[2024] KETAT 1234 (KLR)

Equipped Trading (K) Limited v Commissioner of Domestic Taxes (Tribunal Appeal E458 of 2023) [2024] KETAT 1234 (KLR) (Civ) (9 August 2024) (Judgment)

Neutral citation: [2024] KETAT 1234 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Civil

Tribunal Appeal E458 of 2023

E.N Wafula, Chair, Jephthah Njagi & E Ng'ang'a, Members

August 9, 2024

Between

Equipped Trading (K) Limited

Appellant

and

Commissioner of Domestic Taxes

Respondent

Judgment

1. The Appellant is a limited liability company carrying out businesses within the Republic of Kenya.

2. The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act, Cap 469 Laws of Kenya (KRA Act). Under Section 5 (1) of the Act, KRA is an agency of the Government for the collection and receipt of all revenue. For the performance of its function under Subsection (1), the Authority is mandated under Section 5(2) of the Act to administer and enforce all provisions of the written laws as set out in Parts I and II of the First Schedule to the KRA Act to assess, collect, and account for all revenues under those laws.

3. The Respondent issued a notice of intention to verify tax declarations to the Appellant on 16th December 2021.

4. VAT and Corporate income tax assessments orders were raised on iTax on 9th May 2023 and 24th May 2023 and the Appellant objected to the same on 3rd June 2023.

5. The Respondent issued the Appellant with objection invalidation notices dated 16th June 2023 and the Appellant being aggrieved by the decision appealed against the same through its Notice of Appeal filed on 14th July 2023.

The Appeal 6. The Appeal is premised on the Memorandum of Appeal dated 27th July 2023 and filed on 11th August 2023 raising the following grounds: -a.That the Commissioner failed in fact and in law in failing to provide precise reasons for the refusal of the Appellant's objection and proceeded to demand for additional income tax and VAT that is illegitimate and not payable.b.The Respondent failed to consider the Appellant’s accounts, invoices, audited financial statements, general ledgers, bank statements, reconciliations of the turnover and other related documents provided to it before demanding for additional VAT.c.That the Respondent erred in its decision by demanding additional VAT of Kshs.7,219,623. 00. d.That the reasons advanced by the Respondent in invalidating the Appellant’s objection are vague, hollow and mere monologues whose objectives are chiseled only for purposes of collecting illegitimate taxes.

Appellant’s Case 7. The Appellant’s case is premised on the Statement of Facts dated 27th July 2023 and filed on 11th August 2023.

8. The Appellant averred that on 15th February 2023 it was issued with a notice of assessment followed by additional assessments dated 9th May 2023 and 24th May 2023 respectively.

9. That the Appellant objected to the assessments on 3rd June 2023 and provided all the additional information and documents as demanded by the Respondent but the latter failed to address the issues raised in the objection.

10. The Appellant stated that even before the issuance of the said assessments, the parties held many working meetings and the Appellant provided all the documents for review as demanded by the Respondent.

11. That on 16th June 2023 the Respondent invalidated the Appellant's objection and demanded VAT of Kshs. 7,219,623. 00 together with penalties and interest.

12. That the Respondent did not comply with the provisions of the Tax Procedures Act by invalidating the Appellant’s objection and therefore the tax decision is null and void ab initio.

Appellant’s prayers 13. The Appellant prayed to the Tribunal to find that the Appellant is not liable to pay any additional VAT of Kshs. 7,219. 623. 00 with regard to the tax period under review.

The Respondent’s Case 14. In response to the Appeal the Respondent presented its:a.Statement of Facts dated 3rd November 2023 and filed on 6th November 2023 together with the documents attached thereto.b.Written submissions dated 1st March 2024 and filed on 4th March 2024.

15. The Respondent averred that it relied on Sections 3 of the Income Tax Act and Section 5 of the VAT Act that provides for charge of tax by it.

16. The Respondent also relied on Section 51(3) of the Tax Procedures Act (TPA) and Section 23 of the TPA as read together with Section 59 of the TPA that require the Appellant to maintain documents required under any tax law and to provide the same upon request by the Respondent.

17. The Respondent averred that the Appellant failed to provide the required documents for the objection application.

18. The Respondent also submitted that it is trite law that the burden of proving that the assessments by the Respondent are incorrect, lies with the Appellant and that the Appellant had failed to discharge that burden. That this led to the issuance by the Respondent of the objection invalidation.

19. The Respondent in support of its case relied on the holdings in Mulherin vs Commissioner of Taxation [2013] FCAFC 115, Commissioner of Domestic Services vs Galaxy Tools Ltd [2021] eKLR and TAT No.55 of 2018 Boleyn International Limited vs Commissioner of Domestic Taxes.

Respondent’s prayers 20. The Respondent prayed that the Tribunal:a.Upholds the Respondent’s decision dated 16th June 2023. b.Dismisses the Appeal with costs to the Respondent.

Issues For Determination 21. The Tribunal has considered the facts of the matter and the submissions made by the parties, and considers the issues for determination to be as follows:a.Whether there is a valid appeal before the Tribunal.b.Whether the invalidation decision dated 16th June 2023 is justified.

Analysis And Findings a. Whether there is a valid appeal before the Tribunal 22. The Appellant upon being dissatisfied with the decision dated 16th June 2023 filed its Notice of Appeal on 14th July 2023.

23. The Tribunal notes that the procedure for appeal as set out in Section 13(1) (b) of the Tax Appeals Tribunal Act (TAT Act) requires that a notice of appeal shall be submitted to the Tribunal within thirty days upon receipt of the decision of the Commissioner.

24. Consequently, the Appellant is required to abide by the provisions of Section 13(2) of the TAT Act which provides as follows:“The Appellant shall within fourteen days from the date of filing the notice of appeal, submit enough copies, as maybe advised by the Tribunal of –a.memorandum of appealb.statement of factsc.tax decision

25. The Tribunal observes that the Appellant upon filing its Notice of Appeal on 14th July 2023 was as per Section 13(2) of the TAT Act expected to file its Memorandum of Appeal within fourteen days thereafter. The Appellant filed its Memorandum of Appeal on 11th August 2023, well outside the requisite time.

26. The Tribunal further notes that the Appellant failed to apply for leave to file its Memorandum of Appeal out of time as required under Section 13(3) of the TAT Act which provides as follows:-“The Tribunal may, upon application in writing or through electronic means, extend the time for filing the notice of appeal and for submitting the documents referred to in subsection (2).”

27. The Tribunal is of the considered view that the timelines for appealing the Commissioner’s decisions are clearly set out in the law, and taxpayers are liable to comply with the same.

28. The Tribunal reiterates its holding in the case of W.E.C. Lines Ltd vs. The Commissioner of Domestic Taxes [TAT Case No. 247 of 2020] where it was held at paragraph 70 while reiterating the holding in Krystalline Salt Ltd vs KRA [2019] eKLR that: -“Where there is a clear procedure for redress of any particular grievance prescribed by the constitution or an Act of Parliament, that procedure should be strictly followed. Accordingly, the special procedure provided by any law must be strictly adhered to since there are good reasons for such special procedures. The relevant procedure here is the process of opposing an assessment by the Commissioner.”

29. The Tribunal is also guided on the adherence to timelines by the case of Eastleigh Mall Limited v Commissioner of Investigations & Enforcement (Income Tax Appeal E068 of 2020) [2023] KEHC 20000 (KLR) where the court held that: -“... Parliament in its wisdom knew that in matters tax, time is very crucial as those in commerce need to make informed decisions. If the Commissioner is allowed to exercise his discretion and stay ad-infinitum before issuing an objection decision, the tax payer would be unable to make crucial decisions and plan his/her business properly. The timelines set are mandatory and not a procedural technicality.”

30. Based on the law and the case laws cited above, the Tribunal finds that there is no valid appeal before it as the Memorandum of Appeal in the matter was filed out of time and without leave of the Tribunal. In the circumstances the Tribunal did not delve into the other issue set out for determination as the same was rendered moot.

Final Decision 31. The upshot of the foregoing analysis is that the Appeal is incompetent, and the Tribunal accordingly proceeds to make the following Orders:a.The Appeal be and is hereby struck out.b.Each party to bear its own costs.

32. It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 9TH DAY OF AUGUST, 2024. ERIC NYONGESA WAFULACHAIRMANJEPHTHAH NJAGI EUNICE N. NGA’NG’AMEMBER MEMBERGLORIA A. OGAGAMEMBER