It is a win lose situation for lawyer Nelson Havi after the High Court partially allowed the grounds of appeal in his multi-million tax dispute case.
Havi has been embroiled in tax dispute with the Kenya Revenue Authority which led him to challenge the same before the Tax Appeals Tribunal.
Justice Francis Olel found that only two out of the 14 grounds of appeal succeded dismissing the rest for lack of merit.
“Having considered the issues raised in this appeal, I do find that only grounds 1 and 3 of this appeal succeded…… all the other grounds of appeal lack merit and are dismissed, the judge ruled.
The judge ordered that the initial tax demand of Sh 12,900,959.40 made against Havi on 3rd February 2021 is set aside.
Havi averred that on 28th August 2023, KRA demanded from him tax arrears totalling Sh 17,081,968.63, comprising Income Tax of Sh 1,050,960.88 for the period January 2015 to December 2020 and Value Added Tax of Sh 16,031,007.75 for the period April 2016 to July 2023.
Subsequently, on 29th August 2023, the taxman issued agency notices to all his bankers, demanding tax arrears as aforementioned.
It was his contention that the tax demand of Sh 17,081,986.63 was made in disregard of various correspondences exchanged and prior settlements reached by the parties.
He further noted that, within the period of 3rd February, 2021 to 27th February 2023, KRA had made contradictory tax demand upon him, namely; Sh 12,900,559.40 on 3rd February, 2021, Sh 92,384.00 on 22nd April 2022 and Sh 8,963,204.20 on 13th February 2023.
The advocate had allegedly demanded a clarification to clear the air on these contradictory demands, but none was offered.
“His deduction, therefore, was that any revenue officer assigned to handle his tax file would ignore all the previous settlements made or arrived at, and would proceed as though it were a fresh investigation,” the judge read.
To that extent, the judge added, “the respondents’ demands were unreasonable, unjustified, and logically should have been removed and/or rectified on his I-Tax portal.”
Arising from the demands of 28th August 2023, and agency notices issued on 29th August 2023, did respond to the said letters through his letter dated 31st August 2023, and also opted to a file Judicial Review application, challenging the unlawful demands and closure of his bank accounts.
However, before the said judicial review was heard, KRA gave him a reprieve by suspending the agency notice issued to his bankers.
Havi further bitterly lamented and specifically pleaded instances between 2018 to September 2023 when the respondent unilaterally revised his returns on his I-Tax portal and saddled him with interest and penalties totalling Sh 41,194,998.00 as indicated on the said portal as at 27th September 2023.
The court found that to his mind, the actions on his I-Tax portal did not amount to a valid tax decision on assessment by the Commissioner General in terms of PART VII of the Tax Procedures Act No 29 of 2015, but out of abundance of caution, on 3rd October 2023 wrote to the taxman requesting the reversal of the entries made on his I-Tax portal.
He also wanted to be furnished with the reasons that informed the actions taken by the respondent together with relevant documents supporting the said actions. He noted that no response was made to the aforementioned letter by 3rd October 2023, or at all.
As the tax dispute raged on, he applied for his Tax Compliance certificate on 15th November 2023, but his application was rejected on account of the outstanding tax dispute.
“On 2nd November 2023, he sent a reminder to the respondents to act on his letter of 3rd October 2023 and got no reply therefrom,” Justice Olel ruled.
Exasperated by the obtaining circumstances, the appellant opted to file the 2nd Judicial review application, and as the two judicial review applications were pending, KRA revised his tax liability to Sh 2,618,853.00.
Havi allegedly requested KRA to allow him to pay for the same to enable him get his tax compliance certificate.
“Unfortunately, before an agreement could be reached on 15th January 2024, the respondent engaged the reverse gear and slapped him with an additional tax assessment totalling Sh 74,020,520.49.
A ruling on the judicial review application was subsequently made on 25th March 2025, directing that his dispute with the respondent should be pursued by way of an appeal to the tax appeal tribunal.
On its part, KRA said that it established that Havi declared returns as per income tax returns compared against withholding certificates, turnovers, and VAT returns had unexplained variances, which they tabulated and proceeded to raise assessments as mandated under Section 31 of the Tax Procedures Act, 2015.
“The said assessments were shared with the appellant, and he was invited to provide extricating explanations, but he failed to do so within the thirty (30) day statutory timeline provided under Section 51 of the Tax Procedure Act. He was therefore to be blamed for the misfortune that befell him,” KRA submitted.
Having fully complied with the due process, and in compliance with Article 201(b), (i) of the Constitution of Kenya, 2010, which provides that tax burden shall be shared fairly, they did on 28th August 2023, demand from the appellant due tax arrears amounting to Sh 17,081,968.63 comprising of income tax of Sh 1,050,960.00 and value added tax of Sh 16,031.007.75 for the period January 2015 to December 2020 and subsequently on 29th August 2023 issued agency notices to the appellant’s bankers.
On the issues raised by the advocate that KRA ignored his documentation provided in support of his position and prior settlement resolutions reached during reconciliation meetings, the taxman, while affirming that indeed several correspondences were exchanged and meetings held, had considered all of the said documents and the appellant’s view of the whole matter, but still arrived at the conclusion that there was still variance between the grossed up amounts from the withholding certificates with what was declared for the assessed years of income.
