[2023] KETAT 628 (KLR)

Effic Engineers Limited v Commissioner of Domestic Taxes (Miscellaneous Application E146 of 2023) [2023] KETAT 628 (KLR) (Commercial and Tax) (3 November 2023) (Ruling)

Neutral citation: [2023] KETAT 628 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Commercial and Tax

Miscellaneous Application E146 of 2023

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

November 3, 2023

Between

Effic Engineers Limited

Applicant

and

Commissioner of Domestic Taxes

Respondent

Ruling

1. The Applicant moved the Tribunal vide an application filed on 25th September 2023 under a certificate of urgency and supported by an affidavit sworn by Philamon Kiptoo Kisang, a Director of the Applicant, seeking the following Orders: -a.spent.b.That the Honourable Tribunal be pleased to leave to the Applicant to file, a Memorandum of Appeal, Statement of Facts, Notice of Appeal and any other Appeal documents.c.That consequently the Memorandum of Appeal, Statement of Facts, Notice of Appeal and tax decision be deemed to have been properly filed within time.d.That the Honourable Tribunal be at liberty to grant any other order it may deem fit and/or just to grant.e.That costs for the application be in cause.

2. The application is premised on the grounds, that: -a.That the Applicant is a citizen committed to endure compliance with the existing tax laws and legislation and did not intentionally delay the process.b.That on 1st March 2019 the Respondent sent an email to the Applicant purporting that the information in its system shows a variance of Kshs. 17,423. 288. 00 `between the turnover declared in income tax self-assessment return (IT2C) and the aggregate 12-month turnover for the years of income: 2016 and 2017 as per the filed VAT return filed.c.That on 6th March 2019, the Appellant objected to the Respondent’s variance and explained that VAT 3 for 2017 was declared in 2018 when the VAT withholding certificate was received and the same was to facilitate and minimize accounting errors on the part of the Appellant.d.That on the 2nd April 2019 the Respondent issued an assessment order to the Applicant with a claim amounting to Kshs.3,817,828. 09 and 201,718. 00 inclusive of interest and penalties.e.That the Applicant lodged an objection against the assessments for review on 15th May 2019 and explained the difficulties the Applicant was facing in amending the returns in the iTax and the same was fully rejected demanded for payment of Kshs. 4,808,410. 00f.That on 5th July 2019 the Commissioner issued an inconsistency notice and approved auto assessment of VAT inconsistency receipts on 15th November 2019. The inconsistencies were for the payments received on December 2017 and February 2018. The Applicant fully paid the pending taxes for 2017 since it could not get the disputed receipts from the suppliers.g.That the Commissioner’s rejection of the Applicant’s verbal and written explanations on its objections submitted on 6th March 2019 and 15th April 2019 is unfair and unreasonable to the Applicant as the Applicant complied with its tax obligations and has never intended to evade tax.h.That the Applicant made several attempts to address the issues not limited to several visits to the Respondent’s office for guidance and amending its return appropriately without success.i.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.j.That the said taxes were estimated assessments with no basis in law and which if allowed will highly prejudice the Applicant whose case has a high probability of success.1. The Respondent opposed the application through Grounds of Opposition filed on 5th October 2023 and a Replying Affidavit sworn by Sharlyne Omido, an officer of the Respondent, on the 5th October 2023 and filed on the same date. The grounds of opposition as highlighted in the Affidavit were as follows: -i.That the application is an abuse of the Court process and the Applicant is undeserving of the same. Further the application is an afterthought, brought in bad faith, meant to delay the Respondent’s collection of taxes that are due and payable.ii.That the Respondent confirmed the VAT and Corporate income tax assessments on 20th September 2019. iii.That the Applicant was file a Notice of Appeal within 30 days of the date of the decision, the Applicant failed to appeal within the timelines stipulated in law under Section 13 (1) (b) of the Tax Appeals Tribunal Act.iv.That the Applicant equally failed to lodge the Memorandum of Appeal, Statement of Facts and the tax decision within fourteen days from the date of filing the Notice of Appeal contrary to the provisions of Section 13 (2) of the TAT Act.v.That the application for extension of time is lodged more than 4 years after receiving the Respondent’s decision, the delay is not only inordinate but inexcusable.vi.That the Applicant has not advanced any credible reason to warrant the extension of time to file an appeal as is provided for under Section 13(4)of the TAT Act.vii.That the Applicant is required to prove its reasonable cause, sickness or absence from Kenya. Further ignorance of the law is no defence and the Applicant’s Director cannot allege that he was not aware of the requirements of the appeal.viii.That mere statements that are not backed by evidence of any sort are not solid grounds that would warrant this Honourable Tribunal to exercise its discretion in favour of the Applicant.ix.That the Applicant has failed to lay basis to the satisfaction of the Tribunal for extension of time to file an appeal.x.That the indolence and negligence of the Applicant to follow up on its matter and leaving it unattended should not be excused as doing so will create a bad precedent.

Applicant’s Submissions 4. The Applicant submitted that the Commissioner lacked the will and energy to critique the documents provided and that he was artificially unable to independently decipher the errors that gave rise to the variance and hence advise as appropriate.

5. The Applicant submitted that it was not guilty of latches, but rather asserted that it was the Commissioner’s reluctance that got the Applicant to this position.

6. The Applicant contented that the Objection decision was delivered beyond the stipulated timelines with over 60 days, the failure to observe timelines the Commissioner made it difficult for the Applicant to make crucial decisions and plan its business properly.

7. The Applicant submitted that the Honourable Tribunal should be guided by Article 159 (2) (d) of the Constitution of Kenya and the Applicant prayed for the application to be allowed.

Respondent’s Submissions 8. The Respondent submitted that it issued the Applicant with an Invalidation decision on 20th September 2019 demanding Kshs. 4,808,410, the Applicant was to file a Notice of Appeal with 30 days thereof but failed to so do.

9. The Respondent submitted that it identified one issued for determination, thus;Whether the Applicant has satisfied the exemptions under Section 13 (4) of the Tax Appeals Tribunal Act.

10. The Respondent asserted that the Applicant lodged its application on 26th September 2023 over 4 years after the statutorily prescribe time for lodging an Appeal and referred to Sections 13 (3) and (4) of the TAT Act, Rule 10 (2) and (3) of the Tax Appeals Tribunal (Procedure) Rules 2015 and relied on the case of Speaker of the National Assembly vs. James Njenga Karume [1992] eKLR.

11. The Respondent submitted that in determining whether the delay is inordinate, it urged the Tribunal to be guided by the case of Utalii Transport Company Limited & 3 Others vs. NIC Bank Limited & Another [2014] eKLR.

12. The Respondent contented that in addressing the prayers sought by the Applicant, the Respondent placed reliance on the case of Nicholas Kiptoo Arap Korir Salat vs. Independent Electoral and Boundaries Commission & 7 Others [2014] eKLR.

13. That the reason advanced by the Applicant that its accountant filed a Notice of Appeal on the Respondent’s portal as it was not aware that the appeal was to be lodged at the Tax Tribunal, is frail and inexcusable. Further the Applicant failed to show the efforts that the Director made to follow up on the Appeal. The Respondent prayed for the application to be dismissed with costs.

Analysis and Findings 14. The Applicant seeks orders of extension of time to file an appeal out of time to the Respondent’s decision issued on 20th September 2019.

15. Section 13 (1) and (2) of the TATAct makes provision in the manner that an appeal may be lodged, it provides as follows;(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; andc.the tax decision.‖

16. It follows that, the Applicant ought to have lodged an Appeal within 30 days from 20th September 2019, the Applicant failed to do so necessitating the instant application.

17. The Tribunal’s power to deal with applications of this nature is donated by Section 13 (3) of the Tax Appeals Tribunal Act which provides that:―The Tribunal may, upon application in writing, extend the time for filing the Notice of Appeal and for submitting the documents referred to in subsection (2).‖

18. Similarly, Section 13 (4) of the Tax Appeals Tribunal Act sets out the grounds that the Applicant may rely upon when seeking to extend time to appeal, which Section provides as thus:-―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.‖

19. The Tribunal’s power to extend time to file an appeal out of time are discretionary and not as of right to the Applicant and the same ought to be exercised judicially.

20. The burden to demonstrate the reasons that prevented the Applicant from lodging the Appeal, rests upon the Applicant and the reasons must be demonstrated to the satisfaction of the Tribunal.

21. In the case of Edith Gichungu Koine vs. Stephen Njagi Thoithi [2014] eKLR, the Court of Appeal ruled that a number of factors are to be considered whenever the application for extension of time is before a Court, it stated 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 delay, the degree of prejudice to the Respondent if the application is granted, and whether the matter raises triable issues of public importance, amongst others‖

22. There is no dispute that the appealable decision was issued on 20th September 2019 and the instant application was filed on 26th September 2023, a period over 1,466 days.

23. It was the Applicant’s assertion that the reasons for delay were that it did not know it was to lodge an Appeal before the Tribunal and that its accountant filed a Notice of Appeal to the Respondent’s portal.

24. Upon perusal, the Tribunal noted that the Notice of Appeal lodged on the Respondent’s portal was filed on 14th July 2020. Further the Applicant stated that it was not aware of any decision until the 19th June 2023 when it received communication but the Applicant failed to act in that instance.

25. The Tribunal has observed from the email dated 25th July 2023 sent to the Applicant and attached to the Applicant’s documents in support of application, that the Applicant was informed to make an application for late Appeal but failed to do so until the 26th September 2023.

26. The Applicant therefore was brought to knowledge of the presentation of this application over three (3) months prior to the presentation of the instant application and no grounds have been advanced.

27. It was the Respondent’s contention that the delay in filing this application for leave is inordinate and inexcusable. The Applicant in making this application ought to raise the grounds in accordance with Section 13 (4) of the TATAct and offer sufficient explanations.

28. The Applicant has not demonstrated what efforts or any at all that it employed either upon filing its Notice of Appeal on the Respondent’s portal or when it came to its attention that the said appeal had been dealt with and being informed to file the instant application.

29. It is the Tribunal’s considered view, that the grounds advanced are not reasonable and inconformity with Section 13 (4) of the TATAct.

30. The Tribunal, on a balance of convenience finds that the Applicant has failed to advance sufficient grounds and to adequately explain the delay in filing the Appeal within the statutory timelines.

Disposition 31. Premised on the foregoing analysis, the Tribunal finds that the application is unmerited and accordingly makes the following Orders: -a.That the application dated 25th September 2023 be and is hereby dismissed.b.No orders as to costs.

32. It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 3RD DAY OF NOVEMBER, 2023. ERIC NYONGESA WAFULA - CHAIRMANMUTISO MAKAU - MEMBERELISHAH N. NJERU - MEMBEREUNICE N. NG’ANG’A - MEMBERABRAHAM K. KIPROTICH - MEMBER