[2024] KETAT 1073 (KLR)

Khaki v Commissioner of Domestic Taxes (Tax Appeal E552 of 2024) [2024] KETAT 1073 (KLR) (19 July 2024) (Ruling)

Neutral citation: [2024] KETAT 1073 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal E552 of 2024

E.N Wafula, Chair, M Makau, EN Njeru, E Ng'ang'a & AK Kiprotich, Members

July 19, 2024

Between

Mohsin Abdulrasul HG Khaki

Appellant

and

Commissioner of Domestic Taxes

Respondent

Ruling

1. The Appellant moved the Tribunal vide a Notice of Motion application dated 24th May 2024 and filed under a Certificate of urgency on 26th May, 2024 which is supported by an Affidavit sworn by Mohsin Abdulrasul H.G Khaki, the Appellant, on the 24th May, 2024, seeking for the following Orders, that:-a.Spent.b.The Honourable Tribunal be pleased to issue an order unconditionally vacating, suspending and/or lifting of the Agency Notice dated 22nd May 2024 issued to the Appellant’s bankers Habib Bank AG Zurich and demand notice dated 22nd May 2024 demanding immediate payment of Kshs. 49,708,467. 00 pending the hearing and determination of the application and the Appeal filed herewith.c.The Honourable Tribunal be please to extend the time allowed for the Appellant to file Memorandum of Appeal, Statement of Facts and tax decision.d.The annexed Memorandum of Appeal and Statement of Facts both dated 24th May 2024 to be deemed as properly filed and served.e.Without prejudice to prayers (b) and (c) above, in the alternative the Honourable Tribunal considers reviewing its Judgment dated 17th May 2024 for the error apparent on the face of the record that the Appeal in TAT No. E471 of 2023 may have been late for 5 months if the date of the Objection decision is considered to be 6th July 2023. f.That costs of this application be in the cause.

2. The application is premised on the grounds, that: -i.The date of the Objection decision is one that is still highly contested and one of the reasons why the Appellant has an arguable Appeal with very high probability of success.ii.The fact that the date of the Objection decision is in dispute is prima facie proof of a process of that was in violation of Article 47 of the Constitution on the right to fair administrative action.iii.It is trite law that mistake of counsel should not be visited upon a litigant, a concept that similarly applies in the present matter.iv.The appointed tax agents were erroneously conflating between the procedure for objecting to a Customs dispute and a Domestic taxes dispute hence the application for review of the Objection decision.v.In the event the Appellant demonstrates that the assessments of 10th February 2023 were valid assessments, then the Respondent’s decision of 6th July 2023 will be in violation of Section 51 (11) of the Tax Procedures Act, meaning that it had already been allowed by operation of the law.vi.The Tribunal, in striking out the Appellant’s Appeal vide a Judgment of 17th May 2024, considered two possible scenarios in finding that the Appeal had been filed out of time without leave of the Tribunal: in the first scenario, the Tribunal considered the Respondent’s unrebutted proposition that the Objection decision had been issued on 17th November 2020, to which the Tribunal held the Appeal would have been late by over 2 years and 9 months. In the second scenario, the Tribunal considered that if the Objection decision was the one dated 28th February 2023, to which the Appeal would have been late by about 5 months.vii.The second scenario above cited by the Tribunal is a product of an error apparent on the face of the record since the Objection decision of 2023 was issued on 6th July 2023 and not 28th February 2023 (the latter dated was the date of the Appellant’s notice of objection against the assessment notice dated 10th February 2023).viii.Subsequent to the delivery of the Judgement, the Respondent has issued the Appellant with an Agency Notice dated 22nd May 2024 issued to the Appellant’s banker Habib Bank AG Zurich and a demand notice dated 22nd May 2024 demanding immediate payment of Kshs. 49,708,467. 00 in enforcement of the Tribunal’s Judgement.ix.The Appellant has an arguable Appeal with very high probability of success.x.The Appellant stand to suffer irreparable loss and damage if the orders sought in this application are not granted.xi.It is imperative in the interest of justice that the Appellant herein be granted.xii.No prejudice shall be occasioned on the Respondent if this application is allowed.xiii.The Honourable Court has jurisdiction to grant the orders sought.

3. The Respondent upon being served with the instant application filed a Replying Affidavit sworn by Khadija Mohamed Bwandumia, an officer of the Respondent, on the 5th June, 2024 and filed on the even date, which response raised the following grounds in opposition to the application, that;i.The Tribunal on 17th May 2024 delivered a Judgment striking out the Appellant’s Appeal for having been filed out of time without leave.ii.The Appellant in his application seeks to review the said Judgment on the grounds that there is an error apparent on the face record. The Tribunal is seized of jurisdiction as provided under Section 29 A of the Tax Appeals Tribunal Act, provided that the application is brought within seven days of the date of making of the decree or order.iii.The grounds for an application for review are provided for under Section 29 A of the Tax Appeals Tribunal being; the discovery of new and important matter of evidence which, after the exercise of due diligence, was not within the knowledge of the Applicant or could not be produced by the Applicant at the time when the decree was passed or the order was made; on account of some mistake or error apparent on the face of the record; or any other reasonable cause.iv.The Respondent issued the Objection decision on 17th November 2020 and the letter dated 6th July 2023 stated that the investigations had been carried out, which stated that the Respondent could not review its initial decision dated 17th November 2020. v.The Objection decision dated 17th November 2020 and the letter dated 6th July 2023 are not new information to the Appellant and there is no error apparent on the face of the record.vi.The Appellant has not met the threshold to lodge the application for review as required under Section 29 A of Tax Appeals Tribunal Act and thus the application dated 24th May 2024 should fail and the same be dismissed on that ground.

Analysis and Findings 4. The parties were directed by the Tribunal to file their respective written submissions by the 13th June 2024, however, the orders were not complied with, the Tribunal will therefore consider the application on the basis of the parties’ grounds on the face of the Affidavit in support of the application and the averments in the Replying Affidavit.

5. The Tribunal is enjoined to issue orders lifting agency notices against the Appellant herein, to extend time within which to file an appeal out of time and to review its decision in TAT Appeal No. E473 of 2023 made on 17th May 2024.

6. The Tribunal shall consider the following issues that have arisen in this application;i.Whether the Appellant’s application has met the threshold to warrant review of the Judgement in TAT Appeal No. E473 of 2023 Mohsin Abdulrasul H.G Khaki vs, Commissioner of Domestic Taxes;ii.Whether the Appellant has made a case to warrant the Tribunal to issue orders for leave to file an appeal out of time; and,iii.Whether orders of lifting, varying or setting aside the agency notices issued on 22nd May 2024 are deserved.

7. The Tribunal shall consider the issues as herein under;i.Whether the Appellant’s application has met the threshold to warrant review of the Judgement in TAT Appeal No. E473 of 2023 Mohsin Abdulrasul H.G Khaki vs, Commissioner of Domestic Taxes;

8. It was argued by the Appellant that there was an error apparent on the face onrecord, in the decision rendered by the Tribunal in Appeal No. E473 of 2023 in its Judgment of 17th May 2023, which error, the Appellant maintained that the objection decision was issued on 6th July 2023 and not 28th February 2023.

9. That according to the Appellant, the Tribunal considered and held that if the Objection decision was issued on 28th February 2023, then the Appeal was only late with 5 months, when the Objection decision was issued on 6th July 2023 then the Appeal was therefore not late.

10. The parties relied on Section 29 A (1) and (2) of the Tax Appeals Tribunal Act, relating to review, which Section provides that:-(1)A person who is aggrieved by a decree or an order from which no appeal has been preferred from the Tribunal to the High Court, may apply for review of the decree or the order within seven days from the date the decree or order was made by the Tribunal.(2)Applications for review of decree or orders under subsection (1) may be made—(a)upon the discovery of new and important matter or evidence which, after the exercise of due diligence, was not within the knowledge of the applicant or could not be produced by the applicant at the time when the decree was passed or the order was made;(b)on account of some mistake or error apparent on the face of the record; or(c)for any other sufficient reason.”

11. From the above provision of law, the Appellant ought to move the Tribunal within seven days of the decision, upon discovery of a new and important matter that was not within the Appellant’s knowledge and the Appellant ought to demonstrate the mistake of error apparent on the face of the record.

12. On the first condition, the Tribunal observed that the decision sought to be reviewed was issued on 17th May 2024, while the Appellant made his application for review on the 26th May 2024, which was not in conformity with the provision of Section 29 A (1) of the Tax Appeals Tribunal Act.

13. On the second and third conditions, the Appellant is obligated to demonstrate the discovery of new and important matter or evidence which, after the exercise of due diligence, was not within his knowledge or could not be produced by the Apellant at the time when the decree was passed or the order was made or the error or mistake apparent on the record.

14. The Tribunal upon perusal of the Judgment issued on 17th May 2024, noted that in the said Judgement, there was no ambiguity as regards the date of the Objection decision, which was clearly captured as 17th November 2020.

15. In the said Judgement the Tribunal stated as follows;“41. Even if the Tribunal was to take the date of 28th of February 2023 which is preferred by the Appellant as the date of the decision, the said Appeal would still be late by about 5 months. The Appeal would again fail on this premise”

16. The Tribunal did not pronounce itself on the date of the decision, in fact, a casual reading of the above statement resonates with a hypothetical situation of the arguments of the Appellant and cannot be deemed as a decision of the Tribunal.

17. A keen observation and perusal of the document dated 6th July 2023 issued by the Respondent, is clear that the same is not and does not amount to anything beyond being a notice to the Appellant herein clarifying of the Objection decision as the one issued on 17th November 2020.

18. Of concern to the Tribunal, is that the Appellant has made its application in a fresh Appeal to review a judgement in a distinct Appeal, there is no decision on record for the Tribunal to review in the instant Appeal. The orders for review could only be tenable within the cause where the decision was made.

19. In view of the foregoing, the Appellant’s application has not met the threshold to warrant review of the Judgement in TAT Appeal No. E473 of 2023 Mohsin Abdulrasul H.G Khaki vs. Commissioner of Domestic Taxes. It therefore fails on this limb.ii.Whether the Appellant has made a case to warrant the Tribunal to issue orders for leave to file an appeal out of time;

20. It was the Appellant’s submission that the delay in lodging the Appeal within time was premised on the reasonable grounds of mistake by the Appellant’s tax agent who had already expressed the desire to challenge the assessment by objecting.

21. The Appellant argued that his tax agent instead of lodging an Appeal to the Tribunal, the tax agent sought to review the Respondent’s decision vide the letter dated 7th December 2020. The Appellant argued that mistakes of an agent ought not be visited on an innocent litigant and urged the Tribunal to consider the ground as reasonable.

22. Additionally, the Appellant submitted that the Respondent compounded the delay, when it issued additional assessment on 10th February 2023, following which the Appellant objected to on the 28th February 2023 and thus the letter dated 6th July 2023.

23. In opposing the application, the Respondent submitted that it did not issue its decision on 6th July 2022 rather a communication reminding the Appellant that its Objection decision had been issued on 17th November 2020.

24. The Respondent further submitted that the delay of over 2 years and 9 months is not only inordinate, but no explanations or evidence has been placed before the Tribunal in support of the grounds outlined by the Appellant.

25. Section 13 (3) of the Tax Appeals Tribunal Act provides that:-“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).”

26. The reasons and/or ground upon which a party seeking for extension of time to file an appeal out of time can rely on are contained within the provisions of Section 13 (4) of the Tax Appeals Tribunal Act, which provides;“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 filing the notice of appeal or submitting the documents within the specified period.”

27. Similarly, Rule 10 (3) of the Tax Appeals Tribunal (Procedure) Rules, 2015, in relation to grounds upon which a party can rely on in the making of an application for extension of time, provides as thus:-“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.”

28. It therefore follows that the Appellant is obligated to demonstrate such grounds upon which its application is anchored within the provisions of Section 13 (4) of the Tax Appeals Tribunal Act as read together with Rule 10 of the Tax Appeals Tribunal (Procedure) Rules.

29. The Tribunal has perused the Appellant’s grounds as outlined in the application and affidavit in support of the application thereof and observed that the grounds fall within the confines of Section 13 (4) of the Tax Appeals Tribunal Act as read together with Rule 10 of the Tax Appeals Tribunal (Procedure) Rules, the Appellant has presented the evidence in support of the grounds before the Tribunal for its consideration.

30. In deeming the delay as inordinate or reasonable, the Count does not only consider the length of the period, but in exercise of its discretion consider the reasons occasioning such delay.

31. Accordingly, the Tribunal is guided by the High Court case of Leo Sila Mutiso vs. Rose Hellen Wangari Mwangi, Civil Application Nai 251 of 1997 in which the learned trial 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.”

32. The Tribunal has had the occasion to peruse the Memorandum of Appeal filed herewith which outlines the grounds of Appeal as against the Respondent’s decision dated 6th July, 2023, in the Tribunal’s view the said Appeal is arguable.

33. In the interest of justice, the Tribunal therefore finds that the grounds advanced by the Appellant for delay were reasonable and therefore the delay is not deemed inordinate, the Appellant proffered explanations for such a delay.

34. The Appellant thus succeeds on this issue.iii.Whether orders of lifting, varying or setting aside the agency notices issued on 22nd May 2024 are deserved.

35. The Appellant maintained that its bankers were issued with agency notices dated 22nd May 2024 in recovery of the sum of Kshs. 49,708,467. 00.

36. Whereas it is important for any taxpayer to ensure the remittance of all taxes due and payable, it is more important for the Respondent to discharge its duty of collecting the same with strict adherence of the law and tax procedures.

37. Section 42 (14) (e) of the Tax Procedures Act provides as thus:-(14)The Commissioner shall not issue a notice under this section unless—(a)………………..(b)……………….(c)………………..(d)………………….(e)the taxpayer has not appealed against an assessment specified in a decision of the Tribunal or court.”

38. The above Section alleviates the concerns of potential challenges in demanding and enforcement of demands whilst the dispute is under adjudication, and without necessarily placing prejudice on any of the parties.

39. Section 42 (14) of the Tax Procedures Act clothes the Tribunal with the powers to interfere with the process of recovery of taxes where the such taxes sought to be recovered are the subject of an Appeal before it.

40. The Tribunal, on a balance of convenience and having found the application for leave to file appeal out of time to be merited, finds that the Appellant has advanced sufficient grounds to warrant the Tribunal to interfere with the enforcement process and holds the Appellant’s application as merited.

41. Consequently, the orders to lift the agency notice dated 22nd May 2024 are merited. The efficacy of the proceedings in the Appeal can only be preserved with the stay on enforcement of the objection decision forming the substrum of the proceedings in the Appeal.

Disposition 42. Based on the foregoing analysis, the Tribunal finds that the application is merited and accordingly proceeds to make the following Orders: -a.That Appellant is hereby granted leave to file an appeal out of time;b.The Appellant to file and serve a Notice of Appeal within five days of the date of delivery of this Ruling.c.The Memorandum of Appeal, Statement of Facts dated 24th May 2024 and filed with the Tribunal together with documents attached thereto on 26th May 2024 be and are hereby deemed as properly filed and served.d.The Respondent be at liberty to file a response to the Appeal within Thirty (30) days of the date of delivery of this Ruling.e.No orders as to costs.

43. It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 19TH DAY JULY, 2024ERIC NYONGESA WAFULA - CHAIRMANMUTISO MAKAU - MEMBERELISHAH N. NJERU - MEMBEREUNICE N. NG’ANG’A - MEMBERABRAHAM K. KIPROTICH - MEMBER