M’Rinyiru v Commissioner of Domestic Taxes [2024] KETAT 624 (KLR)

M’Rinyiru v Commissioner of Domestic Taxes (Tax Appeal E896 of 2023) [2024] KETAT 624 (KLR) (22 March 2024) (Ruling)

Neutral citation: [2024] KETAT 624 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal E896 of 2023

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

March 22, 2024

Between

Eunice Mpinda M’Rinyiru

Appellant

and

Commissioner Of Domestic Taxes

Respondent

Ruling

1. The Appellant moved the Tribunal vide a Notice of Motion application dated 6th December 2023 and filed on 13th December 2023 and supported by an Affidavit sworn by the Applicant, herself, on the ….seeking the following Order: -a.Spent.b.That this Honourable Tribunal be pleased to lift the Agency notice dated 30th November 2023 sent to Kenya Commercial Bank as against the Appellant.c.That the Honourable Tribunal do further grant leave to the Appellant to file an Appeal out of time.d.That the Memorandum of Appeal and Statement of Facts annexed to this application be deemed to have been filed and served.e.That the Appellant be at liberty to apply for further orders and the Honourable Tribunal do give any and/or any directions it deems fit and just to grant in the circumstances.f.That costs of this application be in the cause.

2. The application is premised on the grounds, that: -i.The Appellant is a sole proprietor based in Meru County and carrying out business within the Republic of Kenya.ii.The Respondent’s issued an additional VAT assessment and the Appellant objected on 21st September 2022. iii.The Appellant’s Objection has since been rejected and the assessment confirmed vide a correspondence dated 8th November 2022. iv.The Appellant has been served with an Agency notice dated 30th November 2023 sent to her bankers, Kenya Commercial Bank.v.Over and above, statutorily, the Appellant is out of time within which she ought to have lodged her Notice of Appeal and substantive Appeal therefore occasioning the instant application.vi.The Objection decision is an appealable tax decision since the Appellant is not in any way indebted to the Respondent as per the tax decision it arrived at.

3. The Respondent though directed to file a response to the application, did not file its response and therefore the application is not opposed.

4. The Tribunal vide the orders made on 14th December 2023 directed that the application be canvassed by way of written submissions, however, neither party filed their respective submissions.

Analysis and Findings 5. The Applicant’s application seeks for order to lift the Agency Notice dated 30th November 2023 placed on the Applicant’s bankers Kenya Commercial Bank, further, for leave of extension of time to file Appeal out of time to the Respondent’s decision issued on 8th November 2022.

6. The power of the Tribunal to deal with an application of this nature is outlined under Section 13 (3) and (4) of the Tax Appeals Tribunal Act, which provide that:“(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).”“(4)An extension under subsection (3) may 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.”

7. The Appellant relied on the ground of ‘sickness’, and provided medical documents dated 4th December 2023 from GreenWood Cottage Community Hospital, which indicated that she had been undergoing intensive treatment since November 2022. That the medical condition caused the Appellant to be away from work for a period of over 8 months since the aforesaid period.

8. Accordingly, the Tribunal finds that the application is based on the ground as provided under the provisions of Section 13 (4) of the TAT Act and that the reason advanced by the Appellant is reasonable to warrant the granting of the order sought.

9. That consequently, the Tribunal deems the Appellant’s Notice of Appeal,Memorandum of Appeal, Statement of Facts, Tax decision and appeal documents to be properly filed and served.

10. The Agency Notices placed with the Appellant’s bankers Kenya Commercial Bank is an enforcement mechanism available to the Respondent in the process of tax collection. Whereas the Respondent is mandated in law to issue Agency Notices in efforts to recover taxes that are due, the law underSection 42 (14) of the TPA provides for a limitation to the same. Section 42 (14) of the Tax Procedures Act, provides that:-“The Commissioner shall not issue a notice under this section unless—a.the taxpayer has defaulted in paying an instalment under section 33(2);b.the Commissioner has raised an assessment and the taxpayer has not objected to or challenged the validity of the assessment within the prescribed period;c.the taxpayer has not appealed against an assessment specified in an objection decision within the prescribed timelines;d.the taxpayer has made a self-assessment and submitted a return but has not paid the taxes due before the due date lapsed; ore.the taxpayer has not appealed against an assessment specified in a decision of the Tribunal or court.” (Emphasis added)

11. It therefore follows that upon the lodging of a valid or proper Appeal before the Tribunal, the Respondent is precluded from issuing and enforcing agency notices in recovery of taxes pending the hearing and determination of the Appeal.

12. The Tribunal noted that the Appellant lodged its Notice of Appeal, Memorandum of Appeal, Statement of Facts and the Tax decision as provided under Section 13 of the TAT.

13. The Tribunal in its analysis herein above has found the Appellant’s Appeal to be properly filed and served, therefore there is a valid Appeal on record for the Tribunal to exercise its jurisdiction over.

14. Accordingly, once an Appellant has lodged its Appeal before the Tribunal relating to a dispute on assessed taxes, by law the Respondent is retrained from employing any mechanisms in recovery of the said taxes, including, but not limited to Agency notices pending the hearing and determination of the Appeal.

15. The Tribunal had issued interim orders on the 14th December 2023 against the enforcement of the Agency notices against the Appellant’s bankers dated 30th November 2023, on a balance of convenience, the Tribunal finds that the Applicant has advanced sufficient grounds to warrant the Tribunal to interfere with the enforcement process.

16. The Respondent submitted that it shall suffer prejudice if leave is granted, but has not demonstrated how it would suffer any prejudice.

17. It is the Tribunal’s considered view, that the Respondent shall not suffer any prejudice under the circumstances.

18. Consequently, the application is merited and therefore succeeds.

Disposition 19. Anchored on the afore mentioned, the Tribunal finds that the application is merited and accordingly makes the following orders: -a.The Appellant be and is hereby granted leave to file the Appeal out of time.b.The Notice of Appeal, Memorandum of Appeal, Statement of Facts dated and tax decision filed on 6th December 2023 be and are hereby deemed as properly filed and served.c.The Respondent to file and serve its Statement of Facts within Thirty (30) days of the date of delivery of this Ruling.d.That the Agency notices issued on the 30th November 2023 upon the Appellant’s bankers, Kenya Commercial Bank, are hereby lifted unconditionally.e.No orders as to costs.

20. It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 22ND DAY OF MARCH, 2024. ERIC NYONGESA WAFULA - CHAIRMANMUTISO MAKAU - MEMBERELISHAH N. NJERU - MEMBEREUNICE N. NG’ANG’A - MEMBERABRAHAM K. KIPROTICH - MEMBER