Court Sets Limits on KRA Delays in Tax Disputes

The Court of Appeal has restricted the circumstances under which KRA can delay action on disputed tax matters. A taxpayer's objection can automatically succeed when no decision is issued within the legally prescribed period.

The judges determined that the Commissioner cannot suspend a statutory deadline while waiting for another case to be concluded. The finding was made in a dispute involving VAT refunds worth more than Ksh168 million.

Several refund claims had reportedly remained unresolved for years despite some cases undergoing audits. Some of the claims had remained pending for approximately seven years without final determination.

The court found that statutory timelines cannot be set aside through administrative decisions. Public authorities are required to exercise their powers within the limits established by legislation.

Pending Cases Cannot Stop Clock

KRA had argued that action on the refunds was delayed because related proceedings remained before courts and the Tax Appeals Tribunal. That explanation was rejected by the appellate court in its determination of the dispute.

The judges found that pending collateral proceedings do not automatically suspend duties imposed by tax legislation. Consequently, the Commissioner cannot simply wait for separate proceedings before complying with statutory deadlines.

Where an objection is not determined within 60 days, it is deemed allowed under the applicable legal framework. The ruling therefore places emphasis on timely decisions by the tax authority.

Judicial Review Explained

The appellate court also provided clarification on when taxpayers can approach the High Court directly. Judicial review may be available where a statutory duty remains unperformed within the required period.

However, the remedy does not provide an alternative route for challenging the correctness of a tax assessment. Matters that properly belong within the tax appeals process must still be pursued through that framework.

The distinction between the two legal procedures was highlighted by the judges. Judicial review examines the legality of administrative conduct, while statutory appeals focus on the substance of tax decisions.

Refund Payment Not Ordered

Despite overturning the earlier decision, the appellate court did not order KRA to pay the disputed VAT refunds. The underlying entitlement to the money remained contested and therefore required further determination.

Instead, complaints concerning statutory compliance and fair administrative action were returned to the High Court. The matters were directed to be handled on a priority basis.

The ruling consequently does not automatically establish an entitlement to payment of the disputed refunds. Its immediate significance concerns the legal obligation to comply with mandatory statutory timelines.

The decision provides additional guidance for taxpayers facing prolonged administrative delays. It also reinforces the requirement for public authorities to perform statutory duties within prescribed periods.