Judgment summary
Falari Enterprises Limited applied to the Tax Appeals Tribunal for orders compelling the Commissioner of Domestic Taxes to lift Agency Notices issued to three banks, which had frozen its accounts. The Tribunal found that an appeal was on record and that it had jurisdiction under Section 18 of the Tax Appeals Tribunal Act to grant a stay. It allowed the application and lifted the Agency Notices unconditionally pending determination of the appeal, with no order as to costs.
Background
The Applicant filed a Notice of Motion under Certificate of Urgency seeking, among other things, an order compelling the Respondent to write to KCB Bank Kenya Limited, NCBA Bank Kenya PLC and Equity Bank Kenya Limited lifting Agency Notices dated 6th February 2026, and costs (para 1).
The application was supported by a sworn affidavit of Kelvin Mwangi Mungai, the Applicant's director (para 2). The Agency Notice, issued by Grace Kimani, Debt Manager Thika, demanded Kshs. 28,172,993.33 comprising Income Tax of Kshs. 18,133,019.54 and VAT of Kshs. 10,039,973.79, and resulted in the freezing of the Applicant's accounts at KCB, NCBA and Equity Bank (para 2(i)).
The Applicant lodged a late objection to a disputed assessment of Kshs. 27,487,913.20 and, on 20th April 2026, wrote to the Respondent requesting that the Agency Notice be lifted pending determination of the objection (para 2(ii)).
On 20th April 2026 at 4:47pm, the Respondent approved a Payment Plan (Ref: KRA2026111901538) for the undisputed tax of Kshs. 685,080.93, payable in six equal monthly instalments of Kshs. 114,180.16, and the Applicant paid the first instalment on the same date (para 2(iii)-(iv)).
On 22nd April 2026, the Respondent's Independent Review of Objections Office, in a letter signed by Judith Anyumba, accepted the Applicant's late objection to the disputed amount of Kshs. 27,487,913.20 and directed the Applicant to provide valid grounds of objection within 7 days (para 2(v)).
Despite this, the Respondent did not lift the Agency Notice, and the Applicant stated that its accounts had been frozen for 82 days, affecting its ability to meet daily operational requirements, including payment of suppliers (para 2(viii)-(ix)). The Respondent did not file a response to the application (para 3).
Core dispute
The Applicant contended that the approval of the Payment Plan on 20th April 2026 rendered the Agency Notice null, void and unenforceable pursuant to Section 42(10) of the Tax Procedures Act, 2015, which bars the Respondent from exercising recovery powers once a payment arrangement is in force (para 2(vi)).
The Applicant further contended that, under Section 51(11) of the Tax Procedures Act, 2015, the acceptance of its late objection on 22nd April 2026 triggered an automatic stay of all enforcement measures pending determination of the objection (para 2(vii)).
The Applicant argued that the balance of convenience favoured lifting the Agency Notices, since the disputed tax was secured by the ongoing objection process and the undisputed tax had already been paid in full (para 2(xi)).
The Tribunal had to determine whether it had jurisdiction to grant the interlocutory relief sought, which turned on whether an appeal had been lodged in accordance with the Tax Appeals Tribunal Act.
Court findings
The Tribunal noted that an Agency Notice issued under Section 42 of the Tax Procedures Act constitutes an appealable decision, and that the Respondent's continued enforcement of such a notice may properly be challenged in an appeal, provided the appeal has been lodged in accordance with the Tax Appeals Tribunal Act (para 6).
The Tribunal held that its jurisdiction to issue interlocutory orders derives from Section 18 of the Tax Appeals Tribunal Act, which allows the Tribunal to stay or otherwise affect the operation of a decision under review where an appeal has been filed, for the purpose of securing the effectiveness of the proceedings and determination of the appeal (para 5).
The Tribunal relied on its earlier decision in Shop and Deliver Limited v Commissioner of Domestic Taxes [Tax Appeal No. 141 of 2019], which held that the only purpose of a stay is to secure the effectiveness of proceedings and determination of the appeal, and that the filing of an appeal is itself a ground for stay (para 7).
Being satisfied that there was an appeal on record before it, the Tribunal found it appropriate, pursuant to Section 18 of the Tax Appeals Tribunal Act, to stay the Respondent's enforcement actions in order to preserve the appeal pending its hearing and determination (para 8).
Outcome
The Tribunal found the application merited and allowed the Notice of Motion. The Agency Notices dated 6th February 2026 were lifted unconditionally pending the hearing and determination of the Appeal. No order was made as to costs.
Major issues / areas of contention
- Whether the Tribunal had jurisdiction under Section 18 of the Tax Appeals Tribunal Act to grant interlocutory orders in the absence of, or contingent on, a filed appeal.
- Whether the Agency Notice remained enforceable after the Respondent approved a Payment Plan for the undisputed tax, given Section 42(10) of the Tax Procedures Act, 2015.
- Whether acceptance of the Applicant's late objection triggered an automatic stay of recovery proceedings under Section 51(11) of the Tax Procedures Act, 2015.
- Whether the balance of convenience favoured lifting the Agency Notices pending determination of the appeal.