[2023] KETAT 88 (KLR)

Zarnash Investments Limited v Commissioner of Legal Services & Board Co-ordination (Miscellaneous Application E002 of 2023) [2023] KETAT 88 (KLR) (Civ) (10 March 2023) (Ruling)

Neutral citation: [2023] KETAT 88 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Civil

Miscellaneous Application E002 of 2023

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

March 10, 2023

Between

Zarnash Investments Limited

Applicant

and

Commissioner of Legal Services & Board Co-ordination

Respondent

Ruling

1. The applicant vide a notice of Motion application dated the January 20, 2023 and filed on the same date sought for the following orders:-a.Spentb.That the applicant be granted an extension of time within which to file an appeal.c.That the tribunal be pleased to allow the filing of the notice of appeal, memorandum of appeal, statement of facts and tax decision out of time.d.That costs of this application be provided for.e.That the Tribunal may issue any further or just orders as may meet the ends of justice in this application.

2. The application which was supported by an Affidavit sworn by the applicant’s Director, Mohamed Raza Merali, on the January 23, 2023 is premised on the following grounds that:-i.The applicant had registered an email ‘joel.xxx@gmail.com’ principally to access the respondent’s i-tax portal for the payment of taxes, facilitate other various transactions and in order to be compliant with the regulations of the Revenue Authority.ii.The said email address was not in use for any other purpose.iii.Sometime in April 2022, the applicant became aware of an assessment order of Ksh 8,831,096. 16 relating to VAT & interest for the period July 2017 dated April 10, 2018, when it attempted to apply for a tax compliance certificate.iv.As it did not understand the reasons for the assessment, is instructed its audit firm Messers Bakertilly to take up the matter and follow up with KRA following which an objection to the assessment was lodged on May 27, 2022. v.The respondent delivered its objection decision on July 25, 2022, rejecting the applicant’s request for extension of time to lodge a late notice of objection.vi.That the above decision reached it on December 6, 2022 at which time the applicant’s offices had closed for December holidays.vii.The applicant being aggrieved by the decision of the respondent, wishes to appeal against it but the time within which to apply has since lapsed.viii.The applicant was not able to comply with provisions of section 13(1) (b) of the Tax Appeals Tribunals Act, which requires the notice to be submitted to the Tribunal within 30 days upon receipt of the decision of the Commissioner, due to circumstances beyond its control.ix.That the applicant’s delay in filing the appeal is not deliberate or reckless and that it stands to suffer substantial and irreparable loss and damage in the event that it is not granted an extension of time to file its appeal out of time, which would amount to being condemned unheard.x.The applicant thus prayed that in the interest of justice, the application herein be allowed as prayed since the applicant has an arguable appeal and therefore should be accorded an opportunity to be heard.

3. In its written submissions dated February 1, 2023 and filed on February 2, 2023 the applicant identified the following issues as falling for consideration:-i.Administration of Justice;ii.Not to be Condemned unheard;iii.The Assessment issued was an arbitrary figure; andiv.Whether the VAT assessed on the Appellant was due and payable and therefore necessitating the additional assessment raised by the respondent.

i. Administration of Justice 4. The applicant relied on article 159 of the Constitution of Kenya where courts are to do justice without undue regard to technicalities, and cited the case of Chemwolo v Kubende where the Court of Appeal stated that:“The primary concern of the court is to do justice and that section 1A & 1 B of the Civil Procedure Act emphasizes on the inherent power of the Tribunal and / or court by stating that the courts are to facilitate just, expeditious, proportionate and affordable resolution of civil disputes.”

5. With these, the applicant asked the tribunal to do justice by giving the applicant an opportunity to have its case heard on the basis of substantive issues rather that the technicalities.

ii. Not to be Condemned unheard 6. The applicant argued that it had a case to be heard as the respondent’s VAT assessment is not due by it. That the amounts assessed by the respondent are not only wrong but also very strange to the applicant.

7. Additionally, that it is a legal requirement under section 4(3) of the Fair Administrative Action Act, 2015 that where an administrative action is likely to adversely affect the rights and fundamental freedoms of any person, the administrator shall give the person affected by the decision proper, prior and adequate notice of the nature and reasons for the proposed administrative action.

8. Flowing from the above, the applicant maintains that it was never served with a valid assessment notice since the respondent had never requested for any information, clarification, verification or even undertaken an audit for the year 2018 or preceding years. The applicant would not have anticipated that the respondent would issue an assessment.

iii. The Assessment issued was an arbitrary figure 9. According to the applicant, the Law of Evidence bestowed on it the duty to prove that the assessment was incorrect, however, the respondent had not communicated how it had arrived at the assessment until this was stated in the replying affidavit to the application by the respondent.

10. In buttressing this point, the applicant used the case of Republic v Kenya Revenue Authority Ex parte Jaffer Mujtab Mohammed (2015) eKLR, where Odunga J. held as follows:-“a taxing authority is not entitled to pluck a figure from the air and impose it upon a tax payer without some rational basis for arriving at that figure and not another figure. Such action would be arbitrary, capricious and in bad faith. It would be unreasonable exercise of power and discretion and that would justify the court intervening.”

iv. Whether the VAT assessed on the Appellant was due and payable and therefore necessitating the additional assessment raised by the respondent 11. The applicant argued that the Appeal seeks to remedy the breach and illegal demand by the respondent to the Appellant.

12. That the respondent seeks to collect VAT on an amount of Ksh 52,735,875 which is huge particularly because no reasonable explanation was given for it despite the applicant’s efforts of following up to understand which proved futile.

13. It contented that the appeal is based on a matter of law where the respondent should have considered before rejecting the late objection given that the additional assessment was erroneous.

14. The appeal be given a chance for a fair hearing by allowing both parties to present the evidence on substantive issues. This way, the applicant will not be condemned unheard.

15. At the hearing of the appeal, further oral or documentary evidence including case law will be adduced in support of the erroneous assessment.

Response to the Application 16. The respondent filed a replying affidavit sworn by Alice Muthoni, an officer of the respondent, on January 25, 2023, and filed on January 26, 2023 citing the following as the grounds for opposition:

17. The respondent conducted a tax investigation on the applicant and issued assessment orders and uploaded on the applicant’s i-tax portal on April 10, 2018 being VAT additional Assessment for Ksh 8,831,096. 16.

18. That the respondent sent to the same email address as is provided under the applicant’s PIN registration.

19. That upon receipt of the applicant’s Objection dated May 27, 2022, the respondent rejected the late objection application vide a letter dated July 25, 2022.

20. That the applicant did not appeal the decision to this tribunal within 30 days of the decision as required and only sought to file the instant application on January 23, 2023, more than 4 months late which is an inordinate delay.

21. That an application of this nature requires an applicant to prove reasonable cause yet no credible reason has been advanced by the applicant to warrant extension of time to file an appeal out of time as provided at section 13(4) of the Tax Appeals Tribunal Act.

22. Wherefore the applicant’s notice of motion is unfounded, deserving no favourable discretion of this Tribunal and ought to be dismissed with costs to the respondent.

23. In its submissions dated and filed on February 2, 2023, the respondent opposed the application in its entirety and submitted that the applicant had not advanced any viable reason for late filing of the intended appeal as provided for under the Tax Appeals Act.

24. The respondent quoted section 13(3) and (4) of the Tax Appeals Tribunal Act and cited rule 10 of the Tax Appeals Tribunal (Procedure) Rules to buttress its position that the grant of an application for an extension of time to file an appeal is discretionary and conditional on demonstrable reasonable grounds by an applicant seeking refuge under the provisions such as absence from Kenya, sickness, or other reasonable cause.

25. It cited the case of Commissioner of Domestic Taxes v. Mayfair Insurance Company Limited (2017) eKLR where the High Court held that:-“one of the reasons stated under the rule is that the court may extend time where there is reasonable cause for the delay. Effectively, the court’s 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. Each case is to be viewed sui generis and on its own circumstances and facts. The starting point is that the applicant ought to advance sufficient and reasonable grounds for any delay on its part”

26. The respondent went further to submit that the applicant has not shown any prejudice it would suffer if the orders sought are not granted.

27. It concluded by urging the Tribunal to consider the humble submissions and proceed to dismiss the application with cost to the respondent.

Analysis and Findings 28. 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.

29. In determining whether to extend time, the Tribunal was guided by the court in Charles Karanja Kiiru v Charles Githinji Muigwa [2017] eKLR, where the learned Judge stated that:-“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”

30. On the criteria of the issues to be considered when granting an extension to file an appeal out of time, the Tribunal referred to the decision by Odek, JJ. A in Edith Gichugu Koine v Stephen Njagi Thoithi [2014] eKLR, where the Court laid out the factors as thus:-“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...”

31. Further, in Sammy Mwangi Kiriethe & 2 others v Kenya Commercial Bank Ltd [2020] eKLR, the court held that:-“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.”

32. The Tribunal, guided by the principles set out inJohn KuriavKelen Wahito, Nairobi Civil Application Nai 19 of 1983 April 10, 1984 referred to by the judges in the case of WasikevSwala [1984] KLR 591, Sammy Mwangi Kiriethe & 2 others v Kenya Commercial Bank Ltd (supra) and section 13 of the Tax Appeals Tribunal Act, 2013 used the following criteria to consider the application.a.Whether the appeal is merited.b.Whether there is a reasonable cause for the delay.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 the Appeal is merited. 33. The Tribunal wishes to examine whether the actions complained of by the applicant were merited and that there is an arguable appeal before the Tribunal or the appeal is frivolous to the extent that it would only result in a waste of the Tribunal’s time.

34. 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 Kiu & another v Khaemba & 3 others (Civil Appeal (Application) E270 of 2021) [2021] KECA 318 (KLR) (17 December 2021) (Ruling) where it was held that:“In law, an arguable appeal/intended appeal is one that need not succeed but one that warrants the court’s interrogation on the one hand and the courts invitation to the opposite party to respond thereto...”

35. In the instant case, the respondent delivered its decision on July 25, 2022, rejecting the applicant’s request for extension of time to lodge a late notice of objection which the applicant claims to have received on December 6, 2022 that at which time the applicant’s offices had closed for December holidays.

36. After gleaning at the applicant’s notice of motion, the grounds of appeal proffered by the applicant are challenging the respondent’s assessment order dated April 10, 2018 for Ksh 8,831,096. 16 relating to VAT & Interest for the period July 2017.

37. Section 52 (1) of the Tax Procedures Act provides as follows with regard to lodging appeals to the Tribunal:-“A person who is dissatisfied with an appealable decision may appeal the decision to the Tribunal in accordance with the provisions of the Tax Appeals Tribunal Act, 2013”

38. The appealable decision in this case is the respondent’s decision of July 25, 2022 rejecting the application for late objection, the assessment order does not constitute an appealable decision as envisaged under section 52 (1) of the Tax Procedures Act, and would therefore not be the basis of an arguable appeal.

39. In any event the applicant’s application to lodge a late notice of objection was rejected for the reason of failure by the applicant to provide supporting documents for the cause of delay and this was inspite of what the respondent indicates to have been preceeded by several reminders by telephone calls and emails.

40. The applicant has equally failed to provide any of the supporting documents that were requested by the respondent and to that extent the refusal by the respondent to accept the late notice of objection cannot be faulted.

41. The Tribunal therefore finds that there is no arguable appeal and as such this Application has not legs on which to stand.

42. The Tribunal in the circumstances shall not consider the substantive matter of the extension of time as the same has been rendered moot.

Disposition 43. The Tribunal was in the circumstances not persuaded to exercise its discretion in favor of the applicant and accordingly makes the following orders:-a.The application for the extension of time be and is hereby dismissed.b.No orders as to costs.

DATED AND DELIVERED AT NAIROBI THIS 10TH DAY OF MARCH, 2023. ERIC N. WAFULACHAIRMANCYNTHIA B. MAYAKAMEMBERRODNEY ODHIAMBOMEMBERELISHAH NJERUMEMBERABRAHAM K. KIPROTICHMEMBER