[2023] KETAT 872 (KLR)

Kibunyi v Commissioner of Legal Services (Tax Appeal 1253 of 2022) [2023] KETAT 872 (KLR) (8 December 2023) (Judgment)

Neutral citation: [2023] KETAT 872 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal 1253 of 2022

E.N Wafula, Chair, RO Oluoch, Cynthia B. Mayaka, E Ng'ang'a, AK Kiprotich & B Gitari, Members

December 8, 2023

Between

Fredrick Chege Kibunyi

Appellant

and

Commissioner Of Legal Services

Respondent

Judgment

Background 1. The Appellant is an individual and a registered taxpayer. The Appellant is in the business of supply of timber products.

2. The Respondent is a principal officer appointed under and in accordance with Section 13 of the Kenya Revenue Authority Act, the Authority is charged with the responsibility of among others, assessment, collection, accounting, and the general administration of tax revenue on behalf of the Government of Kenya.

3. The Respondent on 26th November, 2021 assessed the Appellant for income tax amounting to Kshs 6,220,278. 00. The Appellant lodged a late objection application on 26th January, 2022.

4. The Respondent Vide a letter dated 25th March, 2022 rejected the Appellant’s application for late objection.

5. The Appellant issued a Notice of Appeal dated 12th October, 2022 and filed this Appeal before the Tribunal on 25th October, 2022.

The Appeal 6. The Appeal is premised on the following grounds as highlighted in the Memorandum of Appeal filed on 26th October, 2022:i.The Respondent erred in law and in fact by failing to consider that the Appellant had adequately tendered his objection within the earliest opportunity.ii.The Respondent erred in law and in fact by failing to consider the fact that the Appellant had adduced adequate reasons for consideration for late objection among them being, failing to receive adequate emails from the Respondent and emails arriving as spam hence the Appellant was unable to adequately respond to the Respondent's emails as reasonable cause for failure to timely object.iii.The Respondent erred in law and in fact by failing to send timely notices hence the Appellant was unable to adequately respond.iv.The Respondent erred in law and in fact by considering erroneous facts in its final determination of income tax resident individual additional assessment, hence arriving at a misleading figure.v.The Respondent erred in law and fact by failing to consider the Appellant evidence or at all in finding that the objection letter was not merited.vi.The Respondent erred in law and in fact by relying and or considering procedural technicalities and not on merit of the application in reaching its decision.vii.The Respondent erred in law and in fact by making an inference of failure to timely object without any justification in law and evidence.viii.The Respondent erred in law and in fact by failing to take into cognizance that the Appellant never received notices or emails to wit a timely response from the Appellant.

Appellant’s Case 7. The Appellant’s case is premised on his Statement of Facts dated 12th October, 2022 and filed on 25th October, 2022 together with the documents attached.

8. The Appellant submitted that in the month of April 2016, the accountant on filing the VAT used a VAT CSV Form of another company Desire Wholesaler Ltd which deals with both vatable and exempt products.

9. That the Accountant forgot to erase the non-vatable elements on both output Vat and input Vat.

10. That upon the analysis of the aggregate VAT filed throughout the accounting year together with the income tax return filed, the KRA officer came up with the variance of Kshs. 18,355,154. 00 which attracts income tax of Kshs 6,200,000. 00

11. The Appellant submitted that the error was not intentional and could be averted.

12. That it had been tax compliant and the mistake could have been averted had the Accountant been more keen and accurate.

13. That the taxes demanded are inaccurate and incommensurate with the statutory prescription.

14. That the error can be corrected in fact finding, the reasons having been adequately provided.

15. It was the Appellant’s contention that mistakes committed/made by a professional should not be visited upon an innocent client. That the Appellant is protected under Article 46 of the Constitution of Kenya on consumer protection and the right to goods and services of reasonable quality and goods and services offered by public entities or private persons.

16. The Appellant stated that the emails sent to the Appellant were never timely received since they were detected as spam. That the Appellant was never accorded ample time to raise an objection according to law.

17. That it is in the best interest of justice and fairness, that the Appellant should be accorded an opportunity to contest the position taken by the Respondent.

18. That on the strength of the evidence it will be clear that the decision of the Respondent cannot be sustained.

Appellant’s Prayers 19. The Appellant made the following prayers;i.That the Appeal be allowed.ii.That the decision of the Respondent be reviewed, varied, set aside or be vacated altogether.iii.That any other or further relief that the Honorable Tribunal may deem just and fit to grant.iv.Costs of the Appeal.

Respondent’s Case 20. The Respondent’s case is premised on the hereunder filed documents and proceedings before the Tribunal;a.The Respondent’s Statement of Facts filed on 23rd November, 2022 together with the documents attached thereto.b.The Respondent’s written submissions dated 8th June, 2023 and filed on 9th June, 2023.

21. The Respondent averred that the Appellant had underdeclared his income tax turnover for the year 2016. That on 26th November 2021, the Respondent assessed the Appellant for unpaid Income taxes that amounted to Sh. 6,220,278. 00.

22. That subsequently, the Appellant lodged a late objection application on 20"' June, 2022. The Respondent contended that the Appellant failed to provide valid reasons for lodging the objection out of time. That vide a letter dated 25th March, 2022 it rejected the Appellant's application for extension of time.

23. The Respondent stated that it shall raise an objection that the Appeal is incompetent;a.For non-compliance with Section 13(b)and 13(2) of the Tax Appeals Tribunal Act.b.For non-compliance with Section 13(2)(c) of the Tax Appeals Tribunal Actc.For non-compliance with Section 13(6) of the Tax Appeals Tribunal Act

24. The Respondent stated that it rendered a decision on 25th March, 2022, but the Appellant has challenged a decision of 23rd March, 2022 which was not annexed. That the decision of the Respondent rendered on 25th March, 2022 was therefore unchallenged.

25. The Respondent in response to the grounds contained in the Memorandum of Appeal reiterated its findings as captured in the Assessment Order dated 26th November 2021.

26. The Respondent averred that in the instant case, the Appellant lodged the notice of objection beyond the statutorily prescribed timelines. That in fact, the assessment was issued on 26th November, 2021 whilst the notice of objection was lodged on 26th January, 2022.

27. That the period within which a notice of objection should be lodged is prescribed under the provisions of Section 51(2) of the TPA.

28. That nevertheless, the Appellant did make an application to the Respondent to extend the time to lodge a late notice of objection.

29. The Respondent asserted that pursuant to the provisions of Section 51(7) of the Tax Procedures Act, the Appellant failed to provide valid reasons for lodging his application out of time.

30. It stated that the Appellant averred that he did not receive e-mails from the Respondent since they were detected as spam hence the delay. That the Appellant had failed to indicate when he detected the emails and why the emails went undetected.

DIVISION - Respondent’s Prayers 31. The Respondent prays that this Tribunal finds that:a.That the Respondent's Assessment Order dated 26th November 2022 is proper in law and the same affirmed.b.The Appeal be dismissed with costs to the Respondent as it is devoid of merit.

Issues For Determination 32. The Appeal herein raises the following issues for determination;a.Whether the Appellant’s Appeal is competent and sustainable in law.b.Whether the taxes assessed are due and payable.

Analysis And Findings 33. Having identified the issues for determination, the Tribunal proceeded to analyze the same as follows:-

a. Whether the Appellant’s Appeal is competent and sustainable in law. 34. The Respondent raised an Objection that the Appeal was incompetent for the following reasons;a.For non-compliance with Section 13 (b)and 13 (2) of the Tax Appeals Tribunal Act.b.For non-compliance with Section 13 (2) (c) of the Tax Appeals Tribunal Actc.For non-compliance with Section 13 (6) of the Tax Appeals Tribunal Act

35. The Respondent stated that it rendered a decision on 25th March, 2022, but the Appellant has challenged a decision of 23rd March, 2022 which was not annexed. That the decision of the Respondent rendered on 25th March, 2022 was therefore unchallenged.

36. The Tribunal noted from the Appellant’s Notice of Appeal and the Memorandum of Appeal, that the Appellant was consistent that it was appealing against a decision of the Commissioner dated 23rd March, 2022. The Tribunal has further noted that the Respondent on the other hand stated and attached to its Statement of Facts its letter dated 25th March 2022 which it averred was the tax decision. It is important that the Tribunal should have sighted the document that the Appellant refers to as dated 23rd March 2022 in order to make a determination.

37. Section 13(2) of the Tax Appeals Tribunal Act provides as follows regarding Appeals to the Tribunal;“The appellant shall, within fourteen days from the date of filing the notice of appeal, submit enough copies, as may be advised by the Clerk, of –(a)a memorandum of appeal;(b)statements of facts; and(c)the tax decision.”(Emphasis added)

38. The Tribunal has perused the documents presented by the Appellant and noted that although the Appellant had filed its Appeal documents on 25th October, 2022 he did not attach the tax decision he referred to as dated 23rd March. 2022 which it was appealing against contrary to the provisions of Section 13(2)(c). This Section of the law is couched in mandatory terms and therefore fatal to a taxpayer who fails to comply.

39. It is the Tribunal’s position that the Appellant cannot find an appeal against a non-existent tax decision. The Appellant ought to have provided the tax decision it was appealing against for the Tribunal’s consideration as required by law.

40. In the light of the foregoing analysis the Tribunal finds that the Appeal lodged by the Appellant is incompetent and unsustainable in law.

b. Whether the taxes assessed are due and payable. 41. Having found that the Appeal is incompetent, the Tribunal did not delve into this issue as it has been rendered moot

Final Decision 42. On the basis of the foregoing analysis the Tribunal proceeds to issue the following Orders:-a.The Appeal be and is hereby struck out.b.Each party to bear its own costs.

43. It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 8TH DAY OF DECEMBER, 2023. ERIC NYONGESA WAFULA - CHAIRMANCYNTHIA B. MAYAKA - MEMBERDR. RODNEY O. OLUOCH - MEMBEREUNICE NG’ANG’A - MEMBERABRAHAM K. KIPROTICH - MEMBERBERNADETTE GITARI - MEMBER