Sonko loses Sh385m tax battle over missing financial records

Former Nairobi governor Mike Sonko has lost a Sh385 million tax dispute linked to Sh1.4 billion deposited in his 11 bank accounts between 2013 and 2019, when he served as Nairobi senator and governor. 

The Tax Appeals Tribunal found that Mr Sonko failed to provide sufficient evidence capable of displacing the Kenya Revenue Authority’s (KRA) assessment, based on analysis of deposits into the bank accounts.

“He has failed to discharge the burden of proof that has been placed on him under Tax Appeals Tribunal Act. The Appellant has not provided persuasive evidence to prove that it provided the respondent with sufficient documents and evidence to cause it to reconsider its assessments,” said the Tribunal.

KRA's Commissioner of Domestic Taxes investigated Mr Sonko’s tax affairs covering seven years and, on June 24, 2022, issued additional income tax assessments of Sh407.4 million. Mr Sonko was later allowed to lodge a late objection.

On December 13, 2024, KRA issued an objection decision partly confirming the assessment at Sh385 million. Mr Sonko appealed in January 2025, challenging the taxman’s treatment of his business purchases and expenses. 

He argued that KRA had wrongly disallowed business purchases and expenses, ignored supporting documents and supplier declarations, and failed to deduct legitimate costs incurred in generating his income.

The dispute centred on how KRA reconstructed his taxable income after examining his banking records and comparing deposits with declared income.

KRA told the tribunal that Mr Sonko operated 11 bank accounts during the period, held at Equity Bank, KCB, Diamond Trust Bank and Co-operative Bank.

The accounts comprised four Equity Bank accounts, one KCB account, five Diamond Trust Bank accounts and one Co-operative Bank account, including accounts denominated in US dollars and euros.

The judgment says KRA obtained statements from the accounts and found net deposits of Sh1.4 billion between 2013 and 2019. It excluded loans, reversals, contra-entries, bounced cheques and income already taxed elsewhere.

Disputed methodology

After those adjustments, KRA calculated net taxable income of Sh1.28 billion and income tax of Sh386 million. Its analysis placed the largest taxable income in 2017, at Sh498.9 million, generating Sh149.6 million in tax.

KRA also said Mr Sonko’s self-declarations showed employment income earned while he served as Nairobi senator and later governor, rather than the larger income identified through banking analysis.

Mr Sonko disputed the methodology and said KRA had failed to account for costs incurred in generating his income. He said he supplied bank statements, reconciliations and other information to remove non-taxable transactions.

He also argued that some records could not be produced because of circumstances beyond his control. He said taxpayers were required to retain records for five years and argued that KRA’s scrutiny had extended beyond that period.

Mr Sonko further argued that KRA could have used its access to the back end of the iTax system to verify whether his suppliers had declared corresponding sales.

He said the taxman’s approach was unfair and had denied him legitimate reliefs for business expenditure. He asked the tribunal to annul the objection decision and award him costs.

However, KRA rejected the claims, saying Sonko had not supplied documents supporting the expenses and purchases he wanted deducted. It maintained that banking analysis was a recognised assessment method where declared income did not explain bank deposits.

In its judgement, the tribunal agreed with KRA on the central evidentiary issue. It said taxpayers must produce documents requested by the Commissioner and prove that an assessment is excessive or otherwise incorrect.

"He who asserts must prove. The appellant has engaged in mere assertions in this appeal without providing evidence," said the tribunal in the judgement dated August 7, 2026, emphasizing that “a mere statement in pleadings is not evidence.”

The tribunal rejected Mr Sonko’s argument that KRA could fill documentation gaps through iTax access, saying his submissions acknowledged he lacked the documents sought.

The tribunal noted that Mr Sonko had been given 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.

Mr Sonko did not comply with those directions. The tribunal restored the earlier position and proceeded using the pleadings and evidence already on record.

It held that KRA was justified in rejecting his objection because he had failed to discharge the burden of proving 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, dismissing the appeal.

However, the final orders also state that KRA’s December 13, 2024 objection decision was set aside, creating an apparent inconsistency within the disposition.

The ruling follows earlier enforcement proceedings involving the same tax dispute. In April 2026, the tribunal ordered KRA to lift agency notices freezing several of Mr Sonko’s Equity Bank accounts pending determination of the appeal.

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