[2023] KETAT 989 (KLR)

Senco Limited v Commissioner of Domestic Taxes (Miscellaneous Tax Appeal E138 of 2023) [2023] KETAT 989 (KLR) (1 December 2023) (Ruling)

Neutral citation: [2023] KETAT 989 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Miscellaneous Tax Appeal E138 of 2023

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

December 1, 2023

Between

Senco Limited

Applicant

and

Commissioner Of Domestic Taxes

Respondent

Ruling

1. The Applicant moved the Tribunal vide a Notice of Motion application dated 13th September 2023 and filed on the 16th September 2023 under a certificate of urgency and supported by an affidavit sworn by Dr. Njoroge O. Kimani, the Advocate of the Applicant, seeking the following Orders: -a.That the Honourable Tribunal do issue an Order lifting, vacating or setting aside the Caveat dated 22nd July 1988 on the Green Card of the property L.R NO.209/3324 which is registered in the name of the Applicant herewith.b.That the Honourable Tribunal do issue an Order restraining the Respondent either by itself, its agents, employees, servants or through any other person at its behest, from issuing a caveat/agency notice to the Appellant property or against bank account or accounts, or any other bank or property held by the Applicant and or lift, vacate or set aside any caveat issued against the Applicant’s property until this Appeal is heard and determined.

2. The application is premised on the grounds, that: -i.That the Applicant has not tax liability at all in the record of the Respondent.ii.That the Applicant is ready and willing to pay any tax liability that the Respondent proves to be “bona fade” tax liability of the Applicant.iii.That the Respondent has never raised any tax assessment on the Applicant.iv.That the Respondent has failed, refused or declined to respond to requests from the Applicant to proof the liability for which the Respondent placed the Caveat of Kshs. 2,000,000/- on the Green Card of the Applicant’s property L.R No.209/3324. v.That there is no reason why the Caveat has been placed on the Applicant’s property.vi.That it is in the interest of justice that this Honourable Tribunal allows this application as prayer to safeguard the Applicant’s right of Appeal and the right to be heard.

3. The Respondent despite being directed by the Tribunal to file its response to the application by the 27th September 2023, the Respondent did not put any response and the application is to that extent deemed unopposed.

4. The Applicant did not file any written submissions and the Tribunal shall determine the same premised on the application before it.

Analysis and Findings 5. The instant application seeks for orders to lift the caveat placed on the Applicant’s property by the Respondent and to restrain the Respondent from issuing a caveat/agency notice or the enforcement of collection of taxes pending the hearing and determination of this Appeal.

6. From the record, the Tribunal noted that the decision subject of the instant Appeal was issued by the Respondent vide the letter dated 8th September 2023.

7. The Applicant stated that the Respondent placed a Caveat on the Applicant’s property known and referred to as L.R No.209/3324 against the tax liability of Kshs. 2,000,000/-, which Caveat was registered on 22nd July 1988.

8. It was the Applicant’s assertion that there is no tax due and owing whatsoever to the Respondent and that no tax liability is indicated in any or of all the Respondent’s records.

9. The Applicant stated the Respondent has never raised any assessment on the Applicant and that the Applicant remains ready and willing to settle any “bonafide” taxes and that therefore, no reasonable grounds have been availed to justify the placing of the caveat.

10. The caveat placed on the Applicant’s property is a form of the enforcement mechanisms available to the Respondent in the process of tax collection.

11. The Tribunal’s jurisdiction to deal with an application of this nature is anchored under Section 42 (14) of the Tax Procedures Act, which provides as follows:-“(14)The Commissioner shall not issue a notice under this section unless—(a)the taxpayer has defaulted in paying an instalment under section 33(2);(b)the Commissioner has raised an assessment and the taxpayer has not objected to or challenged the validity of the assessment within the prescribed period;(c)the taxpayer has not appealed against an assessment specified in an objection decision within the prescribed timelines;(d)the taxpayer has made a self-assessment and submitted a return but has not paid the taxes due before the due date lapsed; or(e)the taxpayer has not appealed against an assessment specified in a decision of the Tribunal or court.” (Emphasis added)

12. The Tribunal has observed from the record that the Applicant pursuant to a Respondent’s decision dated 8th September, 2023, it lodged the following documents;a.Notice of Appeal dated 13th September 2023 and filed on the 16th September 2023;b.Memorandum of Appeal dated 13th September 2023 and filed on the 16th September 2023;c.Statement of Facts dated 13th September 2023 and filed on the 16th September 2023; andd.The Tax decision.

13. The Tribunal’s notes from the foregoing that there is an Appeal on record for the Tribunal to exercise its jurisdiction over.

14. The Tribunal in pursuant to Section 18 of the Tax Appeals Tribunal Act may issue orders affecting the operation or implementation of a decision by the Commissioner under consideration by the Tribunal for the purposes of securing the effectiveness of the proceedings and determination of the Appeal. With the Appeal confirmed as pending before the Tribunal the efficacy of the Appeal proceedings will in the circumstances be safeguarded by the grant of the orders as sought by the Applicant.

15. From the material before the Tribunal, it appears that the Applicant became aware of the said caveat when it attempted to effect a transfer on the same, the Applicant stated that it called for evidence and particulars from the Respondent vide the correspondence dated 28th June 2023 to no avail.

16. Section 42 (14) of the Tax Procedures Act clothes the Tribunal with the powers to interfere with the process of recovery of taxes where the process of recovery of such taxes have not been allowed an opportunity to challenge any decision in respect of the process through an appeal lodged with the Tribunal or through a court process.

17. The Tribunal notes that the Caveat was placed on the title to Plot LR No. 209/3324 on the 22nd July, 1988 by the Commissioner of Income Tax and that the Respondent vide its decision issued on the 8th September, 2023 rejected the Applicant’s application to file a late objection on the basis there was a delay of 35 years in lodging the notice of objection on the part of the Applicant.

18. The Tribunal, on a balance of convenience finds that the Applicant has advanced sufficient grounds to warrant the Tribunal to interfere with the enforcement process but the interests of justice dictate for a balance between the competing interests. The sale of the property, as intended by the Applicant, could possibly prejudice the Respondent in the recovery of any taxes in the event the Appeal is disallowed.

Disposition 19. On the basis of the foregoing analysis, the Tribunal finds that the application is merited and accordingly makes the following orders: -a.That the Caveat placed by the Respondent on the property known as L.R No.209/3324 registered in the name of the Applicant be and is hereby lifted, vacated and/or removed on condition that the Applicant is hereby restrained from disposing off the property pending the hearing and final disposal of the Appeal.b.That the Respondent be and is hereby restrained from placing any caveat or issuing agency notices relating to the tax assessment subject of the instant dispute pending the hearing and determination of the Appeal.c.No order as to costs.

20. It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 1ST DAY OF DECEMBER, 2023. ERIC NYONGESA WAFULA........CHAIRMANMUTISO MAKAU......MEMBERELISHAH N. NJERU .........MEMBEREUNICE N. NG’ANG’A.......MEMBERABRAHAM K. KIPROTICH..........MEMBER