[2023] KETAT 629 (KLR)

Toplink Solutions Ltd v Commissioner of Legal Services and Board Coordination (Miscellaneous Application E099 of 2023) [2023] KETAT 629 (KLR) (3 November 2023) (Ruling)

Neutral citation: [2023] KETAT 629 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Miscellaneous Application E099 of 2023

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

November 3, 2023

Between

Toplink Solutions Ltd

Applicant

and

Commissioner of Legal Services and Board Coordination

Respondent

Ruling

1. The Applicant vide a Notice of Motion application dated 31st July, 2023 and filed under a certificate of urgency on 4th August, 2023 seeks for the following Orders:a.Spentb.That the Honourable Tribunal be pleased to extend the time allowed for the Applicant to file its Memorandum of Appeal, Statement of Facts and all other accompanying documents;c.That costs of the application be provided for.

2. The application which is supported by an Affidavit sworn by Allan Anjeo Ngayo, a director for the Applicant on the 28th July, 2023 is based on the following grounds:a.That the Respondent issued the Applicant with a Value Added Tax additional assessment for the period 1st December, 2017 to 31st December, 2017 dated 15th November, 2019;b.That the Applicant lodged an objection to the assessment on 14th December, 2019;c.That the Respondent rejected the Applicant’s objection Sixteen (16) months later on 29th April, 2021 on the ground that the Objection was not validly lodged;d.That the Applicant was of the view that the Objection to the assessment lodged on the 14th December, 2019 had been allowed after the lapse of Sixty (60) days from the date of lodging as provided by section 51(11) of the Tax Procedures Act (TPA).e.That the thirty (30) days’ statutory timelines lapsed before the Applicant could file its Notice of Appeal to this Honourable Tribunal;f.That the thirty (30) days’ statutory timelines lapsed since the Applicant’s director had been indisposed;g.That during the thirty (30) days’ statutory timelines, the Applicant’s director could not access its emails;h.That the Applicant had limited access to its emails until the Appeal period lapsed;i.That as a result the Applicant was unable to lodge its Appeal to the Commissioner’s Assessment and subsequent Notice of Appeal to this Honourable Tribunal within the statutory timelines;j.That the Applicant has an arguable Appeal with high probability of success;k.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 an erroneous assessment;l.That the Applicant’s reason for delay in filing the Appeal is not as a result of the indolence on its part;m.That the Applicant prays for leave to file the Appeal out of time;n.That the Applicant has a right to be heard and the dispute determined on merit;o.That the Applicant’s director intends to engage the Respondent under the Alternative Dispute Resolution framework with a view of resolving the existing tax disputes;p.That the Honourable Tribunal has powers to extend the time of filing the pleadings as provided by section 13 (3) and (4) of the Tax Appeals Tribunal Act, 2013 and Rule 10 of the Tax Appeals tribunal Rules 2015

3. In its written submissions dated 5th September, 2023 and filed on 6th September, 2023, the Applicant stated as hereunder.a.The Applicant relied on Section 13 (3) of the Tax Appeals Tribunal Act which provides that:-“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).”b.The Applicant while stating that a number of factors have been considered by courts, relied on the decision in Leo Sila Mutiso v Rose Hellen Wangari Mwangi, Civil Application Nai. 251 of 1997 where the Judge held that;-“It is now settled that the decision whether to extend the time for appealing is essentially discretionary. It is also well stated that in general the matters which this court takes into account in deciding whether to grant an extension of time are, first the length of the delay, secondly the reasons for the delay, thirdly (possibly) the chances of the appeal succeeding if the application is granted and fourthly the degree of prejudice to the respondent if the application is granted.”c.The Applicant reiterated the grounds raised by its director that he was unwell and unable to attend to his emails.d.The Applicant submitted that the Respondent in its response has not indicated any prejudice that it is likely going to suffer if the orders sought are granted.e.The Applicant relied on the decision in Wasike v Swala (1984) KLR 591 which provided the hierarchy of the factors to consider when it stated that:-“an applicant must now show, in descending scale of importance, the following factors:-a.That there is a merit in his appeal.b.That the extension of time of time to institute and/or file the appeal will not cause undue prejudice to the respondent; andc.That the delay has no been inordinate.”f.The Applicant submitted that the appeal is merited and the dispute is only on the additional VAT as assessed by the Respondent.g.The Applicant submitted that it raised an objection on 15th November, 2019 which objection was rejected on 29th April, 2021 being Sixteen (16) months after lodging of the objection and relied on Section 51 (11) of the Tax Procedures Act which provides as hereunder;“Where the Commissioner has not made an objection decision within sixty days from the date the tax payer lodged a notice of the objection, the objection shall be allowed.”h.Further, the Applicant submitted that the test on merit is not whether the case is likely to succeed but rather arguable and relied on the finding in Samuel Mwaura Muthumbi v Josephine Wanjiru Ngungi & another (2018) eKLR where the court stated that“Looking at the draft Memorandum of Appeal filed, I am unable to say that the intended Appeal is in arguable. Of course, all the Applicants have to show at this stage is arguability- not high probability of success. At this point the Applicant is not required to persuade the Appellate court that the intended appeal has a high probability of success. All one is required to demonstrate is the arguability of the Appeal, demonstration that the Appellant has plausible grounds of either facts or law to overturn the original verdict. The applicants have easily met that standard. I believe that the Applicant has discharged this burden.”i.The Applicant further relied on the decision in Kenya Commercial Bank Limited v Nicholas Ombija (2009) eKLR where it was held that:-“An arguable appeal is not one which must necessarily succeed, but one which ought to be argued fully before the court.”j.The Applicant submitted that placing reliance on the decisions and pleadings, its objection was not rejected on merit and finally cited the decision in Ojara v Okwera (Miscellaneous Civil Application- 2017/23) (2018) UGHCCD 42 where it was held that:-“An order for enlargement of time to file the appeal should ordinarily be granted unless the applicant is guilty of unexplained and inordinate delay in seeking the indulgence of the Court.”

4. The Respondent opposed the application through a Replying Affidavit sworn by Alfred Maritim, an officer of the Respondent, on the 30th August, 2023 and filed on 31st August, 2023. The Respondent raised the following grounds of opposition:-a.That the Respondent stated that it issued its objection invalidation on 29th April, 2021 to the Applicant;b.That the Applicant’s medical report dated 6th May, 2021 being an afterthought was conducted one (1) month after the Respondent’s objection invalidation and two (2) years after the period in contention;c.That the conduct of the Applicant’s medical report violated provisions of Section 13 (4) of the Tax Appeals Tribunal Act, 2013 for extension of time to file an appeal against the Respondent’s decision;d.That the Applicant failed to provide evidence on its claim of having limited access to its email resulting in a two (2) year delay and lapse of the thirty (30) day statutory timeline for filing an appeal before this Honourable Tribunal;e.That the Applicant does not dispute receipt of the Respondent’s notice of invalidly lodged objection and notice of objection invalidation on the same email;f.That the Applicant has failed to justify the granting of leave to appeal out of time two (2) years after the Respondent’s invalidation within the provisions of Section 13 (4) of the Tax Appels Tribunal Act, 2013;g.That the application discloses no reasonable cause of action;

5. Subsequently, the Respondent filed its written Submissions dated 31st August, 2023 and filed on 6th September, 2023, in which it stated as hereunder.a.That the Respondent on 15th November, 2019 issued additional assessment of VAT;b.That the Applicant consequently objected to the additional assessments on 14th December, 2019;c.That the Applicant was requested to provide documents to support the objection, which request was not honoured;d.That the Respondent vide email raised a notice of invalidly lodged objection to the taxpayer on 26th February, 2021, and there was no response;e.That failure of the Applicant to respond, the Applicant’s objection as invalidated on 29th April, 2021 confirmed the assessment in its entirety; andf.That the Applicant intends to file an appeal against the Respondent’s objection invalidation notice dated 29th April, 2021, upon lapse of the thirty (30) day statutory timeline.g.That the Respondent is opposed to the Applicant’s application on the three grounds:-i.That there is an unexplained and inordinate delay in filing the application herein;ii.The Applicant has not made a case for extension of time for filing of an appeal out of time; andiii.That the Applicant is guilty of non-disclosure and concealment of material facts.h.The Respondent submitted that the Applicant took more than twenty-four (24) months to file the application herein and cited the decision in Commissioner of Domestic Taxes v Mayfair Insurance Company Ltd (2017) eKLR, where the High Court held that a delay of nearly two and half (2 ½) months amounted to inordinate delay.“…There was thus a delay of nearly 2 ½ months. The appeal was only filed on 17 August, 2017. This too is the same date the motion seeking condonation was filed. I deem it that there was inordinate delay in filing the motion for condonation. The Applicant should have moved faster than it did to file the motion earlier and seek extension of time.”“Effectively, the courts 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…The starting point is that the Applicant ought to advance sufficient and reasonable grounds for any delay on its part. If the failure to comply with any time line is self- enforced then the court ought not extend the time… timelines are there for a purpose and there is need for compliance. Where there is non-compliance then there is need to explain away the delay leading to the default.”i.The Respondent further submitted that the Applicant in failing to lodge the appeal within the statutory timeline was neither prevented by sickness nor “other reasonable cause.j.The Respondent stated that no piece of evidence or email inaccessibility was filed to demonstrate that the Applicant’s director had limited access to his email.k.The Respondent urged that the medical report annexed by the Applicant was one (1) month after its objection invalidation.l.The Respondent submitted and relied in the decision in Union Insurance Co. of Kenya Ltd. v Ramzan Abdul Dhanji Civil Application no Nai 179 of 1998 as cited with approval in Nginyanga Kavole v Mailu Gideon (2019) eKLR, where the court held that:-“…The law is that parties must be given a reasonable opportunity of being heard and once that opportunity is given and is not utilized, then the only point on which the party not utilizing the opportunity can be heard is why he did not utilize it.”m.The Respondent stated that the Applicant failed to prove his limited email access and/or establish any other reasonable cause, thus the application should be dismissed and relied on the decision in Wild Lion Investments Limited v Commissioner of Domestic Taxes, Nairobi TAT Misc. App. no 7 of 2022 where the court held:-“18. The Tribunal is unconvinced by the Appellant’s explanations for the delay, which are not supported by any evidence, and thus of the view that there was inordinate and unreasonable delay on the part of the Appellant. 19. The Tribunal having made the above conclusion deems it a moot exercise to discuss the remaining tests.”n.The Respondent as well relied on the decision in Mohammed Shally Sese (Shah Sese) v Fulson Company Ltd & another (2006) eKLR, where the court of Appeal held that:-“It is apparent that the applicant has not been candid with this court. The orders the applicant seeks are discretionary in nature and equitable. Equity calls to those seeking its aid to come before it with clean hands and also do equity.”o.Further, the Respondent relied on the decision in John Njue Nyaga v Nicholas Njiru Nyaga & another (2013) eKLR, the Court of Appeal sitting in Nyeri observed as follows:“It is our considered view that one who comes to equity must come with clean hands and equity frowns upon secrecy and underhand dealings. The applicant has not donme so and is underserving of the orders he seeks.”p.Finally, The Respondent submitted that the Applicant concealed material facts particularly engagement from the Respondent on various dates including 2nd February, 2021 and 3rd March, 2021

Analysis and Findings 6. The Tribunal is enjoined to determine the length and reason for the delay when considering an application for the extension of time to 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.

7. In determining whether to extend time, the Tribunal was guided by the decision in the case of Leo Sila Mutiso v Rose Hellen Wangari Mwangi - Civil Application no Nai. 255 of 1997 (unreported), where the Court expressed itself as thus:-“It is now well settled that the decision whether or not to extend the time for appealing is essentially discretionary. It is also well settled that in general the matters which this court takes into account in deciding whether to grant an extension of time are: first, the length of the delay; secondly, the reason for the delay; thirdly (possibly), the chances of the appeal succeeding if the application is granted; and, fourthly, the degree of prejudice to the respondent if the application is granted.”

8. The Tribunal, is guided by the principles set out in John Kuria v Kelen Wahito, Nairobi Civil Application Nai 19 of 1983 April 10, [1984] where the court 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?

a. Whether there is a reasonable cause for the delay? 9. In considering what constitutes a reasonable cause for the delay, the court in Paul Wanjohi Mathenge v Duncan Gichane Mathenge [2013] eKLR, held that:-“...it is clear that the discretion to extend time is indeed unfettered. It is incumbent upon the applicant to explain the reasons for delay in making the application for extension and whether there are any extenuating circumstances that can enable the Court to exercise its discretion in favour of the applicant.”

10. The Applicant submitted that it did not receive the notice of objection invalidation for the reason that its Managing Director was indisposed for a fairly long period of time and that as a consequence he had very limited access to the Applicant’s emails.

11. The Respondent contended that the Applicant did not adduce any evidence to prove its alleged limited access to its emails and for failure to attend to the notice of objection invalidation in time.

12. The Tribunal has perused the Applicant’s pleadings and documentary evidence and has found that whereas the Applicant raised an objection against the Respondent’s assessment on the 14th December, 2019 the Respondent issued its notice of objection invalidation on 29th April, 2021.

13. The Tribunal finds that the notice of objection invalidation was issued by the Respondent over 16 months after the notice of objection was lodged by the Applicant. The Applicant’s contention that it assumed that its notice of objection was deemed allowed upon the lapse of 60 days subsequent to its lodging of the notice of objection appears to the Tribunal as a reasonable cause for its inactivity to attend to the notice of objection invalidation.

14. It is therefore the Tribunal’s finding that the reason tendered by the Applicant has been satisfactorily established to be a reasonable cause for the delay to the Tribunal.

b. Whether the appeal is merited? 15. 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.

16. 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 George Boniface Mbugua v Mohammed Jawayd Iqbal (Personal representative of the Estate of the late Ghulam Rasool Jammohamed) [2021] eKLR where it was held that:-“It must be remembered that the question whether an appeal is arguable, does not call for the interrogation of the merit of the appeal, and the Court, at this stage must not make any definitive findings of either fact or law. An arguable appeal is not one which must necessarily succeed, but one which ought to be argued fully by the Court.”

17. The Applicant contended that the notice of objection invalidation dated 29th April, 2021 was in respect of the Applicant’s notice of objection lodged on the 14th December, 2019. That there was a lapse of over 16 months between the date of lodging the notice of objection and the date of the invalidation thereof.

18. The Applicant urged that with the delay in the invalidation of its notice of the objection, the notice of objection lodged on its part is deemed to have been allowed by operation of law. This fact is disputed by the Respondent who maintains that there were requests for documents prior to the issuance of the decision invalidating the notice of objection.

19. It is the Tribunal’s finding that these are issues only capable of being appropriately interrogated in a trial. That as such, the Tribunal finds that there is an arguable Appeal and the same has triable issues that can only be gleaned in an evidentiary hearing before it.

c. Whether there will be prejudice suffered by the Respondent if the extension is granted? 20. The Respondent did not demonstrate how it would suffer prejudice if the prayer for expansion of time was granted. The Respondent only pointed out the fact that allowing the Appeal after such an inordinate period will be prejudicial to it and since the Respondent’s mandate of collection of revenue is key to the economic development of the Country, the public and all the arms of the Government specifically the Tribunal are called upon to assist the Respondent in carrying out its mandate so long as the same is within the law.

21. 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.

22. 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.

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

24. The Tribunal in the circumstances finds the application is meritorious and accordingly finds in favour of the Applicant.

Disposition 25. The Tribunal accordingly proceeds to make the following Orders:-a.The application for the extension of time is hereby allowed;b.The Applicant is hereby granted leave to file an appeal out of time.c.The Applicant to file and serve the Notice of Appeal and the appeal documents 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 being served with the appeal documents.e.No orders as to costs.

DATED AND DELIVERED AT NAIROBI THIS 3RD DAY OF NOVEMBER, 2023ERIC NYONGESA WAFULA CHAIRMANCYNTHIA B. MAYAKA MEMBERRODNEY O. OLUOCH MEMBERELISHAH N. NJERU MEMBERABRAHAM K. KIPROTICH MEMBER