[2023] KETAT 583 (KLR)

Alfazance Africa Consulting Limited v Commisioner of DomesticTaxes (Miscellaneous Application E086 of 2023) [2023] KETAT 583 (KLR) (29 June 2023) (Ruling)

Neutral citation: [2023] KETAT 583 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Miscellaneous Application E086 of 2023

E.N Wafula, Chair, Cynthia B. Mayaka, RO Oluoch, EN Njeru & AK Kiprotich, Members

June 29, 2023

Between

Alfazance Africa Consulting Limited

Applicant

and

Commisioner of Domestic Taxes

Respondent

Ruling

1. The application which was by way of a letter dated 23rd February, 2023, and filed on March 15, 2023, is supported by an Affidavit sworn by the Applicant‘s Director, Quaseed Parkar, on the 23rd day of February, 2023 seeks for the following orders for:a.Leave to file the Appeal out of time, andb.The Memorandum of Appeal and Statement of Facts dated February 23, 2023, to be deemed as properly filed.

2. The application was premised on the following grounds that: -a.The objection decision dated 16th June, 2022, by the Respondent was not served upon the Applicant either through its registered postal address or through the Applicant’s email address and as such, service thereof was improper and irregular and did not meet the set requirements under the governing tax laws.b.Its registered and correct postal address is P. O Box 14465-00100 Nairobi and not P. O Box 254-00200 Nairobi that was used by the Respondent. The Applicant averred that the latter postal box does not belong to it and or its agents and servants.c.Since the service of assessment to the Applicant was improper, the Respondent re-issued the assessment through the Applicant’s Finance Manager’s email address-pavan.kumar@alfazance.com instead of the Directors’ email addresses which are well known to the Respondent.d.The Respondent did not follow the prescribed procedure in communicating the objection decision as outlined in section 29, 30 and 31 of the Tax Procedure Act(TPA) which provides as follows;“the Commissioner shall notify in writing a taxpayer assessed under 30(1) of the advance assessment and specify-i.The amount of tax assessedii.The amount of any penalty payable in respect of the tax assessediii.The reporting period to which the assessment relatesiv.The due date for payment of the tax and penaltyv.The manner of objecting to the assessment…”e.It was not aware of the objection decision issued by the Respondent until on 21st October, 2022, when the Applicant received a tax demand letter from the Chief Manager Corporate Taxpayer Account Management Division dated 19th September 2022. Whereupon it responded to the tax demand letter and requested for the Objection decision through its letter dated 21st October 2022. f.It did not receive any correspondence either via its registered address of service or through its official email addresses on the 13th may, 2022, and 3rd June, 2022, as alleged by the Respondent.

3. The Respondent in response to the application filed its:a.Grounds of Opposition filed on 23rd March, 2023. b.Replying Affidavit by David Omondi Okoth sworn and filed on 30th March, 2023. c.Written Submissions file on 13th April, 2023.

4. It stated in its Grounds of Opposition that the Application was incompetent, bad in law, defective and an abuse of process because it did not meet the threshold set by law under Section 13(4) of the TPA. It supported its view with the case of Nicolas Kiptoo Arap Korir Salat vs Independent Electoral and Boundaries Commission and 7 Others (2014) eKLR.

5. It was also its view that the Applicant ought to pay 50% of the tax demanded to show its commitment to pursue the Appeal.

6. The Respondent averred as follows in its Replying Affidavit filed on 30th March, 2023, and Written Submissions filed on 13th April, 2023, that the Applicant:a.Lodged its application to extend time on 15th March, 2023, a period of over 9 months late and after the statutorily prescribed time for lodging an appeal contrary to the provisions of Section 13(1) (b) of the Tax Appeals Tribunal Act. It argued that this delay was not only inordinate but it was also not satisfactorily explained.b.Brought its application after more than 7 (seven) months post the issuance of the invalidation decision.c.Was served with the said decision via its official email address alfazanceafricaconsult@gmail.com as registered by the Applicant on its iTax portal.d.It is trite law that he who alleges must prove and the Applicant had failed to prove its case in this matter on a balance of probabilities that the additional assessments and objection decision were not effectively served upon it contrary to Sections 107, 108, and 109 of the Evidence Act Cap 80 of the laws of Kenya. It also cited the case of Chairman, Kenya National Union of Teachers and Another v Henry Inyangala and 2 others (2018) eKLR.e.Has in no way or fashion advanced sufficient or reasonable grounds for the delay on its part in filing either a notice of appeal or the substantive appeal within the statutory timelines. Neither does the Applicant’s evidence rebut the Respondent’s evidence of effective service.f.Has filed the Appeal after an inordinate period which will be prejudicial because the taxes have been outstanding since the year 2022 and the Applicant has failed to give reasonable cause for delay in filing the application herein.g.Has brought a premature application before the Tribunal to the extent that an objection decision has not been issued in the matter. It relied on the case of Misc. Appl. No. 175 of 2022 Valley Drillers & General Contractors Ltdvthe Commissioner of Domestic Tax and TAT Appeal No 470 of 2021 Seme Ng-CDF V the Commissioner of Domestic Taxes; to support its case.

Analysis And Finding 13. This Appeal relates to a situation where the Applicant affirms that it has never been served with the Invalidation letter which is the subject of the dispute herein and it has made a request to the Respondent through a letter dated 21st October, 2021, requesting it to share the said letter with it. On the other hand, the Respondent has issued a demand notice dated 19th September demanding for tax arrears.

14. The said demand notice has not been withdrawn. It therefore remains in effect and can be enforced at any time. At the same time the Respondent has declined to respond to the Applicant’s letter dated 21st October, 2022, requesting for the formal Invalidation Decision to enable it craft its response, Appeal and or take any other course that it is statutorily entitled to undertake under Section 51 of the TPA Act.

15. It is also not lost on the Tribunal that the said Invalidation Notice which the Applicant is craving is a crucial document in the Appeal process under Section 51(6) of the TPA Act.

16. It is this circumstances that have led the Applicant to invoke the jurisdictional authority of the Tribunal under Section 12 of the TAT which provides as follows in regard to the jurisdictional power of the Tribunal:“A person who disputes the decision of the Commissioner on any matter arising under the provisions of any tax law may, subject to the provisions of the relevant tax law, upon giving notice in writing to the Commissioner, appeal to the Tribunal,”

17. Section 12 of the TAT Act makes it apparent that a person who disputes any decision made by the Commissioner under any provision, of any tax law may appeal to the Tribunal.

18. The fact that the Tribunal is clothed with the power to offer redress to taxpayers aggrieved by the decision of the Respondent was affirmed by Justice Odunga, (as he then was) in Jimbise Limited 2 others v Kenya Revenue Authority [2017] eKLR, when he held as thus:“From a reading of section 2 of the Tax Appeals Tribunal Act, it comes out clearly that the Tribunal is empowered to deal with disputes from the decisions of the Commissioner on any matter arising under the provisions of any tax law. It is therefore clear that the Tribunal’s powers are very wide and are not restricted to disputes relating to facts only as the applicants contend.”

19. Having held that the Tribunal can offer redress to a taxpayer in deserving cases without any restriction. The question before the Tribunal is whether this is a deserving case that deserves its intervention.

20. The crux of this dispute is that whereas the Respondent affirms that it served the Applicant with the Invalidation notice vide its email address: alfazanceafricaconsult@gmail.com; the Applicant on the other hand alleges that it was not served with the said notice. It further avers that the postal address and email used by the Respondent to serve it were not for the Applicant nor is it aware of the persons who own those postal addresses and emails.

21. The Tribunal has gleaned through the documents presented by both parties. Significantly, the Applicant provided its PIN certificate as exhibit 10 to its supporting affidavit dated 11th April 2023. The said PIN Certificate shows that the Applicant’s email address is grace.numbe@alfazance.com. The fact that it appears on the PIN certificate means that it must also be the same email address that is contained in its iTax portal.

22. It is also not lost on the Tribunal that a PIN certificate is a document that is generated by the Respondent. Meaning that this email address that the Applicant affirms is its official email address is known to the Respondent. One therefore, wonders why the Respondent opted to use the email address of alfazanceafricaconsult@gmail.com; to serve the Applicant and yet this email address is not the Applicant’s official email address as contained in its iTax portal.

23. The reason for the use of alfazanceafricaconsult@gmail.com to serve the Applicant has not been explained, justified and or clarified by the Respondent. It is for this reason that the Tribunal arrives at the conclusion that the Applicant has discharged its burden of proof in establishing that it was not served with the Assessment Notice and the subsequent documents arising thereof.

24. The fact that a taxpayer should succeed in cases where it has proved a prima facie case was stated in Kenya Revenue Authority vs Man Diesel & Turbo Se, Kenya [2021] eKLR where the Court held as follows:“Burden of Proof” at the Tax Court is somewhat unique. At the Tax Court, a taxpayer is required to disprove an assessment by the Commissioner. In other words, a Tax payer challenging a tax assessment will need to collect and present evidence in order to disprove the Commissioner’s position. This is the basic principle. However, there are some situations where this responsibility or “onus” is reversed. The onus may also shift based on the stage of the proceedings and the actions taken by the parties.

25. The above position was also affirmed in Kenya Revenue Authority vs Maluki Kitili Mwendwa [2021] eKLR where the court stated as follows:“Once the taxpayer has made out a prima facie case to prove the facts, the onus then shifts to the Revenue Authority to rebut the prima facie case. If the Revenue Authority cannot provide any evidence to prove their position, the taxpayer will succeed.”

26. The Applicant has made out a prima facie case to prove that its email official email address is xxxxxx@alfazance.com and that it had never been served with the assessment order or Objection decision in question. The Respondent on its part has not provided any evidence to justify its use of xxxxxxx@gmail.com to serve the Applicant. There was no indication on the part of the Respondent that the Applicant had changed its initial e-mail address to that used by the Respondent to effect service.

27. Moreover, Section 74(1) the TPA Act states as follows in regards to service of notices:“(1)Except as otherwise provided in a tax law, a notice or other document required to be served on, or given to, a person by the Commissioner under a tax law may be served or given by—(a)delivering it to the person or the person's tax representative;(b)leaving it at, or sending it by post to, the person's usual or last known place of business or residence; or(c)transmitting it in electronic form.”

28. In this matter, the Commissioner did not meet the threshold set in Section 74(1) in regard to service of notices upon the Applicant on the following reasons: -a.It did not deliver the notice in person to the Applicant and or its representative.b.It used the wrong postal address. The Applicant’s registered and correct postal address is P. O Box 14465-00100 Nairobi and not P. O Box 254-00200 Nairobi that was used by the Respondent.c.It transmitted the notices in electronic form to the wrong email address being xxxxx@gmail.com; instead of xxxxxxx@alfazance.com. which is the correct email address of the Applicant.

29. Flowing from the above analysis the decision that commands itself to the Tribunal is that the Respondent’s action in enforcing its tax assessment without serving the Applicant with the said assessment notice and the subsequent Objection decision was unlawful as it directly contradicts the provisions of Section of 74(1) of the TPA Act. The objection decision of the Respondent arising from this unlawful process is prima facie capable of being challenged.

Disposition 30. The Tribunal in the circumstances proceeds to make the following Orders: -i.The Applicant be and is hereby granted leave to file an appeal out of time.ii.The Applicant to file and serve the Notice of Appeal, Memorandum of Appeal, Statement of Facts and Tax Decision within Fifteen (15) days of the date of delivery of this Ruling.iii.he Respondent to file and serve its response to the Appeal within the statutory timelines upon being served with the Appeal documents.iv.No orders as to costs.

DATED AND DELIVERED AT NAIROBI THIS 29TH DAY OF JUNE, 2023. ..........……………….ERIC N. WAFULACHAIRMANCYNTHIA B. MAYAKAMEMBER..........................RODNEY O. OLUOCHMEMBER..........................ELISHAH N. NJERUMEMBER..........................ABRAHAM K. KIPROTICHMEMBER..........................