Atoz Supplies Limited v Commissioner of Domestic Taxes [2023] KETAT 979 (KLR)

Atoz Supplies Limited v Commissioner of Domestic Taxes (Miscellaneous Application E101 of 2023) [2023] KETAT 979 (KLR) (1 December 2023) (Ruling)

Neutral citation: [2023] KETAT 979 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Miscellaneous Application E101 of 2023

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

December 1, 2023

Between

Atoz Supplies Limited

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 4th August 2023 is supported by an Affidavit sworn by the Applicant‘s director, Moses Namiti Wanjala, on the even date seeks for the following Orders:-a.Spentb.The Honourable Tribunal do grant the Applicant leave to file the appeal out of time.c.Upon granting prayer 2, the Memorandum of Appeal filed herewith be deemed properly on record upon payment of the requisite filing fees.d.Pending hearing and determination of the substantive appeal, the enforcement of the Commissioner’s decisions dated 21st June 2022 and 29th June 2022 be stayed.e.The costs of this application be provided for.

2. The application is premised on the following grounds, that:-a.Whereas the Applicant has filed the Appeal outside time, the Appellant herein will be prejudiced by the Tax Dispute Resolution Division- Mombasa’s decision requiring the Appellant to pay Kshs 1,407,666. 70 against provisions of Sections 13 to 18 of the VATAct unless this application is heard urgently.b.The Applicant will be prejudiced if required to perform tasks outside its mandate if Kenya Revenue Authority shifts the burden of proof to the Applicant contrary to established rules of evidence in the circumstances.c.On 22nd March 2022, an additional assessment for VAT was raised and the Applicant Objected to the same with the objection decisions delivered on 21st June 2022 and 29th June 2022. d.Unaware that the Tribunal only held its brief in Nairobi it continued to pursue justice through the KRA Branch office in Mombasa instead of the Tribunal based in Nairobi.e.The delay was not intentional hence the basis of the Applicant’s prayer for leave to file the appeal out of time. There is also the possibility that the Respondent may proceed to enforce the decision under review.f.Enforcement of the said decision will render this appeal nugatory thus the order for a stay of the decision.g.The appeal raises weighty issues for determination and it is only just and proper for the Applicant to be given a chance to present its case for determination before this Tribunal.

3. Seeing as the Applicant did not file any submissions with the Tribunal, the pleadings adduced by the Applicant before the Tribunal together with the documents attached therewith shall form the basis of the Applicant’s entire case to be determined by the Tribunal.

4. The Respondent filed a Replying Affidavit sworn by Yassir Ridha, an officer of the Respondent, on 31st August 2023 citing the following as the grounds for opposition.a.That the analysis carried out on the taxpayer’s PIN indicated that the taxpayer had been underpaying VAT through non-declaration of some of the supplies invoiced.b.That a notice of VAT return inconsistency was sent to the taxpayer via email on 18th November 2021 but the taxpayer failed to respond to the said notice.c.That having failed to respond to the Notice of Additional VAT assessment of Kshs 1,263,534. 74 for the period of January 2021 and Kshs. 1,518,669. 42 for the period August and September 2021 were issued on the Applicant on the 22nd February 2022. d.That being dissatisfied with the additional assessments the Applicant lodged a notice of objection on 11th May 2022 objecting to the part of the principal tax.e.That after considering the objection in strict conformity with the law an Objection decision was issued on 21st June 2022 confirming the tax payable as Kshs 1,514,512. 38. f.That it is expected that if a party is aggrieved by the Commissioner’s decision on their objection, they ought to appeal the said decision to the Tax Appeals Tribunal within thirty days.g.That if a party is unable to appeal within time then they may make an application to the Tax Appeals Tribunal seeking leave to file the appeal out of time.h.That the extension to apply to file the appeal out of time may only 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.i.That there exists no reasonable cause given by the Applicant seeking to extend the time within which to file a Notice of Appeal.j.That the Objection decisions were issued on the 21st June 2022 and 26th June 2022 but since then the Applicant has taken one year and two months before moving this Honourable Tribunal.

5. In its submissions dated 11th September 2023 and filed on 15th September 2023, the Respondent presented its case as hereunder.

i. On whether the Application is merited to allow the Applicant file its appeal out of time. 6. The Respondent cited Section 13(3) and (4) of the Tax Appeals Tribunal Act and contended that it informed the Applicant’s ground that it was unaware that the Tribunal only holds brief in Nairobi and continued to pursue the Appeal through the RA Mombasa Branch office cannot hold water as in all its objection decisions, there existed the guidance that any person wishing to appeal the same may always do so at the Tax Appeals Tribunal which was an avenue opened to the Applicant herein.

7. The Respondent submitted that the Applicant was further given an avenue for seeking clarification from the Respondent which the Applicant never sought from the Mombasa Office.

8. It further submitted that there was no evidence presented by the Applicant to show that it took steps to follow up the matter with the Respondent’s Mombasa Branch after the objection decision was issued.

9. It argued that the failure to know where the Tribunal holds its brief one year after the fact cannot be used to disenfranchise the Respondent’s duty to collect revenue as per Rule 6 of the Tax Appeals Tribunal (Procedure) Rules, 2015.

10. It reiterated that it expected the party, if aggrieved by the Commissioner’s decision, to appeal the said decision to the Tax Appeals Tribunal within thirty days but the Applicant sat on the objection decision for one year and one month without any reasonable reason, with the period of inaction not being able to be explained by the fact that the Applicant was unaware that the Tribunal sits in Nairobi taking it one year to locate the Tribunal.

11. It relied on the case of Mombasa County Government v Kenya Ferry Service & Another [2019]eKLR and submitted that the application has been brought with undue delay and there has been no reasonable cause for the delay.

12. It maintained that the Applicant has failed to prove that it was absent from Kenya, were sick, or any reasonable cause to explain its inaction for one year and that the delay in complying with the statutory timelines within which to lodge an appeal to the Tribunal has been intentional to buy time and deny the Respondent the much-needed revenue.

Analysis and Findings 13. 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.

14. In determining whether to extend time, the Tribunal is guided by the decision of the court 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 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.”

15. 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 or 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? 16. 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.”

17. The Applicant contended that it did not file the appeal on time because it was unaware that the Tax Appeals Tribunal was situated in Nairobi and that it continued to seek an appeal against the Respondent’s objection decision through the Respondent’s Mombasa Office.

18. The Respondent reiterated that the Applicant’s excuse was not reasonable as it followed the law to notify the Applicant of its right to appeal through the Tax Appeals Tribunal. It added that the Applicant never showed evidence of the steps it took to try and resolve or appeal the decision with the Respondent after the decision was issued.

19. The Tribunal finds that the timelines stipulated under Section 13 of the Tax Appeals Tribunal Act are not optional or dependent upon further communication between the parties. It is clear that once an Objection decision has been properly issued, the time within which to file an appeal begins to run, as such, the taxpayer has to file its appeal within the timelines.

20. It is therefore the Tribunal’s finding that the Applicant’s cause for delay is not reasonable as the law is very clear on the procedure and timelines to be adhered to. Ignorance of the law is not an excuse.

21. Following the determination of the absence of reasonable cause for the delay, the consideration of the other criteria for dealing with the application has been rendered moot.

22. The Tribunal is in the circumstances not persuaded to exercise its discretion in favour of the Respondent.

Disposition 23. The Tribunal accordingly proceeds to make the following Orders:-a.The application be and is hereby dismissed;b.No orders as to costs.

24. It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 1ST DAY OF DECEMBER, 2023. ERIC NYONGESA WAFULACHAIRMANMUTISO MAKAU ELISHAH N. NJERUMEMBER MEMBEREUNICE N. NG’ANG’A ABRAHAM K. KIPROTICHMEMBER MEMBER