[2024] KETAT 1236 (KLR)

Mwaura v Commissioner of Domestic Taxes (Tribunal Appeal E521 of 2023) [2024] KETAT 1236 (KLR) (9 August 2024) (Judgment)

Neutral citation: [2024] KETAT 1236 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tribunal Appeal E521 of 2023

E.N Wafula, Chair, G Ogaga, Jephthah Njagi & E Ng'ang'a, Members

August 9, 2024

Between

Francis Mwangi Mwaura

Appellant

and

Commissioner of Domestic Taxes

Respondent

Judgment

Background 1. The Appellant is an individual based in Nakuru offering craft and related services, registered for income tax – resident, PAYE and VAT obligations.

2. The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act, Cap 469 Laws of Kenya (KRA Act). Under Section 5 (1) of the Act, KRA is an agency of the Government for the collection and receipt of all revenue. For the performance of its function under Subsection (1), the Authority is mandated under Section 5(2) of the Act to administer and enforce all provisions of the written laws as set out in Parts I and II of the First Schedule to the KRA Act to assess, collect, and account for all revenues under those laws.

3. The Respondent issued Value Added Tax (VAT) additional assessments amounting to Kshs. 1,864,381. 59 for the periods December 2017, December 2018, December 2019 and December 2020 on 30th April 2021 and 9th March 2022.

4. The Appellant objected to the Respondent’s additional assessments on 11th April 2022 and 28th April 2022.

5. In a letter dated 7th June 2022, the Respondent informed the Appellant that it had declined to grant the application by the Appellant to lodge a late objection and informed him that the taxes assessed are due and payable.

6. The Respondent subsequently issued late objection rejection notices dated 24th June 2022 and 1st September 2022.

7. The Appellant, being dissatisfied with the Respondent’s decisions dated 24th June 2022 and 1st September 2022, filed his Notice of Appeal on 29th August 2023.

The Appeal 8. The Appeal is premised on the Memorandum of Appeal dated 25th August 2023 and filed on 29th August 2023 which raised the following grounds: -a.That the Respondent erred in its decision to issue the Appellant with additional tax assessments of VAT for 2017, 2018, 2019 and 2020. b.That the assessments had no basis and did not reflect the true state of the account for the above assessments.c.That the income for majority of the revenue generated came from the exempt supplies that were being handled at the time when the business was of going concern.

Appellant’s Case 9. The Appellant’s case is premised on the Appellant’s Statement of Facts filed on 29th August 2023 and the documents attached to it.

10. The Appellant stated that the Respondent erred in assessments of VAT for the periods December 2017, December 2018, December 2019 and December 2020.

Appellant’s prayers 11. The Appellant prayed for the following: -a.The Commissioner to vacate the assessment based on the correct position of the account.b.The incomes from exempt supplies be considered and be reflected in the accounts.

Respondent’s Case 12. The Respondent’s case is premised on the following documents:-a.The Respondent’s Statement of Facts dated and filed 27th October 2023 and the documents attached thereto;b.Its Written Submissions filed on 22nd March 2024.

13. The Respondent averred that it raised Value Added Tax (VAT) additional assessments amounting to Kshs. 1,864,381. 59 for the periods December 2017, December 2018, December 2019 and December 2020 on 30th April 2021 and 9th March 2022 based on the information availed to it.

14. That the Appellant objected to the Respondent’s additional assessments on 11th April 2022 and 28th April 2022.

15. The Respondent averred that it requested the Appellant vide email correspondence dated 22nd April 2022 to regularise his objection within 7 days by providing documentary evidence in support of his late application and objection.

16. The Respondent stated that on 7th June 2022, it invalidated the Appellant’s objection and confirmed the assessments as the Appellant failed to meet the requirements of Section 51(7) of the Tax Procedures Act, having failed to provide clarifications on his reason for late objection and documentary evidence in support of the same.

17. That the Appellant being dissatisfied by the Respondent’s decision, filed this Appeal before the Tribunal.

18. The Respondent averred that the assessments were in strict conformity to the relevant statutes and the same reflected the true status of the Appellant’s account.

19. The Respondent further averred that failed to prove that indeed the revenue generated was of exempt supplies and as such the Respondent proceeded to assess the Appellant on the information available.

20. The Respondent placed reliance on the Tax Procedures Act which under Section 56 places the onus in tax objections on the taxpayer to avail evidence that would support a contrary assessment or that would have guided the Respondent in arriving at a different objection decision.

21. The Respondent relied on the case of Metcash Trading Limited vs Commissioner for the South Africa Revenue Services and another Case CCT 3/2000, where Justice Kriegler opined that: -“But the burden of proving that the Commissioner was wrong rests on the vendor. Because VAT is inherently a system of self-assessment based on vendor's own record, it is obvious that the incidence of this onus can have a decisive effect on the outcome of an objection decision.”

22. The Respondent averred that it considered all documents availed to it by the Appellant and that the same did not support the Appellant’s claim.

Respondent’s prayers 23. The Respondent prayed that this Tribunal finds that: -a.The Respondent’s objection decision dated 7th June 2023 is proper in law and the same be affirmed.b.The additional assessment of Kshs. 1,864,381. 59, resultant penalty and interest are due and payable by the Appellant.

Issue For Determination 24. The Tribunal has considered the facts of the matter and the submissions made by the parties, and considers the single issue falling for its determination as being:-

SUBDIVISION - Whether there is a valid Appeal on record.

Analysis And Findings 25. The Tribunal analysed the issue that calls for its determination having reviewed all the pleadings, information and documents adduced by the Appellant and the Respondent concerning the impugned decisions.

26. The Respondent issued Value Added Tax (VAT) additional assessments amounting to Kshs. 1,864,381. 59 for the periods December 2017, December 2018, December 2019 and December 2020 on 30th April 2021 and 9th March 2022.

27. The Appellant objected to the Respondent’s additional assessments on 11th April 2022 and 28th April 2022.

28. In a letter dated 7th June 2022, the Respondent informed the Appellant that it had declined to grant the application by the Appellant to lodge a late objection, and informed him that the taxes assessed are due and payable.

29. The Respondent subsequently issued late objection rejection notices dated 24th June 2022 and 1st September 2022.

30. The Appellant, being dissatisfied with the Respondent’s decisions dated 24th June 2022 and 1st September 2022, filed his Notice of Appeal on 29th August 2023.

31. The Tribunal notes that the procedure for appeal provided in Section 13(1)(b) of the Tax Appeals Tribunal (TAT) Act requires that a Notice of Appeal be submitted to the Tribunal within thirty (30) days upon receipt of the decision of the Commissioner.

32. Section 13(3) of the TAT Act provides the remedy to any party who wishes to lodge an Appeal out of time, being that any such intended Appellant may seek leave of the Tribunal in writing, seeking an extension of time and leave to file an Appeal out of time. The provision reads: -“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).”

33. The Tribunal’s position is that the Appellant ought to have lodged his Notice of Appeal within thirty (30) days from 24th June 2022 and 1st September 2022, being the dates he received the Respondent’s decisions. The Tribunal observes from the documents on record that the Appellant filed his Notice of Appeal on 29th August 2023, which was on a date later than thirty (30) days of receiving the Respondent’s decisions of 24th June 2022 and 1st September 2022.

34. The Tribunal is of the considered view that the timelines for appealing the Commissioner’s decisions are clearly set in the law, and all parties are liable to comply with the timelines, save for when unavoidable circumstances prevent a party from fulfilling its obligations as envisioned in Section 13(4) of the TAT Act which states: -“(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.”

35. The Tribunal further notes that the Appellant failed to apply for leave to file his Notice of Appeal out of time as required under the aforecited Section 13(3) of the TAT Act.

36. The Tribunal refers to the case of W.E.C. Lines Ltd vs. The Commissioner of Domestic Taxes [TAT Case No. 247 of 2020] where it was held at paragraph 70 while reiterating the holding in Krystalline Salt Ltd vs KRA [2019] eKLR that: -“Where there is a clear procedure for redress of any particular grievance prescribed by the constitution or an Act of Parliament, that procedure should be strictly followed. Accordingly, the special procedure provided by any law must be strictly adhered to since there are good reasons for such special procedures. The relevant procedure here is the process of opposing an assessment by the Commissioner.”

37. The Tribunal is further guided by TAT Appeal No. 1321 of 2022 CKL Africa Limited v Commissioner of Domestic Taxes where it was held: -“63. The law makes provisions under Section 13 (3) of the Tax Appeals Tribunal Act for any party who lodges its appeal out of time and with reasonable grounds, to seek leave of the Tribunal to file its appeal out if time, the Appellant did not move the Tribunal seeking such Orders.64. The timelines provided under Section 47 (13) of the Tax Procedures Act and Section 13 (1) of the Tax Appeals Tribunal Act demand strict adherence and are not discretional to any party lodging an appeal before the Tribunal.65. It is the Tribunal’s position that there is no proper and valid Appeal before the Tribunal for the exercise of its jurisdiction.”

38. The Tribunal finds that the Notice of Appeal herein was lodged beyond the statutorily prescribed period and is therefore incompetent and untenable in law. The Appeal is therefore not validly and properly before the Tribunal.

Final Decision 39. The upshot of the above analysis is that the Tribunal finds that the Appeal is incompetent and accordingly proceeds to make the following Orders:a.The Appeal be and is hereby struck out.b.Each party to bear its own costs.

40. It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 9TH DAY OF AUGUST, 2024. ERIC NYONGESA WAFULACHAIRMANGLORIA A. OGAGA JEPHTHAH NJAGI MEMBER MEMBEREUNICE N. NG’ANG’AMEMBER