[2025] KETAT 231 (KLR)

Habtec International Limited v Commissioner of Domestic Taxes (Tax Appeal E204 of 2025) [2025] KETAT 231 (KLR) (Civ) (9 May 2025) (Judgment)

Neutral citation: [2025] KETAT 231 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Civil

Tax Appeal E204 of 2025

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

May 9, 2025

Between

Habtec International Limited

Appellant

and

Commissioner of Domestic Taxes

Respondent

Judgment

1. The Appellant is a limited liability company incorporated under the Companies Act. 2015.

2. The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act, CAP 469 of Kenya’s Laws. Under Section 5 (1) of the Act, the Kenya Revenue Authority is an agency of the Government for the collection and receipt of all tax revenue. Further, under Section 5(2) of the Act with respect to the performance of its functions under subsection (1), the Authority is mandated to administer and enforce all provisions of the written laws as set out in Part 1 and 2 of the First Schedule to the Act for the purposes of assessing, collecting and accounting for all revenues in accordance with those laws.

3. On 13th December 2024 the Respondent issued additional assessment for Income Tax - Company for the tax period 1/01/2023 to 31/12/2023 for Kshs 68,765,171. 10; and additional assessment for VAT for the period July 2024 for Kshs 52,000. 99. The Appellant lodged a late objection dated 15th January 2025 but lodged with the Respondent on 27th January 2025 and further lodged a system-based objection on 26th January 2025.

4. The Appellant having delayed to file an objection, the Respondent vide a letter dated 14th January 2025 issued a demand notice for tax in arrears amounting to Kshs 77,759,764. 39. The Appellant was required to pay the outstanding tax in arrears within fourteen (14) days of the letter.

5. Vide an electronic mail dated 30th January 2025, the Respondent informed the Appellant that the objection was lodged late by one month and thirteen days, noting that the assessment had been raised on 13th December 2024. Consequently, the Respondent issued a decision vide a letter dated 7th February 2025, confirming the liability of Kshs 68,765,171. 10 for the period January to December 2023 together with the accrued penalty and interest, as the Appellant's objection was both late and unsupported by valid reasons contrary to Section 51 (7) of the Tax Procedures Act, CAP 469B of the Laws of Kenya (hereinafter “TPA”).

6. Being dissatisfied with the Respondent's decision, the Appellant filed this Appeal vide notice of appeal dated 3rd March 2025 and filed on even date.

The Appeal 7. The Appellant lodged the Memorandum of Appeal dated on 3rd March 2025 on even date wherein the Appellant raised the following grounds of appeal:a.That the Respondent erred in fact and in law by arbitrarily and unreasonably concluding that the Appellant's application to lodge its objection was out of time and yet the same was within the statutory timelines.b.That the Respondent arrived at the decision without considering that there was no inordinate delay in lodging the objection application noting that the statutory timelines had not yet lapsed.c.That the Respondent misapplied and misinterpreted the law and thereafter arrived at an erroneous conclusion.d.That in view of the foregoing, the Appellant was apprehensive that the actions of the Respondents lacked in merit, are unlawful and gravely unjust and that unless the orders sought are granted, the Appellant risks being unjustly required to pay for the alleged taxes to its prejudice.

The Appellant’s Case 8. The Appellant lodged its Statement of Facts dated 3rd March 2025 on even date. The Appellant also filed written submissions dated 22nd April 2025 on even date. The Tribunal adopted the submissions of the Appellant during the hearing on 24th April, 2025.

9. The Appellant stated that on 27th December 2024, the Respondent vide electronic mail sent to the Appellant on electronic mail account info@habtec.co.ke shared an electronic mail subject being Approval of Additional Assessment. With the said electronic mail was an attachment of the Additional Assessment dated 13th December 2024.

10. Vide another letter dated 14th January 2025, the Respondent issued a demand letter for the same sum of Kshs 77,759,769. 39 as was in the Additional Assessment which was sent vide electronic mail on 27th December 2024. The Appellant was required to respond to the same within 14 days from the date of the letter.

11. Vide an online objection made on 26th January 2025, the Appellant raised its objection on I-Tax as against the additional assessment dated 13th December 2024 and served on the Appellant on 27th December 2024.

12. That vide an objection letter received by the Respondent on 27th January 2025, the Appellant raised its manual objection with the Respondent objecting to the whole of the tax assessment as raised by the Respondent.

13. Vide an electronic mail dated 30th January 2025, the Respondent wrote back to the Appellant noting that the Objection as lodged by the Appellant was late by 1 month 13 days noting that the assessment had been raised on 13th December 2024. In the said electronic mail, the Respondent demanded an explanation for the late lodging of the objection.

14. Vide an electronic mail dated 3rd February 2025, the Appellant wrote to the Respondent explaining that it received the email from the Respondent on 27th December 2024 with the subject being Approval of Additional Assessment. From the said electronic mail, the same advised the Appellant that the Additional Assessment had been approved for the Tax Obligation Income Tax- Company for Tax Period 01/01/2023 to 31/12/2023. the same advised the Appellant to consult the Mombasa North tax offices for any queries and that the email indicated as follows: ‘‘Note: This is a system generated mail, please do NOT reply to it.’’

15. With the referenced statement directing the Appellant not to respond to the electronic mail, the Appellant concluded that the same was the normal auto-generated notices from the Respondent and hence no action was supposed to be taken by it. It is for this reason that the Appellant did not pay attention of the contents of the email assuming that the same was an auto generated email from the Respondent that did not require any action from it.

16. That upon responding as above to the Respondent, the Respondent vide its objection decision dated 7th February 2025 rejected the reasons for the late objection and proceeded to confirm the tax assessment of Kshs 77, 759,769. 39.

17. the Appellant submitted that the objection as raised by the Appellant was in fact not late as averred by the Respondent in its objection decision for the following reasons:a.The electronic mail communicating the Additional Assessment was shared with the Appellant on 27th December 2024 even though the Additional Assessment was dated 13th December 2024;b.That the provisions of Sections 51(2) of the TPA, the same stipulates as that the taxpayer is supposed to objected within 30 days.c.Consequently, the starting point in counting the days in terms of raising an objection is Not the date when the assessment was raised but rather the date when the assessment/tax decision was notified to a taxpayer. In the current case, the same was first communicated to the Appellant on 27th December 2024 with the objection to the same being raised on 26th January 2025 and within the statutory timelines of thirty days.d.As such, the Respondent could not purport that the objection letter was late and yet even though the additional assessment was raised on 13th December 2024, the same was first communicated to the Appellant on 27th December 2024 as per electronic mail. The thirty days from the date of notification thus was 27th January 2025 meaning the Objection on 26th January 2025 (online) and 27th January 2025 (manual) as raised by the Appellant were within the statutory timelines and not late.

18. Based on the above averments thus the Appellant submitted its Objection was not late as concluded by the Respondent in its Objection Decision of 7th February 2025.

19. In light of the above, it was the Appellant's case that the issuance of the Tax Assessments and the subsequent objection decision of 7th February 2025 were without basis and illegal. In written submissions, the Appellant simply reproduced the contents of the statement of facts. In summary, the Appellant submitted that its notice of objection was filed within time and that the Respondent had no basis in rejecting it.

20. Based on the above, the Appellant urged the Tribunal to set aside the tax assessments and rejection of late objection as issued by the Respondent dated 7th February 2025 demanding for payment of tax arrears of Kshs 77,759,769. 39.

The Respondent’s Case 21. In response to the appeal, the Respondent filed Statement of facts dated 1st April 2025 on 2nd April 2025. The Respondent lodged written submissions dated 17th April 2025 on even date.

22. In response to the Appeal, the Respondent stated that the assessment order issued was dated 13th December 2024 and that it was available on the Appellant's i-Tax system on the said date.

23. The Respondent averred that the electronic mail dated 27th December 2024 communicating the additional assessment was auto-generated since once the Respondent posts a task on I-Tax, the systems generates an electronic mail to a Taxpayer. It added that time starts running from when the assessment order is posted on i-Tax, in this case being the 13th December 2024.

24. The Respondent therefore averred that the objection lodged on 26th January 2025 was evidently out of the timelines prescribed by statute which is thirty (30) days. It added that the Appellant cannot therefore contend that the notice of objection was lodged within time. According to the Respondent, the Appellant ought to have lodged an objection within thirty (30) days from 13th December 2024 which ought to have been by 12th January 2025.

25. The Respondent stated that the Appellant was ingenious in stating that it never responded to the electronic mail since it indicated that it should not be replied to. The Respondent argued that the email sent by I-Tax did not prohibit the Appellant from lodging an objection if it intended to challenge the assessments.

26. The Respondent averred that the Appellant's application seeking to file an objection out of time was dealt with in a regular and lawful manner. It added that the reasons advanced by the Appellant for lodging a late objection were not substantiated to the satisfaction of the Respondent and the rejection was therefore justifiable.

27. The Respondent averred that the Appellant was blowing hot and cold air at the same time. On one hand, it had averred that the notice of objection was within time, on the other hand, it was seeking extension of time within which to lodge an objection. The Respondent noted that the Appellant did not demonstrate which provisions of the law the Respondent misconstrued and misapplied before arriving at the said decision.

28. That the Respondent maintained that it acted within its statutory mandate and in strict adherence to the provisions of the TPA. Just like in the case of the Appellant, the Respondent also filed written submissions wherein it simply reproduced the contents of the statement of facts. In summary, the Respondent submitted that it was justified in concluding that the Appellant’s application to lodge its objection was outside of timelines.

29. The Respondent submitted that the objection decision dated 7th February 2025 was proper in law as it met the legal threshold established under section 51(11) of the TPA.

30. It also submitted that the Appellant failed to demonstrate how the Respondent misconstrued the provisions of the law.

Issues forDetermination 31. Having considered the parties’ pleadings documentations and submissions, the Tribunal puts forth the following issues for determination:a.Whether the Tribunal has jurisdiction to determine the Appeal.b.Whether the Respondent erred in confirming the assessment.c.Whether the Appellant discharged burden of proving the Respondent’s objection decision dated 7th February 2025 was incorrect.

Analysis And Findings 32. It is to these issues that the Tribunal will turn within as hereunder:

a. Whether the Tribunal has jurisdiction to determine the Appeal 33. The Tribunal has a duty to satisfy itself that it has jurisdiction to determine the merits of the appeal. The locus classicus on matters jurisdiction is the case of Owners of the Motor Vessel “Lillian S” v Caltex Oil (Kenya) Ltd [1989] KLR, wherein Nyarangi JA held, inter alia as follows:“…Jurisdiction is everything. Without it, a court has no power to make one more step. Where a court has no jurisdiction, there would be no basis for a continuation of the proceedings pending other evidence. A court of law downs its tools in respect of the matter before it the moment it holds the opinion that it is without jurisdiction.”

34. The Respondent issued a decision contained in a letter dated 7th February 2025 wherein the Respondent declined to grant the Appellant’s application for late objection under Section 51(7) of the TPA on the basis that the Appellant did not demonstrate why it delayed to object within the timelines. Consequently, the Respondent demanded the Appellant to pay Kshs 68,765,171. 10 being the principal tax.

35. The Tribunal examined the pleadings and noted that the Respondent issued assessment orders dated 13th December 2024. The Appellant vide a letter dated 15th January 2025 put in a notice of objection. The Tribunal also perused objection application acknowledgment receipt dated 26th January 2025. The issue was whether the Appellant delayed to object.

36. A taxpayer who disputes an assessment has a statutory duty to object to the same within the required timelines as provided for under TPA. Section 51(2) of the TPA provides as follows:“(2) A taxpayer who disputes a tax decision may lodge a notice of objection to the decision, in writing, with the Commissioner within thirty days of being notified of the decision.’’

37. The assessment having been issued vide assessment orders dated 13th December 2024 and the Appellant objecting to the same vide a letter dated 15th January 2025 it was clear that the Appellant failed to comply with the timelines under Section 51(2) of the TPA.

38. Whereas the Appellant delayed to file the notice of objection, the law anticipates such scenarios and provides a remedy. Section 51(6) of TPA provides as follows:“A taxpayer may apply in writing to the Commissioner for an extension of time to lodge a notice of objection.’’

39. The taxpayer has to satisfy the Respondent why it delayed to file an objection to the assessments. Under Section 51(7) of the TPA, the Respondent has discretion to allow or reject the application. Section 51(7) of the TPA provides as follows:“The Commissioner shall consider and may allow an application under subsection (6) 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.’’

40. Pursuant to Section 51(7) of the TPA, the Respondent issued the decision contained in the letter dated 7th February 2025 wherein it declined to grant leave to the Appellant to file its objection out of time. The legal consequence was that the Appellant had no objection decision against which to file this appeal as set out under Section 51(1) of the TPA which provides as follows:“A taxpayer who wishes to dispute a tax decision shall first lodge an objection against that tax decision under this section before proceeding under any other written law.[emphasis ours]’’

41. There being no objection to the assessment, Section 51(1) of the TPA barred the Appellant from invoking the powers of the Tribunal under TATA which simply meant that the Tribunal did not have jurisdiction to entertain the Appeal.

42. Consequently, the Tribunal finds and holds that the Tribunal lacks jurisdiction to hear and determine this Appeal and it will down its tools. This being the position, the Tribunal will not delve into the other issues for determination.

Final Decision 43. The upshot to the foregoing is that the Tribunal finds and holds that the Appeal is not competent and makes the following Orders:a.The Appeal be and is hereby struck out.b.Each party to bear its own cost.

44. It is so Ordered.

DATED AND DELIVERED AT NAIROBI ON THIS 9TH DAY OF MAY 2025. ………………………………….CHRISTINE A. MUGACHAIRPERSON………………………….. …………….……………..BONIFACE K. TERER ELISHAH N. NJERUMEMBER MEMBER………….…..…………… ……….……..…………….EUNICE N. NG’ANG’A OLOLCHIKE S. SPENCERMEMBER MEMBER