[2023] KETAT 242 (KLR)

Suluhisho Africa Limited v Commissioner of Domestic Taxes (Miscellaneous Application E007 of 2023) [2023] KETAT 242 (KLR) (31 March 2023) (Ruling)

Neutral citation: [2023] KETAT 242 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Miscellaneous Application E007 of 2023

E.N Wafula, Chair, Cynthia B. Mayaka, RO Oluoch, EN Njeru & AK Kiprotich, Members

March 31, 2023

Between

Suluhisho Africa Limited

Applicant

and

Commissioner of Domestic Taxes

Respondent

Ruling

1. The Application which was by way of a Notice of Motion dated 3rd February 2023 and filed under a certificate of urgency on the 9th February, 2023 which is supported by an Affidavit sworn by the Applicant’s director, Peninah Wanjuhi Makhalipa sought for Orders:-a.Spentb.The Appellant be granted an extension of time with regard to filing the Notice of Appeal and Memorandum of Appeal and Statement of Facts to this Honourable Tribunal out of time.c.The Honourable Tribunal do issue an order lifting, staying, vacating, and or setting aside the Respondent’s Agency Notices dated 20th July 2022 issued to Cooperative Bank, Absa Bank, Judicial Department, Family Bank Limited, Kenya Commercial Bank, and Equity Bank Limited and any other of the Appellant’s bankers requiring them to pay Kshs. 1,355,761. 00 pending the hearing and determination of this Application and the intended appeal herein.d.The Notice of Appeal dated 23rd January 2023 and filed on 24th January 2023 be deemed as duly filed and served.e.The costs of this application be provided for.

2. The application is premised on the following grounds:-a.That on 20th July 2022, the Respondent issued Agency Notices to the Applicant’s bankers Cooperative Bank, Absa Bank, Judicial department, Family Bank Limited, Kenya Commercial Bank, and Equity Bank Limited under Section 42 of the Tax Procedures Act, 2015 in the enforcement of alleged taxes due amounting to Kshs 1,067,841. 00 without notice to the Applicant. That as a result, the Applicant is unable to access its funds to its detriment.b.That being dissatisfied with the Respondent’s assessments, the Applicant filed its Objections and late notice of Objections on 25th February 2022 and the Respondent acknowledged the objections on 17th May 2022. c.That upon subsequent engagements, the Respondent finally issued its Objection decision dated 12th April 2022. d.That the Applicant had objected to the whole of the tax demand of Kshs. 1,067,841. 00 and had thus not admitted to the taxes being demanded by the Respondent.e.That the Applicant has delayed in the compilation of the relevant supporting documents due to sickness, recurrent admissions, and had limited access to her mail.f.That the prescribed statutory time to lodge the Appeal with the Tribunal has since lapsed.g.That the Applicant did not lodge the appeal in good time and only became aware of the agency notices issued to its banks.h.That the Applicant has urgently approached this Honourable Tribunal to preserve its right to appeal against the Objection decision. That should this application not be certified urgent and heard on priority basis the Applicant stands to lose its right to justice and to be heard on its appeal due to the circumstances that are not of its doing.i.That if this application is not allowed, the Applicant will suffer irreparable loss and damage if the orders sought herein are not issued because the taxes being demanded are erroneous as the sales in returns disallowed have been adequately supported in form of documentary evidence and the intended appeal is merited and stands high chances of success.j.That the delay in approaching this Honourable Tribunal for redress has not been inordinate as the Applicant has been ailing and was unable to beat timelines and became aware when the Agency Notices were issued by the Respondent against the Applicant’s bank accounts.k.That the Applicant is desirous of pursuing its appeal with the Tribunal by availing all the documents requested for further review by this Honourable Tribunal or theADR Department as may be directed.l.That the tax assessments by the Respondent are not only excessive and unreasonable but also fail to reflect the trading position of the Applicant.m.That the application would not prejudice the Respondent in any way but will provide an opportunity to this Honourable Tribunal to decide the issues in dispute on merit and ensure dispensation of justice.n.That the Respondent will not suffer any prejudice if the orders sought are granted.o.That the applicant stands to suffer irreparable loss and damage if the orders sought in this application are not granted as the Respondent may proceed to enforce the Agency Notices.

3. The Applicant in its Written Submissions dated 28th March 2023 and filed on 2nd March, 2023 reiterated the chronology of events and stated as hereunder.

4. It submitted that there has been no unreasonable delay in bringing this application as the Applicant’s Director has been sick with recurrent admissions and surgical procedures that left her on bed rest with limited access to the Respondent’s correspondences.

5. It quoted Section 51(6) of the Tax Procedures Act to submit that it filed the late notice of objection in accordance with the law but due to its director’s ill health, she was unable to routinely check correspondences from the Respondent and would only learn of these developments when an agency notice was issued to all its bankers and customers.

6. It argued that VATfor December 2020, May 2021, and June 2021 were declared and duly paid and that it would be unfair to deny it the right to appeal the Respondent’s decision.

Response to the Application 7. The Respondent filed a Replying Affidavit sworn and filed on 16th February 2023 by Amos Oeta, an officer of the Respondent, in response to the current application citing the following as the grounds for opposition:-a.That on 28th September 2021 and 19th January 2021, the Respondent issued upon the Applicant assessment orders with respect to Value Added Tax for the periods of May 2021, June 2021, and December 2020. b.That the Applicant on 25th February 2022 lodged late objections to the Value Added Tax Assessment orders.c.That the Respondent vide an email dated 4th March 2022 requested the Applicant to provide documentation in support of its late objection within 5 days.d.That the Applicant failed to provide documentation supporting the late invalid objection contrary to Section 51 of the Tax Procedures Act, 2015. e.That the Applicant having failed to provide documentation in support of the late objection the Respondent invalidated the objection vide a letter dated 12th April 2022. f.That the Applicant is yet to provide documents to the Respondent for consideration.g.That the Applicant herein has failed in lodging its appeal within the stipulated timelines as the invalidation was issued more than ten months ago.h.That the Respondent will suffer great prejudice if the application is granted as this will delay the collection of taxes which is the main mandate of the Respondent, hence delayed service to all Kenyan Citizens.i.That the Applicant has therefore not demonstrated in any way that it has arguable appeal with any chances of success.j.That the Applicant has not met the established threshold for the Tribunal to exercise its discretion in granting leave to file an appeal out of time.k.That the Applicant has shown that it is indolent or is not interested in appealing the Respondent’s decision.l.That the application is incompetent, frivolous, without merit, and an abuse of the powers of this Honourable Tribunal.

8. In its written submissions dated and filed on 1st March 2023, the Respondent presented as hereunder.

9. The Respondent reiterated verbatim the chronology of events as narrated in its Replying Affidavit filed before the Tribunal to underpin its opposition to the application.

10. The Respondent submitted that the Applicant has not complied with the law on the procedure for appeals and the Applicant had 30 days to file a Notice of Appeal from the date of the Commissioner’s decision. It quoted Section 13(3) and (4) of the Tax Appeals Tribunal Act and relied on the following cases:-a.Naomi Wangechi Gitonga & 3 others v Independent Electoral and Boundaries Commission and 7 others [2018] eKLR where the Supreme Court in reference to Nicholas Kiptoo Arap Korir Salat v Independent Electoral & Boundaries Commission and 7 others, Sup. Ct. Application No. 16 of 2014 held:-“A Notice of Appeal is a primary document to be filed outright whether or not the subject matter under appeal is that which requires leave or not. It is a jurisdictional pre-requisite.”b.Barclays Bank of Kenya Limited v. Commissioner General and Another (1998) eKLR, where it was held:- "No appeal shall be filed unless a memorandum of appeal is presented to the Registrar during office hours, and a copy served upon the respondent, within 30 days after the date of service upon the respondent of a notice of appeal under section 86 (2); but where the Court is satisfied that, owing to absence from Kenya, sickness, or other reasonable cause, the appellant was prevented from presenting the memorandum of appeal within that period and that there has been no unreasonable delay on his part, the Court may extend that period."c.Northern Province Labour Utilisation Board v The Commissioner of Income Tax[1960] EA 1015:- “In an application under rule 3 other matters not amounting to something which physically impedes an intending Appellant from preferring the appeal should not be taken into account.”d.Obama Enterprises Limited v Commissioner of Domestic Taxes TAT No. 667 of 2021:- “The Respondent is only enjoined in law to consider and issue an Objection Decision in respect of a valid objection lodged in time… the upshot to the foregoing is that the Appellant’s notice of Objection having been lodged late and not having been supported by the necessary, the same is deemed to be invalid as envisaged under Section 51(3) of the Tax Procedures Act… the Tribunal having determined that the Notice of Objection lodged by the Appellant was properly invalidated by the Commissioner for want of supporting documentation and being lodged late, it is absolutely unnecessary to delve into other issues falling for determination as they have been rendered moot [emphasis supplied]”

11. The Respondent quoted Section 13(3) and (4) of the Tax Appeals Tribunal Act and Rule 10 of theTax Appeals Tribunal (Procedure) on the reasonable circumstaces to warrant an order for enlargement of time and relied on the case of Commissioner of Domestic Taxes v Mayfair Insurance Company Limited (2017) eKLR where the court opined:“One of the reasons stated under the Rule is that the court may extend time where there is reasonable cause for the delay. Effectively, the court’s powers and discretion to extend time is unlimited. It is however not to be capriciously exercised. Time, in other words, is not to be extended as a matter of right. Each case is to be viewed sui generis and on its own circumstances and facts. The starting point is that the Applicant ought to advance sufficient and reasonable grounds for any delay on its part.”

12. It argued that the reason given by the Applicant of being out of the Country on business with limited access to its email is not supported by any documentation and that the application was only jolted by the Agency Notices raised for taxes due and payable.

13. It added that the application is a delay mechanism as the Applicant has no plans of settling its taxes. It maintained that the Applicant has not set forth any information on how it was unable to file its documents out of time in its supporting affidavit rendering the Affidavit fatal under Rule 10 and thus ripe for striking out.

14. The Respondent submitted that no substantial loss will be occasioned to the Applicant in the event the orders sought are not granted because the said issue is monetary and it has not been proved that in the event of recovery of taxes, the Respondent will be unable to refund the same. It cited the case of James Wangalwa & Another v Agnes Naliaka Cheseto Misc. Appl No. 42 of 2011 [2002] eKLRwhere Gikonyo J held:-“No doubt, in law, the fact that the process of execution has been put in motion, or is likely to be put in motion, by itself, does not amount to substantial loss. Even when execution has been levied and completed, that is to say, the attached properties have been sold, as is the case here, does not in itself amount to substantial loss. ”

15. It asserted that the Applicant must establish other factors which show that the recovery of taxes will create a state of affairs that will irreparably negate the essential core of the Applicant as the successful party in the appeal.

16. It prayed for a bank guarantee to be deposited as security should the Tribunal be inclined to allow the Application in order for the Respondent to be able to enjoy the full fruits of the judgment.

Analysis and Findings 17. The Tribunal is enjoined to determine the length and reason for the delay when considering an application for the extension of time to file an appeal out of time. The power to extend time is discretionary and unfettered but the same must be exercised judiciously and it is not a right to be granted to the Applicant.

18. In determining whether to extend time, the Tribunal was guided by the court in Charles Karanja Kiiru v Charles Githinji Muigwa[2017] eKLR, where the learned Judge stated that:“It is trite that extension of time is not a right of a party. It is an equitable remedy that is only available to a deserving party, at the discretion of the Court”

19. On the criteria of the issues to be considered when granting an extension to file an appeal out of time, the Tribunal referred to the case of Odek, JJ. A in Edith Gichugu Koine vs. Stephen Njagi Thoithi [2014] eKLR, where the Court laid out the factors thus:“Nevertheless, it ought to be guided by consideration of factors stated in many previous decisions of this Court including, but not limited to, the period of delay, the reasons for the delay, the degree of prejudice to the respondent if the application is granted, and whether the matter raises issues of public importance, amongst others...”

20. Further, in Sammy Mwangi Kiriethe & 2 others v Kenya Commercial Bank Ltd [2020] eKLR, the court held:“The Court considers the length of the delay; the reason for the delay; the chances of success of the intended appeal, and the degree of prejudice that would be occasioned to the respondent if the application is granted.”

21. The Tribunal, guided by the principles set out in John Kuria v Kelen Wahito, Nairobi Civil Application Nai 19 of 1983 April 10, 1984, referred to by the judges in the case of Wasike V Swala [1984] KLR 591, Sammy Mwangi Kiriethe & 2 others v Kenya Commercial Bank Ltd (supra) and Section 13 of the Tax Appeals Tribunal Act, 2013 used the following criteria to consider the application.a.Whether there is a reasonable cause for the delay?b.Whether the appeal is merited?c.Whether there will be prejudice suffered by the Respondent if the extension is granted?

Whether there is a reasonable cause for the delay? 22. In considering what constitutes a reasonable reason for the delay, the court inSilas Kanyolu Mwatha v Josephine Kavive James [2021] eKLR, held that:“The time stipulation is a requirement of the law as clearly stated ... In short, parties cannot, either unilaterally or by agreement between them, metaphorically, waive away the rules of the court. The rules of the Court are meant to achieve timely and orderly commencement, progress, and proper determination of litigation of proceedings. Given the statutory limit, principally, the delay is inexcusable unless the applicant shows sufficient cause to justify the delay and that any such extension shall not prejudice the respondent.” (Emphasis added).

23. The Applicant contended that its delay in filing an appeal was occasioned by the sickness of its director which led her to be in and out of the hospital and not being able to access its emails.

24. The Respondent averred that the application was brought 10 months after receiving the invalidation decision and there is no documentation provided by the Applicant to prove that it was out of the Country when the Objection decision was being issued.

25. Gleaning through the documents attached herein, it is noted that the Applicant’s director had experienced issues with her health from the month of June 2022 with the most current document provided by the Applicant from the hospital being dated 2nd February 2023. The Objection Invalidation was issued on 12th April 2022.

26. The Respondent seems to conclude that the Applicant’s reason for delay is absence from the country yet in the iTax objection Application Acknowledgement Receipt as well as in this application, the Applicant indicated that the reason for the late Objection and subject lodgment of the appeal was sickness. The Tribunal found nothing that indicates a reason for being out of the Country from the Applicant.

27. It is therefore apparent to the Tribunal that the Applicant in its assertion of sickness had proffered a reasonable cause for delay.

Whether the Appeal is merited? 28. The Tribunal examined whether the actions complained of by the Applicant were merited and there was an arguable appeal before the Tribunal or the appeal was frivolous to the extent that it would only result in a waste of the Tribunal’s time.

29. An appeal being merited does not mean that it should necessarily succeed rather it is arguable. The Tribunal was guided by the findings of the court in Kiu & another v Khaemba & 3 others (Civil Appeal (Application) E270 of 2021) [2021] KECA318 (KLR) (17 December 2021) (Ruling) where it was held that:“In law, an arguable appeal/intended appeal is one that need not succeed but one that warrants the court’s interrogation on the one hand and the courts invitation to the opposite party to respond thereto..”

30. The crux of the current intended appeal seems to be a decision on the rejection of the late notice of objection and whether the Respondent exercised its discretion appropriately.

31. In the current Application, the Applicant reiterated that it was unable to lodge the Objection within time due to its director’s sickness at the time of lodging the Objection.

32. As such, the Tribunal finds that there is an arguable Appeal and the same has triable issues that can only be gleaned at an evidentiary hearing before it.

Whether there will be prejudice suffered by the Respondent if the extension is granted? 33. The Respondent submitted that no substantial loss will be occasioned to the Applicant in the event the orders sought are not granted because the said issue is monetary and it has not been proved that in the event of recovery of taxes, the Respondent will be unable to refund the same.

34. The Applicant asserted that the Respondent will not suffer any prejudice if the orders sought are granted and it stands to suffer irreparable loss and damage if the orders sought in this application are not granted as the Respondent may proceed to enforce the Agency Notices.

35. The Tribunal finds that the Respondent has not satisfactorily demonstrated how it would suffer prejudice if the prayer for an extension of time was granted.

36. The Tribunal however observes that the Applicant’s recourse to justice lies in an appeal to the Tribunal. Thus, the Applicant would suffer prejudice if it is not granted leave to file its appeal considering that the amount of money claimed is of significant value.

37. It is the view of the Tribunal that the Respondent would otherwise still collect the taxes together with penalties and interest should the Applicant be found to be at fault.

38. The Tribunal, therefore, finds that the Respondent will not suffer prejudice if the extension is granted.

39. The Tribunal in the circumstances finds that the Applicant has satisfied the legal threshold for the grant of orders for enlargement of time to file an appeal out of time in its favour.

40. With the time for the enlargement of time to file an appeal having been enlarged the ensuing appeal ought to be preserved and for the purposes of guaranteeing the efficacy of the proceedings in the appeal, the agency notices issued ought to be lifted.

Disposition 41. The Tribunal in the circumstances is persuaded to exercise its discretion in favour of the Applicant and accordingly makes the following Orders:-a.The Applicant is hereby granted leave to file an appeal out of time.b.The Applicant’s Notice of Appeal dated 23rd January 2023 be and is hereby deemed as duly filed and served.c.The Applicant to file and serve the Memorandum of Appeal, Statement of Facts and tax decision within Fifteen (15) days of the date of delivery of this Ruling.d.The Respondent to file and serve its Statement of Facts within Thirty (30) days of the date of being served with the appeal documents.e.The Agency notices issued on the 20th July, 2022 to the Applicant’s bankers be and are hereby lifted unconditionally.f.No orders as to cost.

DATED AND DELIVERED AT NAIROBI THIS 31ST DAY OF MARCH, 2023. ERIC N. WAFULACHAIRMANCYNTHIA B. MAYAKA RODNEY ODHIAMBOMEMBER MEMBERELISHAH NJERU ABRAHAM K. KIPROTICHMEMBER MEMBER