Harley Berry Limited, the supplier linked to Kenya Power’s controversial smart-meter deal, has suffered another legal setback.
The Tax Appeals Tribunal has upheld a KSh317.9 million VAT assessment after the company failed to prove its claims.
The ruling has renewed scrutiny of Harley Berry, which supplied more than 320,000 smart meters under a KSh2.9 billion framework.
But the two controversies remain legally separate, with no finding of wrongdoing in the procurement inquiry.
The tax dispute instead turned on something less dramatic but potentially more expensive: records.
Business Daily reported the tribunal defeat on Sunday, highlighting the failed burden of proof.
The judgement itself, delivered mid-August, provides the fuller picture.
It shows how a dispute over input VAT became a battle over evidence, deadlines, and taxpayer obligations.
The Tax Bill
The dispute began when the Commissioner of Domestic Taxes issued Harley Berry an additional assessment.
The assessment, dated March 26, 2025, demanded KSh317,909,009 in VAT covering 2022, 2023, and 2024.
Harley Berry objected on May 27, arguing that KRA had overlooked legitimate input VAT.
The company also complained that it needed additional time to retrieve supporting documents.
KRA nevertheless confirmed the assessment through its July 25, 2025, objection decision.
Harley Berry then appealed to the Tax Appeals Tribunal in September.
Its central argument was straightforward: genuine business inputs existed, but supporting records remained difficult to retrieve.
The company said some information could already be traced through iTax and eTIMS systems.
It wanted those electronic records considered alongside documents still being sought from suppliers.
The Tribunal ultimately found that argument insufficient to overturn the assessment.
KRA’s Red Flags
KRA’s case contained several discrepancies that complicated Harley Berry’s defence.
The authority said the company filed nil returns between January and July 2022.
Those returns were filed despite outstanding withholding VAT credits, according to KRA.
Harley Berry later filed the pending returns on November 20, 2023.
KRA then said the company failed to declare sales connected with withholding VAT certificates.
The authority consequently brought the undeclared income into its assessment.
More questions emerged around Harley Berry’s input VAT claims from several suppliers.
KRA said some suppliers were nil filers, non-filers, or unregistered for VAT.
It specifically cited Coolextreme International Limited and Ndume Chainlinks Limited.
According to KRA, Harley Berry claimed more input VAT than those suppliers declared through sales.
That discrepancy prompted requests for invoices, supplier confirmations, and bank statements.
Harley Berry maintained that it had supporting material but needed additional retrieval time.
The Tribunal, however, found the documentary trail remarkably thin.
Proof Fails
This became the decisive point in the case.
Kenyan tax law places a heavy evidential burden on taxpayers challenging assessments.
Section 56 of the Tax Procedures Act requires taxpayers to prove tax decisions incorrect.
Section 30 of the Tax Appeals Tribunal Act reinforces that burden during appeals.
The Tribunal cited previous High Court decisions confirming this principle.
One important decision was Commissioner of Domestic Taxes v Block International Limited.
Another was Darwine Wholesalers Limited v Commissioner of Investigations and Enforcement.
Both decisions underscore the taxpayer’s responsibility to challenge assessments with evidence.
For Harley Berry, the problem was not merely incomplete paperwork.
The Tribunal said the company failed to file the documents needed to establish its claims.
It found that Harley Berry had filed its notice of objection without supporting documents.
It also filed KRA’s objection decision but little else capable of proving its case.
The Tribunal noted that KRA had specifically requested disputed invoices and supplier confirmations.
It had also requested bank statements to help verify the disputed transactions.
None of those crucial documents formed part of Harley Berry’s appeal record.
“The appellant failed to file documents to demonstrate that KRA erred,” the Tribunal said.
It therefore found that the company had failed to discharge its burden of proof.
Records Matter
The ruling carries a broader warning for businesses facing tax disputes.
The law does not merely expect taxpayers to calculate their taxes correctly.
It expects them to preserve evidence capable of proving those calculations.
Section 23 of the Tax Procedures Act requires taxpayers to maintain relevant tax documents.
Those records generally must be retained for five years after the relevant reporting period.
VAT law separately requires full and true transaction records for the same five-year period.
The Tribunal therefore placed responsibility squarely on Harley Berry.
Its difficulty retrieving manual documents could not displace that statutory obligation.
The company also proposed another solution that failed to gain traction.
It asked KRA to allow input VAT equivalent to roughly 40 per cent of turnover.
That proposal reflected uncertainty over whether missing supplier documents would eventually emerge.
But tax deductions cannot simply be estimated where legislation demands documentary proof.
Section 17(3) of the VAT Act specifies documents supporting input-tax deductions.
These include original tax invoices and other prescribed transaction records.
The Tribunal found Harley Berry had produced none of those required documents.
The judgement also considered the timing of input VAT claims.
KRA argued that some claims were made after the statutory six-month window.
That argument added another obstacle, although the Tribunal’s decisive finding concerned proof.
The case therefore ended without the Tribunal testing every disputed transaction individually.
There simply was insufficient evidence upon which such an exercise could properly proceed.
The Tribunal dismissed the appeal and upheld KRA’s July 25, 2025, decision.
Each side was ordered to bear its own costs.
READ ALSO: Maize Supplier Hit With KSh593 Million Tax Bill After Losing Fight With KRA
Meanwhile, Harley Berry’s separate Kenya Power history provides important context.
A parliamentary and Senate inquiry examined its Sh2.9 billion smart-meter supply arrangement.
The enquiries attracted scrutiny but did not establish corruption or irregularity against Harley Berry.
That procurement controversy remains separate from the tax proceedings.
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