Sonko moves to High Court to block KRA's Sh385m tax assessment

Sonko is challenging a tax assessment arising from Sh1.4 billion deposited into 11 of his bank accounts between 2013 and 2019. [File, Standard]

Former Nairobi Governor Mike Sonko now intends to move to the High Court after losing a Sh385 million tax dispute with the Kenya Revenue Authority (KRA).

Sonko is challenging a tax assessment arising from Sh1.4 billion deposited into 11 of his bank accounts between 2013 and 2019, insisting that the money did not amount to undeclared taxable income.

“I am not giving up on this matter. I will take the fight to the High Court because I believe I have sufficient evidence to demonstrate that these funds were not undeclared taxable income,” Sonko said.

The former governor maintains that he has documents capable of challenging KRA’s assessment and clearing the disputed tax bill.

He argues that the deposits included proceeds from business transactions, loans and other sources that should not have been subjected to income tax.

Sonko has also maintained that part of the money came from the sale of lucrative parcels of land in the coastal region.

“The Sh1.4 billion in question did not simply appear in my accounts. There were legitimate transactions behind the money, including proceeds from the sale of property, business dealings and loans. I will provide the necessary documentation to demonstrate the source of these funds,” he said.

His decision to pursue the matter in the High Court comes after the Tax Appeals Tribunal dismissed his appeal, finding that he had failed to provide sufficient financial records to rebut KRA’s assessment and demonstrate that the disputed deposits were not taxable income.

The dispute followed a seven-year investigation by KRA into Sonko’s tax affairs.

On June 24, 2022, the Commissioner of Domestic Taxes issued additional income tax assessments amounting to Sh407.4 million.

Sonko was subsequently allowed to file a late objection against the assessment.

On December 13, 2024, KRA issued an objection decision partly confirming the assessment at Sh385 million.

Sonko appealed to the Tax Appeals Tribunal in January 2025, challenging the taxman’s treatment of his business purchases and expenses.

At the centre of the dispute were deposits made into 11 accounts held at Equity Bank, KCB, Diamond Trust Bank and Co-operative Bank, including accounts denominated in US dollars and euros.

KRA obtained the bank statements and identified net deposits of Sh1.4 billion during the period under review.

The taxman, however, said it had excluded loans, reversals, contra-entries, bounced cheques and income that had already been taxed elsewhere before determining the taxable amount.

Following the adjustments, KRA calculated net taxable income of Sh1.28 billion and assessed income tax at about Sh386 million.

The largest amount of taxable income was recorded in 2017, when KRA calculated taxable income of Sh498.9 million, resulting in an income tax liability of Sh149.6 million.

Sonko disputed KRA’s methodology, arguing that the authority had wrongly treated some deposits as taxable income while failing to take into account legitimate business expenses and purchases.

He maintained that he had supplied bank statements, reconciliations and other information to demonstrate the nature of the transactions.

Sonko also argued that some of the records requested by KRA could not be produced because of circumstances beyond his control.

He further contended that taxpayers were required to retain records for five years and questioned KRA’s reliance on transactions falling outside that period.

The former governor also argued that KRA could have used information available through the iTax system to establish whether his suppliers had declared corresponding sales.

He accused the taxman of adopting an unfair approach that denied him legitimate deductions for expenses incurred in generating his income and asked the tribunal to set aside the objection decision.

KRA, however, maintained that Sonko had failed to provide adequate documentary evidence to support the expenses and purchases he wanted deducted.

The authority argued that analysing banking transactions was a recognised method of assessing taxable income where declared income failed to explain deposits made into a taxpayer’s accounts.

The tribunal sided with KRA on the central issue of evidence, holding that Sonko had failed to discharge the statutory burden placed on him.

“He who asserts must prove. The appellant has engaged in mere assertions in this appeal without providing evidence,” the tribunal said in its judgment dated August 7, 2026.

The tribunal further emphasised that “a mere statement in pleadings is not evidence.”

It rejected Sonko’s argument that KRA could fill gaps in his documentation by accessing information through iTax, noting that his own submissions acknowledged that he did not have some of the documents requested by the taxman.

The tribunal had also given Sonko another opportunity to strengthen his case.

On June 19, 2026, it allowed him to file additional documents by July 8 and supplementary submissions by July 17.

However, Sonko did not comply with those directions.

The tribunal consequently restored the earlier position and proceeded to determine the appeal based on the pleadings and evidence already on record.

It ultimately held that KRA was justified in rejecting Sonko’s objection because he had failed to prove that the assessment was wrong.

“The appellant’s failure to prove that he had provided the documents that had been requested of him meant he had not discharged his statutory burden of proof,” the tribunal said.

The tribunal dismissed Sonko’s appeal, dealing another blow to the former governor’s attempt to overturn the Sh385 million tax liability.

Sonko now plans to take the dispute to the High Court, where he intends to challenge the tribunal’s findings and present what he says is sufficient evidence to explain the source and nature of the funds.