[2023] KETAT 994 (KLR)

Airtel Networks Kenya Limited v Commissioner of Domestic Taxes (Appeal 851 of 2022) [2023] KETAT 994 (KLR) (Commercial and Tax) (1 December 2023) (Ruling)

Neutral citation: [2023] KETAT 994 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Commercial and Tax

Appeal 851 of 2022

E.N Wafula, Chair, M Makau, E.N Njeru, E Ng'ang'a & AK Kiprotich, Members

December 1, 2023

Between

Airtel Networks Kenya Limited

Appellant

and

The Commissioner Of Domestic Taxes

Respondent

Ruling

1. The Application which was by way of a Notice of Motion dated and filed under a Certificate of urgency on 27th September 2023 is supported by an Affidavit sworn by the Respondent’s Advocate, Lydia Ng’ang’a, on the even date seeks for the following Orders:-a)Spent;b)This Honourable Tribunal be pleased to extend the time for filing documentary evidence to be relied on this Appeal;c)Pursuant to granting prayer (b) above, the annexed documents be deemed as duly filed and served; andd)The costs of this application be provided for.

2. The application is premised on the following grounds, that:-a)The matter came up for hearing by way of viva voce evidence on 27th September 2023. b)While the Appellant’s witness was giving his testimony, the Respondent noted that the Statement of Facts dated 12th September 2022 and the Respondent’s Witness Statement dated 20th March 2023 were not exhaustive as there were crucial documents that were not availed to the Tribunal as at the time of filing the said pleadings.c)The matter is now fixed for Mention on 11th October 2023 to confirm the filing of submissions and thereafter take a judgment date and, unless the Respondent is granted leave to file its Supplementary list of documents, the Tribunal shall not have the benefit of having the correct facts of the matter.d)The list of documents which are entries is vital in the determination of the matter as they justify why the Respondent uplifted the values declared by the Appellant and a demand for extra taxes amounting to Kshs 11,346,251. 00 made and unless the entries are admitted, the Tribunal shall not have the benefit of having the correct facts and arriving at a just determination.e)The Respondent is desirous of presenting the correct position in its defense of the matter vide the information contained in the entries to be filed in this case.f)The Respondent has in paragraph 10 of its Statement of Facts and paragraph 9 of the Respondent’s Witness Statement sworn by Walter Kimani on 20th March 2023 made reference to the comparison done by the Respondent with previously accepted transaction values and the said entries the Respondent seeks to adduce are those upon which the comparison was made.g)The Respondent holds the right to be heard and accorded a fair hearing pursuant to Article 50 of the Constitution of Kenya 2010 and this is ensured by granting the orders sought herein.h)It is in the interest of justice that the Respondent be granted an opportunity to be heard on merits in this Appeal.i)No prejudice will be suffered by the Appellant in the main Appeal if the orders sought herein are allowed as both parties have an equal and just opportunity to present the issues before the Tribunal.j)These entries did not introduce new issues but emphasized the Respondent’s basis to the uplift, which ought to be considered by this Tribunal.k)The further documents sought to be adduced are not new to the Appellant but are within the personal knowledge of the Appellant since they were furnished to the Appellant at various stages that parties were holding discussions and even as at the time the Appellant made its application for value review to the Respondent on 9th May 2022, the said entries were in its knowledge.l)The delay in filing these entry documents is not inordinate nor intentional as it was occasioned by the misfiling of documents at the Respondent’s office, which mistake should not be visited on the Respondent.m)The application has been brought at the earliest time possible for the Tribunal’s consideration and determination.n)The Honourable Tribunal has jurisdiction to grant the orders sought.

3. The Respondent in its written submissions dated and filed before the Tribunal on 3rd October 2023 stated as hereunder.

(i) On whether the Applicant meets the threshold for granting of leave to file a supplementary list of documents 4. The Respondent submitted that the list of documents is not pegged on any new grounds but entries which were used as comparables to the grossly undervalued amounts paid by the Appellant for the consignment in issue and which entries the Appellant was well aware of.

5. It further submitted that the supplementary list of documents is not intended to make out a fresh case for hearing but to aid the Tribunal in arriving at its judgment in the case before it while having all the facts before it.

6. It relied on Article 159(2)(d) of the Constitution of Kenya and contended that justice shall not be denied due to procedural technicalities and whilst considering the admission of the entry documents, it should be in the interest of justice and procedural fairness.

7. It reiterated that the Tribunal should take into account all the relevant and credible evidence that has a direct bearing on the main issues raised in the Appellant’s Statement of Facts and Memorandum of Appeal.

8. It asserted that the evidence it seeks to introduce will not prejudice the Appellant as it has not demonstrated how it will be prejudiced and the Respondent is not introducing new information, rather providing the true picture of how the Respondent’s review decision dated 20th May 2022 was arrived upon and additional assessment issued.

9. It maintained that the entries the Respondent seeks to introduce were shared with the Appellant during the review of its application appealing against the uplift and the Appellant was informed of the entries used to compare the values declared and the basis of the uplift per the review decision of 20th May 2023.

10. It cited the cases of Kenneth Nyaga Mwige v. Austine Kiguta & 2 Others; KAM Company Limited v. Shelter Afrique & Another [2015] eKLR to buttress its position that the entries were inadvertently omitted by the Respondent’s counsel as at the time of filing the Statement of Facts which mistake the Respondent’s counsel seeks to rectify in the interest of justice and should not be visited upon the client

11. It maintained that the purpose of discovery is mainly to ensure that all documents or information necessary for the just determination of the appeal are made available to all parties as well as to the court and relied on Halsbury’s Laws of England 4th Edition Volume 13 at paragraph 1 which provides for the function of discovery of documents

12. It contended that the fact that the contents of the documents it seeks to file are relevant is an issue to be determined at the determination of the Appeal herein and not at this juncture.

(ii) On whether there has been an inordinate delay in filing the documents 13. The Respondent as the Applicant in the instant application to file a supplementary list of documents was brought within the soonest time possible after the Respondent established during the hearing of the matter that the entries the Respondent seeks to introduce were inadvertently omitted from its Statement of Facts.

14. It cited Section 15(4) of the Tax Appeals Tribunal Act and submitted that it was not aware as at the time the Statement of Facts was being filed, the documents showing the comparable entries which formed the basis of the dispute were not availed and immediately that came to be known, the Respondent filed the application without any further delay.

15. It asserted that its application was filed and brought before this Honourable Tribunal within the soonest time possible from realising that it was necessary to have the entries adduced as part of the Respondent’s evidence and that the Honorable Tribunal ought to allow the Respondent an opportunity to adduce the same.

16. It relied on the case of Pravin Chandra Jamnads Kakad v Kenya Bus Services Ltd & Another [2014] eKLR and Essanji & Another v Solanki (1968) EA 218 and argued that the Appellant has failed to demonstrate before the Tribunal that justice will not be done if the Respondent is granted leave to file a supplementary list of documents

17. It asserted that the Tribunal is yet to issue any determination on the matter and as such the Respondent cannot be said to be guilty of undue or inordinate delays.

(iii) On whether the Respondent will be prejudiced in any way 18. The Respondent submitted that no prejudice will be occasioned to the Appellant if the documents are admitted as the matter is yet to be determined hence it will have time to address any of its concern, the parties are yet to exchange submissions on the Appeal and have time to respond to the application; the Appellant has had sufficient time since the filing of the application to look at the draft Supplementary List of Documents; and the documents the Respondent intends to file are within the Appellant’s knowledge and nothing new is being introduced which the Appellant is not aware of.

19. It argued that the application has been made before the Appellant files its submissions to ensure that all parties have considerable time to review the documents and file a reply before the time for filing of submissions is closed.

20. It cited the cases of TAT Appeal No. 304 of 2019 Pevans East Africa v Commissioner of Domestic Taxes and Central Kenya Limited v Trust Bank Limited (2000) EALR 365 and added that the Respondent has not demonstrated to this Honourable Tribunal how it will be prejudiced if the application is allowed.

21. It asserted that the Appellant will not be prejudiced in any way as the documents being introduced are in its knowledge as the same were discussed during the objection stage and the Appellant still has the right of reply. It reiterated that it actually stands to be prejudiced if the said documents are not introduced as the Tribunal will not appreciate that the Respondent before rendering its decision actually accorded the Appellant the opportunity to rebut its assessments.

22. It further relied on Article 159 of the Constitution of Kenya and the case of Pevans East Africa (supra) and reiterated that its application is merited and should be allowed as the information presented are relevant to this case; there was no inordinate delay in filing the application; and the Appellantwill have a right to respond and will not be prejudiced in any way.

Response to the Application 23. The Appellant filed a Replying Affidavit sworn by the Appellant’s Head of Legal Affairs, Lilian Mugo, on 16th October 2023 and filed on 23rd October 2023 in response to the application citing the following as the grounds for opposition, that:-a)The Appellant opposes the application for the introduction of new documents as the same is being made after the hearing has been concluded and witnesses for both sides have already testified. The hearing was concluded on 27th September 2023. b)The Respondent has completely failed to lay a basis for its application and the same has been made after an inordinate period of delay.c)The Respondent has failed to notice that the price for the MX 240 equipment that is referred to in the XON systems invoice that has been attached to the Affidavit of Lidya Ng’ang’a includes 5 years support which is factored into the cost of the equipment whereas there is no such support provided for MX 240 equipment imported by the Appellant. Similarly, the capacity of the equipment that the Respondent has highlighted in the Nokia invoice is different from that imported by the Appellant and therefore cannot be the same price. New evidence that the Respondent now wishes to adduce is therefore completely irrelevant to the Appeal herein.d)The Respondent has also completely failed to explain why the documents were not placed before the Tribunal before the hearing took place.e)The Respondent’s Statement of Facts that was filed on 12th September 2022 makes no reference whatsoever to the documents that it now seeks to introduce after the hearing has been concluded.f)Any attempt to introduce new documents after one year of filing of the Statement of Facts is not only inordinate delay but is prejudicial to the Appellant’s right to a fair hearing given that the hearing has already taken place.g)The Respondent also completely failed to make reference to the documents it now seeks to introduce as evidence in its written statement dated 20th March 2023. h)The Witness statement was filed more than six months ago and any attempt to introduce documents after such a period is also not only inordinate but is prejudicial to the Appellant’s right to a fair hearing given that the hearing has already taken place.i)If the Respondent is allowed to introduce new evidence after the hearing has taken place, it will deprive the Appellant of the opportunity to cross-examine the Respondent’s witnesses and therefore the Appellant’s right to fair hearing pursuant to Article 50 of the Constitution will be violated. Such a right includes the to challenge the evidence adduced against the Respondent.j)The application to introduce new documents more than one year after the Appeal was filed at the Tribunal after the hearing has been concluded is therefore prejudicial to the Respondent’s guaranteed right under Article 50 of the constitution.k)The application should therefore be dismissed.

24. The Appellant prayed for orders from the Tribunal that:a.The application is without merit and be dismissed with costs; orb.Without prejudice to prayer (a) and in the unlikely event that the Honourable Tribunal allows the application, the matter to be referred back to the Commissioner for issuance of a fresh Objection decision having considered the new evidence per Section 29(3) (c) of the TAT Act.c.The costs of this application be provided for

25. In its written submissions dated and filed on 25th October 2023, the Appellant presented its case as hereunder.

(i) On whether the Tribunal has the jurisdiction to allow new evidence to be adduced after an appeal has been heard 26. The Appellant submitted that this Honourable Tribunal’s jurisdiction is grounded in the Tax Procedures Act, the Tax Appeals Tribunal Act, and the Tax Appeals Tribunal (Procedure) Rules 2015 and the Respondent has failed to cite the provisions of the law under which it has brought this application, which is not an omission on the Respondent’s part but because no rules exist that empowers this Honorable Tribunal to allow a party to adduce new evidence after the hearing of an appeal has been concluded thus the application must fail as the Honourable Tribunal has no jurisdiction to grant the orders sought.

(ii) On whether the Respondent will be prejudiced by allowing new evidence to be adduced after a hearing has been concluded. 27. The Appellant submitted that the Respondent has not shown that the entries it seeks to adduce were availed to the Respondent during the review of their Objection Application.

28. It reiterated that the entries that the Respondent is seeking to introduce into evidence after the conclusion of the hearing were not referred to in its Statement of Facts or in the Witness Statements of Walter Kimani and that the Respondent has failed to point out which paragraph of its Statement of Facts or Witness Statements the entries were referred to. It added that the entries the Respondent seeks to adduce before this Honourable Tribunal amount to completely new evidence and are an afterthought.

29. It further reiterated that the Respondent's suggestion that the Appellant can address the evidence in its submissions after adducing new evidence after the hearing has been completed flies in the face of the Respondent’s right to a fair hearing granted by Article 50 (1) of the Constitution of Kenya, 2010.

30. It contended that if the application is granted the Appellant will have been denied a chance to cross-examine the Respondent’s witness or to adduce its own evidence to counter the new evidence the Respondent seeks to produce. It maintained that the conditions attached to the price quoted in one of the entries is different from that imported by the Respondent and such issues cannot be addressed in submissions. It added that it can only test the relevance of the new evidence by cross-examining the Respondent’s witness thus prejudicing the Appellant severely if the new evidence is allowed after the hearing has been concluded.

31. It relied on the case of Raindrops Limited v County Government of Kilifi (2020) eKLR and submitted that the Respondent is trying to fill gaps in its evidence and by its own admission, it only noticed during the hearing that such evidence had not been adduced and the entries were not referred to in the Respondent’s Statement of Facts or Witness Statements and are therefore a means of filling in the gaps in its evidence which will prejudice and embarrass the Appellant.

32. It argued that the Respondent is supposed to demonstrate that the evidence it seeks to introduce could not have been obtained with reasonable diligence at the time of hearing of its case but the Respondent has failed to explain in its submissions why it did not adduce the entries at the time of hearing.

33. It submitted that the case of Pevans East Africa relied upon by the Respondent is easily distinguishable as the substantive appeal had not been heard therein but in the instant case, the substantive appeal has already been heard.

34. It reiterated that the Central Kenya Limited case cited by the Applicant is equally inapplicable as it deals with leave to amend pleadings whereas in the instant application, the Respondent is not amending its pleadings but adducing new evidence thus the Respondent had been unable to find any authority to support its contention that the Appellant will not suffer prejudice if the Respondent is allowed to adduce new evidence so as to bridge the gaps in its evidence after the hearing has been concluded. It added that it has conversely demonstrated with reference to the Raindrops case that prejudice will be suffered by it.

(iii) On whether there has been an inordinate delay and whether the reason for such delay has been explained by the Applicant. 35. The Appellant submitted that it filed its Statement of Facts on 12th September 2022 more than a year before the hearing of the appeal herein took place and the entries it now seeks to adduce were not referred to anywhere in the Statement of Facts therefore the period of one year amounts to inordinate delay per Rule 12 of the Tax Appeals Tribunal (Procedure) Rules 2015 which prescribes a period of 30 days within which the Respondent should file its Statement of Facts and attach documents.

36. It submitted that no reasonable cause has been demonstrated by the Respondent as to why the entries were not included in its Statement of Facts when the same was filed and the Applicant contradicts itself when it avers that it was not aware at the time of filing the Statement of Facts that the entries were not availed then reiterates that it shared the entries with the Respondent during the review application as if entries were availed to the Appellant, there is no reason for not including the same in the Respondent’s Statement of Facts or Witness Statement therefore the Applicant has failed to show cause why the Tribunal should exercise discretion in its favour.

37. It argued that in any event, Section 15(4) of the Tax Appeals Tribunal Act applies to the extension of time for filing a Statement of Facts and not for adducing new evidence after the hearing of an appeal has been concluded.

38. It relied on the case of Raila Odinga & 5 Others v IEBC & 3 Others[2013] eKLR and submitted that the Respondent has failed to adhere to the timelines set in the Tax Appeals Tribunal Act or the Tax Appeals Tribunal (Procedure) Rules. It added that allowing the new evidence after an inordinate period of delay following the expiry of the timelines and after the hearing has been concluded would add an extra burden to the Respondent as the hearing would have to be reopened and the Respondent would need to cross-examine the Applicant’s witness again and adduce evidence to controvert the Applicant’s evidence.

Analysis and Findings 39. For determination before the Tribunal is whether to allow the Respondent to file additional documents in support of its defense against the Appeal.

40. Section 13 (6) of the Tax Appeals Tribunal Act, No. 40 Laws of Kenya provides:“The appellant shall, unless the Tribunal orders otherwise, be limited to the grounds stated in the appeal or documents to which the decision relates.”

41. Section 17 of the Tax Appeals Tribunal Act also provides:“The Tribunal may call any person to attend at a hearing and give evidence including production of any document if the Tribunal believes such evidence shall assist in its deliberations.”

42. As elucidated in Section 17 above, the Tribunal has the jurisdiction and authority to order for or allow any evidence including documentary evidence it deems helpful for the resolution of the dispute before it.

43. In determining whether to allow additional or further documents, the Tribunal is guided by the case of Commissioner of Income Tax v Total Kenya Limited (2021) eKLR where it was held that:-“In Tarmohamed & Another v. Lakhani & Company [1958] EA 567, the Court of Appeal for Eastern Africa adopted the decision in Ladd v. Marshall [1954] WLR 1489 and stated: -Except in cases where the application for additional evidence is based on fraud or surprise: to justify the reception of fresh evidence or a new trial, three conditions must be fulfilled: first, it must be shown that the evidence could not have been obtained with reasonable diligence for use at the trial; secondly, the evidence must be such that, if given, it would probably have an important influence on the result of the case, though it need not be decisive; thirdly, the evidence must be such as is presumably to be believed, or in other words, it must be apparently credible, though it need not be incontrovertible.In Wanjie & Others v. Sakwa & Others [1984] KLR 275, in considering the need for restricting reception of additional evidence under Rule 29 of the Court of Appeal Rules, Chesoni JA observed at pg 280 thus: - This rule is not intended to enable a party who has discovered fresh evidence to import it nor is it intended for a litigant who has been unsuccessful at the trial to patch up the weak points in his case and fill up omissions in the Court of Appeal. The Rule does not authorise the admission of additional evidence for the purpose of removing lacunae and filing in gaps in evidence. The appellate court must find it needful. Additional evidence should not be admitted to enable a plaintiff to make out a fresh case in appeal. There would be no end to litigation if the rule were used for the purpose of allowing the parties to make out a fresh case or to improve their case by calling further evidence. It follows that the power given should be exercised very sparingly and great caution should be exercised in admitting fresh evidence.From the foregoing, it is clear that the power to admit additional evidence is discretionally. However, it should be exercised restrictively. That the evidence should be needful and not meant to patch up an applicant’s case on appeal. Finally, the power should be exercised sparingly but for the ends of justice.In the present case, the evidence was in the possession of the applicant during the trial before the tribunal. However, it was contended, and not controverted, that it was not produced at the trial because the parties knew or conducted themselves in a manner suggesting that it was not necessary. This is so because, the parties with knowledge that the mutual agreement process had collapsed, resorted to the appeal before the Tribunal before and without considering the Alternative Dispute Resolution required under Article 24 of the Double Taxation Agreement. This is the Article the Tribunal relied on to determine the matter against the applicant.The Court has considered that the evidence sought to be relied on is needful. This is so because there was no contention that the respondent had raised the issue of jurisdiction before the Tribunal. It was submitted that that was the case because the parties knew of the position of the MAP that there was no requirement for ADR before approaching the Tribunal.The Court is persuaded that, if it be true that the Tribunal's decision was based on the unavailability of the intended evidence and reliance thereon was suo motto, that piece of evidence would have been crucial to the applicant's case. There would be no prejudice to be suffered if the said evidence is adduced at this stage.”

44. Further, the Supreme Court in Mohamed Abdi Mahmud v Ahmed Abdullahi Mohamed & 3 Others (2018) eKLR expressed itself as thus:“We therefore lay down the governing principles on allowing additional evidence in appellate courts in Kenya as follows:(a)the additional evidence must be directly relevant to the matter before the court and be in the interest of justice;(b)it must be such that, if given, it would influence or impact upon the result of the verdict, although it need not be decisive;(c)it is shown that it could not have been obtained with reasonable diligence for use at the trial, was not within the knowledge of, or could not have been produced at the time of the suit or petition by the party seeking to adduce the additional evidence;(d)Where the additional evidence sought to be adduced removes any vagueness or doubt over the case and has a direct bearing on the main issue in the suit;(e)the evidence must be credible in the sense that it is capable of belief;(f)the additional evidence must not be so voluminous making it difficult or impossible for the other party to respond effectively;(g)whether a party would reasonably have been aware of and procured the further evidence in the course of trial is an essential consideration to ensure fairness and due process;(h)where the additional evidence discloses a strong prima facie case of willful deception of the Court;(i)The Court must be satisfied that the additional evidence is not utilized for the purpose of removing lacunae and filling gaps in evidence. The Court must find the further evidence needful.(j)A party who has been unsuccessful at the trial must not seek to adduce additional evidence to, make a fresh case in appeal, fill up omissions or patch up the weak points in his/her case.(k)The court will consider the proportionality and prejudice of allowing the additional evidence. This requires the court to assess the balance between the significance of the additional evidence, on the one hand, and the need for the swift conduct of litigation together with any prejudice that might arise from the additional evidence on the other.” (Emphasis added)

45. The Respondent submitted that it was in possession of the impugned documents at the instance of filing of its Statement of Facts and the same would have been produced before the Tribunal but for the mistake of its Advocate. The Respondent’s witness equally did not make reference to the documents in his witness statement filed before the Tribunal. This is a clear indication to the Tribunal that the test as provided in the Mohamed Abdi Mahmud case (supra) that the Respondent could not have obtained the intended evidence with reasonable diligence for use at the time is failed by the Respondent as per its concession.

46. The Tribunal therefore finds no need to lend itself to the preceding principles for allowing additional evidence given the above finding.

47. Further, it is not lost to the Tribunal that the hearing of the substantive appeal had ostensibly been closed after the conclusion of viva voche proceedings. The Tribunal therefore concurs with the Appellant that the Respondent being allowed to adduce such evidence at this juncture of filing submissions will be tantamount to reopening the case as the Appellant will have to be allowed a chance to cross-examine on the said documents and to adduce additional evidence controverting the Respondent’s intended evidence.

48. The Tribunal notes that the Respondent has filed the application with a calculated intention to reopen its case with a view of filling in the gaps arising from its evidence as adduced before the Tribunal and to patch up the weak points in its case.

Disposition 49. The Tribunal in the circumstances finds that the application lacks merit and accordingly proceeds to make the following Orders:-a)The application is hereby dismissed.b)No orders as to costs.

50. It is so ordered.

DATED AND DELIVERE AT NAIROBI THIS 1ST DAY OF DECEMBER, 2023. ERIC NYONGESA WAFULACHAIRMANMUTISO MAKAUMEMBERELISHAH N. NJERUMEMBEREUNICE N. NG’ANG’AMEMBERABRAHAM K. KIPROTICHMEMBER