[2023] KETAT 211 (KLR)

Logistics & Energy Africa Limited v Commissioner of Domestic Taxes (Miscellaneous Application 257 of 2022) [2023] KETAT 211 (KLR) (Commercial and Tax) (5 May 2023) (Ruling)

Neutral citation: [2023] KETAT 211 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Commercial and Tax

Miscellaneous Application 257 of 2022

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

May 5, 2023

Between

Logistics & Energy Africa Limited

Applicant

and

Commissioner of Domestic Taxes

Respondent

Ruling

1. The applicant vide a notice of motion dated the September 23, 2023 filed under a certificate of urgency on the September 26, 2022 and supported by an affidavit sworn by Stephen Kariuki, a Director of the applicant, on the September 21, 2022, sought for the following orders:-i.Spent.ii.That the intended appellant/applicant be granted an extension of time with regard to filing notice of appeal and memorandum of appeal to this tribunal.iii.That the tribunal do issue an order lifting, vacating and setting aside the respondent’s agency notices date January 21, 2022 and issued to Managing Directors NCBA Bank, requiring it to pay Kshs 3,298,291. 00 pending the full hearing and determination of this application and appeal herein.iv.That the tribunal do issue an order restraining the respondent either by itself, its agents, employees, servants or through any other person at its behest, from issuing any other agency notices against the referred bank accounts, or any account held and/or owned by the appellant/applicant in any other company, and/or lift, vacate and set aside any other agency notice issued against any other bank or other account owned or held by the appellant/applicant in any other company until this application and the main appeal is heard and determined.v.That the cost of this application be costs in the cause.vi.That this tribunal be pleased to issue any such orders as it deems just and expedient.

2. The application is premised on the following grounds:-i.That the respondent issued the applicant with an assessment on June 8, 2018. ii.That the applicant applied for objection on August 23, 2021. iii.That the respondent later issued an objection decision on October 6, 2021. iv.That the respondent sent the objection decision to a secondary email that only the accountant who had long left the applicant business premises would access.v.That the accountant did not inform the applicant of the objection decision but the applicant came to know about when the agency notices, were issued.vi.That the applicant proceeded to visit the tax service office and was later informed that the agency notice was as a result of the objection decision and the applicant later followed with the independent review of objections and requested for the objection decision to be sent to an email they would access.vii.That the applicant’s reason for delay in filing was not as a result of indolence on its part.viii.That the applicant has approached the tribunal at the earliest juncture and failure to file the notice of appeal within the stipulated timelines is as a result of factors beyond control.

3. The respondent opposed the application through a replying affidavit sworn by Esther Eshiwani, an officer of the respondent, on the October 7, 2022 and filed on the same date. The grounds of opposition as highlighted in the affidavit were as follows:-i.That the respondent opposes in totality all the prayers that the notice of motion dated September 23, 2022 has sought.ii.That tax investigations into the business affairs of the applicant for the tax period December 2017 revealed that the applicant herein had provided vatable services to Kenya Rural Urban Roads Authority and a withholding certificate was issued but the applicant failed to declare the sales.iii.That on the June 8, 2018 the respondent issued a VAT assessment against the applicant based on the undeclared sales made to Kenya Rural Urban Road Authority.iv.That the applicant made a late objection to the additional VAT assessment on the August 23, 2021. v.That on the August 26, 2021 the applicant was requested to validate the late objection with documentation.vi.That the applicant failed to avail the documentation in support of its late objection and the respondent consequently vide a letter dated October 6, 2021 invalidated the late objection and confirmed the additional VAT assessments amounting to Kshs 3,298,291. 00. vii.That the respondent avers that the applicant was served with the invalidation notice dated October 6, 2021 vide an email.viii.That the applicant failed to exercise its right to appeal against the respondent confirmed tax assessment to the Tax Appeals Tribunal within 30 days as stipulated under section 52 of the Tax Procedures Act, 2015 and sections 12 and 13 of the Tax Appeals Tribunal Act, 2013. ix.That the applicant’s contention that it was unaware of the invalidation notice as it was sent to its accountant’s email who left the company is false as the same was sent to the applicant’s official email as provided in its iTax profile.x.That the applicant has failed to explain the 10 months delay in filing the intended appeal.xi.That the applicant has failed to satisfy the conditions to enlarge time to lodge an appeal out of time as laid out under section 13(4) of the Tax Appeals Tribunal Act, 2015 and rule 10(2) and (3) of the Tax Appeals Tribunal (Procedure) Rules, 2015. xii.That the applicant is guilty of undue delay and indolence and has failed to take personal responsibility of its own tax affairs and is only engaging in blame games.xiii.That in the circumstances, the respondent prays that the tribunal dismisses the applicant’s application with costs to the respondent as the taxes of Kshs 3,298,291. 00 are due and payable.

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 respondent filed its submissions while the applicant failed to file any. The tribunal has duly considered the written submissions in arriving at its determination in this ruling.

5. The applicant is primarily praying to the tribunal for its appeal documents to be admitted late. From the submissions, the tribunal noted that the respondent invalidated the applicant’s objection on October 6, 2022.

6. 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.

7. In determining whether to expand time, courts have in the past considered a number of factors. These factors were discussed in Leo Sila Mutiso v 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.”

8. 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.

9. The tribunal, guided by the principles set out in Leo Sila Mutiso v 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.The merits of the complained action.b.Whether there is a reasonable cause for the delay.c.Whether there will be prejudice suffered by the respondent if the extension is granted.

The Merits Of The Complained Action 10. The tribunal considered whether the matter under dispute was frivolous to the extent that it would be a waste of the tribunal’s time, or it was material to the extent that it deserved its day in the tribunal.

11. 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.”

12. The tribunal was further guided by the findings of the court inKenya 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.”

13. The applicant submitted that it applied for objection on August 23, 2021 and the respondent later issued an objection decision on October 6, 2021.

14. The respondent on its part stated that it issued a VAT assessment on June 8, 2018 based on the undeclared sales made to Kenya Rural Urban Road Authority. That the applicant made a late objection to the additional VAT assessment on the August 23, 2021. That on the August 26, 2021 the applicant was requested to validate the late objection with documentation.

15. That the applicant failed to avail the documentation in support of its late objection and the respondent consequently vide a letter dated October 6, 2021 invalidated the late objection and confirmed the additional VAT assessments amounting to Kshs 3,298,291. 00.

16. The tribunal noted that the applicant was served with an assessment order on June 8, 2018 and the applicant filed an application for late objection on August 28, 2021. After various email correspondences, the respondent subsequently vide a letter dated October 6, 2021, invalidated the applicant’s application to file a late objection.

17. From the respondent’s letter dated October 6, 2021, the respondent stated in part as follows;“Reference is made to your application for acceptance of late objection dated August 23, 2021 in response to additional assessments raised in iTax on June 8, 2018, our emails on diverse dates with the last being on September 13, 2021. We note with regret that you have failed to provide reasons for the late applicationIn light of the above, your application is declared invalid as it failes to meet the requirements of section 51(7) of the Tax Procedures Act 2015…..”

18. From the above extract of the respondent’s letter of October 6, 2021 it is clear that the applicant’s application for late objection had been rejected by the respondent for failure to provide valid reasons for the late application. Following from this letter and further from the submissions of the parties, it was clear to the tribunal that there was no objection decision issued in this matter.

19. Section 12 of the Tax Appeals Tribunal Act provides as follows regarding appeals to the tribunal;“A person who disputes the decision of the commissioner on any matter arising under the provisions of any tax law may, subject to the provisions of the relevant tax law, upon giving notice in writing to the commissioner, appeal to the tribunal:”

20. In addition, section 52(1) of the Tax Procedures Act provides as follows regarding an appeal against an appealable decision to the Tribunal;“A person who is dissatisfied with an appealable decision may appeal the decision to the tribunal in accordance with the provisions of the Tax Appeals Tribunal Act, 2013 (No 40 of 2013).”

21. From the above provisions of the law, it follows that for a taxpayer to approach the tribunal for an appeal, there ought to be an appealable decision. Under section 3 of the Tax Procedures Act, an appealable decision is defined as follows;“"appealable decision” means an objection decision and any other decision made under a tax law other than—(a)a tax decision; or(b)a decision made in the course of making a tax decision;”

22. Having determined that there was no objection decision in this case, the tribunal determined that the applicant had no arguable case and therefore granting extension of time would amount to waste of the tribunal’s time.

23. The tribunal having determined that the applicant had no arguable case, it did not delve into the other criteria issues namely; whether there is a reasonable cause for the delay and whether there will be prejudice suffered by the respondent if the extension is granted as they had been rendered moot.

Disposition 24. 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 MAYAKA ABRAHAM KIPROTICHMEMBER MEMBER