KRA’s Agency Notices in Kenya: Lessons from the Katahira Case 2026

The Kenya Revenue Authority (KRA) suffered a significant judicial setback in the recent High Court judgement in the case of Katahira & Engineers International Limited v Kenya Revenue Authority (Judicial Review Application E022 of 2026) [2026] KEHC 687 (KLR) (Judicial Review) (30 January 2026) concerning the lawful grounds for the issuance of Agency Notices. At its core, the judgement reinforces the principle of procedural fairness and affirms the primary jurisdiction of the Tax Appeals Tribunal (the Tribunal) over tax enforcement disputes at first instance.

Kenya Revenue Authority Notices in Kenya Photo by Kelly Sikkema on Unsplash

Overview of the Case

Katahira approached the High Court seeking judicial review in respect of KRA’s tax assessment, which had previously been nullified by the Tax Appeals Tribunal under Appeal No. E276 of 2025. Notwithstanding the Tribunal’s nullification, KRA invoked Section 42 of the Tax Procedures Act and proceeded to issue Agency Notices to NCBA and Stanbic Banks, directing them to restrict the applicant’s access to its bank accounts in order to recover the sums specified in the nullified assessment.

Acting on those Agency Notices, both banks proceeded to freeze Katahira’s accounts, notwithstanding that Katahira had obtained a court order staying enforcement of the assessment.

The taxpayer’s rights at issue included the right to fair administrative action and the right to property, as guaranteed under Articles 47 and 40 of the Constitution, respectively.

Issue for Determination

The central legal issue was whether KRA could disregard the quasi-judicial finality of the Tribunal’s decisions by invoking its administrative enforcement powers to freeze taxpayer assets, thereby bypassing the established judicial hierarchy.

Outcomes from the Katahira Decision

1. Reinforcement of the Doctrine of Exhaustion

   KRA has historically invoked Section 42 of the Tax Procedures Act as a summary enforcement tool, often without regard to the status of ongoing proceedings. The Katahira judgement makes clear that KRA cannot disregard a decision of the Tribunal. Where an assessment has been nullified, that decision is binding and subsisting. Issuing an agency notice in reliance on a nullified assessment would constitute an excess of KRA’s jurisdiction. Such a nullification can only be set aside by a higher court exercising its appellate or judicial review jurisdiction.

   
   

2. Safeguarding the Right to Fair Administrative Action (Article 47)

   The High Court further emphasized that issuing an Agency Notice without a valid legal basis or due process constitutes a violation of the taxpayer’s right to expeditious, efficient, lawful, and reasonable administrative action. KRA must be able to demonstrate that due process was observed before issuing an agency notice, which is an extreme measure that ought to be exercised with caution.

3. Clarification on the implication of a stay of enforcement through Agency Notices

   The High Court also made an essential clarification in its ruling delivered on 18th February 2026. In this decision, NCBA, an interested party to the proceedings, sought clarification on whether staying an agency notice obliged the Bank to reinstate the taxpayer’s unrestricted access to its accounts. The court held that a stay of an agency notice restores the taxpayer to their status quo ante. The court further emphasized that a stay does not merely “pause” the notice; rather, it operates to compel the Bank to grant the taxpayer unrestricted access to their funds.

Our View

This decision carries significant implications, particularly for taxpayers who have been subjected to Agency Notices without adequate legal justification. The case underscores the imperative to uphold administrative fairness and jurisdictional integrity. The nullification of an assessment by the Tribunal is not merely a procedural step; it is a binding determination. Once an assessment has been set aside, KRA’s right to issue an agency notice in furtherance of that assessment ceases, unless and until the nullification is successfully challenged before a superior court of competent jurisdiction.

Ultimately, the Katahira decision affirms that Section 42 of the Tax Procedures Act exists to facilitate lawful revenue collection. It is not a gateway for circumventing judicial outcomes through administrative shortcuts

Author: Camila Kimathi

This article is for informational purposes only and does not constitute legal advice. For tailored advice, please reach out to us directly at info@mckayadvocates.com.