[2024] KETAT 1570 (KLR)

Sugarland Estates Limited v Kenya Revenue Authority (Tax Appeal E960 of 2023) [2024] KETAT 1570 (KLR) (22 November 2024) (Judgment)

Neutral citation: [2024] KETAT 1570 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal E960 of 2023

Grace Mukuha, Chair, GA Kashindi, E Komolo & AM Diriye, Members

November 22, 2024

Between

Sugarland Estates Limited

Appellant

and

Kenya Revenue Authority

Respondent

Judgment

Background 1. The Appellant is a registered limited Liability Company, registered under the Companies Act (Cap 486) of the Laws of Kenya, with its main activity being investments in real estate and based in Eldoret.

2. The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act, CAP 469 of Kenya’s Laws. 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 vide assessment order dated 25th January 2023 raised VAT additional assessments for the periods January 2017, November 2020, December 2018, 2019 and 2020 together with Income Tax - PAYE additional assessments for the period December 2018, 2019 and 2020 based on variances between the VAT declaration and income from the Appellant's bankings.

4. The Appellant being aggrieved by the assessment, filed Notice of Objection dated 24th February 2023, which was later followed by a letter dated 9th March 2023, wherein the Appellant raised further objections. Upon considering the objection, the Respondent issued an Objection Decision dated 19th April 2023 confirming assessments of the Appellant for Kshs 13,709,283 on account of VAT and Kshs 6,153,048 of account of PAYE.

5. The Appellant being dissatisfied with the Objection Decision lodged the Appeal herein vide a Notice of intention to appeal dated 26th July 2023.

The Appeal 6. The Appellant did not file any Memorandum of Appeal.

The Appellant’s Case 7. The Appellant relied on its Statement of Facts dated 26th September 2023 and filed 20th December 2023.

8. The Appellant stated that is that it received correspondence dated 4th March 2022, being Notice of Intention by the Respondent to audit the taxpayer’s operation under Section 58 and 59 of the Tax Procedures Act, 2015. It alleged that responses were done accordingly via correspondence dated 28th March 2022, 5th May 2022 and 6th May 2022 providing the requested supporting documents and explanations to the Commissioner.

9. The Appellant cited section 51 (9) and (10) of the Tax Procedures Act 2015 (TPA), to state that the commissioner raised additional assessments contrary to the said provisions. Section 51 (9) and (10) of the TPA provides as follows: -‘The Commissioner shall notify in writing the taxpayer of the objection decision and shall take all necessary steps to give effect to the decision, including, in the case of an objection to an assessment, making an amended assessment.An objection decision shall include a statement of findings on the material facts and the reasons for the decision.’

10. It is the Appellant’s case that the assessments were raised on 25th January 2023, while the objections to the assessments were done on 24th February 2023 and the objections confirmed on 15th June 2023.

11. The Appellant also cited the provisions of Section 51(11) of the TPA to submit that the Respondent failed to issued objection decision within required timelines.

Appellant’s Prayers 12. In light of the preceding, the Appellant urged this Honourable Tribunal to uphold the Appeal.

The Respondent’s Case 13. In response to the appeal, the Respondent lodged a Statement of Facts dated 26th March 2024 and filed on 27th March 2024. The Respondent also relied on its Written Submissions dated 11th August 2024.

14. The Respondent brought to the attention of this Tribunal that this Appeal is improperly filed and expressed intention to file a notice of preliminary objection challenging the appeal on grounds that the same is improper.

15. The Respondent stated that the procedure of filing of an Appeal is provided for in Section 13 of the Tax Appeals Tribunal (TAT) Act. Particularly, Section 13 (2) provides that an Appellant shall within 14 days from the date of filing the Notice of Appeal, submit enough copies of a Memorandum of Appeal; Statement of Facts; and the Tax Decision.

16. The Respondent stated that integral documents that constitute the appeal are: the Memorandum of Appeal, the Statement of Facts, and the Tax Decision.

17. The Respondent further stated that the documents are integral to an appeal that they have been ingrained in law. It added that the Appellant's instant appeal constitutes the following documents: - its Statement of Facts, Notice of Intention to Appeal, Confirmation of Assessment, Objection Applications, Assessment Orders, Tax Agent's Correspondences, Commissioner's Correspondence. The Memorandum of Appeal does not form part of its appeal.

18. The Respondent asserted that there is therefore no proper appeal before this Honourable Tribunal as the Appellant has failed to file a Memorandum of Appeal as is required by Section 13 of the Tax Appeals Tribunal Act. It added that it is only when a Memorandum of Appeal is filed that there is a proper appeal before this Honourable Tribunal. Further it averred that it is only the Memorandum of Appeal that can tell this Tribunal and the Respondent what the Appellant is appealing against and that in its absence the appeal is void ab initio.

19. In response to the Appellant’s Statement of Facts that the Respondent failed to adhere to the timelines set out by the law, the Respondent stated that it issued the Appellant with an assessment order on the 25th of January 2023 on iTax and that the Appellant lodged its objection on iTax on the 24th of February 2023. It added that on the 9th March 2023, the Appellant in response to a letter dated the 8th March 2023 cited its grounds of appeal and that on the 19th of April 2023, the Respondent issued its Objection Decision. The Respondent, asserted that time from the objection by the Appellant to the decision by the Respondent was 54 days, therefore, the Objection Decision was within timelines and in line with Section 51 (11) of the TPA.

20. Further to the foregoing, the Respondent asserted that the document issued on the 15th of June 2023 is a confirmation of assessment and not the Objection Decision as alleged by the Appellant. The Respondent argued that these are two distinct documents. It maintained that a confirmation of assessment was issued after the Objection Decision was shared by the Respondent.

21. It is the Respondent's case that the Appellant failed to provide the relevant supporting documents to support any of its allegations/explanations challenging the assessments, which the Respondent argued that was contrary to Section 23 of the TPA, which requires a taxpayer to keep records to facilitate determination of tax matters.

22. The Respondent averred that the Appellant was under an obligation to ensure that all its records were properly maintained so as to be easily availed to the Respondent. It accused the Appellant of misleading the Respondent that its documents were with its assessing team which was not true.

23. It is the Respondent's claim that the Appellant bears the burden of proof to rebut the assessments raised by the Respondent as provided for under Section 56(1) of TPA. The Respondent cited the cases of Commissioner of Domestic Taxes -vs- Metoxide Ltd (2021); and Kenya Revenue Authority -vs- Maluki Kitili Mwendwa [2021] eKLR, where it was held that the taxpayer has a duty prove that the Respondent’s decision is incorrect. Therefore, the Respondent argued that the Appellant failed to discharge the burden of proof.

24. Based on the foregoing, the Respondent maintained that the Appellant failed to discharge its burden of proof and therefore it issued an objection decision confirming the additional assessments.

25. The Respondent also relied on its written submission to oppose the appeal wherein the Respondent submitted that the appeal is incompetent since the Appellant did not file memorandum of appeal and that the appeal was filed out of time without leave.

26. It cited the case of Martha Wambui v Irene Wanjiru Mwangi & Another Civil Appeal No. 286 of 2014 and Jebobela Trading Limited v Commissioner of Domestic Taxes TAT No. 1340 of 2022 where the courts held that a litigant has to obtain leave to file an appeal out of time.

Respondent’s Prayers 27. The Respondent prayed that this Honourable Tribunal be pleased to dismiss the appeal with costs to the Respondent as the same lacks merit.

Issues For Determination 28. Having considered the parties’ Statements of Facts, and submissions, the Tribunal is of the view that the following are the issues for determination:a.Whether the Appeal is Valid; andb.Whether the Respondent’s Objection Decision is Proper in Law.

Analysis And Findings a. Whether the Appeal is Valid 29. The Respondent raised a preliminary objection on the ground that the Appellant has not filed a Memorandum of Appeal and therefore the Appeal is incompetent.

30. Section 13 of the Tax Appeals Tribunal (TAT) Act provides for the procedure to be followed when filing an appeal. In particular, Section 13(2) of TAT Act provides as follows:‘‘(2)The appellant shall, within fourteen days from the date of filing the notice of appeal, submit enough copies, as may be advised by the Tribunal, of—(a)A memorandum of appeal;(b)Statements of facts;(c)The appealable decision; and(d)Such other documents as may be necessary to enable the Tribunal to make a decision on the appeal.’’ (emphasis added)

31. Further, Rule 3(2) of the Tax Appeals Tribunals (Procedure) Rules, 2015 provides as follows:‘‘(2)The appellant shall, within fourteen days from the date of filing the notice of appeal, submit enough copies, as may be advised by the clerk, of—(a)A memorandum of appeal;(b)Statement of facts; and(c)The tax decision.’’

32. In addition, Rule 4 of the Tax Appeals Tribunals (Procedure) Rules, 2015 provides as follows: -‘‘Memorandum of appeal(1)A memorandum of appeal referred in rule 3(2) shall—(a)Be signed by the appellant;(b)Set out concisely under distinct heads, numbered consecutively, the grounds of appeal without argument or narrative:(c)Contain an index of all documents in the appeal with number of pages at which they appear; and(d)Be accompanied by a copy of the—(i)Tax decision; and(ii)Notice of appeal.’’

33. It is clear that the Appellant failed to adhere to the express provisions of the law. The Court of Appeal in Speaker of National Assembly -vs- Njenga Karume [2008] 1 KLR 425 held that, “where there is clear procedure for the redress of any particular grievance prescribed by the Constitution or an Act of Parliament, that procedure should be strictly followed.”

34. In absence of the Memorandum of Appeal, the Tribunal has nothing to deliberate upon. Further, in absence of the Memorandum Appeal the Respondent cannot tell why it has been dragged to the court and cannot prepare an informed response, which adversely affects the right to fair hearing.

35. The Memorandum of Appeal is the foundation of an Appeal. Failure to file Memorandum of Appeal is not a procedural technicality. It is a grave mistake that even Article 159(2) (d) of the Constitution cannot be invoked. Article 159(2) (d) of the Constitution is not a panacea for the applicant’s procedural missteps and pitfalls. In the Law Society of Kenya -vs- The Centre for Human Rights and Democracy and 12 Others SCK Petition No. 14 of 2013, the Supreme Court reiterated that, “[T]his Court has had occasion to remind litigants that Article 159(2) (d) of the Constitution is not a panacea for all procedural shortfalls. All that the Courts are obliged to do is to be guided by the principle that “justice shall be administered without undue regard to technicalities.”

36. Having established that the Appellant failed to file its memorandum of Appeal, the Respondent’s preliminary objection is sustained.

37. To add on the foregoing, the Tribunal also notes that the Appellant purported to file this appeal out of time without leave even though the TAT Act has elaborate provisions on what to do in case of delay to file appeal within the required timelines. The Appellant failed to explore this opportunity and proceeded to file the appeal not only without leave, but also without Memorandum of Appeal.

38. In W.E.C. Lines Ltd v 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.”

39. We believe we have said enough to demonstrate that the instant Appeal is incompetent and is fit for striking out.

b. Whether the Respondent’s Objection Decision is Proper in Law. 40. Having found the instant Appeal incompetent, the Tribunal will not delve into the second issue for determination as the same has been rendered moot.

Determination 41. The upshot to the foregoing is that the Tribunal finds and holds that the Appeal is incompetent and makes the following orders: -a.The appeal be and is hereby struck out; andb.Each party to bear its own cost.

42. It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 22ND DAY OF NOVEMBER 2024. GRACE MUKUHA - CHAIRPERSONGEORGE KASHINDI - MEMBERR. ERICK KOMOLO - MEMBERABDULLAHI DIRIYE - MEMBER