[2023] KETAT 254 (KLR)

Humble Enterprises v Commisioner of Domestic Taxes (Tax Appeal 74 of 2022) [2023] KETAT 254 (KLR) (26 May 2023) (Judgment)

Neutral citation: [2023] KETAT 254 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal 74 of 2022

Robert M. Mutuma, Chair, E.N Njeru, Rodney Odhiambo Oluoch, D.K Ngala & Edwin K. Cheluget, Members

May 26, 2023

Between

Humble Enterprises

Appellant

and

Commisioner of Domestic Taxes

Respondent

Judgment

Background 1. The Appellant is a limited liability company incorporated under the Companies Act of the Laws of Kenya, and is in the business of selling second hand goods and business of buying and selling cereals.

2. The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act, and the Kenya Revenue Authority is mandated with the responsibility of assessment, receipting and accounting for all the tax revenue, as an agent of the Government of Kenya, as well as the administration an enforcement of the various tax laws set out in the Schedule to the said Act.

3. The dispute subject of this Appeal arose when on October 14, 2020 the Respondent issued Pre-assessment Notices arising from the variances, demanding VAT for Kshs 271,124. 00.

4. Thereafter, the Respondent conducted an audit for the years 2017, 2018 and 2019 resulting in the issuance of additional assessments on the November 9, 2020 of Kshs 76,155. 84, Kshs 73,736. 64 and Kshs 62,279. 52, respectively.

5. On the November 17, 2020 the Appellant filed its objection against the additional assessments.

6. The Respondent issued its Objection decision on the January 15, 2020 confirming the additional assessments.

7. Aggrieved by the Respondent’s decision, the Appellant lodged its Notice of Appeal with the Tribunal on the January 28, 2022.

The Appeal 8. The Appellant filed its Memorandum of Appeal together with the Statement of Facts on January 28, 2022, and set out the following grounds of appeal:a.That the Respondent failed to respond to, or address the substantive matter of assessment in the dispute as the decision was issued before we raised the Objection.b.That the Respondent’s assessment was excessive and wrong.c.That the taxpayer has been dealing with non-vatable goods as indicated in accounts submitted.d.That the assessed amount is already declared in the income tax return for the year 2017, 2018 & 2019.

The Appellant’s Case 9. The Appellant argued that:a.It dealt in both vatable and non-vatable income in the years 2017, 2018 and 2019. b.The additional assessments for the year 2017, 2018 & 2019 of Kshs 76,155. 84, Kshs 73,736. 64 & Kshs 62,279. 52, respectively, related to non-vatable goods. That this was also indicated in the submitted returns.

The Appellant’s Prayer 10. The Appellant prayed for the following relief:-a.That this Honourable Tribunal considers and determines fairly the substantive matter of facts raised by the Appellant, and the Respondent ordered to amend accordingly as this Honorable Tribunal shall so determine.b.The cost of inclination to the Appeal and cost of the Appeal be awarded to the Appellant.

The Respondent’s Case 11. The Respondent has set out its response to the Appellant’s case in its Statement of Facts and the Preliminary Objection both filed on February 25, 2022. It also filed Written Submissions on September 21, 2022.

12. It addressed the Tribunal as follows on the issue of whether the Respondent’s assessments were justified, that:a.The Appellant failed to discharge its burden of proving that the Respondent’s assessments were made in error as provided in Section 56 of the Tax Procedures Act which provides as follows in part;'In any proceedings under this Part, the burden shall be on the taxpayer to prove; that tax decision is incorrect'.b.The Appellant’s objection was invalidated under Section 51(3) of the Tax Procedures Act for failure to provide supporting documents that had been requested.c.The Appellant had a duty to hold records for a period not less than 5 years and avail them to the Respondent at any time upon request. That the Appellant failed in this obligation and hence the resultant assessments.d.The absence of records and documents compelled the Respondent to make the assessment on the basis of its best judgment and information available to it as is provided in Section 31 of the TPA.

13. On the issue of whether the Appellant was dealing with non-vatable goods the Respondent submitted that:a.The Appellant failed to avail purchase invoices and/or any other records to substantiate its claim that it was dealing in non-vatable goods as is required under Section 17 (3) of the VAT Act.b.The Appellant failed to discharge its burden of proof that it was dealing in non-vatable goods as is provided in Section 56 of the TPA.c.The Appellant filed its Appeal out of time without first seeking leave of the Tribunal to do so as per the provisions of Section 13(3) & (4) of the Tax Appeals Tribunal Act.d.The Appellant’s Notice of Appeal ought to have been submitted to the Respondent on or before February 15, 2021, however the Appellant filed the Notice of Appeal on the January 28, 2022, which was approximately one year later.e.The Appellant has neither filed an application of extension of time nor has it explained its laches to enable the Tribunal decide whether the cause of the laches fall within the grounds stated in Section 13 (4) of the Tax Procedures Act.

14. Based on the above, the Respondent asserted that there was no proper Appeal before the Tribunal.

Respondent’s Prayer 15. The Respondent prayed that this Honourable Tribunal proceeds to:a.Dismiss this Appeal with costs to the Respondent.b.Upholds the Respondent’s assessment as proper and in conformity with the provisions of the Law.

Issues For Determination 16. The Tribunal having gleaned through the pleadings and the submissions filed by the parties, is of the considered view that this Appeal crystalizes into two issues for determination as follows;i.Whether the Appellant’s Appeal before the Tribunal is competent; andii.Whether the Respondent was justified in issuing its Objection decision dated the January 15, 2021.

Analysis And Determination Whether the Appellant’s Appeal before the Tribunal is competent. 17. Section 13(1) of the TAT Act provides as follows in regards to the procedure for Appeal before the Tribunal:'Procedure for appealA notice of appeal to the Tribunal shall—(a)Be in writing or through electronic means;(b)Be submitted to the Tribunal within thirty days upon receipt of the decision of the Commissioner.'

18. Section 13(3) of the TAT Act provides as follows regarding the extensions of time for Appeals that have been filed out of time:'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).'

19. The Objection decision in this matter was issued on the January 15, 2020. Section 13(1) of the TAT Act which is couched in peremptory terms required the Appellant to file its Notice of Appeal on or before the February 14, 2020. The same was however filed on the January 28, 2022.

20. Section 13(3) of the TAT Act gives the Appellant the leeway to file an application for extension of time in the event that it was not able to file its Notice of Appeal in time. However, the Appellant did not abide by Section 13(3) of the TAT Act prior to and or immediately after filing its Notice of Appeal.

21. Accordingly, the Tribunal finds and holds that the Appellant’s Appeal is incompetent for having breached the mandatory provisions of Section 13(1) of the TAT Act.

22. The foregoing conclusion by the Tribunal is in conformity with the decision of the Court of Appeal in Patrick Kiruja Kithinji v Victor Mugira Marete MRU CA Civil Appeal No 48 of 2014 [2015] eKLR where the learned judges of appeal stated that:'It is our view, whether or not an appeal is filed on time goes to the jurisdiction of this Court. It is trite that this Court has jurisdiction to entertain appeals filed within the requisite time and/or appeals filed out of time with leave of the Court. To hold otherwise would upset the established clear principles of institution of an appeal in this Court. Consequently, we find that an appeal filed out of time is not curable under Article 159' 23. The Court of Appeal has thus re-affirmed that failure to file an Appeal within the statutory timelines and without complying with statutory conditions is not a mere technicality that can be overlooked, it goes to the competence of the Appeal. The Tribunal is thus justified in holding that the Appellant’s Appeal is incompetent and unsustainable in law.

Whether the Respondent was justified in issuing its Objection Decision dated January 15, 2021 24. The Tribunal having made the findings under issue (i) above, this issue (ii) is consequently rendered moot as the Tribunal lacks the requisite jurisdiction to hear and determine the merits of the Appeal.

Final Decision 25. The upshot of the foregoing is that the Appeal is incompetent and the Tribunal accordingly proceeds to make the following Orders ;i.The Appeal be and is hereby struck out.ii.Each party to bear its own costs.

26. It is so ordered.

DATED AND DELIVERED AT NAIROBI ON THIS 26TH DAY OF MAY, 2023. ...........................ROBERT M. MUTUMACHAIRPERSON............................ELISHAH N. NJERUMEMBER............................RODNEY O. OLUOCHMEMBER............................DELILAH K. NGALAMEMBER............................EDWIN K. CHELUGETMEMBER