Mungai v Commissioner of Domestic Taxes [2024] KETAT 1308 (KLR)

Mungai v Commissioner of Domestic Taxes (Miscellaneous Application E045 of 2024) [2024] KETAT 1308 (KLR) (26 July 2024) (Ruling)

Neutral citation: [2024] KETAT 1308 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Miscellaneous Application E045 of 2024

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

July 26, 2024

Between

George Mwangi Mungai

Applicant

and

Commissioner of Domestic Taxes

Respondent

Ruling

1. The Applicant vide a Notice of Motion application dated the 30th day of May, 2024 sought for the following Orders:a.That pending Inter-parties hearing and determination of this application this Tribunal be pleased to set aside whole of Income tax - Rent Income original default assessment of the Respondent totaling to Kshs. 119,488. 00 exclusive of penalties and interest.b.That pending hearing and determination of this application this Tribunal be pleased to set aside whole of Income Tax - Rent Income original default assessment of the Respondent totaling to Kshs 119,488. 00 exclusive of penalties and interest.c.That this Tribunal be pleased to grant the Applicant Leave to Appeal out of time against whole of Income tax - Rent Income original default assessment of the Respondent totaling to Kshs 119,488. 00 exclusive of penalties and interest.d.That in line with prayer 3 above, the draft Memorandum of Appeal annexed herewith be deemed as duly filed and served.e.That this Tribunal be pleased to make any order that it deems fit and just.f.That costs of this Application be on cause.

2. The Application is supported by an Affidavit sworn by George Mwangi Mungai on 30th May, 2024. The Application is premised on the following grounds:a.That the statutory timeline to lodge an Appeal with the Tribunal has lapsed and further during the time to lodge an appeal the Applicant was unwell and critically sick.b.That the Applicant did make a notice for objection application of the Income Tax - Rent Income original default assessments based on what is totally erroneous.c.That if this Application is allowed, the Respondent will not be prejudiced as the taxes being demanded are erroneous and grossly exaggerated.d.That it is in the interest of justice that this Tribunal determines this matter.

3. When this matter came up for directions on 5th June 2024, the Tribunal directed the Respondent to file and serve its response upon service of the application. The matter came for hearing on the 13th June 2024 but the Applicant was not represented therefore, the matter was adjourned to 20th June 2024. When the matter came up for hearing on 20th June 2024, the parties were both represented and agreed to proceed by way of written submissions. Upon perusing the file, the Tribunal notes that the Respondent did not file a response to the Application and that the parties did not file written submissions.

Analysis And Findings 4. The Applicant seeks leave to file the appeal out of time. Section 13(3) of the Tax Appeals Tribunal Act, CAP 469A of the Laws of Kenya (hereinafter “TATA”) donates the power to expand time for filing an appeal. It provides as follows: “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).”

5. Section 13(4) of the TATA is key to this Application and provides that, ‘‘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.’’

6. Rule 10 of the Tax Appeals Tribunal (Procedure) Rules, 2015 reiterates the foregoing statutory provision in the following terms: “(3) The Tribunal may grant the extension of time if it is satisfied that the Applicant was unable to submit the documents in time for the following reasons –(a)Absence from Kenya;(b)Sickness; or(c)Any other reasonable cause.”

7. Pursuant to the provisions of section 13 (3) of TATA and Rule 10 of the Tax Appeals Tribunal (Procedure) Rules, 2015, the power to extend time is discretionary and not a right to be granted to the Applicant.

8. The Supreme Court in Nicholas Kiptoo Arap Korir Salat v Independent Electoral and Boundaries Commission & 7 others [2014] eKLR set out general considerations to guide the court in exercising its discretion in cases of this nature. It stated as follows:“i.Extension of time is not a right of a party. It is an equitable remedy that is only available to a deserving party at the discretion of the court;ii.A party who seeks for extension of time has the burden of laying a basis to the satisfaction of the court;iii.Whether the court should exercise the discretion to extend time, is a consideration to be made on a case-to-case basis;iv.Whether there is a reasonable reason for the delay. The delay should be explained to the satisfaction of the court;v.Whether there will be any prejudice suffered by the respondents if the extension is granted;vi.Whether the application has been brought without undue delay; andvii.Whether in certain cases, like election petitions, public interest should be a consideration for extending time."

9. In Leo Sila Mutiso vs Rose Hellen Wangari Mwangi, Civil Application No. 251 of 1997 the Court had the following to say about extension of time to file an appeal: “It is now settled that the decision whether to extend the time for appealing is essentially discretionary. It is also well stated 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 reasons 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.”

10. In Wasike v Swala [1984] KLR 591 the court provided a hierarchy of the factors to consider when it stated that: “An applicant must now show, in descending scale of importance, the following factors: -(a)That there is merit in his appeal.(b)That the extension of time to institute and/or file the appeal will not cause undue prejudice to the respondent; and(c)That the delay has not been inordinate.”

11. The Tribunal is well guided by the provisions of section 13 (4) of the TATA, and principles as set in Nicholas Kiptoo Arap Korir Salat v Independent Electoral and Boundaries Commission & 7 others [2014] e KLR, Leo Sila Mutiso vs Rose Hellen Wangari Mwangi, Civil Application No. 251 of 1997 and Wasike v Swala [1984] KLR 591. Those principles are analysed below.

(a) Whether there is a reasonable cause for the delay. 12. While dealing with the reasonable cause, the Court in National Union of Mineworkers v Council for Mineral Technology [1998] ZALAC 22 the court at paragraph 10 stated as follows:‘‘…There is a further principle which is applied and that is that without a reasonable and acceptable explanation for the delay, the prospects of success are immaterial, and without prospects of success, no matter how good the explanation for the delay, an application for condonation should be refused.”

13. In the instant application, the Applicant argued that it did not file the appeal within the stipulated time due to sickness. It annexed medical records to that effect. Under section 13(4) of the TATA, an application for extension of time maybe granted on account of sickness.

(b) Whether the delay is inordinate. 14. This Tribunal has held that leave to file an appeal out of time can be granted even when the delay is inordinate provided that the delay is explained satisfactorily. In Joseph Odide Walome v David Mbadi Akello [2022] eKLR the Court had the following to say about this issue:‘Where a party is aggrieved and wishes to pursue an appeal, it would be fair to exercise discretion in his favour and especially where the delay in filing the appeal is not inordinate or even if the delay is inordinate, it is explained to the satisfaction of the court and the adverse party will not be prejudiced in any way.’

15. The Applicant argued that he delayed to lodge the appeal owing to sickness. The Tribunal is of the view that the delay is well explained.

(c) Whether there is merit in this Appeal. 16. In Wasike v Swala [1984] KLR 591 (supra) the Court stated that it is important to find out whether the intended appeal has merit. Apart from that, in the case of Samuel Mwaura Muthumbi v Josephine Wanjiru Ngungi & Another (2018) eKLR the court stated as follows regarding this issue: “Looking at the draft Memorandum of Appeal filed, I am unable to say that the intended Appeal is in arguable. Of course, all the Applicants have to show at this stage is arguability- not high probability of success. At this point the Applicant is not required to persuade the Appellate court that the intended or filed appeal has a high probability of success. All one is required to demonstrate is the arguability of the Appeal, a demonstration that the Applicant has plausible grounds of either facts or law to overturn the original verdict. The Applicants have easily met that standard. I believe that the Applicant has discharged this burden.”

17. Further, in Stanley Kangethe Kinyanjui v Tony Keter and others (2013) eKLR, the Court had the following to say about the arguabilty of appeal:“On whether the appeal is arguable, it is sufficient if a single bonafide ground of appeal is raised, an arguable appeal is not one which must necessarily succeed, but one which ought to be argued fully before the court: one which is not frivolous.”

18. Pursuant to the foregoing precedents, the Tribunal has to test whether the matter under dispute is frivolous or whether there are material facts that deserve to be heard and determined.

19. One of the grounds of appeal in the memorandum of appeal is that the Applicant had not met the threshold to file and pay for Monthly Rental Income (MRI). The Tribunal is of the view that this allegation is worth examining further. Therefore, the intended appeal is arguable.

(d) Whether the Respondent will be prejudiced if time is enlarged. 20. Prior to granting an Applicant leave to file appeal out of time, the Tribunal has to evaluate whether the Respondent would be prejudiced. In Edith Gichungu Koine v Stephen Njagi Thoithi [2014] eKLR the court held that, ‘…the degree of prejudice to Respondent if the application is granted should be considered.’’ Further, in Patrick Maina Mwangi v Waweru Peter [2015] eKLR the Court quoted the finding in United Arab Emirates v Abdel Ghafar & Others 1995 IR LR 243 and stated as follows: ‘‘a plaintiff should not in the ordinary way be denied an adjudication of his claim on its merits because of a procedural default, unless the default causes prejudice to his opponent for which an award of cost cannot compensate.”

21. The Respondent in this matter did not file a replying affidavit therefore, there is no evidence that the Respondent would be prejudiced if the Applicant is allowed to file the Appeal out of time. Further, the Respondent will not be prejudiced if this Tribunal allows the Application because the Respondent will still recover the taxes if the Tribunal finds that the Applicant is liable.

22. Due to the foregoing analysis, the Tribunal is persuaded to grant leave to the Applicant to file the Appeal out of time.

Disposition 23. Given the foregoing, the Application is meritorious and the Tribunal accordingly proceeds to make the following Orders: -a.That leave be and is hereby granted to the Applicant to file its Notice of Appeal, Memorandum of Appeal, Statement of Facts and Tax Decision out of time;b.The Applicant to file and serve its Notice of Appeal, Memorandum of Appeal and Statement of Facts within 14 days of this Ruling;c.The Respondent to file and serve its Statement of Facts within Thirty (30) days of the date of being served with the record of Appeal.d.No orders as to costs.

24. 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