[2023] KETAT 221 (KLR)

Jurgen Construction Co Limited v Commissioner of Domestic Taxes (Miscellaneous Application 269 of 2022) [2023] KETAT 221 (KLR) (5 May 2023) (Ruling)

Neutral citation: [2023] KETAT 221 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Miscellaneous Application 269 of 2022

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

May 5, 2023

Between

Jurgen Construction Co Limited

Applicant

and

Commissioner Of Domestic Taxes

Respondent

Ruling

1. The Applicant vide a Notice of Motion dated the October 7, 2022 filed on the same date and supported by an Affidavit sworn by Jaffar Duale, a Director of the Applicant on the even date, sought for the following Orders:-i.Spent.ii.That the Tribunal be pleased to enlarge the time within which the Applicant is to file the Memorandum of Appeal, Statement of Facts and tax decision by 14 days.iii.That the Memorandum of Appeal, Statement of Facts and tax decision be deemed to have been properly filed within time.iv.That the Applicant be at liberty to apply for further orders or directions as the Tribunal may deem just to grant.v.That the cost of this application be in the cause.

2. The application is premised on the following grounds:-i.That the 14 days within which the Applicant was supposed to have filed the Memorandum of Appeal, Statement of Facts and tax decision has since lapsed.ii.That unfortunately, the officer having received the objection on April 7, 2021 issued a decision on August 6, 2021. iii.That the Applicant is in the construction business and it was represented by auditors who had at all times when the Director was sick and he was under the impression that the said auditors were in a process of finalizing the case with the Commissioner’s team in Nakuru.iv.That the Directors had a meeting with Nakuru team and provided all the documents as requested. That the Applicant’s Director due to his medical condition, delegated to the said auditors and he had instructed them to handle the issue and at all times he was under the honest impression that the Memorandum of Appeal, Statement of Facts and tax decision were fully filed within the timelines prescribed by the law.v.That the failure to file the Memorandum of Appeal, Statement of Facts and tax decision within time was a mistake of the Applicant’s auditors. That this mistake should not be visited on the Applicant.vi.That this application has not been brought after undue delay.vii.That the Respondent will not suffer any prejudice if the orders sought herein are granted.viii.That it is in the interest of justice and fairness that the application is allowed to pave way for hearing and determination of the appeal on the merits.

3. The Respondent opposed the application through a Replying Affidavit sworn by Charles Onyurah, an officer of the Respondent, on the October 28, 2022 and filed on the even date. The grounds of opposition as highlighted in the Affidavit were as follows:-i.That the orders sought by the Applicant should not be granted by the Tribunal as they are an abuse of the court process and the Applicant is undeserving of the same.ii.That the Respondent issued the Applicant with an objection decision on August 6, 2021. That the objection decision gave timeline within which to appeal or pay the confirmed taxes failure to which enforcement measures would ensue. That the objection decision specifically advised the Applicant of its right to file a notice of appeal within 30 days of the date of the objection decision.iii.That despite the Respondent advising the Applicant of its rights and timelines to appeal, the Applicant failed to appeal within the timelines stipulated under Section 13(1)(b) of the Tax Appeals Tribunal Act.iv.That equally the Applicant failed to lodge the Memorandum of Appeal, Statement of Facts and the tax decision within the stipulated timelines of fourteen days from the date of filing the Notice of Appeal contrary to the provision of Section 13(2) of the Tax Appeals Tribunal Act.v.That the Applicant lodged the application for extension of time to file appeal more than 1 year and 2 months. That this delay is not only inordinate but incurable.vi.That the Applicant alleges that the appeal was not filed within time due to the fact that the Applicant’s Director was firstly ill and that he was not aware that the auditors who had conduct of the matter neglected to file the appeal on time.vii.That the Applicant has failed to provide evidence to support its assertion. That the Applicant’s director has neither shown when and for how long she fell ill, nor when she learnt of the ineptness of the Applicant’s auditors and further the efforts she made to follow up on the Appeal.viii.That it is also noteworthy that the Applicant is a company and a separate legal entity from its director and operations ought not to stop because a director is unwell. That furthermore, the Applicant’s director has failed to exhibit any evidence of sickness in the affidavit.ix.That the Applicant was indolent for failing to seek an update from its auditors for more than a year. That no evidence has been provided to support the allegation. That furthermore, a taxpayer is not excused from managing its tax affairs just because it has engaged an auditor.x.That mere statements that are not backed by evidence of any sort are not solid grounds that would warrant the Tribunal to exercise its discretion in favour of the Applicant. That the Applicant has failed to lay a basis to the satisfaction of the Tribunal for extension of time to file an appeal.xi.That the fact that the Applicant failed to follow up on its appeal for more than one year after issuance of the objection decision is a demonstration that the Applicant has not been vigilant and does not warrant the exercise of the Tribunal’s discretion in its favour. That the Applicant is guilty of laches.xii.That the delay is unreasonable and not excusable on the grounds that the Applicant like any other taxpayer has a duty to ensure that its tax affairs are well managed by making regular consultation or interactions with its tax agent for purposes of tracking progress of its tax matters.xiii.That the indolence and negligence of the Applicant to follow up on its matter and leaving the same to its tax agent without exercising some control on the work done by the said tax agent should not be excused as doing so will create a bad precedent. That notably, the provision of Section 16(8) of the Tax Procedures Act provides that a taxpayer is not relieved from performing any obligation imposed upon him/her under a tax law that a tax representative has failed to perform.xiv.That the application is an afterthought, brought in bad faith, meant to delay the Respondent from collecting taxes that are due and payable and should not be entertained by this Tribunal as doing so would offend the equitable maxim of equity aids the vigilant and not the indolent and ultimately create bad precedent.xv.That the Applicant is not deserving of the orders sought in the application as the whole period of delay has not been declared and explained satisfactorily to the Tribunal thus the application ought to be dismissed.xvi.That the Respondent’s mandate of collection of revenue is key to the economic development of the Country and consequently the public and all the arms of Government and specifically the Tribunal is called upon to assist the Respondent in carrying out its mandate so long as the same is within the law.xvii.That it is in the public interest that this Tribunal dismisses the Applicant’s application to pave way for the Respondent to collect taxes due from the Applicant which are key to the economic development of the Country.xviii.That the indolence and negligence of the Applicant should not bar the Respondent from fulfiling its mandate of collecting taxes that are due and payable.xix.That the Applicant has failed to satisfy the principles as set out in the case of Nicholas Kiptoo Arap Korir Salat V Independent Electoral and Boundaries Commission & 7 Others [2014] Eklr.

Analysis and Findings 4. The Applicant is primarily praying to the Tribunal for its appeal documents to be admitted late.

5. The power to expand time for filing an Appeal is donated by Section 13(3) of the Tax Appeals Tribunal Act which provides that:“The Tribunal may, upon application in writing, extend the time for filing the Notice of Appeal and for submitting the documents referred to in subsection (2).”It is therefore a discretionary power and not a right to be granted to the Applicant.

6. In determining whether to expand time, courts have in the past considered a number of factors. These factors were discussed in Leo Sila Mutiso vs Rose Hellen Wangari Mwangi, Civil Application Nai 251 of 1997 where the judge held that:“It is now settled that the decision whether to extend the time for appealing is essentially discretionary. It is also well stated that in general the matters which this court takes into account in deciding whether to grant an extension of time are, first the length of the delay, secondly the reasons for the delay, thirdly (possibly) the chances of the appeal succeeding if the application is granted and fourthly the degree of prejudice to the respondent if the application is granted.”

7. The court in Wasike V Swala[1984] KLR 591 provided the hierarchy of the 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; andc)That the delay has not been inordinate.

8. The Tribunal, guided by the principles set out in Leo Sila Mutiso vs Rose Hellen Wangari Mwangi, Civil Application Nai 251 of 1997, Wasike V Swala [1984] KLR and Section 13 of the Tax Appeals Tribunal Act 2013 used the following criteria to consider the application:a.Whether there is a reasonable cause for the delay.b.The merits of the complained action.c.Whether there will be prejudice suffered by the Respondent if the extension is granted.a.Whether there is a reasonable cause for the delay.d.In considering what constitutes as a reasonable reason for delay, the court in Balwant 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”. 9. The statutory timelines and provisions to file an appeal have been clearly set out in the Tax Appeal Tribunal Act. Section 13 (3) of the Tax Appeals Tribunal Act provides as follows with regard to the statutory timelines in commencing 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)statements of facts; and(c)the tax decision.”

10. For a taxpayer who has not met the timelines as provided in the above provision of the law, Section 13(4) of the Tax Appeals Tribunal Act 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.”

11. The Applicant stated that due to its Director’s medical condition, she delegated to its auditors and had instructed them to handle the issue and at all times she had been under the honest impression that the Memorandum of Appeal, Statement of Facts and tax decision were fully filed within the timelines prescribed by the law.

12. That the failure to file the Memorandum of Appeal, Statement of Facts and tax decision within time was a mistake of the Applicant’s auditors. That this mistake should not be visited on the Applicant.

13. The Respondent on its part submitted that the Applicant had failed to provide evidence to support its assertion. That the Applicant’s director had neither shown when and for how long she fell ill, nor when she learnt of the ineptness of the Applicant’s auditors and further the efforts she made to follow up on the Appeal.

14. That it is also noteworthy that the Applicant is a company and a separate legal entity from its director and operations ought not to stop because a director is unwell. That furthermore, the Applicant’s director has failed to exhibit any evidence of sickness in the Affidavit in support of the application.

15. It was not in dispute that the objection decision was served on the Applicant on August 6, 2021. The Applicant therefore ought to have filed a notice of appeal on or before September 5, 2021. The Tribunal noted that the Applicant cited failure of its auditors whom it had assigned the responsibility to handle the case to timeously file the Appeal. It further averred that the director had suffered ill health.

16. The Tribunal however noted that the Applicant does not state when it came to be aware of its auditors’ failure to file the Appeal documents. The Tribunal in such a circumstance is not in a position to ascertain whether the application was brought without undue delay. Further, the Tribunal noted that the Applicant did not adduce any evidence to demonstrate that its Director suffered ill health or details of the previous auditor and the efforts it made once it was made aware of the failure by the said auditors.

17. The Tribunal relies on Section 107 of the Evidence Act, Cap 80 of the Laws of Kenya which provides as thus;“(1)Whoever desires any court to give judgment as to any legal right or liability dependent on the existence of facts which he asserts must prove that those facts exist?(2)When a person is bound to prove the existence of any fact it is said that the burden of proof lies on that person.”

18. The Tribunal further reiterates the holding in the case of Nicholas Kiptoo Arap Korir Salat vs. The Independent Electoral and Boundaries Commission & 7 Others [2014] eKLR, where the Supreme Court while capturing the circumstances to be considered in an application for extension of time stated that:-“… it is clear that the discretion to extend time is indeed unfettered. It is incumbent upon the applicant to explain the reasons for delay in making the application for extension and whether there are any extenuating circumstances that can enable the Court to exercise its discretion in favour of the applicant.

19. Under the circumstances, the Tribunal finds that the Applicant did not meet the threshold for a reasonable cause for delay in filing its Appeal.

20. The Tribunal in its decision is further persuaded by the decision in Abdul Aziz Ngoma vs Mungai Mathayo [1976] Kenya LR 61, 62, where the court stated that:“We would like to state once again that this Court’s discretion to extend time under rule 4 only comes into existence after ‘sufficient reason’ for extending time has been established and it is only then that other considerations such as the absence of any prejudice and the prospects or otherwise of success in the appeal can be considered.”

21. The Applicant therefore has in the circumstances substantively failed to meet the statutory and judicially established threshold for the grant of an application for the enlargement of time to file an appeal. The Tribunal therefore found it unnecessary to delve into the other issues that fell for its determination as they had been rendered moot.

Disposition 22. Based on the foregoing, the Tribunal finds that the application lacks merit and accordingly proceeds to make the following Orders:i.The application be and is hereby dismissed.ii.No orders as to costs.

DATED AND DELIVERED AT NAIROBI THIS 5TH DAY OF MAY, 2023. ………………………….ERIC N. WAFULACHAIRMAN………………………………..CYNTHIA MAYAKAMEMBER………………………………..ABRAHAM KIPROTICH**MEMBER