[2024] KETAT 1357 (KLR)

Thuo v Commissioner of Domestic Taxes (Tax Appeal E071 of 2024) [2024] KETAT 1357 (KLR) (Civ) (20 September 2024) (Ruling)

Neutral citation: [2024] KETAT 1357 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Civil

Tax Appeal E071 of 2024

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

September 20, 2024

Between

John Waithaka Thuo

Appellant

and

Commissioner Of Domestic Taxes

Respondent

Ruling

1. The Appellant moved the Tribunal vide a Notice of Motion Application dated 31st July 2024 and filed under a Certificate of Urgency dated on even date seeking the following Orders:i.Spent.ii.That the Tribunal be pleased to extend the time for filing a Memorandum of Appeal against the Respondent’s objection decision dated 25th February 2021. iii.That the Notice of Appeal filed by the Appellant herein dated 13th October 2023 be deemed to be properly on record.iv.Spent.v.Spentvi.Spentvii.Spentviii.Spentix.That pending hearing and determination of the Application and Appeal, the Tribunal be pleased to restrain the Respondent by itself and/ or its representatives and assignees from issuing any further/other Agency Notices and/or demand in execution and/or recovery of the taxes in dispute.x.That costs be provided for.

2. The Application was supported by a Sworn Affidavit dated 31st July 2024 by John Waithaka Thuo, the Appellant’s Director, on the following grounds:i.That the Appellant operates petrol stations in Kitale and Eldoret as a retailer under the National Oil Corporation of Kenya (NOCK) and equally operates a fleet of 38 public transport buses.ii.That the Appellant was issued with Income Tax and VAT assessments for the 2015, 2016, 2017 and 2018 years of income whereupon the Appellant lodged its objection on 12th October 2020 stating their grounds while simultaneously seeking extension of time to file the objection. The Respondent rendered its objection decision on 25th February 2021 rejecting the Appellant’s objection in its entirety.iii.That upon receiving the objection decision, the Appellant continued to engage the Respondent through submission of additional documents and even though the Appellant communicated its intention to appeal the Respondent’s decision through their previous tax consultant, the consultant failed to file the Memorandum of Appeal without informing the Appellant.iv.That as a result, the Respondent demanded Ksh 30,805,319. 01 on 25th April 2023 and proceeded to issue an Agency Notice dated 14th April 2024 to Crystal Cottage Hospital and Medical Clinic for Ksh 24,199,286. 00 in clear violation of Section 51(4) and 51(7) of the Tax Procedures Act, CAP 469B of the Laws of Kenya (hereinafter “TPA”) which was ultra vires and violated the principles of natural justice as the objection decision was issued four months after Appellant’s objection.v.That the Appellant stood to suffer irreparable damage and its Appeal would be rendered nugatory if orders sought were not granted yet the same would not prejudice the Respondent if granted.

Response To The Application 3. The Respondent upon being served with the Application filed an opposing Replying Affidavit sworn by Nick Otieno Osoro, an officer of the Respondent dated 9th August 2024 and filed on even date citing the following as the grounds:i.That the Application was incompetent and ought to be truck out as the objection decision was issued on 25th February 2021 yet the Application herein was filed three years late on 2nd August 2024 a delay that was inordinate.ii.That the Appellant did not give reasonable cause which would warrant the Tribunal to exercise its discretion since the delay in filing their Appeal failed to meet the threshold as required by Section 13(4) of the Tax Appeals Tribunal Act, CAP 469A of the Laws of Kenya (hereinafter “TATA”) and 10(3) of the Tax Appeals Tribunal (Procedure) Rules, 2015.

Analysis And Findings 4. On 8th August, 2024, the Tribunal directed the matter to be canvassed by way of written submissions and that parties were to file and serve the same on each other on or before 15th August, 2024. The Tribunal notes that neither party filed written submissions.

5. The Tribunal notes that the Appellant’s Application was seeking the intervention of the Tribunal to expand time to file an Appeal out of time and that pending the hearing and determination of the Appeal, the Respondent be restrained from enforcement measures to collect additional taxes assessed as well as enforcement of the Auctioneer’s proclamation.

6. The Tribunal notes that while establishing whether to allow an application for extension of time to appeal out of time, the length and reason for the delay should be considered. Additionally, the power to extend time by the Tribunal is discretionary and unfettered and must be exercised judiciously. It is not a right to be granted to the Appellant. The Tribunal notes that Section 13(4) of the TATA provides as follows in regard to grounds under which an Appellant can be granted leave to file an appeal out of time:“An extension under subsection (3) may be granted owing to absence from Kenya, or sickness, or other reasonable cause that may have prevented the Appellant from filing the notice of appeal or submitting the documents within the specified period.”

7. The Tribunal notes that the Appellant was seeking to be allowed time to file their Appeal out of time against Respondent’s additional assessments in relation to Income Tax Company and VAT for the 2015, 2016, 2017 and 2018 years of income. The Appellant stated that it had objected to the assessment on 12th October 2020 but the Respondent’s objection decision that followed was rendered on 26th February 2021 rejecting the Appellant’s grounds of objection in toto. Similarly, the Tribunal observes that the demand notices were issued on 25th April 2023 and 16th May 2024 respectively followed by the proclamation notice issued by Regent Auctioneers dated 16th May 2024. The instant Application was filed with the Tribunal on 2nd August 2024.

8. In this instance, the Tribunal is guided by the decision of the Court in Charles Karanja Kiiru v Charles Githinji Muigwa [2017] eKLR, where the learned Judge stated as follows:“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”

9. The Tribunal finds it noteworthy and takes cognisance of the Appellant’s own admission that having received the objection decision the Appellant continued to engage the Respondent through submission of additional documents. The Tribunal notes that this task of adducing evidence in support of assessments of the Respondent ought to happen at the objection stage and not at the Appeal stage. Additionally, the Tribunal observes that the Respondent having rendered its objection decision, the Appellant had 30 days within which to lodge an Appeal against the Respondent’s decision as guided by Section 51(12) of the TPA which provides as follows:“a person who is dissatisfied with the decision of the Commissioner under subsection (11) may appeal to the Tribunal within thirty days after being notified of the decision.”

10. The Tribunal notes that both Section 30 of the TATA and Section 56 of the TPA require that in any proceedings, the Appellant must prove the burden in tax matters the same must be shown to the Tribunal. The Tribunal notes that the Appellant in the instant Application was only making averments that were not substantiated as there was no evidence attached to disapprove the Respondent’s assessments. The Tribunal associates with the following holding of the Court in the case of Alfred Kioko Muteti v Timothy Miheso & Another [2015] eKLR“a party can only discharge its burden of proof upon adducing evidence. Merely making pleadings is not enough.”

11. The Tribunal is not convinced that the delay herein was not avoidable or not within the control of the Appellant but appears to be a knee-jerk reaction to the Respondent’s enforcement attempts. The Tribunal is convinced that the Application herein failed the criteria as laid out by the Court in Edith Gichugu Koine v Stephen Njagi Thoithi [2014] eKLR where Odek, JJ. A held as follows:“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...”

12. The Tribunal is moreover, guided by the following holding of the Court in Sammy Mwangi Kiriethe & 2 others v Kenya Commercial Bank Ltd [2020] eKLR:“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.”

13. The Tribunal was not accorded cogent reasons why the Appellant failed to lodge its objection as couched under Section 51(2) of the TPA which provides as follows:“(2)A taxpayer who disputes a tax decision may lodge a notice of objection to the decision, in writing, with the Commissioner within thirty days of being notified of the decision.”

14. In the circumstances, the Tribunal finds that the Application was not properly lodged before it.

Disposition 15. The upshot of the foregoing is that the Tribunal finds that the Application is not merited and accordingly proceeds to make the following Orders:i.The Application be and is hereby dismissed.ii.No orders as to costs.

16. It is so Ordered.

DATED AND DELIVERED AT NAIROBI ON THIS 20TH DAY OF SEPTEMBER, 2024. CHRISTINE A. MUGACHAIRPERSON.........................................BONIFACE K. TERER ELISHAH N. NJERUMEMBER MEMBER.........................................EUNICE N. NG’ANGA OLOLCHIKE S. SPENCERMEMBER MEMBER