[2023] KETAT 278 (KLR)

Mahindi Building & Supplies Limited v Commissioner of Legal Services & Board Coordination (Appeal 205 of 2022) [2023] KETAT 278 (KLR) (Commercial and Tax) (19 May 2023) (Judgment)

Neutral citation: [2023] KETAT 278 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Commercial and Tax

Appeal 205 of 2022

Robert M. Mutuma, Chair, E.N Njeru, Rodney Odhiambo Oluoch, D.K Ngala & Edwin K. Cheluget, Members

May 19, 2023

Between

Mahindi Building & Supplies Limited

Appellant

and

Commissioner of Legal Services & Board Coordination

Respondent

Judgment

Background 1. The Appellant is a limited liability company duly registered under the Companies Act and is a registered taxpayer. Its principal business is in civil construction works.

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 compared the Appellant’s filed self-assessment returns against the corresponding VAT turnovers for the years 2018 and 2019.

4. The Respondent later issued additional assessments on February 24, 2021 on the variances established.

5. In response, the Appellant objected to the assessments on August 6, 2021 stating that the income tax returns it filed for 2018 and 2019 were erroneous adding that it wishes to amend the same.

6. Following further communication, the Respondent issued an Objection decision on January 21, 2022 confirming the assessment.

7. On receiving the decision, the Appellant filed a Notice of Appeal dated February 21, 2022 on February 25, 2022.

The Appeal 8. The Appellant seemingly did not filed a Memorandum of Appeal with the Honourable Tribunal as such, the Tribunal will rely on the documents and available pleadings filed before it.

The Appellant’s Case 9. The Appellant lay out its case in its Statement of Facts dated February 21, 2022 and filed on February 25, 2022, the Appellant reiterated the background of the case as hereunder:-a.The Appellant was issued with an Objection decision dated January 21, 2022 by the Respondent wherein it stipulated the basis for coming up with the decision for the assessments.b.The Appellant’s requested the Respondent to review the returns and concur with the audited loss and balance sheet as per the documents provided.c.Upon receiving the Objection decision, the Appellant in person notified the Respondent of the Appellant’s decision to appeal the Respondent’s decision.d.In light of the foregoing, it is the Appellant’s case that the decision made by the Respondent requiring the Appellant to pay a total incremental liability is improper.

The Appellant’s Prayers 10. The Appellant prayed for orders against the Respondent that:-a.The Respondent reviews documents supporting the disallowed invoices; andb.The Respondent to adjust the Objection based on the documents provided.

The Respondent’s Case 11. The Respondent’s case is premised on a Preliminary Objection dated and filed on November 24, 2022; and its Statement of Facts dated March 23, 2022 and filed on March 24, 2022.

12. The Respondent’s Preliminary Objection states the following points in opposition:a.The Appellant’s Appeal is out of time and is in contradiction to Section 52(1) of the Tax Procedures Act, 2015 as read together with Section 13(1) (b) and (3) of the Tax Appeals Tribunal Act, 2013 and Rule 3(1) (b) of the Tax Appeals Tribunal Procedure Rules.b.The Appellant’s Appeal is in contradiction to Section 13(2)(a) of the Tax Appeals Tribunal Act, 2013 thus defective.c.The Honourable Tribunal has no jurisdiction to entertain this Appeal pursuant to Section 3 read together with Section 52(1) of the Tax Procedures Act of 2015. d.The Appeal is therefore an abuse of the process of the Tribunal and a waste of resources.e.The Appeal thus lacks merit and must fail.

13. In its Statement of Facts, the Respondent stated that the basis for the Appellant’s Objection is premised on an error made on its self-assessment returns wherein the Appellant, in those circumstances, was required to make an application to the Respondent to be allowed to make the amendment.

14. It quoted Section 31(2) and (3) of the Tax Procedures Act which state that:(2)A taxpayer who has made a self-assessment may apply to the Commissioner, within the period specified in subsection (4)(b)(i), to make an amendment to the taxpayer's self-assessment.(3)Where an application has been made under subsection (2), the Commissioner may— (a) amend the self-assessment; or (b) refuse the application, and the Commissioner shall notify the taxpayer in writing of the decision within thirty days of receiving the application.”

15. It contended that the Appellant has never made any application for an amendment of returns thus the averments in the Objection and the Appeal amounts to hearsay.

16. It asserted that the variances established in the Appellant’s returns were factual and the taxes assessed were within the law.

17. It stated that the Appellant did not discharge its burden of proof and thus the Respondent was justified in issuing the Objection decision which confirmed the assessment as per Section 56(1) of the Tax Procedures Act, 2015.

18. It reiterated that the Appellant, having failed to provide the supporting documents which were required by the Respondent to make any amendments to the assessment, its assessment stands.

The Respondent’s prayers 19. The Respondent prayed for the Tribunal to:a.Uphold the Respondent’s decision as proper and in conformity with the provisions of the law.b.Dismiss this Appeal with costs to the Respondent as the same is devoid of merit.

Parties’ Submissions 20. Seeing as the Appellant did not file any submissions in the matter, the Tribunal will rely on the pleadings and documents attached therein to make a determination on the totality of the Appellant’s case.

21. The Respondent filed written submissions on the November 25, 2022 in which it separately addressed the hereunder issues.

On whether the Respondent’s Preliminary Objection is merited 22. The Respondent submitted that the Appellant had filed an Appeal without adhering to the mandatory requirements of the law and rules of the Tribunal on filing an appeal.

23. It quoted Section 52(1) of the Tax Procedures Act, 2015, Sections 13(1)(b), and (2) of the Tax Appeals Tribunal Act, 2013, and Rule 3(1)(b) of the Tax Appeals Tribunal (Procedure) Rules.

24. It argued that the Objection decision was issued on 21st January 2022 but the Appellant failed to adhere to the 30 day statutory timeline and lodged a Notice of Appeal together with the Statement of Facts on February 25, 2022.

25. It relied on Section 13(3) of the Tax Appeals Tribunal Act to assert that where a party fails to lodge an appeal within the timelines, they are allowed to make an application for the Appeal to be admitted out of time.

26. It contended that no reason has been offered by the Appellant as to why there was such a delay nor did the Appellant make an application for the Appeal to be filed out of time.

27. It cited the case of Century Feeds Limited v. Commissioner of Domestic Taxes TAT No. 401 of 2020 where the Tribunal held that:-“The Respondent submitted that two years is an inordinate delay, a position which the Tribunal wholeheartedly endorses. Our position in this regard is further buttressed by the fact that despite having an avenue to seek engagement of time by setting forth grounds in support of such an application, the Appellant herein chose, deliberately that too, to ignore the breaches of statutory timelines was committing by filing the Appeal herein.”

28. It further cited the case of Nairobi H.C. Misc. Civil Application No. 81 of 2011 Republic v. The Commissioner of Customs Services; Ex Parte: SDV Transami where it was held as follows:“It is therefore my view that the decision envisaged under section 229(1) was made on 17th August 2010. The demand letter dated 30th December 2010 was a follow up to the previous demand made upon the applicant and the Interested Party. Once the respondent had communicated in August 2010 that tax was due, it was incumbent upon the applicant to lodge an appeal within the stipulated or specified period under section 229. That was not done. Therefore it was not open or available to the applicant to lodge an appeal 5 months after the offensive decision was made. It was not within the jurisdiction and powers of the respondent to entertain an appeal outside the time allowed.”

29. It maintained that an Appellant who is guilty of inordinate delay and fails to seek an enlargement of time deliberately chooses to ignore statutory timelines. That the Appellant is guilty of inordinate delay and therefore its Appeal is not properly before the Tribunal.

30. It relied on the case of Nicholas Kiptoo Arap Korir Salat v. IEBC and 6 Others[2013] eKLR where the court held that:-“This Court, indeed all courts, must never provide succour and cover to parties who exhibit scant respect for rules and timelines. Those rules and timelines serve to make the process of judicial adjudication and determination fair, just, certain, and even-handed. Courts cannot aid in the bending or circumventing of rules and a shifting of goal posts for, while it may seem to aid one side, it unfairly harms the innocent party who strives to abide by the rules. I apprehend that it is in the even-handed and dispassionate application of rules that courts give assurance that there is clear method in the manner in which things are done so that outcomes can be anticipated with a measure of confidence, certainty, and clarity where issues of rules and their application are concerned.”

31. To buttress its position that the Appellant has not disclosed its reason for the delay, the Respondent cited the case of Dilpack Kenya Ltd v. William Muthama Kitonyi (2018) eKLR where the court quoted approvingly the case of Daphne Parry v. Murray Alexander Carson [1963] EA 546 where it was stated as follows:“… though the provision for extension of time requiring “sufficient reason” should receive a liberal construction, so as to advance substantial justice, when no negligence, nor inaction, nor want of bona fides, is imputed to the appellant, its interpretation must be in accordance with judicial principles. If the appellant had a good case on the merits but is out of time and has no valid excuse for the delay, the court must guard itself against the danger of being led away by sympathy, and the appeal should be dismissed as time-barred, even at the risk of injustice and hardship to the appellant.”

32. It further argued that the Appellant only submitted its Statement of Facts in the instant Appeal without a Memorandum of Appeal contrary to the provisions of Section 13(2) of the Tax Appeals Tribunal Act.

33. It was the Respondent’s submission that there has to be an appealable decision for the appeal to be based on, and that the Appellant did not contest the validity of the assessment but only made a prayer that it be allowed to amend its returns to reflect a true picture of its financial statements.

34. It opined that the Objection decision was made on the basis that the Appellant ought to have made an application for an amendment of the self-assessment returns for the tax period in question which the Respondent is supposed to make a decision on as per Section 13(2) of the Tax Procedures Act. It added that such a decision would still not be an appealable decision as it is a tax decision, unless an Objection was lodged with an Objection decision issued.

35. The Respondent quoted Section 2 of the Tax Procedures Act on the definition of an appealable decision and a tax decision to submit that the Appellant did not dispute the assessment issued by the Respondent and that the Appellant has not made any application to amend its self-assessment returns thus no appealable decision exists before the Tribunal, therefore, the Tribunal lacks jurisdiction to adjudicate on the matter.

36. It cited the case of theOwnersof Motor Vessel “Lillian S” v. Caltex (Kenya) Ltd [1989] KLR 1 where the Court of Appeal stated as follows with regard to jurisdiction:-“By jurisdiction is meant the authority which a court has to decide matters that are litigated before it or to take cognisance of matters presented in a formal way for its decision. The limits of this authority are imposed by the statute, charter, or commission under which the court is constituted, and may be extended or restricted by like means. If no restriction or limit is imposed the jurisdiction is said to be unlimited. A limitation may be either as to the kind and nature of the actions and matters of which the particular court has cognisance, or as to the area over which the jurisdiction shall extend, or it may partake of both these characteristics. If the jurisdiction of an inferior court or tribunal (including an arbitrator) depends on the existence of a particular state of facts, the court or tribunal must inquire into the existence of the facts in order to decide whether it has jurisdiction; but, except where the court or tribunal has been given power to determine conclusively whether the facts exist. Where a court takes it upon itself to exercise a jurisdiction which it does not possess, its decision amounts to nothing. Jurisdiction must be acquired before judgement is given.”

37. It further cited the case of Samuel Kamau Macharia &anotherv Kenya Commercial Bank Limited & 2others[2021] eKLR where the court stated that:“A Court’s jurisdiction flows from either the Constitution or legislation or both. Thus, a Court of law can only exercise jurisdiction as conferred by the constitution or other written law. It cannot arrogate to itself jurisdiction exceeding that which is conferred upon it by law. We agree with counsel for the first and second respondents in his submission that the issue as to whether a Court of law has jurisdiction to entertain a matter before it, is not one of mere procedural technicality; it goes to the very heart of the matter, for without jurisdiction, the Court cannot entertain any proceedings.”

38. It also cited the case of In the Matter of Advisory Opinions of the Court under Article 163 of the Constitution Constitutional Application No. 2 of 2011 where the Supreme Court held that:“...a court may not arrogate to itself jurisdiction through the craft of interpretation or by way of endeavours to discern or interpret the intentions of Parliament, where the legislation is clear and there is no ambiguity.”

39. The Respondent relied on the case of EMV Investment Limited v. Commissioner of Domestic Taxes Misc. App. No. 185 of 2021 where the Tribunal held as follows:“With no appealable decision disclosed, the Tribunal lacks the jurisdiction to grant any leave for the Applicant to pursue a non-existent right to appeal. In the circumstances, the Tribunal finds that there is no appeal with merit capable of being pursued by the Appellant, and to that extent, the other factors that ought to be considered have been rendered moot.”

Issues For Determination 40. The Tribunal puts forth the following issues for determination:a.Whether the Appeal is proper in law; andb.Whether the Respondent’s Objection Decision was justified.

Analysis And Findings 41. The Tribunal wishes to analyse the issues identified as hereunder.

Whether the Appeal is proper in law. 42. The Respondent vide its Preliminary Objection dated November 24, 2022 argued that the Appellant is guilty of inordinate delay in lodging the current Appeal out of time as the Objection decision was rendered on January 21, 2022 with this Appeal filed on 25th February 2022. The Appellant did not advance any arguments in this regard.

43. The Tax Procedures Act provides the action a taxpayer should take when dissatisfied by a tax decision by the Respondent. The Section 51(12) of the Act states that:-“A person who is dissatisfied with the decision of the Commissioner under subsection (11) may appeal to the Tribunal within thirty days after being notified of the decision.”

44. The Tribunal notes that the Appellant filed the instant Appeal on February 25, 2021 when it ought to have been filed on February 21, 2022 making it 4 days late.

45. Under these circumstances, the law has left a door open to allow the Appellant to seek for extension of time by making an application and giving the reason for the delay. This is very well stipulated under Section 13(2) and (3) of the Tax Appeals Tribunal Act which provides as thus:-“The Tribunal may, upon application in writing or through electronic means, extend the time for filing the notice of appeal and for submitting the documents referred to in subsection (2). (4) 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.”

46. To this, the Tribunal wishes to rehash the findings by Musinga JA in the case of Anthony Burugu & Company Advocates v Electrowatts Limited [2022] KECA 415 (KLR) when he stated as follows:-“... It is upon the applicant to explain to the satisfaction of the court that this discretion should be exercised in his favour. If the explanation given is acceptable, the court will then exercise its discretion in favour of the applicant…”

47. It is well settled that the Appellant has no time limit within which to bring an application for an extension of time should it find itself outside the time limits set by the law.

48. Regardless of the duration of the delay, it is incumbent upon the Appellant to apply to the Tribunal for time to be extended, giving a reasonable cause for not filing the Appeal in time, and this the Appellant is yet to do.

49. The Tribunal, therefore, finds that the Appeal is improperly before it. Having found that the Appeal herein is not properly before it, the Tribunal will not delve into the substantive issue as the same has been rendered moot.

Final Decision 50. The upshot of the foregoing is that the Appeal is incompetent and the Tribunal accordingly proceeds to make the following Orders;a.The Appeal be and is hereby struck out.b.Each party to bear its own costs.

51. It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 19TH DAY OF MAY, 2022. ROBERT M. MUTUMACHAIRMANELISHAH N. NJERUMEMBERRODNEY O. OLUOCHMEMBERDELILAH K. NGALAMEMBEREDWIN K. CHELUGETMEMBER