[2023] KETAT 547 (KLR)

Kingori v Commissioner of Domestic Taxes (Tax Appeal E103 of 2023) [2023] KETAT 547 (KLR) (18 August 2023) (Ruling)

Neutral citation: [2023] KETAT 547 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal E103 of 2023

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

August 18, 2023

Between

Margaret Wagaki Kingori

Appellant

and

Commissioner of Domestic Taxes

Respondent

Ruling

1. The Appellant vide a Notice of Motion dated the 31st May, 2023 and filed on the same date and supported by an Affidavit sworn by Margaret Wagaki Kingori, the Applicant herself, on the 31st day of May, 2023 sought for the following Orders:-i.Spent.ii.That the Tribunal do grant leave to the Applicant to file the Appeal out of time.iii.That the Tribunal do issue any other and/or any further Orders that it may deem fit or just.

2. The application is premised on the following grounds:-i.That the Appeal was lodged out of time for reasonable cause as the Applicant was prevented from filing the Appeal due to sickness.ii.That upon recuperation, the appeal was lodged with reasonable speed.

3. In opposition to the application, the Respondent through a Replying Affidavit sworn by Rosemary Lubanga Kwoba, an officer of the Respondent, on the 14th day of June, 2023 and filed on the even date raised the following grounds:-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 objection decision dated 25th July 2022. iii.That the Applicant was to file a Notice of Appeal within 30 days of the date of the decision.iv.That the Applicant failed to appeal within the timelines stipulated under Section 13(1)(b) of the Tax Appeals Tribunal Act.v.That the Applicant indicates that it lodged its Appeal to the Tax Appeals Tribunal on 29th March 2023, 8 months after the Respondent issued its objection decision contrary to the provisions of Section 51(12) of the Tax Procedures Act.vi.That the Applicant lodged the application for an extension of time to file an appeal more than 8 months after receiving the Respondent’s decision and more than a month after receiving the Respondent’s Statement of Facts. That this delay is not only inordinate but inexcusable.vii.That the Applicant’s director alleges that the appeal was filed out of time due to sickness yet they have not availed any proof of any treatment during the periods they allege but instead a letter whose credibility is difficult to determine.viii.That the Applicant’s actions appear to be an afterthought evidenced by the lack of proper medical records for the period to support the assertion as well as the timing of its application which comes after the Respondent has filed its Statements of Facts.ix.That the Applicant’s actions are indolent, an abuse of the Court process and are solely for the purpose of filling the gaps in its case having already had a chance to examine the Respondent’s case.x.That mere statements that are not backed by evidence of any sort and are 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 eight months after issuance of the Respondent’s 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 in order.xiii.That the indolence and negligence of the Applicant to follow up on its matter and leaving the same unattended should not be excused as doing so will create a bad precedent.xiv.That the application is clearly 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 the Tribunal as doing so would offend the equitable maxim that 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 accounted for 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 in the circumstances, it is in the public interest that the Tribunal dismisses the Applicant’s Notice of Motion application to pave way for the Respondent to collect taxes due from the Applicant which are key to the economic development of the Country.

Analysis and Findings 4. In compliance with the directions of the Tribunal to the effect that the application was to be canvassed by way of written submissions, the Appellant filed its submissions dated 14th July, 2023 and filed on the 20th July, 2023 and the Respondent filed its submissions dated the 20th July, 2023 and filed on the same date. The Tribunal has duly considered the written submissions of the parties in arriving at its determination in this Ruling.

5. 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.

6. 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 that:-―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‖

7. 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 v 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...‖

8. Further, in Sammy Mwangi Kiriethe & 2 others v Kenya Commercial Bank Ltd [2020] eKLR, the court held that:-―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.‖

9. The Tribunal, guided by the principles set out in John Kuria v Kelen Wahito, Nairobi Civil Application Nai 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 Tax Appeals Tribunal Act, 2013 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 there will be prejudice suffered by the Respondent if the extension is granted?

a. Whether there is a reasonable cause for the delay 10. The Tribunal notes that the objection decision was issued by the Respondent on 25th July 2022 therefore the Appellant ought to have issued its Notice of Appeal on or before 25th August 2022. The Appellant filed the Notice of Appeal on 29th March 2023 which is more than seven (7) months late.

11. 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‖.

12. 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 AppealsTribunal 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; andc.the tax decision.‖

13. 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 tax payer 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.‖

14. Regarding the reasons for delay, the Appellant stated that it was prevented from filing the Appeal due to sickness of its director

15. The Respondent on its part stated that the Appellant’s director alleged that the appeal was filed out of time due to sickness yet the Appellant has not availed any proof of any treatment during the periods it alleges but instead has produced a letter whose credibility is difficult to determine.

16. The Tribunal notes that to support its averment that the director had been unwell, the Appellant attached a letter dated 24th March 2023 from The Medical Superintendent for Samburu County Referral Hospital indicating theApplicant had been admitted severally following mild stroke she suffered on 20th July 2022.

17. The Tribunal was of the view that although the actual duration and level of indisposition could not be determined, based on the evidence adduced, the Tribunal was persuaded that the director had indeed suffered ill health.

18. Consequently, the Tribunal determined that the Applicant had demonstrated reasonable cause for delay.

b. Whether the appeal is merited? 19. The Tribunal considered whether the matter under dispute was frivolous to the extent that it would be a waste of the Tribunal time, or it was material to the extent that it deserved its day in the Tribunal.

20. 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 that―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.‖

21. The Tribunal was further guided by the findings of the court in Kenya Commercial Bank Limited v Nicholas Ombija [2009] eKLR where it was held that:―An arguable appeal is not one which must necessarily succeed, but one which ought to be argued fully before the court.‖

22. Similarly, in Kenya Commercial Bank Limited v 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 v 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.‖

23. The Tribunal noted that the Respondent’s decision dated 25th July 2023 confirmed the assessments for Income Tax and VAT all amounting to Kshs 3,106,797. 00. Looking at the draft Memorandum of Appeal by the Applicant, the Tribunal noted that the Applicant had raised five grounds of Appeal that required rebuttal by the Respondent. Going by the standards set out in the Stanley Kangethe Kinyanjui Vs Tony Keter & others [2013] case the Tribunal finds that the Appellant had an arguable case which required to be canvassed and considered on its full merits.

a. Whether there will be prejudice suffered by the Respondent if the extension is granted? 24. 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 that:―…….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………‖

25. 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 viewof the Tribunal that the Appellant’s recourse to justice 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 hand 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.

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

Disposition 27. Based on the foregoing, the Tribunal finds that the application is merited and the Tribunal accordingly proceeds to make the following Orders:i. The application be and is hereby allowed.ii. The Appellant be and is hereby granted leave to file an Appeal out of time.iii. The Notice of Appeal, Memorandum of Appeal and the Statement of Facts filed before the Tribunal on the 29th March 2023 be and are hereby deemed as duly filed and served.iv. No orders as to costs.

DATED and DELIVERED at NAIROBI this 18th day of August, 2023. ERIC NYONGESA WAFULA - CHAIRMANABRAHAM KIPROTICH - MEMBEREUNICE NJERI NGANGA MEMBERMARTIN M. MAKAU - MEMBERELISHAH NJERU - MEMBER