Kigwa Conference Hotel Ltd v Commissioner of Domestic Taxes [2024] KETAT 547 (KLR)

Kigwa Conference Hotel Ltd v Commissioner of Domestic Taxes (Tax Appeal 21 of 2023) [2024] KETAT 547 (KLR) (26 April 2024) (Judgment)

Neutral citation: [2024] KETAT 547 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal 21 of 2023

E.N Wafula, Chair, Cynthia B. Mayaka, RO Oluoch, T Vikiru & AK Kiprotich, Members

April 26, 2024

Between

Kigwa Conference Hotel Ltd

Appellant

and

Commissioner of Domestic Taxes

Respondent

Judgment

1. The Appellant was established in Kenya on 31st December, 2011 and registered as a private limited liability company whose principal business activity is hospitality.

2. The Respondent is a principal officer appointed under and in accordance with Section 13 of the Kenya Revenue Authority Act, and the Kenya Revenue Authority is charged with the responsibility of among others, assessment, collection, accounting and the general administration of tax revenue on behalf of the Government of Kenya.

3. The Respondent issued an assessment dated 3rd April, 2020 for VAT and Corporation tax amounting to Kshs. 222,414,091. 00.

4. The Appellant lodged a notice of objection dated 24th April, 2020 objecting to the Respondent's assessment.

5. The Respondent confirmed its assessment through its objection decision dated 22nd November, 2022.

6. The Appellant being dissatisfied with the Respondent’s objection decision lodged a Notice of Appeal dated and filed on 19th December, 2022.

The Appeal 7. The Appeal is premised on the following grounds as stated in the Memorandum of Appeal dated 9th January, 2023 and filed on 10th January, 2023:i.That the objection decision is not valid according to the provisions of Section 51(3) a of the Tax Procedures Act No. 29 of 2015. ii.That the Respondent erred in law in disallowing capital allowances which amounted to the assessment.iii.That the Respondent acted contrary to the provisions of Article 47 of the Kenya Constitution by raising additional tax assessments and in arriving at the objection decision without according the taxpayer a fair hearing.

Appellant’s Case 8. The Appellant’s case is premised on its Statement of Facts dated 9th January, 2023 and filed on 10th January, 2023 together with the documents attached thereto.

9. That on 3rd April, 2020, the Respondent issued an assessment demand notice for Kshs. 122,401,118. 00 for December 2017, inclusive of penalties and interests for VAT and Kshs. 100,012,973. 00 for year 2017, inclusive of penalties and interests for annual income tax, respectively. That however, this assessment was objected using the iTax online portal.

10. That on 22nd November, 2022, the Respondent issued an objection decision. That it should be noted that the decision was issued on contrary ground of not being accorded fair hearing.

11. That the Appellant provided an Advocate’s confirmation on source of funds.

Appellant’s Prayers 12. The Appellant prayed for orders that:i.The decision and subsequent confirmation of the Respondent to levy additional taxes upon the Appellant be set aside;ii.The Commissioner be compelled from effecting any enforcement actions against the Appellant.iii.The cost of and incidental to this Appeal be hereby awarded to the Appellant; andiv.Such other, further, incidental, alternative and /or consequential orders or reliefs as the Honorable Tribunal may deem just and expedient.

Respondent’s Case 13. The Respondent’s case is premised on its Statement of Facts dated 9th February, 2023 and filed on the same date together with the documents attached thereto.

14. That Section 24 of the Tax Procedures Act, 2015 allows a taxpayer to submit tax returns in the approved form and manner prescribed by the Respondent but the Respondent is not bound by the information provided therein and can assess for additional taxes based on any other available information.

15. That the Appellant herein filed self-assessment of nil returns despite the fact that the directors had injected a capital of Kshs. 392,988,701. 00.

16. That the Appellant argued that the amount was compensation from land used by the Government. The Respondent averred that the said compensation was paid in 2010/2011 whereas the capital injection was done in 2016/2017 period and was more than the said compensation.

17. That further, the Respondent, under Section 59(1) of the Tax Procedures Act, 2015 requested production of additional documents via email correspondence as deemed necessary in determination of tax liability.

18. That the Appellant despite the Respondent's request for documents to clarify its position failed to provide the additional documents.

19. That therefore, the Respondent concluded that the Appellant was unable to provide evidence to the contrary hence the capital injection was treated as undeclared income.

20. That the Respondent arrived at its decision supported by Section 29 of the Tax Procedures Act, 2015 and the Appellant's failure to provide full income declaration and requested documents.

21. That the objection decision dated 22nd November, 2022 is proper and the Appellant's Appeal herein should be dismissed with costs to the Respondent.

22. That the Respondent is guided by Section 56(1) of the Tax Procedures Act which provides that:“In any proceedings under this Part, the burden shall be on the taxpayer to prove that a tax decision is incorrect.”

Respondent’s Prayers 23. The Respondent prayed that this Tribunal:i.Upholds the Respondent's Objection decision dated 22nd November, 2022. ii.That this Appeal be dismissed with costs to the Respondent as the same is devoid any merit.

Issues For Determination 24. The Tribunal has carefully considered the pleadings and documentation filed by both parties and is of the view that the issues falling for its determination are:i.Whether there is a valid appeal before the Tribunal?ii.Whether the Respondent issued an invalidation of the Appellant’s objection and whether it was proper in law.iii.Whether the Respondent was justified in confirming the assessment

Analysis And Findings 25. The Tribunal having established the issues for its determination, proceeded to analyse the same as hereunder. The parties having failed to comply with the directions on filing of written submissions proceeded on basis of pleadings as filed on their separate parts.i.Whether there a valid appeal before the Tribunal?

26. The Tribunal gleaned through the Appellant’s pleadings and noted that the Appellant filed its Notice of Appeal on 19th December, 2022 and its Memorandum of Appeal on 10th January, 2023:

27. Section 13 of the Tax Appeals Tribunal Act provides as follows regarding timelines for filing of appeals:“(1)A notice of appeal to the Tribunal shall—(a)be in writing;(b)be submitted to the Tribunal within thirty days upon receipt of the decision of the Commissioner.(2)The appellant shall, within fourteen days from the date of filing the notice of appeal, submit enough copies, as may be advised by the clerk Tribunal, of—(a)a memorandum of appeal;(b)statements of facts; and(c)the tax decision.(3)The Tribunal may, upon application in writing, extend the time for filing the notice of appeal and for submitting the documents referred to in subsection (2).”

28. While the Notice of Appeal by the Appellant was filed in time, its Memorandum of Appeal did not comply with Section 13(2) of the Tax Appeals Tribunal Act.

29. In the instant case, the 14 day timeline envisaged by the Act started running on 19th December, 2022 and therefore the deadline for filing of the Memorandum of Appeal and Statement of Facts fell on 2nd January 2023. It is apparent therefore that the appeal documents as filed by the Appellant on 10th January, 2023 were late and contrary to the provisions of Section 13(2) of the Tax Appeals Tribunal Act.

30. As a result of the foregoing, the Tribunal finds that the instant Appeal is incompetent and unsustainable in law.

31. The Tribunal, having found that the Appeal before it is incompetent, did not delve into the other issues for its determination as they were rendered moot.

Final Decision 32. The upshot of the foregoing is that the Appeal fails and consequently, the Tribunal makes the following Orders: -a.The Appeal be and is hereby struck out.b.The Respondent’s Objection decision dated 22nd November, 2022 be and is hereby upheldc.Each Party to bear its own costs.

33. It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 26THDAY OF APRIL, 2024ERIC NYONGESA WAFULACHAIRMANCYNTHIA B. MAYAKA DR. RODNEY O. OLUOCHMEMBER MEMBERTIMOTHY B. VIKIRU ABRAHAM K. KIPROTICHMEMBER MEMBER