[2024] KETAT 1035 (KLR)

Trifield Holdings Limited v Commissioner of Domestic Taxes (Miscellaneous Application E188 of 2023) [2024] KETAT 1035 (KLR) (5 July 2024) (Ruling)

Neutral citation: [2024] KETAT 1035 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Miscellaneous Application E188 of 2023

E.N Wafula, Chair, M Makau, EN Njeru, E Ng'ang'a & AK Kiprotich, Members

July 5, 2024

Between

Trifield Holdings Limited

Applicant

and

Commissioner of Domestic Taxes

Respondent

Ruling

1. The Appellant moved the Tribunal vide a Notice of Motion application dated and filed under certificate of urgency on 21st December 2023, and which was supported by an Affidavit sworn on 21st December 2023 by Joshua Kariuki Karuga, a Director of the Appellant, seeking for the following Orders: -a.Spent.b.Spent.c.That the Applicant be granted leave to file a Notice of Appeal out of time to this Honourable Tribunal.d.That the Applicant’s Notice of Appeal attached herein be deemed to have been properly filed and be admitted into record of the Honourable Tribunal.e.That the Applicant be granted leave to file and serve all documents as set out under Section 13 (2) of the Tax Appeals Tribunal Act.f.That the Respondent be at liberty to file a response if it so wishes.g.That the cost of this application be in the cause.

2. The application is premised on the grounds, that: -i.On or about December 2023, the Applicant sought taxpayer services at the Respondent’s offices in Thika station.ii.The Applicant was informed that there was an agency notice dated 30th November 2023 that had been issued on the respective banks.iii.The Respondent issued a confirmation notice dated 12th June 2017 rejecting the Applicant’s objection dated 31st March 2016. iv.The Respondent arbitrarily issued agency notices to the respective taxpayer’s clients demanding the confirmed taxes.v.The Applicant did not receive any communication from the Respondent relating to its objection of 31st March 2016, todate the Respondent has not provided the Appellant with the Objection decision as prescribed in law.vi.The Applicant came to the knowledge of the confirmed assessments upon being issued with the agency notices to its respective banks.vii.The late receipt and awareness of the confirmation notice occasioned the delay or failure in filing of the Appeal on time.viii.The Applicant has approached the Honourable Tribunal at the earliest opportune moment and the failure to file the Appeal on time was because of justifiable reasons beyond the control of the Applicant.ix.The application will not occasion any prejudice to the Respondent as the delay was not inordinate and was beyond the scope of the Applicant.x.The Applicant has an arguable appeal with high chances of success.

3. The Respondent upon being served with the instant application filed Grounds of Opposition dated 5th January 2024 and filed on the 10th January 2024, which raised the following grounds, that;i.The application is incompetent, frivolous, vexatious, devoid of merit and otherwise an abuse of the process of the Tribunal as the Applicant did not comply with the mandatory provisions of Section 51 (3) of the Tax Procedures Act.ii.The Applicant has not set out and/or demonstrated the grounds that would warrant this Honourable Tribunal to exercise its discretion in favour of the Applicant.iii.The Applicant is not vigilant, guilty of laches and the delay is inordinate and inexcusable.iv.The Applicant has brought forth the present motion in bad faith meant only to delay the Respondent from collecting taxes owing and due.v.The present application is not in the interest of justice and of the public.

Parties Submissions 4. The Applicant in its written submissions filed on the 16th January 2024, submitted as follows.a.The Applicant submitted that it was informed in November 2023 that it had pending tax liabilities as a result of the assessments issued by the Respondent. Further, that the Applicant was then informed of the confirmed assessment vide the notice dated 12th June 2017 which rejected the Applicant’s objection dated 31st March 2016. b.That the Respondent’s decision was issued beyond the 60 days are stipulated in law and that the Respondent has to date not provided the Applicant with a substantive Objection decision which ought to include a statement of findings and the reasons for the decision.c.The Applicant stated that it had an arguable appeal with high chances of success, as a result and given the opportunity, the Tribunal shall arrive at a different decision to that of the Respondent.d.That the Respondent having been granted an opportunity to file a Replying Affidavit, failed to do so and the application herein is therefore unopposed.e.The Applicant urged that it filed the application within a month of becoming aware of the confirmation notices after the issuance of the agency notices to its bankers.f.The Applicant averred that its reason for delay was the inadvertent, based on the unawareness of the existence of the confirmation assessment.g.The Applicant relied on Articles 48, 50 (1) and 159 of the Constitution of Kenya and further relied on the following case law; Nairobi Civil Application No. 107 of 2020 Omar Shurie v. Marian Rashe Yafar; Ison Technologies Kenya Limited v. Commissioner of Domestic Taxes (Miscellaneous Application No. 117 of 2021; Wasike v. Swala [1984] KLR 591; and Kamlesh Mansukhalal Damki Patni v. Director of Public Prosecutions & 3 Others [2015] eKLR.

5. The Respondent in its written submissions dated 16th January 2024 and filed on 18th January 2024 submitted as follows.a.The Respondent relied on Section 13 (3) & (4) of the Tax Appeals Tribunal Act as well as Rule 10 of the Tax Appeals Tribunal (Procedure) Rules, 2015 and submitted that the Applicant failed to set out reasonable grounds that can prompt the Honourable Tribunal to grant the application.b.The Respondent submitted that the dispute relates to additional assessments on VAT in the sum of Kshs. 15,764,008. 00. c.The Respondent argued that upon receipt of the confirmation of assessments the Applicant failed to pay the taxes or file an appeal within the stipulated 30 days, instead waited for more than six (6) years to move the court seeking to file an appeal out to time.d.The Respondent stated that the delay was inordinate and the Applicant had no intention of settling the taxes but only acted upon the discovery that the agency notices were issued to its accounts.e.The Respondent submitted the Applicant has not been a vigilant litigant as the inordinate delay has not been explained to the satisfaction of the Tribunal in both the filing of the appeal out of time and instant application. The Applicant has therefore not set out any reasonable causes for delay and for this application being brought without undue delay.f.The Respondent averred that there cannot be an arguable appeal premised on a decision that is not an appealable decision and that the Respondent shall suffer prejudice as the application intents to forestall the realization of taxes which the Respondent is mandated to collect.g.The Respondent further relied on the cases of Nicholas Kiptoo Arap Salat v. Indeprendent Electoral and Boundaries Commission & 7 Others [2014] eKLR; Mayfair Insurance Company Limited [2017] eKLR; Edith Gichugu Koine v. Stephen Njagi Thoithi [2014] eKLR; Yussuf Mohamed Salat v. Idris Mohamed Ahmed [2009] eKLR; Mwangi S. Kimenyi v. AG & Another [2014] eKLR and Wild Lion Investments Limited v. Commissioner of Domestic Taxes (Nairobi TAT Misc. APP. No. 7 of 2022).

Analysis and Findings 6. The Tribunal upon hearing the application under certificate of urgency in the first instance on 22nd December 2023, granted interim orders against the enforcement of the agency notices issued to the Applicant’s bankers on 30th November 2023 pending the hearing and determination of the instant application.

7. The application seeks, an order for the extension of time for filing of the appeal out of time and an order for the lifting of the agency notices.

8. The Tribunal is seized of the jurisdiction to entertain an application of this nature and its power is anchored on the provisions of Section 13 (3) of the Tax Appeals Act.

9. An Applicant who approaches the Tribunal seeking for an order for extension of time to file an Appeal out of time is required to present the grounds upon which the delay was occasioned for consideration by the Tribunal.

10. The grounds upon which any party may rely on while making an application to the Tribunal for an order of extension of time to file an appeal out of time are provided for under Section 13 (4) of the Tax Appeals Tribunal Act and Rule 10 (3) of the Tax Appeals Tribunal (Procedure) Rules, 2015.

11. Section 13 (4) of the Tax Appeals Tribunal, provides as thus:-“An extension under subsection (3) may be granted owing to absence from Kenya, or sickness, or other reasonable cause that may have prevented the applicant from filing the notice of appeal or submitting the documents within the specified period.”

12. Further, Rule 10 (3) of the Tax Appeals Tribunal (Procedure) Rules, 2015, provides as follows:-“The Tribunal may grant the extension of time if it is satisfied that the applicant was unable to submit the documents in time for the following reasons-(a)absence from Kenya;(b)sickness; or(c)any other reasonable cause.”

13. Flowing from the above reasons, the Applicant’s grounds for delay in the filing of the Appeal is categorized under any other reasonable cause.

14. The Tribunal is enjoined to interrogate the Applicant’s ground relied upon and determine whether there is a reasonable cause for the delay to its satisfaction.

15. It was the Applicant’s argument that it lodged its objection dated 31st March 2016 and has never been served or notified of any decision by the Respondent.

16. The Applicant submitted that it learned of the Respondent’s decision when agency notices dated 30th November 2023 were issued to its bankers and upon enquiry from the Respondent was informed that a decision had been issued dated 12th June 2017.

17. The Respondent on the other hand, neither offered any rebuttal to the allegations nor particularize on the issue of the service and/or notification of its decision dated 12th June 2017 to the Applicant. Further, the law provides for various modes of service of notices by the Respondent under the provisions of Section 74 (1) of the Tax Procedures Act, 2015.

18. Section 74 (1) of the Tax Procedures Act, as relates to mode of service by the Respondent provides as thus:-“(1)Except as otherwise provided in law, a notice or any other document required to be served on, or given to, a person by the Commissioner under a tax law may be served or given by –a.delivering it to the person or the person’s tax representatives;b.leaving it at, or sending it by post to, the person’s usual or last known place of business or residence; orc.transmitting it in electronic form.”

19. It is the Tribunal’s view that the Applicant having alleged that it was never served or notified with the Respondent’s decision, it was necessary for the Respondent to demonstrate the manner, particularly as to how and when the Applicant was notified of the decision dated 12th June 2017.

20. The Tribunal, in the absence of such evidence and/or particulars of the Applicant being notified, is persuaded that the Applicant was not notified of the Respondent’s decision of 12th June 2017, and the Appellant’s narrative of having come to the knowledge of the decision when the agency notices were issued is persuasive.

21. The Tribunal finds that the Applicant’s reason for the delay in lodging the Appeal to be reasonable and sufficiently explained to its satisfaction. Further, the delay in bringing this application and for failure to lodge the Appeal within the prescribed period in law is therefore reasonable and excusable and is not inordinate under the circumstances.

22. The Applicant submitted that the Respondent had issued agency notices dated 30th November 2023 on its bankers, which fact is not in dispute.

23. Whereas the Respondent is mandated in law to issue agency notices in efforts to recover taxes that are due, the law under Section 42 (14) of the TPA provides for a limitation to the same.

24. Section 42 (14) of the Tax Procedures Act, provides;“The Commissioner shall not issue a notice under this section unless—(a)the taxpayer has defaulted in paying an instalment under section 33(2);(b)the Commissioner has raised an assessment and the taxpayer has not objected to or challenged the validity of the assessment within the prescribed period;(c)the taxpayer has not appealed against an assessment specified in an objection decision within the prescribed timelines;(d)the taxpayer has made a self-assessment and submitted a return but has not paid the taxes due before the due date lapsed; or(e)the taxpayer has not appealed against an assessment specified in a decision of the Tribunal or court.” (Emphasis added)

25. The Tribunal is further guided by Section 18 of the Tax Appeals Tribunal relating to securing the effectiveness of the proceedings and determination of the Appeal, which Section provides as follows:-“Where an appeal against a tax decision has been filed under this Act, the Tribunal may make an order staying or otherwise affecting the operation or implementation of the decision under review as it considers appropriate for the purposes of securing the effectiveness of the proceeding and determination of the appeal.”

26. It therefore follows that upon leave for or the lodging of a valid or proper Appeal before the Tribunal, the Respondent is prohibited in law from issuing and enforcing agency notices in recovery of taxes pending the hearing and determination of the Appeal.

27. The Tribunal having held that the Applicant’s grounds for delay were reasonable, finds that it is contra statute for the enforcement mechanism to have effect while an Appeal is pending hearing and determination, the agency notices issued to the Applicant bankers are hereby lifted.

28. Consequently, the Applicant’s application is merited and therefore succeeds.

Disposition 29. In the upshot of the foregoing analysis the Tribunal finds that the application is merited and accordingly proceeds to make the following Orders: -a.The Applicant be and is hereby granted leave to lodge an appeal out of time.b.The Applicant to file and serve a Notice of Appeal, Memorandum of Appeal, Statement of Facts and tax decision within Fifteen (15) days of the date of delivery of this Ruling.c.The Respondent be at liberty to file and serve its response to the Appeal within thirty (30) days upon being served with the appeal documents.d.No orders as to costs.

30. It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 5TH DAY JULY, 2024ERIC NYONGESA WAFULA - CHAIRMANMUTISO MAKAU - MEMBERELISHAH N. NJERU - MEMBEREUNICE N. NG’ANG’A - MEMBERABRAHAM K. KIPROTICH - MEMBER