[2022] KEHC 15178 (KLR)

Commissioner of Investigations and Enforcement v Ponders Limited (Income Tax Appeal E032 of 2021) [2022] KEHC 15178 (KLR) (Commercial and Tax) (11 November 2022) (Judgment)

Neutral citation: [2022] KEHC 15178 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Commercial Courts Commercial and Tax Division)

Commercial and Tax

Income Tax Appeal E032 of 2021

A Mabeya, J

November 11, 2022

Between

Commissioner of Investigations and Enforcement

Appellant

and

Ponders Limited

Respondent

Judgment

1. This is an appeal arising out of the judgment of the Tax Appeals Tribunal (the tribunal) delivered on April 1, 2021. A brief background to the appeal is that by a notice dated February 10, 2017, the appellant notified the respondent of an intended audit and investigations of its accounts for the years 2014 to 2016.

2. Vide a letter dated April 28, 2017, the respondent availed the documents that had been requested for and on June 14, 2017, the appellant issued an assessment of Kshs 7,448,235/- as the tax due. The respondent objected to the asseement vide a letter dated June 27, 2018. The appellant rejected the respondent’s objection on the grounds that the said objection did not meet the grounds of objection laid out in section 51(3)(a) and (b) of the Tax Procedures Act.

3. The appellant issued a demand notice to enforce collection of Kshs 6,446,764/- as the outstanding taxes. Aggrieved by the appellant’s decision, the respondent appealed to the tribunal against the same. By its judgment dated April 1, 2021, the tribunal held that the appellant had erred in law and in fact in the assessment of the income for the years 2015 and 2016 and set aside the appellant’s tax assessment.

4. Dissatisfied with that judgement, the appellant has lodged this appeal through a memorandum of appeal dated May 5, 2021. It set out 12 grounds of appeal. The grounds can be summarized as follows: -a.That the tribunal erred in failing to consider that the appeal before it was incompetent.b.That the tribunal erred in determining the appeal while there was a pending Tax Appeals Tribunal Misc Appl No 8 of 2018. c.The tribunal erred in law and fact in failing to consider the conditions set out under section 13(4) of the Tax Appeals Tribunal Act No 40 of 2013 (“the Act”).d.The tribunal erred in law and in fact in its holding that the letter dated June 14, 2018 was not produced by the respondent and that it was the objection decision thus the subject matter of the dispute

5. The respondent filed its response to the appeal through the statement of facts dated May 27, 2021. It contended that there was no error on the part of the tribunal in failing to consider the statutory conditions set out under section 13(4) of the Act. That the appellant terminated alternative dispute resolution despite the respondent paying Kshs 1,000,000/. That its documents which explained the variance of Kshs 2,677,188/= were not considered by the appellant and that the appellant did not produce a copy of the letter dated June 14, 2018 which was proof of the confirmation of additional tax assessment.

6. The appeal was canvassed by written submissions which I have considered. In his submissions dated January 28, 2022, the appellant submitted that the appeal before the tribunal was filed prematurely and thus incompetent. That the same was filed before the tribunal could determine the application for extension of time and further that the appeal was filed out of time outside the statutory timelines. With regard to the letter of June 14, 2018, it was submitted that since the respondent had produced the document the appellant did not see the need of reproducing it in evidence.

7. In its submissions of February 11, 2022, the respondent submitted that the delay in filing the appeal was caused by its directors being out of the country and that the matter was still under ADR. That is why the application for extension was made for a reasonable cause. That the tribunal did not err in observing that the appellant failed to produce the letter dated June 14, 2021 as each party relied on own documents as evidence.

8. In Oceanfreight (EA) Limited –vs- CommissionerofDomestic Taxes [2018] eKLR, the court held: -“Whilst the jurisdiction of this court in this appeal is to hear and determine questions of law only, issues of facts may turn out to give rise to a question of law. In Mercy Kirito Mutegi –vs- Beatrice Nkatha Nyaga & 2 others [2013] eKLR, the Court of Appeal said as follows:-“What are the points of law raised in this appeal? an appellate court will not ordinarily differ with the findings on a question of fact, by the trial Judge who had the advantage of hearing and seeing the witnesses. Our role is to review the evidence and determine whether the conclusions reached are in accordance with the evidence and the law. A conclusion although based on primary factual evidence that is erroneous becomes a point of law.”This is a demonstration that there will be occasion when facts or evidence matter in determining a question of law.”

9. On the first, second and third ground, the question is whether the appeal before the tribunal was competent. The appellant’s contention was that the appeal was filed prematurely before an application dated October 18, 2018 had been determined. That application had sought extension of time to give notice of appeal against the decision of the commissioner made on August 13, 2018. According to the appellant, under section 13(1)(2)(3)(4) of the Act, the respondent ought to have filed its appeal within 30 days.

10. Section 13 of the Act provides that: -(1)A notice of appeal to the tribunal shall—(a)be in writing or through electronic means;(b)be submitted to the tribunal within thirty days upon receipt of the decision of the commissioner.

11. It is clear from the foregoing that, a notice of appeal to an objection decision should be lodged with the tribunal within 30 days of receipt of the objection decision. Under section 13(3) and (4), the tribunal can grant leave to extend time within which the notice of appeal is to be filed. The grounds for such leave are absence from Kenya, sickness or any reasonable cause.

12. In the present case, the respondent applied to the tribunal for extension of time to lodge a valid appeal under other reasonable cause. However, that application was not determined by the tribunal. In its judgment, the tribunal held that the appellant had a right to file an appeal under section 52 of the Tax Procedures Act as read with section 13 of the Act. That the appellant would not be prejudiced if the respondent was allowed to proceed with the appeal.

13. In Nicholas Kiptoo Arap Korir Salat v Independent Electoral and Boundaries Commission & 7 others [2014] eKLR, the Supreme Court set out the considerations to guide the court in exercising its discretion in cases seeking extension of time. It stated: -“i)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.ii)A party who seeks for extension of time has the burden of laying a basis to the satisfaction of the court.iii)Whether the court should exercise the discretion to extend time, is a consideration to be made on a case-to-case basis.iv)Whether there is a reasonable reason for the delay. The delay should be explained to the satisfaction of the court.v)Whether there will be any prejudice suffered by the respondents if the extension is granted.vi)Whether the application has been brought without undue delay; and… .”

14. In the present case, not only did the respondent apply for extension time, it also gave plausible reasons for the delay. The tribunals addressed the issue of extension in its judgment with due regard to the principles set out in the above sited case. It is my view that, in dealing with the matter as it did, the tribunal considered the matter and by implication granted the extension. This did not in any way prejudice the appellant.

15. For these reasons the first ground fails.

16. The fourth ground was that the tribunal erred in law and in fact in its holding that the letter dated June 14, 2018 was not produced by the appellant and that it was the objection decision thus the subject matter of the dispute.

17. Counsel for the appellant submitted that since the respondent had produced the letter in its documents, it was not necessary for the appellant to reproduce the same. The respondent on the other hand submitted that, a party ought to produce evidence it intends to rely on.

18. It is not in dispute that the appellant did not produce the said document before the tribunal. The tribunal pointed out that the letter contained the additional assessment which was subject matter of the appeal. The view the court takes is that once the particular document was on record, notwithstanding who produced it, it was there for perusal and consideration by the tribunal. To that extent, the tribunal by insisting that the subject letter should have been produced by the appellant, fell into error.

19. In view of the foregoing, although the appellant succeeded on one ground alone, the same is not sufficient to save the appeal. Accordingly, the appeal is without merit and the same is dismissed. I will not make any order as to costs as the same was partially successful.It is so decreed.

DATED AND DELIVERED AT NAIROBI THIS 11TH DAY OF NOVEMBER, 2022. A. MABEYA, FCIArbJUDGE