[2024] KETAT 1084 (KLR)

Red Mamba Agencies Limited v Commissioner of Domestic Taxes (Tax Appeal E767 of 2023) [2024] KETAT 1084 (KLR) (19 July 2024) (Ruling)

Neutral citation: [2024] KETAT 1084 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal E767 of 2023

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

July 19, 2024

Between

Red Mamba Agencies Limited

Appellant

and

Commissioner of Domestic Taxes

Respondent

Ruling

1. The Appellant vide Notices of Motion dated 2nd November, 2023 and 16th November, 2023 both filed under Certificates of urgency on the respective even dates sought, inter alia, for the following Orders:-a.That pending the hearing and determination of this Appeal there be a stay of the decision by the Respondent dated 26th October, 2023 with regards to the disputed agency notice.b.That this Honourable Tribunal be pleased to grant the Appellant leave to appeal out of time.c.That the Memorandum of Appeal dated 2nd November, 2023 be deemed as final and properly filed.d.That the Appellant be at liberty to apply for further orders and the Honourable Tribunal do give any and/or any directions it deems fit and just to grant in the circumstances.e.That the costs of this application be in the cause.

2. The applications which are supported by the Affidavits sworn by James Wambua Muinde, a Director of the Appellant, on the 2nd and 16th November, 2023 are premised on the following grounds:-a.That the Appellant’s business is based in Mombasa and involves the business of provision of security services.b.That the Appellant was served with an objection assessment notice by the Respondent on 1st March, 2022. c.That the Appellant travelled to the rural home to be safe on Covid-19 infection since January, 2020 due to age factor and consequently they were not in receipt of the letter on that date.d.That the Appellant resumed office on the early quarter of 2023 financial year and immediately responded to the Respondent’s letter via a telephone call.e.That the Appellant having no knowledge of the tax procedures, asked the office administrator to represent the Appellant in solving the matter together with the Appellant’s bookkeeper in the village.f.That the Appellant’s agent wrote a letter of objection to the Respondent’s decision dated 26th March, 2021. g.That on 26th October, 2023 the Appellant was notified by its Bank that the account had been restricted by the Respondent and that it could not draw nor honour any obligation from the Appellant.h.That the Applicant is Constitutionally protected and its right to privacy protected by the bank that was issued with the agency notice owing to the fiduciary trust placed on them as custodians of its financial property.i.That the Applicant being dissatisfied with the Respondent’s decision filed for leave to be allowed to appeal out of time.

3. The Respondent upon being separately served with the two applications opposed the applications through Replying Affidavits sworn by Khadija Ali Dabaso, an officer of the Respondent, on the 20th November, 2023 and the 29th November, 2023, filed on the 21st November, 2023 and the 30th November, 2023, respectively. The grounds of opposition raised in respect of the applications are, inter alia, as follows:-a.That the Respondent carried out investigations of the tax affairs of the Appellant and issued the Appellant with additional assessment orders for VAT for the tax period 2017 to 2020 on 20th May, 2021 and income tax for the years of income 2017 to 2019 on 25th May, 2021. b.That on 23rd June, 2021, the Appellant objected to the assessment both the VAT and Income tax assessment.c.That the Appellant’s objections with regards to the VAT additional assessment was lodged after the lapse of 30 days as provided under Section 51(2) of the Tax Procedures Act.d.That in its late objection, the Appellant indicated that the reason for the delay in lodgings its objection was repetition of many invoices.e.That the Respondent upon consideration of the Appellant’s late objection issued its decision on the 24th February, 2022 rejecting the same.f.That the decision to decline an application to loge a late objection is not an objection decision and it can only be challenged by way of judicial review and by way of an appeal to the Tribunal.g.That the Tribunal thus lacks the requisite jurisdiction to investigate into the reasons for the Respondent’s decision rejecting the application to lodge a late objection and as such the instant application cannot be allowed.h.That though the objections to the income tax additional assessments were lodged in time the same were invalid for absence of stating the grounds of the objection and failure to supply all the relevant documents in support of the objections.i.That the Respondent issued an objection decision in respect of the objections to the income tax additional assessments on the 24th February, 2022. j.That the Appellant being dissatisfied with the objection decision ought to have filed a Notice of Appeal within 30 days as provided under Section 13 of the Tax Appeals Tribunal Act.k.That the Tribunal has power under Section 13(3) of the Tax Appeals Tribunal Act to extend time for filing the Notice of Appeal and submitting appeal documents upon the Appellant proving the existence of one of the grounds provided under Section 13(4) of the Act, being absence from Kenya, or sickness, or other reasonable cause that may have prevented the Appellant from filing the notice of appeal or submitting the documents within the specified period.l.That the reason advanced by the Appellant, of the Director having travelled home from January, 2020 due to Covid-19 until early quarter of 2023 cannot be true as it would otherwise not have been possible for the Appellant to lodge its objection on 23rd June, 2021, which period he was expected to be away due due to Covid-19 pandemic as alleged.m.That the Appellant has in the circumstances failed to explain what caused the delay in making the application in the early quarter of 2023 when the Director allegedly resumed office.n.That the delay by the Appellant is inordinate and as such inexcusable.o.That the Appellant having failed to appeal against the Respondent’s decision the taxes in issue crystallized for collected.p.That since the Appellant never paid the said taxes the Respondent commenced enforcement action on the same.q.That the Respondent is enforcing through the agency notices taxes that have not been objected to and that had crystallized for collection.r.That the Respondent’s enforcement actions are legal and there is no reason for them to be stayed.s.That both applications lack merit.

Analysis and Findings 4. In compliance with the directions of the Tribunal to the effect that the applications were to be canvassed by way of written submissions, the Appellant filed its written submissions on the 22nd November, 2023 that were adopted by the Tribunal on the 23rd November, 2023. The Respondent did not file any submissions and as such its case is to be determined strictly on the basis of the contents of both the Replying Affidavits.

5. 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.

6. 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 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.”

7. 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? 8. 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.”

9. The Appellant’s reason for lodging a Notice of Appeal and submitting the appeal documents out of the statutory timelines on the pretext of the Director of the Applicant having been away in the village by reason of avoiding Covid-19 has been discredited by the Respondent as the Applicant lodging the notices of objections during the very period that the particular Director was away in the village.

10. The Appellant on the face of the CR-12 annexed to the Affidavit in support of the Notice of Motion dated 2nd November, 2023 and marked as “JWM-1” clearly attests to the fact that the Appellant company has three (3) Directors and there is no indication as to the role perfomed by each Director in the operations of the business for the company and on the where abouts of the other two Directors during the interviewing period when one of them was in the village and more particularly as to why the other two Directors did not address the tax dispute in the absence of one of them.

11. It is therefore the Tribunal’s finding that the Appellant has not established any reasonable cause for the delay.

12. Having found as above, it is the Tribunal’s finding that there is no need in analysing the remaining factors for consideration as doing so would be an exercise in futility and a waste of the Tribunal’s time.

13. The Tribunal’s powers to stay the enforcement of an appealable decision during the pendency of an appeal is immortalized under Section 18 of the Tax Appeals Tribunal Act, which provides as follows:-“Where an appeal against a tax decision has been filed under this Act, the Tribunal may make an order staying or otherwise affecting the operation or implementation of the decision under review as it considers appropriate for the purposes of securing the effectiveness of the proceeding and determination of the appeal.”

14. The Tribunal will ordinarily exercise its powers under the foregoing statutory provision to stay the enforcement of agency notices issued to recover taxes payable following the issuance of an objection decision strictly for the purposes of preserving the effectiveness of the proceedings and efficacy of the appeal lodged against such an objection decision.

15. With the Appellant being completely underserving of the orders for the enlargement of time within which to lodge an appeal there is no appeal capable of being preserved for its ultimate efficacy. To that extent the application for stay of agency notices is found to lack merit.

16. The Appellant simultaneously with the filing of the Notice of Motion dated 2nd November, 2023 lodged a Notice of Appeal and filed the appeal documents before the Tribunal on the 2nd November, 2023. With the leave to lodge an appeal out of time having been declined the Appeal before the Tribunal is to that extent incompetent and unsustainable in law.

Disposition 17. On the basis of the foregoing analysis, the Tribunal finds the applications to be without merit and that the Appellant’s Appeal filed herewith is incompetent and unsustainable in law. The Orders that recommend themselves to the Tribunal are as follows:-a.The applications be and are hereby dismissed.b.The Appeal be and is hereby struck out.c.No orders as to costs.

DATED AND DELIVERED AT NAIROBI THIS 19TH DAY OF JULY, 2024. ERIC NYONGESA WAFULA - CHAIRMANELISHAH N. NJERU - MEMBERMUTISO MAKAU - MEMBEREUNICE N. NG’ANG’A - MEMBERABRAHAM K. KIPTROTICH - MEMBER