[2024] KETAT 1317 (KLR)

Zhong Gang Building Materials Company Limited v Commissioner of Domestic Taxes (Tax Appeal E574 of 2024) [2024] KETAT 1317 (KLR) (26 July 2024) (Ruling)

Neutral citation: [2024] KETAT 1317 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal E574 of 2024

CA Muga, Chair, BK Terer, D.K Ngala, GA Kashindi & SS Ololchike, Members

July 26, 2024

Between

Zhong Gang Building Materials Company Limited

Appellant

and

Commissioner of Domestic Taxes

Respondent

Ruling

Background 1. The Appellant moved this Tribunal vide a Notice of Motion dated 30th May 2024 and filed on even date under Certificate of Urgency with a supporting affidavit sworn by Zheng YuanYuan seeking the following Orders:a.That leave be granted to the Appellant to lodge the Notice of Appeal, Memorandum of Appeal, Statement of Facts and other accompanying documents out of time.b.That the attached Memorandum of Appeal, Statement of Facts and Notice of Appeal be admitted on record as duty filed within time.c.That pending the lodging, hearing and determination of this application, an order be issued to vacate the Agency Orders conveyed by the Respondent to the Appellant’s account held at I & M Bank Limited dated 12th May, 2023. d.That pending the hearing and determination of the substantive Appeal and any other applications filed by the Appellant, the Respondent, its agents and/or officers be barred from attaching any moveable and immovable assets of the Appellant.e.That pending the lodging, hearing and any other applications filed by the Appellant, the Respondent, its agents and/or officers be barred from issuing future Agency Notices against the Appellant.f.That the Appellant be at liberty to apply for further orders and the Tribunal to give any directions fit and just to grant in the circumstances.g.That cost of this Application be in the cause.

Grounds for the Application 2. The Application was based on the following grounds:a.That the Respondent assessed the Appellant for Kshs. 20,674,980. 18 in income Tax and Value Added Tax.b.That the Appellant objected the entirety of the assessment through a notice of objection dated 23rd November 2021. c.The Respondent issued its objection decision on 24th December 2021 in response to the objection confirming a VAT Additional Assessment of Kshs 20,674. 980. 18 which the Appellant wishes to appeal to this Tribunal.d.That the Appellant was unable to lodge the Notice of Appeal, Memorandum of Appeal, Statement of Facts and other accompanying documents within statutory timelines due to the ill health and sickness of the Appellant.e.That over the last two years, the Appellant’s health worsened severely and has been in and out of hospital for treatment.f.That the disruption resulted in the Appellant’s inability to lodge its Notice of Appeal, Memorandum of Appeal Statement of Facts and other accompanying documents within time. The deadline for lodging the Notice of Appeal was during the period in which the Appellant was ill.g.That further, due to the Appellant’s Managing, Director’s ill health, it is was only now that the Appellant had been able to lodge this Application when he resumed his duties at the office, though on a part time basis.h.That the Appellant’s Managing Director is a known diabetes and hypertensive patient and has been on medication for the above conditions since November 2021. i.That over the last 2 years the Appellant’s Managing Directors health worsened and he has been in and out at hospital for treatment.j.That for that period, the company has suffered business disruption as a result of the Appellant’s Managing Directors ill health. The Managing Director could not take active role in the business.k.That the business disruption resulted in the Appellant’s inability to lodge its Notice of Appeal, Memorandum of Appeal, Statement of Facts and other accompanying documents within time. The deadline for lodging the Notice of Appeal was during the period in which the Appellant’s business was closed.l.That further, due to the disruption of the business and the Appellant’s Managing Director’s ill health, it is only now that the Appellant has been able to lodge this Application when the Managing Director resumed his duties at the office, though on a part-time basis.m.That this Application was made within reasonable time from the day the Appellant’s managing Director resumed his duties.n.That the Appellant asserted that failure to lodge the Notice of Appeal, Memorandum of Appeal, Statement of Facts and other accompanying documents on time was caused by sickness and/or other reasonable cause.o.That the Appellant had at no point admitted to the Additional Value Added Tax Assessment being demanded by the Respondent.p.That the Agency Notices issued by the Respondent led to the consequent freezing of the Appellant’s Accounts thus rendering it unable to transact its daily business including payment of wages to its construction site staff and purchases of materials.q.That the Appellant stood to suffer irreparable harm if the Agency Orders, the same shall amount to a breach of the principals of natural justice since the same expressly deny the Appellant the right to fair administrative action before the Tribunal.r.That if the Respondent was not barred from carrying out the Agency Orders, the same would amount to a breach of the principles of natural justice since the same expressly deny the Appellant the right to fair administrative action before the Tribunal.s.That the Appellant urgently approached this Tribunal to pressure its right to Appeal the objection decision and should this application not be certified urgent and heard on priority basis, the Appellant stood to lose its right of access to justice and be heard on its Appeal due to circumstances that are not of its doing.t.That the Respondent will not suffer any prejudice should the Appellant be allowed to file its Appeal out of time.

3. In its Written submissions dated 27th June 2024 and filed on even date the Appellant submitted on three issues.

(a) Whether the Appellant filed the Appeal on time as required by law. 4. The Appellant submitted that although it failed to file the Appeal within time, its failure to do so was not intentional.

(b) Whether Appellant had tangible reasons for failure to lodge the appeal in good time. 5. The Appellant submitted that the reason it failed to lodge the Appeal in good time was due to the medical condition of its managing director who is the sole decision maker. It submitted that the Managing Director has been suffering from diabetes and severe hypertension since 2021 which led to the inconsistent attendance to the affairs of the company due to the many times she had to travel away for treatment. This led to the temporary closure of the business.

6. It submitted that the business closure and the Managing Director’s absence resulted to the Appellant’s inability to lodge its Notice of Appeal, Memorandum of Appeal, Statement of Facts and other accompanying documents in time as there was no one to offer direction and make decisions on important matters. It stated further that it was only now after her partial recovery that the Appellant was able to lodge this Application.

(c) Whether the late appeal should be admitted and accepted for consideration. 7. The Appellant submitted that the Managing Director was not in her best state to concentrate on the affairs of the company as she was fighting for her life in hospital which was all that mattered to her. It was not their intention to knowingly fail to file the Appeal and that the support documentation had already been availed to the Respondent.

8. The Appellant prayed that the Tribunal do find that:a.The Appellant did not wilfully fail to lodge the Appeal in time.b.The Appellant sufficiently availed the support documents needed to support the application for admission of the late Appeal.c.The Appellant’s request to be allowed to lodge the late appeal be accepted and allowed to proceed.

Response to the Application 9. The Respondent issued a Tax Review finding for the years 2016-2019 on 2nd June 2021. Thereafter, it issued a demand notice for the amounts in arrears on 21st October 2021 and enforced an Agency Notice on 12th May 2023.

10. That the Appellant neither supported nor proved that the ground raised would warrant the Tribunal to exercise its discretion in its favour. Further that the Appellant failed to justify its lateness to the satisfaction of the Tribunal for extension of time to file an appeal.

11. The claim that the Managing Director was ill and absent from the office without credible evidence to substantiate this did not constitute a reasonable excuse for failing to file an appeal on time. Further that having delayed in filing its Appeal for almost two years, is a demonstration that the Appellant had not been vigilant and does not warrant the exercise of the Tribunal in its favour as the Appellant was guilty of undue delay. This was so because the delay was unjustifiable and inexcusable due to the lack of essential supporting evidence and further that the Appellant had not met the conditions of Section 13(4) of the Tax Appeals Tribunal Act, CAP 469A of the Laws of Kenya, (hereinafter “TATA”) to warrant the exercise of the Tribunal’s discretion in its favour.

12. That the Application was 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 Tribunal as doing so would offend the equitable maxim of equity aids the vigilant and not the indolent and ultimately create bad precedent.

13. That the Appellant did not merit the orders requested in the Application as the entire period of delay had not been adequately substantiated to the Tribunal hence the Application should be dismissed.

14. That the Respondent was merely carrying out its statutory duty under the law by issuing agency notices and consequently pray that its actions be upheld by this Tribunal.

15. That the Respondent’s mandate of collection of revenue is key to the economic development of the country and consequently the public and all the arms of the Government. As such the Respondent is called upon to assist the Respondent in carrying out its mandate so long as the said was within the law.

16. That in the circumstances, it was in the public interest that the Tribunal dismisses the Appellant’s Notice of Motion application dated 30th May 2024 to pave way for the Respondent to collect taxes due from the Appellant which were key to the economic development of the Country.

17. That the indolence and negligence’s of the Appellant need not have barred the Respondent from fulfilling its mandate of collecting taxes that are still due and payable.

18. That the Appellant failed to satisfy the principal as set out in the case of Nicholas Kiptoo Arap Salat vs Independent Electoral and Boundaries Commission & 7 others (2014 eKLR.

19. During the mention of this Application on 20th June 2024, parties were directed to file and serve each other with their written submissions by 27th June 2024. However, by the said date, the Respondent had not filed its Written Submissions.

Analysis and Findings 20. The Tribunal will set out the following criteria to determine this Application:

(a) Whether there is a reasonable cause for the delay. 21. The Appellant had stated that the reason for failure to lodge a Notice of Appeal and other appeal documents within the statutory timelines was due to the ill health of its Managing Director who was in and out of hospital and had to seek some medical intervention in China from October 2021 which was going to take four years.

22. The Tribunal has sighted the medical report from Medisafe Health Care Services signed by Dr Hannighton Kayo dated 9th August 2021 that stated that the Appellant’s Managing Director was to travel to China in October of 2021 to seek medical intervention for a period of four years. It is curious to note that the Respondent issued the demand for tax on 21st October 2021 which the Appellant objected to on 23rd November, 2021 a time which the Appellant was supposed to be in China but was able to object to the Respondent’s demand within reasonable time.

23. The Tribunal notes the Appellant’s failure to attach other medical reports from China where she was expected to be undergoing treatment. Further, the Appellant failed to adduce the travel documents that would have confirmed the exit and entry dates in and out of Kenya to confirm the assertion that indeed the Managing Director travelled out of Kenya to China.

24. The Tribunal would have been better placed to objectively determine the Application based on these crucial documentary evidence. The Tribunal also notes that part of grounds l and m of the Application, the Appellant stated: “when the Managing Director resumed his duties” and “the day the Applicant’s Managing Director resumed his duties” respectively. Yet in the medical report, the Managing Director is being referred as “she”. The report states in part-“The patient is scheduled for several procedural cardiac surgeries and grade 111 Hiatus Hernia repair in China. This will last a period of four years. She is due to travel on the month of October. In view of the above she will be out of the country for four years”. This, in the Tribunal’s view cast doubt on the authenticity of the Medical report and the Appellant’s allegation in its grounds and whether indeed the reference is to the same person.

25. It is therefore the Tribunal’s finding that the reason tendered by the Appellant has not been established to be a reasonable cause for the delay.

(b) Whether the application to file the Notice of Appeal out of time has been brought without undue delay. 26. The Tribunal notes that the Appellant objected to the Respondent’s demand on 23rd November, 2021 and the objection decision issued on 24th December 2021. However, the Appellant applied for leave to file its Notice of Appeal on 30th May 2024. It is the Tribunal’s considered view that a period of almost four years is deemed to be inordinate delay. Further that being a limited company the Managing Director does not work alone and her absence did not result in a vacuum in leadership considering the fact that the Appellant was able to object to the Respondent’s Demand in November of 2021 when the Managing Director was unavailable having travelled to China on in October of 2021.

27. In considering what constitutes a reasonable reason for delay, the Tribunal relies on the holding in the case of Paul Wanjohi Mathenge vs Duncan Gichana Mathenge (2013) eKLR where the Court held as follows:“….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.”

28. In view of the foregoing, it is the Tribunal’s findings that there was reasonable delay in seeking leave from the Tribunal to file the Notice of Appeal out of time.

(c) Whether the Application is merited. 29. As stated above the failure by the Appellant to avail crucial documents like the medical reports from China hospital and proof of exit and entry from Kenya and China had the implication that the Appellant failed to discharge its burden of proof to sway the Tribunals view in its favour.

30. It is also worth noting that in the age of information technology it was possible for the Appellant to access its i-Tax portal from anywhere in the world to transact its tax affairs.

31. The Tribunal finds that the Application was not merited.

Disposition 32. Based on the foregoing analysis, the Tribunal finds that the Application fails and accordingly proceeds to make the following Orders:a.The Application for extension of time to file a Notice of Appeal is hereby dismissed.b.No orders as to costs.

33. It is so Ordered.

DATED AND DELIVERED AT NAIROBI THIS 26TH DAY OF JULY, 2024. CHRISTINE A. MUGA - CHAIRPERSONBONIFACE K. TERER - MEMBERDELILAH K. NGALA - MEMBERGEORGE KASHINDI - MEMBEROLOLCHIKE S. SPENCER - MEMBER