21/05/2026
Are you aware that your employee can sell you to KRA?
That is exactly what happened to Eldoret Grains Limited, a seemingly respectable grain company in Kenya's Rift Valley. In 2011, a former salesman named Ibrahim Ratemo Magonga walked into the Kenya Revenue Authority's offices and handed them a roadmap to his own employer's hidden treasure. He was earning a modest KSh 17,000 per month, yet he confessed that millions of shillings had been flowing through his personal bank accounts at Kenya Commercial Bank – and that money, he said, belonged not to him, but to Eldoret Grains. The company had allegedly been using him as a human shield, depositing sales proceeds into his name to keep them off the company's books and away from the taxman's gaze. The KRA listened, and what followed was a decade‑long legal war that would test the very limits of tax law, burden of proof, and corporate loyalty.
With Magonga's tip‑off as their compass, KRA investigators dug into the period between 2005 and 2010. They discovered that two KCB accounts held by Magonga had received a staggering KSh 385 million (later revised to over KSh 420 million) in deposits. This was no simple bank error. The company's own operations manager, Mohamed Banjo, was a co‑signatory on Magonga's personal account – a fact that defied any innocent explanation. Even more damning, KSh 11 million had been transferred directly from Magonga's account to the personal account of Swaleh Ahmed Taib, the company's managing director. Customers of Eldoret Grains, when contacted, confirmed in writing that they had paid large sums – KSh 1.6 million, KSh 5.1 million, and more – directly into Magonga's account as settlement for goods supplied by the company. The evidence painted a clear picture: Eldoret Grains was using its own salesman as a tax‑evading conduit. The KRA issued an additional tax assessment of KSh 567,920,538, covering the undeclared income for those six years.
Eldoret Grains did not take this lying down. The company argued a deceptively simple defence: the bank account belonged to Magonga, not the company. Under section 3 of the Income Tax Act, tax is chargeable only on income that accrues to the taxpayer. Since the deposits landed in a third party's name, the company insisted it could not be taxed on them. It claimed that Magonga was a rogue employee who had secretly redirected customer payments for his own enrichment. Once the scheme was discovered, the company said, it fired him and filed a civil suit in Eldoret for recovery of just KSh 654,590 – a tiny fraction of the millions that had passed through his hands. To the company, that suit was proof of good faith. To the KRA, it was an obvious cover‑up.
The case first went to the now‑defunct Income Tax Local Committee, which sided with the KRA. But Eldoret Grains fought back through judicial review, and the High Court quashed that decision, ordering a fresh hearing before the newly established Tax Appeal Tribunal (TAT). In 2019, the Tribunal delivered what seemed like a stunning victory for the taxpayer. Relying on its own precedent in Awal Limited v Commissioner of Investigations & Enforcement, the TAT held that the Commissioner cannot tax a company based solely on deposits found in a third party's account. The Tribunal reasoned that if the funds truly belonged to Eldoret Grains, there should have been corresponding transfers from Magonga's account to the company – and none were shown. It declared that only the account holder himself could explain whether the deposits were taxable income, and that the KRA should have assessed Magonga directly. With that, the entire half‑billion‑shilling assessment was set aside. The company celebrated; the KRA fumed..
But the Commissioner of Investigations and Enforcement was not finished. He appealed to the High Court, and on 20 November 2023, Justice A. Mabeya delivered a judgment that destroyed the TAT's reasoning. The judge pointed out that the Tribunal had fundamentally misapplied the burden of proof. Under section 56(1) of the Tax Procedures Act and section 30 of the Tax Appeals Tribunal Act, the burden is on the taxpayer to prove that an assessment is excessive or incorrect. The KRA had placed before the Tribunal a powerful body of circumstantial evidence: sworn statements from three employees (including Magonga), banking records, a letter from KCB confirming that the operations manager was a signatory on Magonga's account, and direct transfers to the managing director's personal account. Once that evidence was tendered, the burden shifted to Eldoret Grains to rebut it. What did the company offer? A civil suit for a paltry KSh 654,590 and a claim that the managing director's role as co‑signatory was merely to help Magonga with his alleged "transport business." Justice Mabeya found this explanation "illogical" and "an afterthought meant to cover the respondent's tax evasion tactics." He noted that a managing director is a very senior officer of a company; his actions are imputed to the company. The absence of direct transfers from Magonga's account to the corporate account was not conslusive. The web of connections – co‑signature, employee deposits, customer confirmations, and director receipts – overwhelmingly pointed to a coordinated scheme to hide income. The High Court allowed the KRA's appeal with costs, reinstated the assessment, and effectively overruled the TAT's narrow third‑party account principle as applied to these facts.
So, are you aware that your employee can sell you to KRA? The answer is a resounding yes. Ibrahim Magonga, the salesman, became the KRA's star witness against his own employer. His bank accounts, once meant to hide income, became the evidence that doomed the company's defence. The Eldoret Grains saga now stands as a landmark in Kenyan tax law: it teaches that while a taxpayer cannot be taxed arbitrarily on a stranger's account, a sophisticated evasion scheme using an employee as a nominee will not escape justice if the Commissioner assembles sufficient circumstantial evidence. It also reaffirms the harsh reality of the burden of proof – once the KRA puts forward credible evidence, the taxpayer must come clean or face the consequences. And for every employer in Kenya, the lesson is clear: trust your employees, but never assume they won't one day walk into the KRA office with your company's secrets. After all, loyalty has a price – and sometimes, that price is a half‑billion‑shilling tax bill.
