Ouko v Commissioner of Domestic Taxes [2023] KETAT 892 (KLR)

Ouko v Commissioner of Domestic Taxes (Appeal 1527 of 2022) [2023] KETAT 892 (KLR) (8 December 2023) (Judgment)

Neutral citation: [2023] KETAT 892 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Appeal 1527 of 2022

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

December 8, 2023

Between

George Aggrey Ouko

Appellant

and

Commissioner Of Domestic Taxes

Respondent

Judgment

Background 1. The Appellant is an individual trading under the business name Kericho Tractors 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. Under Section 5 (1) of the Act, the Kenya Revenue Authority is an agency of the Government for the collection and receipt of all revenue. Further, 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 Part 1 & 2 of the First Schedule to the Act for the purposes of assessing, collecting and accounting for all revenues in accordance with those laws.

3. The Respondent issued the Appellant with VAT additional assessments of Kshs. 617,775. 04 on 7th December 2020 for the period December 2017.

4. The Appellant lodged a notice of objection via Itax on 9th December 2020 and received acknowledgement receipt No. KRA202020971588.

5. The Respondent issued an objection decision on 5th February 2021 confirming the VAT additional assessments.

6. The Appellant being dissatisfied with the Respondent’s decision filed its Notice of Appeal on the 16th December 2022.

The Appeal 7. The Appeal as stated in the Memorandum of Appeal filed on 16th December 2022 was premised on the following grounds: -a.That the Respondent erred in its decision to issue the Appellant with additional tax assessment in respect of VAT for December 2017. b.That the assessor erroneously assessed tax on VAT for the period December 2017.

Appellant’s Case 8. The Appellant’s case is premised on its Statement of Facts filed on 16th December 2022.

9. The Appellant averred that the Respondent erred in assessments of VAT for the period December 2017 through an additional assessment.

10. That the Respondent raised additional assessment on 7th December 2020 to which the Appellant objected on 9th December 2020.

11. That the income for the period from January 2017 to December 2017 is shown as follows:-

12. That based on the above, the resulting incomes were declared correctly and the issued VAT ETR receipts.

13. That the following schedules were attached to show the workings thereof: Schedule 1: Banking analysis for the year ended 31st December 2017

Schedule 2: Summary of the invoices issued for the year ended 31st December 2017

Schedule 2 A: January to December 2-17 Invoices issued for Finlays

Schedule 2 B: January to December 2-17 Invoices issued for Unilever

Schedule 3: Z-Reports for the months from January 2017 to December 2017

Schedule 4: Summary of VAT sales for the months from January 2017 to December 2017

14. The Appellant averred that the Respondent confirmed the assessment on 5th February 2021 disregarding the taxpayer’s objections to the same.

Appellant’s prayers 15. The Appellant prayed that the Tribunal orders as follows: -i.The Respondent to vacate the assessment of VAT for the year 2017 so as to reflect the correct state of the account.ii.The Respondent to vacate the penalties and interest accrued due to the additional assessment.

Respondent’s Case 16. The Respondent neither filed its Statement of Facts nor submissions despite being given time to do so. The Tribunal therefore proceeded on the basis of the Appellant’s pleadings.

Issues For Determination 17. The Tribunal having carefully considered the Appellant’s pleadings and documentation attached thereto, determines that the issues that call for its determination are: -a)Whether there is a valid Appeal before the Tribunalb)Whether the Respondent’s Objection decision was justified.

Analysis And Determination a. Whether there is a valid Appeal before the Tribunal 18. The Tribunal’s record indicate that the Appellant filed its Notice of Appeal on 16th December 2022 against an objection decision rendered on 5th February 2021.

19. The Appellant’s Notice of Appeal was filed more than 20 months after the objection decision was rendered, this contravenes Section 13(1)(b) of the TAT Act which provides that: -“13. Procedure for appeal(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.”

20. The objection decision having been issued on 5th February 2021, the Appellant ought to have lodged a Notice of Appeal within thirty days upon receipt of the Respondent’s decision.

21. The Tribunal further noted from the documents filed by the Appellant that, there was no evidence of the Appellant seeking for leave to file the Notice of Appeal and its appeal documents out of time.

22. For a taxpayer who has not filed its appeal in time, the law provides under Section 13(3) and (4) of the TAT Act the procedure for the taxpayer to remedy the same. The Sections provides as follows: -“(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.”

23. Section 13 of the TAT Act, by using the word “shall” makes it mandatory that the Notice of Appeal must be filed within 30 days after being served with the Objection decision. Failure to do so is fatal and can only be cured by seeking, and obtaining, leave from the Tribunal to file the same outside the stipulated time period. Whereas Section 13(3) and (4) provided the Appellant with the avenue for seeking enlargement of time and thus regularizing the Appeal, this avenue was not exercised by the Appellant.

24. Having carefully reviewed the Appellant’s Appeal documents, the Tribunal confirms that the Appeal was lodged on 16th December 2022 over one and a half years outside the mandatory period without leave from the Tribunal.

25. The Tribunal is guided by the holding in Misc. Application No. 18 of 2019 Nanasai Logistics Ltd v Commissioner of Domestic Taxes. It was held as follows:“..the Appellant is guilty of latches in filing the Notice of Appeal that was filed on the 6th day of December 2018. The Notice of Appeal was filed in complete disregard and contravention of the provisions of section 13(1) of the Tax Appeals Tribunal Act that provides for filing of the Notice of Appeal within 30 days of the issuance of the tax decision.”

26. The Tribunal recognizes that jurisdiction is a very weighty matter and which ought to be dispensed with in the first instance due to the fact that without jurisdiction the Tribunal would be acting ultra vires. In Patrick Kirunja Kithinji-vs-Victor Mugira Marete Nairobi CA Civil Appeal No. 48 012014, the Court held as follows:“In our view whether or not an appeal is filed on time goes to the jurisdiction of this Court. It is trite that this Court has jurisdiction to entertain appeals filed within the requisite time and/or appeals filed out of time with leave of the Court. To hold otherwise would upset the established clear principles of institution of an appeal in this Court. Consequently, we find that an appeal filed out of time is not curable under Article 159. ”

27. In the case of The Owners of the Motor Vessel “Lillian S”-vs-Caltex Oil (Kenya) Ltd (1989) KLR (as reported in Peter Lai Muthoka-vs-Standard Group [2017] eKLR) Nyarangi J.A., held as follows with regard to jurisdiction:-“Jurisdiction is everything. Without it, a court has no power to make one more step. Where a court has no jurisdiction, there would be no basis for a continuation of proceedings pending other evidence. A court of law downs tools in respect of the matter before it the moment it holds the opinion that it is without jurisdiction.”

28. Flowing from the above, this Tribunal finds that this Appeal was filed out of time without seeking and obtaining prior leave of the Tribunal. The Appeal is thus found to be defective for being in contravention of the law and hence the Tribunal lacks the requisite jurisdiction to hear and determine the same.

b. Whether the Respondent’s Objection decision was justified 29. Having entered the above finding, the Tribunal did not delve into the second issue that fell for its determination as it had been rendered moot.

Final Decision 30. Based on the foregoing analysis the Tribunal has determined that the Appeal is incompetent and unsustainable in law. The Orders that accordingly commend themselves are as follows: -a.The Appeal be and is hereby struck out.b.Each party to bear its own costs.

31. It is so ordered

DATED AND DELIVERED AT NAIROBI THIS 8THDAY OF DECEMBER, 2023. GRACE MUKUHACHAIRPERSONGLORIA A. OGAGAMEMBERJEPHTHAH NJAGIMEMBERDR. ERICK KOMOLOMEMBERTIMOTHY VIKIRUMEMBER