[2023] KETAT 333 (KLR)

Safaricom PLC v Commissioner of Domestic Taxes (Appeal 1103 of 2022) [2023] KETAT 333 (KLR) (9 June 2023) (Ruling)

Neutral citation: [2023] KETAT 333 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Appeal 1103 of 2022

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

June 9, 2023

Between

Safaricom PLC

Appellant

and

Commissioner of Domestic Taxes

Respondent

Ruling

1. The application which was by way of a Notice of Motion dated the 14th March 2023 and filed under a Certificate of urgency on the same date is supported by an Affidavit sworn by the Appellant’s Tax Manager, Elizabeth Ndung’u, on the even date seeks for the following Orders:-a.Spent;b.The Tribunal be pleased to grant leave to the Appellant to file a Further list and bundle of documents.c.The costs of this application be provided for.

2. The application is premised on the following grounds:-a.That the Appellant appealed to this Honourable Tribunal by lodging a Notice of Appeal on 20th September 2022 upon being dissatisfied with the Respondent’s Objection decision demanding tax amounting to Kshs. 13,770,023,289. b.That the Appellant filed its Statement of Facts and bundle of documents on 3rd October 2022. c.That the Appellant provided documents to the Respondents by way of a digital platform data room and has since found that pertinent evidence in the matter was supplied to the Respondent but was not included in the Appellant’s appendixes as supporting evidence and hence needs to be put on record.d.That the Appellant is therefore seeking leave to file a further list of documents, which documents are in any event already in the possession of the Respondent as they were already supplied to the Respondent.e.That the further list and bundle of documents that the Appellant seeks to file include a document which at the time of filing the Appellant was barred under the law and also bound by contract not to produce for reasons touching on national security under the Official Secrets Act Cap 187. Although the document could not be produced at the time the Appellant was filing its Statement of Facts and bundle of documents on 3rd October 2022, the Appellant sought permission from the Ministry of Interior and National Administration which subsequently allowed the production of the document strictly for tax purposes but still remains confidential under the Official Secrets Act Cap 187. The Applicant intends to produce the letter granting permission.f.That this matter may soon be proceeding for hearing. It is therefore prudent in the circumstances as a matter of urgency, that the Appellant ensures that it has adequately supported its case. Further, in view of the fact that this appeal is an appeal from the Respondent’s decision, the matter is being heard by the Tribunal as a court of first instance, and all the evidence supplied to the Respondent for a judicious decision ought to be brought on record.g.That the Tax Tribunal stands as an originating jurisdiction forum, as far as it is in the first instance under which the Appellant can get an independent review of the contesting party’s dispute. The Appellant’s full supporting evidence ought to be on the record before the Tribunal.h.That for the Honourable Tribunal to do substantive justice the Honourable Tribunal ought to allow the Appellant to file the further list of documents.i.That the delay in filing the documents is not inordinate as the appeal is yet to be set down for hearing.j.That the Respondent would suffer no prejudice if the orders sought herein are allowed as they may have corresponding leave to respond.k.That unless this Honourable Tribunal intervenes and certifies this application as urgent and the orders sought granted, the Applicant stands to suffer irreparable loss if the orders sought herein are not granted.

3. The Applicant in its written submissions dated 12th April 2023 and filed before the Tribunal on 13th April 2023 stated as hereunder:-a.On whether the Appellant’s Application is merited

4. The Appellant submitted that it seeks to file documents relevant to this case and for the Tribunal to be able to determine this Appeal, it will need to understand the nature of the business and the nature of the transactions that the Respondent is seeking to tax which cannot be done without the aid of the Further List of Documents.

5. It further submitted that the further documents that it seeks to file will demonstrate that it discharged its tax obligations dutifully and in accordance with the law and will assist the Tribunal in deciding the matter on its merits.

6. It contended that it provided these documents to the Respondent by way of a digital platform data room and has since found that pertinent evidence in this matter was not included in its Statement of Facts as supporting evidence.

7. It reiterated that in any event, in tax disputes, the burden of proof is in the first instance on the taxpayer to prove that the Commissioner’s assessment is wrong and it ought to be allowed to produce all relevant documents that can establish their true tax obligation or lack thereof.

8. It asserted that the production of relevant and sufficient supporting evidence to the commissioner at any stage of the proceedings while he is conducting an audit, investigation, or independent review is evidence that ought to also be brought to light before the Tribunal.

9. It maintained that for purposes of establishing a taxpayer’s true tax obligation, it falls on the Commissioner to allow for the Tribunal to grant an independent hearing to the taxpayer and not to behave in an adversarial manner at all material times when it was acting as a tax administrator before the matter came before the Tax Tribunal.

10. It reiterated that there are documents that could not be produced at the time when the Applicant was filing its substantive appeal documents due to a prohibition by the law and it has since sought permission from the Ministry of Interior and National Administration which subsequently allowed the production of the documents strictly for tax purposes, which documents still remain confidential under the Official Secrets Act, Cap 187. It added that it intends to produce the letter granting permission and a redacted version of the document previously prohibited from production.

11. It submitted that nothing bars the Honourable Tribunal from considering documents and evidence produced after an Objection decision has been issued and as a court of first instance, the Tribunal has jurisdiction to consider all facts before it which can only be established through relevant evidence on record. It cited the following cases to buttress its position:a.TAT Appeal no. 304 of 2019 Pevans East Africa v. Commissioner of Domestic Taxes where the Tribunal held: “being a court of first instance in matters of tax disputes and bearing in mind an appeal lies on matters of law only we would hesitate to shut out any material either party is of the view would corroborate their case.”b.TAT Appeal 572 of 2021 Incentro Africa Ltd v. Commissioner of Domestic Taxes where the Tribunal stated: “Parties before the Tribunal ought to be permitted opportunities to present and ventilate their appeals in a manner that affords a fair and just determination of the dispute, including allowing parties to file such documents that the parties may consider necessary in ensuring just and efficient and effective determination of the matter by the Tribunal.”c.TAT Appeal No. 284 of 2019 Tullow Kenya BV v Commissioner of Domestic Taxes where it was provided by the Tribunal as thus: “the Tribunal concurs with the Respondent that the Tribunal to be concerned more with administering justice in a more substantive manner with the calculated intention of determining the disputes on its full merits…”

12. It maintained that given the evidential value of the documents sought to be adduced, it is necessary for this Honourable Tribunal to admit the Further List of Documents to enable it to reach a fair and just determination of the Appeal.b.On whether the documents sought to be filed will prejudice the Respondent in any way

13. The Applicant submitted that the Respondent would not be prejudiced in any way if its application is allowed and that the Respondent is no stranger to the documents it seeks to file as most documents had been availed in the data room with the rest submitted to the Respondent upon demand.

14. It reiterated that the matter is yet to be heard and the Respondent has an opportunity to review and interrogate the documents that will be filed ahead of the hearing. It further reiterated that it is in the interest of justice and the Respondent remains at liberty to seek corresponding leave to file further documents in support of its response to the Appeal. The Appellant relied on the following cases to buttress its position:a.Tullow Kenya BV (Supra) where it was held by the Tribunal: “The relevancy of the documents to the issues informing the Appeal and the admissibility of the documents are matters to be appropriately considered and conclusively determined at the instance of the hearing of the Appeal. At this juncture of the determination of the application, it is premature and inappropriate for the Tribunal to delve into matters that border on the merits or otherwise of the Appeal.”b.Pevans East Africa (supra) where the Tribunal stated as follows. “The Tribunal further holds that there has been no demonstration by the Respondent of the prejudice that will be occasioned to it bearing in mind that the parties have an opportunity to canvas their arguments at the substantive hearing of the appeal.”

15. It concluded that the Respondent has not demonstrated to this Honourable Tribunal how it would be prejudiced if the application is allowed especially since the matter has not proceeded to hearing.

Response to the Application 16. The Respondent filed a Replying Affidavit sworn by Samuel Ngatia, an officer of the Respondent on the 31st March, 2023 and filed on the even date in response to the current application citing the following as the grounds for opposition:-a.That the Respondent conducted an audit and various meetings and correspondences took place culminating in issuance of an assessment letter demanding Kshs. 73, 316,834,6441 on 30th September 2021. b.That the Appellant objected to the assessment on 29th October 2021 and averred that no additional tax is payable either as claimed in the assessment letter or otherwise.c.That throughout that period, the Respondent requested the Appellant to avail documents to support its Objection but the Appellant failed to do so.d.That the Appellant filed the instant appeal but once again failed to attach the documents they purportedly intend to introduce.e.That the matter was referred to ADR the issue of missing documents arose as admitted in the Appellant’s Replying Affidavit and the Appellant through the instant application now wants to heal that error.f.That the intended additional evidence is therefore intended to remove a lacunae and fill the evidential gaps in the Applicant’s case which will amount to great prejudice to the Respondent as their authenticity is not known and they were not brought to the attention of the Respondent at the Review Stage.g.That the Applicant is on a fishing expedition, looking for anything and everything they can grasp to salvage their case.h.That the Applicant has even at this stage failed to attach the said documents and has only provided a list thereby prejudicing the Respondent as the character, nature, or form of such documents remains unknown as at 31st March 2023. i.That the Applicant’s averment is incorrect and the documents as per the attached list were not availed from the virtual data room.j.That since the Respondent did not have the opportunity to go through the documents as per the attached list of documents, allowing the introduction of the new documents at the Appeal stage would highly prejudice the Respondent.k.That the Claimant is therefore not deserving of the orders sought in the application and the same ought to be dismissed with costs to the Respondent.l.That the Respondent has already filed a response to the Appeal and the hearing directions have already been given by the Honourable Tribunal.

17. The Respondent prayed for orders from the Tribunal that:a.The application is without merit and be dismissed with costs; orb.Without prejudice to prayer (a) and in the unlikely event that the Honourable Tribunal allows the application, the matter to be referred back to the Commissioner for issuance of a fresh Objection decision having considered the new evidence per Section 29(3) (c) of the TAT Act.c.The costs of this application be provided for

18. In its submissions dated and filed on 14th April 2023, the Respondent presented its case as hereunder:-

a. On whether the introduction of new documents at an appeal stage should be allowed despite the documents not being availed at the Objection stage 19. The Respondent submitted that by the Applicant’s admission in its Supporting Affidavit, the Respondent was not given a chance to interrogate the impugned documents and that the Applicant confirms that all along the Respondent has made several requests for the Applicant to provide the impugned documents in support of its case.

20. It reiterated that the Applicant intentionally and maliciously deprived the Respondent of the impugned documents he now wants to sneak in and that the matter before the Tribunal is an appeal against the Commissioner’s Objection Decision and as such this Honourable Tribunal sits as an appellate court.

21. The Respondent relied on the case of Kibos Sugar & Allied Industries Limited & Another v Benson Ambuti Adega & 6 Others, Civil Appeal (Application) No. 153 of 2019 (unreported) where the court quoted with approval the English case of The National Guild of Removers & Storers Limited v Bee Moved Limited & Others [2018] EWCA Civ. 1302 where it was stated that: “in determining whether an appellate Court can admit additional evidence, the Court must seek to give effect to the overriding objective of doing justice and, in doing so, attempt to strike a fair balance between the need for concluded litigation to be determinative of disputes and the desirability that the judicial process should achieve the right result.”

22. It further reiterated that the instant Application and the intended additional evidence are intended to remove a lacuna and fill the evidential gaps in the Applicant’s case which will amount to great prejudice to the Respondent as their authenticity is not known and they were brought to the attention of the Respondent at the Review stage.b.On the issue of the impact of the Applicant’s failure to attach/avail the intended documents in the instant Application

23. The Respondent submitted that even to this point, it does not together with the Tribunal know the nature of the impugned documents and all that has been provided is a list of documents that the Applicant intends to provide.

24. It argued that this Tribunal is being called upon to act in vain as it cannot determine whether the impugned documents are material to the suit when the said documents have not been availed. It added that the failure by the Applicant to avail the impugned documents was fatal to its Application and the same should be struck out with costs.

b. On whether the introduction of new evidence at the Appellate stage would be prejudicial to the Respondent 25. The Respondent submitted that it never had the chance to interrogate the impugned documents and was denied the chance to confirm the authenticity of the documents before rendering its decision as contained in its Objection Decision.

26. It reiterated that it severally requested the documents but the documents were never and are yet to be availed and the Applicant only decided to file the instant appeal after reading the Respondent’s pleadings with the intention to fill the gaps noted therein.

27. It argued that allowing the impugned documents would be highly prejudicial to it and would create a very dangerous precedent.

Analysis and Findings 28. For determination before the Tribunal is whether to allow the Appellant to file additional documents in support of its Appeal.

29. The Appellant argued that it had already provided the Respondent the documents it intended to file vide a digital platform data room save for some documents it needed to get permission, which it finally got, from the Ministry of Interior and National Administration due to confidentiality issues presented under the Official Secrets Act CAP 187.

30. The Respondent argued that it requested the documents from the Appellant to no avail since the Review stages of the dispute and it would be prejudiced if the Tribunal allows the Appellant to produce said documents at this point since the Appellant has had the chance to gather the gist of the Respondent’s case and has only come up with the documents to fill in the gaps in its case.

31. It further reiterated that the Tribunal possesses an appellate jurisdiction where it only listens to appeals from the decisions of the Respondent, and as an appellate court with appellate jurisdiction, it cannot allow new evidence to be brought in at the appeal stage.

32. Section 13 (6) of the Tax Appeals Tribunal Act, No. 40 laws of Kenya provides:“The appellant shall, unless the Tribunal orders otherwise, be limited to the grounds stated in the appeal or documents to which the decision relates.”

33. Section 17 of the Tax Appeals Tribunal Act also provides:“The Tribunal may call any person to attend at a hearing and give evidence including production of any document if the Tribunal believes such evidence shall assist in its deliberations.”

34. As elucidated in Section 17 above, the Tribunal has the jurisdiction and authority to order for or allow any evidence including documentary evidence it deems helpful for the resolution of the dispute before it. This is further shown in Section 13 (6) which does not restrict the Appellant’s case to its arguments in the Objection but in the Appeal pleadings. The Respondent’s argument that the Tribunal is constrained only to the documents provided during the objection/review stage of the dispute is therefore defeated.

35. In determining whether to allow additional or further documents, the Tribunal is guided by the case of Commissioner of Income Tax v Total Kenya Limited [2021] eKLR where it was held that:-“In Tarmohamed & Another v Lakhani & Company [1958] EA 567, the Court of Appeal for Eastern Africa adopted the decision in Ladd v Marshall [1954] WLR 1489 and stated: -Except in cases where the application for additional evidence is based on fraud or surprise: to justify the reception of fresh evidence or a new trial, three conditions must be fulfilled: first, it must be shown that the evidence could not have been obtained with reasonable diligence for use at the trial; secondly, the evidence must be such that, if given, it would probably have an important influence on the result of the case, though it need not be decisive; thirdly, the evidence must be such as is presumably to be believed, or in other words, it must be apparently credible, though it need not be incontrovertible.In Wanjie & Others v Sakwa & Others [1984] KLR 275, in considering the need for restricting reception of additional evidence under Rule 29 of the Court of Appeal Rules, Chesoni JA observed at pg 280 thus: - This rule is not intended to enable a party who has discovered fresh evidence to import it nor is it intended for a litigant who has been unsuccessful at the trial to patch up the weak points in his case and fill up omissions in the Court of Appeal. The Rule does not authorise the admission of additional evidence for the purpose of removing lacunae and filing in gaps in evidence. The appellate court must find it needful. Additional evidence should not be admitted to enable a plaintiff to make out a fresh case in appeal. There would be no end to litigation if the rule were used for the purpose of allowing the parties to make out a fresh case or to improve their case by calling further evidence. It follows that the power given should be exercised very sparingly and great caution should be exercised in admitting fresh evidence.From the foregoing, it is clear that the power to admit additional evidence is discretionally. However, it should be exercised restrictively. That the evidence should be needful and not meant to patch up an applicant’s case on appeal. Finally, the power should be exercised sparingly but for the ends of justice.In the present case, the evidence was in the possession of the applicant during the trial before the tribunal. However, it was contended, and not controverted, that it was not produced at the trial because the parties knew or conducted themselves in a manner suggesting that it was not necessary. This is so because, the parties with knowledge that the mutual agreement process had collapsed, resorted to the appeal before the Tribunal before and without considering the Alternative Dispute Resolution required under Article 24 of the Double Taxation Agreement. This is the Article the Tribunal relied on to determine the matter against the applicant.The Court has considered that the evidence sought to be relied on is needful. This is so because there was no contention that the respondent had raised the issue of jurisdiction before the Tribunal. It was submitted that that was the case because the parties knew of the position of the MAP that there was no requirement for ADR before approaching the Tribunal.The Court is persuaded that, if it be true that the Tribunal's decision was based on the unavailability of the intended evidence and reliance thereon was suo motto, that piece of evidence would have been crucial to the applicant's case. There would be no prejudice to be suffered if the said evidence is adduced at this stage.”

36. Further, the Supreme Court in Mohamed Abdi Mahmud v Ahmed Abdullahi Mohamed & 3 Others [2018] eKLR expressed itself as thus: “We therefore lay down the governing principles on allowing additional evidence in appellate courts in Kenya as follows:(a)the additional evidence must be directly relevant to the matter before the court and be in the interest of justice;(b)it must be such that, if given, it would influence or impact upon the result of the verdict, although it need not be decisive;(c)it is shown that it could not have been obtained with reasonable diligence for use at the trial, was not within the knowledge of, or could not have been produced at the time of the suit or petition by the party seeking to adduce the additional evidence;(d)Where the additional evidence sought to be adduced removes any vagueness or doubt over the case and has a direct bearing on the main issue in the suit;(e)the evidence must be credible in the sense that it is capable of belief;(f)the additional evidence must not be so voluminous making it difficult or impossible for the other party to respond effectively;(g)whether a party would reasonably have been aware of and procured the further evidence in the course of trial is an essential consideration to ensure fairness and due process;(h)where the additional evidence discloses a strong prima facie case of willful deception of the Court;(i)The Court must be satisfied that the additional evidence is not utilized for the purpose of removing lacunae and filling gaps in evidence. The Court must find the further evidence needful.(j)A party who has been unsuccessful at the trial must not seek to adduce additional evidence to, make a fresh case in appeal, fill up omissions or patch up the weak points in his/her case.(k)The court will consider the proportionality and prejudice of allowing the additional evidence. This requires the court to assess the balance between the significance of the additional evidence, on the one hand, and the need for the swift conduct of litigation together with any prejudice that might arise from the additional evidence on the other.”

37. It is however not lost to the Tribunal that the said letter from the Ministry of Interior and National Administration permitting the Appellant to use the subject documents for tax purposes has not been adduced before it for the Tribunal to probe, neither has it been accorded the opportunity to glean through the said documents to determine their consequence or lack thereof in the instant Appeal. These will only be possible when the documents are proven to be in existence.

38. Given the foregoing, the Tribunal has interrogated whether the said evidence seeking to be adduced is relevant to the case, and to this, the Tribunal has found no way of establishing this fact as the documents that would have been helpful to persuade it are yet to be produced before it for consideration. There are however, documents that are said to have been provided to the Respondent and within the Respondent’s custody. These are found to have passed the first test thus relevant to the case.

39. On whether it would impact or influence the result of the case if given, again, the Tribunal has had no chance of determining the same as the documents presented do not provide any insight as to the impact of the intended evidence as the same has not been presented before the Tribunal.

40. Whereas the Appellant has alleged that due to the Official Secrets Act, it could not have obtained the intended evidence with reasonable diligence for use at the trial, and that the evidence could not have been produced at the time of the objection proceedings but is now able to do so following a letter of authorisation by the Ministry of Interior and Administration, the Tribunal is yet to set its eyes upon said documents or even the letter of authorisation thus defeating this test per the Supreme Court.

41. The same can be argued about the preceding tests as such the Tribunal finds no need to repeat itself on the same as doing so is redundant.

42. The question, therefore, remains, when does the Appellant intend to provide said documents to the Tribunal, and if they are too sensitive and confidential to be brought before the Tribunal during the determination of this application, are they in turn too sensitive and confidential to be brought before the Tribunal during the hearing of the Appeal.

43. The Tribunal observes the same documents were too sensitive to be produced to the Respondent during the objection/review stage of the tax dispute process. At what point then will the Appellant deem it appropriate for the Respondent to peruse the document for it to make an informed decision?

44. The Tribunal is concerned that should the incident of providing the documents even at this interlocuroty stage pose a threat to National Security, then the same ought not be adduced at any point and the Appellant should therefore try to prove its case with what it is comfortable to produce before the Tribunal thus far and resign itself to its fate.

45. It is the Appellant’s responsibility to prove its case before the Tribunal in whatever issue it alleges. It is therefore the Tribunal’s position that it cannot issue orders on phantom evidence whose viability, authenticity and/or lack thereof cannot be ascertained.

46. To this end, only the documents provided by the Appellant or proved to be in the Respondent’s custody vide the Digital platform data room per appendix SPLC 2 on pages 94 to 102 shall be allowed as evidence.

Disposition 47. The Tribunal in the circumstances proceeds to make the following Orders:-a. The application for leave to file additional documents is partially granted to the extent that it is restricted to the documents provided to the Respondent in the digital platform data room.b. The additional documents as specified above to be filed and served within fifteen (15) days of the date of delivery of this Ruling.c. The Respondent is at liberty to file a Supplementary statement of Facts or any additional documents in respect to the documents to be filed by the Appellant within Fifteen (15) days of being served.d. No orders as to costs.

DATED AND DELIVERED AT NAIROBI THIS 9TH DAY OF JUNE, 2023. ..................................ERIC N. WAFULACHAIRMAN..................................CYNTHIA B. MAYAKA RODNEY O. OLUOCHMEMBER MEMBER..................................ELISHAH NJERU ABRAHAM K. KIPROTICHMEMBER MEMBER