[2023] KETAT 245 (KLR)

Hussein Aluminium Glass Hardware v Commissioner of Domestic Taxes (Miscellaneous Application 205 of 2022) [2023] KETAT 245 (KLR) (Civ) (31 March 2023) (Ruling)

Neutral citation: [2023] KETAT 245 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Civil

Miscellaneous Application 205 of 2022

E.N Wafula, Chair, Cynthia B. Mayaka & AK Kiprotich, Members

March 31, 2023

Between

Hussein Aluminium Glass Hardware

Applicant

and

Commissioner Of Domestic Taxes

Respondent

Ruling

1. The Applicant vide a Notice of Motion application dated the 25th day of July, 2022 and filed on the same date sought for the following Orders:-a.That they be allowed to file the Notice of Appeal, Memorandum of Appeal and Statement of Facts out of time.b.That the agency notice raised by the Respondent on June 22, 2022 be hereby stayed pending the outcome of the appeal.

2. The application which is supported by an Affidavit sworn by Murtaza Najmi, a director of the Applicant, on the 12th day of July, 2022 is premised on the following grounds:-a.That the Director of the Applicant was unwell and unable to attend to his business.b.That the Director had been sickly and on bed rest from June, 2021 to December, 2021c.That the Applicant did not intentionally fail to attend to the assessments raised by the Respondent.

3. The Respondent in reply to the application filed a Replying Affidavit sworn by Rodgers K Koima, an Advocate with the Respondent, on the 17th day of August, 2022 and filed on the same date in which it raised the following grounds in opposition:-a.That the dispute arose after the Applicant received an agency notice from the Respondent requiring the Applicant to pay VAT amounting to Kshs 2,478,899. 00 as tax payable for the period January to April 2018 dated July 28, 2022. b.That the Applicant objected to the assessments and the Respondent on the 25th day of August, 2021 confirmed the assessment of tax payable.c.That the Applicant dissatisfied with this decision did not take any further steps in the matter for a period of 11 months from the time the objection decision was made.d.That the decision to arrive at the assessment was justified and had basis in law and was communicated to the Applicant as required under Section 51(9) of the Tax Procedures Act.e.That the documents adduced by the Applicant to indicate the presence of an illness fail to fully demonstrate the incapacity of the Applicant to carry out its duties and present to Tribunal an appeal to the objection decision.f.That the Applicant has failed to provide medical records evidencing the continued illness of the Director during the period preceding the objection decision that may have prevented it from instituting the appeal.g.That the Applicant has failed to provide any documentation that proves that the disclosed Director was the only party legally mandated to appeal the decision made by the Respondent.h.That the Applicant is therefore under an obligation to provide a reasonable explanation for the delay.i.That the Respondent finds no valid reason for the Applicant to support this claim as the company maintained operations during the illness of the Director and therefore a person duly authorized would have filed the appeal within the statutory timeline.j.That the Respondent finds no valid reason for the Applicant not filing the Memorandum of Appeal since it had already filed its Notice of Appeal.

Analysis and Findings 4. The parties in due compliance with the directions of the Tribunal duly filed their separate written submissions and the Tribunal has considered the Submissions in arriving at its findings hereinafter.

5. In determining whether to extend time, the Tribunal was guided by the decision of the High Court in Joseph Ondiek Tumbo v Sony Sugar Co Ltd [2014] eKLR, where the learned Judge quoted Sir Thomas Bingham M R in Costellow v Somerset County Council [1993]1 All ER 952 where he stated that:“The first principle is that the rules of court and the associated rules of practice, devised in the public interest to promote expeditious dispatch of litigation, must be observed. The prescribed time limits are not targets to be aimed at or expressions of pious hope but requirements to be met. The second principle is 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 costs cannot compensate…. Further, an extension of time is an indulgence from the court by a party in default. He is not entitled to an extension. He has no reasonable or legitimate expectation of receiving one. His only reasonable or legitimate expectation is that the discretion relevant to his application to extend time will be exercised judicially in accordance with established principles of what is fair and reasonable. In those circumstances, it is incumbent on the applicant for an extension of time to provide the court with a full, honest and acceptable explanation of the reasons for the delay. He cannot reasonably expect the discretion to be exercised in his favour, as a defaulter, unless he provides an explanation for the default.”

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 ofWasike v Swala[1984] KLR 591 where the Court laid a hierarchy of 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; and c) That the delay has not been inordinate.”

7. The Tribunal, guided by the principles set out inWasike V Swala [1984] KLR 591, Joseph Ondiek Tumbo v Sony Sugar Co Ltd[2014] eKLR and Section 13 of the Tax Appeals Tribunal Act, 2013 used the following criteria to consider the application:-a.Whether the appeal is merited?b.Whether there will be prejudice suffered by the Respondent if the extension is granted?c.Whether the Application for extension has been brought without undue delay?d.Whether there is a reasonable cause for the delay?a.Whether the Appeal is merited.

8. Under this head, the Tribunal examined whether the action complained of by the Applicant was merited and there was an arguable appeal before the Tribunal or the appeal was frivolous and would only result in a waste of the Tribunal’s time.

9. An appeal being merited does not mean that it should necessarily succeed rather it is arguable. The Tribunal was guided by the findings of the court in Kenya Commercial Bank Limited v 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.”

10. The Tribunal notes that the Applicant did not attach its notice of objection to the application and to that extent denied the Tribunal an opportunity to consider the grounds of objection as against the objection decision issued to determine the merits or otherwise of the intended appeal. The Tribunal however upon perusal of the objection decision noted that the Appellant to lodged its notice of objection decision on the March 31, 2020 and the objection decision was issued on the August 25, 2021 following what the Respondent indicates to have been subsequent engagement between the two parties.

11. It therefore follows that the eventuating appeal, interalia, gives rise to pertinent questions touching on the legal issues that might arise for determination as to the validity of the objection decision.

b. Whether there will be prejudice suffered by the Respondent if the extension is granted? 12. The Respondent did not demonstrate how it would suffer prejudice if the prayer for expansion of time was granted. The Respondent only pointed out the fact that the Appellant had not proved the prejudice it would suffer as the loss was only monetary.

13. The Tribunal however observes that the Applicant’s recourse to justice lies in an appeal to the Tribunal. Thus, the Applicant would suffer prejudice if it is not granted leave to file its appeal considering that the amount of money claimed is of significant value.

14. The Tribunal's view is that the Respondent would otherwise still collect the taxes together with penalties and interest should the Applicant be found to be at fault.

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

c. Whether there is a reasonable cause for the delay? 16. In considering what constitutes as a reasonable cause for the delay, the court inBalwant 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”.

17. The objection decision was issued on the August 25, 2021 while the present application was filed on the July 25, 2022. There was a delay of 10 months on the part of the Applicant in pursuing an appeal as against the objection decision.

18. The Applicant contended that it had not been in a position to file the appeal in time as its Director had not been in a healthy physical condition to perform his duties with regards to the appeal.

19. A perusal of the documents adduced by the Applicant show a medical report recognizing that indeed the Applicant’s Director has been unwell and indisposed thereby unable to perform his duties to the company properly.

20. The Respondent reiterated that the reasons for non-compliance advanced by the Applicant is not good enough. That the operations of the Respondent went on hence the reason is not sufficient to cause a 10 months delay.

21. The Tribunal finds the explanation and reasons raised by the Applicant as to the cause for the delay on its part in commencing the appeal process to be plausible as there is documentary evidence that the Applicant’s Director was unwell during the period in question and is still suffering to date as a result of the same.

22. The Applicant has therefore in the circumstances met the statutory and judicially established threshold for the grant of application for the enlargement of time to file an appeal out of time.

23. The Tribunal has discretion under Section 18 of the Tax Appeals Tribunal Act to preserve the efficacy of any proceedings before it and more particularly in averting the rendering of any appeal proceedings before it superfluous. The Section provides as follows:-“Where an appeal against a tax decision has been filed under this Act, the Tribunal may make an order staying or otherwise affecting the operation or implementation of the decision under review as it considers appropriate for the purposes of securing the effectiveness of the proceedings and determination of the Appeal.”

24. The Respondent issued agency notices on the June 22, 2022 and on the July 28, 2022 to the Applicant’s creditors and bankers, respectively, with a calculated intention of enforcing payment of the taxes confirmed under the objection decision. If the Respondent was to be allowed to enforce payment of the taxes through the agency notices then the intended appeal will be rendered superflous.

25. The Tribunal with a view of preserving the effectiveness of the intended appeal finds it appropriate to have the agency notices issued by the Respondent to the Applicant’s creditors and bankers lifted.

Disposition 26. Given the foregoing, the application has merit and the Tribunal accordingly proceeds to make the following Orders:-a.The Applicant be and is hereby granted leave to file an appeal out of time.b.The Applicant to file and serve a Notice of Appeal and the appeal documents within Fifteen (15) days of the date of delivery of this Ruling.c.The Respondent to file and serve its Statement of Facts within Thirty (30) days of the date of being served with the appeal documents.d.The Agency notices issued by the Respondent to the Applicant’s creditors and bankers on the June 22, 2022 and on the July 28, 2022, respectively, be and are hereby lifted unconditionally.e.No orders as to costs.

DATED and DELIVERED at NAIROBI this 31st day of March, 2023. ......................................ERIC N. WAFULACHAIRMAN......................................CYNTHIA MAYAKA ABRAHAM K. KIPROTICHMEMBER MEMBER