[2024] KETAT 1546 (KLR)

Sny Motors Limited v Commissioner of Domestic Taxes (Tax Appeal E912 of 2023) [2024] KETAT 1546 (KLR) (8 November 2024) (Judgment)

Neutral citation: [2024] KETAT 1546 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal E912 of 2023

BK Terer, Chair, BK Terer, EN Njeru, E Ng'ang'a & SS Ololchike, Members

November 8, 2024

Between

Sny Motors Limited

Appellant

and

Commissioner Of Domestic Taxes

Respondent

Judgment

Background 1. The Appellant is a private limited company incorporated on 11th September, 2018 and motor vehicle dealer based in Mombasa, importing vehicles from Japan.

2. The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act, CAP 469 of Kenya’s Laws (hereinafter “the Act”) Under Section 5 (1) of the Act, the Kenya Revenue Authority is an agency of the Government for the collection and receipt of all tax revenue. Further, under Section 5(2) of the Act with respect to the performance of its functions under subsection (1), the Authority is mandated to administer and enforce all provisions of the written laws as set out in Part 1 and 2 of the First Schedule to the Act for the purposes of assessing, collecting and accounting for all revenues in accordance with those laws.

3. The Respondent undertook VAT and Income Tax return review of the Appellant for the period January 2019 to December, 2021 wherein the Respondent established that there were discrepancies between imports made pursuant to the Respondent's customs data and purchases claimed in both VAT and Income tax returns. Consequently, the Respondent issued additional assessments on 10th June 2023, 12th June 2023 and 17th June 2023 for VAT and Income Tax.

4. The Appellant being dissatisfied, lodged notices of objection on 9th June 2023 and 20th June 2023. Upon consideration of the objection, the Respondent issued an objection decision dated 8th August, 2023 wherein the Respondent confirmed total principal tax amount of Kshs 9,468,938. 70.

5. Aggrieved by the objection decision the Appellant lodged the Appeal herein on 6th December, 2023.

The Appeal 6. The Appeal is based on the memorandum of appeal dated 6th December 2023 and filed on 13th December 2023 raising the following grounds of appeal:a.That the director was sick and the Respondent proceed[sic] for assessments.b.That the matter be heard by the Alternative Dispute Resolution within the department.

Appellant's Case 7. The Appellant relied on its statement of facts dated 6th December 2023 and filed on 13th December 2023 wherein it sought to challenge the Respondent’s objection on VAT and income tax assessment for May 2023 based on the following grounds [sic]:a.The reason of assessment is variance of VAT with Income tax due to some of imports missing which was carried in year 2021. b.The Respondent’s team was in a hurry to make assessments and yet the Director was sick.

Appellant's Prayers 8. The Appellant urged the Tribunal to look into the matter and advice accordingly.

Respondents Case 9. In response to the appeal, the Respondent lodged a Statement of facts dated 13th January 2024 and filed on 16th January 2023 wherein it stated that it undertook VAT and Income Tax return review of the Appellant for the period January 2019 to December 2021. It established that there were discrepancies between imports made as per Respondent’s customs data and purchases claimed in both VAT and Income tax returns.

10. The Respondent stated that on 30th November 2022, the Appellant was issued with a pre-assessment notice highlighting the discrepancies and requesting the Appellant to provide reconciliations and/or explanations for the variances and that that exercise led to issuance of the additional assessments.

11. The Respondent averred that the basis of the aforementioned assessment was hinged on section 31 of the Tax Procedures Act, CAP 469B of the Laws of Kenya (hereinafter “TPA”), which gives the Respondent leeway to issue additional assessments based on the available information and best of its judgement. The Appellant being dissatisfied, lodged notices of objection on 9th June 2023 and 20th June 2023.

12. It was the Respondent’s case that upon receipt of the said notices of objection, vide electronic mails dated 23rd June 2023 and a reminder dated 10th July 2023 and 31st July 2023 it requested the Appellant to validate its notices of objection so as to comply with the provisions of section 51(3) of the TPA. The Respondent alleged that the Appellant was particularly required to provide statutory required documents in support of the objection failure to which the objection would be invalidated.

13. In the absence of satisfactory explanation from the Appellant, the Respondent proceeded to issue an objection decision dated 8th August 2023. Consequently, the Respondent confirmed the assessments and issued confirmation assessment notices dated 15th September, 2023. The Appellant being aggrieved, filed this appeal.

14. The Respondent also raised raised a preliminary objection within its statement of facts that the Appeal was incompetent for non-compliance with section 13 (1) (b) of the Tax Appeals Tribunal Act, CAP 469A of the Laws of Kenya (hereinafter “TATA”).

15. On whether the Appellant discharged its burden of proof and whether the assessment is proper in law, the Respondent averred that upon analysis of the Appellant’s VAT returns filed for the period January 2019 to December 2021, it established discrepancies between imports made as per the customs data and purchases claimed in both VAT and income tax returns.

16. The Respondent stated that in 2019, imports from the customs data indicated that the Appellant bought goods worth Kshs 51,957,681. 00 but only declared income from Kshs 28,755,746. 00 worth of purchases.

17. The Respondent further averred that in 2020, imports from the customs data indicated that the Appellant bought Kshs 34,229,748. 00 but overstated its purchases by claiming Kshs 39,896,398. 00. The Respondent further averred that in 2021, imports from customs data indicated that the Appellant bought Kshs 40,468,159. 00 but overstated their purchases by claiming Kshs 44,479,173. 00.

18. The Respondent asserted that it requested the Appellant to provide supporting documents for instance, financial statements, sales invoices and ledgers, purchases invoices and ledgers, bank statements and any other relevant documents to support their objection and that the Appellant only provided draft-audited accounts for the year 2021, which was not sufficient to unable the Respondent to review and amend the assessments.

19. The Respondent maintained that despite several engagements with the Appellant to avail requisite documentations, the Appellant failed to provide sufficient evidence for the Respondent to render a meritorious decision in the circumstance. It asserted that the Appellant disregarded section 23(b) of the TPA.

20. The Respondent relied on Section 24 of the TPA to argue that this allows a taxpayer to submit tax returns in the approved form and manner prescribed by the Respondent, the Respondent is not bound by the information provided therein and can assess for additional taxes based on any other available information and to the best of its judgement.

21. The Respondent also stated that pursuant to section 56 of the TPA and 30 of the TATA, the burden of proof lies on the Appellant to demonstrate that it discharged its tax liability. The Respondent maintained that this burden was never discharged as no satisfactory documentary evidence was availed to the Respondent to enable it render a meritorious decision in the circumstances.

22. In addition to this, the Respondent relied on the provisions of section 109 of the Evidence Act, CAP 80 of the Laws of Kenya (hereinafter “Evidence Act”) which provides as follows:“the burden of proof as to any particular fact lies on the person who wishes the court to believe in its existence, unless it is provided by any law that the proof of that fact shall lie on any particular person.”

23. In light of the foregoing, the Respondent asserted that the Appellant's assertion that the Respondent was in a hurry to issue the assessments is incorrect and misleading. On the contrary, the Respondent stated that the Appellant was granted ample time to avail documentation in support of the objection but failed to do so.

Respondent’s prayers 24. Based on the foregoing, the Respondent prayed that the Tribunal would be pleased to uphold its objection decision dated 8th August 2023; and that the Appeal be dismissed with costs to it as the same lacked merit.

Issues for Determination 25. On 11th September, 2024, this matter came before the Tribunal for hearing and it was noted that whereas the parties had been accorded ample time to file their written submissions neither party complied. Accordingly, the Tribunal proceeds to determine this case on the basis of the parties’ respective pleadings.

26. The Tribunal having considered the parties’ pleadings puts forth the following issues for determination:a.Whether the Appeal is incompetent for non-compliance with Section 13(b) of the TATA.b.Whether Respondent’s objection decision dated 8th August 2023 is justified.

Analysis and Findings 27. The Tribunal proceeds to analyse the issues identified for determination as hereinunder:(a)Whether the Appeal is incompetent for non-compliance with Section 13(b) of the TATA.

28. The Tribunal notes the following provisions of Section 13 (1) (b) of the TATA:“A notice of appeal to the Tribunal shall—(b)be submitted to the Tribunal within thirty days upon receipt of the decision of the Commissioner.’’

29. The Respondent issued an objection decision dated 8th August 2023. The Appellant lodged its Notice of Appeal on 6th December 2023. Pursuant to section 13 (1) (b) of TATA, it is evident that the Appellant delayed the filing of its Appeal within the statutorily required period of 30 days. The next issue that the Tribunal will determine in this context is whether the Appellant sought leave to file its Appeal out of time.

30. The Tribunal notes the following provisions of Section 13(3) of TATA:‘‘The Tribunal may, upon application in writing, extend the time for filing the notice of appeal and for submitting the documents referred to in subsection (2).’’

31. Having perused the Appellant’s bundle of documents, the Tribunal observes that there is no application by the Appellant seeking leave to file its Appeal out of time. The Tribunal stands guided by the following holding by the Supreme Court in the case Nicholas Kiptoo Arap Korir Salat v TheIndependent Electoral and Boundaries Commission and 8 Others Application No. 16 of 2014:‘‘No appeal can be filed out of time without leave of the Court. Such a filling renders the ‘document’ so filed a nullity and of no legal consequence. Consequently, this Court will not accept a document filed out of time without leave of the Court.’’

32. The Tribunal notes that having found itself in the circumstances that it did, the Appellant, failed to seek the remedy of applying for leave from the Tribunal to file its Appeal out of time. Consequently, the Appeal is incompetent for non-compliance with section 13 (1) (b) of TATA and is available for striking out.

33. Having so made the determination that the Appeal herein is incompetent, the Tribunal will not delve into the second issue that fell for its determination as the same is rendered moot.

Final Decision 34. The upshot to the foregoing is that the Appeal fails and accordingly, the Tribunal makes the following Orders:a.The Appeal be and is hereby struck out.b.Each party to bear its own cost.

35. It is so Ordered.

DATED AND DELIVERED AT NAIROBI ON THIS 8TH DAY OF NOVEMBER, 2024. …………………………………CHRISTINE A. MUGACHAIRPERSON…………………………………………………….BONIFACE K. TERERMEMBER……………………………………….ELISHAH N. NJERUMEMBER……………………………………….EUNICE N. NG’ANG’AMEMBER……………………………………….OLOLCHIKE S. SPENCERMEMBER