[2024] KETAT 8 (KLR)

Shabuvilla Enterprises Ltd v Commissioner of Domestic Taxes (Tribunal Appeal 1204 of 2022) [2024] KETAT 8 (KLR) (26 January 2024) (Judgment)

Neutral citation: [2024] KETAT 8 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tribunal Appeal 1204 of 2022

Grace Mukuha, Chair, E Komolo, Jephthah Njagi, T Vikiru & G Ogaga, Members

January 26, 2024

Between

Shabuvilla Enterprises Ltd

Appellant

and

Commissioner of Domestic Taxes

Respondent

Judgment

1. The Appellant is a private limited Company incorporated in Kenya.

2. The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act, Cap 469 laws of Kenya (KRA Act). Under Section 5 (1) of the Act, KRA is an agency of the Government for the collection and receipt of all revenue. Under Section 5(2) of the Act with respect to the performance of its function under subsection (1), the Authority is mandated to administer and enforce all provisions of the written laws as set out in Parts I and II of the First Schedule to the KRA Act for the purposes of assessing, collecting, and accounting for all revenues in accordance with those laws.

3. The Respondent discovered that there was a variance between the income tax turnover and sales declared in the Appellant's VAT declaration for the period 2020 and proceeded to issue the Appellant with a pre-assessment demand notice on 3rd February 2022.

4. The Appellant failed to respond to the demand notice and the Respondent consequently raised an additional assessment before issuing the Appellant with an Assessment Order on 9th May 2022.

5. The Appellant objected to the additional assessment on 2nd June 2022 raising several concerns and was requested to provide documents to support its objection and it provided some.

6. The Respondent consequently issued the Appellant with an objection decision dated 23rd August 2022.

7. The Appellant thereafter filed this Appeal vide Notice of appeal filed on 17th October 2022.

The Appeal 8. The Appeal is premised on the Memorandum of Appeal filed on 17th October 2022 stating that the Appellant filed the Appeal against additional assessment of Kshs. 3,298,929. 52 on the ground that the assessment was based on gross income of the year 2020 and that the business had closed down.

Appellant’s Case 9. The Appellant’s case is premised on the Statement of Facts filed on 17th October 2022.

10. The Appellant averred that the assessment was purely on the previous returns reflection of gross sales of Kshs. 34,772,556. 00 and that the returns and accounts for the year of income 2020 had already been submitted to the department with gross sale of Kshs. 20,275,468. 00.

11. The Appellant also stated that the operations of the business had already ceased.

Appellant’s Prayers. 12. The Appellant prayed that the total taxes plus interest and penalty be vacated

Respondent’s Case 13. The Respondent’s case is premised on the following documents:a.The Respondent’s Statement of Facts dated and filed on 15th November 2022. b.The Respondent’s Written Submissions dated 20th March 2023 and filed on 21st March 2023.

14. The Respondent started by raising a Preliminary Objection on a point of law on the ground that the purported Appeal is fatally defective for being filed out of time without leave and for being premised on an invalid Notice of Appeal as required under the Tax Procedures Act and the Tax Appeals Tribunal Act.

15. The Appellant also averred that the basis of the assessment was turnover variance where the VAT turnover was Kshs. 33,500,755. 00 and the income tax turnover was Kshs. 20,275,468. 00.

16. That the Respondent noted the undeclared income of Kshs. 13,225,287. 00 which it charged additional Corporation tax of Kshs. 3,306,322. 00

17. That the Respondent issued additional assessment for June 2020 and factored the undeclared income of Kshs. 13,225,287. 00 which the taxpayer did not object to.

18. The Respondent submitted that it raised the additional assessment based on the information provided by the Appellant and that the Appellant failed to illustrate if and how the Respondent’s computation was erroneous nor provided alterations to be made to the assessments.

19. The Respondent argued that the Appellant failed to address the basis of the assessment and hence the Respondent proceeded to confirm the assessment as raised on 23rd August 2022.

20. The Respondent in support of its case relied on the holdings in the cases of James Mangeli Musoo [Industrial Court of Kenya Ltd at Nairobi cause No. 1263 of 2012] and Nicholas Kiptoo Arap Korir Salat v IEBC & 7 Others [2014] eKLR amongst others.

Respondent’s Prayers. 21. The Respondent prayed that the Tribunal finds that: -a.The objection decision dated 23rd August 2022 be upheldb.The Appeal be dismissed with costs to the Respondent.

Issues for Determination 22. The Tribunal has considered the facts of the matter and the submissions made by the parties, and considers the following to be the issues for determination in this matter:a.Whether there is a valid appeal before the Tribunal.b.Whether the Respondent’s assessment was valid and justifiable.

Analysis and Findings a. Whether there is a valid appeal before the Tribunal. 23. The genesis of this Appeal is the additional assessment on Income tax of Kshs. 3,298,929. 52 issued by the Respondent on 9th May 2022.

24. The Appellant made an objection notice to the assessment on 2nd June 2022 whereupon it was requested to avail supporting documents and the Appellant did supply some documents.

25. The Respondent consequently issued an objection decision on 23rd August 2022 and the Appellant aggrieved by the same filed its Notice of Appeal on 17th October 2022.

26. The Tribunal noted that the procedure for appeal as set out in Section 13 (1) (b) of the Tax Appeals Tribunal Act (TAT Act) requires that a Notice of Appeal shall be submitted to the Tribunal within thirty days upon receipt of the decision of the Commissioner.

27. The Tribunal also noted that the Appellant is allowed by the law to apply for leave to file its Notice of Appeal out of time as required in Section 13 (3) of the TAT Act which provides as follows:“The Tribunal may, upon application in writing or through electronic means, extend the time for filing the notice of appeal and for submitting the documents referred to in subsection (2).”

28. The Tribunal would then have determined whether to expand the time for filing of the Notice of Appeal.

29. The Tribunal is of the considered view that the timelines for appealing the Commissioner’s decisions are clearly set in the law, and taxpayers are liable to comply with the same. In the same vein the Tribunal took into consideration the holding in the case of Equity Group Holdings Limited -Vs- Commissioner of Domestic Taxes 2021 (eKLR) where the High Court held as follows:“A statutory edict is not procedural technicality. It’s a law which must be complied with. Parliament in its wisdom expressly and in mandatory terms provided………”

30. The Tribunal is further guided by its holding in the case of W.E.C. Lines Ltd vs. The Commissioner of Domestic Taxes [TAT Case No. 247 of 2020] where it was held at paragraph 70 while reiterating the holding in Krystalline Salt Ltd vs KRA [2019] eKLR 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. The relevant procedure here is the process of opposing an assessment by the Commissioner.”

31. Based on the foregoing, the Tribunal finds that there is no valid appeal before it and therefore does not have the jurisdiction to determine the matters raised in the Appeal.

32. Having determined that there is no valid Appeal before it, the Tribunal did not delve into the second issue for determination as it had been rendered moot.

Final Decision 33. The upshot of the foregoing is that the Appeal fails, and the Tribunal accordingly proceeds to make the following Orders:a)The Appeal be and is hereby struck out.b)Each party to bear its own costs.

34. It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 26TH DAY OF JANUARY, 2024. GRACE MUKUHACHAIRPERSONDR ERICK KOMOLO JEPHTHAH NJAGI MEMBER MEMBERTIMOTHY VIKIRU GLORIA A. OGAGA MEMBER MEMBER