[2024] KETAT 1302 (KLR)

Jadveck General Agencies Limited v Commissioner of Domestic Taxes (Appeal E592 of 2024) [2024] KETAT 1302 (KLR) (26 July 2024) (Ruling)

Neutral citation: [2024] KETAT 1302 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Appeal E592 of 2024

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

July 26, 2024

Between

Jadveck General Agencies Limited

Appellant

and

Commissioner of Domestic Taxes

Respondent

Ruling

1. The Appellant by way of a Notice of Motion dated 30th May, 2024 and filed on 3rd June, 2024 sought the following Orders:a.That the Tribunal be pleased to grant leave to the Appellant to file its appeal out of time.b.That the costs of this Application be provided for.

2. The Application which was supported by an Affidavit sworn by the tax agent of the Appellant, Mr. Simon Maina on the 30th day of May, 2024 was premised on the following grounds:a.That the Appellant’s principal activity was that of civil engineering.b.That the Respondent issued additional assessments for the period 2016-2017 and 2019-2020 on 10th June 2022 and 29th March respectively.c.That on 24th May 2022, the Appellant objected to the additional assessments reference to the objection acknowledgement receipts.d.That the Respondent issued a late objection decision on 7th February 2023 confirming the additional assessments of Kshs.10,364,643. 34. e.That the Appellant being aggrieved by the Respondent’s tax decision contained in the letter dated 7th February has lodged this Appeal.f.That the delay in filing the Appeal was occasioned by the fact that the Appellant 's director was sick suffering from stroke and has been attended to various hospitals such as the Mater Hospital, Mountain View Medical Centre and Sonar Imaging centre and thus the Appellant was unable to respond to the Respondent's objection decision within the stipulated timeframe as reflected in the copies of his medical records.g.That it is in the interest of justice that the Tribunal grants leave to file an appeal against the Respondent's decision dated 7th February 2023. h.That in the circumstances the delay in presenting this Application is neither inordinate nor inexcusable.i.That no prejudice will be occasioned to the Respondent which cannot be ameliorated by costs.

3. The Respondent in reply to the application objected to the Application by raising and filing the following grounds of opposition on 19th June, 2024:a.That the affidavit as sworn was fatally defective having been sworn by a tax agent on factual issues contrary to the relevant laws.b.That the Appellant did not prove that Aliphonce Muli Mutua was the sole director of the Applicant.c.That the attached medical reports were for irrelevant periods.

Analysis And Findings 4. The Tribunal notes that it is only the Appellant who complied with the directions of the Tribunal which were to the effect that the application was to be canvassed by way of written submissions to be filed and served on each other on or before 27th June, 2024. The Tribunal notes that the Respondent did not comply with the directions but the that the Appellant’s written submissions dated 26th June, 2024 were filed at the registry by electronic means on 3rd July, 2024.

5. The Tribunal further notes that the Appellant had attempted to file the submissions at the Tribunal vide electronic mail, on 27th June, 2024 but was advised by the Registry to file the same through the e-filing system on 3rd July, 2024. It complied immediately. The Tribunal has therefore considered the Appellant’s submissions though it will not consider the additional evidence that the Appellant attached to its submissions as it did so without the leave of the Tribunal.

6. The Appellant also filed its Notice of Appeal, Memorandum of Appeal and statement of facts simultaneously with the Application. However, the Orders sought do not reflect those sought in the Appeal and therefore the Tribunal will proceed to outline its findings.

7. The Tribunal will first analyse the first and second grounds of opposition by the Respondent before proceeding to examine whether it will grant the Orders sought by the Applicant since the Respondent has questioned its jurisdiction in the matter. The Respondent opposed this application on the grounds that it was defective since the Replying affidavit ought to have been sworn by the Appellant’s director. Rule 10 (2) (a) of the Tax Appeals (Procedure) Rules, 2015 [hereinafter “the Rules”] provide as follows:(2)An application for extension of time referred to in rule 10(1) shall be—(a)supported by an affidavit stating reasons why the applicant was unable to submit the documents in time;”……….

8. The Tribunal’s view is that the Rules do not specify who is to swear the Affidavit on behalf of an Appellant or Applicant. The Rules only state that the Application is to be supported by an Affidavit. Section 2 of the Tax Appeals Tribunal Act, CAP 469A of the Laws of Kenya (hereinafter “TATA”) provides as follows regarding the definition of a Tax Agent:“tax agent” means a person acting on behalf of another person on matters relating to tax and is registered as such by the Commissioner;

9. In view of the foregoing, a Tax Agent who having been authorised by the Appellant to act on its behalf, is capable of swearing an Affidavit on behalf of the Appellant. The Tribunal therefore finds that the Application is not fatally defective and the Tribunal has jurisdiction to hear and decide the Application.

10. With regard to the Respondent’s second ground of opposition, wherein it stated that the Appellant, did not prove that Mr. Alphonce Muli Mutua is sole director of the Appellant; the Tribunal is of the view that the Respondent must disprove an assertion by adducing competent relevant evidence. In this instant, the Appellant’s assertion was that Mr. Mutua is its only director. The Companies Act, CAP 486 of Kenya’s Laws (hereinafter “Companies Act”) allows for a Company to have a single director pursuant its provisions as outlined in section 11:“11. Method of forming company(1)One or more persons [emphasis ours] who wish to form a company may—(a)subscribe their names to a memorandum of association; and……”

11. The Tribunal finds that the Appellant’s assertion that it had a single director was neither unusual nor in error. The Respondent ought to have disproved the Appellant’s assertion by providing competent and relevant evidence. The mere opposition by the Respondent was not competent evidence. In Commissioner of Domestic Taxes v Trical and Hard Limited (Tax Appeal E146 of 2020) [2022] KEHC 9927 (KLR) (Commercial and Tax) (8 July 2022) (Judgment) Justice Majanja held as follows:“While the general rule or requirement under the sections 107 and 108 of the Evidence Act is he who asserts must prove, it must also be remembered that a person has the burden of proving facts that are peculiarly within its knowledge as provided by section 112 of the Evidence Act which states that, “In civil proceedings, when any fact is especially within the knowledge of any party to those proceedings, the burden of proving or disproving that fact is upon him.”

12. The power to expand time for filing an Appeal is donated by Section 13 (3) of the TATA which provides as follows:(3)The Tribunal may grant the extension of time if it is satisfied that the applicant was unable to submit the documents in time for the following reasons—(a)absence from Kenya;(b)sickness; or(c)any other reasonable cause.”

13. The Tribunal’s power to grant extension of time is discretionary and not a right to be granted to the Appellant. In determining whether to extend time, the Tribunal was guided by the decision of the Court in Charles Karanja Kiiru v Charles Githinji Muigwa [2017] eKLR, where the learned Judge stated as follows:“it is trite that extension of time is not a right of a party. It is an equitable remedy that is only available to a deserving party, at the discretion of the Court. “

13. 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 of Odek, JJ. A in Edith Gichugu Koine vs. Stephen Njagi Thoithi [2014] eKLR, where the Court laid out the factors as thus:“Nevertheless, it ought to be guided by consideration of factors stated in many previous decisions of this Court including, but not limited to, the period of delay, the reasons for the delay, the degree of prejudice to the respondent if the application is granted, and whether the matter raises issues of public importance, amongst others...”

14. Further, in Sammy Mwangi Kiriethe & 2 others v Kenya Commercial Bank Ltd [2020] eKLR, the court held as follows:“The Court considers the length of the delay; the reason for the delay; the chances of success of the intended appeal, and the degree of prejudice that would be occasioned to the respondent if the application is granted.”

15. The Tribunal, guided by the principles as set out in John Kuria v Kelen Wahito, Nairobi Civil Application No. 19 of 1983 April 10, 1984, referred to by the Judges in the case of Wasike V Swala [1984] KLR 591, Sammy Mwangi Kiriethe & 2 others v Kenya Commercial Bank Ltd (supra) and Section 13 of the TATA used the following criteria to consider the application:(a)Whether there is a reasonable cause for the delay.

16. In considering what constitutes a reasonable reason for delay, the court in Balwant Singh v Jagdish Singh & Ors (Civil Appeal No.1166 of 2006), held as follows:“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 statutory timelines and provisions to file an Appeal have been clearly set out in the Section 13 (3) of the TATA which provides as follows with regard to the statutory timelines to be adhered to in commencing an appeal process:“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.2. The appellant shall, within fourteen days from the date of filing the notice of appeal, submit enough copies, as may be advised by the Tribunal, of—a.a memorandum of appeal;b.statement of facts; andc.the tax decision….”

18. For a taxpayer who has not met the timelines as provided in the above provision of the law, Section 13(4) of the TATA provides the conditions that the taxpayer ought to meet to enable the Tribunal to exercise its discretion to extend time to appeal. The Section provides as follows:“An extension under subsection (3) may be granted owing to absence from Kenya, or sickness, or other reasonable cause that may have prevented the applicant from giving notice of appeal within the specified period.”

19. Regarding the reasons for delay, the Appellant averred that its director suffered ill health at the time the objection decision was issued. He had chronic illness as evidenced by a letter from his doctor dated 22nd April, 2024 supported by various medical and laboratory tests carried out as early as January, 2023. The director of the Appellant had suffered a stroke and was unable to respond to the Respondent’s objection decision within the stipulated time frame.

20. The Tribunal notes that the Respondent opposed this vehemently in suggesting that the attached medical records were for ‘irrelevant periods’ without specifying what it meant by ‘irrelevant periods’. However, in raising this ground, the Respondent, did not controvert the fact that the Appellant ‘s director was sick, it instead affirmed the position of the Appellant, in recognising that indeed the director was sick but the evidence suggested that the same was for ‘irrelevant periods’.

21. In determining the competence and relevance of the evidence, produced by the Appellant, the Tribunal further relies on the following holding in the case of McQuire v. Western Morning News (1903) by Sir Richard Henn Collins MR on how to determine how an ordinary man would reason:“One thing, however, is perfectly clear, and that is that the jury have no right to substitute their own opinion of the literary merits of the work for that of the critic, or to try the "fairness" of the criticism by any such standard. "Fair," therefore, in this collocation certainly does not mean that which the ordinary reasonable man, "the man on the Clapham omnibus," as Lord Bowen phrased it the juryman common or special, would think a correct appreciation of the work”;

22. The 10th Edition of the Oxford Advanced Learners Dictionary, defines ‘Chronic’ as follows:“(of a disease) lasting for a long time, difficult to cure”

23. The finding of the Tribunal in placing itself in the shoes of the “ordinary man” is that the director of the Appellant had a chronic illness for which he was diagnosed in 2011. It matters not the period to which it was related for the illness was long lasting and difficult to cure having not been cured since 2011. It was therefore a chronic illness. The chronic illness was serious enough to disempower the Appellant’s director and it made him unable to file his Appeal in accordance with the timelines outlined in the tax statutes. In this case, the indisposition of the Appellant’s director is infinite based on the evidence adduced. The Tribunal is therefore persuaded that the director of the Appellant has indeed been suffering ill health since 2011.

24. Consequently, the Tribunal determined that the Appellant demonstrated reasonable cause for delay.(b)Whether the Appeal is merited?

25. 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.

26. 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 as follows:“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.”

27. The Tribunal was further guided by the findings of the court in Kenya Commercial Bank Limited Vs Nicholas Ombija (2009) eKLR where it was held as follows:“An arguable appeal is not one which must necessarily succeed, but one which ought to be argued fully before the court.”

28. 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 Kinyanjui Vs 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.”

29. The Tribunal noted that the Respondent’s decision dated 7th February, 2023 confirmed the assessments for Value Added Tax and Income Tax. Upon a perusal of the Memorandum of Appeal by the Appellant, the Tribunal noted that the Appellant had raised three grounds of Appeal that required rebuttal by the Respondent. Pursuant to the standards set out in the Stanley Kangethe Kinyanjui Vs Tony Keter & others case, the Tribunal finds that the Appellant had an arguable case which required to be canvassed and considered on its full merits.(c)Whether there will be prejudice suffered by the Respondent if the extension is granted?

30. The courts have held that in considering whether to extend time, due regard must be given to whether the extension will prejudice the opponent. In determining this, the Judge in Patrick Maina Mwangi v Waweru Peter [2015] eKLR quoted the finding in United Arab Emirates V Abdel Ghafar & Others 1995 IR LR 243 in finding as follows:“…….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 cost cannot compensate………”

31. The test, therefore, as set out in the case above is whether the Respondent will suffer irreparable prejudice if the application is granted. However, having found that the subject matter was arguable, it is the view of the Tribunal that the Appellant’s recourse to justice now lies in an appeal to the Tribunal. Thus, the Appellant would suffer prejudice if it is not granted leave to file its appeal. The Respondent on the other had will not suffer prejudice since it will still be able to collect the taxes plus interest and penalties should the Applicant be found to be at fault.

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

Disposition 33. Based on the foregoing analysis, the Tribunal finds that the Application is merited and accordingly proceeds to make the following Orders:a.The Application be and is hereby allowed.b.Leave be and is hereby granted for the Appellant to file its Notice of Appeal, Memorandum of Appeal and Statement of Facts out of time.c.The Appellant’s Notice of Appeal, Memorandum of Appeal, Statement of Facts and tax decision are deemed as having been duly filed on 9th June, 2024. d.The Respondent to file and serve its response to the Appeal within 30 days of the date of this Ruling.e.No orders as to costs.

34. It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 26TH DAY OF JULY, 2024. ………………………………….CHRISTINE A. MUGACHAIRPERSON…………………………... …………….……………..BONIFACE K. TERER DELILAH K. NGALAMEMBER MEMBER…………..………………. ……………..…………….GEORGE KASHINDI OLOLCHIKE S. SPENCERMEMBER MEMBER