Case Reference:Sonko v Commissioner of Domestic Taxes (Tax Appeal E033 of 2025) [2026] KETAT 288 (KLR) (7 August 2026) (Judgment)
Background
Mike Sonko, a prominent Kenyan politician and former Governor of Nairobi, came under KRA investigation for the period spanning 2013 to 2019. During this time, while Sonko declared only his employment income from public service, KRA investigators identified substantial deposits totaling over Kshs 1.4 billion flowing through eleven bank accounts held across various financial institutions. These significant discrepancies between declared income and actual bank deposits triggered a comprehensive tax compliance investigation. The KRA’s findings revealed that Sonko had only declared his salary earnings from his roles as Senator and later Governor, while substantial business income remained undisclosed.
The KRA’s Assessment
KRA conducted a thorough banking analysis of Sonko’s accounts, making appropriate adjustments for non-income items including loans, reversals, contra-entries, and bounced cheques. This analysis yielded a net taxable income of Kshs 1,287,142,038, resulting in an additional income tax liability of Kshs 385,142,611.40. The banking method, which has been judicially recognized as a valid assessment tool, was employed where the taxpayer’s declared income failed to explain the substantial bank deposits. The assessment was issued on 24th June 2022, and after Sonko was allowed to file a late objection, KRA issued its Objection Decision on 13th December 2024, partially confirming the additional tax assessments.
Sonko’s Position
Sonko objected to the assessment, raising several grounds of appeal, including:
- Alleged failure by KRA to account for business costs and overheads
- Claimed provision of supporting documentation
- Assertion that KRA should have utilized its iTax system to verify supplier declarations
- Argument that record-keeping obligations extend only to a five-year statutory period
Sonko contended that the assessment went beyond the statutorily prescribed five-year period for record retention and that any ambiguity in tax law should be interpreted in favor of the taxpayer under the contra proferentem doctrine. He further argued that KRA acted arbitrarily and violated his constitutional rights to fair administrative action.
The Tribunal’s Determination
The Tribunal identified a fundamental flaw in Sonko’s case. Despite making robust assertions, he failed to provide any tangible evidence to support his claims. In June 2026, the Tribunal granted Sonko a final opportunity to file additional supporting documents, with a clear deadline of July 8, 2026. This deadline passed without any compliance from Sonko or his legal representatives.
The Tribunal applied established legal principles, emphasizing that “he who asserts must prove.” Under Section 56(1) of the Tax Procedures Act and Section 30 of the Tax Appeals Tribunal Act, the burden of proof rests squarely on the taxpayer to demonstrate that an assessment is incorrect. The Tribunal further cited the principle that “a mere statement in pleadings is not evidence.”
Crucially, the Tribunal observed that Sonko had effectively admitted his inability to produce the requested records by suggesting KRA should utilize its back-end access to fill the gaps in his documentation. This admission proved fatal to his case. The Tribunal found that Sonko had surrendered himself to KRA’s best judgment in determining his tax liability.
Key Takeaways for Taxpayers
This case underscores several critical lessons for all taxpayers:
1. The Importance of Proper Record Keeping Taxpayers must maintain comprehensive and accurate financial records. Section 23 of the Tax Procedures Act requires records to be kept for five years, and failure to produce them when demanded can be determinative in a tax dispute. The Tribunal emphasized that mere assertions without documentary evidence are insufficient to discharge the burden of proof.
2. Burden of Proof in Tax Disputes The burden of proof lies with the taxpayer to establish that an assessment is incorrect. Mere assertions, without supporting documentary evidence, will not suffice. The Tribunal cited the case of Commissioner of Domestic Taxes v Dinesh Construction Limited where the court held that “a mere statement in pleadings is not evidence.”
3. Banking Analysis as a Valid Assessment Method Where taxpayers fail to maintain proper records or accurately declare their income, KRA is empowered to employ indirect methods such as banking analysis to determine tax liability. The method has been consistently upheld by courts as a legitimate assessment tool.
4. Compliance with Tribunal Directives Failure to comply with Tribunal orders and deadlines can result in dismissal of an appeal, as demonstrated in this case. The Tribunal granted Sonko an opportunity to file additional documents, but his non-compliance proved fatal to his appeal.
Conclusion
The Sonko case serves as a sobering reminder that in the realm of tax administration, substance prevails over rhetoric. The Tribunal’s decision reinforces the principle that taxpayers must maintain proper records and be prepared to produce them when required. In the absence of adequate documentation, KRA is entitled to utilize recognized assessment methods to determine tax liability. This judgment underscores the importance of proactive tax compliance and the need for taxpayers to engage professional tax advisors to ensure proper record-keeping and effective management of tax disputes.
