When can the Kenya Revenue Authority (KRA) treat every deposit into your bank account as taxable income?

This was the central question in the case of Kirin Pipes Limited vs Commissioner, Intelligence Strategic Operations Investigations & Enforcement (Appeal E1116/2024) before the Tax Appeals Tribunal.

The Tribunal’s decision, delivered on 22 August 2025, has reaffirmed a crucial principle in tax law: the burden of proof lies with the taxpayer.

KRA investigated Kirin Pipes Limited’s tax affairs for the period 2019 to 2022. Following the probe, the Authority issued additional assessments of Sh34.3 million in income tax and Sh22.6 million in VAT.

Kirin Pipes objected, but the objection decision confirmed a liability of Sh21.6 million. Dissatisfied, the company appealed to the Tribunal.

The company argued that large sums reflected shareholder capital injections and a loan, not business revenue.

It also stated that it had secured a Sh31.6 million loan from Nanchang Municipal Engineering Development to support its operations. Further deposits totalling Sh24.6 million, the company explained, were shareholder funds rather than income.

In addition, Kirin Pipes insisted that it had received advance payments from clients, which were later invoiced and declared for tax purposes.

On this basis, the company urged the Tribunal to overturn KRA’s decision, arguing that treating these deposits as taxable income would amount to double taxation and unfair assessments.

The Tribunal examined the documentation provided but concluded that Kirin Pipes had not produced sufficient evidence.

On the matter of capital injections, the company presented bank statements and swift confirmation slips, but these were uncertified.

It failed to link the deposits to its shareholders as reflected in the official company search (CR12), and it did not provide resolutions, meeting minutes, or updated shareholding records to prove that the deposits were genuine increases in share capital.

As a result, the Tribunal ruled that deposits worth Sh54 million could not be proven as shareholder capital.

Regarding the alleged loan from Nanchang Municipal Engineering Development, the Tribunal noted that the agreement was interest-free, had no fixed repayment schedule, and placed repayment entirely at the discretion of Kirin Pipes.

No proof of repayment was provided, even though five years had elapsed between the agreement and the tax assessment.

The Tribunal therefore held that the loan documents did not meet the evidential threshold to prove that the sum was not taxable income.

On the issue of advance payments from clients, Kirin Pipes claimed it had received Sh65.3 million to cover future supplies.

However, it only submitted a schedule of invoices without the actual invoices or certified bank records. The Tribunal concluded that without corroborating evidence, it could not confirm whether the relevant taxes had already been accounted for on those sales.

In the end, the Tribunal determined that Kirin Pipes had failed to discharge its statutory burden of proof. The appeal was dismissed, and KRA’s objection decision was upheld.

KRA’s banking analysis method, treating unexplained deposits as income, is increasingly used in audits. For businesses and individuals alike, this case is proof that bank deposits can attract tax unless properly explained.