[2024] KETAT 1026 (KLR)

Nuru Palace Hotel Limited v Commissioner of Domestic Taxes (Miscellaneous Application E021 of 2024) [2024] KETAT 1026 (KLR) (5 July 2024) (Ruling)

Neutral citation: [2024] KETAT 1026 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Miscellaneous Application E021 of 2024

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

July 5, 2024

Between

Nuru Palace Hotel Limited

Applicant

and

Commissioner of Domestic Taxes

Respondent

Ruling

1. The application which was by way of a Notice of Motion dated and filed under a Certificate of urgency on 19th March 2024 is supported by an Affidavit sworn by the Appellant’s Director, Bernadette Njoki Mambo, on the 18th March, 2024 and it sought for the following Orders:-a.Spent.b.The Honourable Tribunal be pleased to extend the time allowed for the Applicant to file a Notice of Appeal, Memorandum of Appeal, Statement of Facts, and all other accompanying documents.c.The Respondent be restrained from taking any enforcement measures in regards to the assessments dated 16th June 2022 on VAT pending the hearing and determination of this Application and lift Agency Notice dated 22nd February 2024. d.The cost of this application be provided for.

2. The application is premised on the following grounds:-a.That the Respondent issued the Appellant with an assessment dated 16th June 2022 for VAT.b.That the Appellant objected to the said assessment on 21st June 2022. c.That the Appellant was prevented from filing an appeal within time due to a lack of Objection decision from the Respondent and the failing health of the director of the company.d.That an ongoing matter relating to the same period of assessment was at the Tax Appeals Tribunal at the time of this assessment.e.That the intended appeal raises triable issues with a high probability of success for the matter at the Tax Appeals No Tribunal 949 of 2022 went in favour of the Applicant, nullifying an additional assessment for the year 2021 for income tax which is the basis of this current additional assessment.f.That the Applicant received an “Agency Notice” on 22nd February 2024. g.That the Applicant’s reason for delay in filing the Appeal is not a result of indolence on its part.h.That the Applicant therefore prays for leave to file the appeal out of time.i.That the Applicant has a right to be heard on merit.

3. Seeing as the Applicant did not file its submissions with the Tribunal as directed, the Tribunal shall rely on the pleadings before it and the documents attached to determine the totality of the Applicant’s application.

Response to the Application 4. The Respondent filed a Replying Affidavit sworn by Kevin Njue Ngari, an officer of the Respondent, on the 22nd April 2024 and filed on the 25th April, 2024 citing the following as the grounds for opposition:-a.That on 16th June 2022 the Applicant lodged an Objection against the assessments of Kshs 726,608. 80 after establishing variances between VAT returns and income tax returns in 2019. b.That on 21st June 2022, the Applicant lodged an Objection against the assessments.c.That the Respondent reviewed the Applicant’s Objection and noted that the Objection was not validly lodged as the Applicant failed to provide substantive grounds of appeal, make amendments to the assessments, and provide supporting documentation for the objection alongside the detailed reconciliation for any variances for the period.d.That on 28th June 2022, the Respondent communicated the observation pursuant to Section 51(4) of the Tax Procedures Act and requested it to validate the objection.e.That the Applicant neither presented any records nor reconciled the variances as directed by the Respondent.f.That the Respondent made a reminder to the Applicant on 4th July 2022 to avail grounds of objection and supporting documents.g.That the Respondent issued an objection decision on 17th August 2022 rejecting the objection in its entirety confirming the assessments.h.That the Objection decision was communicated through the Applicant’s registered email address info@nurupalacehotel.com and a copy was made to the director of the Applicant’s email address brabom@yahoo.com.i.That the Respondent confirmed the assessments on the iTax platform on 4th October 2022. j.That in the absence of a valid appeal before the Tribunal, the Respondent is entitled to enforce the collection of the taxes that are due.k.That the application as filed is incompetent, bad in law, fatally defective, and is otherwise an abuse of this Honourable Tribunal’s process.l.That it is misleading to allege that the Applicant failed to file the appeal in time because it was not furnished with a copy of the Objection decision. The Respondent sent the decision to the Appellant’s registered email address which also appeared on the Objection application.m.That subject to the provisions of Section 9 of the Tax Procedures Act, a taxpayer is placed with the obligation of supplying information to the Commissioner upon change of particulars. The Respondent used the correct address to issue the Objection decision.n.That the Applicant further alleges that the reason why the Appeal was not filed in time was because of the failing health of the director. The Applicant is a limited liability Company thus as a going concern, it is a fallacy to allege that the appeal was not filed on time because of the failing health of the director. The Applicant was at all times aware of the tax dispute with the Respondent, it ought to have followed up on the position of the matter and move the Tribunal within time.o.That the Applicant has not tendered any explanation why it never sought to know from the Respondent and/or make any attempt to follow up with the Respondent for more than one and a half years whether a decision had been rendered on the Objection.p.That the Applicant has been indolent and the application ought not be allowed.q.That the instant application is misconceived, as the Applicant has not demonstrated that it has met the provisions of Section 13(4) of the Tax Appeals Tribunal Act. The Applicant has therefore not demonstrated to the Tribunal why the orders sought should be granted.r.The Applicant has not demonstrated why it deserves a favourable discretion of this Honourable Tribunal and the application should be dismissed with costs to the Respondent.s.The application dated 19th March 2024 is misplaced and thus ripe for striking out.

The Respondent’s submissions 5. In its submissions dated 22nd April 2024 and filed on 25th April 2024, the Respondent presented on specific legal issues as hereunder.

a. On whether the Appellant is deserving of the orders sought 6. The Respondent submitted that it issued additional assessments of Kshs 726,608. 80 on 6th June 2022 after establishing variances between VAT returns and Income Tax returns in the year 2019.

7. It contended that on 21st June 2022, the Applicant lodged an Objection against the assessments which it reviewed and noted that the Objection was not validly lodged as the Applicant failed to provide substantive grounds of appeal, make amendments to the assessments and provide supporting documentation for its Objection alongside the detailed reconciliation for any variances for the period.

8. The Respondent submitted that it communicated its observations to the Appellant under Section 51(4) of the Tax Procedures Act and requested the Applicant to validate the Objection but the Applicant failed to reconcile the variances and provide records in support of its Objection prompting the Respondent to remind the Applicant vide a letter of 4th July 2022 to avail the grounds of the Objection and supporting documentation.

9. The Respondent submitted that it consequently issued an Objection decision on 7th August 2022 rejecting the Objection in its entirety and duly notifying the Applicant of its right of appeal pursuant to the provisions of the Tax Appeals Tribunal as required by Section 52 of the Tax Procedures Act, 2015, if the Applicant was aggrieved but the Applicant failed to appeal the decision within 30 days as required.

b. On whether the Applicant has met the criteria set by Section 13 of the Tax Appeals Tribunal Act. 10. The Respondent submitted that a valid appeal is one which has been filed within the confines of the laws.

11. It relied on Section 13 of the Tax Appeals Tribunal Act and argued that in the absence of a valid appeal before the Tribunal, the Respondent is entitled to enforce the collection of taxes confirmed in the Objection decision.

c. On whether the Applicant has given sufficient reasons for the delay 12. The Respondent submitted that an extension of time to file an Appeal is an exercise of judicial discretion and Section 13(4) of the Tax Appeals Tribunal Act requires an Applicant to provide a reasonable cause preventing it from filing the Notice of Appeal or submitting the documents within the specified period.

13. It cited the case of Jomusons Investment Limited v Commissioner of Domestic Taxes [2020] eKLR and posited that in order for the discretion of the court to be exercised for the grant of leave to file an appeal out of time. It is required for the Applicant to advance satisfactory reasons as was found in the case of income Tax Appeal No 31 of 2017 Commissioner of Domestic Taxes v Mayfair Insurance Company Limited (2017) eKLR

14. It reiterated that no credible reason has been advanced by the Applicant to warrant an extension of time to file an appeal as provided under Section 13(4) of the Tax Appeals Tribunal Act.

15. It maintained that contrary to the Applicant’s assertions, the Respondent used the email address which was availed by the Applicant: info@nuruplacehotel.com and a copy made to the director’s email address: brabom@yahoo.com, the email indicated in the Appellant’s Objection.

16. It argued that contrary to Section 9 of the Tax Procedures Act, the Applicant failed to inform the Respondent of any changes in its email at any point after it lodged its Objection or even prior to the Objection decision being issued therefore the Respondent used the correct email address to issue the Objection Decision.

17. It was submitted that the Applicant is a limited liability Company and thus as a going concern, it is misleading to allege that the Appeal was not filed on time because of the Director’s sickness as the Applicant was aware of the tax dispute and ought to have followed up on the position of the matter and move the Tribunal within time.

18. It asserted that the Applicant has not tendered any explanation for not seeking to know from the Respondent or follow up with the Respondent on whether a decision has been rendered for more than one year therefore no credible reason has been advanced by the Applicant to warrant an extension of time to file an appeal as per Section 13(4) of the Tax Appeals Tribunal Act.

d. On whether there was an inordinate delay on the part of the Applicant 19. The Respondent submitted that the Applicant delayed to file its appeal by one year and 3 months.

20. It relied on the case of Jomusons Investment Company (supra) and submitted that the Applicant’s inordinate delay is not excusable as no plausible reason has been given per the law and the Applicant’s failure to file an Appeal on time is a blatant disregard of the provisions of the law.

21. It asserted that the Applicant has been indolent and the indolence should not be excused.

22. It argued that the taxes demanded fell due on 17th September 2022 when the Applicant failed to lodge an appeal within 30 days from the date of the Objection decision as per the provisions of the Tax Procedures Act and the Tax Appeals Tribunal Act.

23. It reiterated that the Applicant has not shown any prejudice it would suffer if the orders sought are not granted. It added that it is the obligation of every citizen to pay taxes as and when they fall due and the application is an afterthought and a delay tactic by the Applicant meant to delay the conclusion of the matter which holds substantial Government revenue.

Analysis and Findings 24. 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.

25. In determining whether to extend time, the Tribunal was guided by the decision in Charles Karanja Kiiru v Charles Githinji Muigwa [2017] eKLR, where the learned Judge stated that:“It is trite that 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”

26. On the criteria of the issues to be considered when granting an extension to file an appeal out of time, the Tribunal referred to the decision of Odek, JJ.A in Edith Gichugu Koine v Stephen Njagi Thoithi [2014] eKLR, where the Court laid out the factors as thus:-“Nevertheless, it ought to be guided by consideration of factors stated in many previous decisions of this Court including, but not limited to, the period of delay, the reasons for the delay, the degree of prejudice to the respondent if the application is granted, and whether the matter raises issues of public importance, amongst others...”

27. Further, in Sammy Mwangi Kiriethe & 2 others v Kenya Commercial Bank Ltd [2020] eKLR, the court held that:-“The Court considers the length of the delay; the reason for the delay; the chances of success of the intended appeal, and the degree of prejudice that would be occasioned to the respondent if the application is granted.”

28. The Tribunal, guided by the principles set out in John Kuria v Kelen Wahito, Nairobi Civil Application Nai 19 of 1983 April 10, 1984 referred to by the Judges in the case of WasikevSwala [1984] KLR 591, Sammy Mwangi Kiriethe & 2 others v Kenya Commercial Bank Ltd (supra) and Section 13 of the Tax Appeals Tribunal Act, 2013 used the following criteria to consider the application.a.Whether there is a reasonable cause for the delay?b.Whether the appeal is meritedc.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? 29. In considering what constitutes a reasonable reason for the delay, the court in Silas Kanyolu Mwatha v Josephine Kavive James [2021] eKLR, held that:“The time stipulation is a requirement of the law as clearly stated ... In short, parties cannot, either unilaterally or by agreement between them, metaphorically, waive away the rules of the court. The rules of the Court are meant to achieve timely and orderly commencement, progress and proper determination of litigation of proceedings. Given the statutory limit, principally, the delay is inexcusable unless the applicant shows sufficient cause to justify the delay and that any such extension shall not prejudice the respondent.” (Emphasis added).

30. The Applicant contended that it could not file the Appeal on time because the Respondent did not issue the Objection decision.

31. It further averred that its delay was compounded by the Appellant’s Director’s sickness.

32. The Respondent contended that the Applicant lodged an invalid Objection because it did not contain any supporting evidence prompting it to write a letter to the Applicant requesting documentation to support its Objection decision to the Applicant’s official email address: info@nurupalacehotel.com and a copy made to the director’s email address: brabom@yahoo.com, the email indicated in the Applicant’s objection.

33. The Respondent contended that it was not aware that the Applicant had changed its email details nor did the Applicant inform it of any changes contrary to the provisions of the law.

34. It further contended that the Applicant is a limited liability Company and thus as a going concern, its Director’s sickness should not keep it from following up on the tax dispute for more than a year.

35. The Tribunal has perused the evidence provided by both parties and has found that, whereas the Applicant asserted that it did not receive the Objection decision, the email correspondence indicates that the Applicant’s official email address per the notice of objection filed by the Applicant itself was used to communicate the position of the Applicant’s Objection as well as the Objection Decision.

36. The Tribunal also observes that no evidence has been tabled by the Applicant to show if at all its director was sick and for how long the director suffered the sickness.

37. It is therefore the Tribunal’s finding that the reason provided by the Applicant as the cause for its delay falls short and is therefore insufficient to warrant the Tribunal’s exercise of its discretion in favour of the Applicant.

38. Having found as above, the Tribunal finds no need to embark on an academic exercise by delving into the remaining factors for consideration in an application of this nature as they have been rendered moot.

Disposition 39. The Tribunal is in the circumstances not persuaded to exercise its discretion in favour of the Applicant and hereby accordingly proceeds make the following Orders:-a.The application for the extension of time be and is hereby dismissed;b.No Orders as to costs.

DATED AND DELIVERED AT NAIROBI THIS 5TH DAY OF JULY, 2024ERIC NYONGESA WAFULACHAIRMANEUNICE N. NG’ANG’AMEMBERMUTISO MAKAUMEMBERELISHAH N. NJERUMEMBERABRAHAM K. KIPROTICHMEMBER