[2024] KETAT 1301 (KLR)

Indent Limited v Commissioner of Domestic Taxes (Appeal E425 of 2023) [2024] KETAT 1301 (KLR) (26 July 2024) (Judgment)

Neutral citation: [2024] KETAT 1301 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Appeal E425 of 2023

CA Muga, Chair, BK Terer, D.K Ngala & SS Ololchike, Members

July 26, 2024

Between

Indent Limited

Appellant

and

Commissioner of Domestic Taxes

Respondent

Judgment

Background 1. The Appellant is a limited liability company incorporated in Kenya which ceased business on 31st December, 2017 and was dissolved on 18th January, 2019 through confirmation of the Kenya Gazette dated 9th January, 2019.

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. The Respondent carried out a compliance audit on the Appellant’s records in respect of the years 2008 -2009 for accounts and 2009 to 2012 in respect of VAT, PAYE and Withholding Tax and communicated its findings to the Appellant vide a letter dated 30th April, 2013 and confirmed the assessment of taxes amounting to Kshs. 13,113,062. 00.

4. The Appellant negotiated with the Respondent and agreed to settle a principal tax of Kshs 6,662,610. 00. The Appellant requested that the penalties and interest be waived and reminded the Respondent of their promise to waive the penalties and interest on several occasions the last time being on 7th November, 2023 and the Respondent did not act on its promise.

5. The tax assessed was Kshs 8,360. 547. 00 and was the sum total of the principal amount of Kshs. 5,413,448. 00 and interest of Kshs. 2,947,099. 00.

6. Aggrieved by the Respondent's tax demand dated 3rd March, 2023, the Appellant lodged its Notice of Appeal on 20th July, 2023.

The Appeal 7. The Appeal as contained in the Memorandum of Appeal dated 28th July, 2023 and filed on 1st August, 2023 is premised on the following grounds:i.That the Respondent claimed assessments vide a demand letter dated 3rd March, 2023 amounting to Kshs. 5,413,448. 00 being principal tax and alleged penalty and interest of Kshs. 2,947,099. 00 all totaling to Kshs. 8,360,547. 00 in respect to alleged income tax for the period 2008 to 2014 and subsequently leading to this Appeal challenging the same pursuant to section 52 of the Tax Appeal Tribunal Act CAP 469A of Kenya’s Laws (hereinafter "TATA”).ii.That the Respondent erred in both fact and law by assessing taxes and demanding the production of documents in contravention of Section 23(1) (c) of the Tax Procedures Act, CAP 469B of Kenya’s Laws (hereinafter “TPA”) which provides as follows:“Subject to subsection (3), retail the document for a period of five years form the end of the reporting period to which it relates, or such shorter period as may be specified in “Tax Law”.iii.That the Appellant did indeed respond to the demand on 13th March, 2023 referring to the said demand letter, and disputed to the said assessment as follows:iv.That after a tax audit undertaken in April, 2013, the agreed principal tax being Kshs. 6,662,610. 00 was to be paid and was indeed paid and an application for waiver of penalties and interest was raised to the Respondent who has not replied to the same.v.That the Appellant in fact ceased operations on 31st December,2017 and the process of deregistration with confirmation of the same on the Kenya Gazette dated 9th January, 2019 [sic] to be dissolved after the expiry of three months. On 18th January, 2019 the Appellant was dissolved.vi.That any such demands or notices are now bad in law given that the company no longer exists and any such demand furthermore is time barred.vii.That the amounts assessed by the Respondent was Kshs. 5,413,448. 00 being principal tax and alleged penalty and interest of Kshs. 2,947,099. 00 all totaling to Kshs. 8,360,547. 00 in respect to alleged income tax for the period 2008 to 2014 were therefore wrong in law and fact and should be annulled.

The Appellant’s Case 8. The Appellant set out its case in its Statement of Facts dated 28th July, 2023 and filed on 1st August, 2023 in which it stated as follows:

9. The instant Appeal was triggered by the Respondent giving a notice of demand pursuant to section 59 (1) and 61 of the TPA on 3rd March, 2023.

10. That the Respondent erred in law and fact by assessing taxes and demanding the production of documents in contravention of Section 23 (1) (c) of the TPA.

11. That the Appellant did indeed respond to the demand on 13th March, 2023 referring to the said demand letter and disputed the said assessment in respect of the years 2008 to 2014 dated 3rd March, 2023 which were in no doubt time barred pursuant to Section 29 (5) of the TPA and the same was reiterated vide a further letter from the Appellant dated 12th June, 2023 which were never responded to.

12. The Respondent carried out a compliance audit and confirmed the same through a letter dated 30th April, 2013 of various taxes totaling to Kshs. 13,113,062. 00 analysed as follows:(a)Account: Kshs. 10,506,345. 00;(b)Withholding Tax: Kshs. 166,130. 00;(c)Pay as You Earn: Kshs. 1,636,244. 00; and(d)V.A. T: Kshs. 804,343. 00.

13. The Appellant therefore raised the issue of the Respondent’s contravention of section 23 (1) (c) of the TPA which provides as follows:“Subject to the Subsection (3) retain the document for a period of five years from the end of the reporting period to which it relates, or such shorter period as may be specified in Tax Law.”

14. After a tax audit undertaken in April, 2013 an agreed principal tax of Kshs. 6,662,610. 00 was confirmed by a letter dated 6th May, 2013 and the same was negotiated settled upon and paid.

15. The Appellant raised an application for waiver of penalties and interest vide a letter dated 23rd September, 2013 and on 17th October, 2013, the Appellant sent the Respondent a reminder regarding the waiver.

16. The Respondent replied to the Appellant’s application for a waiver through a letter dated 7th November, 2013 indicating that they were in review of the same and it would respond accordingly. The same was never confirmed and accordingly the Appellant believed the same to have been approved.

17. That the burden of proof pursuant to section 107 and 108 of the Evidence Act, CAP 80 of Kenya’s laws (hereinafter “the Evidence Act”) rested on the Respondent who was required to prove that the Appellant’s failure to file returns was motivated by gross or wilful neglect in filing its returns to evade payment of taxes.

18. The Respondent failed to consider and prove the Appellant’s breach of section 29(6) of the TPA to justify making assessments concerning taxes for the year 2014, notwithstanding the five-year limit rule.

19. The Appellant ceased operations on 31st December, 2017 and the process of de-registration with a confirmation of the same on the Kenya Gazette dated 21st September, 2018 was to be dissolved after the expiry of three months. On 18th January, 2019 the Appellant was dissolved.

20. The demands by the Respondent were bad in law in view of the fact that the Appellant is a non-existent entity and furthermore, such a demand was time barred. The amount assessed by the Respondent of Kshs.5,413,448. 00 being principal tax and alleged penalty and interest of Kshs. 2,947,099. 00 all totaling Kshs. 8,360,547. 00 in respect of alleged income tax for the period 2008 to 2014 were therefore wrong in law and fact and ought to have been annulled.

21. The Appellant’s prayer to the Tribunal was that the Appeal would be allowed and the decision of the Respondent would be annulled or varied in such manner that is just and reasonable.

Respondent’s Case 22. The Respondent’s case was as set out in its Statement of Facts dated 26th October, 2023 and filed on 30th October, 2023 in which it stated that the Appellant ceased business on 31st December, 2017 and was dissolved on 18th January, 2019 through confirmation of the Kenya Gazette dated 9th January, 2019 [sic].

23. The Respondent conducted a compliance audit on the Appellant’s records in respect of the years 2008 to 2009 for accounts and 2009 to 2012 for VAT, PAYE and Withholding tax and communicated its findings to the Appellant vide a letter dated 30th April, 2013.

24. During the said audit the Respondent made the following findings:i.The Appellant over claimed the cost of sales for the year 2008 and 2009. This observation was disallowed and brought to charge resulting in additional tax of Kshs. 10,560,345. 00 including interest and penalties.ii.The Appellant was found to have under-declared sales for VAT purposes for the years 2008 and 2009 as revealed by comparison of sales declared in VAT returns and sales declared as per audited accounts. The adjustments resulted in additional tax of Kshs. 804,343. 00 including interest and penalties.iii.The Appellant gave commissions and loans to staff members which were not taxed. The same were bought to charge for fringe benefit tax and P.A.Y.E tax amount to Kshs. 1,636,244. 00 including interest and benefits.iv.Further the Appellant was found to make payments that attracted withholding tax specifically payments to professionals and the same were brought to tax resulting to additional tax of Kshs. 166,130. 00.

25. In response to the findings of the compliance audit, the Appellant, vide a letter dated 6th May, 2013 made a proposal for payment of the principal tax of Kshs. 6,622,610. 00 in five monthly instalments.

26. An application for waiver of penalties and interest was lodged by the Appellant through a letter dated 23rd September, 2013 and a reminder of the same dated 17th October, 2013. The Application was made on the basis that first, the Appellant had been remitting promptly, all the taxes to the Respondent as and when they fell due; second that the Appellant had made efforts to promptly clear the principal tax pursuant to its proposed plan; and finally, the errors raised were not deliberate and occurred as a result of evolving development in the tax system.

27. The Respondent informed the Appellant vide a letter dated 7th November, 2013 that any decision with regards to their waiver request would be communicated in due course, then on 12th September, 2022, the Appellant requested closure of its Personal Identification Number Certificate (PIN) and it was advised to make the application through the i-TAX system and it did so on 11th January, 2023.

28. Upon review of the Appellant’s application to cancel the PIN the Respondent’s records showed that there was an outstanding tax liability in respect of the period 2008 to 2014 amounting to Kshs. 8,360,547. 00 made up of a principal tax of Kshs. 5,3413,448. 00 and penalties and interest of Kshs. 2,947,099. 00.

29. Subsequently, the Respondent issued a tax demand through a letter to the Appellant dated 3rd March, 2023 and for this reason, the Appellant filed the instant Appeal.

30. The Respondent in its statement of facts identified three issues for determination as outlined in the following paragraphs:

(i) Whether the Respondent’s demand for outstanding taxes was proper in Law. 31. The Appellant contended that the Respondent had indicated, vide a letter dated 7th November, 2013 that there were in review of their application for waiver of interest and penalties. The Appellant assumed that the same had been allowed by the Respondent without express confirmation from it.

32. The Respondent averred that there was no room for intendment and presumption to tax and that nothing in the tax law was to be read in and to be implied. The Appellant was not proper in law in assuming that the Respondnet had allowed its application.

33. The Respondent relied on the provisions of Section 32 of the TPA which provide as follows:“(1)A tax payable by a person under a tax law shall be a debt due to the Government and shall be payable to the Commissioner.(2)A taxpayer who is required to pay a tax electronically under a tax law or section 75 of this Act shall pay the tax electronically unless he or she is authorized in writing by the Commissioner to use another method of payment.”

34. The Respondent also relied on the following provisions of Section 23(1) of the TPA which provide that the taxpayer has the duty to maintain records to enable the Commissioner to ascertain a person’s tax liability. The Respondent, upon review of the Appellant’s records, ascertained that the Appellant had pending tax obligations:“(1)A person shall—(a)maintain any document required under a tax law, in either of the official languages;(b)maintain any document required under a tax law so as to enable the person's tax liability to be readily ascertained; and(c)subject to subsection (3), retain the document for a period of five years from the end of the reporting period to which it relates or such shorter period as may be specified in a tax law.”

35. The Respondent maintained that in view of the foregoing it was justified in demanding the taxed due as a debt owed to the Government.

(ii) Whether the Appellant followed the correct procedure in cancelling its PIN. 36. The Appellant requested closure of its PIN following the dissolution of its business and was advised by the Respondent to lodge its application through the i-TAX system. The Appellant applied for PIN Cancellation through the system on 11th January, 2023.

37. The Respondent stated that the application to deregister a PIN was to be conducted on the i-TAX system pursuant to the procedure as outlined in sections 10 and 14 of the TPA which provides as follows:“Section 10(1)A person who ceases to be required to be registered for the purposes of a tax law shall apply to the Commissioner for deregistration under that specific tax law.(2)A registered person shall apply for deregistration under subsection (1)—(a)in the prescribed form; and(b)within thirty days of ceasing to be required to be registered under that tax law.(3)Where a tax law requires a registered person to apply for deregistration in addition to the requirement under this section, that person shall also apply for deregistration in accordance with the provision of that tax law.(4)The Commissioner shall notify in writing a registered person of the deregistration of that person if the Commissioner is satisfied that the person is no longer required to be registered for the purpose of a tax law.(5)The Commissioner may, on his or her own motion and by notice in writing to a person or a person’s tax representative, deregister the person when satisfied that the person is eligible for deregistration, including when the person is a natural person who has died, a company that has been liquidated, or any other person that has otherwise ceased to exist.(6)A person shall cease to be a registered person on the date of notification by the Commissioner in relation to the deregistration.(7)Where the Commissioner fails to respond to the application for deregistration within six months, the applicant shall be deemed to be deregistered.(8)Where the deregistration of a person requires the cancellation of that person’s registration or licence under a tax law, that registration or license shall be cancelled on the effective date of the deregistration.”“Section 14(1)A person issued with a PIN under section 12(3) but who is not registered under section 8 shall notify the Commissioner in writing when that person no longer requires a PIN for the purposes of a transaction specified in the First Schedule.(2)The Commissioner shall, by notice in writing, cancel the PIN of a person when satisfied that—(a)the person has been deregistered under section 10;(b)the person is required to notify the Commissioner under subsection (1) but has failed to do so;(c)the person has notified the Commissioner under subsection (1);(d)a PIN has been issued to the person under an identity that is not the person's true identity; or(e)the person had been previously issued with a PIN that is still in force.”

38. The Respondent stated that it issued the tax arrears notice to the Appellant as it reviewed its application to cancel its PIN and established that the Appellant had outstanding tax liabilities and that contrary to the Appellant’s contention that the assessment taxes for the years 2008-2014 were time barred, the Respondent averred that it did not issue any new assessments in the demand notice dated 3rd March, 2023. The Letter dated 3rd March, 2023 was issued as demand for outstanding tax liabilities following the Appellant’s application to cancel its PIN.

39. The Respondent further averred that Section 30 of the TATA and section 56 of the TPA placed the burden of proving whether the tax decision ought to have been made differently on the Appellant.

40. The Appellant, failed to discharge its burden of poof as it did not produce documents to ascertain that it had settled its tax obligations.

(iii) Whether there was an Appealable decision in the Respondent’s demand notice. 41. The Respondent averred that the Appeal was not properly before the Tribunal as it emanated from the Notice of Demand of tax arrears issued by the Respondent and the Appellant’s Appeal was premised on the said notice dated 3rd March, 2023 which was improper in tax law as the same was not an Appealable decision.

42. The Respondent cited section 3(3) of the TPA which provides as follows:“appealable decision” means an objection decision and any other decision made under a tax law other than—(b)a tax decision; or(c)a decision made in the course of making a tax decision;”

43. Section 3(3) further provides for the definition of a tax decision as follows:“tax decision” means—(a)an assessment;(b)a determination under section 17(2) of the amount of tax payable or that will become payable by a taxpayer;(c)a determination of the amount that a tax representative, appointed person, director or controlling member is liable for under sections 15, 17 and 18;(d)a decision on an application by a self-assessment taxpayer under section 31(2);(e)a refund decision;(f)a decision under section 48 requiring repayment of a refund; or(g)a demand for a penalty;”

44. The Respondent also stated that the Appellant was in total contravention of section 52 of the TPA which provides for appeals to the Tribunal on appealable decisions as follows:“Appeal of appealable decision to the Tribunal(1)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).(2)A notice of appeal to the Tribunal relating to an assessment shall be valid if the taxpayer has paid the tax not in dispute or entered into an arrangement with the Commissioner to pay the tax not in dispute under the assessment at the time of lodging the notice.”

45. From the foregoing, the Respondent averred that the said communication did not fall within the scope of an appealable decision and therefore the Appeal lacked merit and should be dismissed with costs to the Respondent.

46. Having established that the Respondent’s Letter dated 3rd March, 2023 did not include an appealable decision, the Respondent submitted that the Tribunal lacked jurisdiction to entertain the matter.

47. The Respondent’s prayers to the Tribunal were that it would find that the outstanding taxes of Kshs. 8,360,547. 00 in respect of the period from 2008 to 2014 would be upheld as due and payable by the Appellant and that the Appeal ought to be dismissed with costs to it as it lacked merit.

Parties’ Submissions 48. In its Written Submissions dated 6th March, 2024 and filed on 12th March, 2024 the Appellant submitted on three issues that it had identified for determination whilst the Respondent, in its Written Submissions dated 25th March, 2024 and filed on even date, submitted on and analyzed five issues that it had identified for determination. The Tribunal however notes that it will not rehash the submissions of both parties where these were already outlined in the Statement of Facts of the respective parties.

49. The Appellant submitted as follows regarding the three issues it had identified for determination:

(i) Suing a dissolved Company 50. The Appellant submitted that the Respondent’s demand as argued were statute barred by virtue of the provisions of Section 912(2)c as read with 917(4) of the Companies Act, CAP 486 of Kenya’s Laws (hereinafter “Companies Act”) and further that by the principle of exhaustion of alternative and efficacious statutory remedies enunciated by the decisions in Speaker of National Assembly vs Hon. James Njenga Karume [1992] KLR 22, Peter Ngoge vs Francis Kaparo and ;Yusuf Gitau Abdallah vs Building Centre (K) Ltd [2014] eKLR.

51. The Appellant avowed that the Respondent should have looked for alternative methods to inform the former directors of the same, before suing a now defunct company. That indeed to claim such sums, the Respondent ought to have made an application to restore the company subject to making an application to the Registrar for administrative restoration under Sections 913(2) and 918 of the Companies Act.

52. In the case of James Gitau Kamau & 9 others v Habo Group of Companies Limited & another [2021] eKLR it was held as follows:“According to the Gazette Notice, the Respondent was dissolved under Section 97(4) of the Companies Act, which provides for dissolution of companies pursuant to own application. Under Section 897(6) however, directors and other officers of a dissolved company may be pursued to settle liability as if the company had not been dissolved.”

53. The Appellant further submitted that it was already dissolved vide Gazette notice No.451 on 18th January 2019, and therefore the Respondent ought to have sought other alternative methods to recover or claim any alleged tax.

(ii) Was the Demand Time Barred? 54. The Appellant submitted that the Respondent erred in law and by fact by assessing taxes and demanding the production of documents in contravention of Section 23 (1) (c) of the TPA which provides as follows:“Subject to Subsection (3), retail the document for a period of five years from the end of the reporting period to which it relates, or such shorter period as may be specified in Tax Law”.”

55. The Appellant submitted that it responded to the demand on 13th March 2023 referring to the said demand letter, and disputed to the said assessment as follows: “That after a tax audit undertaken in April 2013 the agreed principal tax being 6,662,610 was to be paid and was indeed paid and an application for waiver of penalties and interest was raised to the respondents to which the same has not been responded to.”

56. The Appellant, in its submissions, invoked Section 23 (1)(c) of the TPA which raised the question whether the assessments were time barred under Section 29 (5) of the TPA. The Appellant cited 29(6) of the TPA which provides as follows:“Subsection (5) shall not apply in the case of gross or willful neglect, evasion or fraud by a taxpayer.”

57. In Gitere Kahura Investments Ltd vs Commissioner of Investigations and Enforcement Tax Appeal No.16 of 2019, the Tribunal held that pursuant to Sections 107 and 108 of the Evidence Act, the burden of proof falls upon the Respondent who must prove that the Appellant’s failure to file returns was motivated by gross or willful neglect to file returns, attempt to evade paying taxes or fraud by a taxpayer.

58. The Appellant asserted that there was no evidence on record from the Respondent to prove that it breached Section 29(6) of the TPA to justify the Respondent’s making of assessments concerning the taxes for the year 2008- 2014 dated 3rd March 2023, notwithstanding the five-year limit rule.

59. The submission of the Appellant and its observation was that its letters dated 3rd March 2023 and 30th April 2013 did not constitute an objection decision. The Appellant indicated that it was notable that an objection decision is a product of Section 51(8) of the TPA where an objection has been validly lodged. The objection decision and the(sic). The Appellant submitted that the procedures were not followed by the Respondent.

(iii) Whether the Respondent erred in law and fact by issuing tax assessments on the Appellant for the years 2008 to 2014? 60. Having established that the Respondent did not issue an Objection Decision and the Respondent itself having stated in the letters dated 3rd March 2023 and 30th April 2013 that it did not issue an objection decision, the Tribunal finds that there is no objection decision [sic].

61. The Respondent submitted and analysed as follows regarding the five issues it had identified for determination:

(i) Whether the Demand Notice dated 3rd March 2023 constituted an appealable decision. 62. On this issue, the Respondent submitted that the instant appeal was hinged on the demand notice dated 3rd March 2023 annexed to its Statement of Facts and that the decision communicated vide the letter dated 3rd March 2023 did not constitute an "appealable decision" as contemplated under the provisions of section 3 of the TPA. As a matter of fact, the issue had been admitted on page 4 of the Appellant's written submissions dated 6th March 2024.

63. The Respondent’s submission was that the Tribunal would employ the statutory interpretation rule of ejusdem generis. The ejusdem generis rule of statutory construction is basically to the effect that wide words associated in the text with more limited words are taken to be restricted by implication to matters of the same character. Of the word "other", In Stroud's Judicial Dictionary 3rd Ed outlines the following in relation to the ejusdem generis rule:'Where a statute, or other document, enumerates several classes of persons or things, and immediately following and classed with such enumeration the clause embraces 'other' persons or things - the word 'other' will generally be read as 'other such like', so that the persons or things therein comprised may be read as ejusdem generis with, and not of a quality superior to, or different from, those specifically enumerated."

64. From the foregoing, the Respondent submitted that the impugned decision (demand notice) was not in the nature of an objection decision referred to hereinabove and that what was of essence was that the Appellant was issued with an assessment on 30th April 2013 for corporate tax, withholding tax, PAYE and VAT and the the Appellant did not lodge a notice of objection against the assessment. Instead. vide a letter dated 6th May 2013. the Appellant committed to pay a sum of Kshs. 6,622. 610. 00 in five (5) monthly instalments.

65. That in the absence of an objection against the assessments issued, no objection decision was issued. A demand notice therefore that seeks to enforce collection of the outstanding tax liability cannot form a basis for appeal at the Tribunal. From the above sequence of facts, the Respondent submitted that the demand notice dated 3rd March 2023 did not constitute an appealable decision.

(ii) Whether the Instant Appeal is valid. 66. Without prejudice to the foregoing, the Respondent averred that the demand notice was issued on 3rd March, 2023. Assuming that the same constituted an appealable decision, the Appellant had an obligation to file a Notice of Appeal within thirty (30) days. The Respondent relied on Section 13 (1) of the TATA which provides as follows:“(1)A notice of appeal to the Tribunal shall -(a)Be in writing;(b)Be submitted to the Tribunal within thirty days upon receipt of the decision of the Commissioner.”

67. From the foregoing, the Respondent submitted that the Appellant ought to have filed a Notice of Appeal by 2nd April 2023. However, the Notice of Appeal was filed on 20th July 2023, three (3) months and eighteen (18) days later.

68. The Respondent submitted that the same was evidently out of time and this rendered the appeal fatally defective since it is time barred. The Respondent further submitted that where there is a laid down procedure as well as set timelines for performing an action under legislation, those affected by the respective legislation have to adhere to the same at all times without default, failure to which the law will not come to their rescue.

69. In so submitting, the Respondent relied on the case of Speaker of the National Assembly vs James Njenga Karume [1992] Eklr where Kwach, Cockar & Muli JJ A) held as follows:“Where there is a clear procedure for redress of any particular grievance prescribed by the Constitution or an Act of Parliament. that procedure should be strictly followed. Accordingly. the special procedure provided by any law must be strictly adhered to since there are good reasons for such special procedures."

70. In TAT Appeal Number 254 Of 2021: Salsa Global Investment Co. Limited vs. Commissioner of Domestic Taxes, the Tribunal held as follows:“53. Flowing from the above, this Tribunal finds that this Appeal was filed out of time without seeking and obtaining prior leave of the Tribunal. The Appeal is thus found to be defective for being in contravention of the law and hence the Tribunal lacks the requisite jurisdiction to hear and determine the same.”

71. From the foregoing, the Respondent submitted that the Appeal before the Tribunal was improper for determination as the Appellant was in breach of the mandatory provisions of Section 13 of the TATA and by failing to adhere to the laid down procedures without giving any valid reasons.

(iii) Whether the Failure by The Respondent to Respond to the Letter Requesting Waiver of Penalties and Interest translates to automatic grant of Waiver. 72. The Respondent submitted that the Appellant applied for waiver of penalties and interest vide a letter dated 23rd September 2013 and issued a further reminder vide a letter dated 17th October 2013. The Appellant had contended that owing to the fact that the Respondent never responded to its application, the same ought to have been deemed as allowed.

73. The Respondent submitted that this position was misleading and erroneous and urged the Tribunal to disregard this position as the Appellant had not quoted the sections of the law it relied on in its submission. It was the further submission of the Respondent's that tax statutes ought to be construed strictly and there is no room for intendment and it relied on the case of Cape Brandy Syndicate V I.R. Commissioners [1921] 1kb where the Learned Judge expressed the common law position in this area by stating as follows:“... in a taxing Act one has to look at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used.”

74. The Respondent submitted that the Tribunal ought to find that in the absence of an express communication from it regarding a waiver application for interest and penalties cannot be deemed to have been allowed.

(iv) Whether the Dissolution of the Appellant herein extinguishes its tax liability. 75. The Appellant contended that it had ceased its business operations on 31st December 2017 and was dissolved on 18th January 2019 through confirmation in the Kenya Gazette on 9th January 2019 and that vide a letter dated 22nd September 2022. the Appellant herein requested for the closure of the PIN wherein they were advised to apply fore-cancellation through the i-Tax portal. On 11th January 2023. the Appellant applied for PIN cancellation throughh i-Tax.

76. The Respondent submitted that it interrogated the issue wherein the PIN showed that it had arrears of Kshs. 8,360,547. 00 wherein a demand notice dated 3rd March 2023 was issued to the Appellant. The Respondent submitted that the dissolution of a company was not intended to extinguish the tax liability of an enterprise. The Respondent submitted that a registered PIN could not be cancelled if it had outstanding tax liabilities.

77. The Respondent submitted that the Appellant had a responsibility to lodge a notice of objection to challenge the assessment issued by the Respondent herein conclusively. Challenging the demand notice as it were did not sufficiently discharge the burden of proof with respect to the issued assessments.

78. The Respondent submitted that it was practically impossible to cancel a PIN that bears outstanding tax liabilities. Therefore. as a matter of necessity. it was imperative that the Appellant herein settled the outstanding tax liabilities before the PIN was registered [sic]. The Respondent further submitted that PIN cancellation is not automatic and that the Respondent had to review the application under the following criteria:a.Whether the Company has been dissolved and gazetted as such;b.Whether a cessation letter has been issued by the companies' registry;c.Minutes approving pin cancellation;d.Company tax compliance certificate;e.All director's tax compliance certificates;f.Copy on incorporation certificate;g.Copy of company PIN; andh.An official letter signed by all the directors requesting for pin cancellation.

79. In the instant case, the Appellant did not have the companies' tax compliance certificate by virtue of the outstanding liabilities whereof the PIN cancellation could not be effected. The Respondent urged the Tribunal to find that the decision to refuse to cancel the PIN certificate was neither arbitrary nor whimsical as the Respondent had solid and justifiable grounds to that effect.

(v) Whether the assessments are beyond the five-year statutory prescribed timelines. 80. The Respondent submitted that the Appellant contended that the issuance of the demand letter dated 3rd March 2023 contravened section 29(6) of the TPA on the basis that it did not issue assessments beyond the five-year rule. The Respondent contended, on the other hand, that in the absence of a valid objection by the Appellant to the assessment dated 30th April 2013, the said taxes became due and outstanding.

81. The fact that the Respondent did not make the decision within the five-year period did not mean that the penalties and interest were waived. As such, the demand letter dated 3rd March 2023 could not be termed as being beyond the five-year period. The settlement of taxes was a prerequisite to the PIN cancellation, and was therefore a legal requirement.

82. The Respondent urged the Tribunal to peruse the purported notice of objection dated 6th May 2013. It was noteworthy that the Appellant did not meet the threshold of a proper objection. The Appellant just admitted a tax liability of Kshs. 6. 622,610. 00 but never challenged the entire sum of Kshs. 13,113,062. 00 assessed vide the letter dated 30th April, 2013.

83. In the circumstances, the Respondent submitted that the tax liability of Kshs. 5,413,448. 00 (principal taxes) had already crystallized even before the impugned demand notice was issued.

Issues For Determination 84. The Tribunal having carefully considered the parties’ pleadings, documentation and submissions has identified a single issue for determination:Whether the Appeal is properly before the Tribunal.

Analysis And Findings 85. Having identified this single issue for determination the Tribunal will proceed to analyse it as follows:

Whether the Appeal is properly before the Tribunal. 86. The Tribunal notes that the dispute herein arose when the Appellant, having been dissolved on 18th January, 2019 applied for cancellation of its PIN. The Respondent, while processing the cancellation discovered that the Appellant owed taxes amounting to Kshs. 8,360. 547. 00 made up of a principal tax of Kshs. 5,413,448. 00 and interest of Kshs. 2,947,099. 00.

87. The Tribunal notes that the Respondent upon making this realisation demanded that the Appellant settles the taxes owed before it could cancel the PIN. The Tribunal further notes that the Appellant, in its pleadings, averred that it had paid an amount of Kshs. 6,662,610. 00 without providing documentation to prove that it had done so.

88. The Tribunal observes that both the Appellant and Respondent neither of whom provided evidence, acknowledged that the Appellant was dissolved on 18th January, 2019. A Company can be dissolved pursuant to the following provisions of the Companies Act:“Division 2 — Dissolution of companies 894. Power of Registrar to strike off company not carrying on business or in operation(1)If the Registrar reasonably believes that a company is not carrying on business or is not in operation, the Registrar may send to the company by post a letter inquiring whether the company is carrying on business or is in operation.(2)If the Registrar does not within one month after sending the letter receive any answer to it, the Registrar shall, within fourteen days after the end of that month, send to the company by post a registered letter referring to the first letter, and stating—(a)that no answer to it has been received to it; and(b)that, if no answer is received to the second letter within one month after its date, a notice will be published in the Gazette with a view to striking the name of the company off the Register.(3)If the Registrar—(a)receives an answer to the effect that the company is not carrying on business or is not in operation; or(b)does not within one month after sending the second letter receive an answer to it, the Registrar may publish in the Gazette, and send to the company by post, a notice that, at the end of the period of three months from the date of the notice, the name of the company referred to in it will, unless cause is shown to the contrary, be struck off the Register and the company will be dissolved.(4)At the end of the period specified in the notice sent under subsection (3), the Registrar may, unless cause to the contrary is previously shown by the company, strike the name of the company off the Register.(5)As soon as practicable after striking the name of the company off the Register, the Registrar shall publish in the Gazette a notice to the effect that the name of the company has been struck off the register.(6)On publication of the notice in the Gazette, the company is dissolved [emphasis ours].(7)Despite subsection (6)—(a)the liability (if any) of every officer and member of the company continues and may be enforced as if the company had not been dissolved; and [emphasis ours](b)nothing in this section affects the power of the Court to liquidate a company the name of which has been struck off the Register. [emphasis ours]”

89. The Tribunal wishes to establish the impact of dissolution of a Company following the High Court Ruling in the case James Gitau Kamau and 9 Others vs. Habo Group of Companies limited and HGC Habo Group Limited [Cause No. 279 of 2015] where it was held as follows:“According to the Gazette Notice, the Respondent was dissolved under Section 897(4) of the Companies Act, which provides for dissolution of companies pursuant to own application. Under Section 897(6) however, directors and other officers of a dissolved company may be pursued to settle liability as if the company had not been dissolved. It follows therefore that dissolution of a company does not in any way, extinguish accrued liabilities, such as the decretal sum owed to the Claimants in this case.”

90. The Tribunal notes that the Appellant never adduced evidence, at the Appeal stage, that it had ceased operations on 31st December, 2017. However, following the ruling in James Gitau Kamau and 9 Others vs. Habo Group of Companies limited and HGC Habo Group Limited [Cause No. 279 of 2015], it is the view of the Tribunal that dissolution did not absolve the Appellant from its pre-existing liabilities.

91. In determining whether this Appeal is properly before it, the Tribunal must consider the impact of dissolution of the Appellant as provided under the Companies Act. In other words, what does it mean when both the Respondent and Appellant state that it was dissolved? Would it mean that the entity is defunct as submitted by the Appellant? Also, the Tribunal would be interested in understanding whether it is correct to describe a dissolved company as “defunct”, meaning “no longer existing or functioning”.

92. The view of the Tribunal based on the preceding cited provisions of the Companies Act and analysis is that even where a Company is dissolved, it is neither absolved from its pre-existing liabilities nor from liquidation proceedings. In this regard, the Tribunal’s further view is that the Respondent was correct in demanding tax from the Appellant.

93. The Tribunal notes the Appellant’s submission that the Respondent sued it despite it being defunct and is of the view that it was clearly the Appellant who brought this suit against the Respondent who had assessed it for taxes through the demand that it made for taxes that are due by the Appellant.

94. The Tribunal therefore wishes to proceed to determine whether an assessment or demand for taxes and penalties would fall under the ambit of an appealable decision pursuant to the following provisions of Section 3 of the TPA:“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; “tax decision” means—(a)an assessment [emphasis ours];(b)a determination under section 17(2) of the amount of tax payable or that will become payable by a taxpayer;(c)a determination of the amount that a tax representative, appointed person, director or controlling member is liable for under section 15, section 17 and section 18(d)a decision on an application by a self-assessment taxpayer undersection 31(2);(e)a refund decision;(f)a decision under section 48 requiring repayment of a refund; or(g)a demand for a penalty; [emphasis ours]”

95. The Tribunal’s finding is that the tax decision which was the basis of this Appeal was not an appealable decision. It is also notable that the Appellant could have adduced evidence that it had made payment of the outstanding tax of Kshs. 6,662,610. 00, a principal tax which it admitted by itself, it owed, but it did not. The Tribunal finds that accordingly, it has no jurisdiction to hear this matter and will therefore down its tools as recommended in the case Owners of the Motor Vessel “Lillian S” vs. Caltex Oil (Kenya) Limited (Civil Appeal No. 50 of 1989) where it was held 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 proceedings pending other evidence. A court of law downs tools in respect of the matter before it the moment it holds the opinion that it is without jurisdiction. …..’

96. The Tribunal’s finding is that this Appeal is improperly before it.

Final Decision 97. The upshot of the foregoing is that the Appeal fails and the Tribunal accordingly proceeds to make the following Orders:a.The Appeal be and is hereby struck out.b.Each party to bear its own costs.

98. It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 26TH DAY OF JULY, 2024. CHRISTINE A. MUGA - CHAIRPERSONBONIFACE K. TERER- MEMBERDELILAH K. NGALA- MEMBEROLOLCHIKE S. SPENCER- MEMBER**