Introduction
1. This judgment is in respect of an appeal filed by MAGENTA (K) LIMITED (“the Appellant”) against the decision of the Tax Appeals Tribunal ("the Tribunal") dated 16th August 2024, in which the Tribunal struck out the Appellant's appeal on the grounds that it was incompetent, having been filed out of time and without seeking leave for late filing.
2. The Appellant seeks to overturn the Tribunal’s finding, arguing that its appeal before the Tribunal was, in fact, filed within the statutory timelines and that the Tribunal erred in its determination.
3. The genesis of this dispute lies in the Respondent's (Kenya Revenue Authority) assessment of the Appellant's tax liability. The Respondent identified a variance in sales declared in the Appellant's Value Added Tax (VAT) and Income Tax self-assessment returns. Following a pre-assessment notice and the Appellant's explanation, which the Respondent deemed unsatisfactory, assessments were issued on 12th June 2023. The Appellant objected on 5th July 2023. On 30th August 2023, the Respondent issued an Objection Decision, confirming the additional assessments.
4. Dissatisfied with the Objection Decision, the Appellant filed an appeal at the Tax Appeals Tribunal. The Tribunal, in its judgment of 16th August 2024, struck out the Appellant's appeal, holding that it was incompetent due to late filing, and without leave. It is this finding by the Tribunal on the competency of the appeal that forms the crux of the present appeal before this Court.
5. The Appellant in its Memorandum of Appeal dated 9th September 2024 enumerated the following as the grounds of appeal: -
i. That the Honourable Tribunal erred in law and fact in disallowing the Appeal on reason that it was incompetent as it was filed out time without appreciating the fact that the Appeal was indeed filed within time as is evident on the received and stamped copy by the Honourable Tax Appeals Tribunal’s registry.
ii. That the Honourable Tribunal erred in fact and in law in finding that the Appeal was invalid by failing to take judicial notice that when the Appellant filed the Appeal, the Judiciary had not fully operationalized the e-filing system and hence parties were allowed to file hard copies of documents physically at the Tribunal’s Registry.
iii. That the Honourable Tribunal erred in law in disallowing the Appellant’s Appeal without considering the merits of the Appeal but determined it merely on a technicality in total disregard of the express provisions of Article 159(2) of the Constitution of Kenya that obligates the Honourable Tribunal to do substantive justice without undue regard to procedural technicalities.
iv. That the Respondent erred in law and in fact by disallowing valid purchases that had been claimed in the Income Tax return and not declared in the VAT return.
v. The Respondent erred in law and fact in its Objection Decision by failing to review the appellant's documentation. As a result, the Respondent incorrectly converted zero-rated sales to standard-rated sales, which led to an inaccurate and inflated taxable income figure for the appellant.
vi. The Respondent erred by acting in contravention of the Tax Procedures Act, 2015, by imposing late payment penalties and interest based on incorrect tax assessments.
7. The Respondent opposed the Appeal and filed its Statement of Facts dated 17th October 2024 in that regard.
8. The matter proceeded by way of written submissions. The Appellant filed its submissions dated 16th April 2025, whilst the Respondent filed theirs dated 6th May 2025.
Appellant’s Submissions
9. The Appellant, in its submissions, challenges the Tribunal's decision to strike out its appeal as incompetent, arguing that it was, in fact, filed within the statutory timelines. According to the Appellant, the Notice of Appeal was physically filed on 25th September 2023, and the Memorandum of Appeal on 2nd October 2023. The Applicant asserted that both dates fall within the timelines stipulated under Section 13(2) of the Tax Appeals Tribunal Act.
10. The Appellant maintained that the Tribunal erred by assuming e-filing was mandatory in 2023, failing to appreciate the prevailing physical filing system at the time. The Tribunal failed to take judicial notice that the electronic case management system became fully operational only on 29th January 2024, and that physical filing was permissible and common before this date.
11. Secondly, the Appellant submitted that the Tribunal's decision to strike out the appeal on a perceived technicality was contrary to Article 159(2) of the Constitution, which mandates substantive justice without undue regard to procedural technicalities.
12. The Appellant submitted that the Tribunal failed to appreciate that the Respondent erred in disallowing valid purchases claimed in the Appellant's Income Tax returns solely because they were not declared in VAT returns. The Appellant argued that Income Tax and VAT operate under distinct legal regimes, and there is no statutory basis for linking deductions in one to declarations in the other. This action violates principles of certainty and legality in taxation.
13. The Appellant asserted that the Respondent failed to properly review documentation (flash drive, bank statements) submitted by the Appellant, which would have explained discrepancies in sales figures (specifically, zero-rated sales inadvertently omitted from VAT but correctly declared in Income Tax returns). This failure led to an inflated assessment and violated the Respondent's duty to verify claims.
14. In the premises, the Appellant prayed for the following orders from this Court:-
i. That this Appeal be allowed.
ii. That the entire Judgment of the Tax Appeals Tribunal dated 16th August 2024 be set aside in its entirety.
iii. That this Honourable Court set this Appeal for hearing and determination on its merits before this Honourable Court on a priority basis.
iv. That based on prayer (iii) above, Respondent’s Objection Decision contained in the letter dated 30th August 2023, demanding payment of Kshs. 55,651,250 be set aside entirely;
v. The Appeal against the Respondent’s Objection Decision contained in the letter dated 30 August 2023, be allowed; and
vi. The costs of and incidental to this Appeal be awarded to the Appellant.
Respondent’s Submissions
15. The Respondent opposed the appeal, asserting that the Tribunal rightly found the Appellant's appeal incompetent due to late filing contrary to the express statutory provisions, and failing to seek leave for the late filing.
16. The Respondent contended that the Objection Decision was issued on 30th August 2023, and that pursuant to Section 51(12) of the Tax Procedures Act and Section 13(1) of the Tax Appeals Tribunal Act, the Appellant was required to lodge an appeal within thirty (30) days from the date of that decision. The Respondent maintained that although the Appellant’s Notice of Appeal was dated 28th September 2023, it was not received by the Tribunal until 2nd October 2023, which was three days outside the statutory timeline.
17. It was further the Respondent’s submissions that the Appellant also failed to seek leave from the Tribunal to file the appeal out of time, which is a mandatory requirement for late filings.
18. The Respondent maintained that the Appellant’s claim—that the Notice of Appeal was filed and stamped by the Tribunal on 25th September 2023—was never raised before the Tribunal, despite the Respondent having expressly raised the issue of late filing in its defence. The Respondent therefore submitted that the Appellant's argument ought to be disregarded, as it is being introduced for the first time at the appellate stage.
19. It was further the Respondent’s case that, in any event, the Appellant also failed to serve upon the Respondent the said Notice of Appeal within two days of filing, contrary to the express provisions of Section 13(5) of the Tax Appeals Tribunal Act. The Respondent submitted that the said Notice of Appeal was only served upon them on 18th December 2023.
20. Regarding the Appellant’s reliance on Article 159(2) of the Constitution, the Respondent submitted that the said provision of the Constitution is not a blanket waiver for procedural non-compliance, especially concerning statutory timelines. The Respondent maintained that strict adherence to statutory procedures is necessary for a fair and predictable judicial process.
21. Finally, the Respondent argued that under Section 56(2) of the Tax Procedures Act, appeals to the High Court are on questions of law only, and that this Court cannot, in its appellate capacity, delve into the grounds concerning the merits of the tax assessment, such as disallowed purchases and zero-rated sales. These are factual issues that were not determined by the Tribunal, and therefore, this Court lacks jurisdiction to delve into them at this stage.
22. The Respondent concluded by urging this Court to uphold the judgment by the Tribunal, and dismiss this appeal with costs in its favour.
Analysis and Determination
23. Upon careful consideration of the submissions of both parties, the following issues are ripe for determination by this Court:-
i. Whether the Tribunal erred in finding that the Appellant's appeal was filed outside the statutory timelines.
ii. Whether the Tribunal was right in striking out the Appellant's appeal for being filed outside the statutory timelines, particularly in light of Article 159(2) of the Constitution.
iii. Whether this Court has jurisdiction to delve into the merits of the case at this stage.
Whether the Appeal was filed within the timelines
24. The Appellant’s position is that the Notice of Appeal was filed on 25th September 2023, as evidenced by a received and stamped copy from the Tribunal's registry. Consequently, the Memorandum of Appeal, filed on 2nd October 2023, was well within the fourteen-day period stipulated by Section 13(2) of the Tax Appeals Tribunal Act, which commences after the filing of the Notice of Appeal.
25. Section 13 of the Tax Appeals Tribunal Act Cap. 469A provides as follows: -
“13. Procedure for appeal
(1) A notice of appeal to the Tribunal shall—
(a) be in writing or through electronic means;
(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 Tribunal, of—
(a) a memorandum of appeal;
(b) statements of facts; and
(c) the appealable decision; and
(d) such other documents as may be necessary to enable the Tribunal to make a decision on the appeal.
(3) The Tribunal may, upon application in writing or through electronic means, 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.
(5) An appellant shall serve a copy of the appeal on the Commissioner within two days after giving notice of appeal to the Tribunal."
26. Bearing in mind that the Commissioner’s Objection Decision was made on 30th August 2023, it therefore follows that pursuant to the provisions of Section 13(1) of the Tax Appeals Tribunal Act (TAT Act), the 30-day period for appeal would have expired around 29th September 2023. The Appellant presented a physically stamped document (page 101 of the Record of Appeal) showing that the Notice of Appeal was filed on 25th September 2023.
27. The Respondent, on the other hand, asserts that this allegation by the Appellant is incorrect and that, in any event, this evidence was not brought to the attention of the Tribunal, even after the Respondent raised the issue of late filing at the Tribunal.
28. Having reviewed the rival submissions, I find the Respondent’s argument more plausible. The Court is of the view that if the Notice of Appeal was lodged within the timelines as alleged by the Appellant, nothing would have been easier for the Appellant to adduce that evidence at the Tribunal, especially taking into account that the Respondent had taken it up in its defence at the Tribunal. Additionally, the fact that the Appellant only served upon the Respondent the said Notice of Appeal on 18th December 2023, long after the filing of the substantive appeal at the Tribunal, is also indicative that the “stamped copy” of the Notice of Appeal may not have been filed at the Tribunal on 25th September 2023 as alleged.
29. The burden lay with the Appellant to demonstrate the timely filing of the Notice of Appeal at the Tribunal. As correctly submitted by the Respondent, presenting this evidence for the first time at the High Court, at the appellate stage, without a clear explanation for its omission at the Tribunal, weakens the Appellant's argument.
30. In the premises, this ground of appeal fails. The Court upholds the finding by the Tribunal that the Appeal was filed outside the timelines stipulated under Section 13 of the TAT Act.
Whether the Tribunal erroneously disregarded Article 159(2) of the Constitution
31. Having found that the appeal was filed outside the timelines prescribed by law, the next issue for determination is whether, in the circumstances of this case, such a finding should result in the automatic striking out of the appeal.
32. The Appellant contended that the Tribunal's decision to dismiss the appeal on a technicality disregarded Article 159(2) of the Constitution, which enjoins courts and tribunals to administer justice without undue regard to procedural technicalities. The Appellant cited, among others, the case of LTI Kisii Safari Inns Ltd & 2 others v Deutsche Investitions-Und Enwicklungsgesellschaft (‘Deg’) & others [2011] KECA 1 (KLR) in support of the argument that the ultimate goal of the courts should be to do substantive justice.
33. The Respondent counters that Article 159(2) is not a panacea for all procedural shortfalls and that statutory timelines are not mere technicalities but fundamental requirements. The Respondent relies on cases such as Nicholas Kiptoo Arap Korir Salat vs. the Independent Electoral and Boundaries Commission and 6 Others and Jaldesa Tuke Dabelo vs Independent Electoral & Boundaries Commission & Another, which underscore the importance of adhering to rules and timelines for a fair, just, and certain judicial process.
34. I have carefully considered the parties’ respective submissions and the authorities relied upon. While it is correct that courts have consistently held that statutory timelines are not mere technicalities that can be disregarded under the guise of Article 159(2) as per the holding in the Nicholas Kiptoo Arap Korir Salat(supra) case, it is equally established that, in appropriate and deserving cases, the Court may exercise its discretion to excuse non-compliance with such timelines. This is particularly so where the interests of substantive justice would otherwise be undermined by strictly striking out of a claim or defence filed outside the prescribed statutory timelines.
35. In Abdirahman Abdi v Safi Petroleum Products Ltd & 6 others [2011] KECA 183 (KLR), the Court of Appeal had the following to say on the issue: -
“In the days long gone the court never hesitated to strike out a notice of appeal or even an appeal if it was shown that it had been lodged out of time regardless of the length of delay. The enactment of sections 3A and 3B of the Appellate Jurisdiction Act, Cap 9 Laws of Kenya, and later, Article 159(2)(d) of the Constitution of Kenya, 2010, changed the position. The former provisions introduced the overriding objective in civil litigation in which the court is mandated to consider aspects like the delay likely to be occasioned, the cost and prejudice to the parties should the court strike out the offending document. In short the court has to weigh one thing against another for the benefit of the wider interests of justice before coming to a decision one way or the other. Article 159 (2)(d) of the Constitution makes it abundantly clear that the court has to do justice between the parties without undue regard to technicalities of procedure. That is not however to say that procedural improprieties are to be ignored altogether. The court has to weigh the prejudice that is likely to be suffered by the innocent party and weigh it against the prejudice to be suffered by the offending party if the court strikes out its document. The court in that regard exercises judicial discretion.” [emphasis added].
36. Again in Purity Kagendo Anampiu & another v Nelie Mugambi & another [2021] eKLR, Muriithi J, in dealing with a similar situation, adopted the reasoning by the Court of Appeal (P. N. Waki JA, M. Warsame JA and F. Sichale JA) in the case of Kenya Trypanosomiasis Research Institute v Anthony Kabimba Gusinjilu (Suing for and on behalf of 112 Plaintiffs) Civil Appeal No. 212 of 2015 [2019] eKLR where the judges held as follows: -
“Lastly, having established that the respondent’s application dated 17th December 2010 had been brought under the wrong law, we agree with the court’s finding that the irregularity was not serious enough to prevent the court from exercising its discretion, hearing and determining the said application on its merit. Taking note that the rules of procedure should be used as handmaids of justice but not to defeat it, the court weighed the issues before it and found that there would be no injustice visited on the appellant in the spirit of Article 159 (2)(d) of the Constitution and Sections 1A and B of the Civil Procedure Act.”
37. The common thread in the two cases cited above is that, before determining whether to uphold a procedural non-compliance, courts and tribunals are enjoined by Article 159(2)(d) of the Constitution to first assess whether the non-compliance is so material as to preclude the exercise of discretion to determine the matter on its merits, while also considering any prejudice or injustice that may be occasioned to either party.
38. In determining whether to admit a matter for consideration on its merits pursuant to Article 159(2)(d) of the Constitution, the applicable test is whether failure to hear the case on its merits would occasion prejudice or injustice to a party, or whether striking out the suit on a technicality would lead to an absurd outcome that cannot reasonably be presumed to reflect the intention of the legislature.
39. In the LTI Kisii Safari Inns Ltd & 2 others v Deutsche Investitions-Und Enwicklungsgellschaft (‘Deg’) & others [2011] KECA 1 (KLR) cited by the Appellant, the Court of Appeal stated as follows: -
“The constitution has further boldly stated in Article 159 (2) (d) that:
“Justice shall be administered without undue regard to procedural technicalities.”
With the advent of the new constitution and a new set of civil procedure regime, the courts have been sufficiently enabled to apply substantive justice rather than seek refuge by way of short-cuts to technicalities. In the situation presenting itself before this Court, the learned Judge should have operationalised the concept and elements of substantive law so as to ensure that the parties’ rights and obligations are guaranteed, protected and enforced without imbalance between the appellants and the respondents….”
40. In the present case, I have already found that the appeal was filed three (3) days outside the statutory timelines prescribed under Section 13(1) of the Tax Appeals Tribunal Act. The Court is therefore called upon to balance the strict application of statutory deadlines against the Appellant’s plea for substantive justice.
41. From the record of appeal and the submissions, it is apparent that the Appellant contends that, in arriving at the tax assessment, the Respondent disallowed legitimate business expenses in contravention of Section 15 of the Income Tax Act, which permits a taxpayer to deduct “all expenditure incurred in such year of income which is expenditure wholly and exclusively incurred by him/her in the production of that income” the subject to taxation. These claims warranted preliminary consideration by the Tribunal before determining whether to strike out the appeal for non-compliance with the timelines prescribed under Section 13(1) of the Tax Appeals Tribunal Act, particularly in light of the potential prejudice that such a decision could occasion to either party.
42. The proper approach, as outlined above, is that before dismissing, striking out, or even allowing a tax appeal on the basis of a procedural technicality, it is prudent for the Tribunal to first consider whether, on the merits, the taxes assessed are lawfully payable. The outcome of this initial inquiry should then inform the subsequent determination as to whether the procedural lapse affects the Tribunal’s jurisdiction or causes material prejudice to the opposing party.
43. Substantive tax statutes (statutes imposing taxes) must be strictly interpreted. A taxpayer should not be subjected to tax unless it is clearly and unequivocally mandated by the language of the statute. Conversely, no tax should be waived or foregone where the clear provisions of the taxing statute impose such a liability. This reflects the spirit of Article 210 of the Constitution, which requires that no tax may be imposed, waived, or varied except as provided by law. It is also the principle affirmed in numerous judicial decisions, including the Court of Appeal decision in Mount Kenya Bottlers Ltd & 3 others v Attorney General & 3 others [2019] eKLR, where the Court held that: —
“The above principles apply to general interpretation of statutes. However, when it comes to interpretation of tax legislation, the statute must be looked at using slightly different lenses. With regard to tax legislation, the language imposing the tax must receive a strict construction. Judge Rowlett in his decision in Cape Brandy Syndicate v I.R. Commissioners [1921]1KB(cited by the appellants), expressed the common law position in this area when he stated;-
'...in a taxing Act one has to look at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used’….” [Emphasis added].
44. Applying the foregoing principles to the present case, I am hesitant to adopt an interpretation that elevates the procedural tax laws (the Tax Procedures Act and the Tax Appeals Tribunal Act) above the substantive tax statutes, in this case, the Income Tax Act and the Value Added Tax Act. It is these substantive tax statutes that imposes or waives tax liability. A construction of procedural law that results in the imposition of tax where none is authorized by substantive law would amount to substantive injustice and cannot be sustained.
45. Conversely, an interpretation of a procedural tax law that allows a taxpayer to avoid liability where tax is legally due under a substantive tax law would likewise be unjust and contrary to public policy. Both extremes undermine the coherence and integrity of the tax system and ought not to be upheld.
46. As was held in Mbaki & Others v Macharia & Another [2005] 2 EA 206, procedural rules are handmaidens of justice and not its mistress. While compliance with procedural requirements remains essential for the orderly conduct of proceedings, such requirements must be applied in a manner that facilitates, not frustrates, the attainment of justice on the merits. Accordingly, unless the procedural lapse goes to the jurisdiction of the tribunal or causes material prejudice to the other party, a court or a tribunal ought to lean in favour of a determination on substance rather than form.
47. Accordingly, this Court finds that the Tribunal erred by striking out the appeal for non-compliance with the timelines prescribed under Section 13(1) of the Tax Appeals Tribunal Act without first considering whether, on the merits, the taxes assessed were lawfully payable.
Whether this Court can, at this stage, consider the merits of the dispute .
48. The Tribunal struck out the appeal on a preliminary procedural ground, namely, that the appeal was incompetent for having been filed out of time. As a result, the Tribunal did not address the substantive merits of the tax dispute. It neither heard evidence nor made any findings on critical factual issues, such as the validity of the disallowed purchases or the propriety of the Respondent's reclassification of zero-rated sales as standard-rated.
49. This Court, sitting as an appellate court, cannot at this stage engage in a primary evaluation of facts or undertake a factual inquiry that was not addressed by the Tribunal. That mandate lies squarely with the Tax Appeals Tribunal, which is, under statute, the primary fact-finding body in tax disputes. Accordingly, the proper course of action is to remit the matter to the Tribunal for a hearing and determination on the merits.
50. In light of the foregoing, this Court makes the following orders: -
i. The appeal against the decision of the Tax Appeals Tribunal dated August 16, 2024, is hereby partially allowed.
ii. The finding of the Tax Appeals Tribunal that the Appellant's appeal was filed out of time is hereby upheld.
iii. The Tribunal’s decision of striking out the Appellant’s appeal for having been filed outside the statutory timelines is hereby set aside and substituted with an order of this court reinstating the appeal.
iv. The matter is hereby remitted back to the Tax Appeals Tribunal for a full hearing and determination on the merits of the Appellant's appeal, including the issues raised in grounds (iv), (v), and (vi) of the grounds of appeal.
v. Each party shall bear its own costs for this appeal.
51. It is so ordered.
SIGNED, DATED, and DELIVERED IN VIRTUAL COURT THIS
24TH DAY OF JULY 2025
ADO MOSES
JUDGE
In the presence of: -
C/A – Moses
1. This judgment is in respect of an appeal filed by MAGENTA (K) LIMITED (“the Appellant”) against the decision of the Tax Appeals Tribunal ("the Tribunal") dated 16th August 2024, in which the Tribunal struck out the Appellant's appeal on the grounds that it was incompetent, having been filed out of time and without seeking leave for late filing.
2. The Appellant seeks to overturn the Tribunal’s finding, arguing that its appeal before the Tribunal was, in fact, filed within the statutory timelines and that the Tribunal erred in its determination.
3. The genesis of this dispute lies in the Respondent's (Kenya Revenue Authority) assessment of the Appellant's tax liability. The Respondent identified a variance in sales declared in the Appellant's Value Added Tax (VAT) and Income Tax self-assessment returns. Following a pre-assessment notice and the Appellant's explanation, which the Respondent deemed unsatisfactory, assessments were issued on 12th June 2023. The Appellant objected on 5th July 2023. On 30th August 2023, the Respondent issued an Objection Decision, confirming the additional assessments.
4. Dissatisfied with the Objection Decision, the Appellant filed an appeal at the Tax Appeals Tribunal. The Tribunal, in its judgment of 16th August 2024, struck out the Appellant's appeal, holding that it was incompetent due to late filing, and without leave. It is this finding by the Tribunal on the competency of the appeal that forms the crux of the present appeal before this Court.
5. The Appellant in its Memorandum of Appeal dated 9th September 2024 enumerated the following as the grounds of appeal: -
i. That the Honourable Tribunal erred in law and fact in disallowing the Appeal on reason that it was incompetent as it was filed out time without appreciating the fact that the Appeal was indeed filed within time as is evident on the received and stamped copy by the Honourable Tax Appeals Tribunal’s registry.
ii. That the Honourable Tribunal erred in fact and in law in finding that the Appeal was invalid by failing to take judicial notice that when the Appellant filed the Appeal, the Judiciary had not fully operationalized the e-filing system and hence parties were allowed to file hard copies of documents physically at the Tribunal’s Registry.
iii. That the Honourable Tribunal erred in law in disallowing the Appellant’s Appeal without considering the merits of the Appeal but determined it merely on a technicality in total disregard of the express provisions of Article 159(2) of the Constitution of Kenya that obligates the Honourable Tribunal to do substantive justice without undue regard to procedural technicalities.
iv. That the Respondent erred in law and in fact by disallowing valid purchases that had been claimed in the Income Tax return and not declared in the VAT return.
v. The Respondent erred in law and fact in its Objection Decision by failing to review the appellant's documentation. As a result, the Respondent incorrectly converted zero-rated sales to standard-rated sales, which led to an inaccurate and inflated taxable income figure for the appellant.
vi. The Respondent erred by acting in contravention of the Tax Procedures Act, 2015, by imposing late payment penalties and interest based on incorrect tax assessments.
7. The Respondent opposed the Appeal and filed its Statement of Facts dated 17th October 2024 in that regard.
8. The matter proceeded by way of written submissions. The Appellant filed its submissions dated 16th April 2025, whilst the Respondent filed theirs dated 6th May 2025.
Appellant’s Submissions
9. The Appellant, in its submissions, challenges the Tribunal's decision to strike out its appeal as incompetent, arguing that it was, in fact, filed within the statutory timelines. According to the Appellant, the Notice of Appeal was physically filed on 25th September 2023, and the Memorandum of Appeal on 2nd October 2023. The Applicant asserted that both dates fall within the timelines stipulated under Section 13(2) of the Tax Appeals Tribunal Act.
10. The Appellant maintained that the Tribunal erred by assuming e-filing was mandatory in 2023, failing to appreciate the prevailing physical filing system at the time. The Tribunal failed to take judicial notice that the electronic case management system became fully operational only on 29th January 2024, and that physical filing was permissible and common before this date.
11. Secondly, the Appellant submitted that the Tribunal's decision to strike out the appeal on a perceived technicality was contrary to Article 159(2) of the Constitution, which mandates substantive justice without undue regard to procedural technicalities.
12. The Appellant submitted that the Tribunal failed to appreciate that the Respondent erred in disallowing valid purchases claimed in the Appellant's Income Tax returns solely because they were not declared in VAT returns. The Appellant argued that Income Tax and VAT operate under distinct legal regimes, and there is no statutory basis for linking deductions in one to declarations in the other. This action violates principles of certainty and legality in taxation.
13. The Appellant asserted that the Respondent failed to properly review documentation (flash drive, bank statements) submitted by the Appellant, which would have explained discrepancies in sales figures (specifically, zero-rated sales inadvertently omitted from VAT but correctly declared in Income Tax returns). This failure led to an inflated assessment and violated the Respondent's duty to verify claims.
14. In the premises, the Appellant prayed for the following orders from this Court:-
i. That this Appeal be allowed.
ii. That the entire Judgment of the Tax Appeals Tribunal dated 16th August 2024 be set aside in its entirety.
iii. That this Honourable Court set this Appeal for hearing and determination on its merits before this Honourable Court on a priority basis.
iv. That based on prayer (iii) above, Respondent’s Objection Decision contained in the letter dated 30th August 2023, demanding payment of Kshs. 55,651,250 be set aside entirely;
v. The Appeal against the Respondent’s Objection Decision contained in the letter dated 30 August 2023, be allowed; and
vi. The costs of and incidental to this Appeal be awarded to the Appellant.
Respondent’s Submissions
15. The Respondent opposed the appeal, asserting that the Tribunal rightly found the Appellant's appeal incompetent due to late filing contrary to the express statutory provisions, and failing to seek leave for the late filing.
16. The Respondent contended that the Objection Decision was issued on 30th August 2023, and that pursuant to Section 51(12) of the Tax Procedures Act and Section 13(1) of the Tax Appeals Tribunal Act, the Appellant was required to lodge an appeal within thirty (30) days from the date of that decision. The Respondent maintained that although the Appellant’s Notice of Appeal was dated 28th September 2023, it was not received by the Tribunal until 2nd October 2023, which was three days outside the statutory timeline.
17. It was further the Respondent’s submissions that the Appellant also failed to seek leave from the Tribunal to file the appeal out of time, which is a mandatory requirement for late filings.
18. The Respondent maintained that the Appellant’s claim—that the Notice of Appeal was filed and stamped by the Tribunal on 25th September 2023—was never raised before the Tribunal, despite the Respondent having expressly raised the issue of late filing in its defence. The Respondent therefore submitted that the Appellant's argument ought to be disregarded, as it is being introduced for the first time at the appellate stage.
19. It was further the Respondent’s case that, in any event, the Appellant also failed to serve upon the Respondent the said Notice of Appeal within two days of filing, contrary to the express provisions of Section 13(5) of the Tax Appeals Tribunal Act. The Respondent submitted that the said Notice of Appeal was only served upon them on 18th December 2023.
20. Regarding the Appellant’s reliance on Article 159(2) of the Constitution, the Respondent submitted that the said provision of the Constitution is not a blanket waiver for procedural non-compliance, especially concerning statutory timelines. The Respondent maintained that strict adherence to statutory procedures is necessary for a fair and predictable judicial process.
21. Finally, the Respondent argued that under Section 56(2) of the Tax Procedures Act, appeals to the High Court are on questions of law only, and that this Court cannot, in its appellate capacity, delve into the grounds concerning the merits of the tax assessment, such as disallowed purchases and zero-rated sales. These are factual issues that were not determined by the Tribunal, and therefore, this Court lacks jurisdiction to delve into them at this stage.
22. The Respondent concluded by urging this Court to uphold the judgment by the Tribunal, and dismiss this appeal with costs in its favour.
Analysis and Determination
23. Upon careful consideration of the submissions of both parties, the following issues are ripe for determination by this Court:-
i. Whether the Tribunal erred in finding that the Appellant's appeal was filed outside the statutory timelines.
ii. Whether the Tribunal was right in striking out the Appellant's appeal for being filed outside the statutory timelines, particularly in light of Article 159(2) of the Constitution.
iii. Whether this Court has jurisdiction to delve into the merits of the case at this stage.
Whether the Appeal was filed within the timelines
24. The Appellant’s position is that the Notice of Appeal was filed on 25th September 2023, as evidenced by a received and stamped copy from the Tribunal's registry. Consequently, the Memorandum of Appeal, filed on 2nd October 2023, was well within the fourteen-day period stipulated by Section 13(2) of the Tax Appeals Tribunal Act, which commences after the filing of the Notice of Appeal.
25. Section 13 of the Tax Appeals Tribunal Act Cap. 469A provides as follows: -
“13. Procedure for appeal
(1) A notice of appeal to the Tribunal shall—
(a) be in writing or through electronic means;
(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 Tribunal, of—
(a) a memorandum of appeal;
(b) statements of facts; and
(c) the appealable decision; and
(d) such other documents as may be necessary to enable the Tribunal to make a decision on the appeal.
(3) The Tribunal may, upon application in writing or through electronic means, 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.
(5) An appellant shall serve a copy of the appeal on the Commissioner within two days after giving notice of appeal to the Tribunal."
26. Bearing in mind that the Commissioner’s Objection Decision was made on 30th August 2023, it therefore follows that pursuant to the provisions of Section 13(1) of the Tax Appeals Tribunal Act (TAT Act), the 30-day period for appeal would have expired around 29th September 2023. The Appellant presented a physically stamped document (page 101 of the Record of Appeal) showing that the Notice of Appeal was filed on 25th September 2023.
27. The Respondent, on the other hand, asserts that this allegation by the Appellant is incorrect and that, in any event, this evidence was not brought to the attention of the Tribunal, even after the Respondent raised the issue of late filing at the Tribunal.
28. Having reviewed the rival submissions, I find the Respondent’s argument more plausible. The Court is of the view that if the Notice of Appeal was lodged within the timelines as alleged by the Appellant, nothing would have been easier for the Appellant to adduce that evidence at the Tribunal, especially taking into account that the Respondent had taken it up in its defence at the Tribunal. Additionally, the fact that the Appellant only served upon the Respondent the said Notice of Appeal on 18th December 2023, long after the filing of the substantive appeal at the Tribunal, is also indicative that the “stamped copy” of the Notice of Appeal may not have been filed at the Tribunal on 25th September 2023 as alleged.
29. The burden lay with the Appellant to demonstrate the timely filing of the Notice of Appeal at the Tribunal. As correctly submitted by the Respondent, presenting this evidence for the first time at the High Court, at the appellate stage, without a clear explanation for its omission at the Tribunal, weakens the Appellant's argument.
30. In the premises, this ground of appeal fails. The Court upholds the finding by the Tribunal that the Appeal was filed outside the timelines stipulated under Section 13 of the TAT Act.
Whether the Tribunal erroneously disregarded Article 159(2) of the Constitution
31. Having found that the appeal was filed outside the timelines prescribed by law, the next issue for determination is whether, in the circumstances of this case, such a finding should result in the automatic striking out of the appeal.
32. The Appellant contended that the Tribunal's decision to dismiss the appeal on a technicality disregarded Article 159(2) of the Constitution, which enjoins courts and tribunals to administer justice without undue regard to procedural technicalities. The Appellant cited, among others, the case of LTI Kisii Safari Inns Ltd & 2 others v Deutsche Investitions-Und Enwicklungsgesellschaft (‘Deg’) & others [2011] KECA 1 (KLR) in support of the argument that the ultimate goal of the courts should be to do substantive justice.
33. The Respondent counters that Article 159(2) is not a panacea for all procedural shortfalls and that statutory timelines are not mere technicalities but fundamental requirements. The Respondent relies on cases such as Nicholas Kiptoo Arap Korir Salat vs. the Independent Electoral and Boundaries Commission and 6 Others and Jaldesa Tuke Dabelo vs Independent Electoral & Boundaries Commission & Another, which underscore the importance of adhering to rules and timelines for a fair, just, and certain judicial process.
34. I have carefully considered the parties’ respective submissions and the authorities relied upon. While it is correct that courts have consistently held that statutory timelines are not mere technicalities that can be disregarded under the guise of Article 159(2) as per the holding in the Nicholas Kiptoo Arap Korir Salat(supra) case, it is equally established that, in appropriate and deserving cases, the Court may exercise its discretion to excuse non-compliance with such timelines. This is particularly so where the interests of substantive justice would otherwise be undermined by strictly striking out of a claim or defence filed outside the prescribed statutory timelines.
35. In Abdirahman Abdi v Safi Petroleum Products Ltd & 6 others [2011] KECA 183 (KLR), the Court of Appeal had the following to say on the issue: -
“In the days long gone the court never hesitated to strike out a notice of appeal or even an appeal if it was shown that it had been lodged out of time regardless of the length of delay. The enactment of sections 3A and 3B of the Appellate Jurisdiction Act, Cap 9 Laws of Kenya, and later, Article 159(2)(d) of the Constitution of Kenya, 2010, changed the position. The former provisions introduced the overriding objective in civil litigation in which the court is mandated to consider aspects like the delay likely to be occasioned, the cost and prejudice to the parties should the court strike out the offending document. In short the court has to weigh one thing against another for the benefit of the wider interests of justice before coming to a decision one way or the other. Article 159 (2)(d) of the Constitution makes it abundantly clear that the court has to do justice between the parties without undue regard to technicalities of procedure. That is not however to say that procedural improprieties are to be ignored altogether. The court has to weigh the prejudice that is likely to be suffered by the innocent party and weigh it against the prejudice to be suffered by the offending party if the court strikes out its document. The court in that regard exercises judicial discretion.” [emphasis added].
36. Again in Purity Kagendo Anampiu & another v Nelie Mugambi & another [2021] eKLR, Muriithi J, in dealing with a similar situation, adopted the reasoning by the Court of Appeal (P. N. Waki JA, M. Warsame JA and F. Sichale JA) in the case of Kenya Trypanosomiasis Research Institute v Anthony Kabimba Gusinjilu (Suing for and on behalf of 112 Plaintiffs) Civil Appeal No. 212 of 2015 [2019] eKLR where the judges held as follows: -
“Lastly, having established that the respondent’s application dated 17th December 2010 had been brought under the wrong law, we agree with the court’s finding that the irregularity was not serious enough to prevent the court from exercising its discretion, hearing and determining the said application on its merit. Taking note that the rules of procedure should be used as handmaids of justice but not to defeat it, the court weighed the issues before it and found that there would be no injustice visited on the appellant in the spirit of Article 159 (2)(d) of the Constitution and Sections 1A and B of the Civil Procedure Act.”
37. The common thread in the two cases cited above is that, before determining whether to uphold a procedural non-compliance, courts and tribunals are enjoined by Article 159(2)(d) of the Constitution to first assess whether the non-compliance is so material as to preclude the exercise of discretion to determine the matter on its merits, while also considering any prejudice or injustice that may be occasioned to either party.
38. In determining whether to admit a matter for consideration on its merits pursuant to Article 159(2)(d) of the Constitution, the applicable test is whether failure to hear the case on its merits would occasion prejudice or injustice to a party, or whether striking out the suit on a technicality would lead to an absurd outcome that cannot reasonably be presumed to reflect the intention of the legislature.
39. In the LTI Kisii Safari Inns Ltd & 2 others v Deutsche Investitions-Und Enwicklungsgellschaft (‘Deg’) & others [2011] KECA 1 (KLR) cited by the Appellant, the Court of Appeal stated as follows: -
“The constitution has further boldly stated in Article 159 (2) (d) that:
“Justice shall be administered without undue regard to procedural technicalities.”
With the advent of the new constitution and a new set of civil procedure regime, the courts have been sufficiently enabled to apply substantive justice rather than seek refuge by way of short-cuts to technicalities. In the situation presenting itself before this Court, the learned Judge should have operationalised the concept and elements of substantive law so as to ensure that the parties’ rights and obligations are guaranteed, protected and enforced without imbalance between the appellants and the respondents….”
40. In the present case, I have already found that the appeal was filed three (3) days outside the statutory timelines prescribed under Section 13(1) of the Tax Appeals Tribunal Act. The Court is therefore called upon to balance the strict application of statutory deadlines against the Appellant’s plea for substantive justice.
41. From the record of appeal and the submissions, it is apparent that the Appellant contends that, in arriving at the tax assessment, the Respondent disallowed legitimate business expenses in contravention of Section 15 of the Income Tax Act, which permits a taxpayer to deduct “all expenditure incurred in such year of income which is expenditure wholly and exclusively incurred by him/her in the production of that income” the subject to taxation. These claims warranted preliminary consideration by the Tribunal before determining whether to strike out the appeal for non-compliance with the timelines prescribed under Section 13(1) of the Tax Appeals Tribunal Act, particularly in light of the potential prejudice that such a decision could occasion to either party.
42. The proper approach, as outlined above, is that before dismissing, striking out, or even allowing a tax appeal on the basis of a procedural technicality, it is prudent for the Tribunal to first consider whether, on the merits, the taxes assessed are lawfully payable. The outcome of this initial inquiry should then inform the subsequent determination as to whether the procedural lapse affects the Tribunal’s jurisdiction or causes material prejudice to the opposing party.
43. Substantive tax statutes (statutes imposing taxes) must be strictly interpreted. A taxpayer should not be subjected to tax unless it is clearly and unequivocally mandated by the language of the statute. Conversely, no tax should be waived or foregone where the clear provisions of the taxing statute impose such a liability. This reflects the spirit of Article 210 of the Constitution, which requires that no tax may be imposed, waived, or varied except as provided by law. It is also the principle affirmed in numerous judicial decisions, including the Court of Appeal decision in Mount Kenya Bottlers Ltd & 3 others v Attorney General & 3 others [2019] eKLR, where the Court held that: —
“The above principles apply to general interpretation of statutes. However, when it comes to interpretation of tax legislation, the statute must be looked at using slightly different lenses. With regard to tax legislation, the language imposing the tax must receive a strict construction. Judge Rowlett in his decision in Cape Brandy Syndicate v I.R. Commissioners [1921]1KB(cited by the appellants), expressed the common law position in this area when he stated;-
'...in a taxing Act one has to look at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used’….” [Emphasis added].
44. Applying the foregoing principles to the present case, I am hesitant to adopt an interpretation that elevates the procedural tax laws (the Tax Procedures Act and the Tax Appeals Tribunal Act) above the substantive tax statutes, in this case, the Income Tax Act and the Value Added Tax Act. It is these substantive tax statutes that imposes or waives tax liability. A construction of procedural law that results in the imposition of tax where none is authorized by substantive law would amount to substantive injustice and cannot be sustained.
45. Conversely, an interpretation of a procedural tax law that allows a taxpayer to avoid liability where tax is legally due under a substantive tax law would likewise be unjust and contrary to public policy. Both extremes undermine the coherence and integrity of the tax system and ought not to be upheld.
46. As was held in Mbaki & Others v Macharia & Another [2005] 2 EA 206, procedural rules are handmaidens of justice and not its mistress. While compliance with procedural requirements remains essential for the orderly conduct of proceedings, such requirements must be applied in a manner that facilitates, not frustrates, the attainment of justice on the merits. Accordingly, unless the procedural lapse goes to the jurisdiction of the tribunal or causes material prejudice to the other party, a court or a tribunal ought to lean in favour of a determination on substance rather than form.
47. Accordingly, this Court finds that the Tribunal erred by striking out the appeal for non-compliance with the timelines prescribed under Section 13(1) of the Tax Appeals Tribunal Act without first considering whether, on the merits, the taxes assessed were lawfully payable.
Whether this Court can, at this stage, consider the merits of the dispute .
48. The Tribunal struck out the appeal on a preliminary procedural ground, namely, that the appeal was incompetent for having been filed out of time. As a result, the Tribunal did not address the substantive merits of the tax dispute. It neither heard evidence nor made any findings on critical factual issues, such as the validity of the disallowed purchases or the propriety of the Respondent's reclassification of zero-rated sales as standard-rated.
49. This Court, sitting as an appellate court, cannot at this stage engage in a primary evaluation of facts or undertake a factual inquiry that was not addressed by the Tribunal. That mandate lies squarely with the Tax Appeals Tribunal, which is, under statute, the primary fact-finding body in tax disputes. Accordingly, the proper course of action is to remit the matter to the Tribunal for a hearing and determination on the merits.
50. In light of the foregoing, this Court makes the following orders: -
i. The appeal against the decision of the Tax Appeals Tribunal dated August 16, 2024, is hereby partially allowed.
ii. The finding of the Tax Appeals Tribunal that the Appellant's appeal was filed out of time is hereby upheld.
iii. The Tribunal’s decision of striking out the Appellant’s appeal for having been filed outside the statutory timelines is hereby set aside and substituted with an order of this court reinstating the appeal.
iv. The matter is hereby remitted back to the Tax Appeals Tribunal for a full hearing and determination on the merits of the Appellant's appeal, including the issues raised in grounds (iv), (v), and (vi) of the grounds of appeal.
v. Each party shall bear its own costs for this appeal.
51. It is so ordered.
SIGNED, DATED, and DELIVERED IN VIRTUAL COURT THIS
24TH DAY OF JULY 2025
ADO MOSES
JUDGE
In the presence of: -
C/A – Moses