[2023] KETAT 595 (KLR)

Mandalia v Commissioner of Domestic Taxes (Appeal E198 of 2023) [2023] KETAT 595 (KLR) (29 June 2023) (Ruling)

Neutral citation: [2023] KETAT 595 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Appeal E198 of 2023

E.N Wafula, Chair, Cynthia B. Mayaka, RO Oluoch, EN Njeru & AK Kiprotich, Members

June 29, 2023

Between

Manoj Dharamshi Karsan Mandalia

Appellant

and

Commissioner Of Domestic Taxes

Respondent

Ruling

1. The application which was by way of a Notice of Motion dated on 4th May, 2023, and filed under a certificate of urgency on the even date is supported by an Affidavit sworn by the Appellant, on the 4th May, 2022, seeking for the following Orders: -a.Spentb.The intended Appellant/Applicant be granted leave to file a Notice of Appeal, Memorandum of Appeal, and Statement of Facts plus all other supporting documents to this Honorable Tribunal out of time.c.The costs of this application be in the cause.d.This Honorable Tribunal be pleased to issue any such orders as it deems just and expedient.

2. The application is premised on the following grounds: -a.That the Objection decision was issued on 1st August, 2022, via the email address of the Appellant, the Appellant had a technical problem with his email and did not receive the objection, it came to realize the Objection after rectification of the technical issue.b.That the Respondent may attach the bank accounts if the orders sought are not granted.c.That the Appellant has an appeal with a high probability of success based on the attached Notice of Appeal, Memorandum of Appeal, and Statement of Facts and documents herein evidence.d.That it is in the interest of justice that this Honourable Tribunal grants the orders sought herein.e.That the intended Appellant/Applicant has approached this Honourable Tribunal at the earliest juncture and failure to file the Notice of Appeal within the stipulated timelines is a result of factors beyond the Applicant’s control.

3. The Applicant in his written submissions dated and filed before the Tribunal on 23rd May, 2023, stated as hereunder.

4. The Applicant submitted that the Tribunal’s jurisdiction for enlargement of time in the commencement of an appeal process is found in the law under Section 13(2) of the Tax Appeals Tribunal Act which it cited and added that the delay was not inordinate bearing the circumstances, subject matter and nature of the case.

5. He provided that the VAT is treated as being incurred by the partnership, not by the individual partner and that the partnership, Mandalia Enterprise, complied with its VAT obligations under the VAT Act.

6. He contended that the Commissioner erred by charging him output VAT on the revenues earned by the Partnership adding that the Respondent is subjecting him to double taxation on already declared tax invoices. He quoted the definition of double taxation under the Black’s Law Dictionary 5th Edition, 1979.

7. He further relied on the case of Kenya Pharmaceutical Association & Another vs. Nairobi City County and 46 Other County Governments & Another [2017] eKLR, where the Mativo J held that: -“Double taxation is the taxing of the same income twice.”

8. He maintained that the Respondent’s Confirmation Assessment Notice is not a valid objection decision as it did not include a statement of findings on all material facts neither did the Respondent give reasons for its decision under Section 51(10) of the TPA which is couched in mandatory terms and Sections 4(2), and 6(1) (2) of the Fair Administrative Actions Act.

9. It also relied on the case of Tax Appeals No. 50 of 2017, Local Productions Kenya Limited v the Commissioner of Domestic Taxes where the Tribunal held that: “in the absence of reasons… how is the aggrieved party supposed to know the grounds of the decision and assess his position before exercising his right of appeal? Without reasons… it is not harsh to say that the right of the party who wishes to challenge the assessment of the tax due from him is arbitrarily taken away.”

10. The Applicant asserted that the Respondent’s submissions did not address the merits of their objection decision for the Tribunal’s consideration and the Respondent’s actions failed to comply with the provisions of Article 47 of the Constitution 2010, Section 51(10) of the Tax Procedures Act and Sections 4(2), 6(1)(2) of the Fair Administrative Actions Act 2015 which it quoted.

11. It was the Applicant's argument that the VAT liability claimed by the Respondent was declared and remitted and there was no VAT liability payable by the Appellant.

Response to the Application 12. The Respondent filed a Replying Affidavit sworn by Samuel Kibet, an officer of the Respondent, and filed on 16th May 2023 citing the following as the grounds for opposition.a.That the Respondent issued the Applicant with the Objection decision dated 1st August, 2022. b.That the Applicant failed to appeal within the timelines stipulated under Section 13(1)(b) of the Tax Appeals Tribunal Act.c.That the Applicant indicates that he lodged his Notice of Appeal on 4th May, 2023, 8 months after the due date.d.That the Applicant equally failed to lodge the Memorandum of Appeal, Statement of Facts, and Tax decision within fourteen days from the date of filing the Notice of Appeal contrary to the provision of Section 13(2) of the Tax Appeals Tribunal Act.e.That the Applicant lodged the application for an extension of time to file the appeal 8 months after receiving the Respondent’s decision. This decision is not only inordinate but inexcusable.f.That the Applicant’s director alleges that the appeal was not filed within time due to the fact that they faced a technical problem with its email.g.That the Applicant has failed to provide evidence to support his assertion. The Applicant has neither shown when he learnt of the Respondent’s decision nor further the efforts he made to follow up on the appeal.h.That mere statements that are not backed by evidence of any sort are not solid grounds that would warrant this Honourable Tribunal to exercise its discretion in favour of the Applicant. The Applicant has failed to lay a basis to the satisfaction of the Tribunal for an extension of time to file an appeal.i.That the fact that the Applicant failed to follow up on its appeal for more than 8 months after the 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 favor. The Applicant is guilty of laches.j.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 in order.k.That the indolence and negligence of the Applicant to follow up on his matter and leaving the unattended should not be excused as doing so will create a bad precedent.l.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 this Honourable Tribunal as doing so would offend the equitable maxim of equity aids the vigilant and not the indolent and ultimately create a bad precedent.m.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 the 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.n.That it is in the public interest that this Honourable Tribunal dismisses the Applicant’s Notice of Motion and application to pave the way for the Respondent to collect taxes due from the Applicant which are key to the economic development of the Country.o.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.p.That the Applicant has failed to satisfy the principles as set out in the case of Nicholas Kiptoo Arap Korir Salat v. Independent Electoral and Boundaries Commission and 7 Others [2014] eKLR.

13. In its submissions dated and filed on 18th May, 2023, the Respondent presented its case as hereunder.

14. The Respondent submitted that the Applicant lodged his application objecting to the assessments but it was not supported by any documents in contravention of Section 51(3) of the Tax Procedures Act which led to the Applicant being issued with an invalidation decision on 1st August 2022 lawfully and regularly.

15. It further submitted that the Applicant lodged its application to extend time on 4th May 2023, 8 months after the statutorily prescribed time for lodging an appeal contrary to the provisions of Section 13(1) of the Tax Appeals Tribunal Act which delay is inordinate and not satisfactorily explained.

16. It urged the Tribunal to be guided by the case of Utalii Transport Company Limited & 3 Others v NIC Bank Limited & Another [2014] eKLR where it was held that: -“Whereas there is no precise measure of what amounts to inordinate delay. And whereas what amounts to inordinate delay will differ from case to case depending on the circumstances of each case; the subject matter of the case; the nature of the case; the explanation given for the delay; and so on and so forth. Nevertheless, inordinate delay should not be difficult to ascertain once it occurs; the litmus test being that it should be an amount of delay which leads the court to an inescapable conclusion that it is inordinate and therefore, inexcusable. On applying the court's mind on the delay, caution is advised for courts not to take the word ‘’inordinate’’ in its dictionary meaning, but in the sense of excessive as compared to normality.”

17. The Respondent cited Section 13(3) and (4) of the Tax Appeals Tribunal Act and argued that the power to extend the time to file an appeal is discretionary and that the prayers sought by the Applicant should not be granted. It further relied on the case of Nicholas Kiptoo Arap Korir Salat v. Independent Electoral and Boundaries Commission and 7 Others [2014] eKLR where it was held that:“1. 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;

2. A party who seeks for extension of time has the burden of laying a basis to the satisfaction of the court

3. Whether the court should exercise the discretion to extend time, is a consideration to be made on a case-to-case basis;

4. Whether there is a reasonable reason for the delay. The delay should be explained to the satisfaction of the Court;

5. Whether there will be any prejudice suffered by the respondents if the extension is granted;

6. Whether the application has been brought without undue delay; and

7. Whether in certain cases, like election petitions, public interest should be a consideration for extending time.”

18. The Respondent cited the case of Misc. Application No 175 0f 2022 Valley Drillers & General Contractors Limited v The Commissioner of Domestic Tax where the Tribunal held that “without a valid Objection the Applicant has no basis for bringing its appeal before the Tribunal”

19. It submitted that the Applicant has failed to discharge his burden of proof pursuant to the provisions of Section 56(1) of the Tax Procedures Act.

Analysis and Findings 20. 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.

21. In determining whether to extend time, the Tribunal was guided by the decision in the case of Leo Sila Mutiso -vs- Rose Hellen Wangari Mwangi - Civil Application No. Nai. 255 of 1997 (unreported), where the Court expressed itself as 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.”

22. 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? 23. 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.”

24. The Applicant submitted that he did not receive the Notice of Objection Invalidation because he had some technical issues with his email address and only got to get the Respondent’s decision after the issue was resolved.

25. The Respondent contended that the Applicant has not advanced any evidence to prove its case and has thus failed to discharge its burden of proof under Section 51 of the Tax Procedures Act.

26. The Tribunal has perused the Applicant’s pleadings and documentary evidence and has found no mention of the nature of the technical difficulty it encountered with its email address, talk less of the evidence to support the claim. It was only advanced as a technical issue.

27. Without any knowledge of what kind of technical issue, it encountered that led to the delay in forming the Appeal, the Tribunal cannot in good practice entertain the reason advanced by the Appellant herein.

28. It is therefore the Tribunal’s finding that the reason tendered by the Applicant has not been satisfactorily established to be a reasonable cause for the delay to the Tribunal.

b. Whether the Appeal is merited? 29. The Tribunal will therefore not delve into the remaining tests given the foregoing findings as doing so would not yield a moot result.

Disposition 30. The Tribunal in the circumstances finds the application as lacking in merit and finds in favour of the Respondent.

31. The Tribunal accordingly makes the following Orders: -a.The application for the extension of time is hereby dismissed;b.No orders as to costs.

DATED AND DELIVERED AT NAIROBI THIS 29TH DAY OF JUNE 2023. ...........……………….ERIC N. WAFULACHAIRMAN........................CYNTHIA B. MAYAKAMEMBER….................RODNEY O. OLUOCHMEMBER….................ELISHAH N. NJERUMEMBER….................ABRAHAM K. KIPROTICHMEMBER