[2023] KETAT 336 (KLR)

Gathee Wholesalers Limited v Commissioner of Domestic Taxes (Appeal E107 of 2023) [2023] KETAT 336 (KLR) (Civ) (9 June 2023) (Ruling)

Neutral citation: [2023] KETAT 336 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Civil

Appeal E107 of 2023

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

June 9, 2023

Between

Gathee Wholesalers Limited

Appellant

and

Commissioner of Domestic Taxes

Respondent

Ruling

1. The Applicant vide a Notice of Motion dated the March 24, 2023 and filed under a Certificate of Urgency on March 28, 2023 and supported by an Affidavit sworn by Peter Ngánga Muchiri, a Director of the Applicant on the March 24, 2023, sought for the following Orders:-i.Spent.ii.That the Tribunal be pleased to issue an order unconditionally vacating and or lifting the Agency Notices dated March 15, 2023 issued to Equity Bank (Kenya) Limited, Cooperative Bank of Kenya Ltd and Family Bank Limited and any of the Appellant’s bankers pending the hearing and determination of this application and intended appeal.iii.That the Tribunal be pleased to extend the time allowed for Applicant to file Notice of Appeal, Memorandum of Appeal, Statement of Facts and all other accompanying documents.iv.That the Notice of Appeal filed herewith to be deemed as properly filed and served.v.That costs of this application be provided for.

2. The application is premised on the following grounds:-i.That on November 15, 2019, the Respondent issued the Appellant with assessment No. KRA20191562415 for the month of January 2018, for Kshs 1,268,088. 33, Assessment No. KRA201915650153 for the month of February, 2018 for Kshs 1,192,141. 93, Assessment No. KRA201915650152 for the month of March 2018 for Kshs 1,478,292. 28, Assessment No. KRA201915649801for the month of April 2018 for Kshs 1,395,047. 72 and Assessment No. KRA201915645242 for the month of May 2018 for Kshs 1,454,914. 79 all totaling Kshs 6,788,512. 05. ii.That the Appellant objected to the said assessment on December 11, 2019. iii.That the Appellant provided the Respondent with documents and bank statements in support to its objection dated December 11, 2019. iv.That the Appellant later learnt that the Respondent’s officer who was handling the matter was transferred and a new officer by the name Victor Ayieko appointed.v.That on March 16, 2022, Mr Ayieko started the case afresh and requested the Appellant to provide more documents in support to its objection.vi.That on the same day, the Appellant wrote an email to the Respondent informing it that all its efforts to have the dispute sorted was rendered futile due to the transfer of the Respondent’s case officer.vii.That surprisingly the Respondent issued the Appellant with an objection decision dated June 22, 2022 rejecting fully the Appellant’s objection.viii.That on September 21, 2022 the Appellant wrote to the Respondent an email informing the Respondent that the decision to reject its objection was erroneous.ix.That on September 29, 2022 the Respondent responded through an email informing the Appellant that an objection decision had been issued and the only recourse available was through an appeal.x.That on October 2, 2022 the Appellant’s Director became seriously ill and was not able to attend to any matter.xi.That when the Appellant regained some December 28, 2022 the Appellant director through an email sought for guidance from the Respondent on how to file an out-of-time appeal.xii.That the Applicant’s director is a layman and fairly elderly and was indisposed during the period of objection and continues to be unwell to date.

Analysis and Findings 3. In compliance with the directions of the Tribunal to the effect that the application was to be canvassed by way of written submissions, the Appellant filed its submissions on April 13, 2023. The Respondent did not file any response to the Application even after being offered the opportunity to do so and the Tribunal directed that the application shall be considered on its merits. The Tribunal has duly considered the written submissions of the Applicant in arriving at its determination in this Ruling.

4. 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.

5. 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”

6. 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, JJA in Edith Gichugu Koine v 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...”

7. 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.”

8. 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 WasikevSwala [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 appeal 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 9. In considering what constitutes as 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”.

10. The statutory timelines and provisions to file an appeal have been clearly set out in the Tax Appeals Tribunal Act. Section 13 (3) of the Tax Appeals 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.”

11. 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 tax payer 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.”

12. Regarding the reasons for delay, the Appellant stated that its director is a layman and fairly elderly and was indisposed during the period of objection and continues to be unwell to date.

13. To support its averment that the director had been unwell, the Appellant attached a letter from Gatundu Level Five Hospital indicating that the 70 year old director had at some point in May to June 2022 been hospitalized for undisclosed illness.

14. The Tribunal was of the view that although the actual duration and level of indisposition could not be determined, based on the evidence adduced, the Tribunal was persuaded that the director had indeed been suffering ill health.

15. Consequently, the Tribunal determined that the Appellant had demonstrated reasonable cause for delay.

b. Whether the appeal is merited? 16. 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.

17. 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 MuthumbivJosephine 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.”

18. The Tribunal was further guided by the findings of the court in Kenya Commercial Bank LimitedvsNicholas 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.”

19. Similarly, in Kenya Commercial Bank Limited Vs 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.”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.”

20. The Tribunal noted that the Respondent’s decision dated 2May 5, 2021 confirmed the assessments for VAT amounting to Kshs 6,788,512. 05. Looking at the Memorandum of Appeal filed by the Appellant, the Tribunal noted that the Appellant has raised three substantive grounds of Appeal that require rebuttal by the Respondent. Going by the standards set out in the Stanley Kangethe Kinyanjui Vs Tony Keter & others (2013) case the Tribunal finds 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? 21. 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 EmiratesvAbdel Ghafar &others 1995 IR LR 243 in which it was stated that:-“…….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………”

22. The test, therefore, as set out in the case above is whether the Respondent will suffer irreparable prejudice if the application is granted. However, having found that the subject matter was arguable, it is the view of the Tribunal that 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. The Respondent on the other had 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.

23. The Tribunal therefore finds that the Respondent will not suffer prejudice if the extension is granted.

Disposition 24. Based on the foregoing, the Tribunal finds that the application is merited and 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 March 28, 2023 be and are hereby deemed as duly filed and served.iv.The Respondent to file its Statement of Facts within Thirty (30) days of the date of delivery of this Ruling.v.The Agency Notices dated March 15, 2023 issued to Equity Bank (K) Limited, Cooperative Bank of Kenya Ltd and Family Bank Limited requiring them to pay the Respondent the sum of Kshs 12,213,945. 00 as tax owing by the Appellant be and are hereby unconditionally lifted.vi.No orders as to costs.

DATED AND DELIVERED AT NAIROBI THIS 9TH DAY OF JUNE, 2023. …..………………………. ….…………….…………ERIC N. WAFULACHAIRMAN…..………………………. ….…………….…………CYNTHIA B. MAYAKA…..………………………. ….…………….…………RODNEY O. OLUOCHMEMBER…..………………………. ….…………….…………ELISHAH NJERUMEMBER…..………………………. ….…………….…………ABRAHAM K. KIPROTICHMEMBER…..………………………. ….…………….…………