enterprises Limited indicated that they did not maintain the requested documents for cash transactions for scrutiny by KRA.

KRA is dissatisfied with the TAT judgment has appealed the entire judgment to the High Court on grounds:

a) THAT the Tribunal erred in fact and in law in failing to appreciate that the dispute before it was based on Section 59 of the Tax Procedures Act
which expressly gives power to the KRA to request the production of records and additional information which can fully satisfy the KRA where it is of the view that the information given is insufficient.
b) THAT the Tribunal failed to appreciate and/or give due regard to the provisions of Section 43 of the VAT Act 2013 applicable to the dispute which requires the taxpayer to keep transactional records for a period of five years.
c) THAT the Tribunal erred in both law and fact in failing to take into account and/ or disregarding evidence adduced by the witness of the KRA that the taxpayer allegedly procured steel worth Ksh. 4,821,085,712 on cash basis and the cash books were not available for perusal.
d) THAT the Tribunal erred in both law and fact in holding that a stamp on an invoice is sufficient evidence of a transaction.
e) THAT the Tribunal erred in fact by failing to appreciate that in this case there was VAT loss because there was no exchange of goods or services in respect of which VAT input was claimed by the taxpayer.

Commissioner, Legal Services and Board Coordination – Paul Matuku