[2024] KETAT 1025 (KLR)

Brand Experts Limited v Commissioner of Domestic Taxes (Miscellaneous Case E405 of 2024) [2024] KETAT 1025 (KLR) (19 July 2024) (Ruling)

Neutral citation: [2024] KETAT 1025 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Miscellaneous Case E405 of 2024

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

July 19, 2024

Between

The Brand Experts Limited

Appellant

and

Commissioner of Domestic Taxes

Respondent

Ruling

1. The Appellant vide a Notice of Motion dated the 28th March, 2024 and filed under a Certificate of Urgency on the even date and supported by an Affidavit sworn by Benard O Kawuondi, a Director of the Appellant, on the same date, sought for the following Orders:-i.That the Appellant be granted leave to file its Memorandum of Appeal and Statement of Facts out of time.ii.That the Notice of Appeal, Memorandum of Appeal, and Statement of Facts herein attached be deemed to have been duly filed and served.iii.That the Respondent be at liberty to file a response if it so wishes.iv.That the demand for the principal taxes and resultant penalties and interest be stayed pending outcome of this Appeal.v.That the cost of this application be in the cause.

2. The application is premised on the following grounds:-i.That the Commissioner issued additional assessments on the taxpayer's VAT accounts on January 2022 thereof for the periods December 2016, December 2017, and December 2017. ii.That on 13th February 2022, the Appellant objected to these VAT additional assessments issued by the Respondent thereabout and provided all the required documentation on iTax and to the particular Respondent's officer handling the objection.iii.That on or about 31st May 2022, the Commissioner issued an objection decision that confirmed the additional assessments that the Appellant had objected to on 13th February 2022. iv.That the Respondent issued a rushed objection decision without considering all the material information and facts of the tax dispute herein.v.That the Appellant is largely a sole proprietor owned and managed by Ms. Betty Ogina.vi.That the Appellant's Managing Director i.e. Ms. Betty Ogina became extensively ill during this period and was in and out of hospital taking care of her then deteriorating health.vii.That due to the then ill-health, the Managing Director i.e. Ms. Betty was unaware and uninformed that an objection decision had already been rendered by the Respondent which had ultimately disallowed the objections done on 13th February 2022. viii.That the Appellant only came to realize the existence of the alleged objection decision when the Respondent's officers demanded the taxes thereof.ix.That the Appellant was regrettably unaware and uninformed of the next cause of action and most importantly the appeal process at the Tax Appeals Tribunal.x.That the Appellant visited the Respondent's office i.e. the Tax Dispute Resolution office to seek guidance and request the Respondent to accord her an opportunity to resolve the tax disputes therein amicably.xi.That the Appellant was further advised to seek the services of tax agents who are versed with the appeal process which it has done and it has necessitated this application.xii.That upon seeking guidance and relevant information on the appellate process, the Appellant has approached the Tribunal at the earliest opportune moment.xiii.That in the interests of justice and business continuity, the Appellant seeks indulgence of the Tribunal to be allowed to file its appeal out of time.xiv.That the Constitution of Kenya under Article 159(2)(d) clearly provides that, justice shall be administered without undue regard to procedural technicalities.xv.That the application will not occasion any prejudice to the Respondent as the delay is not inordinate.xvi.The Appellant has an arguable appeal with a high chance of success as per the draft Memorandum of Appeal attached. That it will therefore be highly prejudicial to the Appellant if leave is not granted to enable the Appellant argue its appeal.xvii.That without prejudice, the Appellant is willingly ready, with the leave of the Tribunal, to engage the Respondent via ADR mechanism and take advantage of the amnesty offer is necessary.xviii.That it is in the interest of justice that the Appellant be granted leave to file its appeal out of time.

3. The Respondent opposed the application through a Replying Affidavit sworn by Robert Kiboi Nganga, an officer of the Respondent, on the 4th April, 2024 and filed on the even date and which raised the following grounds of opposition to the application:-i.That the subject application is with reference to additional Value Added Tax assessments for the periods 2016, 2017 and 2018. ii.That the Appellant lodged a late objection application on 13th February 2022. iii.That the Appellant validated its late objection on 25th February 2024 and the substantive objection application on the 12th May 2023 following repeated follow ups by the Respondent for to the tax dispute to be considered on merit.iv.That the Respondent on 31st May 2022, having considered, the Appellant's objection, issued an objection decision, wherein it upheld it additional assessments in its entirety.v.That on 21st July 2022, the Appellant lodged a notice of objection challenging the objection decision of 31st May 2022. vi.That from the foregoing chronology of events, the subject application is disingenuous failing to disclose that the Appellant as early as 13th February, 2022 was aware of the subject additional assessments.vii.That the Appellant failed to file a substantive appeal within the timelines specified in Section 13(2) of the Tax Appeals Tribunal Act.viii.That the Appellant has not provided reason to warrant extension of time to file an appeal subject to Section 13(4) of the Tax Appeals Tribunal Act.ix.That the Appellant had sufficient time to lodge an appeal as per Section 13(2), a delay that the Appellant has failed to explain.x.That a delay of 23 months is inordinate, which inherently divests the Appellant of audience before the Tribunal.xi.That the Appellant has not demonstrated why it deserves a favourable discretion of the Tribunal and the application should be dismissed with costs to the Respondent.xii.That the Respondent has not flouted any procedure or acted contrary to the law. That due process has been followed by the Respondent in assessing, demanding and enforcing collection of taxes from the Appellant by making the correct adjustments in the iTax system in line with the objection decision.xiii.That it is in the interest of the public for the Respondent to recover tax in order to finance the growth and development of the nation which is a very important public duty and for which the public must have an immense interest.xiv.That the application as filed is an afterthought, incompetent, bad in law, fatally defective and is otherwise an abuse of the Tribunal's process and should be struck out.

Analysis and Findings 4. In compliance with the directions of the Tribunal to the effect that the application was to be canvassed by way of written submissions, the Respondent filed its submissions on 8th May 2024 and while the Appellant did not file any submissions. The Tribunal has duly considered the written submissions of the Respondent in arriving at its determination in this Ruling.

5. The Tribunal is enjoined to determine the length and reason for the delay when considering an application for the extension of time to appeal out of time. The power to extend time is discretionary and unfettered but the same must be exercised judiciously and it is not a right to be granted to the Applicant.

6. In determining whether to extend time, the Tribunal was guided by the decision of the Court in Charles Karanja Kiiru v Charles Githinji Muigwa [2017] eKLR, where the learned Judge stated that:-“It is trite that extension of time is not a right of a party. It is an equitable remedy that is only available to a deserving party, at the discretion of the Court”

7. On the criteria of the issues to be considered when granting an extension to file an appeal out of time, the Tribunal referred to the case of Odek, JJ. A in Edith Gichugu Koine vs. Stephen Njagi Thoithi [2014] eKLR, where the Court laid out the factors as thus:-“Nevertheless, it ought to be guided by consideration of factors stated in many previous decisions of this Court including, but not limited to, the period of delay, the reasons for the delay, the degree of prejudice to the respondent if the application is granted, and whether the matter raises issues of public importance, amongst others...”

8. Further, in Sammy Mwangi Kiriethe & 2 others v Kenya Commercial Bank Ltd [2020] eKLR, the court held that:-“The Court considers the length of the delay; the reason for the delay; the chances of success of the intended appeal, and the degree of prejudice that would be occasioned to the respondent if the application is granted.”

9. The Tribunal, guided by the principles set out in John Kuria v Kelen Wahito, Nairobi Civil Application Nai 19 of 1983 April 10, 1984, referred to by the Judges in the case of Wasike V Swala [1984] KLR 591, Sammy Mwangi Kiriethe & 2 others v Kenya Commercial Bank Ltd (supra) and Section 13 of the Tax Appeals Tribunal Act, 2013 used the following criteria to consider the application.a.Whether there is a reasonable cause for the delay?b.Whether the appeal is merited?c.Whether there will be prejudice suffered by the Respondent if the extension is granted?

a. Whether there is a reasonable cause for the delay 10. In considering what constitutes as a reasonable reason for delay, the court in Balwant Singh v Jagdish Singh & Ors (Civil Appeal No.1166 of 2006), held that: “The test is whether or not a cause is sufficient to see whether it could have been avoided by the party by the exercise of due care and attention”.

11. The statutory timelines and provisions to file an appeal have been clearly set out in the Tax Appeal Tribunal Act. Section 13 (3) of the Act provides as follows with regard to the statutory timelines in commencing an appeal process:-“A notice of appeal to the Tribunal shall—(a)be in writing;(b)be submitted to the Tribunal within thirty days upon receipt of the decision of the Commissioner.(2)The appellant shall, within fourteen days from the date of filing the notice of appeal, submit enough copies, as may be advised by the Tribunal, of—(a)a memorandum of appeal;(b)statements of facts; and(c)the tax decision.”

12. For a taxpayer who has not met the timelines as provided in the above provision of the law, Section 13(4) of the Tax Appeals Tribunal Act provides the conditions that the taxpayer ought to meet to enable the Tribunal to exercise its discretion to extend time to appeal. The Section provides as follows;“An extension under subsection (3) may be granted owing to absence from Kenya, or sickness, or other reasonable cause that may have prevented the applicant from giving notice of appeal within the specified period.”

13. Regarding the reasons for the delay, the Appellant stated that its Managing Director, Ms. Betty Ogina, became extensively ill during this period and was in and out of hospital taking care of her then deteriorating health.

14. That due to the then ill-health, the said Managing Director was unaware and uninformed that an objection decision had already been rendered by the Respondent which had ultimately disallowed the objections done on 13th February 2022.

15. That the Appellsnt only came to realize the existence of the objection decision when the Respondent's officers demanded the taxes thereof.

16. The Respondent on its part stated that the Appellant failed to file a substantive appeal within the timelines specified in Section 13(2) of the Tax Appeals Tribunal Act.

17. That the Appellant has not provided reason to warrant extension of time to file an appeal subject to Section 13(4) of the Tax Appeals Tribunal Act.

18. That the Appellant had sufficient time to lodge an appeal as per Section 13(2), a delay that the Appellant has failed to explain.

19. The Respondent maintained that a delay of 23 months is inordinate, which inherently divests the Appellant of audience before the Tribunal.

20. The Tribunal notes that the Appellant cited illness of its director whom it averred was the sole proprietor of the business. To support this averment that the director had been unwell, the Appellant attached documents from Prime Medical Centre in Nairobi indicating that its Managing Director, Betty Ogina, at some point in June 2022 had been unwell and had been recommended for complete house rest. The Appellant also attached a payment invoice from the same facility dated 24th June 2022.

21. The objection decision was issued by the Respondent on 31st May 2022 which is around the same time the Appellant claims and has provided documents to demonstrate that its Managing Director was unwell. It was the Tribunal’s view that although the actual duration and level of indisposition could not be determined, based on the evidence adduced, it is persuaded that the Managing Director had indeed suffered ill health.

22. Consequently, the Tribunal determined that the Appellant had demonstrated reasonable cause for the delay in lodging the appeals within the statutory period.

b. Whether the appeal is merited? 23. The Tribunal considered whether the matter under dispute was frivolous to the extent that it would be a waste of the Tribunal’s time, or it was material to the extent that it deserved its day in the Tribunal.

24. The test is not whether the case is likely to succeed. Rather, it is whether the case is arguable. This was the finding in Samuel Mwaura Muthumbi V Josephine Wanjiru Ngungi & Another (2018) eKLR where the court stated that:-“Looking at the draft Memorandum of Appeal filed, I am unable to say that the intended Appeal is in arguable. Of course, all the Applicants have to show at this stage is arguability- not high probability of success. At this point the Applicant is not required to persuade the Appellate court that the intended or filed appeal has a high probability of success. All one is required to demonstrate is the arguability of the Appeal, a demonstration that the Appellant has plausible grounds of either facts or law to overturn the original verdict. The Applicants have easily met that standard. I believe that the Applicant has discharged this burden.”

25. The Tribunal was further guided by the findings of the court in Kenya Commercial Bank Limited Vs Nicholas Ombija (2009) eKLR where it was held that:-“An arguable appeal is not one which must necessarily succeed, but one which ought to be argued fully before the court.”

26. Similarly, in Kenya Commercial Bank Limited Vs Nicholas Obija (2009) eKLR it was stated that:-“an arguable appeal is not one which must necessarily succeed, but one which ought to be argued fully before the court”

27. That was also the position held in Stanley Kangethe Kinyanjui Vs Tony Keter & others (2013) eKLR where the court held that:-“on whether the appeal is arguable, it is sufficient if a single bonafide ground of appeal is raised, .. an arguable appeal is not one which must necessarily succeed, but one which ought to be argued fully before the court: one which is not frivolous.”

28. The Tribunal noted that the Respondent’s decision dated 31st May 2022 confirmed the assessments for Value Added Tax amounting to Kshs 7,157,482. 00. Looking at the draft Memorandum of Appeal attached by the Appellant, the Tribunal noted that the Appellant had raised eight grounds of Appeal that raise substantive factual and legal issues that require rebuttal by the Respondent. Going by the standards set out in the case of Stanley Kangethe Kinyanjui Vs Tony Keter & others (2013) the Tribunal finds that the Appellant had an arguable case which required to be canvassed and considered on its full merits.

c. Whether there will be prejudice suffered by the Respondent if the extension is granted? 29. The courts have held that in considering whether to extend time, due regard must be given to whether the extension will prejudice the opponent. In determining this, the Judge in Patrick Maina Mwangi v Waweru Peter [2015] eKLR quoted the decision in United Arab Emirates V Abdel Ghafar & Others 1995 IR LR 243 in finding that:“…….a plaintiff should not in the ordinary way be denied an adjudication of his claim on its merits because of a procedural default, unless the default causes prejudice to his opponent for which an award of cost cannot compensate………”

30. The test, therefore, as set out in the case above is whether the Respondent will suffer irreparable prejudice if the application is granted. However, having found that the subject matter was arguable, it is the view of the Tribunal that the Appellant’s recourse to justice now lies in an appeal to the Tribunal. Thus, the Appellant’s would suffer prejudice if it is not granted leave to file its appeal. The Respondent on the other had will not suffer prejudice since it will still be able to collect the taxes plus interest and penalties should the Appellant be found to be at fault.

31. The Tribunal therefore finds that the Respondent will not suffer prejudice if the extension is granted.

Disposition 32. Based on the foregoing analysis, the Tribunal finds that the application meets the legal threshold for the Tribunal to exercise its discretion in favour of the Appellant and accordingly proceeds to make the following Orders:-i.The application be and is hereby allowed.ii.Leave be and is hereby granted for the Appellant to file its Notice of Appeal, Memorandum of Appeal, Statement of Facts and tax decision out of time.iii.The Appellant’s Notice of Appeal and Appeal documents dated 28th March, 2024 and filed on the even date be and are hereby deemed as duly filed and served.iv.The Respondent be and is at liberty to file and serve its response to the Appeal within Thirty (30) days of the delivery of this Ruling.v.No orders as to costs.

DATED AND DELIVERED AT NAIROBI THIS 19TH DAY OF JULY, 2024. ERIC NYONGESA WAFULACHAIRMANMUTISO MAKAU EUNICE N. NG’ANG’AMEMBER MEMBERABRAHAM K. KIPROTICH ELISHAH N. NJERUMEMBER MEMBER