[2024] KETAT 1039 (KLR)

Crevation International Limited v Commissioner of Domestic Taxes (Tax Appeal E302 of 2024) [2024] KETAT 1039 (KLR) (Civ) (12 July 2024) (Ruling)

Neutral citation: [2024] KETAT 1039 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Civil

Tax Appeal E302 of 2024

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

July 12, 2024

Between

Crevation International Limited

Appellant

and

Commissioner of Domestic Taxes

Respondent

Ruling

1. The Appellant vide a Notice of Motion filed under a Certificate of Urgency on 13th March, 2024 and which is supported by an Affidavit sworn by Chen Yidan, a Director of the Appellant, sought for the following Orders:-i.Spent.ii.That this Tribunal be pleased to grant the Appellant/Applicant leave to file an appeal out of time since the Appellant, Ms. Chen Yidan who was dealing with the emails and tax correspondences flew out of the Country since 2021 due to the effects of corona pandemiciii.That this Tribunal treat such leave as granted and be pleased to admit the Appellant appeal in opposition of the Respondent's confirmation of assessment emailed to the Appellant email on 22nd November 2023, and all the supporting documents in support of the underlying cause of action.iv.That this Honorable Tribunal be pleased to deem the Memorandum of Appeal, Statement of Facts and Notice of Appeal herein as properly filed on time.v.Spentvi.That this Tribunal sets aside the confirmation of assessment and tax demands until the final determination of the suit.vii.That this Tribunal grants the costs of this application to the Appellant.viii.That this Tribunal grants any other appropriate orders or reliefs that it may deem just and reasonable to do so.

2. The application is premised on the following grounds:-i.That the confirmation of assessment which precipitated the present application and appeal was wrongful and erroneous in law and in fact.ii.That the Appellant’s request for resolution of the dispute through Alternative Dispute Resolution which was made to the Respondent was not responded to, and thus denied the Appellant its right to access to justice, since ADR is a means of resolving tax disputes as per Section 55 of the Tax Procedures Act,No.29 of 2015. iii.That the company accountant of the Apellant Ms. Chen Yidan, who was dealing with the emails and tax correspondences flew out of the Country since 2021 due to the effects of corona pandemiciv.That this application does not introduce a new or inconsistent cause of action as it relates to the same facts and circumstances upon which the underlying cause of action is based.v.That this application has been made in good faith and solely for the purpose of enabling this Tribunal to appreciate the real issues between the parties, and to make its decision based on the true representation of facts and circumstances surrounding the matter.vi.That no prejudice whatsoever will be occasioned to the Respondent if the present application is allowed.vii.That the Appellant will be highly prejudiced should the Tribunal fail to grant the orders sought herein.viii.That it will be in the interests of justice and fair administrative action that this Honorable Tribunal grants the Appellant the orders sought herein.

Response to the application 3. The Respondent opposed the application through a Replying Affidavit sworn by Wambui Kindiga, an officer of the Respondent, on the 30th April, 2024. The grounds of opposition as highlighted in the Affidavit were as follows:-i.That the Appellant was issued with an additional assessment order dated 25th March 2020 for KShs.311,005. 50. ii.That the Appellant objected to the additional assessment vide an objection application filed on iTax on 8th April, 2020. iii.That the Appellant's objection was not compliant with the requirements of section 51(3) of the Tax Procedures Act (TPA) in that it failed to;a.State precisely the grounds of Objectionb.State the Amendments required to be made to correct the Decisionc.State the reasons for the amendmentsd.Include all the relevant documents relating to the Objectioniv.That the Respondent vide a letter dated 22nd November, 2023 notified the Appellant that it's Objection was invalid.v.That through the same letter the Appellant was notified of its right to appeal the said decision within 30 days.vi.That had the Appellant been aggrieved with the said objection decision then the Appellant ought to have filed a Notice of Appeal within 30 days as provided for under Section 13 of the Tax Appeals Tribunal Act.vii.That the Appellant failed to lodge a Notice of Appeal within the allowed statutory timelines hence this instant application for enlargement of time to lodge a late appeal.viii.That where a taxpayer is for any reason unable to file a Notice of Appeal on time, then the taxpayer can apply to the Tribunal for extension of time.ix.That the Tribunal has power under Section 13 (3) of the Tax Appeal Tribunal Act to extend the time for filing the Notice of Appeal and submitting the Memorandum of Appeal, Statement of Facts and the tax decision upon application by an Applicant.x.That for the Appellant to be granted extension of time under Section 13 (3) of the Tax Appeals Tribunal Act the Appellant has to prove existence of one of the grounds provided for under Section 13 (4) of the TAT Act.xi.That Section 13 (4) of the TAT Act 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 filing the notice of Appeal or submitting the documents within specified period.”xii.That from the above cited Section of the law there are only three grounds of extension of time and those are: absence from Kenya, sickness and other reasonable cause as the Tribunal may determine.xiii.That the ground for delay advanced by the Appellant would appear to be absence from the Country by the accountant of the Appellant.xiv.That the ground advanced by the Appellant is unsubstantiated and/or suspicious for the following reasons;a.The Passport annexed is in a language that is not official within the Kenyan jurisdiction.b.There is no evidence that one Chen Yidan is the Accountant of the Appellant.c.No reason has been advanced as to why the directors of the Company could not file an appeal and why the accountant had to be awaited.d.There is no evidence that the said accountant has come back and no explanation has been given as how then the Applicant now learned of the Respondent's impugned decision.xv.That it is the Respondent's position that the reason advanced by Appellant for not filing an appeal on time is not plausible and as such is opposed to the application for enlargement of time.xvi.That the delay by the Applicant is inordinate and as such inexcusable.

Analysis and Findings 4. The Tribunal’s directions on the manner of determination of the application were that the application was to be canvassed by way of written submissions. However, the parties failed to file any submissions and therefore the Tribunal has only considered the Notice of Motion together with the documents annexed to the Affidavit in support thereto and the Respondent’s reply 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 Appellant.

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 application 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 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 Tribunal 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 reasons for delay the Appellant stated that its accountant of the appellant Ms. Chen Yidan who was dealing with the emails and tax correspondences flew out of the country since 2021 due to the effects of Covid-19 pandemic

14. On the reason of absence of the Appellant’s accountant, the Respondent submitted that the reason advanced by Appellant for not filing an appeal on time is not plausible and as such is opposed to the application for enlargement of time.

15. That the delay by the Appellant is inordinate and as such inexcusable.

16. The Tribunal noted that the Respondent’s decision to which the Appellant wishes to appeal against was issued on 22nd November 2023. It follows therefore that the Appellant ought to have filed a Notice of Appeal on or before 22nd December 2023 when the 30 days statutory timeline lapsed.

17. The Appellant filed this application on the 13th March, 2024 which is approximately 3 months and 20 days late. It was the view of the Tribunal that although the Respondent had raised doubt on the documents presented by the Applicant, the delay was not inordinate.

18. In the circumstances the Tribunal finds that the delay in lodging of the application for the enlargement of time was not inordinate.

b. Whether the application is merited 19. 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.

20. 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.”

21. The Tribunal was 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.”

22. Similarly, in Kenya Commercial Bank Limited v 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”

23. 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 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.”

24. The Tribunal noted that the Appellant in the draft Memorandum of Appeal and the Statement of Facts filed before the Tribunal on the 4th March, 2024 has raised six grounds of Appeal raising factual and legal issues, that calls for appropriate rebuttal by the Respondent.

25. Going by the standards set out in the Stanley Kangethe Kinyanjui v Tony Keter & others [2013] case the Tribunal found 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.

26. 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 finding in United Arab Emirates v Abdel Ghafar & Others 1995 IR LR 243 as thus:-“…….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………”

27. The test, therefore, as set out in the case above is whether the Respondent will suffer irreparable prejudice if the application is granted.

28. The Appellant stated in its application that it will be highly prejudiced should the Tribunal fail to grant the orders sought.

29. The Tribunal was of the view that having found that the subject matter was arguable, 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 out of time.

30. The Respondent on its part did not demonstrate that there will be any prejudice that could not be compensated by an award of penalties and interests on any principal tax ultimately found to be due and payable by the Appellant. The Tribunal therefore finds that the Respondent 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. Consequently, the Tribunal found 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 is merited 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 and Statement of Facts out of time.iii. The Notice of Appeal, Memorandum of Appeal and the Statement of Facts filed before the Tribunal on the 4th March, 2024 be and are hereby deemed as duly filed and served.iv. The Respondent to file its response to the Appeal within Thirty (30) days of the date of delivery of this Ruling.v. No orders as to costs.

DATED and DELIVERED at NAIROBI this 12th day of July, 2024. ERIC NYONGESA WAFULACHAIRMANEUNICE N. NG’ANG’A MUTISO MAKAUMEMBER MEMBERELISHAH N. NJERU ABRAHAM K. KIPROTICHMEMBER MEMBER