[2019] KEHC 7997 (KLR)
The court found that while Kenya Revenue Authority is entitled under Section 43 of the Tax Procedures Act to preserve funds in a taxpayer's account, such preservation is subject to strict statutory timelines. In this case, although KRA's application for extension was filed outside the initial ten-day period, there...
Source-derived case information.
- Citation
- [2019] KEHC 7997 (KLR)
- Parties
- Applicant: Kenya Revenue Authority; Defendant: Africa Spirits Limited
- Court
- High Court
- Court Station
- High Court at Nairobi (Milimani Commercial Courts)
- Jurisdiction
- Kenya
- Case Number
- Miscellaneous Civil Application 179 of 2019
- Procedural Posture
- Miscellaneous Application / Ruling on Notice of Motion to Unfreeze Bank Accounts
- Outcome
- interim extension of preservation orders with conditional access to accounts
- Judges
- GL Nzioka
- Legal Topics
- Tax Procedure Act Section 43, Preservation of Funds, Freezing Bank Accounts, Tax Assessment Timelines
- Source Language
- en
Source-derived case record
Summary, issues, holding and outcome
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Parties
Kenya Revenue Authority
Applicant
Africa Spirits Limited
Defendant
Procedural Posture
Miscellaneous Application / Ruling on Notice of Motion to Unfreeze Bank Accounts
Legal Issues
- 1 Whether the preservation orders over the defendant's bank accounts should be set aside or extended.
- 2 Whether Kenya Revenue Authority complied with statutory timelines under Section 43 of the Tax Procedures Act.
- 3 Whether the applicant is entitled to access funds in the frozen accounts pending tax assessment.
Ratio Decidendi
The court found that while Kenya Revenue Authority is entitled under Section 43 of the Tax Procedures Act to preserve funds in a taxpayer's account, such preservation is subject to strict statutory timelines. In this case, although KRA's application for extension was filed outside the initial ten-day period, there was no serious objection from the applicant. The court noted that KRA had not completed its tax assessment within the thirty-day period and had not sought a timely extension. However, considering the urgency and the need to balance the interests of both parties, the court granted KRA a final seven-day extension to complete the tax assessment and serve the applicant. If KRA fails...
Court Disposition
interim extension of preservation orders with conditional access to accounts
Orders
- Kenya Revenue Authority is granted a seven-day extension from the date of this order to complete the tax assessment and serve the applicant.
- If KRA fails to serve the assessment within seven days, all preservation orders and notices over the accounts shall automatically lapse.
Full Case Text
Judgment text and source record
33 paragraphs
REPUBLIC OF KENYA
IN THE HIGH COURT OF KENYA AT NAIROBI
ANTI-CORRUPTION AND ECONOMIC CRIMES DIVISION
MISCELLANEOUS CIVIL APPLICATION NO. 179 OF 2019
IN THE MATTER OF TAX PROCEDURES ACT, 2015
ACT NO. 29 OF 2015
IN THE MATTER OF AN APPLICATION BY KENYA REVENUE AUTHORITY
FOR AN ORDER UNDER SECTION 43 OF TAX PROCEDURES ACT
KENYA REVENUE AUTHORITY.........................................APPLICANT
VERSUS
AFRICA SPIRITS LIMITED.................................................DEFENDANT
RULING
1. The subject of this ruling is the notice of motion application dated 1st March 2019, supported by the grounds on the face of it and an affidavit sworn by Robert Thinji Muriithi, a director of the Applicant’s company. I have taken note of the prayers therein and the provisions of the law cited in support thereof.
2. In a nutshell, the Applicants are seeking for an order that, the accounts; Nos. 117573****, 117802****, 110714****, 117802****, 1107143*** and 1166883*** held by them at Kenya Commercial Bank Limited be unfrozen. The said accounts were apparently frozen following an agency notice served on the Bank by the Kenya Revenue Authority (KRA), the Respondent to this application.
3. Following the filing of a notice of motion dated 21st February 2017, by Kenya Revenue Authority, the court issued an order on 22nd February 2019 preserving funds and prohibiting the transfer, withdrawal or disposal of or other dealings involving the funds in the said accounts hence the orders sought for by the Applicant herein. The Applicants aver that, the Respondent has also shut down their business premises and carted away several documents, books of accounts and data.
4. However, the application was opposed vide a replying affidavit of Dominic Keng’ara, an officer of Kenya Revenue Authority (KRA). He deposed that, Kenya Revenue Authority (KRA) together with the DCI officers on 31st January 2019were was in pursuit of a truck Registration No. KCD 672Y ZF 3996, suspected to be conveying un-customed ethanol.
5. The truck was tracked to the Applicant’s premises situated in Thika Kiambu County. Subsequently the security agencies obtained warrants of search and seizure, 100 drums of un-customed ethanol and a cache of approximately 894 reels of counterfeit exercise stamps in the premises.
6. The Respondent then concluded the Applicant were liable to pay Kenya Shilling Ninety-Three Million (Kshs. 93,000,000), although it is believed that, after full assessment, the tax liability will be way over Kenya shilling Three Billion (Kshs. 3,000,000,000). However, as the exercise of ascertaining tax evasion is extensive, it is important that, the accounts that contain Kenya Shillings Fifty Eight Million (Kshs.58, 000,000), which is a small fraction of the sum sought, be preserved under Section 43 of the Tax Procedure Act.
7. The court heard the parties orally in this subject application, and in my considered opinion, the only issue that is urgent relates to the prohibition and/or access to the Applicant’s accounts.
8. The provisions of Section 43 of the Tax Procedures Act, (herein “the Act”) entitles Kenya Revenue Authority, to preserve money and prohibits the owner not to transfer, withdraw, dispose or otherwise deal with the funds, within the period of ten (10) days’ notice. However, the commissioner can apply to the High court for extension of the ten (10) days’ notice, for a period of thirty (30) days, and this period may be extended by the court, beyond the initial thirty (30) days.
9. However, the tax payer can apply within fifteen (15) days of service of the court order to have it discharged. If the order is not discharged, the Commissioner shall within thirty (30) days, assess the tax due and payable and notify the tax payer. It is therefore clear from the provisions of Section 43, that, there are strict timelines set.
10. In the instant matter, Kenya Revenue Authority sent a notice to the head of Legal Kenya Commercial Bank Limited on 8th February 2019, in terms of the provisions of the law; this notice should have lapsed on or before 18th February 2019. The application to extend this period was filed in court on 22nd February 2019. As can be seen clearly, it was outside the period of ten (10) days, but there was no serious contention therefore by the Applicants.
11. The application to set aside the preservation of funds was filed court on 1st March 2019. It suffices to note that, the thirty (30) days given to Kenya Revenue Authority should have expired by 22nd March 2019. By 3rd April 2019, Kenya Revenue Authority had not sought for extension of those orders, but sought for an extension of seven (7) days on the 4th of April 2019 on the ground that, it needed more time to go through the documents seized from the Applicants to fully ascertain the tax liability.
12. However, it is noteworthy that, the Applicants offered to deposit the initial assessed sum of Kenya Shillings Ninety Three Million (Kshs. 93,000,000) for Kenya Revenue Authority to allow them access the funds. However, that offer was turned down on the ground that, the same was based on different assessment of domestic tax. It is clear that, Kenya Revenue Authority will require a lot of time to assess the tax due and payable, that the Applicants cannot be shut out of funds without an indication of as to how soon Kenya Revenue Authority will be done with the exercise.
13. In that regard, to address the urgency of this matter and at the same time to allow Kenya Revenue Authority an opportunity to conclude the assessment, I shall grant Kenya Revenue Authority the seven (7) days of this order extension period to ascertained tax liability and serve it upon the tax payer. In default thereof, any orders and/or notice issued preserving the funds shall automatically lapse. In the meantime, as per the request of the Applicants on 9th April 2019, the accounts may be opened purely for the purposes of receiving credits and no debits shall bepaid out. The rest of the issues in the application will go to full hearing.
14. Those then are the orders of the court.
Dated, delivered and signed in an open court this 24th day of April 2019.
G.L. NZIOKA
JUDGE
In the presence
Mr. Kirugi for the Applicant
Mr. Ouma for the Respondents
Dennis ……………………court Assistant