[2023] KETAT 223 (KLR)

Gitari Wholesalers Limited v Commissioner of Domestic Taxes (Miscellaneous Application E069 of 2023) [2023] KETAT 223 (KLR) (Civ) (5 May 2023) (Ruling)

Neutral citation: [2023] KETAT 223 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Civil

Miscellaneous Application E069 of 2023

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

May 5, 2023

Between

Gitari Wholesalers Limited

Applicant

and

Commissioner of Domestic Taxes

Respondent

Ruling

1. The Applicant vide a Notice of Motion dated the 7th March, 202 filed under certificate of urgency on 24th March, 2023 and supported by an Affidavit sworn by Joseph Wambori Gitari, a Director of the Applicant, on the 7th March, 2023 on sought for the following Orders:-i.Spentii.That the Applicant be granted leave to appeal out of time against the objection decision dated 4th August 2022 delivered at Nairobi.iii.That the Notice of Appeal annexed hereto be deemed as duly filed and servediv.That cost of this application be provided for.

2. The application is premised on the following grounds:-i.That the Applicant received VAT assessments for the period January 2018 to May 2018 which it objected to Kenya Revenue Authority.ii.That upon deliberations KRA issued a decision on the dispute on the 4th August 2022. iii.That the Applicant was dissatisfied with the decision and sought to appeal before the Tribunal.iv.That the Applicant is aware that the legal timeline for lodging an appeal has lapsed however the Applicant’s delay was a result of force majure.v.That the Applicant’s store burnt down on 23rd September burning down crucial documents that were important to this appeal.vi.That it has taken time for the Applicant to call its suppliers to re-issue it with invoices for the purpose of gathering evidence to support its appeal.vii.That in the circumstances, it is just and fair that the orders sought be granted.viii.That the Applicant stands to be highly prejudiced and suffer substantial loss if the Tribunal does not hear its intended appeal.ix.That it is in the interest of justice and fairness that the orders sought be granted.

3. The Respondent opposed the application through a Replying Affidavit sworn by Willis Macharia, an officer of the Respondent, on the 6th April, 2023 and filed on the same date. The grounds of opposition as highlighted in the Affidavit were as follows:-i.That the orders sought by the Applicant should not be granted by the Tribunal as they are an abuse of the Courts’ process and the Applicant is undeserving of the same.ii.That the Respondent issued automated additional assessments for VAT for the period of January 2018 to May 2018 in the sum of Kshs 10,406,831. 52 on 15th November 2019. iii.That the Applicant ignored, refused and/or failed to pay the confirmed taxes or lodge an objection against the assessments within 30 days of the date of the decision as stipulated under Section 51(2) of the Tax Procedures Act.iv.That the Applicant subsequently filed an objection against the additional assessments on 9th June 2022, which is beyond the statutory timelines set out in the aforementioned Act.v.That the Applicant made an application for an extension of time to lodge a notice of objection dated 9th June 2022. vi.That the Respondent vide the letter dated 4th August 2022 wrote to the Appellant declining to grant the application sought since the Applicant failed to provide supporting documents to validate its late objection as prescribed in Section 51(3) of the Tax Procedures Act.vii.That the Applicant has not set out and/or demonstrated any solid grounds that would warrant the Tribunal to exercise its discretion in favor of the Applicant. That the Applicant has failed to lay sufficient basis to the satisfaction of the Tribunal for extension of time to file an appeal.viii.That the fact that the Applicant failed to follow up on the decision of the Respondent, for more than six months, is a demonstration that the Applicant has not been vigilant and does not warrant the exercise of the Tribunal in its favour. That the Applicant is guilty of latches.ix.That the delay is unreasonable and not excusable on the grounds that the Applicant had no intention of settling the outstanding tax liability and only woke up after the agency notices.x.That the application is an afterthought, brought in bad faith, meant to delay the Respondent from collecting taxes that are due and payable and should not be entertained by the Tribunal as doing so would offend the equitable maxim of equity aids the vigilant and not the indolent and ultimately create bad precedent.xi.That the Applicant is not deserving of the orders sought in the application, as the whole period of delay has not been sufficiently explained satisfactorily to the Tribunal thus the application ought to be dismissed.xii.That the Respondent is merely carrying out its statutory duty under the law by issuing enforcement notices and consequently pray that its actions be upheld by the Tribunalxiii.That the Respondent’s mandate of collection of revenue is key to the economic development of the Country and consequently, the public and all the arms of the Government and specifically the Tribunal is called upon to assist the Respondent in carrying out its mandate so long as the same is within the law.xiv.That in the circumstances, it is in the public interest that this Tribunal dismisses the Applicant’s Notice of Motion dated 7th March 2023 to pave way for the Respondent to collect taxes due from the Applicant which are key to the economic development of the country.xv.That indolence and negligence of the Applicant should not bar the Respondent from fulfilling its mandate of collecting taxes that are still due and payable.xvi.That the Applicant has failed to satisfy the principles as set out in the case of Nicholas Kiptoo Korir Arap SalatvIndependent Electoral and Boundaries Commission & 7 Others [2014] eKLR.

Analysis and Findings 4. In compliance with the directions of the Tribunal to the effect that the application was to be canvassed by way of written submissions, the Respondent filed its submissions on 17th April 2023. The Tribunal has duly considered the written submissions in arriving at its determination in this Ruling.

5. The Applicant’s application is primarily praying to the Tribunal for extension of time to file an appeal out of time.

6. The power to expand time for filing an Appeal is donated by Section 13(3) of the Tax Appeals Tribunal Actwhich 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).”It is therefore a discretionary power and not a right to be granted to the Applicant.

7. In determining whether to expand time, courts have in the past considered a number of factors. These factors were discussed in Leo Sila Mutiso vs Rose Hellen Wangari Mwangi, Civil Application Nai. 251 of 1997 where the judge held that:“It is now settled that the decision whether to extend the time for appealing is essentially discretionary. It is also well stated that in general the matters which this court takes into account in deciding whether to grant an extension of time are, first the length of the delay, secondly the reasons for the delay, thirdly (possibly) the chances of the appeal succeeding if the application is granted and fourthly the degree of prejudice to the respondent if the application is granted.”

8. The court in WasikevSwala [1984] KLR 591 provided the hierarchy of the factors to consider when it stated that:“an applicant must now show, in descending scale of importance, the following factors: -a)That there is merit in his appeal.b)That the extension of time to institute and/or file the appeal will not cause undue prejudice to the respondent; andc)That the delay has not been inordinate.”

9. The Tribunal, guided by the principles set out in Leo Sila Mutiso vs Rose Hellen Wangari Mwangi, Civil Application Nai. 251 of 1997, Wasike v Swala [1984] KLR and Section 13 of the Tax Appeals Tribunal Act 2013 used the following criteria to consider the application:a.The merits of the complained action.b.Whether there is a reasonable cause for the delay.c.Whether there will be prejudice suffered by the Respondent if the extension is granted.

a) The Merits of the Complained action 10. 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.

11. 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 Muthumbi v Josephine 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.”

12. The Tribunal was further guided by the findings of the court in Kenya Commercial Bank Limitedvs Nicholas 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.”

13. 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 Kinyanjuivs 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.”

14. Regarding the merits of the Appeal, the Respondent stated that it issued automated additional assessments for VAT for the period of January 2018 to May 2018 in the sum of Kshs 10,406,831. 52 on 15th November 2019.

15. That the Applicant ignored, refused and/or failed to pay the confirmed taxes or lodge an objection against the assessments within 30 days of the date of the decision as stipulated under Section 51(2) of the Tax Procedures Act.

16. It added that the Applicant subsequently filed an objection against the additional assessments on 9th June 2022, which was beyond the statutory timelines set out in the aforementioned Act and further made an application for an extension of time to lodge a notice of objection on the same date.

17. That vide a letter dated 4th August 2022 the Respondent wrote to the Appellant declining to grant the application sought since the Applicant failed to provide supporting documents to validate its late objection as prescribed in Section 51(3) of the Tax Procedures Act.

18. The Applicant on its part stated that it received VAT assessments for the period January 2018 to May 2018 which it objected to Kenya Revenue Authority. That upon deliberations KRA issued a decision on the dispute on the 4th August 2022.

19. That the Applicant was dissatisfied with the decision and sought to appeal before the Tribunal.

20. The Tribunal noted from the submissions and documents presented by the parties that the Respondent issued a letter dated 4th August 2022 titled “Application for Extension of Time to Lodge an Objection Notice Against Corporation Vat Assessment of Kshs 10,406,831. 52” where it stated in part as follows;“I refer to your application for an extension of time to lodge a notice of objection dated 9th June 2022 in response to Value Added Tax additional assessments raised on iTax on 15th November 2019 and your email........In this regard, the Commissioner hereby declines to grant the application sought. The principal VAT liability of Kshs 10,406,831. 52 together with the accrued penalty and interest as at the date of this letter remains due and payable as per the assessment”

21. It was not in dispute that the Respondent issued a VAT assessment on iTax on 15th November 2019 and the Applicant applied to the Commissioner for a late objection on 9th June 2022. The Respondent vide the letter dated 4th August 2022 disallowed the Applicant’s application for extension of time to lodge a late objection.

22. Section 51(7) provides as follows regarding redress for late objections;“The Commissioner may allow an application for the extension of time to file a notice of objection if—(a)the taxpayer was prevented from lodging the notice of objection within the period specified in subsection (2) because of an absence from Kenya, sickness or other reasonable cause; and(b)the taxpayer did not unreasonably delay in lodging the notice of objection.”

23. It follows from the above provision of the law that the Applicant ought to have convinced the Commissioner on the reasons for the late objection before its objection could be allowed. On the case at hand, the Respondent declined to grant the Applicant’s application for late objection and therefore there is no objection decision issued by the Commissioner. The letter dated 4th August 2022 was not a tax decision as alleged by the Applicant but a notice of rejection of the Applicant’s application for a late objection.

24. Section 52(1) of the Tax Procedures Act provides as follows regarding appealable decisions to the Tribunal:-“A person who is dissatisfied with an appealable decision may appeal the decision to the Tribunal in accordance with the provisions of the Tax Appeals Tribunal Act, 2013 (No. 40 of 2013).”

25. It follows from the above provision of the law that for a taxpayer to approach the Tribunal to argue its case, there ought to be an appealable decision from the Commissioner.

26. In addition, Section 3 of the Tax Procedures Act defines an appealable decision as follows;“"appealable decision” means an objection decision and any other decision made under a tax law other than—(a)a tax decision; or(b)a decision made in the course of making a tax decision;”

27. In this case the Applicant’s application to lodge a late objection having been rejected, there is no objection decision that can enable the Applicant to approach the Tribunal with an appeal therefore granting the extension of time would be a waste of the Tribunal’s time.

28. Consequently, the Tribunal finds that the Applicant had no arguable appeal.

29. The Tribunal having found that there was no appealable decision, it accordingly finds that a determination of the other tests is rendered moot.

Disposition 30. Based on the foregoing analysis, the Tribunal finds that the application lacks merit and the Appeal filed therewith is a nullity and the Tribunal accordingly proceeds to make the following orders:-i.The application be and is hereby dismissedii.No orders as to costs

31. It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 5TH DAY OF MAY, 2023. .............................ERIC N. WAFULACHAIRMAN.............................CYNTHIA B. MAYAKAMEMBER.............................ABRAHAM KIPROTICHMEMBER.............................RODNEY O. OLUOCHMEMBER.............................ELISHAH NJERUMEMBER