Caleb Africa Ltd v Commissioner of Domestic Taxes [2024] KETAT 21 (KLR)

Caleb Africa Ltd v Commissioner of Domestic Taxes (Tribunal Appeal 976 of 2022) [2024] KETAT 21 (KLR) (26 January 2024) (Judgment)

Neutral citation: [2024] KETAT 21 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tribunal Appeal 976 of 2022

Grace Mukuha, Chair, E Komolo, Jephthah Njagi, T Vikiru & G Ogaga, Members

January 26, 2024

Between

Caleb Africa Ltd

Appellant

and

Commissioner Of Domestic Taxes

Respondent

Judgment

Background 1. The Appellant is a limited liability company and a registered taxpayer.

2. The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act, Cap 469 laws of Kenya (KRA Act). Under Section 5 (1) of the Act, KRA is an agency of the Government for the collection and receipt of all revenue. Under Section 5(2) of the Act with respect to the performance of its function under subsection (1), the Authority is mandated to administer and enforce all provisions of the written laws as set out in Parts I and II of the First Schedule to the KRA Act for the purposes of assessing, collecting, and accounting for all revenues in accordance with those laws.

3. The Respondent conducted tax investigations into the business affairs of the Appellant for the tax period month of December 2016 with an intention of confirming that the Appellant was tax compliant for the tax period under review.

4. That from the tax investigations the Respondent noted that there was a variance between the sales declared in the VAT and income tax returns for the tax period year 2016.

5. The Respondent on the 18th November, 2021 issued the Appellant with a pre- assessment notice notifying them of the variances between the sales declared in the VAT3 and the turnover in the income tax returns.

6. The Respondent also requested the Appellant to amend its returns and generate a PRN and pay the correct tax due within 7 days but the Appellant did not respond.

7. On the 28th December, 2021 the Respondent raised additional VAT assessments for the tax period month of December 2016 amounting to principal VAT of Kshs 1,448,997. 28.

8. The Appellant failed to object to the additional VAT assessments and the Respondent issued distress orders to collect the taxes due.

9. On 7th February 2022, the Respondent issued an agency notice to the Appellant’s bankers demanding Kshs. 2,677,721. 00 on VAT obligation.

10. The Appellant consequently objected through a late objection via a letter dated 4th March 2022 and the Respondent on 14th April 2022 vide an email informed the Appellant that there were outstanding VAT arrears for the month of December 2016 and that the late objection was invalidly lodged.

11. The Respondent also requested for further supporting documents but the Appellant failed to supply the same.

12. The Respondent issued a late objection decision on 27th April 2022 and the Appellant filed its Memorandum of Appeal on 8th September 2022.

The Appeal 13. The Appeal is premised on the Memorandum of Appeal filed on 8th September 2022 raising the following grounds: -a.That the assessment and demand of Kshs. 1,448,997. 28 by the Respondent be vacatedb.That the Tribunal be at liberty to make any such orders as it deems necessary in the circumstances

Appellant’s Case 14. The Appellant’s case is premised on the hereunder stated documents:a.Statement of Facts filed on 8th September 2022. b.The written submissions dated 25th February 2023 and filed on 28th February 2023.

15. The Appellant averred that the Respondent should be barred from collecting different amounts of tax demands without explanation on the diverse variances of figures.

16. The Appellant averred that the Respondent erred in making an assessment out of the stipulated five years period in that an assessment was raised on 28th December 2021 for the period of income 2016.

Appellant’s prayers. 17. The Appellant prayed that the Tribunal orders that:a.The assessment on the Appellant is out of timeb.The assessment on the Appellant is erroneous and excessive and the demand figures are differentc.The Respondent has failed to take into account pertinent information in rendering its objection decision

Respondent’s Case 18. The Respondent’s case is premised on the following documents:a.The Respondent’s Statement of Facts dated and filed on 22nd September 2022b.The Respondent’s Written Submissions dated 23rd March 2023 and filed on the same date.

19. The Respondent averred that Section 24 of the Tax Procedures Act, 2015 allows a taxpayer to file returns but further provides that the Commissioner is not bound by the information provided therein and can assess the tax liability based on any other available information.

20. That Section 31 of the Tax Procedures Act, 2015 empowers the Respondent to amend original assessments and issue additional assessments where a taxpayer has been assessed of a lesser amount based on any additional available information and to the best of his judgement.

21. The Respondent averred that the additional VAT assessments were based on the variances in the sales declared in the VẤT returns and the turnover declared in the income tax returns for the tax period year 2016.

22. The Respondent also averred that the Appellant raised an invalid late objection and failed to provide supporting documents despite the Respondent's request for the same.

23. The Respondent stated that the Appellant's contention that the assessment herein was issued out of time is erroneous and false as the additional assessments were issued within the statutory 5 years.

24. The Respondent averred that the variations in the amounts demanded is due to the accruing interest which is calculated at 1% per month and that the Appellant has not pointed out which pertinent information was ignored in rendering the objection decision.

25. The Respondent submitted that the Appellant failed to avail documentation as required under Sections 23, 58 and 59 of the Tax Procedures Act, 2015 to support its late invalid objection.

26. The Respondent averred that the objection decision dated the 27th April 2022 is proper based on the information available to the Commissioner.

27. The Respondent in support of its case relied on the cases of Nairobi TAT Appeal No. 55 of 2018 Boleyn International Ltd v Commissioner of Investigations and Enforcement and Primarosa Flowers Ltd v Respondent of Domestic Taxes [2019] Eklr amongst others.

Respondent’s Prayers 28. The Respondent prayed that the Tribunal do find:a.That the objection decision dated 27th April, 2022 confirming additional principal VAT of Kshs. 1,448,997. 28 be upheld.b.That this Appeal be dismissed with costs to the Respondent as the same is without merit.

Issues For Determination 29. The Tribunal has considered the facts of the matter and the submissions made by the parties, and considers the following to be the issues for determination in this matter.a.Whether there is a valid appeal before the Tribunal.b.Whether the Respondent’s assessment was valid and justifiable.

Analysis And Findings 30. Having determined the issues that fall for its determination, the Tribunal proceeds to analyse them as hereunder.a.Whether there is a valid appeal before the Tribunal.

31. The genesis of this Appeal is the VAT additional assessment of Kshs. 1,448,997. 27 issued by the Respondent on 28th December 2021.

32. The Appellant made an objection notice to the assessment on 4th March 2022 whereupon it was requested to avail supporting documents and the Appellant did not comply.

33. The Respondent consequently issued a decision on 27th April 2022 declining to allow the application for late objection. The Appellant aggrieved by the same filed its Notice of Appeal on 8th September 2022.

34. The Tribunal notes that the procedure for appeal as set out in Section 13 (1) (b) of the Tax Appeals Tribunal Act (TAT Act) requires that a Memorandum of Appeal shall be submitted to the Tribunal within thirty days upon receipt of the decision of the Commissioner.

35. The Tribunal also noted that the Appellant is allowed by the law to apply for leave to file its Memorandum of Appeal out of time as required in Section 13 (3) of the TAT Act which provides as follows:“The Tribunal may, upon application in writing or through electronic means, extend the time for filing the notice of appeal and for submitting the documents referred to in subsection (2).”

36. The Tribunal would then have determined whether to expand the time for filing of the Notice of Appeal.

37. The Tribunal is of the considered view that the timelines for appealing the Commissioner’s decisions are clearly set in the law, and taxpayers are liable to comply with the same.In the same vein the Tribunal took into consideration the holding in the case of Nicholas Kiptoo Arap Korir Salat v IEBC & 6 Others [2013] eKLR, where the court held the following in respect to adherence to timeliness: -“This Court, indeed all courts, must never provide succor and cover to parties who exhibit scant respect for rules and timelines. Those rules and timelines serve to make the process of judicial adjudication and determination fair, just, certain and even-handed. Courts cannot aid in the bending or circumventing of rules and a shifting of goal posts for, while it may seem to aid one side, it unfairly harms the innocent party who strives to abide by the rules. I apprehend that it is in the even-handed and dispassionate application of rules that courts give assurance that there is a clear method in the manner in which things are done so that outcomes can be anticipated with a measure of confidence, certainty and clarity where issues of rules and their application are concerned…”

38. Similarly, the High Court in emphasizing the strict application of statutory timelines had this to say in Equity Group Holdings Limited -Vs- Commissioner of Domestic Taxes 2021 (eKLR): -“A statutory edict is not procedural technicality. It’s a law which must be complied with. Parliament in its wisdom expressly and in mandatory terms provided………”

39. The Tribunal is further guided by its holding in the case of W.E.C. Lines Ltd vs. The Commissioner of Domestic Taxes [TAT Case No. 247 of 2020] where it was held at paragraph 70 while reiterating the holding in Krystalline Salt Ltd vs KRA [2019] eKLR that: -“Where there is a clear procedure for redress of any particular grievance prescribed by the constitution or an Act of Parliament, that procedure should be strictly followed. Accordingly, the special procedure provided by any law must be strictly adhered to since there are good reasons for such special procedures. The relevant procedure here is the process of opposing an assessment by the Commissioner.”

40. Based on the foregoing, the Tribunal finds that there is no valid Appeal before it and therefore does not have the jurisdiction to determine the matters raised in the Appeal.

41. Having determined that there is no valid Appeal before it, the Tribunal did not delve into the second issue for determination as it had been rendered moot.

Final Decision 42. The upshot of the foregoing is that the Appeal fails and the Tribunal accordingly proceeds to make the following Orders:a)The Appeal be and is hereby struck out.b)Each party to bear its own costs.

43. It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 26TH DAY OF JANUARY, 2024. GRACE MUKUHACHAIRPERSONDR ERICK KOMOLO JEPHTHAH NJAGI MEMBER MEMBERTIMOTHY VIKIRU GLORIA A. OGAGA MEMBER MEMBER