[2024] KETAT 489 (KLR)

Lumet v Commissioner of Domestic Taxes (Tax Appeal E128 of 2023) [2024] KETAT 489 (KLR) (19 April 2024) (Ruling)

Neutral citation: [2024] KETAT 489 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal E128 of 2023

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

April 19, 2024

Between

Joseph Malei Lumet

Applicant

and

Commissioner of Domestic Taxes

Respondent

Ruling

1. The Applicant filed this application vide a Notice of Motion dated the 18th August, 2023 under Certificate of urgency on the 12th September, 2023 together with a supporting affidavit sworn by Dr. Njoroge O. Kimani, Advocate for the Applicant, on the 18th August, 2023. The Application is brought pursuant to sections 12 and 13(3)of the Tax Appeal Tribunal, Act, 2013, section 52 of Tax Procedure Act, 2015 and seeks the following Orders:i.Spent.ii.That the Applicant be granted leave to file The Appeal out of time against confirmation of 20th June 2020 on VAT for July 2016, January to April 2018. iii.That the Honorable Tribunal be at liberty to make such orders as it deems fit in the circumstances.

2. The application is based on the following grounds:-a.That the Applicant has been sick and unable to attend to his usual hardware business.b.That the Respondent has frozen the Applicant’s bank account making doing business difficulty.c.That the tax demanded amounting to Kshs 4,765,067 is wrongly calculated.d.That the Applicant’s attempt to have the bank account opened has completely failed.e.That the intervention of the Tribunal is necessary to issue order(s) to the Respondent to have the bank account opened.f.That the Applicant has explained the variances queried by the Respondent in full.g.That there is no prejudice likely to be suffered by the Respondent if this application is allowed as prayed.

3. On 28th September 2023, the Respondent filed a Replying Affidavit sworn by Mangiteni Chacha, an officer of the Respondent and in which Affidavit the Respondent opposed the application as follows:-i.That the orders sought by the Applicant should not be granted by this Honourable Tribunal as they are an abuse of the Court process and the Applicant is undeserving of the same.ii.That the Respondent confirmed the Appellant’s assessments on the 25th June 2020 amounting to Kshs 4,765,067 and that the Applicant was expected if aggrieved with the said decision to appeal to the Tribunal within 30 days from the date of the decision.iii.That the Applicant did not appeal the decision to the Tribunal within thirty (30) days of the decision as required and only sought to file the instant application on 9th August 2023 therefore the Applicant is late by 3 years and 1 month.iv.That by any standards, a delay of more than 3-years and 1 month amounts to inordinate delay by the Applicant and that from the attached Memorandum of Appeal, the appeal is not arguable.v.That no credible reason has been advanced by the Applicant to warrant extension of time to file appeal as provided at Section 13(4) of the Tax Appeals Tribunal Act.vi.That the medical report furnished by the Applicant is dated 25th July 2023 and further, the same is not detailed and does not account for the years when the Applicant should have filed the appeal.vii.That the medical report attached only demonstrates that the Applicant was only hospitalized in the year 2022 and 2023 and that the Applicant has not provided credible evidence to confirm his hospitalization in the year 2020, 2021 and 2022. viii.That the Applicant despite sickness has continued to file subsequent returns on his obligations and the argument that sickness only prevented the filing of an appeal is misconceived.ix.That by the fact that the Applicant failed to follow up on his appeal for three years and 1 month after issuance of the objection decision is a demonstration that the Applicant has not been vigilant and does not warrant the exercise of the Tribunal’s discretional powers in its favour. The Applicant is guilty of laches.x.That the delay is unreasonable and not excusable on the grounds that the Applicant like any other taxpayer has a duty to ensure that his tax affairs are well managed by making regular consultations or interactions with his tax agent for purposes of tracking progress of his tax matters.xi.That the indolence and negligence of the Applicant to follow up on his tax matters should not be excused as doing so will create a bad precedent.xii.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 precedent.xiii.That in the circumstances, it is in the public interest that this Honourable Tribunal dismisses the Applicant’s application to pave way for the Respondent to collect taxes due from the Applicant which are key to the economic development of the Country.

4. In support of its case, the Respondent filed written submissions on 13th October 2023. The Respondent submitted that the provisions of Section 13(3) and (4) of the Tax Appeals Tribunal Act are not absolute and rather the Tribunal is to exercise its discretion being guided by the principles laid down in allowing a party to file its appeal out of time. The Respondent cited the case of Income Tax Appeal No. 31 of 2017 Commissioner of Domestic Taxes vs Mayfair Insurance Company Limited (2017) eKLR wherein the court held that:-“Time, in other words, is not to be extended as a matter of right. Each case is to be viewed sui generis and on its own circumstances and facts. The starting point is that the Applicant ought to advance sufficient and reasonable grounds for any delay on its part.”

5. The Respondent submitted that the Applicant’s reliance on the reason that he was sick even though a reason qualifying to allow the extension to file an appeal out of time, the said reason in this circumstance cannot be allowed because the Applicant relies on a hospital letter indicating that he has been sick and at one time he had been referred to Kenyatta National Hospital yet the Applicant has not presented any report from the said Hospital.

6. According to the Respondent, the medical report attached only demonstrates that the Appellant was only hospitalized in the year 2022 and 2023 and that the Appellant has not provided credible evidence to confirm his hospitalization in the year 2020, 2021 and 2022. The Respondent submitted that the letter indicates that the Applicant was hospitalized on the 25th June 2023.

7. Further, the Appellant submitted that extension of time is an equitable remedy reserved only for a deserving applicant but the Applicant has not demonstrated that he deserves time extension. The Respondent relied on the case of Mombasa County Government v Kenya Ferry Services & another [201 9] eKLR where the Supreme Court at paragraph 25 held that:“(25)Concerning extension of time, this Court has already set the guiding principles in the Nick Salat Case as follows: ‘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.”

8. Finally, the Respondent submitted that there exists no reasonable cause given by the Applicant seeking to extend time, the reasons advanced are an afterthought intended to delay the Respondent from collecting the taxes due to it and therefore prejudicial to the Respondent.

Analysis and Findings 9. 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)”.

10. The Conditions that the Applicant has to satisfy are stipulated under 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.’

11. Similarly, Rule 10 of the Tax Appeals Tribunal (Procedure) Rules reiterates the foregoing statutory provision in the following terms: -“(3)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.”

12. From the face of the application, the Applicant is seeking leave under section 13(4) of the Tax Appeals Act and Rule 10 (3) (b) of the Tax Appeals Tribunal (Procedure) Rules.

13. From the reading of the provisions of Section 13 (3) and Rule 10 of the Tax Appeals Tribunal (Procedure) Rules, the power to extend time is discretionary and not a right to be granted to the Applicant.

14. The Supreme Court in Nicholas Kiptoo Arap Korir Salat v Independent Electoral and Boundaries Commission & 7 others [2014] eKLR set out general considerations to guide the court in exercising its discretion in cases of this nature. It stated thus: -i.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;ii.A party who seeks for extension of time has the burden of laying a basis to the satisfaction of the court;iii.Whether the court should exercise the discretion to extend time, is a consideration to be made on a case-to-case basis;iv.Whether there is a reasonable reason for the delay. The delay should be explained to the satisfaction of the court;v.Whether there will be any prejudice suffered by the respondents if the extension is granted;vi.Whether the application has been brought without undue delay; andvii.Whether in certain cases, like election petitions, public interest should be a consideration for extending time."

15. In determining whether to enlarge time, the court in Leo Sila Mutiso vs Rose Hellen Wangari Mwangi, Civil Application Nai. 251 of 1997 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.”

16. In addition, 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.”

17. This Tribunal is therefore guided by the provisions of Section 13 (4) of the Tax Appeals Tribunal Act, and principles as set in Nicholas Kiptoo Arap Korir Salat v Independent Electoral and Boundaries Commission & 7 others [2014] e KLR, Leo Sila Mutiso vs Rose Hellen Wangari Mwangi, Civil Application Nai. 251 of 1997 and Wasike v Swala [1984] KLR 591 in determining this application.

a. Whether there is a reasonable cause for the delay 18. As the Tribunal analyses this issue, the Tribunal is cognisant of the guidance by the Court in National Union of Mineworkers v Council for Mineral Technology[1998] ZALAC 22 wherein the court at paragraph 10 stated that:-“…There is a further principle which is applied and that is that without a reasonable and acceptable explanation for the delay, the prospects of success are immaterial, and without prospects of success, no matter how good the explanation for the delay, an application for condonation should be refused.”

19. The statutory timelines and provisions to file an appeal have been clearly set out in the Tax Appeal Tribunal Act under Section 13 (3) Section 13(4) and Rule 10 (3)(b) of the Tax Appeals Tribunal (Procedure) Rules. The confirmation of tax assessment on the part of the Respondent was made on the 25th June, 2020 and to that extent the Applicant was expected to have commenced an appeal against the decision on or before the 25th July, 2020.

20. The present application having been filed on the 12th September, 2023, it translates to a delay of 3 years and 49 days in the commencement of the Appeal process.

21. The Applicant adduced a medical report stamped on 25th July 2023 from Matasia Nursing Home. The Report indicates that the Applicant had been attending the said medical facility on and off from 2019. The Report also indicates that the said facility referred the Applicant to Kenyatta National Hospital for further treatment sometimes in May, 2023.

22. The Respondent questioned why the Applicant did not provide medical records from Kenyatta National Hospital. The Respondent also submitted that the Applicant has not provided credible evidence to confirm his hospitalization in the year 2020, 2021 and 2022.

23. The Tribunal upon perusal of the medical chit from Matasia Nursing Home noted inconsistencies in the dates when the Applicant may have been attended to at the facility and his subsequent alleged admission at Kenyatta National Hospital on referral from the facility. The medical chit indicates that he was attended to at the facility on 29th May, 2023 when the Applicant’s medical condition worsened prompting the referral to the Kenyatta National Hospital. The admission at Kenyatta National Hospital is however indicated to have been in June, 2022.

24. The Tribunal has equally noted from the documents filed before the Tribunal a letter from Kimani and Associates dated 22nd June, 2022 addressed to the Deputy Commissioner, East and South of Nairobi Tax Services office that makes reference to some tax assessment in issue and that clearly suggests that the Applicant had by 22nd June, 2022 instructed its Advocate on record to handle its tax dispute.

25. The foregoing letter puts into issue the credibility of the reason advanced by the Applicant as having been the cause for the delay in timeously lodging the Appeal. Needless to say it suggests that the treatment chit was purposefully authored to lend credence to a non-existent situation.

26. The Tribunal in the circumstances finds that the cause for the delay in commencing the appeal within the statutory period has not been reasonable explained.

27. In the light of the foregoing finding the Tribunal does not have to consider the other factors ordinarily considered in such an application as such consideration has been rendered moot.

28. Due to the foregoing analysis, the Tribunal is thus not persuaded to exercise its discretion in favour of the Applicant.

Disposition 29. In the circumstances, the Tribunal finds the application to be devoid of merit and accordingly proceeds to make 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 WAFULA - CHAIRMANEUNICE NG’ANG’A ELISHAH NJERU - MEMBER MEMBERMUTISO MAKAU ABRAHAM K. KIPROTICH - MEMBER MEMBER