[2024] KETAT 1243 (KLR)

Pejom Contractors Limited v Commissioner of Domestic Taxes (Tax Appeal E670 of 2024) [2024] KETAT 1243 (KLR) (Civ) (23 August 2024) (Ruling)

Neutral citation: [2024] KETAT 1243 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Civil

Tax Appeal E670 of 2024

E.N Wafula, Chair, Cynthia B. Mayaka, RO Oluoch, T Vikiru & AK Kiprotich, Members

August 23, 2024

Between

Pejom Contractors Limited

Appellant

and

Commissioner of Domestic Taxes

Respondent

Ruling

1. The Appellant vide an application dated 14th day of June, 2024 and filed on the 18th day of June, 2024 and which is supported by an Affidavit sworn by Peterson Njomo, a Director of the Appellant, on the 14th day of June, 2024 sought for the following Orders:-a.Spent.b.Spent.c.That this Honourable Tribunal lifts the agency notice placed on the Appellant’s bank account held at Equity Bank.d.That the Appellant be granted leave to file an appeal out of time against the Respondent’s demand notices dated 11th November, 2021 and 23rd November, 2021. e.That the annexed Notice of Appeal, Memorandum of Appeal, Statement of Facts and other accompanying documents be deemed as duly filed and served.f.That pending the hearing and determination of the substantive appeal and any other application filed by the Appellant, the Respondent, its agents or officers be barred from accessing, interfering and/or withdrawing funds and/or issuing agency notices against the Appellant.g.That costs of this application be in the cause.

2. The application is premised on the following grounds:-a.That the Appellant is a resident taxpayer based in Nairobi County.b.That the prescribed statutory time to lodge the Appeal with the Tribunal has expired.c.That the Appellant received two demand notices dated 11th November, 2021 and 23rd November, 2021, respectively, from the Respondent.d.That there was no assessment done on the Appellant or any notice of assessment issued or sent to the Appellant by the Respondent prior to issuance of the demand notices.e.That the tax decision was served upon the Appellant by the Respondent outside the statutory deadlines hence preventing it from filing an appeal within the time allowed by law and thus denying it an opportunity to be heard.f.That the Appellant is not in any way indebted to the Respondent as per the tax decision it arrived at.g.That if this application is not allowed, the Appellant will suffer irreparable loss on account of a mistake by the Respondent and no mistake by the Appellant, as the taxes being demanded are excessive, erroneous and the intended appeal is merited.h.That the delay in filing this Appeal is not inordinate in these circumstances.i.That if this application is allowed, the Respondent will not suffer any loss as in the event it is determined that taxes are due, the Appellant will pay interest for the continued non-payment of taxes.j.That the application will not prejudice the Respondent in any way but will provide an opportunity to this Honourable Tribunal to decide the issues on merit and ensure dispensation of justice.

Analysis and Findings 3. When the application came up for hearing on the 27th June, 2024 the Tribunal directed the Respondent to file and serve its response to the application by the 3rd July, 2024 and the parties were to file and serve upon each other their respective written submissions by the 14th July, 2024.

4. The Respondent did not file any response to the application and the application is to that extent deemed as unopposed.

5. None of the parties filed any written submissions and the Tribunal has in the circumstances been prompted to make a determination of the application strictly on the premise of the grounds on the face of the application and the facts as disclosed in the Affidavit in support of the application.

6. The Tribunal’s jurisdiction for the enlargement of time in the commencement of an appeal process is found under Section 13(2) of the Tax Appeals Tribunal Act which provides as thus:-“(3)The Tribunal may, upon application in writing, extend the time for submitting the documents referred to in subsection (2).(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 giving notice of appeal within the specified period.”

7. 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 is discretionary and unfettered but the same must be exercised judiciously.

8. In determining whether to extend time, the Tribunal was guided by the court in Joseph Ondiek Tumbo v Sony Sugar Co Ltd [2014] eKLR, where the learned Judge quoted Sir Thomas Bingham M R in Costellow v Somerset County Council [1993]1 All ER 952 where he stated that:-“The first principle is that the rules of court and the associated rules of practice, devised in the public interest to promote expeditious dispatch of litigation, must be observed. The prescribed time limits are not targets to be aimed at or expressions of pious hope but requirements to be met. The second principle is 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 costs cannot compensate…. Further, an extension of time is an indulgence from the court by a party in default. He is not entitled to an extension. He has no reasonable or legitimate expectation of receiving one. His only reasonable or legitimate expectation is that the discretion relevant to his application to extend time will be exercised judicially in accordance with established principles of what is fair and reasonable. In those circumstances, 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.”

9. 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 Wasike V Swala [1984] KLR 591 where the Court laid a hierarchy of factors to consider when it stated that:-“an applicant must now show, in descending scale of importance, the following factors: - a) That there is merit in his appeal. b) That the extension of time to institute and/or file the appeal will not cause undue prejudice to the respondent; and c) That the delay has not been inordinate.”

10. The Tribunal, guided by the principles set out in Wasike v Swala [1984] KLR 591, Joseph Ondiek Tumbo v Sony Sugar Co Ltd [2014] eKLR and Section 13 of the Tax Appeals Tribunal Act, 2013 used the following criteria to consider the application.a.Whether the appeal is merited.b.Whether there is a reasonable cause for the delay.c.Whether there will be prejudice suffered by the Respondent if the extension is granted.

a. Whether the appeal is merited. 11. The Tribunal examined whether the actions complained of by the Applicant were merited and whether there was an arguable appeal before the Tribunal or the appeal was frivolous to the extent that it would only result in a waste of the Tribunal’s time.

12. An appeal being merited does not mean that it should necessarily succeed but rather it is arguable. The Tribunal was 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.”

13. The Tribunal has noted from both the application and the Notice of Appeal filed on the 18th June, 2024 that the Appellant intends to appeal as against the demand notices issued by the Respondent on the 11th and 23rd November, 2021.

14. The demand notices issued constitute tax decisions and any party dissatisfied with a tax decision ought to invoke the provision of Section 51 of the Tax Appeals Tribunal Act in challenging such a tax decision. The relevant parts of the Section provides as follows:-“(1) A taxpayer who wishes to dispute a tax decision shall first lodge an objection against that tax decision under this section before proceeding under any other law.(2)A taxpayer who disputes a tax decision may lodge a notice of objection to the decision, in writing with the Commissioner within thirty days of being notified of the decision.”

15. The Appellant has admittedly not lodged any objections on the basis that it was not served with any notices of tax assessments prior to its being issued with the demand notices in issue.

16. It is manifestly clear that the Appellant did not attempt to exhaust the mechanisms provided under Section 51 of the Tax Procedures Act prior to attempting to invoke the jurisdiction of this Tribunal. To this extent the taxes demanded crystallized for recovery on the part of the Respondent and thus the Respondent appropriately exercised its statutory mandate in the issuance of the Agency notices against the Appellant’s banker in enforcement of payment of the taxes.

17. The need to adhere to statutory edicts was aptly emphasized in 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.”

18. The Appellant having failed to adhere to the provisions of Section 51 of the Tax Procedures Act there is no conceivably sustainable appeal that can be pursued by the Appellant before this Tribunal.

19. The Tribunal in the circumstances finds that there is no proper and competent appeal that can be filed for determination on its merits.

20. The Tribunal having made the foregoing finding of absence of a competent Appeal that is capable of being pursued by the Appellant before the Tribunal finds that the other factors for consideration have since been rendered moot.

21. Following the foregoing finding that the Appellant has no appeal capable of being pursued the Tribunal hereby finds that the Notice of Appeal and the Appeal documents simultaneously filed with the application were premature, incompetent and unsustainable in law.

Disposition 22. On the basis of the foregoing analysis the application lacks merit and the Appeal filed therewith is invalid and the Tribunal accordingly proceeds to make the following Orders:-a.The application be and is hereby dismissed.b.The Appeal be and is hereby struck out.c.No orders as to costs.

DATED AND DELIVERED AT NAIROBI THIS 23RD DAY OF AUGUST, 2024ERIC NYONGESA WAFULA - CHAIRMANCYNTHIA B. MAYAKA - MEMBERDR. RODNEY O. OLUOCH - MEMBERDR. TIMOTHY B. VIKIRU - MEMBERABRAHAM K. KIPROTICH - MEMBER