[2024] KETAT 1493 (KLR)

Gazlin Energy Limited v Commissioner of Domestic Taxes (Tax Appeal E950 of 2024) [2024] KETAT 1493 (KLR) (31 October 2024) (Ruling)

Neutral citation: [2024] KETAT 1493 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal E950 of 2024

CA Muga, Chair, BK Terer, EN Njeru, E Ng'ang'a & SS Ololchike, Members

October 31, 2024

Between

Gazlin Energy Limited

Applicant

and

Commissioner of Domestic Taxes

Respondent

Ruling

1. The Applicant moved the Tribunal vide a Notice of Motion Application dated 26th August 2024 and filed under a Certificate of Urgency dated 29th August 2024 seeking the following Orders:a.Spent.b.That the Tribunal be pleased to extend the time allowed for the Applicant to file Notice of Appeal, Memorandum of Appeal, Statement of Facts and tax decision.c.That the Notice of Appeal, Memorandum of Appeal and Statement of Facts both dated 26th August 2024 filed herewith be deemed as properly filed and served.d.That the Costs of this Application be in the cause.

2. The Application was supported by a Sworn Affidavit dated 26th August 2024 by Ahmednoor Mohamed Sheikh, the Appellant’s Director, on the following grounds:i.That on 5th June 2023, the Respondent issued the Applicant with an i-Tax system generated income tax assessment for the amount of Kshs 1,469,991,584. 00 and similarly on the even date proceeded to issue a Demand Notice of Kshs 1,231,327,177. 00 in relation to 2018 to 2022 review period.ii.That dissatisfied, the Applicant lodged its objection to the Assessment on 5th July 2023 with the Respondent confirming its Assessment vide its objection decision dated 1st September 2023. iii.That dissatisfied with the Respondent’s objection decision, the Applicant filed its Notice of Appeal at the Tribunal on 25th October 2023 followed by its Memorandum of Appeal and Statement of Facts on 4th December 2023 i.e. TAT No E880 of 2024. iv.That the said Appeal documents were filed outside the statutory timelines and without the leave of the Tribunal by the Applicant’s previous representative whose mistake should not be visited upon the Applicant. That this was precisely why the Applicant withdrew the said Appeal pursuant to Section 27 of the Tax Appeals Tribunal Act, CAP 469A of the Laws of Kenya (hereinafter “TATA”) on 26th August 2024 and hence the instant Application to expand time to file the Appeal.v.That the Applicant demonstrated desire to challenge the Respondent’s assessment by filing its objection to the assessments and that the delay in filing notice of appeal and Appeal documents was not inordinate.vi.That the Applicant has an arguable Appeal with high probability of success and since the taxes involved were colossal, the Applicant stood to suffer irreparable loss and damage if orders sought in this Application were not granted.vii.That no prejudice would be occasioned to the Respondent if this Application was allowed, on the contrary, if the orders sought were not granted, the Appeal would be rendered nugatory.viii.That the Tribunal has jurisdiction to grant orders sought thus it was imperative in the interest of justice that the Application herein be granted.

Response To The Application 3. The Respondent upon being served with the Application filed an opposing Replying Affidavit sworn by Doreeen Muchee, an officer of the Respondent dated 4th September 2024 and filed on even date citing the following as its grounds of opposition:i.That the Applicant was undeserving of orders sought and the same should not be granted as they were an abuse of the Court process.ii.That upon being issued with an assessment on 5th June 2023, the Applicant’s system-based objections of 5th July 2023 failed to meet proper objection threshold as outlined under Section 51(3) of the Tax Procedures Act, CAP 469B of the Laws of Kenya (hereinafter “TPA”) as the Applicant did not provide grounds and documents in support of their objection despite being requested to do so by the Respondent.iii.That as a result, the Respondent rendered its objection decision to which the Applicant had 30 days to appeal at the Tribunal which lapsed on 1st October 2023 but instead the Applicant filed late its notice and appeal documents on 4th December 2023 without leave of the Tribunal as couched under Section 13(1) and (2) of the TATA citing a mistake by its previous tax agent.iv.That the reason advanced by the Applicant was not among those set out under Section 13(4) of TATA and was an afterthought that was prompted by the Respondent’s rebuttals made in the TAT No. E880, thus there was no valid reason for late Appeal to warrant the Tribunal to exercise its discretion to extend time in favour of the Applicant as the same had been brought in bad faith and was meant to delay the Respondent from collecting taxes due and payable.v.That it was in the interest of justice that the Application be dismissed as the tax agent ought to have known the applicable legal provisions before lodging an appeal and that this indolence should not bar the Respondent from fulfilling its mandate of collecting taxes.vi.That the Applicant failed to satisfy the principles as set out in the case of Nicholas Kiptoo Arap Korir Salat v Independent Electoral and Boundaries Commission & 7 Others [2014] eKLR.

4. On 5th September 2024, the Tribunal granted the Appellant orders to file a further replying affidavit to the Respondent’s response by 5th September 2024. There was no further Appellant’s replying affidavit on record as of 5th September 2024. Further, the Tribunal directed the matter be canvassed by way of written submissions which were to be filed and served on or before 12th September 2024, both parties complied with this directive. The Tribunal fully considered the parties written submissions in arriving at its determination in this Ruling.

Analysis And Findings 5. The Tribunal observes that the Applicant herein was seeking orders to be allowed to file their Appeal out of time owing to in advent procedural error by their previous tax agent who filed an Appeal without first seeking leave from the Tribunal. A position that was contested by the Respondent who insisted that the Application was an afterthought and in bad faith meant to delay it from fulfilling its mandate of tax collection.

6. The Tribunal notes that extension of time to file an Appeal falls within its discretionary ambit as provided for under Section 13(3) and (4) of TATA which provides as follows:“(3)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).(4)An extension under (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.”

7. Additionally, the Court in Charles Karanja Kiiru v Charles Githinji Muigwa [2017] eKLR, held as follows:“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….”

8. The Tribunal in this Application will consider 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 TATA in establishing whether the Applicant deserved prayers sought:a.Whether there is a reasonable cause for the delay?b.Whether the appeal is merited?c.Whether the application for extension has been brought without undue delay?d.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 the instant Application, the Applicant indicated the desire to challenge the Respondent’s assessment by filing their objection. However, upon being issued with an objection decision, the Applicant’s tax agent filed a notice of appeal late without first seeking leave of the Tribunal which should have been the correct procedure. The Applicant went further to withdraw the impugned appeal at the Tribunal upon realising the lapse in appeal procedure by its previous tax agent. The Respondent contested this as being an afterthought and for being inordinately late in the appeal process.

10. The Tribunal notes that the circumstances that led to lapse of time up to the date of Applicant’s withdrawal of their Appeal was not within the control of the Applicant as the Appeal matter was before the Tribunal thus the actual time for consideration stopped running when the Applicant filed its Appeal TAT E880 of 2023 on 4th December 2023, which time was less than six months and as the Tribunal has previously held, the same is not an inordinate delay.

b. Whether the appeal is merited? 11. The Tribunal notes that Applicant herein has presented an Objection Decision from the Respondent dated 1st September 2023 whereupon it had filed an appeal stating 11 grounds of appeal. These grounds raise pertinent issues that form a basis of an arguable Appeal.

c. Whether the application for extension has been brought without undue delay? 12. The Tribunal notes that the Respondent stated that the Applicant’s seven (7) months delay was neither excusable nor warrants the Tribunal’s exercise of discretion in favour of the Applicant. On its part, the Applicant stated that an inadvertent mistake of its tax agent when filing the Appeal could not be visited upon it yet it had shown desire to challenge the assessments when it first filed its notice of objection.

13. The Tribunal notes that the Applicant herein upon discovery of the anomaly was quick to file an Application to withdraw the Appeal and correct the same to align with procedure as dictated by the law. Accordingly, the Tribunal finds that the Applicant sought to arrest a procedural technicality in advance before the Tribunal rendered its decision. It is the holding of the Tribunal that the Applicant’s application for extension was brought without undue delay.

d. Whether there will be prejudice suffered by the Respondent if the extension is granted? 14. The Tribunal observes that while the Respondent’s position was well laid out on how it arrived at the assessments and the consequent tax demands, the Applicant’s position was not within the Tribunal’s reach to ensure that taxes owing as just and equitable. Secondly, the Tribunal notes that great prejudice would be suffered by the Applicant since the disputed taxes were immense and the Applicant had demonstrated willingness to challenge them noting the only recourse available lay in the Appeal; it would therefore only fair that the matter is determined on its merits since the Respondent failed to demonstrated the prejudice it would suffer which could not be compensated in monetary terms inform in interest and penalties.

Disposition 15. The upshot of the foregoing is that 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.The Applicant is granted leave to file Notice of Appeal, Memorandum of Appeal and Statement of Facts.iii.The Applicant’s Notice of Appeal, Memorandum of Appeal, Statement of Facts and Tax Decision dated 26th August 2024 are hereby deemed as properly filed and served.iv.The Respondent is to file and serve its Statement of Facts within 30 days of this Ruling.v.No orders as to costs.

16. It is so Ordered.

DATED AND DELIVERED AT NAIROBI ON THIS 31ST DAY OF OCTOBER, 2024. .. …………………………………….……………..CHRISTINE A. MUGACHAIRPERSON.. …………………………………….……………..BONIFACE K. TERERMEMBER.. …………………………………….……………..ELISHAH N. NJERUMEMBER…………..……………… ……………..…………….EUNICE N. NG’ANG’AMEMBER.. …………………………………….……………..OLOLCHIKE S. SPENCERMEMBER