[2024] KETAT 488 (KLR)

Mwea County Medical Centre Limited v Commissioner of Domestic Taxes (Tax Appeal E939 of 2023) [2024] KETAT 488 (KLR) (22 March 2024) (Ruling)

Neutral citation: [2024] KETAT 488 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal E939 of 2023

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

March 22, 2024

Between

Mwea County Medical Centre Limited

Applicant

and

Commissioner of Domestic Taxes

Respondent

Ruling

1. The application which was by way of a Notice of Motion dated 15th December 2023 and filed under a certificate of urgency on 19th December 2023 is supported by an Affidavit sworn by, Kennedy Murimi, a Director of the Appellant, on 15th December, 2023, sought for the following Orders:-a.Spent.b.The Honourable Tribunal be pleased to extend the time allowed for the Appellant to file the Notice of Appeal, Memorandum of Appeal, Statement of Facts, tax decision and all other supporting documents.c.The Honourable Tribunal be pleased to issue an order unconditionally vacating and/or suspending the Agency notices dated 1st December 2023, issued to the National Bank of Kenya and any other bank pending the hearing and determination of this application and the Appeal filed herewith.d.The Notice of Appeal, Memorandum of Appeal, together with the Statement of Facts dated 15th December 2023 filed herewith be deemed as properly filed and served.e.The costs of this application be provided for.

2. The application is premised on the grounds, that:-a.That the Respondent issued the Appellant with an additional assessment on 18th December 2018 for the year of income 2017 through iTax.b.That the Appellant objected to the said assessment on 17th January 2019. c.That the Respondent allegedly issued the Appellant with an Objection decision on 28th March 2019 via email.d.That the Appellant did not receive the Objection decision dated 28th March 2019 and has been all along aware that the Respondent had allowed its Objection lodged on 17th January 2019. e.That the Respondent has since taken enforcement measures by way of issuing Agency notices dated 1st December 2023 against the Appellant/Applicant’s bankers.f.That as a result, the Appellant was not able to file its Appeal within the stipulated timelines.g.That the Appellant has an arguable appeal with high probability of success.h.That the Appellant stands to suffer irreparable loss and damage if the orders sought in this application are not granted as the Respondent may proceed to enforce an erroneous assessment.

3. The Applicant through its written submissions dated and filed on 16th January, 2024 stated that it has brought the instant application under Section 14(4) of the Tax Appeals Tribunal Act, 2014 and is premised on the director’s sickness barring him from attending to business affairs.

4. It submitted that the Respondent issued the Appellant with additional assessments on 18th December 2018 for the year of income 2017 through iTax.

5. It contended that it did not receive the Respondent’s Objection decision dated 28th March 2019 and has been of the view that the Respondent had allowed its Objection lodged on 17th January 2019.

6. It asserted that the Respondent has since taken enforcement measures by way of issuing Agency notices dated 1st December 2023 against its bankers.

7. It argued that its reason for delay in filing the Appeal was caused by the fact it did not receive the Respondent’s decision in time.

8. It argued that it has an arguable appeal with high probability of success and it stands to suffer irreparable loss and damage if the orders sought in the application are not granted as the Respondent may proceed to enforce an erroneous assessment.

9. It relied on Section 13(4) of the Tax Appeals Tribunal Act and Rule 10(3) of the Tax Appeals Tribunal (Procedure) Rule, 2015 and submitted that the Commissioner is allowed to communicate with taxpayers by various means including by way of emails but there are many challenges with technology as in the instant case the Appellant has never received the purported email that contained the Respondent’s Objection decision.

10. It asserted that it will greatly be prejudiced if the Honourable Tribunal finds in favour of the Respondent who has many tools of communication including calling the Appellant or physically visiting the Appellant’s premises to dispatch any correspondence.

11. The Appellant asserted that objecting to the assessment on 17th January 2019 was a demonstration that it was not indolent and had initiated legal steps having been aggrieved by the Commissioner’s decision.

12. It urged the Tribunal to consider the case of Sardah M. Shroff v The Commissioner of Income Tax, Case No. 101 E.A. Tax Cases Vol. IV Part 189 and contended that the failure to procedurally lodge an appeal to this Honourable Tribunal has been properly sufficiently explained.

13. It cited the case of Nicholas Kiptoo Korir Arap Salat v Independent Electoral & Boundaries Commission & 7 Others [2014] eKLR and relied on Section 26 of the Tax Appeals Tribunal asserting that if it is not granted leave to file an Appeal, its rights under Article 159 of the Constitution of Kenya 2010 will be infringed.

14. The Appellant submitted that the rules of justice apply to both the Respondent and Appellant and the Respondent will not suffer any prejudice if the orders sought are granted. It added that if the intended appeal does not succeed there is nothing to stop the Respondent from restoring to the provision of the Tax Procedures Act, 2015 to recover the taxes from being demanded which taxes are in any event erroneous and excessive.

15. It submitted that it will be greatly prejudiced since it did not supply any vatable goods or services as assessed and demanded by the Respondent, if this application is not allowed, the Intended appeal will be rendered nugatory and cited Section 30 of the Tax appeals Tribunal Act, 2013.

16. It concluded that considering the size of its operations and critical care services it provides to the public, there are high chances that such emails are likely to be missed out or fail to be delivered by the Respondent’s system.

17. The Respondent filed a Replying Affidavit sworn by Emma Wambui Karoki, an officer of the Respondent, on 12th January 2024 and filed on 16th January 2024 citing the following as the grounds for opposition:-a.That the Respondent issued the Appellant with an Objection decision on 28th March 2019. b.That the Appellant failed to lodge the Notice of Appeal within the timelines stipulated under Section 13(1)(b) of the Tax Appeals Tribunal Act.c.That the Appellant failed to lodge a Memorandum of Appeal within the timelines of fourteen days from the date of filing the Notice of Appeal contrary to the provisions of Section 13(2) of the Tax appeals Tribunal Act.d.That the Appellant lodged the application for extension of time to file an appeal more than 4 years. This delay is not only inordinate but inexcusable.e.That the Appellant has failed to provide evidence to support the above assertion. The Appellant has neither shown when it learnt of the Respondent’s decision nor the efforts made to follow up on the Appeal. The Appellant is thus guilty of laches.f.That the Appellant was indolent for failing to follow up on its tax affairs for more than 4 years.g.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 Appellant. The Appellant has failed to lay a basis to the satisfaction of the Tribunal for extension of time to file an appeal.h.That the fact that the Appellant failed to follow up on its appeal for more than four years after the issuance of the decision is a demonstration that the Appellant has not been vigilant and does not warrant the exercise of the Tribunal in its favour. The Appellant is guilty of laches.h.That the delay is unreasonable and not excusable on the grounds that the Appellant like any other taxpayer had a duty to ensure that its tax affairs are well managed.i.That an application of this nature requires an Appellant to prove his or her reasonable cause that being sickness or absence from Kenya.j.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.k.The applicant is not deserving of the orders sought in the Application as the whole period of delay has not been declared and explained satisfactorily to the Tribunal thus the Application ought to be dismissed.l.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 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.m.In the circumstances, it is in the public interest that this Honourable Tribunal dismisses the Applicant’s Notice of Motion Application dated 15th December 2023 to pave the way for the Respondent to collect taxes due from the Applicant which are key to the economic development of the country.n.The indolence and negligence of the Applicant should not bar the Respondent from fulfilling its mandate of collecting taxes that are due and payable.o.The Applicant has failed to satisfy the principles as set out in the case of Nicholas Kiptoo Korir Arap Salat v Independent Electoral and Boundaries Commission & 7 Others [2014] eKLR.

18. The Respondent in its written submission dated and filed on 16th January, 2024 stated that the Appellant had lodged its application objecting the assessment issued on 18th December 2018 which was not supported by any documents in contravention of Section 51(3) of the Tax Procedures Act.

19. It asserted that the Appellant was issued with an Objection decision on 28th March 2019 and was lawfully and regularly issued pursuant to Section 51(4) of the Tax Procedures Act.

20. The Respondent argued that the Appellant lodged its application to extend time on 21st December 2023, over 4 years after the statutorily prescribed time for lodging an appeal contrary to the provisions of Section 13(1)(b) of the Tax Appeals Tribunal Act.

21. The Respondent relied on the case of Utalii Transport Company Limited & 3 Others v NIC Bank Limited & Another [2014] eKLR and submitted that the delay is not only inordinate but it has also not been satisfactorily explained.

22. It reiterated that the intended appeal is out of time in contravention of the mandatory provisions of Section 13 of the Tax Appeals Tribunal Act as there is an inordinate delay of over 4 years in lodging an Appeal against the Objection decision, which was rendered on 28th March 2019.

23. It relied on Section 13(3) and (4) of the Tax Appeals Tribunal Act and the case of Nicholas Kiptoo Korir Arap Salat v Independent Electoral and Boundaries Commission & 7 Others [2014] eKLR and asserted that the reason advanced by the Appellant is frail and incapable of being verified because the Appellant failed to show when the director learnt of the existence of the Objection decision and that the efforts that the Director made upon learning of its existence to follow up on the Appeal.

24. It argued that the inordinate delay has not been justified to the satisfaction of the Tribunal to warrant exercise of the Tribunal’s discretion in favour of the Appellant.

25. The Respondent reiterated that the Appellant has been indolent in seeking the extension of time to lodge an appeal. The Appellant herein is evidently not keen with this matter and allowing the appeal after such an inordinate period will be prejudicial to the Respondent since taxes are due.

26. The Respondent maintained that the Appellant has failed to discharge its burden of proof pursuant to the provisions of Section 56(1) of the Tax Procedures Act, 2015.

Analysis and Findings 27. 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 Appellant.

28. 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.”

29. 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? 30. 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.”

31. The Appellant stated that it could not file the Appeal in time because it did not receive the Respondent’s Objection decision within the stipulated time frame thus it assumed that its Objection was deemed to have been allowed within the stipulated time frame.

32. It further contended that due to the complex nature of its business ist was unable to receive the Objection decision it was unable to know about the Objection decision on time.

33. The Respondent contended that the Appellant did not provide adequate evidence to prove its assertions in the application therefore making the Tribunal incapable of exercising its discretion in favour of the Appellant per the law.

34. The Tribunal has perused the Appellant’s Affidavit and documentary evidence and has found that the Appellant has indeed not adduced before it any evidence to indicate why or how it was unable to receive an Objection decision sent to it in four years.

35. It is therefore the Tribunal’s finding that the reason rendered by the Appellant that the Respondent was in a position to communicate to it via every other means including calling the Appellant to inform it of the Objection Decision is weak and defeated as the same means were available to the Appellant to find out the status of its Objection.

36. The Tribunal having made a finding that the delay in seeking leave to file an appeal out of time is inordinate with the delay not appropriately explained the determination of the other factors for consideration in such an application has been rendered moot.

37. The Appeal filed simultaneously with the present application is in the circumstances rendered incompetent and it is to that extent unsustainable in law.

Disposition 38. The Tribunal in the circumstance finds that the application lacks merit and accordingly proceeds to make the following Orders:-a.The application for the extension of time be and is hereby dismissed;b.The Appeal filed before the Tribunal be and is hereby struck out.c.No orders as to costs.

DATED AND DELIVERED AT NAIROBI THIS 22ND DAY OF MARCH, 2024. ERIC NYONGESA WAFULA - CHAIRMANELISHAH N. NJERU - MEMBERMUTISO MAKAU - MEMBEREUNICE N. NG’ANG’A - MEMBERABRAHAM K. KIPTROTICH - MEMBER