The High Court in Nairobi has ruled that the Kenya Revenue Authority (KRA) acted within statutory timelines in a Sh1.1 billion tax dispute involving Chinese investor Hanqing Zhao, overturning an earlier decision by the Tax Appeals Tribunal (TAT) that had favoured the businessman.
Justice Moses Ado, sitting at the Milimani High Court Commercial and Tax Division, found that the Commissioner of Domestic Taxes lawfully issued its Objection Decision within the 60 days allowed under the Tax Procedures Act, 2015, effectively reversing the Tribunal’s finding that the decision was time-barred.
“This Court finds and holds that the Commissioner’s Objection Decision issued on January 29, 2024 was made well within the statutory time limits,” Justice Ado ruled in his detailed 27-page judgment.
“The Tribunal therefore erred in finding that the decision was issued out of time.”
The case stemmed from a Notice of Tax Assessment issued by KRA on September 7, 2023, demanding Sh 1,136,144,299 in taxes from Mr Zhao for the period between 2018 and 2023.
Zhao contested the assessment through a letter dated September 29, 2023, which he emailed to KRA officers.
Despite this correspondence, the tax authority issued a demand notice on November 8, 2023, maintaining that no valid objection had been filed via its iTax system, the official electronic tax platform.
Following further engagements, KRA allowed Zhao to file a late objection, which he did formally on November 30,2023 through iTax.
Two months later, on January 29, 2024, KRA issued its Objection Decision, slightly revising the tax downwards to Sh 1,129,243,870.
Unsatisfied, Zhao appealed to the Tax Appeals Tribunal, which in November 2024 ruled in his favour, holding that KRA had exceeded the 60-day deadline for issuing its decision.
The Tribunal held that the taxpayer’s email of September 29, 2023 constituted a valid objection, meaning the 60-day period expired on November 28, 2023.
It therefore deemed KRA’s decision “allowed by operation of law,” setting aside the Sh1.1 billion assessment entirely.
KRA appealed the decision in January 2025, arguing that only objections properly lodged through iTax are valid under the Tax Procedures Act.
Justice Ado agreed with the tax agency, ruling that the valid objection date was November 30, 2023, when the filing was completed on iTax, not the date of the earlier email.
“The date from which the sixty (60) day period provided under Section 51(11) ought to be reckoned is November 30 2023, when the Respondent formally lodged the objection on the iTax platform,” he held.
He emphasized that the iTax system is not a mere administrative convenience but a statutory requirement ensuring transparency, accountability, and legal certainty.
“The i-tax, being the prescribed electronic platform, serves a critical statutory and administrative function as it ensures that each objection is linked to a specific assessment, assigned a unique reference number, and bears an official timestamp,” the judge noted.
In contrast, he observed that objections filed by email “lack these essential attributes” and “are incapable of generating an auditable trail,” which exposes the process “to ambiguity, dispute, and potential abuse.”
Although the court found that KRA had complied with the law, Justice Ado declined to declare the agency’s tax decision final.
Instead, he ordered that the matter be remitted to the Tax Appeals Tribunal for a fresh hearing on the merits of Zhao’s objection.
“Justice in tax administration must balance legality with fairness,” he said.
“The object of this appeal was to determine the legality and timeliness of the Commissioner’s decision, not to foreclose the taxpayer’s right to be heard on the merits of its case.”
He further stated: “It would be unjust and contrary to the dictates of Article 159(2)(d) and Article 210 of the Constitution to simply uphold the Commissioner’s Objection Decision and thereby trigger enforcement of the entire tax demand of over Sh 1.1 billion, without allowing the taxpayer to have its substantive objections ventilated and determined on their merits.”
In his final orders, Justice Moses Ado found that Zhao’s initial letter dated September 29 2023, which had been sent via email to KRA officers, “did not constitute a valid notice of objection” under the Tax Procedures Act, 2015. Justice Ado emphasized that the law requires all objections to be lodged through the prescribed electronic system to ensure proper tracking and compliance.
Secondly, the judge ruled that the valid objection in this case was the one filed through the iTax system on November 2023.
According to the court, this was the date that triggered the statutory 60-day countdown within which the Commissioner was expected to issue an objection decision.
Thirdly, the court declared that the Commissioner’s Objection Decision dated January 29, 2024 “was issued within the statutory timelines.”
Fourth, Justice Ado set aside the Tax Appeals Tribunal’s judgment delivered on November 22,2024, which had deemed Zhao’s objection as allowed by operation of law.
The High Court held that the Tribunal had erred in its interpretation of the law and the computation of time.
Fifth, in the interest of fairness and due process, the court directed that the matter be remitted to the Tribunal for a fresh hearing and determination on the substantive tax issues.
The judge stated that it would be unjust to enforce the entire Sh1.1 billion tax demand without allowing Zhao to argue the merits of his case before the Tribunal.
