Digital Box Ltd Fined Sh700 Million

by Lawyer Wanz

Digital Box Ltd, an electronics firm will pay the Kenya Revenue Authority (KRA) over Sh700 million.

This comes after the firm failed to convince the Tax Appeals Tribunal (TAT) that the taxman’s assessment on undeclared tax, was flawed,

The firm had appealed, challenging KRA’s decision to assess and demand for the undeclared tax liabilities which involved Sh481 million in income tax and Sh219 million in value added tax for sales.

The facts were objectively gathered, we did not find any errors in the arithmetic computations and the sampling technique did not indicate any bias,” noted the judgment.

According to KRAs investigation process as submitted to the Tribunal, the process involved conducting court sanctioned searches to obtain vital transaction records at the company and at the director’s residence for examination and analysis.

KRA’s position was that it carried out a test to check on whether all sales were banked through a comparative analysis of the banking with the sales from the delivery notebooks.

Challenging KRAs assessment, Digital Box Ltd alleged that KRA had misapplied the banking analysis test to establish the company’s tax liabilities.

The analysis test by KRA revealed a huge variance between the sales declared by the firm for tax purposes and the amounts banked as proceeds of sales.

Its investigations showed the company purchases for the 2011 to 2013 were lower than the figures stated in the taxpayer’s accounts.

The Tax Appeals Tribunal said the firm failed to prove that KRA had misapplied bank analysis test and ruled that KRA did not err.

The firm had initially argued that KRA based its decision on extraneous considerations to arrive at the tax assessments. According to the judgement of the tribunal, all bank deposits are subject to taxation unless the account holder explains why they should not be taxed

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