[2023] KETAT 162 (KLR)

Brema Construction Limited v Commissioner of Domestic Taxes (Miscellaneous Application 298 of 2022) [2023] KETAT 162 (KLR) (10 March 2023) (Ruling)

Neutral citation: [2023] KETAT 162 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Miscellaneous Application 298 of 2022

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

March 10, 2023

Between

Brema Construction Limited

Applicant

and

Commissioner Of Domestic Taxes

Respondent

Ruling

1. The Applicant vide a Notice of Motion application dated November 29, 2022 filed under a certificate of urgency on the December 1, 2022 sought for the following Orders:-a.That the intended Appellant/Applicant be granted extension of time in regard to filing of Memorandum of Appeal and the Applicant’s Notice of Appeal dated March 2, 2022be admitted into record of this Tribunal.b.That the intended Appellant/Applicant files and serves herewith all documents set out under Section 13(2) of the Tax Appeals Tribunal Act.c.That the Respondent lift and/or withdraw its agency notices issued to the bankers of the intended Appellant/Applicant until the appeal is heard and determined.d.That the cost of this application be in the cause.e.That this Honourable Tribunal be pleased to issue any such other orders as it deems just and expedient.

2. The Application which is supported by an Affidavit sworn by the Applicant’s director, Linet Nyanchama Onchon’ga, on the November 29, 2022 and her Further Affidavit sworn and filed on February 10, 2023 is premised on the following grounds:a.The Appellant/Applicant was issued with agency letters in respect of tax assessments of KSh 3,068,739. 00 dated July 29, 2021 issued to National Bank of Kenya; Diamond Trust Bank; Co-operative Bank of Kenya Ltd and Kenya Commercial Bank, without communicating to the Appellant/Applicant the basis used to raise the assessment.b.The Appellant/Applicant filed its Notice of Appeal on March 2, 2022 but has been unable to file documents referred to under Section 13(2) of the Tax Appeals Tribunal Act, due to medical challenges to the Director of the Appellant/Applicant who controls and manages the company.c.The Appellant’s director has been unwell for many years and is still currently unwell and undergoing cancer treatment through chemotherapy sessions.d.The Appellant submitted its self-assessment tax returns to the Respondent for the period between the year 2017 and 2019 but the same was not admitted by the Respondent.e.The Respondent erred by issuing an objection decision without giving reasons for rejecting the objection contrary to Section 51(10) of the Tax Procedures Act.f.The Intended Appellant/Applicant approached the Respondent at the earliest juncture and failure to file the Notice of the Appeal within time was a result of justifiable factors beyond the control of the Intended Appellant/Applicant.g.The Intended Appellant has an appeal with high probability of success based on plausible and conceivable persuasive facts and law, which appeal will be rendered nugatory unless the orders sought in this application are granted.h.The Appellant/Applicant has substantive issues with the decision of the Commissioner to assess taxes which is meritorious and should be canvassed at full hearing rather than being locked out unheard on the basis of time within which to file a Notice of Appeal.i.The Applicant, like any other Kenyan, is entitled to a right to fair hearing as enshrined under Article 50 of the Constitution of Kenya 2010. j.All that the Applicant is seeking is to be given a fair opportunity to canvass the dispute rather than being condemned unheard.k.The Applicant is merely seeking to have its day in court.l.The Applicant’s director’s sickness is an issue that was beyond the Applicant and it is in the interest of justice and fairness that the Applicant be given an opportunity to be heard before the determination of the dispute.m.The Respondent’s Agency Notices to the Appellant/Applicant’s bankers have affected the director of the Appellant/Applicant, Linet Nyanchama Onchonga, who is sickly since all funds for her medical bills are channeled through the said banks.n.The said director of the company, who is seized with the daily running of the company could not venture out to visit the Respondent to file a Notice of Appeal since she was at a higher risk of contracting Covid-19 until matters improved as they now have.o.That the Respondent will not suffer any prejudice from the grant orders sought herein.p.That the grant of the orders sought in this application will allow for the determination of a substantive tax dispute herein on its merits, rather than on a procedural technicality.q.It is in the interest of justice that this Honourable Tribunal grants the orders sought herein.1. The Applicant in its Written submissions dated February 3, 2023 and filed before the Tribunal on February 10, 2023 where it reiterated the issues presented in its Notice of Motion and further added that:-a.On the issue of the merit of the appeal, the Applicant produced its bank statements for the relevant period to show that all taxes had been paid and that there is no outstanding tax obligation. It argued that it had a viable arguable appeal whose only hope lay in the matter being heard in a substantive appeal.b.The Applicant further argued that the Respondent will not suffer any prejudice at all if this application is allowed as it would otherwise still collect the taxes together with penalties and interest should the Applicant be found to be at fault in the intended appeal.c.In explaining the cause for the delay, it stated that the Applicant’s director has been ill and still is receiving cancer treatment and only managed to lodge the Notice of Appeal when she found strength to do so. The Applicant relied on the case of Balwant Singh vs Jagdish Singh & Ors (Civili Appela No 1166 of 2006), where the court 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”.d.The Applicant further relied on the following decisions in support of its Application:i.TAT Misc Application No 117/2021 Ison Technologies Kenya Limited v Commissioner of Domestic Taxes.ii.TAT Misc Application No 115/2021 Beder Wholesalers Limited v Commissioner of Domestic Taxes; andiii.TAT Misc Application No 131/2021 Beta Care Hospital Limited v Commissioner of Domestic Taxes.

4. The Respondent filed a Replying Affidavit sworn by Daniel Gachanja, an officer of the Respondent, on January 10, 2023 and filed on January 11, 2023 in response to the current Application citing the following as the grounds for opposition:a.That the Applicant was issues with additional VAT on June 10, 2020 covering the months of June 2016, December 2017, October 2018 and February 2019 with a principal tax liability Kshs 3,068,739. 12. b.That the Applicant made an application to lodge a late objection on March 31, 2021 with the reason “Other Reasonable Cause; wrong email address the company found out about the assessment when applying for TCC” and did not provide documentary support despite email requests on April 9, 2021 and May 17, 2021. c.Through a decision dated May 27, 2021, the Respondent rejected the late application to object and consequently confirmed the assessment. Following which the taxes crystalized and by dint of Section 42 of the Tax Procedures Act, the Respondent went on to place Agency Notices on the Applicant’s banks dated July 29, 2021. d.That the Applicant appealed to this Tribunal on December 1, 2022. e.That since the Applicant lodged an application to lodge the late Notice of Objection to the additional assessments which was rejected there has never been an objection and the only appeal available to the Applicant is an appeal against that decision rejecting the application to lodge a late objection.f.That the Appeal being referred to in the application is incompetent for being an appeal against an objection decision whereas there was neither an objection nor an objection decision.g.That without prejudice, the Applicant has attached documents for medical records while in the later objection application among the reasons provided, there was no medical reason.h.That without prejudice, there are no explanations or supporting documents for the variances noted in the VAT declarations that led to the assessments.i.That the application lacks merit and ought to be dismissed with costs to the Respondent.1. In its Written submissions dated February 6, 2023 and filed on even date, the Respondent stated as hereunder.

Whether the Appellant’s ‘Notice of Appeal’ has a basis in law. 6. The Respondent submitted that the Applicant’s Notice of Appeal is incompetent and ought not to be entertained by this Tribunal as it was filed outside the statutory period provided under Section 13(1)(b) of the Tax Appeals Tribunal Act.

7. That it issued a decision rejecting the Applicant’s application for extension of time to lodge an objection on May 27, 2021, further that without seeking leave to file its Notice of Appeal out of time, the Applicant filed its Notice of Appeal on March 2, 2022 which was nine (9) months and six (6) days from the date the objection decision was issued.

8. In buttressing its case, the Respondent relied on the case of Tangazo Letu Limited v Commissioner of Investigations & Enforcement [TAT No 21/2018 ] and also the case of Commissioner of Domestic Taxes v Local Productions (Kenya) Limited[2020] eKLR.

9. Wherefore the Respondent urged this Tribunal to strike out the Appellant’s Notice of Appeal as it was filed without seeking prior leave to file the same out of time.

Whether the Applicant Should be Granted Leave to Appeal Out of Time. 10. The Respondent submitted that the Applicant filed its Notice of Appeal on March 2, 2022, the Applicant ought to have approached this Tribunal within 14 days provided under Section 13 (2) of Tax Appeals Tribunal Act, to either file a Memorandum of Appeal or to apply for additional time to file its Memorandum of Appeal if it was impossible to adhere with the timelines provided in law. The Respondent submitted that to delay for more than 8 months was in ordinate.

11. It went on to submit that the Tribunal is bound to uphold the statutory timelines provided in law and relied on the case of Equity Group Holdings Limited v Commissioner of Domestic Taxes (2021) eKLR where the court emphasized the strict application of statutory timelines stating: -“A statutory edit is not a procedural technicality. It’s a law which must be complied with. Parliament in its wisdom expressly and in mandatory terms provided…”

12. The Respondent submitted that the intended Appeal is defective because the Applicant failed to annex a copy of the tax decision to the intended appeal contrary to Section 13 (2) (c) of the Tax Appeals Tribunals Actand in support of this argument cited the case of Lijas Contractors Limited v Commissioner of Domestic Taxes [TAT No 119/2019].

13. Further that the intended appeal was incapable of being argued and the Applicant has not provided plausible grounds of either facts or law which would likely overturn the Respondent’s decision.

14. The Respondent asserted that equity aids the vigilant and not the indolent, that the Applicant has been indolent and as such cannot be aided by equity in regularizing its late appeal.

15. The Respondent relied on the case of Yusuf Mohamed Salat v Idris Ali Ahmed(2009) eKLR where it was held that:-“I would agree with Mr. Matini that the sword of justice is double edged and equity aids the vigilant not the indolent…

16. That this Tribunal should not entertain the Applicant’s application as it is an afterthought, brought on bad faith meant to delay the Respondent from collecting taxes that are due and payable.

17. The Respondent urged the Tribunal to allow it collect the taxes due from the Applicant by dismissing the Notice of Motion dates November 29, 2022 and the Applicant’s Amended Notice of Motion dated January 20, 2023 as the same are devoid of merit and with cost to the Respondent.

Analysis and Findings 18. The Tribunal is entreated to ascertain the length and reason for the delay when considering an application for the extension of time to appeal. 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.

19. In determining whether to extend time, the Tribunal was guided by 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”

20. 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 decision of Odek, JJ A in Edith Gichugu Koine vs Stephen Njagi Thoithi [2014] eKLR, where the Court laid out the factors 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...”

21. Further, inSammy Mwangi Kiriethe & 2 others v Kenya Commercial Bank Ltd[2020] eKLR, the court held:“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.”

22. 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 the appeal is merited.b.Whether there is a reasonable cause for the delay.c.Whether the application for extension has been brought without undue delay.d.Whether there will be prejudice suffered by the Respondent if the extension is granted.

a) Whether the Appeal is merited. 23. The Tribunal wishes to examine whether the actions complained of by the Applicant were merited and that there is an arguable appeal before the Tribunal or the appeal is frivolous to the extent that it would only result in a waste of the Tribunal’s time.

24. An appeal being merited does not mean that it should necessarily succeed rather it is arguable. The Tribunal was guided by the findings of the court in Kiu & another v Khaemba & 3 others (Civil Appeal (Application) E270 of 2021) [2021] KECA 318 (KLR) (17 December 2021) (Ruling) where it was held that:“In law, an arguable appeal/intended appeal is one that need not succeed but one that warrants the court’s interrogation on the one hand and the courts invitation to the opposite party to respond thereto...”

25. In the instant case, the Applicant made an application to lodge a late objection on March 31, 2021 with the reason “Other Reasonable Cause; wrong email address the company found out about the assessment when applying for TCC” which the Respondent through a decision dated May 27, 2021, rejected and consequently confirmed the assessment.

26. The Respondent argued that the Applicant lodged an application to lodge the late Notice of Objection to the additional assessments which was rejected and that there has never been an objection to the additional assessments thus the only appeal available to the Applicant is an appeal against that decision rejecting the application to lodge a late objection.

27. After gleaning at the documents provided by the Appellant, the Tribunal has not seen any evidence to show that the Appellant lodged a valid objection and in time, nor is there an Objection Decision by the Respondent relating to the Additional Assessment that the Respondent seeks to appeal against.

28. In its application, the Applicant stated as one of its grounds that, “The Respondent erred by issuing an objection decision without giving reasons for rejecting the objection...” The Applicant however did not attach this Objection Decision unless the Objection Decision being referred to was the Respondent’s rejection of the Applicant’s application for the Late Objection Decision.

29. Section 52 (1) of the Tax Procedures Act provides as follows with regard to lodging appeals to the Tribunal:-“A person who is dissatisfied with an appealable decision may appeal the decision to the Tribunal in accordance with the provisions of the Tax Appeals Tribunal Act, 2013”

30. The appealable decision in this case is the Respondent’s decision of May 27, 2021 rejecting the Application for Late Objection, the Assessment Order does not constitute an appealable decision as envisaged under Section 52 (1) of the Tax Procedures Act, and would therefore not be the basis of an arguable appeal. The intended appeal as against the tax assessment is unsustainable in law and cannot found a cause of action for an appeal.

31. The Tribunal therefore finds that there is no arguable appeal and as such this application has no legs on which to stand.

32. The Tribunal shall not consider the other substantive factors for the extension of time as the same have been rendered moot.

Disposition 33. The Tribunal was in the circumstances not persuaded to exercise its discretion in favor of the Applicant and accordingly proceeds to makes the following Orders: -a.The application for the extension of time be and is hereby dismissed.b.No orders as to costs.

DATED AND DELIVERED AT NAIROBI ON THIS 10TH DAY OF MARCH, 2023. .......................ERIC N. WAFULACHAIRMAN........................CYNTHIA B. MAYAKAMEMBER........................RODNEY O DHIAMBOMEMBER........................ELISHAH NJERUMEMBER........................ABRAHAM K. KIPROTICHMEMBER