[2023] KETAT 239 (KLR)

Owuor v Commissioner of Domestic Taxes (Appeal 1372 of 2022) [2023] KETAT 239 (KLR) (31 March 2023) (Ruling)

Neutral citation: [2023] KETAT 239 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Appeal 1372 of 2022

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

March 31, 2023

Between

Ben Okeyo Owuor

Applicant

and

Commissioner of Domestic Taxes

Respondent

Ruling

1. The application which was by way of a Notice of Motion dated November 10, 2022 and filed on November 14, 2022 which is supported by an Affidavit sworn by the Applicant, sought for the following Orders:-a.Spentb.That pending the hearing and determination of this Application an order be issued to vacate the Agency Notice conveyed by the Respondent to the Consolidated Bank of Kenya and MyCredit Ltd on February 25, 2022. c.That this Honourable Tribunal do grant leave to the Applicant to file the Appeal out of time.d.That pending hearing and determination of the substantive Appeal, the Respondent, its agents, and/or workers be barred from attaching any moveable and immovable assets of the Applicant.e.That the Applicant be at liberty to apply for further orders and the Honourable Tribunal do give any directions it deems fit and just to grant in the circumstances.f.That the costs of this application be in the cause.

2. The application is premised on the following grounds that:-a.The Applicant’s business is premised in Nakuru and is involved in tendering and supplies.b.On October 25, 2022, the Applicant was notified by his bank that the account had been restricted by the Respondent and that it could not draw nor honor any obligations from the Applicant.c.The Applicant queried the Respondent and was informed that the Application for Late Objection had been denied and a confirmation of the Assessment issued.d.On the same date, October 25, 2022, when the Applicant visited the Respondent’s office he received a correspondence dated November 25, 2021 notifying the Applicant that its application for extension of time to lodge a notice of objection had been denied.e.The said tax decision was served upon the Applicant by the Respondent outside of the statutory deadlines thereby locking him out from filing an appeal within the time allowed by the law.f.Further, the Applicant is constitutionally protected and its right to privacy by the bank that was issued with the Agency Order owing to the fiduciary trust placed on them as custodians of his financial business.g.The Applicant is not in any way indebted to the Respondent as per the tax decision arrived at.

The Applicant’s Submissions 3. The Applicant in its Written Submissions dated January 11, 2023 and filed before the Tribunal on January 12, 2023 stated as hereunder.

4. The Applicant submitted that he had for the better part of the year experienced bad health that tampered with his movements occasioning him to fall out on deadlines which reason is enough to be indulged in the circumstances.

5. The Applicant relied on the case of Geoffrey Otieno Oduor v Commissioner of Domestic Taxes TAT Misc No 185 of 2011 where the Tribunal opined that,“... illness as the cause of delay… the Tribunal does not find the Application brought with undue delay.” It opined that the treatment notes shared with the Tribunal is substantive enough to allow the application.

6. The Applicant cited the case of Agip (Kenya) Limited v Highlands Tyres Limited (2001) eKLR 630 where it was held:“Delay is a matter of fact to be decided on the circumstances of each case, where a reason for the delay is offered, the courts should be lenient and allow the Plaintiff an opportunity to have his case decided on merit.”

7. It further cited the case ofKennedy Mutua Ngunu v The Commissioner of Domestic Taxes TAT Misc No 86 of 2022 where the Tribunal opined that:-“... tribunal finds the axplanations raised by the Applicant as to the cause of the delay on his part commencing the appeal process to be plausible as there is documentary evidence.”

8. The Applicant submitted that the Respondent would otherwise still collect taxes, penalties and interests should the Applicant be found to be at fault.

9. The Applicant argued that the Agency Notices were issued prematurely and is an action ultra vires to the Respondent’s statutory mandate. He added that the Respondent chose to breach the rules of natural justice by denying him the opportunity to be heard and that tax is a penalty and one must be heard before a penalty is imposed arbitrarily.

10. It asserted that it was a procedural lapse on the Respondent’s part by issuing the Agency Notices which had the effect of freezing his account without notice to him thereby exposing the Applicant to unfair treatment.

11. The Applicant contended that it has a statutory duty to pay undisputed taxes but due process and procedure must be followed. He cited the case of SBI International Holdings Limited v the Commissioner of Customs and Border Control.

12. The Applicant argued that the Respondent acted against statute by seeking to collect disputed taxes before ascertaining whether the taxes demanded are due and the process by the Respondent lacks the power to issue the agency notices.

13. The Respondent posited that to preserve the substratum of the appeal and to [cushion] the Applicant from undue economic hardships it is fair that the Application be allowed and have the appeal canvassed on merit.

Response to the Application 14. The Respondent filed a Replying Affidavit sworn by Amos Nyaunga Oeta, an officer of the Respondent, on the November 17, 2022 and filed on the same date in response to the current application citing the following as the grounds for opposition:a.That the application seeks to challenge an objection decision 11 months after the Respondent issued an objection decision in November 2021. b.That at all material times the Respondent promptly and effectively communicated its decisions with the Applicant as below:i.On April 14, 2021, the Respondent issued an additional assessment to the Applicant via the automatic serve protocol on iTax platform;ii.On November 9, 2021, the Respondent allowed the Applicant’s application for late objection;iii.On 26th November, the Respondent emailed the Appellant its Objection decision;iv.At all material times, the Respondent and the Appellant corresponded via email addresses benslynconsultants@yahoo.com and kosgeyreuben@gmail.com.c.That the Applicant in response to the Respondent’s exercise of Revenue Authorisation authority has consistently acted in a manner as to defeat the ends of justice and/or final determination of the impugned tax assessment.d.That effluxion of time with regard to the Applicant complying with statutory timelines directly related to the tax assessment and subsequent judicial proceedings therein is a constant theme. It is trite law that equity does not aid the indolent in addition to the Applicant’s approach with the Tribunal with unclean hands.e.That while procedural technicalities are not to defeat the ends of justice, the law behooves proportionate exercise of litigants rights. In the present case, the Respondent’s right to just, expeditious, proportionate and affordable resolution outweighs the Applicant’s right to appeal in light of the Applicant’s conduct.f.That it is in the interest of justice that the application herein is dismissed in favour of the overriding public interest in expeditious and efficient disposal of suits with costs for the Respondent.

Respondent’s Submissions 15. In its submissions dated November 29, 2022 and filed on November 30, 2022, the Respondent presented as hereunder.

On whether the Applicant Merits Extension of Time to File an Appeal Out of Time 16. The Respondent submitted that pursuant to Section 13(3) and 13(4) of the Tax Appeals Tribunal Act, extension of time to file an appeal out of time is conditional on demonstrable reasonable grounds by an Applicant seeking refuge under the provisions which is unequivocal on the allowable parameters as absence from Kenya, sickness, or other reasonable cause.

17. It cited the case ofNicholas Kiptoo Arap Salat v Independent Electoral and Boundaries Commission and 7 other[2014] eKLR where it was held:-“it is incumbent on the applicant for an extension of time to provide the court with a full, honest and acceptable explanation of the reasons for the delay. He cannot reasonably expect the discretion to be exercised in his favour, as a defaulter, unless he provides an explanation for the default.”

18. It further cited the case of Commissioner of Domestic Taxes v Mayfair Insurance Company Limited (2017) eKLR where the court opined that:-“It is however not to be capriciously exercised. Time, in other words, is not to be extended as a matter of right. Each case is to be viewed sui generis and on its own circumstances and facts. The starting point is that the Applicant ought to advance sufficient and reasonable grounds for any delay on its part.”

19. The Respondent contended that the application challenges an objection decision issued on November 26, 2021, more than 11 months after the issuance of the Objection Decision.

20. It maintained that it served tha Applicant with its Objection decision on November 26, 2021 via its official email address which are: benslynconsultants@yahoo.com and kosgeyreuben@gmail.com and upon service of the obection decision. Time began to run

21. It argued that the Applicant has not advanced sufficient or reasonable grounds for the delay on its part in filing the appeal within the statutory timeline and that there is no evidence from the Applicant which rebuts the Respondent’s evidence of effective service.

22. It relied on the case of Chairman, National Union of Teachers and Another v Henry Inyangala & 2 others[2018] eKLR to assert that a delay of over 11 months with no explanation such as in the present case is inordinate.

23. It reiterated that it timeously delivered and served its objection decision as per the chronology of events, reiterating the same verbatim as listed in its Statement of Facts noting that it issued its objection decision 9 days within receipt of a valid objection and that the Applicant’s allegation that the Objection decision was out of time fails.

24. It submitted that the Applicant’s application must be proportionally balanced with the Respondent’s statutory obligation to collect taxes under Section 5(1) of the Kenya Revenue Authority Act.

25. The Respondent contended that pursuant to Sections 13(1) and (2) of theTATAct, upon the Applicant failing to file a Notice of Appeal or a Memorandum of Appeal within the stipulated timelines the tax claimed crystalised and that allowing the Application 11 months later prejudices the Respondent’s legitimate expectation to timeous resolution of tax disputes which risks materially hampering its administrative functions.

Analysis and Findings 26. The Tribunal is enjoined to determine the length and reason for the delay when considering an application for the extension of time to file an 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.

27. In determining whether to extend time, the Tribunal was guided by the court 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”

28. 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 case of Odek, JJ A in Edith Gichugu Koine vs 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...”

29. Further, inSammy Mwangi Kiriethe & 2 others v Kenya Commercial Bank Ltd [2020] eKLR, the court held:-“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.”

30. 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 Wasike V Swala[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 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? 31. 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).

32. The Applicant contended that he was delayed in filing the appeal because of the Respondent’s delay in issuing an objection decision within the statutory timelines. He further submitted that he had for the better part of the year experienced bad health that tampered with his movements occassioning him to fall out on deadlines which reason is enough to be indulged in the circumstances.

33. The Respondent reiterated that it was in constant and timely communication with the Applicant and that it issued its objection decision 9 days after the Objection decision was issued.

34. Gleaning through the documents tabled by the parties herein and arguments proffered in their pleadings in toto the Tribunal notes that there was communication between the parties via email from November 9, 2021 to November 26, 2021. The Applicant replied positively to all the email communications and has not disputed the email addresses benslynconsultants@yahoo.com and kosgeyreuben@gmail.com not being valid.

35. The Applicant however neither produced evidence of the assertions made of his sickness, nor did he show that indeed the Respondent was late in issuing its Objection decision.

36. It is therefore apparent to the Tribunal that the Applicant has failed to prove its assertions and therefore there’s no reasonable cause for the delay advanced.

37. Having examined the first test and found that there was no reasonable cause the Tribunal sees no need in embarking in an academic exercise by analysing the remaining tests as the same have been rendered moot.

38. It is noted that the Applicant filed the current appeal prior to seeking for the leave for the enlargement of time to file the appeal and with the application being unmerited the Appeal filed is hereby rendered incompetent and unsustainable in law.

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

DATED AND DELIVERED AT NAIROBI THIS 31ST DAY OF MARCH, 2023. ...........……………….ERIC N. WAFULACHAIRMAN..……………………….CYNTHIA B. MAYAKA........................RODNEY ODHIAMBOMEMBER………………………ELISHAH NJERUMEMBER...................ABRAHAM K. KIPROTICHMEMBER