[2023] KETAT 610 (KLR)

Wenton Enterprises v Commissioner of Domestic Taxes (Miscellaneous Appeal E076 of 2023) [2023] KETAT 610 (KLR) (19 October 2023) (Ruling)

Neutral citation: [2023] KETAT 610 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Miscellaneous Appeal E076 of 2023

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

October 19, 2023

Between

Wenton Enterprises

Applicant

and

Commissioner of Domestic Taxes

Respondent

Ruling

1. The application which was by way of a Notice of Motion dated and filed under a certificate of urgency on 14th July 2023 is supported by an Affidavit sworn by the Applicant's Director, Juliet Wanja Njue, on the 14th July, 2023 sought for the following Orders:-a.Spentb.The Applicant be granted leave to file an appeal out of time to enable it to challenge the Commissioner's objection decision dated 2nd September 2021. c.The Applicant's Notice of Appeal dated 14th July 2023 be admitted into the record of this Honourable Tribunal as having been filed within time.d.The costs of this application be in the cause.e.This Honourable Tribunal be pleased to issue any such orders as it deems just and expedient.

2. The application is premised in the following grounds:-a.The intended Appellant/Applicant was not informed of the objection decision dated 2nd September 2021 by the person who handles its emails because the Yahoo email had apparently been deleted due to inactivity.b.The intended Appellant/Applicant learned of the same on 26th May 2023 after the issuance of the agency notices to its bank accounts.c.Upon receiving communication forwarded to the tax representative, action was taken without undue delay.d.The intended Appellant/Applicant has approached this Honourable Tribunal at the earliest juncture and failure to file the Notice of Appeal and appeal documents within the stipulated timeline is a result of factors beyond the Applicant's control.e.This application is brought about without undue delay.f.The Respondent will not suffer any harm or loss if orders sought therein are granted.g.It is in the interest of justice that the Honourable Tribunal grants the orders sought herein.h.Unless this application is heard on a priority basis and the orders sought herein granted, the Applicant will be highly prejudiced as the taxpayer is not in a position to pay the assessed taxes which were excessive and estimated.

The Applicant's Submissions 3. The Applicant in its written submissions dated 2nd August 2023 and filed before the Tribunal on 3rd August 2023 stated as hereunder.

i. On whether the Appellant's Application to file an Appeal out of time should be allowed 4. The Applicant submitted that the Finance Act 2016 grants an extension 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 time period.

5. It argued that the Respondent will not suffer prejudice should the application be allowed and in the instance the application is not allowed, then the Applicant stands to suffer prejudice and grave injustices.

6. It relied on the case of Leo Sila Mutiso -v- Rose Hellen Wangari Mwangi - Civil Application No. Nai. 255 of 1997 (unreported), where the Court held that :-“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.”

7. It contended that the application to file an appeal out of time will not affect the interest of the Respondent or in any way affect its rights and it will be in the interest of justice that the appeal is made and adopted for the sake of protecting the interest of the Appellant.

8. It also relied on the case of Wasike v Swala (1984) KLR 591 where the court held 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; and c) That the delay has not been inordinate.”

9. It maintained that its appeal has merit and a probability of success and unless the application is allowed, the Applicant will be subject to grave injustices by paying a huge amount of money.

10. The Applicant asserted that the Respondent has not demonstrated any chance of injustice or prejudice which will occur to it if the Tribunal allows the application and the only party who will suffer prejudice is the Applicant if the application is denied since it will be subjected to comply with a judgment that was entered without being heard or represented prior to the issuance of the same therefore infringing on the Applicant's Constitutional rights under Article 50 of the Constitution of Kenya.

ii. On whether the matter should be referred to Alternative Dispute Resolution 11. The Applicant cited Section 13(4) of the Tax Appeals Tribunal Act and Article 159(2)(c) of the Constitution of Kenya and prayed that the matter be settled through alternative dispute resolution and in the instance it does not bear fruit then the Tribunal should hear and determine the matter.

Response to the Application 12. The Respondent filed a Replying Affidavit sworn by Duncan Gikuma, an officer of the Respondent, on 24th July 2023 and filed on 25th July 2023 citing the following as the grounds for opposition, that:-a.The Respondent issued the Applicant with the objection decision on 2nd September 2021. b.The statutory timeline within which to appeal or pay the confirmed taxes is 30 days from the date the decision is made.c.The Applicant did not appeal the decision to the Tribunal within thirty days from the decision as required and only sought to file the instant application on 14th July 2023 (a period of 1 year and 10 months late). This delay is not only inordinate but inexcusable.d.By any standards, a delay of more than 1 year and 10 months amounts to an inordinate delay by the Applicant.e.The Applicant has not attached a draft Memorandum of Appeal and it remains speculative what the Applicant wishes to appeal against. Further one of the requirements for a party to be granted an extension of time to file an appeal out of time, the Applicant must demonstrate that the intended appeal is arguable. This requirement has not been met.f.No credible reason has been advanced by the Applicant to warrant an extension of time to file the appeal as provided in Section 13(4) of the Tax Appeals Tribunal Act.g.An application of this nature requires an Applicant to prove his/her absence from Kenya, sickness or other reasonable cause. This requirement has not been met by the Applicant.h.Equity aids the vigilant and not the indolent. The Respondent's objection decision dated 2nd September 2021 was lodged on the Applicant's iTax portal.i.The Applicant has not annexed the alleged agency notices placed on 26th May 2023 on its bank. The reasons provided by the Applicant for failing to file an Appeal within timelines are not credible and do not meet the requirements provided for under Section 13(4) of the Tax Procedures Act. The Applicant has failed to provide evidence to support its assertion.j.Mere statements that are not backed by evidence of any sort are not solid grounds that would warrant this Honourable Tribunal to exercise its discretion in favour of the Applicant. The Applicant has failed to lay a basis to the satisfaction of the Tribunal for an extension of time to file an appeal.k.The fact that the Applicant failed to follow up on its appeal for more than 1 year and 10 months after the issuance of the Respondent's decision is a demonstration that the Applicant has not been vigilant and does not warrant the exercise of the Tribunal's discretion in its favour. The Applicant is guilty of laches.l.The application is an afterthought, brought in bad faith, meant to delay the Respondent from collecting taxes that are due and payable and should not be entertained by this Honourable Tribunal as doing so would offend the equitable maxim of equity aids the vigilant and not the indolent and ultimately create a bad precedent.m.The Applicant is not deserving of the orders sought in the application as the whole period of delay has not been explained satisfactorily to the Tribunal thus the application ought to be dismissed.n.The Respondent is merely carrying out its statutory duty under the law by issuing agency notices and consequently prays that its actions be upheld by this Honourable Tribunal.o.It is in the public interest that this Honourable Tribunal dismisses the application dated 14th July 2023 to pave the way for the Respondent to collect taxes due from the Applicant which are key to the economic development of the Country.p.The indolence and negligence of the Applicant should not bar the Respondent from fulfilling its mandate of collecting taxes that are due and payable.

Respondent's submissions 13. In its submissions dated 31st July 2023 and filed on 1st August 2023, the Respondent presented its case as hereunder.

14. The Respondent submitted that the Applicant lodged its application to extend time on 14th July 2023, a period of 1 year and 10 months after the statutorily prescribed time for lodging an appeal contrary to the provisions of Section 13(1)(b) of the Tax Appeals Tribunal Act. This delay is not only inordinate but it has also not been satisfactorily explained.

15. It submitted that the Applicant lodged its application objecting to the assessments issued by the Respondent and was thereafter issued with an objection decision on 2nd September 2021 for failure to provide reasons for the objection and documentary evidence in support of the objection of the assessments pursuant to Section 51(3) of the Tax Procedures Act and the Respondent's decision was lawfully and regularly issued pursuant to Section 51(4) of the Tax Procedures Act.

16. It reiterated that the Applicant has not advanced sufficient or reasonable grounds for the delay on its part for filing either a Notice of Appeal or the substantive Appeal within the statutory timelines and failed to provide evidence to rebut the Respondent's evidence of effective service of the objection decision.

17. It contended that despite the Applicant's averment that it was not aware of the Respondent's decision, the Tribunal should note that the Applicant has annexed the objection decision in its application confirming that the Respondent's decision was lodged in the Applicant's iTax portal on 2nd September 2021 and the Applicant was indolent for not taking any action for 1 year and 10 months.

18. It relied on the case of Chairman, Kenya National Union of Teachers & Another v Henry Inyangala & 2 Others [2018] eKLR where it averred that the court held that a delay of 15 months in the absence of a satisfactory and reasonable explanation is inordinate and an instance of laches arguing that the delay of 1 year and 10 months with no explanation is not only inordinate but unreasonable and ought not be excused by the Honourable Tribunal.

19. It urged the Tribunal to be guided by the case of Utalii Transport Company Limited & 3 Others v NIC Bank Limited & Another [2014] eKLR where it was held:“Whereas there is no precise measure of what amounts to inordinate delay. And whereas what amounts to inordinate delay will differ from case to case depending on the circumstances of each case; the subject matter of the case; the nature of the case; the explanation given for the delay; and so on and so forth. Nevertheless, inordinate delay should not be difficult to ascertain once it occurs; the litmus test being that it should be an amount of delay which leads the court to an inescapable conclusion that it is inordinate and therefore, inexcusable. On applying the court's mind on the delay, caution is advised for courts not to take the word „'inordinate'' in its dictionary meaning, but in the sense of excessive as compared to normality.”

20. The Respondent cited Section 13(3) and (4) of the Tax Appeals Tribunal Act and argued that the power to extend the time to file an appeal is discretionary. It further relied on the case of Nicholas Kiptoo Arap Korir Salat v. Independent Electoral and Boundaries Commission and 7 Others [2014] eKLR where it was held that:“1. 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;2. A party who seeks for extension of time has the burden of laying a basis to the satisfaction of the court3. Whether the court should exercise the discretion to extend time, is a consideration to be made on a case-to-case basis;4. Whether there is a reasonable reason for the delay. The delay should be explained to the satisfaction of the Court;5. Whether there will be any prejudice suffered by the respondents if the extension is granted;6. Whether the application has been brought without undue delay; and7. Whether in certain cases, like election petitions, public interest should be a consideration for extending time.”

21. It maintained that the fact that the Applicant contended that it did not file an appeal because the Yahoo email had been deleted due to inactivity is confirmation that the objection decision was sent to the Applicant's email registered in its iTax and the Applicant's mistakes should not be visited on the Respondent who discharged its statutory mandate.

22. It reiterated that the fact that the Applicant did not bother to check on the status of its objection despite being aware that the law requires the Commissioner to render it within 60 days is a demonstration of indolence.

23. It submitted that the delay by the Applicant is unreasonable and not excusable on the ground that the Applicant like any other taxpayer has a duty to ensure that its tax affairs are well managed by making regular consultations with its tax agent for the purpose of tracking the progress of its tax matters.

24. It asserted that Section 16(8) of the Tax Procedures Act provides that a taxpayer is not relieved from performing any obligation imposed on it under a tax law that a tax representative has failed to perform and the indolence of the Applicant to follow up on this matter and leaving the same to its tax agent without exercising some control on the tax agent's work should not be excused.

25. It contended that the Assessment Order and the Respondent's decision were lodged on the Applicant's iTax portal and the fact that the Applicant lodged an Objection is further confirmation that it was issued with the assessments by the Respondent thus the Applicant has not provided the Tribunal with credible reasons to warrant the exercise of its discretion to extend the time to file an appeal as provided in Section 13(4) of the Tax Appeals Tribunal Act.

26. It cited the case of Misc App No. 177 of 2022: Katahira & Engineers International v Commissioner of Domestic Taxes where the Tribunal held that:-“for the Tribunal to exercise its discretion, the Applicant ought to explain the reason(s) for the delay which reason(s) should either be absence from Kenya, sickness or other reasonable cause. In the absence of such explanation from the Appellant, the Tribunal is constrained from exercising such discretion.”

27. It reiterated that the Applicant has not been keen on this matter and was woken up from slumber by the action of the Respondent of lawfully enforcing taxes which was undisputed as no appeal had been lodged within statutory timelines.

28. The Respondent contended that allowing the appeal after such an inordinate period will be prejudicial to the Respondent since the taxes have been outstanding since 2021 and the Appellant has failed to give reasonable cause for delay.

29. It maintained that the Applicant has not attached a draft Memorandum of Appeal and it remains speculative what the Applicant wishes to appeal against. A requirement that has not been met.

30. It argued that the Applicant's Application must be proportionally balanced with the Respondent's statutory Obligation to collect taxes under Section 5(1) of the KRA Act and pursuant to Sections 13(1) and (2) of the TAT Act, upon the Applicant failing to file a Notice of Appeal or a Memorandum of Appeal within the stipulated timelines, the taxes assessed crystalised and allowing the subject application 1 year and 10 months later prejudices the Respondent's legitimate expectation to timeous resolution of tax disputes which risks materially hampering its administrative functions of revenue collection.

Analysis and Findings 31. 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.

32. In determining whether to extend time, the Tribunal was guided by the decision in the case of Leo Sila Mutiso -vs- 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.”

33. 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 the application for extension has been brought without undue delay?d.Whether there will be prejudice suffered by the Respondent if the extension is granted?

a. Whether there is a reasonable cause for the delay? 34. In considering what constitutes a reasonable reason 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.”

35. The Applicant submitted that it did not receive the Notice of Objection Invalidation because its Yahoo email address had been deleted due to inactivity and only became aware of the Respondent's decision when agency notices were issued to its bank on 19th June 2022.

36. The Respondent contended that the Applicant has not advanced the said agency notices to prove that the same were indeed issued to its bank and the fact that the Applicant did not bother to check on the status of its objection despite being aware that the law requires the Commissioner to render it within 60 days is a demonstration of indolence.

37. 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 received by the Respondent on 5th December 2019, the Respondent issued its objection decision on 2nd September 2021.

38. The Tribunal finds that the objection decision was issued by the Respondent over 20 months after the Objection was lodged by the Applicant. It is therefore probable that if indeed the account remained inactive between the date the objection was lodged and the date of the objection decision, such is ample time for a Yahoo account to be deleted for inactivity.

39. 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? 40. 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.

41. 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.”

42. In the instant case, the Respondent and the Applicant have taken issue with the mode of delivery of the objection decision. Whereas the Applicant contends that the Respondent effected service to it on an email address that is not active, the Respondent maintains that the Applicant has always been registered and communicated with it under the same email address the objection decision was sent.

43. The Tribunal notes that while the Appellant has not provided documentation detailing the gist of its case, the objection decision was provided before the Tribunal and it is observed that the objection was partially allowed for insufficient documentation provided by the Appellant to warrant a full allowance of the objection.

44. It is the Tribunal's finding that these are issues only to be interrogated in 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? 45. 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.

46. 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.

47. 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.

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

d. Whether the Application for an extension has been brought without undue delay? 49. The Tribunal noted from the submissions and documents presented that the Applicant's bank was issued with an agency notice on 26th May 2023 with the current application being filed with the Tribunal on 3rd August 2023.

50. The Applicant contended that it did not become aware of the notice of objection decision until the Respondent issued agency notices against the Applicant's bankers.

51. The Respondent on the other hand contended that the period of 1 year and 10 months after issuing the objection decision was too inordinate a delay to file for an extension of time.

52. From the events set out in this application, and upon looking through the documents provided, it is noted that the Applicant became aware of the Respondent's objection decision on 26th May 2023 and filed this application on 14th July 2023 after the Appellant found out about the objection decision.

53. The Tribunal, consequently finds the Applicant has satisfactorily proven to it that it filed the application at the earliest convenient time after it found out about the issuance of the objection decision and the same has been brought without undue delay.

Disposition 54. The Tribunal in the circumstances finds the application is not meritorious and finds in favour of the Respondent.

55. The Tribunal accordingly makes 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's Notice of Appeal dated the 14th July, 2023 be and is hereby deemed as duly filed and served.d.The Applicant to file and serve the Appeal documents within Fifteen (15) days of the date of delivery of this Ruling.e.The Respondent to file and serve its Statement of Facts within Thirty (30) days of being served with the appeal documents.f.No orders as to costs.

DATED AND DELIVERED AT NAIROBI THIS 19TH DAY OF OCTOBER, 2023ERIC NYONGESA WAFULACHAIRMANELISHAH N. NJERUMEMBERMUTISO MAKAUMEMBEREUNICE N. NG'ANG'AMEMBERABRAHAM K. KIPTROTICHMEMBER