https://new.kenyalaw.org/akn/ke/judgment/ketat/2026/124

**THE REPUBLIC OF KENYA** **IN THE TAX APPEALS TRIBUNAL AT NAIROBI** **TAT NO. E513 OF 2026** **GICHEHA INVESTMENTS LIMITED……………….......................APPELLANT/APPLICANT** **VERSUS** **COMMISSIONER FOR LARGE AND MEDIUM TAXPAYERS…………….…. RESPONDENT** **RULING** 1. The Applicant filed a Notice of Motion dated 29th April 2026 and filed on 30th April 2026 seeking the following Orders: - 2. Spent; 3. That the Agency Notice issued by the Respondent to the Applicant’s bank being the Stanbic Bank Kenya Limited (Stanbic) requiring it to pay a sum of KES 8,278,407 be lifted and/or stayed from execution or enforcement initially until the hearing and determination of this Application, and subsequently, until the hearing and determination of the main appeal; 4. That any other enforcement action taken by the Respondent which the Applicant may not have been aware of at the time of making this application be stayed and the Respondent whether by itself, its officers, employees and or agents, be stopped from taking any steps to collect any amount pursuant to the Agency Notice; and 5. That each party bear their own costs. 6. The Application which is supported by an Affidavit sworn by Melvin Opot, the Applicant’s head of finance overseeing the Appellant’s financial reporting, dated 29th April 2026 and filed on 30th April 2026, is premised on the following grounds: 7. That the Agency Notice is unlawful, unreasonable, procedurally irregular, unfair and in bad faith for the following reasons: a. That the Applicant does not have any outstanding tax liability and in fact, the Applicant has paid up all its tax obligations. b. That the purported outstanding tax liability for the years 2014 and 2015 has been the subject of previous correspondence and engagement between the Applicant and the Respondent, in which the Applicant has consistently demonstrated through self-assessment income tax returns and supporting documentation, that no tax is due. c. That the Applicant's tax position for 2014 and 2015 is: (i) for 2014: tax payable of KES 87,476 which was paid in full; and (ii) for 2015: a tax credit of KES (1,340,514), meaning the Applicant overpaid taxes and was entitled to a refund. d. That the Applicant has provided all supporting documentation to the Respondent, including the Applicant's income tax returns filed with the KRA, tax payment slips evidencing payment of the tax liability, and full tax computation schedules. 1. That despite the Applicant's repeated efforts to engage the Respondent and provide supporting documentation demonstrating that no tax is due, the Respondent has unilaterally maintained and enforced the Agency Notice without any rational basis, justification, or engagement with the Applicant's documented position. 2. That pursuant to Section 42(1) of the Tax Procedures Act, chapter 469B of the Laws of Kenya (the Tax Procedures Act), an Agency Notice can only be issued against a taxpayer who is liable to pay a tax and has not paid the tax due; or will become liable to pay the tax but the Respondent reasonably believes that the taxpayer will not pay the tax when it falls due. 3. That the taxpayer, in this case the Applicant, does not meet any of the above two conditions. The Applicant has not been assessed for additional tax and the tax being demanded by the Respondent is in dispute and cannot therefore be said to be tax due. Secondly, being in dispute, it is not certain that the Applicant will become liable to pay the tax, as this is a question that will be determined following the application by the Respondent, of the properly laid down procedure as set out at Sections 38(1), as well as section 51 and 52 of the Tax Procedures Act, which provide for the Objection process against tax decisions and appeals to the Tribunal. 4. That in going ahead to issue the Agency Notice, the Respondent has circumvented the entire procedure set out at Section 38(1) of the Tax Procedures Act that precedes the issuance of an Agency Notice where the Respondent believes that a tax is due from a taxpayer. This procedure has not been followed, and now exposes the Applicant to enforcement action by the Respondent, without the Applicant being afforded its right to due process under Section 51 and Section 52 of the Tax Procedures Act. 5. That in any event and notwithstanding the above, the circumstances set out under Section 42(1) of the Tax Procedures Act do not apply to the Applicant since the Applicant has fully paid up all its present and past tax obligations. 6. That Section 42(14) (C) of the Tax Procedures Act prohibits the Respondent’s from issuing an agency notice where the Appellant has filed an appeal. In this case the Applicant has filed a notice of appeal dated 16th April 2026. 7. That as such, the only remedy available for the Applicant to pursue is through filing an application to this Honourable Tribunal. 8. That the Applicant has already lodged an appeal to this Honourable Tribunal against the issuance of the Agency Notice. 9. That in order to preserve the subject matter of the appeal, the Applicant prays that a specific order be granted in the first instance lifting and/or staying the Agency Notice issued by the Respondent, failing which the appeal will be rendered nugatory. 10. That there is imminent danger that should the Respondent, or Stanbic as appointed by the Respondent, proceed to enforce the Agency Notice, the Applicant will suffer irreparable harm, which cannot be compensated in damages and which irreparable harm will include a crippling of the Applicant’s business since the Applicant will not be able to transact through its bank account at Stanbic. 11. That unless an Order is granted in the first instance lifting or staying the Agency Notice issued by the Respondent, the Applicant stands to suffer substantial and irreparable financial loss and damage in its commercial dealings. 12. That the Applicant’s position is that no tax is due for 2014 and 2015, and this position is supported by the Applicant's filed tax returns and the KRA's own system acknowledgments. 13. That it is in the best interests of justice that this Honourable Tribunal issues orders lifting and/or staying the Agency Notice. **Appellant/Applicant’s submissions** 1. The Appellant/Applicant filed submissions dated 15th May 2026 and filed on 29th May 2026 in support of its Application. 2. The Appellant/Applicant submitted that the issue for determination is ***Whether the Agency Notice issued by the Respondent is lawful, having regard to the provisions of the Tax Procedures Act.*** 3. The Appellant/Applicant noted that the Agency Notice issued is premised on Section 42(1) of the Tax Procedures Act, which grants the Respondent the power to collect tax from a person (in this case Stanbic) owing money to or holding money on account of the taxpayer (the Applicant). That the provision states as follows: - *“(1). This section applies when a taxpayer or a non-resident person who is subject to tax in Kenya is, or will become liable to pay a tax and;* *(a) the tax is unpaid tax; or* *(b) the Commissioner has reasonable grounds to believe that the taxpayer will not pay the tax by the due date for the payment of the tax.”* 1. It submitted that the import of this provision is that the Respondent is empowered to issue an Agency Notice only where: 1. a taxpayer is liable to pay a tax and has not paid the tax due; or 2. a taxpayer will become liable to pay the tax, but the Respondent has reasonable grounds to believe that the taxpayer will not pay the tax when it falls due. 2. The Applicant/Applicant asserted that the Agency Notice issued by the Respondent does not meet the above conditions. Notably, there has been no prior assessment, objection, or objection decision in respect of the taxes to which the Agency Notice relates. 3. The Appellant/Applicant argued that the Agency Notice itself constitutes the disputed decision, and the Applicant has duly filed an appeal being **Tax Appeal No. E513 of 2026 (Gicheha Investments Limited vs Kenya Revenue Authority)** before this Honourable Tribunal against the Agency Notice. That accordingly, until **Tax Appeal No. E513 of 2026** is heard and determined, the Applicant cannot be said to be liable to the taxes demanded in the Agency Notice. 4. The Appellant/Applicant averred that as part of the main Appeal, it has attached documentary evidence to the Application showing that the taxes for the years of Income 2023, 2014 and 2015 to which the Agency Notice relates to were paid. 5. That accordingly, the taxes that the Respondent seeks to collect through the Agency Notice are not due and payable by the Applicant until **Tax Appeal No. E513 of 2026** is heard and determined. The Appellant/Applicant stated that it has exercised its right of appeal, and the taxes are therefore still very much in dispute. 6. That in the case of **Katahira & Engineers International Limited v Kenya Revenue Authority & Others (Judicial Review Application No. E022 of 2026) [2026] KEHC 4661 (KLR)** (28 April 2026) (Katahira case) stating that the High Court, in quoting the provisions of section 42 (1) held at paragraph 26 of the judgment held that: - *“The above provisions (section 42(1) of the Tax Procedures Act) postulate that, this Section becomes activated where the tax is unpaid or the Commissioner believes that the taxpayer may not settle the tax debt by the due date. It means that there has to be an assessment process undertaken to require the making of a demand for settlement by the ex-parte Applicant. That demand must be in writing and giving timelines within which, the tax demanded must be paid. Only upon such notice or demand and failure to pay or to challenge the assessment would the respondent be entitled to issue agency notices against the taxpayer.”* 1. That the import of this judgment is that there is a set out procedure that must be followed by the Respondent before issuing an Agency Notice under section 42 (1) of the Tax Procedures Act. That this procedure is provided for in the Tax Procedures Act, and the Courts have reiterated the importance of adhering to them. That in addition to this, the Court in this most recent case was clear that where there has been a challenge to the assessment, the Respondent cannot issue an Agency Notice. 2. That as set out in the above Judgment and Section 31(8) of the Tax Procedures Act, the procedural manner of issuing an Agency Notice is preceded by an assessment process. 3. The Appellant cited Section 31(8) of the Tax Procedures Act which provides as follows: - *“31. (8) When the Commissioner has made an amended assessment, he or she shall notify the taxpayer in writing of the amended assessment and specify: (a) the amount assessed as tax; (b) any late payment penalty or interest; (c) the relevant reporting period; (d) the due date for payment of the tax, which shall not be less than 30 days after the date of receipt of the notice by the taxpayer; and (e) the manner of objecting to the tax decision.”* 1. That the above provision imposes a mandatory obligation on the Respondent, upon making an amended assessment, to notify the taxpayer in writing of the amount assessed, penalties and interest, the relevant reporting period, the due date for payment and the manner of objecting to the tax decision. 2. The Appellant/Applicant submitted that in the instant case, the Respondent did not issue the Applicant with an assessment and neither did it inform them of their right to engage through the objection process. 3. That the Appellant/Applicant has provided evidentiary documents showing the Applicant’s self-assessment returns, and it is evident that all the taxes for the relevant period was fully settled. That in fact, this Honourable Tribunal will note from the returns that the Applicant is in a refund position. 4. That based on the foregoing submissions, the Appellant/Applicant respectfully submits that the Respondent failed to adhere to the prescribed statutory procedure prior to issuing the Agency Notice. That instead of first issuing a valid assessment and/or demand for payment and affording the Applicant an opportunity to respond or settle any outstanding taxes, the Respondent prematurely and unjustifiably resorted to enforcement by issuing Notices under Section 42 to the Applicant’s bank. 5. The Appellant/Applicant therefore submits that, in the absence of any documentary evidence demonstrating that an assessment or demand for payment was issued to the Applicant, and further, in the absence of any refusal by to the Applicant settle any taxes lawfully due, the Agency Notice was issued irregularly, unlawfully, and in contravention of the laid down procedure. That consequently, the enforcement action undertaken by the Respondent is premature, procedurally improper, and ought to be lifted and/or stayed pending the hearing and determination of the Appeal. 6. That further, Section 42(14)(e) provides that *“The Commissioner shall not issue a notice under this section unless the taxpayer has not appealed against an assessment specified in a decision of the Tribunal or Court.”* 7. That the foregoing provision is couched in mandatory and unequivocal terms. The provision imposes a clear statutory bar against the issuance of an Agency Notice where a taxpayer has lodged an appeal. 8. That in the instant case, the Respondent failed to issue the Applicant with an assessment, thereby denying the Applicant an opportunity to seek redress through the ordinary tax dispute resolution process. Consequently, being aggrieved by the Agency Notice, which constitutes an appealable decision, the Applicant promptly lodged Tax Appeal No. E513 of 2026 before the Tribunal for redress. That notably, the Applicant’s appeal does not arise from an assessment or objection decision. 9. That no prior assessment, objection, or objection decision was issued by the Respondent, and none was therefore required as a precondition for the Applicant’s appeal. That the prohibition under Section 42(14)(e) takes effect immediately upon the filing of that appeal and does not require any further act, election, or direction on the part of the taxpayer. That the Respondent is therefore legally restrained from undertaking enforcement measures once the dispute has been placed before the Tribunal. 10. That it bears emphasis that this is not an appeal arising from an assessment or objection decision. That as no such assessment or objection decision was ever issued by the Respondent. That the Agency Notice is itself the subject of the appeal, and the statutory prohibition under Section 42(14)(e) was therefore triggered upon its filing. In the circumstances, the Respondent’s decision to proceed with enforcement notwithstanding the pendency of the Appeal was unlawful and in direct contravention of the express provisions of the law. 11. The Appellant/Applicant therefore submitted that the impugned Agency Notice is null and void *ab initio* and prays for it to be lifted and/or stayed pending the hearing and determination of the Appeal. 12. That the significance of Section 42(14)(e) as a safeguard against enforcement during live proceedings was affirmed in the **Katahira case**. That the Court emphasised that Section 42 of the Tax Procedures Act exists to facilitate lawful revenue collection and is not a gateway for circumventing judicial outcomes. That where an appeal has been filed, the prohibition under Section 42(14)(e) operates to suspend the KRA’s enforcement power for the duration of those proceedings. 13. The Respondent did not file a response to the Application. **Analysis and Findings** 1. The Applicant seeks lifting and staying the implementation of the Respondent’s Agency Notices and restraining the Respondent from issuing further agency notices pending the hearing and determination of this Application and Appeal. 2. The Tribunal has carefully examined the documents filed together with the Notice of Motion and observes the following chronology of events: 1. The Respondent issued an Agency Notice addressed to CFC Stanbic Bank Limited on 3rd March 2026 in respect of Income tax assessments. 2. On 16th April 2026, the Appellant/Applicant lodged its Notice of Appeal dated 16th April 2026, and on 30th April 2026, it lodged its Memorandum of Appeal against the Agency Notice dated 3rd March 2026 in the Appeal **TATC E513 of 2026 Gicheha Investments Limited vs Commissioner for Large and Medium Taxpayers**. 3. The Tribunal refers to Section 18 of the Tax Appeals Tribunal Act which provides as follows: - *“18. Order to stay or affect the implementation of the decision under review Where an appeal against a tax decision has been filed under this Act, the Tribunal may make an order staying or otherwise affecting the operation or implementation of the decision under review as it considers appropriate for the purposes of securing the effectiveness of the proceeding and determination of the appeal.”* 1. The Tribunal is also guided by its previous decision in **Shop and Deliver limited -vs- Commissioner of Domestic Taxes [Tax Appeal no. 141 of 2019]** where it held that: - “29. … *The Tribunal notes that the only purpose for which a stay may be granted is to secure the effectiveness of the proceedings and determination of the Appeal. Thus, in its wisdom, parliament appears to have donated the power to stay implementation to avoid a situation where monies are inadvertently collected from a taxpayer only to find out after determination that the amounts had been erroneously demanded. The Tribunal finds that filling of an appeal is a ground for stay by the Tribunal.”* 1. The Tribunal cognizant that there is an Appeal, **TATC E513 of 2026**, against the subject Agency Notice dated 3rd March 2026 before the Tribunal, pursuant to Section 18 of the Tax Appeals Tribunal Act, finds it appropriate to stay the Respondent’s enforcement actions in respect of the appealed decision so as to preserve the Appeal, pending the hearing and determination of the Appeal. **Disposition** 1. The Tribunal finds that the Application is merited and accordingly proceeds to issue the following Orders: - 2. The Notice of Motion Application dated 29th April 2026 and filed on 30th April 2026 be and is hereby allowed. 3. The Agency Notice dated 3rd March 2026 be and is hereby lifted unconditionally pending the hearing and determination of the Appeal. 4. No orders as to costs. 5. It is so ordered. **DATED AND DELIVERED AT NAIROBI THIS 26TH DAY OF JUNE 2026.** **……………………………..….** **ROBERT M. MUTUMA** **CHAIRMAN** **……………………………… ……..….……..……………..** **GLORIA A. OGAGA DR. TIMOTHY B. VIKIRU MEMBER MEMBER** **………………………………** **JIMMY M. MALLA** **MEMBER**