[2025] KETAT 194 (KLR)

Car And General Kenya PLC v Commissioner of Domestic Taxes (Miscellaneous Application E134 of 2024) [2025] KETAT 194 (KLR) (Civ) (27 February 2025) (Ruling)

Neutral citation: [2025] KETAT 194 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Civil

Miscellaneous Application E134 of 2024

E.N Wafula, D.K Ngala & GA Kashindi, Members

February 27, 2025

Between

Car And General Kenya PLC

Appellant

and

Commissioner of Domestic Taxes

Respondent

Ruling

1. The Appellant vide a Notice of Motion application dated the 18th day of December, 2024 and filed on the 19th December, 2024 sought for the following Orders:-a.Spentb.That this Honourable Tribunal be pleased to allow the Appellant to file an Appeal out of time.c.That consequently the said Appeal lodged be deemed to have been properly filed.d.That consequently, the said Notice of Appeal, Memorandum of Appeal and Statement of Facts be deemed to have been properly filed within time.e.That the Appellant can apply for further orders and/or directions as the Honourable Tribunal may deem just to grant.f.That the costs of this application be in the cause.

2. The application which is supported by an Affidavit sworn by Phineas Koome, the Tax Accountant of the Appellant, on the 18th day of December, 2024 and filed on the 19th day of December, 2024 and a Supplementary Affidavit sworn on the Tax Accountant’s part on the 13th day of January, 2025 and filed on the even date was premised on the following grounds, that:-a.The 30 days within which the Appellant was supposed to have filed the Appeal lapsed on the 6th December, 2024. b.On or about the 12th July, 2021 the Respondent sent tax assessment to the Appellant for the amount of Kshs 1,433,541. 00 being alleged incremental liability.c.The Appellant fully objected and subsequently filed the notice of objection to the assessment on the 10th August, 2021. d.The Respondent issued on objection decision on the 6th November, 2024. The Appellant being aggrieved with the said decision, has consequently, out of time, lodged a Notice of Appeal, Memorandum of Appeal and Statement of Facts dated the 18th day of December, 2024. e.That the reason why this has happened is that the Appellant had initially lodged the Notice of Appeal at the iTax portal with an acknowledgment receipt number KRA202463504914. f.That the Appellant has since been guided to make this application through the Judiciary e-filing system.g.The Appellant stands to suffer irreparable loss and damage if the orders sought in this application are not granted.h.The likely enforcement action by the Respondent will adversely affect the Appellant as it will be unable to meet its financial obligation.i.Unless the orders sought in the application are granted the Appellant will face the wrath of the Respondent which will be detrimental to the Appellant’s business.j.That the Appeal raises arguable issues with a high probability of success and should be heard and determined on its merits.k.That the Appeal has been filed without any inordinate delay after recuperating.l.That the Respondent will not suffer any prejudice if the orders sought are granted.m.That it is in the interests of justice and fairness that the application is allowed to pave the way for hearing and determination of the Appeal on its merit.n.That the Respondent made it clear that the 7th October, 2024 response was not an objection decision under Section 51(9) furthermore, it affirmed that it recognized it was a reconciliation issue.

3. The Respondent in opposition to the application filed a Replying Affidavit sworn by Polly Mbaabu, an officer of the Respondent, on the 6th day of January, 2025 and filed on the even date in which it stated as follows:-a.That on 12th July, 2021 the Respondent issued the Appellant with additional Income tax assessments for the tax period between 2016 and 2018. b.That the Appellant on 10th August, 2021 lodged an objection to the additional assessments.c.That the assessments were based on disallowance of credits under Section 42 of the Income Tax Act, as the credits claimed did not relate to the provision’s intended purpose.d.That upon recognizing that this matter required reconciliation of the disallowed credits claimed did not relate to the provisions intended purpose.e.That upon additionally, the credits were double claimed, and proper verification and alignment were not conducted by the Appellant engaging the Section 42 project team as advised to conduct verification and do proper alignment were necessary.f.That the Appellant was required to provide all relevant documentation to facilitate the correct alignment of credits in their iTax ledger, ensuring that no double claims were made.g.That despite the Appellant being granted sufficient time to complete the reconciliation and alignment of credits the process was not completed. As a result, the credits remained unaligned in the iTax system and the Appellant’s claim under Section 42 was still deemed incorrect.h.That on 6th November, 2024 the Respondent confirmed the assessments as an enforcement of the outcome of the decision issued on the 7th October, 2021. i.That the Respondent will suffer prejudice if the application is granted as this will delay collection of taxes which is the main mandate of the Respondent, hence delayed service to all Kenyan citizens.j.That the Appellant has not demonstrated in any way that it has an arguable appeal with any chances of success.k.That the Appellant has not met the established threshold for the Tribunal to exercise its discretion in granting leave to file appeal out of time.l.That the Appellant has shown that it is indolent or does not have interest in appealing the decision of the Respondent.m.That the application is incompetent, frivolous, without merit and an abuse of the powers of this Honourable Tribunal.n.That this Honorable Tribunal do dismiss the application with costs to the Respondent.

Analysis and Findings 4. In compliance with the directions of the Tribunal made on the 9th day of January, 2025 to the effect that the application was to be canvassed by way of written submission, both parties filed their respective written submissions on the 23rd day of January, 2025. The Tribunal has duly considered the written submissions as filed by the parties 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 an Applicant.

6. In determining whether to extend time, the Tribunal is guided by the decision of the Court in Charles Karanja Kiiru vs. 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 has 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...” (Emphasis added)

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 has 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 of the Act provides as follows with regard to the statutory timelines in commencing an appeal process:-“(1)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 under Section 13(3) of the Tax. The Section provides as follows: -“(3)The Tribunal may, upon application in writing or through electronic means,extend the time for filing the notice of appeal and for submitting the documents referred to in subsection (2).(4)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 it was mistaken as to the procedure for filing the Appeal and as such it filed its initial Notice of Appeal on the iTax platform as opposed to lodging it at the Tribunal. The Appellant annexed to the Affidavit in support of the application an acknowledgment of receipt of the Notice of Appeal on the part of the Respondent dated the 6th December, 2024.

14. The Respondent issued its Confirmation Assessment Notice rejecting the Appellant’s notice of objection on the 6th November, 2024. The Appellant being dissatisfied with the Respondent’s decision ought to have filed its Notice of Appeal before the Tribunal on or before the 6th day of December, 2024.

15. The Appellant filed the present application seeking for the leave of the Tribunal to file an appeal out of time on the 18th day of December, 2024, which was after a lapse of 12 days from the date when the Appellant ought to have filed its Notice of Appeal.

16. The Respondent has not denied having received the Notice of Intention to Appeal inadvertently lodged by the Appellant on its iTax platform on the 6th December, 2024. The Appellant was manifestly keen on exercising its right of appeal as against the Respondent’s decision of 6th November, 2024 in time.

17. Consequently, the Tribunal determines that the Appellant has demonstrated reasonable cause for the delay in lodging the appeal within the statutory period and that in any event a delay of 12 days is not in any conceivable manner inordinate.

b. Whether the Appeal is merited? 18. The Tribunal has considered whether the matter under dispute was frivolous to the extent that it would be a waste of the Tribunal’s time, or it is material to the extent that it deserves its day in the Tribunal.

19. 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.”

20. The Tribunal is further guided by the findings of the Court in Kenya Commercial Bank Limited v 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.”

21. That was also the position held in Stanley Kangethe Kinyanjui v Tony Keter & others [2013] eKLR where the Court held that:-“on whether the appeal is arguable, it is sufficient if a single bona fide 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.”

22. The Tribunal notes that the Respondent’s decision dated 6th November, 2024 was in respect of what the Appellant indicates to have been its notice of objection dated the 10th August, 2021. The Appellant in its Supplementary Affidavit alleges that the Respondent’s decision offends the provision of Section 51(11) of the Tax procedures Act for having been issued outside the permissible 60 days subsequent to the receipt of the Appellant’s notice of objection. The allegation of the objection decision having been issued outside the statutory timelines poses a substantive factual and legal issue that requires rebuttal by the Respondent.

23. Going by the standards set out in the case of Stanley Kangethe Kinyanjui Vs Tony Keter & others (2013) the Tribunal finds that the Appellant has an arguable case which requires to be canvassed and considered on its full merits.

c. Whether there will be prejudice suffered by the Respondent if the extension is granted 24. 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…”

25. 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 would suffer prejudice if it is not granted leave to file its appeal. The Respondent on the other hand 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.

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

Disposition 27. The Tribunal is in the circumstances pursuaded to exercise its discretion in favour of the Appellant and accordingly proceeds to make the following Orders:-a. The application be and is hereby allowed.b. Leave is hereby granted for the Appellant to file its Notice of Appeal and the Appeal documents out of time.c. The Appellant to file and serve the Notice of Appeal and the Appeal documents within Fifteen (15) days of the date of delivery of this Ruling.d. The Respondent is at liberty to file and serve its response to the Appeal within Thirty (30) days of the date of being served by the Appellant with the Appeal documents.e. No orders as to costs.

DATED AND DELIVERED AT NAIROBI THIS 27TH DAY OF FEBRUARY, 2025. ERIC NYONGESA WAFULACHAIRMANDELILAH K. NGALA GEORGE KASHINDIMEMBER MEMBER