[2024] KETAT 602 (KLR)

Kimani v Commissioner of Domestic Taxes (Miscellaneous Application E131 of 2023) [2024] KETAT 602 (KLR) (Civ) (19 April 2024) (Ruling)

Neutral citation: [2024] KETAT 602 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Civil

Miscellaneous Application E131 of 2023

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

April 19, 2024

Between

John Gathecha Kimani

Applicant

and

Commissioner Of Domestic Taxes

Respondent

Ruling

1. The Application which was by way of a Notice of Motion dated 8th September 2023 and filed on the 14th September, 2023 is supported by an Affidavit sworn by the Applicant, himself, on the 7th September, 2023 sought for the following Orders:-a.The Honourable Tribunal be pleased to grant leave to the Applicant to file and serve its Notice of Appeal to the tax decision out of time.b.The Honourable Tribunal be pleased to grant leave to the Applicant to file and serve its Memorandum of Appeal, Statement of Facts and tax decision out of time.c.The Honourable Tribunal be pleased to grant the Applicant an extension of time to file and serve its Memorandum of Appeal, Statement of Facts and tax decision.d.The costs of this application be provided for.

2. The application is premised on the following grounds:-a.That the Applicant, being dissatisfied with the decision of the Respondent given on 21st June 2022 wishes to institute an appeal against the Respondent by filing a Notice of Appeal.b.That as per Section 13(2) of the Tax Appeals Tribunal Act No. 40 of 2013 and Rule 3(2) of the Tax Appeals (Procedures) Rule 2015, the Applicant was required to file a Notice of Appeal, the tax decision within (14) days after the tax decision.c.That as per Section 13(2) of the Tax Appeals Tribunal Act No. 40 of 2013 and Rule 3(2) of the Tax Appeals (Procedures) Rule 2015, the Applicant was required to file a Memorandum of Appeal, Statement of Facts and tax decision within 30 days after filing the Notice of Appeal.d.That these 14 days lapsed on 5th July 2022. e.That the Appeal is based on the decision by the Commissioner of the Respondent to assess and charge a total of Kshs 16,550,906,.58 to the Applicant without regard to the rule of law. The Applicant was unable to prepare for the Appeal since during this period he was unwell and unable to receive communication via email or post office due to his condition.f.That the Applicant came to know of the tax decision later when he received an email communicating the tax decision and was later called upon by the Commissioner’s team to be informed of the intention to file an agency on his accounts over tax debts.g.That the Applicant stands to suffer substantial financial loss if the orders sought are not granted.h.That this application is brought in good faith and if leave is granted, the Respondent will not in any way be prejudiced.i.That it is in the circumstances only fair and just that the orders sought be granted.

3. The Applicant in his written submissions dated and filed on 24th October, 2023 relied on Section 13(3) of the Tax Appeals Tribunal Act and the cases of Leo Sila Mutiso v Rose Hellen Wangari Mwangi, Civil Application Nai. 251 of 1997 and Stanely Kaiyongi Mwenda v Cyprian Kubai [2000] eKLR and submitted that its Application meets the criteria for extension of time.

4. The Applicant submitted that since there was an unintentional breakdown of communication between the Respondent and the Applicant sometime in May 2022, the instant application was filed on 14th September 2023.

5. The Applicant cited the case of Karatina Emporium Limited v Commissioner of Domestic Taxes (Miscellaneous Application No E24 of 2023) [2023] KETAT 358 (KLR) (Civ) (9 June 2023) (Ruling) where the court considered the Ugandan case of Ojara v Okwera (Miscellaneous Civil Application- 2017/23) [2018] UGHCCD 42 and submitted that the Respondent has not put forth any proof or evidence of the letters or emails alleged to have been sent to the Applicant dated 30th May and 16th June 2022 therefore the letters are mere allegations.

6. The Applicant contended that he could not confirm that he received communication from the Respondent requesting to be furnished with further particulars and/or supporting documents in favour of the Objection and thus he could not have been aware that there was a confirmation of assessment that had been delivered.

7. The Applicant relied on Section 107 of the Evidence Act, CAP 80 and argued that the delay was occasioned by the failure of the Respondent’s correspondence to reach the Applicant.

8. The Applicant cited Section 13(4) of the Tax Appeals Tribunal Act and maintained that the delay in the instant case was unintentional and inordinate as the Applicant co-operated with the Respondent until his illness arising from his diabetes and hypertension hindered and consequently led to a breakdown of communication between the Applicant and his tax agent and the Respondent and the Applicant thus the Applicant was not in a position to follow up and/or cause due diligence on the status of the matter.

9. The Applicant submitted that he produced a copy of correspondence between the Respondent and his then duly appointed tax agent, M/S Thumbi Ng’ang’a & Associates (CPA) dated 10th March 2022 soon after the Respondent’s assessment was issued to prove his good faith intention to participate in the proceedings which the Respondent also acknowledges in its decision in its letter dated 21st June 2021.

10. The Applicant reiterated that he was unwell and produced medical reports from Nazareth Ruiru Hospital dated 15th October 2023 before the Honourable Tribunal which indicate that the Applicant was seriously taken ill and was unable to walk, talk, had general weakness and high blood pressure which incapacitated him. He added that the medical reports indicate that the Applicant was admitted on 2nd May 2022, about 1 month and 18 days before the Respondent issued its decision dated 21st June 2022 and his condition was explained as being an uncontrolled diabetic thus his health was at high risk until his discharge on 12th July 2022.

11. The Applicant argued that he was unable to respond to any request for documents if at all the Respondent sent emails as alleged or issued instructions regarding the dispute since he was discharged after three weeks after he was discharged and he was unable to go about his normal operation and duties until a full and proper recovery.

12. On whether the intended appeal is merited the Applicant submitted that the actions complained of against the Respondent are merited and the Applicant has an arguable appeal on its merits and would not be a waste of this Honourable Tribunal’s time. He added that it is sufficient that the intended appeal is arguable and not mandatorily viewed to succeed.

13. The Applicant cited the case of Esso Motors Limited v Commissioner of Domestic Taxes [2022] eKLR where the court approvingly cited the case of Samwel Mwaura Muthumbi v Josephine Ngugi & Another [2018] eKLR and contended that in disputing the objection decision confirming the assessment for the income tax amounting to Kshs. 16,550,906. 58, he annexed to his application a draft copy of the Intended Memorandum of Appeal dated 13th September 2023 in which he argued that the confirmation of assessments issued by the Respondent was incorrectly based on non-revenue items like loans and personal bank deposits extrapolated from the Applicant’s bank statements without considering allowable expenses thus incorrectly assessing the Applicant beyond his earnings.

14. On whether there will be any prejudice to be suffered by the Respondent if the orders sought are granted the Applicant submitted that he stands to suffer substantial loss if he is not allowed to ventilate and prosecute his intended appeal as a substantial sum of Kshs 16,550,906. 58 after additional assessments are issued between the parties.

15. The Applicant relied on the case of Patrick Maina Mwangi v Waweru Peter [2015] eKLR where the court approvingly cited the case of United Arab Emirates v Abdel Ghafar & Others [1995] IR LR 243 and reiterated that the Respondent has not demonstrated how it stands to be prejudiced by an extension of time to lodge an appeal as the Respondent will still have an opportunity to respond to the intended appeal and it shall also be at liberty to make any applications to this Honourable Tribunal if necessary.

16. The Applicant argued that his recourse to justice lies in an appeal to the Tribunal thus he would suffer prejudice if he were not granted leave to file his Appeal. That in any event, the Respondent would still collect the taxes inclusive of penalties and interest should it be found to be due and payable.

Response to the Application 17. The Respondent filed a Replying Affidavit sworn by Amon Kipkemei Kandagor, an officer of the Respondent, on 26th September 2023 and filed on 28th September 2023 citing the following as the grounds for opposition:-a.That the Respondent issued an assessment for income Tax- Resident individual for the period of January 2017 to May 2020 in the sum of Kshs. 16,550,906. 58 on 10th February 2022. b.That the Applicant subsequently filed an Objection against the assessments on 24th February 2022. c.That the Respondent vide the letter dated 21st June 2022 wrote to the Applicant in response to the notice of objection and declared the application invalid since the Applicant failed to provide supporting documents to validate its objection as prescribed in Section51(3) of the Tax Procedures Act 2015. d.That the Applicant has not set out and/or demonstrated any solid grounds that would warrant this Honourable Tribunal to exercise its discretion in favour of the Applicant. The Applicant has failed to lay a sufficient basis to the satisfaction of the Tribunal for extension of time to file an appeal.e.That the fact that the Applicant failed to follow up on the decision of the Respondent for more than twelve months is a demonstration that the Applicant has not been vigilant and does not warrant the exercise of the Tribunal’s discretion in his favour. The Applicant is guilty of laches.f.That the delay is unreasonable and not excusable on the grounds that the Applicant had no intention of settling the outstanding tax liability and only woke up after the agency notices.g.That the Applicant has not met the conditions of Section 13(4) of the Tax Appeals Tribunal Act to warrant the exercise of the Tribunal’s discretion in its favour.h.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 Honourable Tribunal as doing so would offend the equitable maxim of equity aids the vigilant and not the indolent and ultimately create bad precedence.i.That the Applicant is not deserving of the orders sought in the application as the whole period of delay has not been sufficiently explained satisfactorily to the Tribunal thus the application ought to be dismissed.j.That the Respondent is merely carrying out its statutory duty under the law by issuing enforcement notices and consequently pray that its actions be upheld by this Honourable Tribunal.k.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.l.That in the circumstances, it is in the public interest that this Honourable Tribunal dismisses the Applicant’s application dated 8th September 2023 to pave the way for the Respondent to collect taxes due from the Applicant which are key to the economic development of the Country.m.That the indolence and negligence of the Applicant should not bar the Respondent from fulfilling its mandate of collecting taxes that are due and payable.n.That the Applicant has failed to satisfy the principles as set out in Nicholas Kiptoo Arap Korir Salat v Independent Electoral and Boundaries Commission & 7 Others [2014] eKLR.

18. The Respondent in its written submissions dated and filed on 13th October, 2023 contended that the Applicant should not be granted the leave to appeal the Commissioner’s decision out of time for reasons that it would be in contravention of the Tax Appeals Tribunal Act, which provides for the timelines within which the aggrieved party should prefer an appeal. It added that the Applicant has not met the requisite threshold to warrant leave to appeal out of time.

19. The Respondent relied on Section 13(1) and (2) of the Tax Appeals Tribunal Act and asserted that the intended appeal is defective for being time barred according to the statutory timelines.

20. The Respondent contended that it rendered the invalidation notice on 21st June 2022 but the Applicant lodged the instant application on 8th September 2023, more than 12 months later, evidently out of time.

21. The Respondent relied on the case of Mwangi Vs. Kenya Airways which was cited in the case of APA Insurance Limited v Michael Kinyanjui Muturi [2016] eKLR and Section 13(3) and (4) of the Tax Appeals Tribunal Act and maintained that the Applicant failed to provide supporting documents and the intended appeal is 12 more than months late after the invalidation notice was issued.

22. The Respondent cited the case of Nicholas Kiptoo Korir Arap Salat v Independent Electoral and Boundaries Commission & 7 Others [2014] eKLR and argued that the Applicant failed to meet the threshold laid out therein and to satisfy the provisions of Section 13(4) of the Tax Appeals Tribunal Act.

23. The Respondent submitted that the reason advanced by the Applicant to file the appeal within statutory timelines was that he was unwell and unable to receive communication via email or post office due to his health condition but the Applicant had failed to attach a medical report to prove the claim of illness.

24. The Respondent cited the case of Yussuf Mohamed Salat v Idris Ali Ahmed [2009] eKLR and maintained that the Applicant has not been vigilant in pursuing this matter since the application was filed more than 12 months after the invalidation notice.

25. The Respondent further relied on the case of Mwangi S. Kimenyi v Attorney General & Another [2014] eKLR and asserted that the Applicant slept on his laurels as the period is inordinately long in the circumstances as more than 12 months cannot be termed as normal but excessive and is inexcusable and does not warrant the Tribunal’s exercise of discretion in favor of the Applicant.

26. The Respondent relied on the case of Cleophas Wasike v Mucha Swala [1984] eKLR and the case of Joseph Gitahi Gachau & Another v Pioneer Holdings (A) Ltd & 2 Others, Civil Application No. 124 of 2008 and submitted that the intended appeal is frivolous and would lead to the eventual waste of the Honourable Court’s time as a cursory perusal of the Memorandum of Appeal filed reveals that the intended appeal is incapable of being argued since the Applicant has not provided plausible grounds of facts or law that would likely overturn the Respondent’s decision.

27. The Respondent asserted that the grounds set out in the Memorandum of Appeal by the Applicant are on the substantive issues of the assessment and not the invalidation notice. It added that the Applicant cannot go into the merits of the assessments as the decision by the Respondent was in respect to the invalidation of an objection for failure to provide supporting documents and relied on Section 56(3) of the Tax Procedures Act and Section 13(6) of the Tax Appeals Tribunal Act.

28. The Respondent cited the case of TAT Misc. Appl No. E069 of 2023 Gitari Wholesalers Limited v Commissioner of Domestic Taxes and contended that there is no appealable decision that can be appealed at the Tribunal thus the Applicant has no arguable appeal.

Analysis and Findings 29. The Tribunal is enjoined to determine the length and reason for the delay when considering an application for the extension of time to appeal out of time. The power to extend time is discretionary and unfettered but the same must be exercised judiciously and it is not a right to be granted to the Applicant.

30. In determining whether to extend time, the Tribunal was guided by the decision in the case of Leo Sila Mutiso v Rose Hellen Wangari Mwangi - Civil Application No. Nai. 255 of 1997 (unreported), where the Court expressed itself thus:-“It is now well settled that the decision whether or not to extend the time for appealing is essentially discretionary. It is also well settled 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 reason 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.”

31. The Tribunal, guided by the principles set out in John Kuria v Kelen Wahito, Nairobi Civil Application Nai 19 of 1983 April 10, [1984] where the court used the following criteria to consider the application.a.Whether there is a reasonable cause for the delay?b.Whether the appeal is merited?c.Whether the application for extension has been brought without undue delay?d.Whether there will be prejudice suffered by the Respondent if the extension is granted?

a. Whether there is a reasonable cause for the delay? 32. In considering what constitutes a reasonable reason for the delay, the court in Paul Wanjohi Mathenge v Duncan Gichane Mathenge [2013] eKLR, held 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.”

33. The Applicant submitted that he could not file the Appeal in time because he did not receive the Respondent’s decision as he was sick and thus unable to receive any communication from the Respondent concerning his Objection.

34. The Applicant produced a medical chit from Nazareth Ruiru Hospital that is dated 15th October, 2023 which suggests that the Applicant was admitted for treatment at the facility on 2nd May, 2022 and was discharged on 12th July, 2022. There are no admission and discharge notes produced by the Applicant. The treatment chits speaks to a general medical condition and appears authored specifically for the present application.

35. The Tribunal having perused the Applicant’s pleadings and documentary evidence finds that the Applicant has not proffered any reasonable evidence or explanation on why the instant application was lodged late other than the same was brought without undue delay.

36. It is therefore the Tribunal’s finding that the Applicant has not established any reasonable cause for the delay.

37. Having found as above, it is the Tribunal’s finding that there is no need in analyzing the remaining factors or principles to be considered in such an application as doing so would be an exercise in futility and a waste of the Tribunal’s time.

Disposition 38. The Tribunal in the circumstances finds that the application is not meritorious and finds in favour of the Respondent.

39. The Tribunal accordingly makes the following Orders:-a.The application be and is hereby dismissed;b.No orders as to costs.

DATED AND DELIVERED AT NAIROBI THIS 19TH DAY OF APRIL, 2024ERIC NYONGESA WAFULACHAIRMANELISHAH N. NJERU MUTISO MAKAUMEMBER MEMBEREUNICE N. NG’ANG’A ABRAHAM K. KIPTROTICHMEMBER MEMBERRULING – MISC APPLICATION NO. E131 OF 2023 JOHN GATHECHA KIMANI VS. COMMISIONER OF DOMESTIC TAXES Page 15