Trader sues KRA over freezing of accounts
What you need to know:
- Dalcom Kenya Limited claims that the taxman violated its rights after freezing its accounts and ordering its major clients to remit the taxes directly to the KRA.
- The taxman’s decision stemmed from an alleged default in payment of taxes by the company between November 2014 to July 2016.
- The company, with an annual turnover of Sh100 million, raised an objection to the said notice and challenged its accuracy.
A trading company has moved to court seeking damages of Sh100 million from the Kenya Revenue Authority (KRA) over alleged loss of business after its bank accounts were “maliciously and erroneously” frozen by the taxman over claims of tax default.
Dalcom Kenya Limited claims that the taxman violated its rights after freezing its accounts and ordering its major clients to remit the taxes directly to the KRA.
The taxman’s decision stemmed from an alleged default in payment of taxes by the company between November 2014 to July 2016.
“KRA froze all the bank accounts for the company rendering it ineffective and hence could not carry out business for a period of one month. The actions of the KRA were unprocedural as it did not address the objections raised by the company,” says the taxpayer in court papers.
In the petition filed at the High Court in Milimani, the taxpayer narrates that sometime in March 2022, it received an agency notice from KRA claiming that it had defaulted in tax remittances for the period of November 2014 to July 2016.
The company, with an annual turnover of Sh100 million, raised an objection to the said notice and challenged its accuracy.
“We wrote to the KRA and further visited their offices to amicably resolve the stalemate. KRA did not address our objections nor did it grant us an audience to explain,” read the court papers.
Instead, KRA wrote to the company’s official banks ordering them to freeze its accounts pending the remittance of the alleged taxes.
Through one of its directors Lillian Wairimu Waiganjo, the company says the KRA proceeded to issue notices to its major clients appointing them as its tax agents and ordering them to remit the taxes owed by the firm.
The clients included Toyota Kenya, Masai Kenya, Acme, Somack and Royal Media Services, which subsequently terminated their contracts with the firm “as they view it as a company which is hell-bent to defrauding government”.
“As a direct consequence of the said actions, KRA led to the closure of business as the company lost its major clients, could not pay its employees and could not carry out its day-to-day operations. The company experienced a loss of business as a direct consequence of the KRA’s action and inaction,” the petition filed through Phares Karanja & Company Advocates indicates.
The company had to declare some of its employees redundant while its directors have had a hard time trying to make ends meet.
Ms Waiganjo says the action of the KRA has exposed the company to its creditors as it was unable to meet part of its obligations.
One Philip International Auctioneers have issued a 45 days notice of redemption for properties owned by the company.
The company wants the court to issue an order compelling KRA to pay it special damages of Sh100 million for loss of business and general damages. The petition is pending the hearing and further directions.
Pending the hearing and determination of the suit, the company wants the court to issue a temporary order stopping any creditor from auctioning its property.
In addition, the company wants orders compelling KRA to write to the company’s clients to mitigate the damage occasioned by “falsely” accusing it of non-remittance.