[2023] KETAT 611 (KLR)

Patel v Commissioner of Domestic Taxes (Miscellaneous Case E280 of 2023) [2023] KETAT 611 (KLR) (29 June 2023) (Ruling)

Neutral citation: [2023] KETAT 611 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Miscellaneous Case E280 of 2023

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

June 29, 2023

Between

Jayeshkumar Vinubhai Patel

Applicant

and

Commissioner Of Domestic Taxes

Respondent

Ruling

1. The Applicant vide a Notice of Motion dated the 4th April, 2023 filed under certificate of urgency of the same date and supported by an Affidavit sworn by Applicant on the 4th April 2023 sought for the following Orders: -i.Spent.ii.That this Honorable Tribunal be pleased to extend the time for filing the Applicant’s Notice of Appeal, Memorandum of Appeal and Statement of Facts hereiniii.That the Applicant be granted leave to file its Notice of Appeal, Memorandum of Appeal and Statement of Facts out of time against the Objection Decision of the Respondent issued on 17th November 2021. iv.That the Honorable Tribunal be pleased to deem the annexed Notice of Appeal as being properly on record.v.That the objection decision dated 17th November 2021 and any all-other consequent orders be stayed pending the hearing and determination of the application.vi.That the costs of this Application be in the main Appeal.

2. The application is premised on the following grounds: -i.That on 15th of November 2019, the Applicant received a Notice of Assessment from the Respondent claiming taxes of Kshs. 1,259,955. 34/=. The Applicant filed an Objection to the said Demand and requested the same to be reviewed. The said Objection was rejected.ii.That the annexed Notice of Motion seeks for extension of time to file a Notice of Appeal, Memorandum of Appeal and Statement of Facts in respect of the above-mentioned objection decision issued by the Respondent dated 17th November 2021. iii.That the Appellant’s email address had an issue and could not be accessed at the time of objection decision was issued. Through an email the Applicant had communicated to the Commissioner that he had entrusted a Tax Consultant to handle all the tax matters and all communication regarding the objection process to be channeled to him but the Commissioner went ahead to issue the decision in the same email that had accessibility problems therefore, the Applicant could not respond on time as stipulated in law.iv.That the decision came into the Applicant’s attention after application of a Tax Compliance Certificate where the amounts demanded were still pending and upon seeking clarification from the Commissioner’s office, was notified the objection was rejected and upon consultation from the station, it was advised to appeal for his matter to be resolved.v.That in the circumstances therefore, it is necessary that the said application be heard on a priority basis.

3. The Respondent opposed the application through a Replying Affidavit sworn by Antony Gathai, an officer of the Respondent, on the 27th April, 2023 and filed on the same date. The grounds of opposition as highlighted in the Affidavit were as follows: -i.That the Respondent issued a Notice of Assessment for Value Added Tax (VAT) on 15th November, 2019 in the sum of Kshs. 1,259,955. 34ii.That the Applicant consequently filed an objection against the demand, which objection was rejected by the Respondent.iii.That the Applicant on 4th April, 2023 filed an application to file the Appeal out of time citing the problem of email accessibility and that he had entrusted his tax matters to a tax consultant.iv.That the Applicant is not relieved of any obligation imposed on him under tax law that the tax representative has failed to perform as per Section 16(8) of the Tax Procedures Act.v.That the Applicant has not set out and/or demonstrated any solid grounds that would warrant this Honourable Tribunal to exercise its discretion in the favour of the Applicant. The Applicant has failed to lay a sufficient basis to the satisfaction of the Tribunal for extension of time to file an appeal.vi.That the fact that the Applicant failed to file the Appeal for more than one year and five months is a demonstration that the Applicant has not been vigilant and does not warrant the exercise of the Tribunal’s discretion in his favour. The Applicant is guilty of laches.vii.That the delay is unreasonable and not excusable on the grounds that the Applicant had no intention of settling the outstanding tax liability and only woke up after the agency notices were issued by the Respondent.viii.That the application is an afterthought, brought in bad faith, meant to delay the Respondent from collecting taxes that are due and payable and shout 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.ix.That the Applicant is not deserving of the orders sought in the application as the whole period of delay has not been sufficiently explained satisfactorily to the Tribunal thus the application ought to be dismissed.x.That the Respondent is merely carrying out its statutory duty under the law by issuing enforcement notices and consequently pray that its actions be upheld by this Honourable Tribunal.xi.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 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.xii.That in the circumstances, it is in the public interest that his Honourable Tribunal dismisses the Applicant’s Notice of Motion application dated 4th April 2023 to pave way for the Respondent to collect taxes due from the Applicant which are key to the economic development of the Country.xiii.That the indolence and negligence of the Applicant should not bar the Respondent from fulfilling its mandate of collecting taxes that are still due and payable.xiv.That the Applicant has failed to satisfy the principles set out in the case of Nicholas Kiptoo Arap Koris Salat vs Independent Electoral and Boundaries Commission & 7 Others (2014) eKLR

Analysis And Findings 4. In compliance with the directions of the Tribunal to the effect that the application was to be canvassed by way of written submissions, the Applicant filed his submissions on 15th May, 2023, and the Respondent filed its submissions on 12th May, 2023. The Tribunal has duly considered the written submissions of both the Applicant and Respondent in arriving at its determination in this Ruling.

5. The application is primarily praying to the Tribunal for extension of time to file an appeal out of time.

6. 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.

7. In determining whether to extend time, the Tribunal was guided by the decision of 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”

8. 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...”

9. 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.”

10. 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 there will be prejudice suffered by the Respondent if the extension is granted?a.Whether there is a reasonable cause for the delay

11. In considering what constitutes as a reasonable reason for delay, the court in Balwant Singh v Jagdish Singh & Ors (Civil Appeal No.1166 of 2006), held that: “The test is whether or not a cause is sufficient to see whether it could have been avoided by the party by the exercise of due care and attention”.

12. The statutory timelines and provisions to file an appeal have been clearly set out in the Tax Appeal Tribunal Act. Section 13 (3) of the Tax Appeals Tribunal Act provides as follows with regard to the statutory timelines in commencing appeal process:-“A notice of appeal to the Tribunal shall—(a)be in writing;(b)be submitted to the Tribunal within thirty days upon receipt of the decision of the Commissioner.(2)The appellant shall, within fourteen days from the date of filing the notice of appeal, submit enough copies, as may be advised by the Tribunal, of—(a)a memorandum of appeal;(b)statements of facts; and(c)the tax decision.”

13. For a taxpayer who has not met the timelines as provided in the above provision of the law, Section 13(4) of the Tax Appeals Tribunal Act provides the conditions that the tax payer ought to meet to enable the Tribunal to exercise its discretion to extend time to appeal. The Section provides as follows;“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 giving notice of appeal within the specified period.”

14. Regarding the reasons for delay, the Applicant stated he filed an objection to the Respondent’s assessment on 18th July, 2020. The Respondent rejected the late objection on 17th November, 2021, just over one year later.

15. The Applicant further averred that his email had an issue and he did not receive the objection decision. This was primarily because the Applicant had entrusted the process on a Tax Consultant and communicated to the Commissioner but this was not acted upon.

16. The Applicant has not annexed any evidence confirming this communication with the Commissioner. However, his averment is not contended by the Respondent.

17. The Respondent’s submissions on this limp are primarily built on equitable principles. In particular, the Respondent avers that the Applicant failed to file an Appeal for over one year and five months, and should not therefore benefit from the Tribunal’s discretion.

18. The Respondent has, however, not challenged the Applicant’s contention that he did not receive the objection decision.

19. Based on these unchallenged averments by the Applicant on oath, the Tribunal was persuaded that the Applicant may not have indeed received the Notice of Late Objection Rejection.

20. Consequently, the Tribunal determined that the Applicant had demonstrated reasonable cause for delay.a.Whether the appeal is merited?

21. The Tribunal considered whether the matter under dispute was frivolous to the extent that it would be a waste of the Tribunal time, or it was material to the extent that it deserved its day in the Tribunal.

22. The test is not whether the case is likely to succeed. Rather, it is whether the case is arguable. This was the finding in Samuel Mwaura Muthumbi v Josephine Wanjiru Ngungi & Another [2018] eKLR where the court stated that“Looking at the draft Memorandum of Appeal filed, I am unable to say that the intended Appeal is in arguable. Of course, all the Applicants have to show at this stage is arguability- not high probability of success. At this point the Applicant is not required to persuade the Appellate court that the intended or filed appeal has a high probability of success. All one is required to demonstrate is the arguability of the Appeal, a demonstration that the Appellant has plausible grounds of either facts or law to overturn the original verdict. The Applicants have easily met that standard. I believe that the Applicant has discharged this burden.”

23. The Tribunal was further guided by the findings of the court in Kenya Commercial Bank Limited v Nicholas Ombija [2009] eKLR where it was held that:“An arguable appeal is not one which must necessarily succeed, but one which ought to be argued fully before the court.”

24. Similarly, in Kenya Commercial Bank Limited v Nicholas Obija [2009] eKLR it was stated that “an arguable appeal is not one which must necessarily succeed, but one which ought to be argued fully before the court” that was also the position held in Stanley Kangethe Kinyanjui v Tony Keter & others [2013] eKLR where the court held that “on whether the appeal is arguable, it is sufficient if a single bonafide ground of appeal is raised, .. an arguable appeal is not one which must necessarily succeed, but one which ought to be argued fully before the court: one which is not frivolous.”

25. From the pleadings, the Tribunal noted the Respondent’s assessment of 15th November 2019, and Notice of Rejection of Late Objection dated 17th November 2021.

26. The Tribunal also noted the Applicant’s eight (8) grounds of appeal outlined in the draft Memorandum of Appeal and averments in the draft Statement of Facts.

27. Accordingly, the Tribunal finds that the standards set out in Stanley Kangethe Kinyanjui v Tony Keter & others [2013] case have been met. The Applicant has an arguable case which should be considered on its full merits.a.Whether there will be prejudice suffered by the Respondent if the extension is granted?

28. The courts have held that in considering whether to extend time, due regard must be given to whether the extension will prejudice the opponent. In determining this, the Judge in Patrick Maina Mwangi v Waweru Peter [2015] eKLR quoted the finding in United Arab Emirates V Abdel Ghafar & Others 1995 IR LR 243 in finding that:“……. a plaintiff should not in the ordinary way be denied an adjudication of his claim on its merits because of a procedural default, unless the default causes prejudice to his opponent for which an award of cost cannot compensate………”

29. The test, therefore, as set out in the case above is whether the Respondent will suffer irreparable prejudice if the application is granted. However, having found that the subject matter was arguable, it is the view of the Tribunal that the Applicant’s recourse to justice now lies in an appeal to the Tribunal.

30. Thus, the Applicant would suffer prejudice if it is not granted leave to file its appeal. The Respondent on the other had will not suffer prejudice since it will still be able to collect the taxes plus interest and penalties should the Applicant be found to be at fault.

31. The Tribunal therefore finds that the Respondent will not suffer prejudice if the extension is granted.

Disposition 32. Based on the foregoing, the Tribunal finds that the application is merited and proceeds to make the following orders:i.The application is hereby allowed.ii.The Applicant is hereby granted leave to file its Notice of Appeal, Memorandum of Appeal and Statement of Facts out of time.iii.The Notice of Appeal, Memorandum of Appeal and the Statement of Facts filed before the Tribunal with the instant application are deemed as duly filed and served.iv.The Respondent to file its response to the Appeal within thirty (30) days from the date of delivery of this Ruling.v.No orders as to costs.

DATED AND DELIVERED AT NAIROBI THIS 29TH DAY OF JUNE, 2023. ...................................ERIC N. WAFULACHAIRMANCYNTHIA B. MAYAKA RODNEY O. OLUOCHMEMBER MEMBER....................................ELISHAH N. NJERU ABRAHAM K. KIPROTICHMEMBER MEMBER