[2025] KETAT 208 (KLR)

Aiveo Limited v Commissioner of Legal Services and Board Co-ordination (Tax Appeal E945 of 2024) [2025] KETAT 208 (KLR) (4 April 2025) (Ruling)

Neutral citation: [2025] KETAT 208 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal E945 of 2024

CA Muga, Chair, T Vikiru & BK Terer, Members

April 4, 2025

Between

Aiveo Limited

Appellant

and

Commissioner of Legal Services and Board Co-ordination

Respondent

Ruling

Background 1. The Appellant moved the Tribunal vide a Notice of Motion, an interlocutory application, dated and filed on 18th March, 2025 seeking the following Orders:a.Spent.b.That the Tribunal be pleased to direct that the Appellant is at liberty to file an amended Memorandum of Appeal and Supplementary Statement of Facts to corroborate the evidence submitted in the earlier filed statement.c.Cost of this application to be in the intended appeal.

2. The Application was supported by a sworn affidavit of Joseph Gicingiri, the Appellant’s tax accountant dated and filed on 18th March, 2025 wherein the Appellant cited the following as its grounds for the Application:a.That the Respondent issued the Appellant with a demand on 29th February 2024, demanding for WHVAT amounting to Kshs. 25,088,808. 51. b.That on 24th April 2024, the Respondent proceeded to issue the Appellant with assessments amounting to Kshs. 14,242,805. 20. c.That the Appellant objected to the assessments via a letter dated 20th May 2024. d.That the Respondent requested for a supplier confirmation that the Applicant’s suppliers accounted for the VAT in full with a listing of all the invoices on 6th June 2024. e.That the Appellant made the request to the suppliers on 7th June 2024 and the suppliers proceeded to send a letter dated 29th August 2024 to the Respondent.f.That the Respondent proceeded to issue the Appellant with an objection decision dated 17th July 2024 demanding Kshs. 25,088,808. 51. g.That while engaging in the Alternative Dispute Resolution (“ADR”) process the Appellant provided the Respondent with the supplier confirmation dated 29th August 2024. h.That upon providing the evidence to the Respondent during the ADR process, the Respondent refused to consider the evidence.i.That the dispute is centered on whether there was tax leakage and whether the withholding tax demanded by the Respondent was fully accounted for.j.That the new evidence confirmed that indeed there was no tax leakage and all the withholding tax demanded by the Respondent was accounted for.k.That should this application be allowed; the Respondent suffers no prejudice because it already had an opportunity to interrogate the documents in question during the ADR discussions. In addition, the suppliers sent the confirmation to the Respondent on 29th August 2024. l.That this Tribunal has in the past allowed evidence that was not considered by the Respondent during ADR. This was in the case of TAT 848 of 2022, KCSSA East Africa Limited vs Commissioner of Customs & Border Control.m.That there was immediate and imminent danger that the Appellant’s evidence may not be admitted by the Tribunal which would be prejudicial to the Appellant’s case.n.That unless this Tribunal intervenes and certifies this application as urgent and the orders sought granted, the Appellant stood to suffer irreparable loss.

3. In response to the Application, the Respondent filed its grounds of opposition dated 21st March, 2025 on 26th March 2025, wherein it stated as follows:a.That the Application was incompetent, bad in law, fatally defective and is an abuse of the Tribunal's process.b.The Appellant sought to be granted leave to file an amended Memorandum of Appeal and Supplementary Statement of Facts to corroborate the evidence submitted in the earlier statement. The Appellant had not attached a draft Memorandum of Appeal and Supplementary Statement of Facts for scrutiny by the Tribunal or the Respondent.c.The extent and/ or scope of the intended amendment was therefore not known to either the Respondent or the Tribunal.d.That an application of this nature required an Applicant to be forthright about the intended amendment and outrightly disclose the facts in issue otherwise, it would only set up the Respondent for trial by ambush. The Respondent will be prejudiced if the orders of amendment of pleadings are granted blindly.e.The Application was an afterthought and a delay tactic by the Appellant meant to delay the conclusion of the matter, which holds substantial Government Revenue.f.The Appellant did not demonstrate that it deserved favourable discretion of this Tribunal and the Application should be dismissed with costs to the Respondent.

4. The Respondent also filed a Replying Affidavit dated 21st March, 2025 and filed on 26th March, 2025, sworn by its officer, Ms. Linet Anne Akinyi Ojiambo wherein it outlined the following as its further grounds of opposition:a.That the Appellant filed an Appeal at the Tribunal on 30th August, 2025 contesting the Respondent's decision dated 17th July, 2024 which confirmed taxes of Ksh. 25,088,808. 51. b.That the Appellant was invited to engage in ADR with a view to settling the case out of Court.c.That the process at ADR is a ‘without prejudice process’ that is carried out with the view to reach a middle ground. The ADR collapsed when parties failed to reach a common middle ground.d.That Appellant intended to introduce documents that were not considered at objection stage, which concluded on 17th July, 2024 and the documents were only sourced after the issuance of the objection decision.e.That it is the mandate of the Respondent to carry out review of objections as set out under Section 51 of the Tax Procedures Act, CAP 469B of the Laws of Kenya (hereinafter “TPA”).f.The new documents that are intended to be included in the Appeal were not considered during the review of objections by the Respondent. In the event the application is allowed, the Respondent will be deprived of an opportunity to carry out its statutory mandate.g.That in the event the application is allowed and the Appellant is allowed to bring the additional documents not considered, the role of the Respondent under Section 51 of the TPA will be usurped.h.The Respondent and the Tribunal ought not to be slowed down by the Appellant's actions.i.The introduction of the documents by the Appellant that were not provided during the review stage should not be condoned.j.That the Application is calculated at unnecessarily delaying the hearing and determination of the matter pursuant to directions already issued by the Tribunal.k.That the Appellant had not demonstrated to the Tribunal that it is entitled to the prayers sought in the application.

5. The Appellant’s tax accountant, Mr. Joseph Gicingiri swore a further replying affidavit dated and filed on 26th March, 2025 wherein the Appellant outlined the following further grounds in response to the Respondent’s Replying affidavit and grounds of opposition:a.The Appellant was not in possession of the documents during the objection stage:i.That the Respondent requested supplier confirmation that the Appellant’s suppliers accounted for the VAT in full with a listing of all the invoices on 6th June 2024. ii.That the Appellant made the request to the suppliers on 7th June 2024 and the suppliers proceeded to send a letter dated 29th August 2024 to the Respondent.iii.That the Respondent proceeded to issue the Appellant with an objection decision dated 17th July 2024 demanding Kshs. 25,088,808. 51. iv.That the suppliers provided the Respondent with the supplier confirmation dated 29th August 2024, which was a date after the Respondent had issued its objection decision.v.That these documents are critical to the case, and it is in the best interest of justice to allow the Appellant to adduce them.b.The Respondent will not be prejudicedi.That the Respondent suffers no prejudice because they already had an opportunity to interrogate the documents in question during the ADR discussions.ii.That the evidence indeed confirms that the VAT that the Respondent is claiming was fully accounted for.iii.That the Appellant should only pay taxes that are truly due and payable.iv.That it is in the interest of justice for this Tribunal to allow the Application.

6. On 21st March, 2025, the Tribunal directed parties to file and serve upon each other their written submissions on or before 28th March, 2025 and since both parties complied with the Tribunal’s directions, the written submissions of both parties have been carefully considered by the Tribunal.

Analysis And Findings 7. The Tribunal notes that the Appellant sought the indulgence of the Tribunal to allow it to file an amended memorandum of appeal and supplementary statement of facts. More particularly the Appellant sought to corroborate evidence submitted in an earlier filed statement of facts by being allowed to file an amended memorandum of appeal and statement of facts. The Appeal is against the invalidation of the Appellant’s objection by a decision of the Respondent dated 17th July, 2024.

8. The Tribunal will delve into the chronology of events which was that the Appellant objected to assessments issued on 24th April, 2024 through its letter dated 24th May, 2024. That in an electronic mail dated 6th June, 2024, prior to making its objection decision, the Respondent requested the Appellant for confirmation from its suppliers and the letter was not availed by 17th July, 2024 when the Respondent issued its objection decision. The Appellant only received the letter of confirmation on 29th August, 2024 when the ADR process was ongoing.

9. The Tribunal finds it noteworthy that the stated letter of confirmation from the suppliers was requested before the Respondent made its decision, that is on 6th June, 2024. The Appellant however stated that it wrote to its suppliers on 7th June, 2024, a day after the request was made but that the letter of confirmation of suppliers was delivered to it during the ADR process and after the objection decision was issued. The view of the Tribunal is that first the Respondent could not have taken the letter into account whilst making its decision issued on 17th July, 2024 and Second, the Respondent, who is bound by the statutory timelines as mandated by statute was inclined to protect its rights to meet the statutory timelines and therefore could not have been expected to consider, prior to making its objection decision, a letter that was not availed at the time when it made its decision.

10. The Tribunal further notes that the Appellant has stated as one of its grounds for the Application, that the Respondent failed to consider documentation during the ADR process in spite of the fact that it was the Respondent who requested the documents during the ADR process. However, the Tribunal’s finding in this regard is that Respondent requested the document on 6th June, 2024, before issuing its objection decision on 17th July, 2024.

11. The Tribunal also notes the contention by the Respondent that it would be prejudiced if the Orders sought in this Application were to be granted by the Tribunal as the Appellant did not avail the requested documents to enable it review them before making its objection decision. The Respondent also opposed the Application on the basis that the Appellant did not attach the draft amended pleadings.

12. The Tribunal’s power to determine an application of this nature is anchored on the following provisions of Rule 21 of the Tax Appeals Tribunal (Procedure) Rules 2015:“21. Amendment of pleadings“A party may at any time before the closure of the case, orally apply to amend its pleadings and the Tribunal may, at its discretion, allow such application on such terms and conditions including granting leave to the other party to amend its pleadings provided the amendments do not raise new issues.”

13. The Tribunal also notes the following provisions of Section 13 (6) of the TATA:“The appellant shall, unless the Tribunal orders otherwise, be limited to the grounds stated in the appeal or documents to which the decision relates. " (Emphasis added)

14. The Tribunal notes that the Appellant has sought orders to be allowed to file an amended memorandum of appeal and statement of facts to corroborate the evidence submitted in its earlier filed statement of facts. The finding of the Tribunal in this regard is that the Appellant failed to attach with its Application, the draft amended memorandum of appeal and statement of facts and in the absence of the drafts, the Tribunal is not in a position to determine whether or not the proposed amendments comply with Section 13 (6) of the TATA and more particularly the proviso to Rule 21 of the Tax Appeals Tribunal (Procedure) Rules 2015.

15. The Tribunal notes that the Appellant in its Application, did not seek Orders for the extension of time to submit the additional documents. The Tribunal’s powers to consider such an application is as anchored on the following provisions of Rule 10 of the Tax Appeals Tribunal (Procedure) Rules 2015:“10. Extension of time for submitting documents1. Where the documents referred to in rule 3(2) are not filed within the time specified therein, the Tribunal may, upon application in writing, extend the time for submitting the documents.2. An application for extension of time referred to in rule 10(1) shall be—a.supported by an affidavit stating reasons why the applicant was unable to submit the documents in time;b.served on the respondent by the applicant within two days of filing with the clerk.3. The Tribunal may grant the extension of time if it is satisfied that the applicant was unable to submit the documents in time for the following reasons—a.absence from Kenya;b.sickness; orc.any other reasonable cause.4. The respondent may respond to the application by filing an affidavit within fourteen days from the date of service of the application.5. The Tribunal shall set down the hearing date for the application.”

16. The Tribunal is also guided by the following holding in the case of Commissioner of Income Tax-vs-Total Kenya Limited [2021] eKLR in deciding whether or not to allow an Applicant to file additional documents:“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 {19841 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 discretionary. 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. "

17. In the case of Mohamed Abdi Mahmud-vs-Ahmed Abdullahi Mohamed & 3 Others [2018] eKLR the Supreme Court expressed itself by holding as follows:“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 fade case of wilful 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)

18. Guided by statute and the principles in the authoritative and persuasive precedents as outlined in the preceding paragraphs, the Tribunal notes that the additional evidence that the Applicant seeks to adduce through the instant Application was neither provided during the formative period, of the dispute; namely the objection stage, nor the period before the Respondent made its objection decision. The documents were availed during the ADR process on 29th August, 2024, when ADR was in progress and the Respondent refused to consider the documents leading to failure of the ADR process.

19. The view of the Tribunal is that the letter dated 29th August, 2024 (from the Appellant’s suppliers) and its corresponding attachments at Appendix 2 is the document that the Appellant would wish to introduce at this late stage of the proceedings.

20. The Tribunal is of the further view that it has the discretion, pursuant to the provisions of section 13(6) of the TATA, to limit whether or not it may consider any new documentary evidence that is adduced at any stage of the dispute with the main condition being that new issues are not raised. The Tribunal has the jurisdiction to hear appeals against the decision of the Respondent whilst the ADR process is an independent process guided by the provisions of the Tax Procedures (Settlement of Tax Disputes Out of Court or Tribunal) Regulations, Legal Notice No. 23 of 2020 and the Respondent’s internal procedures and guidelines.

21. In view of the preceding paragraph the view of the Tribunal is that it is not party to the settlement Agreements reached by the parties during the ADR process and furthermore, it cannot determine an Appeal on the basis of any Agreements reached or any disagreements during the ADR process as outlined by the following provisions of Section 28 of the TATA:“Power of the Tribunal where the parties reach agreement1. The parties may, at any stage during proceedings, apply to the Tribunal to be allowed to settle the matter out of the Tribunal, and the Tribunal shall grant the request under such conditions as it may impose.2. The parties to the appeal shall report to the Tribunal the outcome of settlement of the matter outside the Tribunal.”

22. The further view of the Tribunal is that the issue for determination is not that documents were not reviewed or considered during ADR but that in compliance with Order 10 of the Tax Appeals Tribunal (Procedure Rules), 2015, a party to the proceedings may wish to seek extension of time to file a document where it did not do so within the statutory timeline. In order to determine whether or not to allow such document or documents, the Tribunal would have to consider whether such document or documents would cause either party to suffer prejudice.

23. It is the view of the Tribunal that the tests prescribed in Mohamed Abdi Mahmud case [SUPRA] have not been met to the extent that the additional evidence sought to be adduced will serve to remove a lacuna and fill in a gap in evidence and this will have a direct bearing on the main issue in the Appeal. Accordingly, if allowed, the instant Application will cause the Respondent to suffer prejudice.

24. The Tribunal reiterates its holding in the case of Alliance TobaccoLimited vs Commissioner of Legal Services & amp; Border Control [TAT Appeal No. 42 of 2024] to support the position that the guiding principle in applications to amend pleadings is that the same will be liberally and freely permitted unless prejudice and injustice will be occasioned to the opposite party.

Disposition 25. Based on the foregoing analysis, the Tribunal finds that this Application lacks merit and will proceed to make the following Orders:a.This Application be and is hereby dismissed.b.The Appeal is fixed for hearing on 8th April, 2025. c.No orders as to costs.

26. It is so Ordered.

DATED AND DELIVERED AT NAIROBI ON THIS 4TH DAY OF APRIL, 2025. CHRISTINE A. MUGA - CHAIRPERSONDR. TIMOTHY B. VIKIRU - MEMBERBONIFACE K. TERER - MEMBER