Toyo Construction Limited v Commissioner of Domestic Taxes [2024] KETAT 1291 (KLR)

Toyo Construction Limited v Commissioner of Domestic Taxes (Tribunal Appeal E604 of 2023) [2024] KETAT 1291 (KLR) (23 August 2024) (Ruling)

Neutral citation: [2024] KETAT 1291 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tribunal Appeal E604 of 2023

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

August 23, 2024

Between

Toyo Construction Limited

Appellant

and

Commissioner of Domestic Taxes

Respondent

Ruling

Background 1. The Appellant moved the Tribunal by way of a Notice of Motion dated 8th May 2024 and supported by an Affidavit sworn by Joshua Kenga, the tax agent on record for the Appellant, on the even date, seeking for the following Orders: -a.Spent.b.That the Tribunal be pleased to grant the Appellant leave to file an amended Memorandum of Appeal and Statement of Facts pending the filing of its witness statement for hearing and determination of the main Appeal.c.That the Tribunal be pleased to extend the time for filing the amended Memorandum of Appeal and Statement of Facts.d.The cost of the application be in the cause.

2. The Application was premised on the following grounds: -a.That the matter was fixed for Mention on 9th May 2024 to confirm whether the parties have filed their respective witness statements and for further directions on hearing.b.That while preparing its witness statement the Appellant received information that the ruling delivered in Petition No. E280 of 2021, Eliud Karanja Matindi Vs Cabinet Secretary - National Treasury, Commissioner General Kenya Revenue Authority. Attorney General, National Assembly and Speaker of National Assembly had been stayed by the Court of Appeal which information was not available to the Appellant at the time of lodging the Appeal.c.That with the new development it is prudent for the Appellant to first amend its Memorandum of Appeal and Statement of Facts to reflect the correct position of the matter as well as file additional supporting documents before preparing the witness statement.d.That the amendments would allow the Tribunal to clearly articulate and appreciate the matters in issue in the Appeal.e.That the Application has been brought at the earliest time possible for the Tribunal’s consideration and determination.f.That the urgency that then suffices is that the Appellant herein is desirous of having a judgment wherein its pleadings including its proposed amended Memorandum of Appeal and Statement of Facts have been considered as required by the rules of substantive justice.g.That the Appellant herein was apprehensive that if the Application is not allowed, the Tribunal will not appreciate the crux of the matter and as such is desirous that the Tribunal looks at the Appellant’s application and makes a determination of this Application.h.That unless the Tribunal certifies the Application as urgent and Orders the Appellant to file the amended Memorandum of Appeal and statement of facts within twenty-one (21) days the Appellant herein was in danger of suffering irreparable harm to its access to justice where this Honorable Tribunal issues a decision without appreciating the facts of the case.i.That there was no prejudice that would be suffered by the Respondent if the Application is allowed.j.That the Application was made without inordinate delay considering that both parties have not filed their respective witness statements, and the matter is yet to be fixed for hearing.k.That it was in the interest of justice that the Appellant be granted an opportunity to be heard on merits on its Appeal.l.That the Appellant was desirous of prosecuting its case in this Appeal vide the Amended Memorandum of Appeal and statement of facts and documents filed.m.That the Tribunal has jurisdiction to grant the orders sought.

3. The Respondent in reply to the Application filed a Replying Affidavit sworn by Eric Mwangi, an officer of the Respondent, on the 28th day of May 2024 in which the Respondent raised the following grounds in opposition to the application: -i.That the document the Appellant intends to introduce before this Tribunal has no bearing whatsoever on the Appeal before the Tribunal.(ii)That the intended documents if allowed will subject the Tribunal to interpreting the decision of the Court of Appeal which the Tribunal lacks jurisdiction to interpret.(iii)That the Application is ill intended and meant to forestall the ongoing proceedings at the Tribunal.(iv)That the intended documents did not have any probative value to the Appeal before the Tribunal and hence a waste of the Tribunal's precious time.(v)That the Appellant further had an opportunity to present the said documents while attempting Alternative Dispute Resolution however they failed to.(v)That the Application to adduce additional documents is aimed at strengthening Appellant’s case which if allowed will be prejudicial to the Respondent's case yet the Respondent did not have a chance to review the same during the objection review stage.(vi)That the Respondent and the Tribunal ought not be slowed down by the Appellant’s Application.(vii)That the Appellant has not given a cogent explanation on how the document if allowed will affect the current dispute.(viii)That the intended document's validity was bound to expire in a month’s time and will not have any implication on the ongoing case save to stall the process.(ix)That the Application is calculated at unnecessarily delaying the hearing and determination of the matter pursuant to directions already issued by the Tribunal.

Appellant’s Submissions 4. The Appellant’s submission identified the following issues for determination which it analysed as follows:

(i)Whether the Appellant’s application is merited. 5. The Appellant submitted that the Respondent's additional assessment was based on the decision of the High Court in Petition No. E280 of 2021, Eliud Karanja Matindi vs. Cabinet Secretary - National Treasury, Commissioner General - Kenya Revenue Authority, Attorney General, National Assembly, and Speaker of the National Assembly.

6. The Appellant asserted that the documents it sought to introduce before the Tribunal included the Court of Appeal’s ruling on the stay of execution of the High Court’s judgment, which was the basis for the current assessment.

7. The Appellant further submitted that the additional documents were highly relevant to this matter and would demonstrate that the Appellant dutifully discharged its tax obligations in accordance with the law.

8. It was the Appellant’s submission that, since in tax disputes the burden of proof initially rests on the taxpayer to show that the Commissioner's assessment is incorrect, the taxpayer should be allowed to produce all relevant documents that establish their true tax obligation or lack thereof.

9. It was also the Appellant’s submission that the production of relevant and sufficient supporting evidence to the Commissioner at any stage of the proceedings, or during any communications and interaction with the Commissioner, while he was conducting an audit, investigation, or independent review, is evidence that ought to also be brought to light before the Tribunal.

10. The Appellant further submitted the new documents that it intended to file were not available at the time of filing the Appeal as the Court of Appeal ruling in Petition No. E280 of 2021, Eliud Karanja Matindi vs. Cabinet Secretary - National Treasury, Commissioner General - Kenya Revenue Authority, Attorney General, National Assembly, and Speaker of the National Assembly was delivered on 19th December 2023 whereas the appeal was filed in September 2023.

11. The Appellant contended that nothing prevented the Tribunal from considering documents and evidence produced after an objection decision has been issued. Being a court of first instance, the Tribunal has the jurisdiction to consider all facts before it, which can only be established by placing all relevant evidence on record.

12. The Appellant in fortifying its position relied on the following authorities; TAT Appeal No. 304 of 2019- Pevani East Africa v Commissioner of Domestic Taxes.

TAT Appeal No. 572 of 2021- Incentro Africa Limited v Commissioner of Domestic Taxes.

TAT Appeal No. 284 of 2019- Tullow Kenya BV v Commissioner of Domestic Taxes.

(ii)Whether the documents sought to be filed by the Appellant will prejudice the Respondent in any way. 13. On this issue, the Appellant submitted that the Respondent would not be prejudiced in anyway if the instant application is allowed and further, the Tribunal may grant the Respondent corresponding leave to file a Supplementary Statement of Facts in reply if need be.

14. The Appellant further submitted that it had not introduced a new issue or ground of Appeal which the Respondent was a stranger to in the instant Application.

15. The Appellant also submitted that the Appeal was yet to be heard and that the Respondent was in possession of the documents and therefore had an opportunity to review and interrogate the documents that will be filed ahead of the hearing.

16. The Appellant asserted that the Respondent did not demonstrate how it would be prejudiced if the Appellant's application is allowed, especially since the matter has not yet proceeded to hearing.

17. The Appellant therefore urged the Tribunal to find that its Application dated 6th May 2024 was merited and the same be allowed and the Appellant be granted leave to file its Supplementary Statement of Facts, and the accompanying documents annexed to its application.

Respondent’s Submissions 18. The Respondent did not file any submissions in respect to the instant application.

Analysis And Findings 19. The Tribunal is to determine whether the Appellant should be granted leave to file an amended Memorandum of Appeal and a Supplementary Statement of Facts together with the accompanying documents. The Appellant in its Application relied on Section 13(6) of the Tax Appeals Tribunal Act, CAP 469B of Kenya’s Laws (hereinafter “TATA”) and Rules 10 and 21 of the Tax Appeals Tribunal (Procedure) Rules 2015.

20. Rule 21 of the Tax Appeals Tribunal (Procedure) Ruler 2015, provides as follows:“A party may at any time before the closure of the case, orally apply to amend its pleadings and the Tribunal may, at its discretion, allow such application on such terms and conditions including granting leave to the other party to amend its pleadings provided the amendments do not raise new issues"

21. The Tribunal notes that the Respondent was opposed to the instant Application on the basis that it would be prejudicial to its case as the documents were new and were never produced in the first instance and that the Respondent did not have an opportunity to consider them in its objection decision. The Respondent also stated that the documents intended to be produced have no probative value.

22. The Tribunal however notes that the documents the Appellant wished to introduce were not available at the time of filing the appeal as the Court of Appeal ruling in Petition No. E280 of 2021, Eliud Karanja Matindi Vs Cabinet Secretary - National Treasury. Commissioner General Kenya Revenue Authority. Attorney General, National Assembly and Speaker of National Assembly was delivered on 19th December 2023 whereas the Appeal was filed in September 2023.

23. The Tribunal has had several opportunities to consider similar applications. The Tribunal is prompted in the circumstances to reiterate its finding in the Ruling delivered in TAT No. 411 of 2018 Registered Trustees of the Agricultural Society of Kenya Vs. Commissioner of Domestic Taxes when it stated as follows: -“The Tribunal is of the considered view the Tribunal ought to be concerned more with administering justice in a more substantive manner with the calculated intention of determining the disputes on its full merits and accordingly cites with approval the finding in Essanji & Another vs. Solanki [1968] EA 218 to the effect that:“The administration of justice should normally require that the substance of all disputes should be investigated and decided on their merits and that error and lapses should not necessarily debar a litigant from the pursuit of his right”

24. The cornerstone of the administration of justice and the exercise of judicial authority is aptly immortalized under Article 159 of the Constitution of Kenya, 2010 that dictates that justice shall be administered without undue regard to procedural technicalities.

25. The Tribunal aware to the position of the law under Section 30 of the TATA and Section 56 of the Tax Procedures Act, CAP 469B, of the Laws of Kenya that the burden of demonstrating that an assessment is erroneous or that the tax is not due is borne by the Appellant. As such, The Appellant has to be given opportunity to adduce whatever evidence is deems will be beneficial to its appeal, unless the application is shown to be totally unmerited.

26. With the Appeal still pending for substantive hearing and determination thereof there is no conceivable prejudice to be suffered by the Respondent with the Appellant being allowed to file an amended Memorandum of Appeal and a Supplementary Statement of Facts introducing the additional documents.

27. The Respondent remains at liberty to seek to adduce any incidental additional evidence in the appeal and will have the opportunity to appropriately and substantively interrogate the relevance and admissibility of the further documents during the hearing.

Disposition 28. The upshot of the foregoing is that the Tribunal finds the Application is merited and accordingly proceeds to make the following Orders: -(i)The Appellant be and is hereby granted leave to file an amended Memorandum of Appeal and a Supplementary Statement of Facts with the proposed additional documents.(ii)The Appellant to file and serve the amended Memorandum of Appeal and the Supplementary Statement of Facts with the additional documents within twenty one (21) days of the date of delivery of this Ruling.(iii)The Respondent is at liberty to file any Supplementary Statement of Facts and/or any additional documents within Fourteen (14) days of the date of being served with the amended Memorandum of Appeal and Supplementary Statement of Facts by the Appellant.(iv)No orders as to costs.

29. It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 23RD DAY OF AUGUST,2024. CHRISTINE A. MUGACHAIRPERSONBONIFACE K. TERER DELILAH K. NGALAMEMBER MEMBERGEPORGE KASHINDI OLOLCHIKE S. SANKALEMEMBER MEMBER