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KRA escapes punishment for seizing Israeli firm’s Sh400m

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Times Tower in Nairobi, the Kenya Revenue Authority headquarters. FILE PHOTO | DENNIS ONSONGO | NMG

The High Court has declined to cite the director general of the Kenya National Highway Authority (Kenha) and the commissioner for domestic taxes for contempt of court over the seizure of Sh400 million meant for an Israeli construction firm.

High Court judge Aleem Visram ruled that there was no evidence that Kenha boss Kung’u Ndung’u and Ms Rispah Simiyu of KRA were personally served with the order stopping the release of the millions that was meant for SBI International AG Kenya.

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The money was meant to settle some payment to the construction firm, but it was seized by KRA after issuing agency notices to Kenha.

“Applying the above law to the facts, evidence shows that while the Commissioner was represented by an advocate at the Tribunal, she was not personally present when the order was made. Further, she was not personally served with the order; and no penal notice was endorsed on the said order,” Justice Visram said.

The construction firm in an affidavit of its managing director, Gilad Mishni, said the company obtained an order on January 27, 2022, before the Tax Appeals Tribunal suspending the payment of the money. He accused Kenha of releasing the Sh400 million in disobedience of court order and the officials should therefore be punished.

KRA on its part said it undertook an audit of the firm’s affairs and raised a tax assessment of Sh3.6 billion which it alleged was under-declared on income tax and VAT for the period 2016 to 2020, inclusive of penalties and interest.

The Commissioner later discovered that SBI had won a case against Kenha and directed the road agency to pay the money to a bank account in London. The court heard that KRA was apprehensive that it may not get the money if it is wired out of the country.

Using Section 42 of the Tax Procedures Act, KRA then issued agency notice on December 23, 2021 to KeNHA to secure payment of the said assessed taxes.

The construction firm then moved to court to suspend the agency notice.

Ms Simiyu contended that she was not served with the order and by the time the order was received at KRA offices, the money had been wired to the taxman.

The company said KeNHA said it was aware of the court order at 8.30 am on January 27 but still went ahead and made the payment at around 3:18 pm. In disobedience of the order.

Justice Visram said the time at which payment was made was relevant because the question was whether Mr Ndung’u and Ms Simiyu knew of the order at the time the payment was made.

The judge ruled that it must be shown beyond reasonable doubt that they were aware of the order before the payment was made, and not after.

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“Considering the above, I am more inclined to exercise caution, and in doing so, I am persuaded that the time stamp on the KRA payment slip is more likely to reflect the time that payment was received by KRA, rather than the time that payment was made to it,” the judge said.

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