Judgment summary
This is a decision of the Tax Appeals Tribunal at Nairobi in an appeal by Lalji Vishram Hiram against the Commissioner of Customs and Border Control. The dispute concerned a tax demand of Kshs 2,039,423,932.00 for Income Tax, VAT, and Customs duty covering the years 2016 and 2017, arising from bank accounts and a company allegedly linked to the Appellant.
The Appellant argued that his identity documents had been stolen and used without his authorisation to register a company, Apcon Developers Ltd, and open bank accounts at Diamond Trust Bank, and that forensic analysis by the Directorate of Criminal Investigations (DCI) confirmed the account-opening signatures were not his. The Respondent maintained that no formal clearance document had been produced and that the Appellant remained liable in the absence of such clearance.
The Tribunal held that the Appellant was not the rightful person to bear the tax demand and that the demand was therefore not justified. It allowed the appeal and set aside the Respondent's Objection Decision.
Background
The Appellant is a Kenyan resident. The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act Cap 469, mandated under Sections 5(1) and 5(2) to collect and administer revenue laws (paras 1-2).
The Respondent issued a demand for tax on the Appellant on 26th December 2024 covering the period 2016 and 2017, being Kshs 2,039,423,932.00 for Income Tax, VAT, and Customs duty (para 3).
On 20th February 2025 the Appellant was allowed to object out of time, and did so on 24th February 2025. The Respondent reviewed the objection and issued a Review Decision by letter dated 26th March 2025 (paras 4-5). The Appellant filed a Notice of Appeal dated 11th April 2025, filed the same date (para 6).
The Appellant asserted he first became aware of the alleged liability through correspondence dated 5th February 2019, and denied any involvement with Apcon Developers Ltd, stating his identity documents had been stolen from his vehicle in 2019 and reported at Kilimani Police Station under OB No.28/23/2019 (paras 9-13). He also cited medical treatment abroad between 2017 and 2022 as the reason for his late objection (para 14). He stated a Departure Prohibitory Order was issued against him on 8th January 2021 and lifted on 22nd April 2021 (para 10).
Core dispute
The core dispute was whether the Appellant was the rightful person liable for the tax and customs demand, given his claim that his identity had been stolen and used to fraudulently register a company and operate bank accounts at Diamond Trust Bank, and given forensic findings by the DCI that the account-opening signatures were 'dissimilar and distinguishable' from the Appellant's own signature (paras 19-20, 78-79).
The Appellant contended that the Respondent's entire case rested on a banking analysis treating deposits in the Apcon Developers and Jayan Enterprises accounts as his undeclared import value, resulting in an assessed customs liability of Kshs 862,264,240.00, despite DCI findings naming one Kavit Shah as the person fraudulently operating the accounts (paras 15-18, 22).
The Appellant also challenged the invalidation of his Notice of Objection under Section 51(3)(c) of the Tax Procedures Act, 2015, arguing it was unlawful to require him to produce documents held by the DCI within seven days when the DCI itself could not obtain them for months (paras 31-34). He further argued the Objection Decision violated Article 47 of the Constitution and the Fair Administrative Action Act, 2015 (paras 37-42).
The Respondent maintained that the Appellant had not produced any conclusive clearance document from the DCI, the Financial Reporting Centre, or a court, and that the letter of 12th February 2026 merely confirmed ongoing investigations rather than exonerating him, so the burden of proof under Section 56 of the Tax Procedures Act, 2015 and Section 229(6) of the EACCMA, 2004 had not been discharged (paras 62-66).
Court findings
The Tribunal identified two issues for determination: whether the Appellant was the rightful person to bear the tax demand, and whether the Respondent's tax demand was justified (para 71).
The Tribunal noted that the Respondent issued its Objection Decision before DCI investigations were completed, and that a DCI internal memo dated 11th March 2025 forwarded the fraudulently registered company to KRA for failure to declare taxes, but did not itself establish the Appellant's culpability (paras 76-77).
The Tribunal considered the Respondent's letter dated 12th February 2026, which stated that a forensic document examiner found the signatures on the account documents to be 'dissimilar and distinguishable', and that investigations were ongoing to establish the persons involved in the forgery (para 78). The Tribunal noted the DCI memo of 11th March 2025, received by the Respondent by 3rd April 2025, identified one Kavit Shah as the person operating the Diamond Trust Bank accounts, and that the Respondent had not denied receipt of this memo (para 80).
The Tribunal found it evident from the DCI's investigative findings and the Respondent's own admissions that the Appellant was not responsible for the fraudulent activities, and that until investigations were complete the Respondent could not demand tax from him on account of alleged tax evasion (paras 81-82). Accordingly, the Tribunal held that the Appellant was not the rightful person to bear the tax demand (para 83), and that, having found the Appellant not culpable, the Respondent's tax demand was not justified (para 84).
Outcome
The Tribunal held that the appeal was meritorious and allowed it. The Respondent's Objection Decision dated 25th March 2025 was set aside. Each party was ordered to bear its own costs (paras 85-86).
Major issues / areas of contention
- Whether the Appellant was the rightful person to bear the customs and tax demand, given claims of identity theft and forged account-opening documents.
- Whether forensic findings that the account signatures were 'dissimilar and distinguishable' from the Appellant's rebutted the presumption that unexplained bank deposits are taxable income.
- Whether the invalidation of the Appellant's Notice of Objection under Section 51(3)(c) of the Tax Procedures Act, 2015 was lawful where the required documents were in the custody of the Directorate of Criminal Investigations.
- Whether the Respondent's Objection Decision violated Article 47 of the Constitution of Kenya, 2010 and the Fair Administrative Action Act, 2015.
- Whether the Appellant discharged the burden of proof under Section 56 of the Tax Procedures Act, 2015 and Section 229(6) of the EACCMA, 2004.
- Whether the letter dated 12th February 2026 amounted to a discharge or clearance of the Appellant from tax and customs liability.
- Whether the Respondent's tax demand was justified in light of ongoing DCI investigations naming a third party as the account operator.