The Kenya Revenue Authority (KRA) is allowed to audit taxpayer records for up to five years, from the date of the filing of a return, except in cases involving gross neglect, evasion, or fraud. In Cellnet Limited vs. Commissioner Domestic Taxes, the Tax Appeals Tribunal (the Tribunal), without the taxpayer initiating the issue (Suo Moto), raised concerns regarding the KRA audit exceeding the five-year limit. In this decision the Tribunal ruled that unless KRA can substantiate claims of gross neglect, evasion, or fraud, it cannot audit beyond the prescribed time limit.

Background 

Cellnet Limited is a private limited liability company engaged in selling airtime, connector packs, mobile phones, accessories, computer equipment, and networking accessories. The KRA initiated investigations into Cellnet Limited's tax affairs covering the period from July 2015 to June 2020. Subsequently, on 28^th June, 2022, the KRA issued an assessment to Cellnet Limited. 

When delivering its judgement, the Tribunal  perused the KRA’s  assessment dated 28^th June, 2022 wherein the KRA assessed Cellnet Limited for the taxes from 2016 to 2020. On its own accord, the Tribunal raised ...