[2024] KETAT 1076 (KLR)

Sergon v Commissioner of Domestic Taxes (Tax Appeal E248 of 2023) [2024] KETAT 1076 (KLR) (19 July 2024) (Ruling)

Neutral citation: [2024] KETAT 1076 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal E248 of 2023

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

July 19, 2024

Between

Dr. Kibet Sergon

Appellant

and

Commissioner of Domestic Taxes

Respondent

Ruling

1. The Appellant vide a Notice of Motion dated 14th May, 2024 and filed under a Certificate of urgency on the 15th May, 2024, sought for the following Orders:-a.Spentb.That this Honourable Tribunal be pleased to grant the Appellant leave to file a Supplementary Statement of Facts to corroborate the earlier filed Statement of Facts dated 28th February, 2024. c.That upon granting prayer (b) above, the Honourable Tribunal be pleased to admit the Supplementary Statement of Facts as having been done within time.d.That this Honourable Tribunal be pleased to grant the Appellant leave to serve the admitted Statement of Facts upon the Respondent and the same be deemed as having done within time.e.That the costs of incidental to this application abide the result of the said application.

2. The application which is supported by an Affidavit sworn by the Appellant himself on the 14th day of May, 2024 is premised on the following grounds, that:-a.The intended Supplementary Statement of Facts is geared to enable the parties to litigate between themselves on the basis of the true state of facts and law and for the Tribunal to dispose of all issues arising conclusively;b.The intended Supplementary Statement of Facts does not introduce any new or inconsistent cause of action delineated in the Memorandum of Appeal.c.The matter is yet to be issued with a hearing date and is still at the preliminary stages hence, this application has been brought without undue delay as pleadings are not yet closed.d.That it is in the interest of justice and fairness that the application is allowed to pave way for the hearing and determination of the Appeal on the merits.e.The Respondent stands to suffer no prejudice should the application be allowed as prayed.f.That this application has been made without undue delay.

3. The Respondent upon being served with the application filed a Replying Affidavit sworn by Abel Mokaya, an officer of the Respondent, on the 22nd day of May, 2022 and filed on the even date and raised the following grounds in opposition to the application:-a.That the Respondent is vehemently opposed to the Appellant’s introduction of the sale agreements and bank statements since the documents were not considered during the objection stage by the Respondent.b.That the documents were requested by the Respondent on 21st July, 2023 during the objection stage but the said documents were not availed by the Appellant.c.That the Respondent’s objection decision issued on the 11th September, 2023 was based on the documents that the Appellant provided during the objection stage.d.That allowing the Appellant to introduce the documents at appeal stage will prejudice the Respondent’s decision since the burden of proof will shift back to the Respondent.e.The introduction of the documents in prejudicial since the Appeal before the Tribunal is premised on the objection decision which cannot be amended at this late stage of appeal.f.That introduction of documents will impact on the assessment by the Respondent and thus will alter the nature of the dispute.g.That the Tribunal can still determine the case with the information availed in the Appeal without causing prejudice to the Respondent.h.That the Appellant has not demonstrated that the information it intends to introduce is new information that was not available in its possession either at the time of objection or at the time of lodging the appeal.i.That the application to introduce documentary evidence is an afterthought and a knee jerk reaction by the Appellant after being served with the Respondent’s Statement of Facts which should not be entertained.j.That the Appellant did not annex any of the documents stated in the application which it intends to rely upon and that, that in itself is fatal to the application.k.That the application lacks merit and ought to be dismissed with costs to the Respondent.

Analysis and Findings 4. In compliance with the direction of the Tribunal to the effect that the application was to be canvassed by the way of written submissions, the Appellant filed its written submissions on the 29th May, 2024 that were adopted by the Tribunal on the 30th May, 2024. The Respondent did not file any submissions and as such the Tribunal will determine the Respondent’s case on the basis of the contents of its Replying Affidavit.

5. The Tribunal’s power in determining applications of this nature is anchored in Section 15 (4) of the Tax Appeals Tribunal Act and under Rule 10 of the Tax Appeals Tribunal (Procedure) Rules 2015.

6. For determination before the Tribunal is the principal question of whether to allow the Appellant to file additional documents in support of its Appeal.

7. Section 13 (6) of the Tax Appeals Tribunal Act, No. 40 laws of Kenya provides as follows with regard to determination of an appeal on the basis of documentation filed before the Tribunal:-“The appellant shall, unless the Tribunal orders otherwise, be limited to the grounds stated in the appeal or documents to which the decision relates.” (Emphasis added)

8. In determining whether to allow additional or further documents, the Tribunal is guided by the case of Commissioner of Income Tax-vs-Total Kenya Limited [2021] eKLR where it was held:“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.” (Emphasis added)

9. Further, the Supreme Court in Mohamed Abdi Mahmud-vs-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.” (Emphasis added)

10. Based on the foregoing, the Tribunal has interrogated whether the said evidence seeking to be adduced is relevant to the case, and to this, the Tribunal is of the view that the documents listed in the application which the Appellant seeks to adduce before the Tribunal are critical in assisting the Tribunal towards clarifying the facts of the dispute and in helping the Tribunal in arriving at a just and fair determination.

11. On whether it would impact or influence the result of the case if adduced, the Tribunal opines that the said documents appear to go to the crux of the Appellant’s challenge to the tax assessment and thus the same are likely to have an influence on how the Tribunal is likely to reach its decision after the interrogation of such documents.

12. Though the Appellant has not addressed the concerns raised with regard as to whether it had in its possession the impugned documents and the cause for not supplying the same to the Respondent during the objection stage, the Tribunal notes that the Appellant has indicated that while filing the present Appeal the documents were inadvertently left out in the bundle of documents filed before the Tribunal.

13. It is the view of the Tribunal that the tests prescribed in Mohamed Abdi Mahmud case [SUPRA] have been met to the extent that the additional evidence sought to be adduced dent to remove any vagueness or doubt over the dispute and has a direct bearing on the main issue in the Appeal.

14. The Tribunal has looked into the list provided by the Appellant and finds that the additional documents are not overtly voluminous thus it might not be difficult or impossible for the Respondent to respond effectively. It is also apparent that the Appellant had the documents in its possession and had shared the documents with the Respondent through an email link during the objection proceedings.

15. The Tribunal does not find any evidence to suggest the Appellant’s intended documents indicate a calculated wilful deception of the Tribunal by the Appellant neither does it seem to be the case that the documents sought to be produced are calculated to be utilized for the purposes of removing lacunae and filling gaps in evidence. The documents are relevant to the Appeal and it is in the interests of justice and fairness to allow the same to be admitted in evidence.

16. The Respondent has not demonstrated to the Tribunal what kind of grave prejudice it is likely to suffer should the additional documents the Appellant seeks to adduce be admitted by the Tribunal.

Disposition 17. The Tribunal is in the circumstances inclined to exercise its discretion in favour of the Appellant and allow a similar latitude in filing any additional documents to the Respondent for the purposes of balancing out the competing interests of the parties in the Appeal.

18. The Orders that accordingly recommend themselves are as follows:-a.The Appellant be and is hereby granted leave to file a Supplementary Statement of Facts and to file additional documents limited to the documents identified in the application.b.The Appellant to file and serve the Supplementary Statement of Facts and the additional documents within Fifteen (15) days of the date of delivery of this Ruling.c.The Respondent be and is hereby granted a corresponding leave to file and serve any Supplementary Statement of Facts and additional documents.d.The Respondent to file and serve the Supplementary Statement of Facts and additional documents (if necessary) within Fifteen (15) days of the date of being served by the Appellant.e.No orders as to costs.

DATED AND DELIVERED AT NAIROBI THIS 19TH DAY OF JULY, 2024ERIC NYONGESA WAFULACHAIRMANELISHAH N. NJERU MUTISO MAKAUMEMBER MEMBEREUNICE N. NG’ANG’A ABRAHAM K. KIPTROTICHMEMBER MEMBERRULING – TAT E248 OF 2024 DR. KIBET SERGON VS. COMMISSIONER OF DOMESTIC TAXES Page 10