[2025] KETAT 4 (KLR)

Eliye Springs Resort v Commissioner of Domestic Taxes (Tax Appeal E899 of 2024) [2025] KETAT 4 (KLR) (17 January 2025) (Ruling)

Neutral citation: [2025] KETAT 4 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal E899 of 2024

RM Mutuma, Chair, D.K Ngala, M Makau, Jephthah Njagi & T Vikiru, Members

January 17, 2025

Between

Eliye Springs Resort

Appellant

and

Commissioner of Domestic Taxes

Respondent

Ruling

1. The Applicant moved the Tribunal vide a Notice of Motion application dated 9th August 2024 under Certificate of urgency that is supported by an Affidavit sworn on 30th July 2024 by Rolf Gloor, the Managing Director of the Appellant/Applicant, seeking for the following orders that:a.Spentb.The Applicant be granted leave to file a Notice of Appeal and the time for filing the appeal documents be extended.c.The Notice of Appeal filed by the Applicant herein be deemed as properly filed.d.The cost of this application be in the cause.

2. The Application is premised on the grounds that;a.On 16th April 2021 the Respondent issued an additional assessment for Kshs. 2,940,000. 00 purportedly for Value Added Tax (VAT) covering 1st December 2020 to 31st December 2020. b.The Applicant objected to the additional assessment through an objection lodged on iTax and an objection letter dated 14th May 2021 issued by their tax agent Labchey Consulting in accordance with the provisions of the Tax Procedure Act.c.Contrary to the provisions of the Tax Procedures Act the Respondent failed to issue an Objection Decision pursuant to Sections 51 (9), (10) and (11) of the Tax Procedures Act. The objection dated 14th May 2021 was therefore deemed to be allowed.d.On 31st August, a confirmation Assessment Notice was issued by the Respondent. The confirmation notice was not an Objection Decision as it did not meet the threshold for an objection decision set out under Section 51 (10) and (11) of the Tax Procedures Act.e.On 13th December 2023 the Respondent issued the Agency Notice to Kenya Commercial Bank for the recovery of Kshs. 3,920,000. 00 being VAT due, which amount was disputed by the Applicant. The Agency Notice was not served on the Applicant and the Applicant has recently come to be aware of the Agency Notice.f.The Respondent failed to issue an Objection Decision before issuing the Agency Notice. The Agency Notice issued was therefore defective, illegal and void.g.The Applicant filed a Miscellaneous Application No. E031 of 2024 Eliye Springs Resort vs. Commissioner of Domestic Taxes on 18th April 2024 seeking among other orders that the court set aside the Agency Notice dated 13th November 2023 for being illegal and void.h.The Miscellaneous Application dated 18th April 2024 was determined on 5th July 2024. The Tribunal dismissed the application stating that the issue of validity of a decision is a substantiate issue to be gleaned at the full hearing of any appeal filed against the decision determined on its proper merits and not at this preliminary point.i.Due to the delay in the issuance of a decision by the Respondent pursuant to the objection lodged by the Applicant and the Applicant’s decision to file Miscellaneous Application dated 18th April 2024 the time for filing a Notice of Appeal has since lapsed.j.The failure to file the Appeal on time is not deliberate.k.The Applicant has a good and valid Appeal to the Respondent’s decision of 31st August 2021 and requires its opportunity to be heard before the Tribunal. The Applicant is desirous to have the dispute determined.l.It is in the interest of justice that leave be granted to file the Notice of Appeal and the Applicant be granted an opportunity to be heard.m.The Respondent will not be prejudiced in any way whatsoever if the Tribunal grants the Applicant leave to file the Appeal out of time.n.Unless the application is certified urgent and the orders therein granted, the Applicant will suffer great prejudice as it will be condemned unheard.o.It is the interest of justice and fairness that this application is allowed.

3. The Respondent upon being served with the instant application responded through its grounds of opposition dated 11th August 2024 raising the following grounds;a.That the Applicant has not given grounds for the late filing as provided for under Section 13 (4) of the TAT Act.b.That the delay in filing the instant Application is highly inordinate with the impugned decision having been issued on 31st August 2021. c.That the instant Application is an abuse of the court process and ought to be dismissed with costs.

Parties Submissions 4. The Applicant’s written submissions dated and filed on 11th September 2024 sought to establish whether the Appeal was merited and whether there was reasonable cause for the delay. It also submitted on whether there would be any prejudice suffered by the Respondent if the extension is granted.

5. The Appellant submitted that the Respondent was required by Section 51 (9), (10) and (11) of the TPA to issue an Objection Decision to the Appellant sixty (60) days after the Appellant had lodged its objection which the Respondent failed to do. It therefore submitted that it had shown that the Appeal is arguable with a high chance of success and that it deserves its day in the Tribunal. It relied on the following authorities in its argument to justify why its application was merited, namely Samuel Mwaura Mitumba vs. Commissioner of Domestic Taxes (Misc. App E24 of 2023) [2023] KETAT 358(KLR)(CIV) (9 June 2023) and Stanley Kinyanjui vs. Tony Ketter & 5 others [2013] eKLR.

6. The Appellant averred that the delay in filing the Appeal was due to the delay in the issuance of a decision by the Respondent and the Appellant’s decision to file the Miscellaneous Application No. E031 of 2024 Eliye Springs Resort vs. Commissioner of Domestic Taxes dated 18th April 2024 which was dismissed by the Tribunal for reasons that the validity of a decision was a substantive issue to be addressed in a formal Appeal and hence it was advised to file an Appeal.

7. The Appellant submitted that the circumstances surrounding the issuance of a confirmation notice by the Respondent four (4) months after the Appellant lodged an objection were unclear and a cause for the delay in filing the Appeal. It therefore urged the Tribunal to find that the explanation for the delay was plausible.

8. It was the Appellant’s submission that no prejudice would be occasioned to the Respondent if the application is allowed as it would still collect taxes inclusive of penalties and interest should it be found due and payable.

9. In its written submission dated and filed on 13th September 2024 the Respondent submitted on whether the reason for delay was sufficient and reasonable and whether the Application was an abuse of the courts process.

10. The Respondent submitted that pursuant to the provisions of Section 13 (3) & (4) of the Tax Appeal Tribunals Act, a taxpayer can apply for extension of time to file an Appeal out of time. However, the Applicant has not given any reason as to why it took three (3) years to file the instant application.

11. It submitted further that whereas the Tribunal has discretion to extend time to file an Appeal by determining the duration of delay and the reason for delay, this discretion must be exercised judiciously and not as a matter of right as it was held in the case of Income Tax Appeal No. 31 of 2017 Commissioner of Domestic Taxes vs. Mayfair Insurance Company Limited [2017] eKLR.

12. On the issue of whether the application is an abuse of the court process the Respondent submitted that the Application before the Tribunal is not only frivolous but is also an abuse of the courts process and time as the Applicant has instituted the same Application on numerous occasions seeking for the same order on the same grounds and is therefore undeserving of the remedy sought. The Respondent sought for the dismissal of the Application stating that the Applicant has also failed to take advantage of the remedies by the Tribunal on 19th December 2022 when the Application for extension of time to file the Appeal was allowed.

13. The Respondent submitted that should the Application be allowed; the Respondent would suffer irreparable harm as there will be undue delay in collecting taxes which are due and owing which taxes are vital in the running of the day to day operations of the Government.

14. The Respondent submitted further that the Applicant’s Application lacks merit as it does not meet the threshold set for granting of leave to file the Appeal out of time and as such the Application should not be allowed.

15. The Respondent relied on the following other Authorities in buttressing its argument.i.TAT Misc App. No 9 of 2022 Joesla Limited vs. Commissioner of Domestic Taxes;ii.Muchanga Investments Limited vs. Safaris Unlimited (Africa) Ltd & 2 others Civil Appeal No 25 of 2002 [2009] KLR 229; and,iii.Stephen Somett Takwenyi & Another vs. David Mbuthia Githare & 2 others Nairobi (Milimani) HCC No.363 of 2009.

Analysis and Findings 16. The Appellant has approached this Tribunal seeking its leave to file its Appeal out of time. The Tribunal has the power to extend time, however the said power is discretionary and must therefore be exercised judiciously.

17. Section 13 (4) of the Tax Appeals Tribunal Act grants a taxpayer a lifeline should it seek to file an Appeal out of time. It 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 the specified period.”

18. In its pleadings the Applicant has not cited the grounds envisaged under Section 13 (4) of the TATA, being absence from Kenya or sickness as a cause for the delay. The Tribunal is therefore called to determine whether there was reasonable cause and whether the delay was inordinate.

19. The Applicant had submitted that the circumstances surrounding the issuance of a confirmation notice by the Respondent four (4) months after the Appellant had objected to the assessment were unclear and a cause for the delay by the Appellant in filing the Appeal. If indeed the Appellant was aware that the Respondents confirmation Assessment was late, nothing stopped it from raising it as a ground of Appeal, and filing the Appeal then.

20. It is often stated that ignorance of the law is no defence, and as John Seldon (1584 – 1654) stated;“Ignorance of the law excuses no man, not that all men know the law, but ‘tis an excuse every man will plead and no man can tell how to confute him.”

21. Regarding the delay in the bringing of the application seeking leave to Appeal out of time, the Applicant had stated that it acted only when it was made aware of the agency notice that had been issued to its bankers on 13th December 2023 which prompted it to file a Miscellaneous Application No E031 of 2024 dated 18th April 2024 seeking the lifting of the Agency notice.

22. The Tribunal notes that in the first instance, the Applicant was aware that the Respondent’s confirmation Assessment was 4 months late, yet failed to proactively seek a remedy by filing an Appeal. In the second instance, the Applicant was made aware about the Agency notice of 13th December 2023, yet waited for four (4) months to file a Miscellaneous Application No. E031 of 2024.

23. Indeed, equity aids the vigilant, and in the instant case, the Applicant failed to be vigilant of its circumstances and cannot now seek the Tribunal’s intervention to cure its shortcomings. In considering what constitutes a reasonable cause for the delay, the Tribunal relies in the courts holding in Balwant Singh vs. Jagdesh Singh & Ors (Civil Appeal No 1166 of 2006) where it was stated;“The test is whether or not a cause is sufficient to see whether it could have been avoided by the party by exercise of due care and attention”.

24. The Tribunal in the circumstances finds that there is no reasonable cause advanced to its satisfaction for failure by the Applicant to timeously lodge its Appeal.

25. Consequently, leave for file an Appeal out of time having not been granted, the Appeal is left with no legs to stand on, thus is incompetently before the Tribunal.

Dispostion 26. The upshot of the foregoing is that the Tribunal finds the application lacks merit and it accordingly proceeds to make the following Orders;a.The Application be and is hereby dismissed;b.The Appellant’s Appeal be and is hereby struck out; and,c.No orders as to costs.

27. It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 17TH DAY OF JANUARY 2025ROBERT M. MUTUMACHAIRMANDELILAH K. NGALA MUTISO MAKAUMEMBER MEMBERJEPHTHAH NJAGI DR. TIMOTHY B. VIKIRUMEMBER MEMBER