[2017] KEHC 9650 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA AT NAIROBI

JUDICIAL REVIEW DIVISION

JUDICIAL REVIEW APPLICATION NO. 138 OF 2017

REPUBLIC................................................................................APPLICANT

VERSUS

COMMISSIONER OF DOMESTIC TAXES........................RESPONDENT

EX-PARTE: I & M BANK LIMITED

RULING

Introduction

1. By a Notice of Motion dated 4th April, 2017, the ex parteapplicant herein, I & M Bank Limited, seeks the following orders:

1) An Order of Certiorari to remove into the High Court for purposes of it being quashed the decision and order of the Commissioner of Domestic Taxes dated 13th March 2017 demanding for tax, penalties and interest.

2) An order of Prohibition to prohibit the Commissioner of Domestic Taxes from demanding the tax, penalties and interest claimed in her decision dated 13th March 2017.

3) An order that the Respondent do pay the cost of the proceedings.

Ex ParteApplicant’s Case

2. According to the applicant, pursuant to an assessment, the Respondent issued a decision to the Applicant on 29th May 2015 wherein she sought to recover tax, penalty and interest for the sum of Kshs 434,247,169/-. Apparently unhappy with the said decision, the Applicant, pursuant to s.84(1) of the Income Tax Act, lodged a notice of objection with the Respondent to correct her said decision dated 25th May 2015 and in the said objection the Applicant filed an Objection and clearly set out the grounds upon which it objected to the Respondent’s decision.

3. However, the Applicant did not receive any response from the Respondent thereto and on 25th January 2017 it wrote to the Respondent and stated that since the Respondent had not communicated her response to the Applicant’s Objection within the sixty (60) day period prescribed by s. 51(8) and (11) as read together with s.113(1) of the Tax Procedures Act (that is now in force), the Respondent was deemed to have allowed the Applicant’s Objection. The said letter it was averred was received by the Respondent on 25th January 2017.

4. Upon receipt of the said letter, the Respondent wrote to the Applicant on 13th March 2017 and demanded payment of the tax of Kshs. 238,811,243. 00 which sum included penalties and interest. It was however the applicant’s belief that as the Respondent did not communicate her decision within the time period prescribed by the Tax Procedures Act, neither the tax claimed nor the penalties nor the interest were payable. It was contended that the Respondent has no jurisdiction to demand payment for the sum of Kshs 238,811,243 or penalties or interest because it is deemed to have allowed the Applicant’s Objection to the assessment by virtue of s. 51(11) of the Tax Procedures Act by virtue of the Respondent’s failure to communicate its decision to the Applicant’s Objection within the statutory period.

5. In a rejoinder to the Respondent’s response, the applicant averred that the Applicant provided all the information that was requested by the Respondent and that contrary to the Respondent’s averments, the Applicant’s Objection was a proper objection and the same was acknowledged by the Respondent as a proper objection. The Applicant complied with the Income Tax Act which only required the Applicant to state the grounds for the objection. In any event, the Applicant not only stated the grounds for the objection but also the amendments required to be made to correct the decision and the reasons for the amendments.

6. The applicant insisted that it provided the Respondent with all information that it had requested. The Respondent acknowledged receipt of the information on 22nd September 2015. Further, the Respondent’s in its letter dated 15th July 2015 (received by the Applicant on 17th July 2015) acknowledged the Applicant’s objection as a valid objection and stood over the taxes. In addition, the Applicant videan email dated 3rd August 2015 requested for a meeting with the Respondent to discuss the nature of the information requested by the Respondent in its letter dated 15th July 2015 which meeting was held on 11th August 2015.

7. Contrary to the Respondent’s allegations, the applicant averred that it was agreed in the meeting of 11th August 2015 that the Applicant would provide the Respondent with the information required. Consequently, the Applicant videthe email dated 17th September 2015, sent to the Respondent the information agreed upon in the meeting on the body of the minutes. To show that the Applicant provided the Respondent with all the information that it had sought for, the applicant relied on the email of 22nd September 2015 by which while replying to the Applicant’s email forwarding the information, the Respondent’s officer, Ms Doreen Mbingi, categorically stated that she received the information and further indicated that she would review the information provided and thereafter revert. To the applicant, the Respondent is thus not being candid when it alleges that the Applicant did not provide it with the requested information.

8. The applicant asserted that contrary to the Respondent’s allegations, it fully settled the sum of Kshs. 6,563,684. 86, being the undisputed tax, in the year 2015 and exhibited copies of the RTGS payment details for the undisputed tax and email correspondences to the Respondent confirming the payments.

9. Based on legal advice, the applicant’s belief was that in these proceedings, it does not seek to challenge the merits of the Respondent’s decision to demand the taxes but the legality of the decision and the process of making that decision hence the proceedings are properly before this Court.

10. The applicant however disclosed that it has filed an appeal out of abundant caution at the Tax Appeals Tribunal challenging the Respondent’s decision on issues of merit to demand the alleged tax in order to preserve its right of appeal under the Tax Procedures Act 2015.

11. The applicant explained that in its Objection letter dated 26th June 2015 it, categorically stated that it would exercise its right to make an application for a waiver of any penalties and interest once all disputed issues were resolved, and all applicable taxes have been determined and paid. However, the Respondent did not communicate further or demand the penalties and interest with respect to the principal taxes remitted by the Applicant. In fact, the Respondent in its letter dated 15th July 2015 acknowledged the Applicant’s objection and while referring to the undisputed taxes in the acknowledgment did not refer to penalties and interest. The applicant reiterated that its intention was to apply for a waiver of penalties and interest once it received a confirmed assessment. However, the confirmed assessment received by the Applicant was not proper and lawful. Further, the Applicant is ready and willing to make the application for waiver in the event it succeeds in the proceedings herein.

12. It was the applicant’s case based on legal advice that there was no requirement under section 84(2) of the Income Tax Act (then applicable) for the Applicant to pay the undisputed tax, penalties and interest at the time of filing the Objection. The Applicant, it was averred was only required to file the notice of objection within 30 days stating precisely the grounds of objection, which it did and the Respondent admitted the Objection as valid. In any event, it averred, section 89 (3) of the Tax Procedures Act clearly states that a person shall be liable to a penalty only when the Commissioner notifies the person in writing the demand for the penalty setting out the amount of the penalty payable and the due date for the payment. Further, sub-paragraph 5 provides that the penalty is due and payable on the date specified under paragraph (3). However, no such notification was received by the Applicant.

13. The applicant denied that it conceded that principal taxes were due. To the contrary, it averred that it illustrated that in effect an overpayment of taxes had been made and that it would be in a recoverable position. Furthermore, the Applicant categorically objected to the assessment, and this objection was confirmed and accepted by the Respondent.

14. The applicant explained that it did fully settle the undisputed tax of Kshs. 6,563,684. 86 and after the Respondent requested for further information, the same was provided between 3rd and 27th March 2015. However following the request for further information by the Respondent, on 15th July 2015, the applicant, videan email dated 3rd August 2015, requested for a meeting with the Respondent to discuss the nature of the information requested by the Respondent which meeting was held on 11th August 2015 at which it was agreed that the Applicant would provide the Respondent with the information required. Consequently, the Applicant videthe email dated 17th September 2015, sent to the Respondent the information agreed upon in the meeting on the body of the minutes receipt of which was confirmed by the Respondent’s officer, Ms Doreen Mbingi, who indicated that she would review the information provided and thereafter revert. However the Respondent did not revert and subsequently, the Tax Procedures Act 2015 (“the Act) was passed on 15th December 2015 and commenced on 19th January 2016.

15. According to the applicant, on 25th January 2017 it wrote to the Respondent and stated that since the Respondent had not communicated its response to the Applicant’s Objection within the sixty (60) day period prescribed by s.51(8) and (11) as read together with s.113(1) of the Tax Procedures Act, the Respondent was deemed to have allowed the Applicant’s Objection. Under the savings provisions (s.113(1)) of the Act, as no appeal had been filed at the time of the commencement of the Act, the provisions of the Act were applicable in the circumstances.

16. However after receiving the letter, the Respondent wrote to the Applicant on 13th March 2017 and purported to demand payment of the tax of Kshs. 238,811,243. 00 which sum included penalties and interest.

17. It was however the applicant’s case that as the Respondent ought to have issued its objection decision within 60 days of the commencement of the Act, the demand by the Respondent more than one year later was clearly time barred.

18. It was submitted on behalf of the applicant that the following issues lie for determination:

1) Was the Respondent’s Objection under section 84(1) of the Income Tax Act valid?

2) Did the Respondent render its decision to the Applicant’s Objection in respect of the Applicant’s Objection lodged under s.84(1) of the Income Tax Act within the time prescribed by s.51(11) of the Act as read together with section 113 of the Act?

3) If the Respondent did not render its decision within the time prescribed under s.51(11) of the Act, is the Applicant’s Objection deemed to have been allowed by virtue of s.51(11) of the Tax Procedures Act as read together with section 113 of the Act?

4) In the event that the Applicant’s Objection is deemed to have been allowed by virtue of s.51(11) of the Act, does the Respondent have any jurisdiction to demand payment of the tax claimed in its decision dated 13th March 2017?

19. According to the applicant, section 84(1) of the Income Tax Act (then applicable) provides that a person who disputes an assessment made against him under the Act may, by notice, in writing to the Commissioner, object to the assessment. Further, sub-section (2) read as follows:

“(2) A notice given under subsection (1) shall not be a valid notice unless it states precisely the grounds of objection to the assessment and is received by the Commissioner within thirty days after the date of service of the notice of assessment;....”

20. It was the applicant’s position that its letter of Objection concisely stated the grounds of objection in respect of the particular heads of tax set out in the Respondent’s assessment since the said letter read as follows:

“We wish to lodge an objection to the additional tax assessments issued under notice whose details are as follows:...”

21. It was submitted that the Applicant specifically asked the Respondent to vacate the demand under each of the heads of tax in the Respondent’s assessment and that the Applicant, upon setting out the grounds of objection together with the amendments required, specifically made reference to s.84(1) of the Income Tax Act and informed the Respondent accordingly to treat the letter as an objection for Corporate tax, Withholding tax and VAT assessed in the letter dated 29th May 2015. In response on 15th July 2015, the Respondent wrote to the Applicant informing the Applicant that:

“By a copy of this letter, we acknowledge your objection to additional assessment for the following tax heads....The tax under objection has been stood over...”

22. It was therefore Applicant’s submission that its Objection to the Respondent’s Assessment was proper as the grounds were stated and it was acknowledged by the Respondent as an objection. Further, the Applicant complied with the Income Tax Act which only required the Applicant to state the grounds for the objection. It was its submission that s.84(1) of the Income Tax Act (which was applicable at the time) did not require the Applicant to state the amendments required by the Respondent to make to correct the decision. In any event, by requesting the Respondent to vacate the assessment, the Applicant not only stated the grounds for the objection but also the amendments required to be made to correct the decision and the reasons for the amendments.

23. It was contended that the Respondent issued its assessment on 29th May 2015 and the Applicant validly lodged its Objection to the said assessment on 26th June 2015 which objection the Respondent acknowledged as a valid objection by its letter dated 15th July 2015. Subsequently, on 15th December 2015, the Tax Procedures Act, 2015 (“the Act”) was passed and it commenced on 19th January 2016. According to the applicant, s.113(1) of the Act provides as follows:

(1) Subject to this section, this Act shall apply to any act or omission that occurred or is occurring for which no prosecution has been commenced, or any assessment made against which no appeal has been made, before the commencement date.

24. Since the Applicant had not yet filed an appeal against the Respondent’s decision, it was submitted that by virtue of the clear wording of s.113(1) of the Act, the provisions of the Act apply in the circumstances. The applicant also relied on s.51(8) which reads as follows:

(8)Where a notice of objection has been validly lodged within time, the Commissioner shall consider the objection and decide either to allow the objection in whole or in part, or disallow it, and Commissioner's decision shall be referred to as an "objection decision"

25. It was submitted that the above provision required the Respondent to consider an objection, such as the Applicant’s, and to make a decision, either allowing the objection, in whole or in part, or disallowing it and relied on s.51(11) which provides that:

(11) Where the Commissioner has not made an objection decision within sixty days from the date that the taxpayer lodged a notice of the objection, the objection shall be allowed.

26. To the applicant, the above provision clearly states that where the Respondent fails to communicate its decision within the stated period, the Respondent will be deemed to have allowed the objection. In this case, the applicant submitted, the Respondent has not denied in its Affidavit that that the purported decision dated 13th March 2017 was made or communicated after the expiry of 60 days period stipulated in the Act. To the applicant, the Respondent’s letter dated 15th July 2015 and received by the Applicant on 17th July 2015 did not make any decision in respect to the Applicant’s Objection. Instead, the Respondent acknowledged the Applicant’s Objection and stood over the taxes under the objection. Further, the Respondent requested the Applicant to provide necessary information for the Respondent’s review.

27. While reiterating the foregoing, it was submitted by virtue of the clear provisions of s.51(8) and (11) as read together with s.113(1) of the Tax Procedures Act, the Respondent is deemed to have allowed the Applicant’s objection. In this respect the applicant relied on Republic vs. Commissioner of Customs Services Ex-Parte Unilever Kenya Limited [2012] eKLR, in which Korir J stated thus:

“My understanding of the above quoted section is that once a taxpayer lodges an application for review, the Commissioner of Customs who is the respondent in this case has 30 days within which to make and communicate a decision to the taxpayer. If the respondent does not communicate a decision within 30 days, then the respondent “shall be deemed to have made a decision to allow the application.” The law is so clear that it can only be interpreted in one way...The respondent communicated the decision to the ex-parte applicant on 18th July, 2011. By communicating the decision four months from 16thMarch, 2011 the respondent was clearly in breach of the provisions of Section 229 EACCMA…The implication of the respondent’s non-communication within the statutory period of 30 days is that the ex-parte applicant did not owe the taxes demanded by the demand notice of 9th February, 2011. The respondent’s decision in the letter dated 18th July, 2011 which revised the tax demand downwards from Kshs. 102,254,601. 00 to Kshs. 65,335,378. 00 was therefore void from the beginning. The law as it is presumes that by failing to communicate a decision by 16th April, 2011 the respondent was telling the ex-parte applicant that its appeal against the tax demand contained in the notice dated 9th February, 2011 had been allowed and the ex-parte applicant did not owe the respondent any tax in respect of that particular demand.”

28. It was submitted that as the Respondent failed to make its decision within the statutory of period of 60 days, by virtue of s.51(11) of the Act, the Applicant’s Objection is deemed to have been allowed by operation of law. Accordingly, the Applicant did not thereafter owe the Respondent any taxes demanded in the letter dated 13th May 2017. In failing to communicate its decision within the statutory period of 60 days, from 19th January 2016, the Respondent is taken to have allowed the Applicant’s Objection. Having allowed the Applicant’s notice of objection, the Respondent has no jurisdiction to claim the tax, penalties or interest in its decision dated 13th May 2017 as it is deemed to have allowed the Applicant’s notice of objection. It was therefore submitted that the Respondent is estopped from demanding any other taxes since the Applicant had paid all the undisputed taxes in 2015. To the applicant, the Respondent’s purported decision in its letter dated 13th March 2017 was made without jurisdiction and is therefore ultra vires.

29. It was the applicant’s case that it does not seek to challenge the merits of the Respondent’s decision to demand the taxes but the legality of the decision and the process of making that decision.

30. With respect to the appeal filed by the applicant before the Tax Appeals Tribunal, it was submitted that the Applicant’s appeal is purely on merit and has been filed out of abundant caution to challenge the Respondent’s decision on issues of merit to demand the alleged tax and that the Applicant has filed the appeal to preserve its right of appeal under the Tax Procedures Act 2015. In these proceedings however, the Applicant is challenging the legality of the Respondent’s decision dated 13th March 2017 on the basis that the Respondent did not have jurisdiction to render the decision or alternatively was acting in excess of its jurisdiction. This Court, being the Judicial Review Court, is the proper Court to hear the Applicant’s review. In this respect the applicant relied on Republic vs. Commissioner of Domestic Taxes (Large Taxpayers Office) Ex parte Barclays Bank of Kenya Limited [2015] eKLR and Republic vs. The Commissioner of Income Tax Ex Parte SDV Transami (Misc Civil Application No. 2012 of 2004) for the holding that the existence of a right to appeal or alternative remedy like review does not prevent an Applicant from seeking Judicial Review. Therefore these proceedings are properly before this Court.

31. It was the applicant’s case that the position taken by the Respondent that the Notice of Objection was not a valid objection under s.51(3) of the TPA, is untenable since the TPA was enacted on 19th January 2016. The Applicant’s Notice of Objection was filed on 26th June 2015 within 30 days after receiving the Respondent’s assessment dated 29th May 2015. This was as per the requirement of s.84(1) of the Income Tax Act. By the time the TPA was enacted, the Applicant had already filed its Notice of Objection in accordance with s.84 of the Income Tax Actwhich was in force at the time. In the applicant’s submissions, the Respondent, in its submissions, seems to suggest that the Applicant should have filed another Notice of Objection, yet there is no provision either in the Income Tax Act or the TPA for the filing of two Notices of Objection. The Applicant could therefore not have filed two notices as this would have been completely unprocedural and contrary to the Law.

32. It was submitted that the Applicant was not expected to have known or foreseen the requirements for filing Notices of Objection under the TPA as the said Act was not in force at the time it filed its Notice of Objection. The Applicant could have only complied with the Law in force at the time which was s.84(1) of the Income Tax Act. Conversely, by the time the TPA came into force, the Respondent had not issued its Objection Decision. Once the TPA was enacted on 19th January 2016, the Respondent became aware by virtue of the saving provisions of the Act that is s.113(1) of the TPA, that there was now a statutory requirement by virtue of s.51(11) to issue its Objection Decision within 60 days of the coming into effect of the Act failing which the objection would be allowed. Instead it chose to ignore the said provision and issued its decision more than one year after the coming into effect of the Act.

33. Similarly, the applicant could not have foreseen the requirement to state the amendments to be made as this was not a requirement under the Income Tax Act, it nevertheless complied with this requirement in any event. There is a clear request in the Notice of Objection for the Respondent to amend its assessment in accordance with the Applicant’s suggestion even though it was not a statutory requirement at the time.

34. The applicant insisted that there was no requirement under s.84(1) or s.84(2)to pay the taxes that had been admitted prior to filing the objection. The Applicant would have only known about the requirement when the TPA commenced on 19th January 2016 and it is manifest from the RTGS payment details annexed that the payments were made on 2nd May 2015 and 17th July 2015. Therefore by the time the TPA was enacted, the payments had in fact already been made and Applicant was not in contravention of the Act in any way. To the applicant, once the assessment was issued on 29th May 2015 the Applicant was required by virtue of the provisions of s.84(1) of the Income Tax Act to file its Objection within 30 days. It proceeded to do so and set out the taxes that it was admitting and with regard to the taxes that it was objecting to, it set out its grounds of objection and requested the Respondent to amend its assessment in accordance with the objection. Having received the Notice of Objection the Respondent wrote to the Applicant on 15th July 2015, acknowledging receipt of the objection and proceeded to issue form IT 13. At no time did the Respondent ever state that the Applicant’s Notice of Objection lacked finality or that it was not a valid Notice of Objection. When the TPA came into force on 19th January 2016, s.51(4) gave the Respondent an opportunity to determine whether an objection had been validly lodged and to immediately inform the Applicant if, in the Respondent’s view, it was not validly lodged. The said section states that “Where the Commissioner has determined that a notice of objection lodged by a tax payer has not been validly lodged, the Commissioner shall immediately notify the tax payer in writing that the objection has not been validly lodged.” No such communication was ever received from the Respondent. In fact, the Respondent even proceeded to issue an Objection Decision, which it could have only done if it considered the Notice of Objection to be valid. Indeed s.51(8) of the TPA states that “Where a notice of objection has been validly lodged within time, the Commissioner shall consider the objection and decide either to allow the objection in whole or in part, or disallow it, and Commissioner’s decision shall be referred to as an “objection decision.” In the applicant’s submission, the Respondent’s claim that the Notice of Objection was not valid is clearly an afterthought and completely devoid of merit or veracity.

35. According to the applicant the additional details that the Applicant was to provide were under the heading “Withholding tax payable on interest on customer deposits” and specifically in respect of the incomplete tax exempt customers schedule. A cursory glance at the Objection Decision dated 13th March 2017 will demonstrate that the withholding tax claim in respect of interest payable on customer deposits was in fact vacated and did not form part of the Objection Decision. It was contended that the Applicant had specifically requested the Respondent in its Notice of Objection to amend the assessment in accordance with the grounds adduced by the Applicant. It is obvious that the Applicant would request the Respondent to stand over the tax and not claim payment of the same until it has considered the Applicant’s grounds as set out in the Notice of Objection and amended its assessment accordingly. It is also clear that this is what the Respondent understood by the tax that was disputed being “stood over” as it has itself repeated in its letter dated 15th July 2015 that the “ The tax under objection has been stood over” and this has been repeated again in the forms IT 13 that were issued.

36. To the applicant, nothing in law stops the Appellant and the Respondent from continuing to discuss the tax that has been objected to as long as the prescribed time frames are adhered to. It is often the case that the Kenya Revenue Authority will request for additional information after a Notice of Objection has been lodged. The fact that discussions might be going on does not in any way extend the time period within which the Respondent was required to issue the Objection Decision nor does it in any way invalidate the Objection itself. It was therefore submitted that the Respondent cannot use the discussions or the further information as an excuse for not issuing the Objection Decision.

37. While conceding that it had filed an appeal before the Tax Appeals Tribunal to preserve its right of appeal on the merits of the Objection Decision, the applicant insisted that the said Appeal was filed out of abundant caution and only deals with the merits of the Decision while this Judicial Review Application is with regards to whether the Respondent acted within the Law and within its Jurisdiction in issuing its Objection Decision outside the time period prescribed by the TPA. It was submitted that this Judicial Review Court is the proper forum for determining whether the Respondent acted lawfully and within its jurisdiction. It is also apparent from the Application filed herein that the Court has not been asked to consider the merits of the Objection Decision in terms of the tax payable. That being the case, the Judicial Review Application is properly before the Court.

38. In the applicant’s view the decisions relied on by the Respondent were distinguishable.

39. In light of the foregoing, the Applicant prayed that its Application be allowed with costs.

Respondent’s Case

40. The application was opposed by the Respondent.

41. According to the Respondent, it carried out a tax audit of the ex-parte Applicant tax affairs on the records and books of accounts covering the years of income 2011 and 2012 for Corporation Tax and 2012 up to 2013 for Agency taxes and in the course thereof, its officers on 3rd March 2015 held a meeting with the ex-parte Applicant’s representatives at the Respondent’s office to discuss the status of the audit. At the meeting, the ex-parte Applicant agreed to provide the Respondent with the necessary documentation to enable the conclusion of the audit.

42. It was deposed that the ex-parte Applicant however failed to produce the documents as agreed in the meeting of 3rd March, 2015 and consequently, the Respondent, vide its letter of 29th May 2015 proceeded to raise the tax assessment based on the information available to it.

43. After receiving the Notice of Assessment, the ex-parte Applicant, vide their letter of 26th June 2015 wrote to the Respondent purportedly disputing the aforesaid tax Assessment by the Respondent. It was however the Respondent’s case that the ex-parte Applicant’s said letter of 26th June 2015 was open ended and did not amount an objection under the Income Tax Act, Cap. 470 Laws of Kenya since in the ex-parte Applicant’s said letter of 26th June 2015, the ex-parte Applicant indicated that it was still undertaking a further review of the matter of the matter in question and would later revert to the Respondent with additional details.

44. The Respondent nevertheless acknowledged the ex-parte Applicant’s aforesaid letter vide the Respondent’s letter dated 15th July, 2015 and in the same breath requested the ex-parte Applicant to provide the necessary information within fourteen (14) days from the date of the letter to enable the Respondent properly review the tax assessment. However, the ex-parte Applicant failed to avail to the Respondent the requested information within the timelines stipulated in the Respondent’s letter of 15th July 2015 and in a follow up meeting held on 11th August 2015 between the ex-parte Applicant herein and the Respondent, the ex-parte Applicant again promised to avail further information and reconciliations to the Respondent to enable the Respondent to conclusively deal with the issues raised in the ex-parte Applicant’s letter of 26th June 2015.

45. According to the Respondent, on 17th September, 2015, the ex-parte Applicant’s officer, one Ms. Lucy Thegeya while corresponding through email affirmed to the Respondent that the ex-parte Applicant had taken up the action points arising from the meeting of 11th August, 2015 and that they would provide the required information. Further to the aforesaid ex-parte Applicant’s email of 17th September 2015, parties subsequently corresponded where the ex-parte Applicant indicated to the Respondent that they would supply the outstanding information and documents to the Respondent to enable the Respondent properly address the ex-parte Appellant’s objection. Instead of supplying the aforesaid outstanding information as promised, the ex-parte Applicant vide its letter of 25th January 2017 retreated from the review of the tax assessment exercise by invoking section 51(11) of the Tax Procedure Act, 2015 which was effective as from 1st January, 2016. Vide the aforesaid letter of 25th January 2017, the ex-parte Applicant contended that their objection had been admitted pursuant the provisions of section 51 (11). To the Respondent that position is not correct since there was no valid objection in terms of the provisions of section 51(3) of the Tax Procedures Act, 2015.

46. In the Respondent’s view, under section 51(3) of the Tax Procedures Act, 2015, for there to be a valid objection, the objection letter must precisely state the grounds of objection, the amendments required to be made to correct the decision, and the reasons for the amendments. In the instant case, the alleged objection by the ex-parte Applicant was not conclusive since there were ongoing engagements and correspondences between the parties and that the ex-parte Applicant had not supplied all the information relevant to the objection and that the alleged objection was open - ended. Although the Appellant’s notice of objection dated 26th June, 2016 stated the grounds of objection, the said letter did not conclusively state what amendments the Respondent was required to make to correct the decision since the information required to effect the amendment had not been fully provided by the appellant.

47. Based on legal advice, the Respondent believed that an inquiry or plea or request for a meeting or discussion or consultation or clarification, or response to a report of findings cannot in law constitute a valid objection within the meaning of section 51(3) of the Tax Procedures Act, 2015since for an objection to a tax assessment to be valid, the taxpayer must have paid the entire taxes not in dispute. In this case, the ex-parte Applicant vide its letter of 26th June 2015 conceded a principal tax of Kenya shillings six million five hundred sixty three thousand eight hundred and eighty five thousand (Kshs. 6,563,885) which the ex-parte Applicant had not fully settled contrary to the express provisions of section 51(3) of the Tax Procedures Act, 2015.

48. It was the Respondent’s case that the instant application is premature as the ex parte Applicant has failed to comply with the mandatory provisions of section 51(3) of the Tax Procedure Act, 2015 and that this being a tax dispute, the proper forum should be the Tax Appeal Tribunal established under the Tax Appeal Tribunal Act, 2013 as read together with the Tax Procedures Act, 2015. It was disclosed that the ex-parte Applicant had in fact filed an Appeal against the Respondent’s assessment at the Tax Appeals Tribunal being Nairobi Tax Appeals Tribunal Number 72 of 2017: I & M Bank Limited v. Commissioner of Domestic Taxes and the instant application is therefore an abuse of the court process and primarily aimed at forum shopping.

49. It was contended that in a Judicial Review application, the Court would be concerned not with reviewing the merits of the decision in respect of which the application for judicial review is made, but the decision making process itself.

50. In a further affidavit, the Respondent reiterated that the Respondent reiterated the foregoing and averred that under section 21 of the Value Added Tax Act, 2013 and section 94 of the Income Tax Act, Cap. 470 Laws of Kenya (which was the then applicable law) any amount of tax remaining unpaid after the due date statutorily attracts interest at the rate of two (2) per cent per month or part thereof until the full amount is either paid or recovered. Similarly, under both the Income Tax Act and the VAT Act, 2013 (as they then stood) provided that any amount of tax remaining unpaid after the due date, in addition to the interest thereon, attracts penalties at the rates specified under the respective statutes. It was disclosed that the Respondent vide its letter of assessment dated 29th May 2015 duly communicated to the ex-parte Applicant that apart from the principal taxes, interest and penalties were due and payable as per (then) statutorily provided.

51. Based on legal advice, the Respondent believed that the ex-parte Applicant having admitted the principal taxes, interest and penalties in relation thereto were automatically admitted by operation of the law. To it, under the Income Tax Act, the Value Added Tax Act, and the Tax Procedures Act, 2015, the term “tax” is statutorily defined to include any interest or penalty charged thereon on the outstanding principal tax. In this case the ex-parte Applicant having admitted the principal taxes of Kenya shillings six million five hundred sixty three thousand eight hundred and eighty five thousand (Kshs. 6,563,885. 00), it ought to have computed and paid to the Respondent the interest and penalties thereon. In the premises, it was the Respondent’s case that the ex-parte Applicant herein had not paid the entire amount of the admitted taxes as required under section 51(3)(b) of the Tax Procedures Act, 2015 to make the objection valid and could not in law dispute the resultant interest and penalties. Apart from failing to pay penalties and interest in respect of the admitted taxes, the ex-parte Applicant also failed to pay the entire of the admitted taxes under Paragraph 8 (Corporation Tax on Unrealized Foreign Exchange Loss – Item 2) of the ex-parte Applicant’s letter of 26th June 2015.

52. It was therefore the Respondent’s position that the Notice of Motion application discloses no reasonable cause of action and is totally unfounded and ought to be dismissed with costs to the Respondent.

53. It is submissions, the Respondent reiterated the foregoing and averred in the alternative that the subject ‘objection decision’ was made within the timelines as provided under section 51(11) of the Tax Procedure Act, 2015 in view of the engagements which took place between the parties herein prior to the impugned objection decision being issued by the Respondent.

54. The Respondent relied on section 51(2) of the Tax Procedures Act, 2015 provides that a taxpayer who disputes a tax decision may lodge a notice of objection to the decision with the Commissioner within thirty (30) days of being notified of the decision. To it, for an objection to be considered valid, the same must meet the criteria set under section 51(3) of the Tax Procedures Act, 2015, which provides that;-

“(3) A notice of objection shall be treated as validly lodged by a taxpayer under subsection

(2) if –

(a) the notice of objection states precisely the grounds of objection, the amendments required to be made to correct the decision, and the reasons for the amendments; and

(b) in relation to an objection to an assessment, the taxpayer has paid the entire amount of tax due under the assessment that is not in dispute.

55. It is only after an objection has been validly lodged that Section 51(8) of the TPA, 2015 sets in and requires that the Commissioner deals with the objection in the manner specified therein and issue his decision thereon, referred to as “an objection decision” and reliance was placed on section 51(8) which provides that:

“Where a notice of objection has been validly lodged within time, the Commissioner shall consider the objection and decide either to allow the objection in whole or in part, or disallow it, and the Commissioner’s decision shall be referred to as an “objection decision”.

56. In this case, it is not in dispute that the audit the subject of these proceedings was done by the Respondent under the Income Tax Act, Cap. 470 Laws of Kenya and that the procedural aspect of the audit, which included the time within which an objection was to be done by the ex-parte Applicant was then governed by that Act. The law as it then stood provided that the ex-parte Applicant had 30 days from the date of receipt of the Commissioner’s assessment to object to the same. The Act however did not prescribe the timelines within which the Commissioner was to issue the Confirmation of the Assessment (now referred to as the ‘objection decision’).

57. It was submitted that section 84 of the Income Tax Act (which was substantially similar in its provision to section 50 of the Value Added Tax Act, 2013 – also then applicable but has since been repealed) governed procedure and provided that:

84. (1) A person who disputes an assessment made upon him under this Act may, by notice in writing to the Commissioner, object to the assessment.

(2) A notice given under subsection (1) shall not be a valid notice of Objection unless it states precisely the grounds of objection to the assessment and is received by the Commissioner within thirty days after the date of service of the notice of assessment……”

58. According to the Respondent, in accordance with the provisions of section 84(1), the Respondent’s letter of 29th May 2015 (Letter of Assessment) duly informed the ex-parte Applicant of its right of objection under section 84 of the Income Tax Act and section 50 of the VAT Act, 2013 respectively.

59. It was submitted that the ex-parte Applicant objected to the Commissioner’s (Respondent’s) Assessment under the said provisions of the law vide its letter of 26th June 2015. All these happened prior to (19th January 2016) coming into effect of the TPA, 2015. On 19th January 2016, the TPA, 2015 (enacted on 15th December 2015) came into effect and not only fixed the timelines within which the Commissioner is to respond to a tax payers’ objection, but also prescribed what constitutes a valid objection, consequently amending (by deleting) section 84 of the Income Tax Act and section 50 of the VAT Act, 2013.

60. According to the Respondent, the Transitional clause being section 113 (1) of the TPA, 2015 specifically provided that the Act (TPA, 2015) is to apply among others, to an assessment against which no Appeal had been made. The Respondent’s agrees with the ex-parte Applicant’s submissions that by dint of this provision, the TPA, 2015 is applicable, particularly on what constitutes a valid objection and the timelines within which the Commissioner it to issue an objection decision. Section 51(8) of the TPA, 2015 as read together section 51(11) of the same Act requires that where a Notice of Objection has been validly lodged, the Commissioner is to issue an objection decision within 60 days failure to which the objection shall be deemed allowed. From the foregoing, it was submitted that it is evident that before the Commissioner deals with an objection, the same must be validly lodged in terms of section 51(3) of the TPA, 2015. To be considered validly lodged, an objection must not only state precisely the grounds of objection and the amendments required to correct the decision, but the objector must also have paid the entire amount of tax not disputed. In the instant case, the Respondent’s position is that the ex-parte Applicant’s ‘letter of objection’ dated 26th June 2015 did not constitute a valid objection in terms of section 51(3) of the TPA, 2015 (neither did said letter of objection meet the criteria set under section 84(1) of the Income Tax Act). The Respondent’s position as supported by the following reasons;-

1) The ex-parte had not paid the entire undisputed amount of tax due under the assessment prior to lodging the objection. In fact, todate, the ex-parte Applicant has not fully settled the undisputed taxes. The ex-parte Applicant in its letter of 26th June 2015 admitted a total of Kshs. 6,563,885 which the ex-parte Applicant has not paid in its entirety.

2) The ex-parte Applicant in the Further Affidavit of Lucy Thegeya sworn on the 19th day of June 2017 expressly admitted that only the principal taxes (Kshs. 6,563,885) were paid leaving out penalties and interest. Once the principal taxes were admitted, then penalties and interest thereon automatically accrues by operation of the law.

3) Section 21 of the VAT ACT, 2013 (which was then applicable) provided that;

a. “21. (1) Where any amount of tax remains unpaid after the date on which it becomes payable under section 19, an interest equal to two percent per month or part thereof of the unpaid amount shall forthwith be due and payable.

b. (2) Any interest charged under subsection (1) shall, for the purpose of this Act relating to the collection and recovery of tax, be deemed to be tax and any interest which remains unpaid after becoming due and payable under subsection (1) shall attract further interest equal to two per cent per month or part thereof:

Provided that the interest chargeable under this subsection shall not exceed one hundred percent of the tax originally due.”

4) The above provision in the VAT Act at it then stood was similar to the then section 94 of the Income Tax Act which also provided for a late payment interest of two per cent (2%) per month and that the interest charged under the section shall, for the purpose of the provisions of the Act relating to the collection and recovery of tax, be deemed to be tax.

5) With the coming into effect of the TPA, 2015 Section 21 of the VAT Act, 2013 and Section 94 of the Income Tax Act were both repealed. Section 38 of the TPA, 2015 consolidated the two provisions but reduced the rate to one per cent (1%) per month. Section 38(5) of the TPA, 2015 specifically provides that the late payment interest shall be treated as tax.

6) The statutory treatment of late payment interest is similar to the treatment of any outstanding penalties. Section 72D of the Income Tax Act (now repealed) and section 3 of the TPA, 2015 (current provision) are clear that any outstanding penalties is treated as tax for the purposes of enforcement and collection of tax.

7) In fact, the term “unpaid tax” is defined under section 3 of the TPA, 2015 to mean ‘any tax that has not been paid by the due date………and includes any late payment interest in respect of a tax liability. The Section further provides that:-

i. “(3) For the purposes of enforcement and collection of tax–

(a) late payment interest, penalty, fines, or any other imposition under a tax law shall be treated as tax..…”

8) The Respondent maintains that the ex-parte Applicant having not fully paid the whole of the outstanding taxes (a fact which the ex-parte Applicant has alluded to), the ex-parte Applicant’s letter of 26th June 2015 was not a valid objection in terms of section 51(3) of the TPA, 2015 and therefore could not in law be said to have been validly lodged to occasion the Respondent’s action under section 51(8) of the TPA, 2015.

9) In the premises, it is the Respondent’s position that the ex-parte Applicant cannot in law rely on an invalid objection to assert its rights under section 51(11) when Section 51(8) is clear that the Commissioner (Respondent herein) can only issue an objection decision where a valid objection has been lodged.

10) It is not enough that the Respondent acknowledged the ex-parte Applicant’s said ‘letter of objection’ and even went ahead and confirmed the assessment vide the Respondent’s letter of 13th March 2017. The Respondent maintains that its actions aforesaid could not in law validate the Respondent’s “letter of objection” if the same did not meet the criteria set under section 51(3) of the TPA, 2015.

11) The Respondent holds the position that if this Honourable Court were to make a finding against the Respondent, that finding can only to the effect that the Respondent’s letter of 13th March 2017 was based on an invalid objection and therefore equally invalid. This will have effect of taking both parties to the objection stage, with the ex-parte Applicant having time to validate the objection after which the Respondent will be able to deal in accordance with section 51(8) within the timelines specified under section 51(11).

12) The ex-parte Applicant’s argument that section 84 of the Income Tax Act under which the objection was made does not help either. Your Lordship will note that the Respondent’s acknowledgment letter of 15th July 2015 advised the ex-parte Applicant that the ex-parte Applicant had to pay the admitted taxes.

13) In any event, the ex-parte Applicant cannot in these proceedings be allowed to elect which law to apply. While on the one hand the ex-parte Applicant seeks to rely on the fact that under Section 84 of the Income Tax Act did not require the ex-parte Applicant to pay the admitted taxes, the ex-parte Applicant has deliberately failed to acknowledge that the law as it then stood equally had no time limit within which the Respondent was to confirm the assessment.

14) The Respondent takes the view that once the TPA, 2015 became effective on 19th January 2016, it placed an obligation not only on the Respondent to deal with a valid objection within 60 days, but also placed an obligation on taxpayers (ex-parte Applicant herein included) to ensure that their objection (if any), meets the threshold set under section 51(3) of the Act.

15) On this ground alone, the Respondent submits that the instant application lacks merit and ought to be dismissed.

61. The Respondent further contended that:

1) Section 51(3) of the TPA, 2015 provides that for an objection to be considered valid, it must state ‘precisely the grounds of objection, the amendments required to be made to correct the decision, and the reasons for the amendments’ and that if the objection relates to an assessment, the taxpayer must have paid the entire an amount of taxes under the assessment which is undisputed.

2) It is important to note that the above provision under the TPA, 2015 (on clarity and finality objections) is substantially similar to the provision under section 84 of the Income Tax Act which was in force when the letter of objection was issued by the ex-parte Applicant.

3) The Respondent’s position is that the ex-parte Applicant’s ‘letter of objection’ dated 26th June 2015 did not meet the criteria set under section 51(3) of the TPA, 2015 as to clarity and finality. This is because the letter was open-ended which in fact amounted to reopening of the assessment.

4) It is evident from the aforesaid letter of 26th June 2015 that the said ‘letter of objection’ did not meet the legal criteria as to specificity and finality in the sense that despite the fact that the letter stated the grounds of objection, the same did not conclusively state what amendments the Respondent was required to make in order to correct the decision.

5) It is apparent from the said letter that the information that was to be used in effecting the amendments (if any) had not been fully provided by the ex-parte Applicant. This fact is aptly evidenced by the following paragraphs of the letter;-

6) The ex-parte Applicant stated at page 2 of the letter that;-

i. “We are undertaking a further review of 2012 and 2011 and will provide additional details shortly.”

7) On the page 3 of the said letter the ex-parte Applicant again stated that;-

i. “We are continuing review of the source of the differences for the years of income 2011 and 2012 and will revert in short while”

8) The ex-parte Applicant in the said letter of 25th June 2015 concluded as follows;-

i. “10. Conclusion

ii. In view of the above and under the provisions of section 84 (1) of the Income Tax Act and section 50(1) of the VAT Act 2013, we request that the objection to the additional assessments be considered and the balance of the tax shown as due per the assessments be stood over until the final outcome of discussions between us on the contentious issues.”

9) From the foregoing it is evident that there were ongoing discussions between the parties and that the ex-parte Applicant specifically requested the Respondent to stand over the issues in dispute until the final outcome of discussions between the parties.

10) The ex-parte Applicant having itself requested the Respondent to stand over the taxes until the final outcome of discussions between the parties, it is obvious that the ex-parte Applicant’s said ‘letter of objection’ was not clear, unambiguous and final so as to be valid in terms of section 51(3) of the TPA, 2015 (or even under the then applicable section 84 of the Income Tax Act).

62. In the Respondent’s submission, for an objection to valid, ‘it must satisfy the description of a counter offer as understood in the law of contract or constitute a clear and complete answer to the assessment in a manner that can bind the KRA’ and relied on the decision of Nyamu J. (as he then was) in the Nairobi HC Misc. Civil Application No. case of Arrow Hi-Fi (EA) Ltd. vs. Kenya Revenue Authority & 2 Others where the Judge concluded on the issue by making a finding that:

“An inquiry for information, meeting or discussion cannot in my view constitute the “application” contemplated by the section. The making of pleas and inquires leaves the assessments unaffected and effectual.”

63. It also referred to Africa K-Link International Limited vs. The Commissioner of Customs (HC Misc. Civil Appli. No. 157 of 2012), where Justice Githua while rendering her decision on a similar provision (Section 229(5)) under the East African Community Customs Management Act, 2004 stated that for such a section to apply, a taxpayer “must lodge a valid application for review in terms that are clear and unambiguous and which show clearly that the tax payer was making an application for review under section 229 of the Act.”

64. The Respondent similarly referred to Republic v Kenya Revenue Authority Ex-Parte Funan Construction Limited [2016] eKLR where this Court stated at Paragraph 45 of the Judgment that;-

“In this case, the said letter of 23rd June, 2014 cannot be said to be unambiguous. Whereas on the one hand it indicate that the taxes, were disputed, it is clear from the letter that the Applicant was unable at that stage to determine whether the demand was correct or not since it required time to verify the claim made by the Respondent. In My view such a letter is not an objection contemplated under section 5o of the VAT Act and does not meet the criteria of a valid objection thereunder….”

65. In the Respondent’s view, by the ex-parte Applicant stating that it was still undertaking “a further review of 2012 and 2011 and will provide additional details shortly and also that they were also still examining the source of the differences between the Respondent’s figures and their (ex-parte Applicant’s) figures, the ex-parte Applicant effectively asked for the Respondent’s indulgence thereby re-opening the assessment.

66. The above position, according to the Respondent was confirmed by Justice W.K Korir in Metro Pharmaceuticals Limited v. Kenya Revenue Authority (Nrb. HC. Misc. Civil Appli. No. 108 of 2011) where the Judge stated that:

“The Applicant has cited this letter as its application for review under Section 229 of the EACCMA. I have carefully looked at Section 229 EACCMA and conclude that any application for review of the decision of the Commissioner of Customs should be worded in such a way as to make it very clear that the importer is making an application for review as envisaged by Section 229 EACCMA. The conclusion of the letter…clearly shows the Applicant was reopening the assessment and not asking for a review”

67. According to the Respondent, in the Metro Pharmaceuticals (supra)case, the taxpayer had in the conclusion of its letter had stated that, “Finally by a copy of this forwarding letter we would wish to have a meeting on a date to be specified by you in order to amicably settle the issue. Your acceptance and quick response to MPI objection will be appreciated.” This conclusion, it was submitted, is substantially similar to the ex-parte Applicant’s conclusion in the instant case and the same principle must therefore apply since the ex-parte Applicant herein in the conclusion of its letter of 25th June 2015 requested “that the objection to the additional assessments be considered and the balance of the tax shown as due per the assessments be stood over until the final outcome of discussions between us on the contentious issues.”

68. It was therefore submitted that from the foregoing, it is clear that what the ex-parte Applicant requested for was that the assessed taxes be stood over pending the final outcome of the discussions between the parties. In fact, in accordance with the ex-parte Applicant’s request, the Respondent stood over the taxes and the same was duly communicated to the ex-parte Applicant vide the Respondent’s letter of 15th July 2015. This had the effect of re-opening the assessment and could not therefore amount to a valid objection in terms of section 51(3) of the TPA, 2015 (or even the then section 84 of the Income Tax Act).

69. In the premises, it was the Respondent’s position that the aforesaid ex-parte Applicant’s letter did not meet the requirements of the law as to the finality of an objection.

70. As to whether this a proper matter for judicial review the Respondent relied on Republic vs. Secretary County Public Board & Another Ex Parte Hulbai Gedi Abdille [2015] eKLR,as well as Republic vs. Kenya Revenue Authority Ex Parte Abdalla Brek Said t/a Al Amry Distributors & 4 others [2016] eKLR,whereEmukule Jafter setting out the scope of judicial review proceedings came to a conclusion at paragraph 14 of the Judgment that:

“This court will therefore not look at whether the amounts indicated as owing from the Ex arte Applicants were the right amounts of tax arrears. Put differently, it is not the duty of this court to delve into the question of how much income the Ex Parte Applicants earned and how much tax they were supposed to pay. The court’s mandate is to answer the question of whether the Respondent had the power to raise those figures and whether in arriving at the figures, the Respondent followed the due process.”

71. In the instant case, it was submitted that the Respondent adhered to due process regarding the tax audit as to the issuance notice of intention to audit, the audit process and notification of the audit results, the assessment, objection and the Appeal process. All these can be demonstrated from the correspondences and/or meetings held/exchanged between the parties herein. The Respondent having issued an objection decision, the provisions of Section 52 of the Tax Procedures Act, 2015 and section 12 of the Tax Appeals Tribunal Act, 2013 sets in as regards the Appeal. Aware of this, the ex-parte Applicant has in fact filed an Appeal against the Respondent’s assessment at the Tax Appeals Tribunal being, the Nairobi Tax Appeals Tribunal Number 72 of 2017: I & M Bank Limited v. Commissioner of Domestic Taxes.

72. In the Respondent’s view, the instant application in the Respondent’s respectable view is therefore an abuse of the court process and primarily aimed at forum shopping.

73. It was therefore prayed that this Application be dismissed with costs to the Respondent.

Determinations

74. I have considered the issues raised in this application.

75. Before delving into the merits of the matter, it was contended by the Respondent that the instant application is premature as the ex parte Applicant has failed to comply with the mandatory provisions of section 51(3) of the Tax Procedure Act, 2015 and that this being a tax dispute, the proper forum should be the Tax Appeal Tribunals established under the Tax Appeal Tribunal Act, 2013 as read together with the Tax Procedures Act, 2015. It was disclosed that the ex-parte Applicant had in fact filed an Appeal against the Respondent’s assessment at the Tax Appeals Tribunal being Nairobi Tax Appeals Tribunal Number 72 of 2017: I & M Bank Limited v. Commissioner of Domestic Taxes and the instant application is therefore an abuse of the court process and primarily aimed at forum shopping.

76. While conceding that it had filed an appeal before the Tax Appeals Tribunal to preserve its right of appeal on the merits of the Objection Decision, the applicant insisted that the said Appeal was filed out of abundant caution to challenge the Respondent’s decision on issues of merit to demand the alleged tax and that the Applicant filed the appeal to preserve its right of appeal under the Tax Procedures Act 2015. In these proceedings however, the Applicant is challenging the legality of the Respondent’s decision dated 13th March 2017 on the basis that the Respondent did not have jurisdiction to render the decision or alternatively was acting in excess of its jurisdiction.

77. According to the Applicant, the said appeal only deals with the merits of the Decision while this Judicial Review Application is with regards to whether the Respondent acted within the Law and within its Jurisdiction in issuing its Objection Decision outside the time period prescribed by the TPA. It was accordingly submitted that this Judicial Review Court is the proper forum for determining whether the Respondent acted lawfully and within its jurisdiction since in these proceedings the Court has not been asked to consider the merits of the Objection Decision in terms of the tax payable.

78. In this respect the applicant relied on Republic vs. Commissioner of Domestic Taxes (Large Taxpayers Office) Ex parte Barclays Bank of Kenya Limited [2015] eKLR and Republic vs. The Commissioner of Income Tax Ex Parte SDV Transami (Misc Civil Application No. 2012 of 2004) for the holding that the existence of a right to appeal or alternative remedy like review does not prevent an Applicant from seeking Judicial Review. Therefore these proceedings are properly before this Court.

79. It is in my view proper at this stage to revisit the principles that guide resort to alternative dispute resolution mechanisms.

80. This principle was well articulated by the Court of Appeal in Speaker of National Assembly vs. Njenga Karume [2008] 1 KLR 425, where it held that:

“Irrespective of the practical difficulties enumerated...these should not in our view be used as a justification for circumventing the statutory procedure....In our view, there is considerable merit in the submission 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. We observe without expressing a concluded view that Order 53 of the Civil Procedure Rules cannot oust clear constitutional provisions and statutory provisions.”

81. The same principle has been underlined in the cases of Kipkalya Kones vs. Republic & Another ex-parte Kimani Wanyoike & 4 Others (2008) 3 KLR (EP) 291, Francis Gitau Parsimei & 2 Others vs. National Alliance Party & 4 Others Petition No.356 and 359 of 2012.

82. As was held by this Court in Republic vs. Ministry of Interior and Coordination of National Government and Another ex parte ZTE Judicial Review Case No. 441 of 2013:

“…one must not lose sight of the fact that the decision whether or not to grant judicial review orders is an exercise of judicial discretion and as was held by Ochieng, J in John Fitzgerald Kennedy Omanga vs. The Postmaster General Postal Corporation of Kenya & 2 Others Nairobi HCMA No. 997 of 2003,for the Court to require the alternative procedure to be exhausted prior to resorting to judicial review is in accord with judicial review being very properly regarded as a remedy of last resort though the applicant will not be required to resort to some other procedure if that other procedure is less convenient or otherwise less appropriate. Therefore, unless due to the inherent nature of the remedy provided under the statute to resort thereto would be less convenient or otherwise less appropriate, parties ought to follow the procedure provided for under the statute. This position was re-affirmed by the Court of Appeal in Speaker of The National Assembly vs. Karume Civil Application No. Nai. 92 of 1992, where it was held that there is considerable merit in the submission 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.”

83. There is now a chain of authorities from the High Court as well as the Court of Appeal that where a statute has provided a remedy to a party, this Court must exercise restraint and first give an opportunity to the relevant bodies or State organs to deal with the dispute as provided in the relevant statute. It is now a ‘cardinal principle that save in the most exceptional circumstances, the judicial review jurisdiction would not be exercised and the court must not exercise it where there exist alternative remedy.

84. However, in Ex parteWaldron [1986] 1QB 824 at 825G-825H,Glidewell LJ observed that the court should always interrogate relevant factors to be considered when deciding whether the alternative remedy would resolve the question at issue fully and directly.

85. This principle is now part our legislation and has acquired a statutory underpinning since section 9(2),(3) and (4) of the Fair Administrative Action Act, No. 4 of 2015 provides:

(2) The High Court or a subordinate court under subsection (1) shall not review an administrative action or decision under this Act unless the mechanisms including internal mechanisms for appeal or review and all remedies available under any other written law are first exhausted.

(3) The High Court or a subordinate Court shall, if it is not satisfied that the remedies referred to in subsection (2) have been exhausted, direct that applicant shall first exhaust such remedy before instituting proceedings under sub-section (1).

(4) Notwithstanding subsection (3), the High Court or a subordinate Court may, in exceptional circumstances and on application by the applicant, exempt such person from the obligation to exhaust any remedy if the court considers such exemption to be in the interest of justice.

86. It is however my view that the onus is upon the applicant to satisfy the Court that he ought to be exempted from resorting to the available remedies.

87. I am bound to follow that principle of law since it flows from the other important principle that not each and every violation of the law be raised before the High Court as a public law dispute that must be litigated as a constitutional petition or a judicial review application. Where there exists an alternative remedy through statutory law, then it is desirable that such a statutory remedy should be pursued first. In that regard the words of the Court in Harrikinson vs. Attorney General of Trinidad and Tobago [1980] AC 265, hold true today as they did then that:

“The notion that whenever there is a failure by an organ of Government or a Public authority or public office to comply with the law this necessarily entails the contravention of some human rights or fundamental freedoms guaranteed to individuals by Chapter 1 of the Constitution is fallacious. The right to apply to the High Court under Section 6 of the Constitution for redress when any human right or fundamental freedoms is or is likely to be contravened, is an important safeguard of those rights and freedoms; but its value will be diminished if it is allowed to be misused as a general substitute for the normal procedures for invoking judicial control of administrative action.”

88. The Court concluded thus;

“The mere allegation that a human right has been or is likely to be contravened is not itself sufficient to entitle the applicant to invoke the jurisdiction of the court under the section if it is apparent that the allegation is frivolous, vexatious or abuse of the process of court, as being made solely for the purpose of avoiding the necessity of applying the normal way for appropriate judicial remedy for unlawful administrative action which involves no contravention of any human right or fundamental freedom.”

89. I am in complete agreement. However there is a rider that while it is general recognised that the aforesaid general principle must be respected, it must also be borne in mind the nature of the dispute before the Court vis-à-vis the jurisdiction vested in the alternative Appeals Tribunal, in this case the Tax Appeals Tribunal. It is in that light that I agree with the decision of the Court of Appeal of Trinidad and Tobago in the case of Damian Belfonte vs. The Attorney General of Trinidad and Tobago C.A 84 of 2004 that:

“The opinion in Jaroo has recently been considered and clarified by the Board in A.G vs Ramanoop. Their lordships laid stress on the need to examine the purpose for which the application is made in order to determine whether it is an abuse of process where there is an available common law remedy. In their lordship’s words:

“Where there is a parallel remedy, constitutional relief should not be sought unless the circumstances of which the complaint is made include some feature which makes it appropriate to take that course. As a general rule, there must be some feature, which, at least arguably, indicates that the means of legal redress otherwise available would not be adequate. To seek constitutional relief in the absence of such a feature would be a misuse, or abuse, of the Court’s process. Atypical, but by no means exclusive, example of such a feature would be a case where there has been an arbitrary use of state power.

Another example of a special feature would be a case where several rights are infringed, some of which are common law rights and some for which protection is available only under the constitution. It would not be fair, convenient or conducive to the proper administration of justice to require an applicant to abandon his constitutional remedy or to file separate actions for the vindication of his rights.”

90. Useful guidance as to whether the existence of alternative remedy precludes a party from seeking judicial review orders was given by the House of Lords in the case of R vs. Inland Revenue Commissioners, ex parte Mead and Another [1993] All ER where the Court stated that:

“The fact that there were alternative remedies in the magistrate’s court or the crown court in respect of some matters, did not prevent direct access to the High Court if those remedies did not cover the whole ambit of the jurisdiction in judicial review.”

91. I entirely agree and confronted with a question as to which remedy a litigant ought to seek, a Court should examine whether the alternative remedy provides an efficacious and satisfactory answer to the litigant’s grievance. In my view, it would not be fair, convenient or conducive to the proper administration of justice to require a Petitioner to split its case into two or more causes and file them before different Tribunals when the matter can be dealt with by one Tribunal. In my view the Petitioner in such circumstances ought to commence the case before the Tribunal with the jurisdiction to hear and determine all the questions in controversy and grant all the reliefs sought. That Tribunal, in the circumstances of these Petitions is the High Court.

92. As was stated by Nyamu, J (as he then was) in Republic vs. The Commissioner of Lands Ex parte Lake Flowers Limited Nairobi HCMISC. Application No. 1235 of 1998:

“Availability of other remedies is no bar to the granting of the judicial review relief but can however be an important factor in exercising the discretion whether or not to grant the relief...”

93. However as was held in Yusuf Gitau Abdallah vs. Building Centre (K) Ltd & 4 Others [2014] eKLR:

“A party cannot be heard to move a Court in glaring contradiction of the judicial hierarchal system of the land on the pretext that an injustice will be perpetrated by the lower court. Courts of justice have the jurisdiction to do justice and not injustice. However, the law acknowledges that judges are human and are fallible hence the judicial remedies of appeal and review. A party cannot in total disregard of these fundamental legal redress frameworks move the apex Court”.

94. Similarly in Peter Oduor Ngoge vs. Hon. Francis Ole Kaparo, SCPetition 2 of 2012, [para. 29-30] it was held:

“The Supreme Court, as the ultimate judicial agency, ought in our opinion, to exercise its powers strictly within the jurisdictional limits prescribed; and it ought to safeguard the autonomous exercise of the respective jurisdictions of the other Courts and tribunals. In the instant case, it will be perverse for this Court to assume a jurisdiction which, by law, is reposed in the Court of Appeal, and which that Court has duly exercised and exhausted. In the interpretation of any law touching on the Supreme Court’s appellate jurisdiction, the guiding principle is to be that the chain of Courts in the constitutional set-up, running up to the Court of Appeal, have the professional competence, and proper safety designs, to resolve all matters turning on the technical complexity of the law; and only cardinal issues of law or of jurisprudential moment, will deserve the further input of the Supreme Court...Consequently, this Court recognises that all courts have the constitutional competence to hear and determine matters that fall within their jurisdictions and the Supreme Court not being vested with ‘general’ original jurisdiction but only exclusive original jurisdiction in presidential petitions, will only hear those matters once they reach it through the laid down hierarchical framework”.

95. In my view what the Court ought to consider in such circumstances is the efficacy of the alternative remedy and whether it is less appropriate, convenient, effective and/or beneficial. Otherwise as was held in International Centre for Policy and Conflict and 5 others-vs- The Hon. Attorney-General & 4 others [2013] eKLR the Court recognizes the need to let relevant statutory bodies deal with matter within their mandate fully before interfering in manner sought in these proceedings by holding that a Court of law:

“…must first give an opportunity to the relevant constitutional bodies or State organs to deal with the dispute under the relevant provision of the parent statute. If the court were to act in haste, it would be presuming bad faith or inability by that body to act...Where there exists sufficient and adequate mechanisms to deal with a specific issue or dispute by other designated constitutional organs, the jurisdiction of the court should not be invoked until such mechanisms have been exhausted…”

96. In Thuku Kirori & 4 Others –vs- County Government of Murang’a [2014] eKLR the Court similarly held that:

“Moreover, where a statute or constitution, for that matter, has expressly delegated specific functions, duties or responsibilities to a particular organs, state or otherwise , this court will be hesitant to intervene and curtail these organs’ efforts to execute their statutory or constitutional mandates’’

97. That judicial review is a remedy of last resort and a party ought to endeavour to exhaust the alternative remedies available and reliance was emphasised in Republic –vs- Chief Magistrate Nanyuki Law Courts Ex Parte Purity Gathoni Macheru [2016] eKLR where the Court held that:

“The Learned authors Beatson, Mathews and Elliot in the book Administrative Law on availability of alternative remedy had this to say.’ It is generally accepted that, at least in principle, judicial review is a remedy of last resort, to be invoked only when other avenues , such as rights of appeal…have been explored; if not then permission may be defined.’’

98. See also NasiekuTarayia G vs. Board of Directors Agriculture Finance Corporation & Another [2012] eKLR.

99. It was this realisation, in my view that guided the Court in Diana Kethi Kilonzo & another vs. Independent Electoral & Boundaries Commission & 10 others [2013] eKLR when it expressed itself as follows:

‘We note that the Constitution allocated certain powers and functions to various bodies and tribunals. It is important that these bodies and tribunals should be given leeway to discharge the mandate bestowed upon them by the Constitution so long as they comply with the Constitution and national legislation. These bodies and institutions should be allowed to grow. The people of Kenya, in passing the Constitution, found it fit that the powers of decision-making be shared by different bodies. The decision of Kenyans must be respected, guarded and enforced. The courts should not cross over to areas which Kenyans specifically reserved for other authorities. As was stated in International Centre for Policy and Conflict and 5 others -vs- The Hon. Attorney General & 4 Others [2013] eKLR:

[109] “An important tenet of the concept of the rule of law is that this court before exercising its jurisdiction under Article 165 of the Constitution in general, must exercise restraint. It must first give an opportunity to the relevant constitutional bodies or State organs to deal with the dispute under the relevant provision of the parent statute. If the court were to act in haste, it would be presuming bad faith or inability by that body to act. For instance, in the case of IEBC, the court would end up usurping IEBC’s powers. This would be contrary to the institutional independence of IEBC guaranteed by Article 249 of the Constitution.

110. Where there exists sufficient and adequate mechanisms to deal with a specific issue or dispute by other designated constitutional organs, the jurisdiction of the court should not be invoked until such mechanisms have been exhausted…”

100. The court went ahead to hold as follows:

“Equally, and as we have already stated, it was the exclusive constitutional mandate of the IEBC under Article 88(4)(e) to settle all pre-election disputes, including those relating to registration and nomination. Accordingly, Ms. Kilonzo’s legitimate expectations must be circumscribed within this legal environment, and we hold that to be the case.”

101. I agree with the decision in Nasieku Tarayia G vs. Board of Directors Agriculture Finance Corporation & Another [2012] eKLR that judicial review is a remedy of last resort and where an alternative remedy exists, the court has to be satisfied that judicial review is the more convenient, beneficial, efficacious alternative remedy available.

102. Section 12 of the Tax Appeals Tribunal Act provides as follows:

A person who disputes the decision of the Commissioner on any matter arising under the provisions of any tax law may, subject to the provisions of the relevant tax law, upon giving notice in writing to the Commissioner, appeal to the Tribunal.

103. The wording of the above section is clearly wide to encompass any matter arising under the provisions of any tax law. In this case what provoked these proceedings according to the applicant was the failure by the Commissioner to comply with section 51(9) of the Tax Procedures Act. No one doubts that such a failure clearly falls within a matter arising under the provisions of any tax law in this case the Tax Procedures Act. Section 52(1) of the Tax Appeals Tribunal Act on its part provides that:

A person who is dissatisfied with an appealable decision may appeal the decision to the Tribunal in accordance with the provisions of the Tax Appeals Tribunal Act, 2013 (No. 40 of 2013).

104. In this case, it is clear that the applicant did exercise the optional available to it under the Tax Procedures Act and the Tax Appeals Tribunal Act and filed Nairobi Tax Appeals Tribunal Number 72 of 2017: I & M Bank Limited v. Commissioner of Domestic Taxes which is yet to be determined. I have perused the Memorandum of Appeal to the Tax Appeals Tribunal exhibited and it is clear that the issue of the objection having been deemed to have been allowed by the failure on the part of the Respondent to comply with section 51(9) of the Tax Procedures Act is not explicitly taken up. It has however not been contended that the applicant is barred from amending its pleadings before the Tribunal to incorporate that issue. Nevertheless it is my view that the failure by a party to bring an issue within the jurisdiction of the Tax Appeals Tribunal, where the same could have been properly taken up thereat, does not warrant the commencement of judicial review proceedings based on the omitted ground.

105. In this case as I have stated hereinabove, the law gives the Tribunal very wide powers with respect to matters arising from the provisions of any tax law. Whereas the applicant contends that the appeal filed before the Tribunal challenges the merits while these proceedings challenge the legality of the Respondent’s action in issuing its Objection Decision outside the time period prescribed by the Tax Procedures Act, nowhere in the submissions is it contended that the Tribunal does not have the power to make a decision regarding the failure by the Respondent to make a determination on a valid objection within the prescribed time.

106. To my mind, the sole reason why the applicant has invoked the two jurisdictions is as it contends “to preserve its right of appeal on the merits of the Objection Decision and out of abundant caution.” That statement in my view speaks volumes about the applicant’s real intentions. What I understand the applicant to be saying is that it is taking precautionary measures so that if it does not succeed in these proceedings, it would still be at liberty to pursue its appeal before the Tribunal without being locked out. In other words the applicant appreciates that if this application is successful, it would not be necessary to proceed with the appeal. With due respect to the applicant, this is a gross abuse of the due process.

107. In my view section 9(2)of the Fair Administrative Action Act is clear that this Court is barred from reviewing an administrative action or decision until the mechanisms including internal mechanisms for appeal or review and all remedies available under any other written law are first exhausted. The Legislature must be taken to have been aware that these proceedings only challenge the process while an appeal challenges the merits of the case yet they still, in their wisdom, provided that parallel proceedings are not permissible as long as they challenge the same decision and, in my view, provided that the issues in dispute can be resolved through that alternative dispute resolution mechanism without the necessity of having to split the matter and have the issues in dispute resolved before separate forums. As was held by this Court in Nairobi High Court Petition No. 613 of 2014 – Patrick Musimba vs. The National Land Commission and Others:

“…it would be ridiculous and fundamentally wrong, in our view, for any court to adopt a separationalistic view or approach and insist on splitting issues between the Courts where a court is properly seized with a matter but a constitutional issue not within its obvious exclusive jurisdiction is raised.”

108. However, if what is sought to be achieved by judicial review proceedings is substantially the same as what is sought in the appeal, a party ought not to be allowed to have a double-pronged attack on the same decision with a view to availing to itself an opportunity of challenging the same decision twice over. In my view even without the provisions barring such a course, to proceed in that manner would amount to playing lottery with the Court and render legal proceedings a circus. That clearly is an abuse of the Court process.

109. Whereas, this Court may in exceptional cases excuse the failure to invoke the alternative dispute resolution mechanisms provided under the law, where such mechanisms have in fact been invoked, to abandon the same midstream without terminating the same and proceed to commence judicial review proceedings or vice versa amounts to abuse of the process of the Court.

110. Instances that constitute abuse of the Court process were set out in Muchanga Investments Limited vs. Safaris Unlimited (Africa) Ltd & 2 Others Civil Appeal No. 25 of 2002 [2009] KLR 229 as including the following cases:

(a) “Instituting multiplicity of actions on the same subject matter against the same opponent on the same issues or a multiplicity of action on the same matter between the same parties even where there exists a right to begin the action.

(b) Instituting different actions between the same parties simultaneously in different courts even though on different grounds.

(c) Where two similar processes are used in respect of the exercise of the same right for example, a cross appeal and a respondent’s notice.

(d) (sic) meaning not clear))

(e)Where there is no iota of law supporting a Court process or where it is premised on frivolity or recklessness.” [Emphasis added].

111. It is therefore clear that a party cannot invoke two jurisdictions at the same time merely because he is relying on different grounds in both matters. As was held in Mitchell and Others vs. Director of Public prosecutions and Another (1987) LRC (const) 128:

“…in civilized society legal process is the machinery used in the courts of law to vindicate a man’s rights or to enforce his duties .It can be used properly, it can be used improperly, and so abused. An instance of this is where it is diverted from its proper purpose, and is used with some ulterior motive, for some collateral one or to gain some collateral advantage, which the law does not recognize as legitimate use of that process. But the circumstance in which abuse of process can arise are varied and incapable of exhaustive listing. Sometimes it can be shown by the very steps taken and sometimes extrinsic evidence only. But if and when it is shown it happened, it would be wrong to allow the misuse of that process to continue. Rules of court may and usually do provide for its frustration in some instance. Others attract the res judicata rule.But apart from and independent of these there is the inherent jurisdiction of every court of justice to prevent an abuse of its process and its duty to intervene and stop proceedings, or put an end to it. This inherent power has been used time and again to put a summary end to a process which seeks to raise and have determined an issue which has been decided against the party issuing it in earlier proceedings between the parties”. [Emphasis added].

112. Having considered the issues raised before me in these proceedings, I am not satisfied that this is a matter in which an exemption ought to be considered. As was held in Republic vs. National Environment Management Authority Civil Appeal No. 84 of 2010 in which the Court of Appeal expressed itself as follows:

“...where there was an alternative remedy and especially where Parliament had provided a statutory appeal process it is only in exceptional circumstances that an order for judicial review would be granted, and that in determining whether an exception should be made and judicial review granted, it was necessary for the court to look carefully at the suitability of the statutory appeal in the context of the particular case and ask itself what, in the context of the real issue is to be determined and whether the statutory appeal procedure was suitable to determine it...The learned judge, in our respectful view, considered these strictures and come to the conclusion that the Appellant had failed to demonstrate to her what exceptional circumstances existed in its case which would remove it from the appeal process set out in the statute. With respect we agree with the judge.”

113. The substance of my findings hereinabove is that the issues raised herein would have been better dealt with by the Tax Appeals Tribunal in the exercise of its appellate jurisdiction under section 12 of the Tax Appeals Tribunal Act as read with section 51(9) of the Tax Procedures Act.

114. In the premises I find that the Notice of Motion dated 4th April, 2017 is misconceived and incompetent.

115. However section 11 of the section 11 of the Fair Administrative Action Act, 2015 provides as follows:

(1) In proceedings for judicial review undersection 8 (1), the court may grant any order that is just and equitable, including an order

(a)declaring the rights of the parties in respect of any matter to which the administrative action relates;

(b) restraining the administrator from acting or continuing to act in breach of duty imposed upon the administrator under any written law or from acting or continuing to act in any manner that is prejudicial to the legal rights of an applicant;

(c) directing the administrator to give reasons for the administrative action or decision taken by the administrator;

(d) prohibiting the administrator from acting in a particular manner;

(e) setting aside the administrative action or decision and remitting the matter for reconsideration by the administrator, with or without directions;

(f) compelling the performance by an administrator of a public duty owed in law and in respect of which the applicant has a legally enforceable right;

(g) prohibiting the administrator from acting in a particular manner;

(h) setting aside the administrative action and remitting the matter for reconsideration by the administrator, with or without directions;

(i) granting a temporary interdict or other temporary relief; or

(j) for the award of costs or other pecuniary compensation in appropriate cases.

116. The operating word is including which means that the Court is not restricted to the reliefs enumerated thereunder. In my view, an appropriate remedy must mean an effective remedy, for without effective remedies for breach, the values underlying and the rights entrenched in the Constitution cannot properly be promoted or enhanced. This Court is therefore empowered to fashion appropriate remedies. It must however be noted that in so doing the Court ought not to interfere with the merits of the Respondent’s decision.

Order

117. In the result, the said Motion is hereby struck out but in the exercise of the powers conferred upon this Court by section 11 of the Fair Administrative Action Act, I direct the applicant, if so minded to amend its pleadings before the Tribunal and incorporate the issue of the legality of the Respondent’s decision in light of the timelines for delivery of the Objection Decision within 14 days from the date hereof so that all the issues in controversy can be dealt with by the Tribunal.

118. As the merits of the issues raised remain unresolved there will be no order as to costs.

119. It is so ordered.

Dated at Nairobi this 5th day of December, 2017

G V ODUNGA

JUDGE

Delivered in the presence of:

Miss Malik for the applicant

CA Ooko