[2023] KETAT 597 (KLR)

Cosmopolan Consultants Limited v Commissioner of Legal Services & Board Coordination (Appeal E201 of 2023) [2023] KETAT 597 (KLR) (Commercial and Tax) (29 June 2023) (Ruling)

Neutral citation: [2023] KETAT 597 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Commercial and Tax

Appeal E201 of 2023

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

June 29, 2023

Between

Cosmopolan Consultants Limited

Appellant

and

Commissioner of Legal Services & Board Coordination

Respondent

Ruling

1. The application which was by way of a Notice of Motion dated 4th May 2023 and filed under a certificate of urgency is supported by an Affidavit sworn by the Appellant’s Director, Samson Kahinga, on the 4th May, 2023 seeks for the following Orders:-a.Spent;b.This Honourable Tribunal be pleased to extend the time of filing the Applicant’s Notice of Appeal herein.c.The Applicant be granted leave to file its Notice of Appeal, Memorandum of Appeal and Statement of Facts out of time against the Objection Invalidation issued on 10th March 2021;d.The Tribunal be pleased to deem the annexed Notice of Appeal as being properly on record;e.Pending the hearing and determination of this Application inter partes, a temporary order be issued staying and/or suspending the Agency Notices dated 10th January 2023 issued to Kenya Commercial Bank and 16th March 2022 issued to Cooperative Bank of Kenya or any other enforcement action taken by the Respondent which the Applicant may have not been aware of at the time of making this application be stayed and the Respondent whether by itself, its officers, employees and/or agents be stopped from taking any steps to collect any money pursuant to the said Agency Notices; andf.The costs of this Application be in the main appeal.

2. The application is premised on the following grounds that;-a.On 25th February 2021, the Respondent sent a Notice of Invalidly lodged Objection which the Applicant never got to receive since the Respondent sent the same to the wrong email purported to be that of the Applicant.b.On 10th March 2021, the Respondent sent a Notice of Objection invalidation to the same unresponsive email of the Applicant which the Applicant never got to see.c.The Applicant later received Agency Notices issued to its bankers and that is what made the Applicant visit its station to enquire about the Agency Notices issued.d.The Applicant herein did not receive the objection invalidation purportedly sent to its email since the same was sent to the wrong email therefore missed out on the copy sent to it by the Respondent.e.Upon the Applicant visiting the Respondent’s offices to enquire about the Agency Notice, it was informed of the Objection Invalidation dated 10th March 2021. The Applicant requested for a hard copy of the same and sought direction on how to file an Appeal to the TAT thus this Application.f.It is due to these above-stated reasons that the Applicant failed to file its Appeal documents within the stipulated days provided by law.g.The Applicant has filed this application at the earliest time possible upon the realisation of the Objection Invalidation without any further delays.h.Section 13(4) of the Tax Appeals Tribunal Act grants this Honourable Tribunal the power to extend the time within which a Notice of Appeal could be lodged if the delay was occasioned by absence from Kenya, or sickness, or other reasonable cause that may have prevented the Applicant from filing the Notice of Appeal and Appeal documents.i.In the circumstances, it is in the interest of justice that the application be allowed. The Respondent is unlikely to suffer any prejudice.j.It is in the interest of justice and the rules of natural justice that this Honourable Tribunal grants the orders sought herein and the Appellant given an opportunity to properly file its Notice of Appeal, Memorandum of Appeal, and Statement of Facts as chances of its success are overwhelming.

3. The Appellant filed written submissions in which it identified and submitted on the issues as hereunder:-

a.On whether the Applicant’s right to reply was violated 4. The Applicant submitted that the only reason for this matter is because letters and notices issued by the Respondent after May 2020 through the email info@cosmoplan.co.ke have not been received by the Applicant.

5. It further submitted that after the Respondent issued the assessment on 15th November 2019 for the accounting period March 2019, the Applicant lodged an Objection on 9th December 2019 which was received by the Respondent on 10th December 2019, the Applicant expected the Respondent to reply but the Respondent did not receive it until it later found the Respondent’s letter dated 28th August 2020.

6. It contended that after Covid 19, it closed its office and the service contract with the providers who hosted its domain name cosmoplanconsultants.co.ke fell due in May 2020 when its offices were closed. It added that with no renewal premium paid, the service was discontinued to date leaving all communications passing through the email from May 2020 unseen by the Applicant.

7. It reiterated that the email correspondences ended with the Respondent requesting further documentation to support the objection, warning the Applicant that its Objection might be found invalid if the information requested for is not provided.

8. It asserted that there is no absolute need for the cosmoplan domain to be working for the Applicant to remain in operation and since its domain went down, it resulted to using the free google supported email of cosmoplanconsultants@gmail.com for communication which is the email the Respondent is currently using for communication with the Applicant.

9. It maintained that the Respondent sent the assessment order for returns filed in February and March 2018 in November 2019, almost two years later. It added that considering the long time taken by the Respondent to issue the orders and that the monies had already been paid, the Applicant assumed that either the matter had been laid to rest or the response was on the way.

10. Receipt of this letter by the Applicant was vehemently denied as the Applicant reiterated that the Respondent did not show evidence of delivery of the same.

11. It asserted that when it got knowledge of the existence of the invalidation notice after the banker’s call, its agents promptly responded and had been in constant touch with the Respondent to clear the matter and no matter or insolence was intended.

12. It was submitted that if the Respondent got its way, the Applicant’s right to reply will be violated.

b. On whether there was negligence by the Respondent through failure to use alternative means of service when no response was received through email. 13. The Applicant submitted that the Respondent informed its bankers that it sent copies of the agency notices to its email and postal address which postal address is still operational.

14. It contended that its agent visited the postal address numerous times but the letter was not found, eventually forcing it to get a copy of the agency notices from its bankers.

15. It argued that the Respondent was partially responsible for the failure to get the letters and notices sent to it by failing to exhaust all the methods of service never intended for the Applicant to receive them.

16. It further argued that if the Respondent was able to scout for the Appellant’s bankers it was also in a position to send such important documents through registered mail when no response from the email was forthcoming.

c.On whether there is legitimate expectation to be heard. 17. The Applicant submitted that it possesses evidence to prove that indeed the money under investigation was paid to the service providers whose PIN numbers the Respondent possesses and no effort has been made to follow up in order to ascertain if indeed they issued the ETR receipts in question.

Response to the Application 18. Through its Grounds of Opposition filed on 11th May 2023 and the Replying Affidavit sworn by Anastacia Diramu, an officer of the Respondent, on 16th May 2022 and filed on even date, the Respondent opposed the application citing, inter-alia, the following grounds: -a.That the application is incompetent, bad in law, fatally defective and is an abuse of this Honourable Tribunal’s process.b.That no credible reason has been advanced by the Applicant to warrant extension of time to file appeal as provided at Section 13(4) of the Tax Appeals Tribunal Act.c.That an application of this nature requires an Applicant to prove his/her absence from Kenya, sickness or other reasonable cause.d.That equity aids the vigilant and not the indolent. The Applicant ought to have acted swiftly to preserve its rights. It is guilty of laches.e.That the application is an afterthought and a delay tactic by the Applicant meant to delay the conclusion of the matter which holds substantial government revenue.f.That the taxes demanded herein became due on confirmation of the assessment on. They now continue to accrue interest and penalties as provided under the various tax laws as there is no valid appeal before the Tribunal thus the Applicant ought to pay 50% on account to show commitment in the matter/for the Tribunal to consider granting the orders sought.g.That the Applicant has not demonstrated it deserves favourable discretion of this Honourable Tribunal and the application should be dismissed with costs to the Respondent.h.That on 15th November 2019 the Respondent issued the Applicant with additional assessments for VAT for the period between February 2018 to March 2018i.That consequently, the Applicant lodged his notices of objection dated 10th December 2019 challenging the assessments in their entirety.j.That the Applicant failed to support its objection with the relevant documentation. The above notwithstanding, vide an email dated 26th August 2020, the Respondent wrote to the Applicant requiring it to avail invoices and proof of payments listed therein.k.That the above email did not elicit any response from the Appellant. That in the circumstances, the Respondent herein sent a reminder vide an email dated 23rd October 2020 requiring the Applicant to comply be availing documents in support of their Notice of Objection.l.That in the absence of any feedback from the Applicant, the Respondent sent a further reminder vide an email dated 13th January 2021 directing the Applicant to avail the requisite documents failure to which the Respondent would proceed to invalidate their objection.m.That the said email did not elicit any response prompting the Respondent to send a final reminder vide the letter dated 25th February 2021. The said letter was dispatched to the Applicant vide their email info@cosmoplan.co.ke.n.That in the absence of any documents, the Respondent proceeded to invalidate the Applicant’s Notice of Objection vide the letter dated 10th March 2021, which was dispatched vide email on the same date.o.That consequently, on 6th May 2021 the Respondent proceeded to confirm the assessments and fully reject the claims for refund of input VAT.p.That on 5th May 2023 the Applicant lodged the application for extension of time to file an appeal over 2 years after the Notice of Invalidation of Objection was rendered.q.That the Applicant failed to file the Notice of Appeal, Memorandum of Appeal, Statement of Facts and tax decision within the statutory timelines contrary to Section 13(1) and (2)of the Tax Appeals Tribunal Act.r.That the Applicant avers that it failed to file his appeal within the statutory timelines as the email address used by the Respondent was the wrong email. This is misleading to the Tribunal since the email info@cosmoplan.co.ke was what the Applicant had submitted to the Respondent during registration.s.That the Applicant company is a going concern and it is highly unlikely that its management did not have access to their email for a period in excess of two years.t.That the reasons advanced by the Applicant have not been demonstrated to the satisfaction of the Honourable Tribunal.u.That the fact that the Applicant failed to follow up on its objection for over two years after lodging its notice of objection is a demonstration that the Applicant has not been vigilant and does not warrant an exercise of the Tribunal’s discretion in its favour. The Applicant is guilty of laches.v.That the Applicant has failed to provide a valid reason for the late appeal contrary to the provision of Section 13(4) of the Tax Appeals Tribunal Act.w.That the failure to provide a valid reason for the late appeal does not warrant this Honourable Tribunal to exercise its discretion in favour of the Applicant. The Applicant has failed to lay a basis to the satisfaction of the Tribunal for extension of time to file an appeal.x.That the application is an afterthought, brought in bad faith, meant to delay the Respondent from collecting taxes that are due and payable and should not be entertained by this Honourable Tribunal.y.That the Applicant is not deserving of the orders sought in the application as the whole period of delay has not been declared and explained satisfactorily to the Tribunal that the application ought to be dismissed.z.That in the circumstances, it is in the interest of justice that this Honourable Tribunal dismissed the Applicant’s Notice of Motion application dated 2nd May 2023 to pave way for the Respondent to collect taxes due from the Applicant which are key to the economic development of the Country

19. The indolence of the Applicant should not bar the Respondent from fulfilling its mandate of collecting taxes that are due and payable.

20. The Applicant has failed to satisfy the principles as set out in the case of Nicholas Kiptoo Arap Korir Salat v Independent Electoral and Boundaries Commission & 7 Others [2014] eKLR.

Respondent’s Submissions 21. The Respondent filed written submissions in which it raised and addressed the Tribunal on the issues raised hereunder.

a. On whether the Applicant should be granted leave to appeal the Objection Decision out of time 22. The Respondent submitted that the Applicant should not be granted leave to appeal the Commissioner’s decision out of time for reasons that it would be in contravention of Section 13(1) and (2) of the Tax Appeals Tribunal Act.

23. It contended that the Application and intended appeal are defective for being time barred according to the statutory timelines contemplated under Section 13(1) and 13(2) of the Tax Appeals Tribunal Act which it cited adding that the Application of 2nd May 2023 was two years and two months late.

24. The Respondent cited the case of APA Insurance Limited v Michael Kinyanjui Muturi 2016 eKLR in which the case of Meangi v Kenya Airways was cited.

25. It cited Section 13(3) and (4) of the Tax Appeals Tribunal Act and the case of Nicholas Kiptoo Arap Korir Salat v Independent Electoral and Boundaries Commission & 7 Others [2014] eKLR where the following principles were laid down as those to be applied when an application for extension of time has been raised:“1. 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;2. A party who seeks for extension of time has the burden of laying a basis to the satisfaction of the court3. Whether the court should exercise the discretion to extend time, is a consideration to be made on a case to case basis;4. Whether there is a reasonable reason for the delay. The delay should be explained to the satisfaction of the Court;5. Whether there will be any prejudice suffered by the respondents if the extension is granted;6. Whether the application has been brought without undue delay; and7. Whether in certain cases, like election petitions, public interest should be a consideration for extending time.”

26. The Respondent asserted that the Applicant has failed to satisfy the provisions of Section 13(4) of the Tax Appeals Tribunal Act and meet the threshold set out in the APA Insurance case (supra) by failing to demonstrate a reasonable cause for the failure to appeal within the statutory timelines, not demonstrating the existence of a prima facie arguable appeal and that it would occasion the Respondent prejudice should the Application be allowed since the collection of taxes due would be further delayed.

27. The Respondent urged that the reason advanced by the Applicant for failing to file the appeal within the statutory timelines is misleading since the email info@cosmoplan.co.ke was what the Applicant had submitted to the Respondent during registration.

28. It argued that the fact that the Applicant failed to follow up on its objection for over two years after lodging its notice of Objection is a demonstration that the Applicant has not been vigilant and does not warrant the exercise of the Tribunal’s discretion in its favour citing the case of Yessuf Mohamed Salat v Idris Ali Ahmed [2009] eKLR where it was stated “I would agree with Mr. Matini that the sword of justice is double edged and equity aids the vigilant not the indolent.”

29. The Respondent submitted that the delay of two years and two months was inordinate and inexcusable and does not warrant the Tribunal’s exercise of its discretion in favour of the Applicant and cited the decision in the case of Mwangi Kimenyi v. Attorney General & Another (2014) eKLR where the court held that:“There is no precise measure of what amounts to inordinate delay. Inordinate delay will differ from case to case depending on the circumstances of each case; the subject matter of the case; the nature of the case; the explanation given for the delay; and so on and so forth. Nevertheless, inordinate delay should not be difficult to ascertain once it occurs; the litmus test being that it should be an amount of delay which leads the court to an inescapable conclusion that it is inordinate and therefore, inexcusable...”

b. On whether the Appellant has demonstrated merit in their intended appeal 30. The Respondent cited the case of Cleophas WasikevMucha Swala [1984] KLR 591 where the Court of Appeal stated that“an applicant must now show, in descending scale of importance, the following factors: - a) That there is merit in his appeal. b) That the extension of time to institute and/or file the appeal will not cause undue prejudice to the respondent; and c) That the delay has not been inordinate.”

31. It also relied on the decision in Joseph Gitahi Gachau & amp andanother v Pioneer Holdings (A) Ltd & amp and 2 others Civil Application No. 124 of 2008 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; one which is not frivolous”

32. It reiterated that the Applicant has not attached its draft Memorandum of Appeal which would assist the Tribunal make a determination as to whether there is an arguable appeal.

The Tribunal’s Findings 33. 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.

34. In determining whether to extend time, the Tribunal was guided by the decision in the case of Leo Sila Mutiso v Rose Hellen Wangari Mwangi - Civil Application No. Nai. 255 of 1997 (unreported), where the Court expressed itself as thus:-“It is now well settled that the decision whether or not to extend the time for appealing is essentially discretionary. It is also well settled that in general the matters which this court takes into account in deciding whether to grant an extension of time are: first, the length of the delay; secondly, the reason for the delay; thirdly (possibly), the chances of the appeal succeeding if the application is granted; and, fourthly, the degree of prejudice to the respondent if the application is granted.”

35. The Tribunal, guided by the principles set out in John Kuria v Kelen Wahito, Nairobi Civil Application Nai 19 of 1983 April 10, [1984] where the court 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 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 there is a reasonable cause for the delay. 36. In considering what constitutes a reasonable reason for the delay, the court in Paul Wanjohi Mathenge v Duncan Gichane Mathenge [2013] eKLR, held that:“...it is clear that the discretion to extend time is indeed unfettered. It is incumbent upon the applicant to explain the reasons for delay in making the application for extension and whether there are any extenuating circumstances that can enable the Court to exercise its discretion in favour of the applicant.”

37. The Applicant contended that it could not receive the Notice of Objection Invalidation because the Respondent sent the same to an email address info@cosmoplan.co.ke which stopped becoming functional during the Covid-19 pandemic when the Applicant stopped paying its domain services to the service providers.

38. The Applicant further argued that the Respondent ought to have tried other means of communicating its decision to the Applicant when it found that there was no response from the Applicant.

39. The Respondent contended that the email address info@cosmoplan.co.ke was the registered email of the Applicant on iTax and still is.

40. The Tribunal is of the position that when it realised that its official email address was no longer working and that it had to change the same for purposes of communication, it was the Applicant’s responsibility to communicate the same to the Respondent on time and not for the Respondent to search for a reason why the Applicant is not responding to any of its enquiries.

41. It is therefore the Tribunal’s finding that the reason tendered by the Applicant that the Respondent sent the Notice of Objection Invalidation to a different email address was not reasonable cause for the delay.

42. Having found as above, the Tribunal will not consider the remaining tests for the reason that the same have been rendered moot

43. The Tribunal notes that the Appellant filed an Appeal simultaneously with the present application and which Appeal having been filed without the leave of the Tribunal is hereby deemed as incompetent and unsustainable in law.

Disposition 44. In light of the above, the application lacks merit and the Tribunal accordingly makes the following Orders: -i.The application is hereby dismissed.ii.The Appeal is hereby struck out.iii.No orders as to costs.

DATED AND DELIVERED AT NAIROBI ON THIS 29TH DAY OF JUNE, 2023. ...........……………….ERIC N. WAFULA - CHAIRMANCYNTHIA B. MAYAKA - MEMBERRODNEY O. OLUOCH - MEMBERELISHAH N. NJERU - MEMBERABRAHAM K. KIPROTICH - MEMBER