Lawyer Nelson Havi loses Sh100 million tax appeal against KRA

Former Law Society of Kenya Nelson Havi has lost over Sh100 million tax appeal against the Kenya Revenue Authority (KRA).

This is after the Tax Appeal Tribunal dismissed Havi’s case for being improperly constituted.

KRA had issued Havi with additional Pay as You Earn (PAYE), Value Added Tax (VAT) and income tax assessment amounting to Sh114.250,178 between 2016 and 2020.

But in his appeal, Havi asked the tribunal to set aside KRA’s demand of Sh132,297,486, citing inconsistency in the adjustments to his returns and additional tax assessments between 2021 and 2023.

The Tax Appeal Tribunal dismissed Havi’s appeal for being incompetent and improperly before the Tribunal and said it did not comply with Section 13 (2) of the Tax Appeal Tribunal Act (TATA) in filing the appeal.

Justices Christine Muga, Boniface Terer, Elisha Njeru, Eunice Ng’ang’a and Spenser Ololchike said the lawyer squandered his rights as a taxpayer to object to KRA’s decision within 60 days under the provisions of the Tax Procedure Act (TPA).

The tribunal said since Havi lodged his objection against KRA’s 2021 and 2022 decisions outside the mandated timelines and failed to lodge the same in 2023, it rendered the appeal incompetent and improperly before them.

“It is therefore, the Tribunal’s view that the Respondent (KRA) cannot therefore be liable or be held liable for not making an objection decision since the Appellant (Havi) did not object in certain instances and when he did, it was not within the statutorily mandated timelines,” said justice Muga.

KRA said it investigated Havi’s tax affairs for failure to correctly declare income tax and VAT.

The taxman said they established that he was registered as a VAT withholding agent but was not withholding and remitting VAT as required under Section 42A of the TPA.

The taxman said that upon verification of Havi’s i-Tax ledger vis-a-vis the VAT returns, it was noted that he was not withholding and remitting VAT as required by law.

They further established there was a variance between Havi’s declarations and gross turnover and then proceeded to analyse the variance noted to establish his tax liability.

KRA wrote to Havi notifying him of unpaid tax and that he had not declared all the taxable income for the years 2016 to 2021.

KRA said Havi failed to honour an invitation to explain the variance within statutory timelines and therefore cannot be held liable for his acts of commission or omission.

However, in his appeal, Havi said that evidence of payment of VAT for the years 2016, 2017 and 2018 totalling Sh6,859,205 was given to KRA. 

Havi said contradictory demands on account of income tax claimed from him were made from February 3, 2021, to August 28, 2023.

According to him, in 2018 his net taxable income was Sh2,473,602 and the tax due was Sh339,465.

In 2019, his net taxable income was Sh3,031,774 and the tax due was Sh697,908 whereas in 2020, his net taxable income was Sh1,108,981.00 and the tax due was Sh168,244.

He faulted KRA for unilaterally adjusting the 2018 taxable income from Sh2,473,602.88 to Sh28,927,218.88 and fixing tax on the same at Sh7,908,985 without notice to or hearing him.

The lawyer said KRA further adjusted his 2019 taxable income from Sh3,031,774.64 to Sh36,384,392.64 and fixed tax on the same at Sh10,282,675.

Havi said that the taxable income due for 2020 was also adjusted from Sh1,108,981 to Sh42,468,775 and tax fixed at Sh10,508,192.

The top lawyer said that KRA erroneously assessed Sh1,313,558.71 on account of VAT in respect of Sh8,209,741.94 fees received from a client.

Havi said that on January 15, 2024, KRA forwarded him an additional assessment of Sh74,020,520 after applying for a Tax Compliance Certificate (TCC).

The lawyer said that on August 29 2023, KRA issued agency notices to NCBA Bank Kenya PLC, Standard Chartered Bank (K) Limited; Co-operative Bank of Kenya, Absa Bank Kenya PLC, Kenya Commercial Bank, CFC Stanbic Bank Limited; I&M Bank Limited, and Equity Bank Limited for the collection of Sh17,081,968.63 from bank accounts that he operated.

He said despite his detailed response to KRA, his accounts operated with NCBA bank were seized and could not operate the same until after the suspension of the agency notices on September 62023.