The High Court has backed a decision by the Tax Appeals Tribunal to strike out an appeal by Aspac International East Africa Ltd over tax liabilities of Sh599 million, ruling that the company filed its case more than three months outside the statutory timelines.
The court found that the company lodged its appeal at the tribunal on November 26, 2021, challenging the Kenya Revenue Authority (KRA) Commissioner’s decision to invalidate its objection to the tax assessment, without seeking leave to file the case out of time.
The company had argued that the 30-day period for filing an appeal did not start running on June 3, 2021, when the Commissioner issued a letter invalidating its objection, because there was no evidence that it received the letter on that date.
However, the court found that the letter had been sent to the company’s designated tax agents and that, even if July 13, 2021, was taken as the latest date of receipt, the statutory period for filing an appeal had expired by August 12, 2021.
It noted that the company did not dispute that it had neither applied for an extension of time under Section 13(3) of the Tax Appeals Tribunal Act nor obtained leave from the Tribunal to file its appeal out of time.
‘Consequently, this Court finds no error in the Tribunal’s finding that the appeal before it was lodged out of time without leave of the Tribunal and was therefore incompetent,’ the court ruled.
The dispute arose from a tax audit conducted by KRA into the company’s tax affairs for the 2015 to 2019 income years.
Following preliminary audit findings issued on June 19, 2020, and subsequent engagements between the parties, KRA issued an assessment on October 23, 2020, demanding Sh599,036,434 in Corporation Tax, Withholding Tax, Pay As You Earn (PAYE) and Value Added Tax (VAT), inclusive of penalties and interest.
Dissatisfied with the assessment, Aspac lodged objections dated November 20 and November 25, 2020.
The parties subsequently held meetings and exchanged emails as the company sought to provide supporting documents for its objection.
However, on June 3, 2021, the Commissioner issued a letter invalidating the objection, citing the company’s failure to provide the required supporting documents under Section 51(3) of the Tax Procedures Act.
After the company failed to settle the tax demand, KRA issued agency notices to its bankers on November 1, 2021, seeking to recover the outstanding amount under Section 42 of the Act.
The company moved to the tribunal on November 26, 2021, filing an application seeking to suspend the agency notices alongside its substantive appeal against the tax decision.
The tribunal dismissed the application for interim relief on March 4, 2022, before proceeding to determine the substantive appeal.
In its decision delivered on June 29, 2023, the tribunal struck out the appeal, finding that it had been filed outside the 30-day statutory period prescribed under Section 13(1) of the Tax Appeals Tribunal Act.
The tribunal held that the company should have filed its notice of appeal by July 3, 2021, but instead lodged it on November 26, 2021, four months and 24 days late, without seeking an extension of time as required under Section 13(3) and (4) of the Act.
The company challenged the decision at the High Court, arguing that the tribunal had erred in law and fact by finding that its appeal was time-barred.
It maintained that under Section 13(1)(b) of the Tax Appeals Tribunal Act, the 30-day period begins to run upon receipt of the Commissioner’s decision and not merely when the decision is issued.
The High Court, however, found that the evidence showed the invalidation letter had been transmitted to the company’s designated tax agents and that, even on the company’s preferred date of receipt, the appeal was filed outside the statutory period.