What you need to know:
- Revenue authority had argued that by going to court, the businessman was trying to evade paying tax for his firms.
- Tycoon said his only source of income was from employment.
Mombasa tycoon Mohammed Jaffer has succeeded in stopping the taxman from demanding more than Sh180 million alleged to be undeclared tax.
Mr Jaffer, the managing director of the multi-million-shillings Grain Bulk Handlers Limited (GBHL), moved to court in 2011 when the Kenya Revenue Authority (KRA) issued agency notices to his bankers.
KRA told the court that it conducted investigations on various accounts held by the businessman and found that he failed to declare huge deposits in his bank accounts.
KRA served Mr Jaffer with the first assessment tax notice alleging that he had earned Sh300 million in business in 2007 and another Sh15.8 million but refused to pay an additional Sh90 million in tax arrears.
But he countered the allegation saying he was away residing in Dubai and only earned an income as a director of the company.
He was further accused of earning Sh300 million in business and another Sh31.9 million in 2009 where he was entitled to pay the taxman an additional Sh90 million.
But the businessman claimed that after he was appointed the firm’s MD in 2009, he changed his residence to Kenya and his only source of income was from his employment.
He denied having any income from self-employment.
KRA said a perusal of the income tax returns for January 1, 2007 to July 27, 2011 indicated that monies banked in Mr Jaffer’s accounts from the proceeds of sale of grain were not declared for tax purposes.
The taxman, therefore, said that it was lawfully entitled to treat the amounts in the accounts as undeclared income and to consequently issue an additional assessment to the tycoon.
GBHL owns and operates a specialised dry bulk discharge and handling terminal for grain imports located at Kilindini Port, Mombasa.
On February 20, Justice George Odunga said no attempt was made to show the nexus between the sums claimed to have been deposited in the accounts and the assessment made by KRA.
The judge faulted KRA saying there was no explanation as to how the assessment was arrived at.
“A taxing authority is not entitled to pluck a figure from the air and impose it upon a taxpayer without some rational basis for arriving at that figure and not another figure. Such action would be arbitrary, capricious and in bad faith,” ruled the judge.