[2023] KETAT 222 (KLR)

Vibe Nairobi Limited v Commissioner of Domestic Taxes (Miscellaneous Application 266 of 2022) [2023] KETAT 222 (KLR) (Commercial and Tax) (5 May 2023) (Ruling)

Neutral citation: [2023] KETAT 222 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Commercial and Tax

Miscellaneous Application 266 of 2022

E.N Wafula, Chair, Cynthia B. Mayaka & AK Kiprotich, Members

May 5, 2023

Between

Vibe Nairobi Limited

Applicant

and

Commissioner Of Domestic Taxes

Respondent

Ruling

1. The applicant vide a notice of motion dated September 26, 2022 filed under certificate of urgency on October 5, 2022 and supported by an affidavit sworn by Joash Okombo, the accountant of the applicant, on the September 26, 2022 sought for the following orders:-i.That the applicant be granted leave to file its memorandum of appeal and statement of facts out of time.ii.That the memorandum of appeal and statement of facts annexed hereto be and is hereby deemed as duly filed and served.iii.That the respondent be at liberty to file a response if it so wishes.iv.That cost of this application be costs in the cause.

2. The application is premised on the following grounds, that:-i.The invalidation notice was not communicated through the applicant’s accessible emails handled by the accountants.ii.The applicant was issued with an invalidation notice without due regard to the objection review process.iii.The Constitution of Kenya under article 159(2)(d) clearly provides that justice shall be administered without undue regard to procedural technicalities.iv.The application will not occasion any prejudice to the respondent as the delay is not inordinate.v.The applicant has an arguable appeal with a high probability of success as per the memorandum of appeal annexed hereto. It will therefore be highly prejudicial to the applicant if leave is not granted to enable the applicant to argue its appeal.vi.It is therefore in the interest of justice that the applicant be granted leave to file its appeal out of time.

3. The applicant stated that the respondent issued it with the assessment orders on November 15, 2019, demanding for the payment of VAT from theVAT auto assessment for the periods January 2018 to May 2018 amounting to Kshs 11,076,316. 48.

4. That on May 4, 2020, it objected to these assessments clearly outlining its grounds of objection to the tax demand and provided invoices and bank statements as proof of purchases for the input VAT claimed.

5. That on May 2, 2021, the respondent issued an invalidation notice fully rejecting the objection and thereafter confirming its assessment of an amount of Kshs 11,076,316. 48 arising from the disallowed input VAT.

6. That the respondent communicated the objection decision through an email not often accessible to it.

7. That the applicant learnt of the invalidation notice through word of mouth while on a visit toKRA offices to get official update on the objection review.

8. That subsequently the respondent had already debited the VAT account via debit assessment order for Kshs 11,076,316. 48.

9. That the appellant enquired from the respondent for the basis of the invalidation notice to which the respondent stated that the appellant’s objection was fully rejected, and therefore the tax demanded was payable in the absence of an appeal to the Tax Appeal Tribunal.

10. That it is in the interest of justice and the rule of law that the applicant be granted leave to file its appeal out of time in accordance with article 159(2)(d) of the Constitution that provides that, justice shall be administered without undue regard to procedural technicalities.

11. That the applicant will suffer irreversible damage to its business operations if this application is not allowed.

12. The appellant prayed that the application be allowed as prayed.

Response to the application 13. The respondent opposed the application through a replying affidavit sworn by Nahashon Ndung’u, an officer of the respondent, on the October 13, 2022 and filed on October 14, 2022. The grounds of opposition as highlighted in the affidavit were as follows:-i.That the applicant has not given any valid reasons as to why it wants to file an appeal out of time.ii.That section 13(1)(b) of the Tax Appeals Tribunal Act states that a notice of appeal to the tribunal should be submitted within 30 days upon receipt of the decision of the commissioner.iii.That the commissioner issued its objection decision on June 2, 2021 and the appellant lodged its appeal documents on September 26, 2022, more than one year and two months.iv.That section 13(4) of the Tax Appeals Tribunal Act provides that an extension of time for filing of appeal documents may be granted owing to absence from Kenya, or sickness, or other reasonable cause that may have prevented the applicant from filing the documents within the specified period.v.That the applicant has not demonstrated to the tribunal how it could not access its email account for more than one year. That further, its accountants who allegedly have access to the said email account are considered by law to be employees of the applicant, hence under duty to inform the applicant of any emails received. That the applicant has failed to demonstrate reasons why its accountant failed to inform it of the emails from the respondent.vi.That a gap of more than 1 year is quite unreasonable for the applicant to allege not receiving emails as its business is a going concern that normally receives emails as a means of communication.vii.That the delay by the applicant is unreasonable and the tribunal should strike out the application as the delay is inordinate and no justifiable reason had been furnished to demonstrate the delay.viii.That the applicant claims that the respondent did not review its objection however, it did not attach the objection in its application and no evidence was adduced to support this claim.ix.That the respondent rejected the applicant’s objection as the same was not supported by documents as attested in the respondent’s decision dated June 2, 2021. x.That section 51(3) of the Tax Procedures Act provides the requirements of a validly lodged objection is that all the relevant documents relating to the objection have been submitted.xi.That equity aids the vigilant and not the indolent as demonstrated by the applicants conduct in this matter.

Analysis and Findings 14. The applicant is primarily praying to the tribunal for extension of time to file an appeal out of time.

15. The power to expand time for filing an appeal is donated by section 13(3) of the Tax Appeals Tribunal Act which provides that:“The tribunal may, upon application in writing, extend the time for filing the notice of appeal and for submitting the documents referred to in subsection (2).”It is therefore a discretionary power and not a right to be granted to the applicant.

16. In determining whether to expand time, courts have in the past considered a number of factors. These factors were discussed 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.”

17. The court in Wasike v Swala[1984] KLR 591 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 merit in his appeal.b)That the extension of time to institute and/or file the appeal will not cause undue prejudice to the respondent; andc)That the delay has not been inordinate.

18. The tribunal, guided by the principles set out in Leo Sila Mutiso v Rose Hellen Wangari Mwangi, civil application Nai 251 of 1997, Wasike v Swala [1984] KLR 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.The merits of the complained action.c.Whether there will be prejudice suffered by the respondent if the extension is granted.

Whether there is a reasonable cause for the delay. 19. In considering what constitutes as a reasonable reason for delay, the court in Balwant Singh v Jagdish Singh & Ors (civil appealNo 1166 of 2006), held that: “The test is whether or not a cause is sufficient to see whether it could have been avoided by the party by the exercise of due care and attention”.

20. Section 13(4) of the Tax Appeals Tribunal Act provides as follows regarding extension 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 applicant from filing the notice of appeal or submitting the documents within the specified period.”

21. The applicant in this case averred that the invalidation notice was not communicated through the applicant’s accessible emails handled by the accountants. That it learnt of the invalidation notice through word of mouth while on a visit to KRA offices to get official update on the objection review.

22. The respondent on its part contended that the applicant had not given any valid reasons as to why it wants to file an appeal out of time

23. That the applicant had not demonstrated to the tribunal how it could not access its email account for more than one year. That further, its accountant who allegedly have access to the said email account are considered by law to be employees of the applicant, hence under duty to inform the applicant of any emails received. That the applicant has failed to demonstrate reasons why its accountant failed to inform it of the emails from the respondent.

24. From the pleadings and documents availed by the parties, the tribunal noted that the applicant wished to appeal against the respondent’s letter of invalidation dated June 2, 2021 which it avers it did not receive in time. From the appellant’s pleadings it was clear that it was seeking the tribunal’s consideration under ‘reasonable cause’ for the extension of time.

25. The tribunal noted that although the applicant stated that it received the information about the invalidation notice late, it does not state the date this came to its knowledge and further it does not say which email it ought to have been sent to. The tribunal was therefore not in a position to determine whether there was any lapse in communication from the respondent.

26. Furthermore, in ordinary circumstances it is the taxpayer who provides to the respondent its contacts in iTax at the time of registration as provided for under section 8 of the Tax Procedures Act. The section provides as follows:“8. Registration of taxpayers

(1)A person who—(a)has accrued a tax liability or who expects to accrue a tax liability under the Income Tax Act or the Value Added Tax Act, 2013;(b)expects to manufacture or import excisable goods; or(c)expects to supply excisable services; shall apply to the commissioner to be registered.(2)An application for registration under subsection(1)shall be—(a)made in the prescribed form;(b)accompanied by documents that the commissioner may require, including documents of identity; and(c)made within thirty days of the applicant becoming liable for that tax.”

27. The tribunal, in arriving at its decision, wishes further to refer to the case of Abdul Aziz Ngoma v Mungai Mathayo [1976] eKLR, whereby the Court of Appeal emphasised that:“We would like to state once again that this court’s discretion to extend time under rule 4 only comes into existence after ‘sufficient reason’ for extending time has been established and it is only then that other considerations such as the absence of any prejudice and the prospects or otherwise of success in the appeal can be considered.”

28. Going by the above analysis the tribunal finds that the applicant has not provided sufficient reasons for the delay.

29. Having entered the above findings and going by holding in the case of Abdul Aziz Ngoma v Mungai Mathayo [1976] eKLR, the tribunal finds that the applicant has substantively failed to meet the statutory and judicially established threshold for the grant of an application for the enlargement of time to file an appeal.

30. Consequently, the tribunal found it unnecessary to delve into the other factors that fell for its determination as they had been rendered moot.

Disposition 31. Based on the foregoing analysis, the tribunal finds that the application is devoid of any merit and proceeds to make the following orders:i.The application be and is hereby dismissed.ii.No orders as to costs.

DATED AND DELIVERED AT NAIROBI THIS 5TH DAY OF MAY, 2023. ..........................................ERIC N. WAFULACHAIRMANCYNTHIA B.MAYAKA ABRAHAMKIPROTICHMEMBER MEMBER