The Applicant commenced business in January, 1998 and filed its first income tax return on 31st December, 1998. Thereafter the Applicant consistently continued filing its tax returns on or before 31st December of every year. It is the Applicant’s case that on 12th April, 2010 the Respondent, the Commissioner of Income Tax wrote a letter stating that twelve months from the date of the Applicant’s registration had elapsed in July, 1998 and the Applicant’s initial tax returns should have been filed on 31st July, 1998 instead of 31st December, 1998. The Respondent informed the Applicant that all subsequent tax returns had been filed late and had accordingly accrued interest and penalties amounting to Kshs.5, 141,047 for the period 1998-2008. The Applicant’s accountant through a letter dated 12th April, 2010 informed the Respondent that the Applicant’s accounting date was 31st December and not 28th February. The parties kept on exchanging correspondences and on 11th October, 2011, the Respondent issued a demand notice to the Applicant for the sum of Kshs.7,243,818 being additional tax and penalties due.
The respondent had made a claim that the applicant had erroneously changed the date to 28th February but in 1996 attempted to change the accounting date. It was held that The Applicant’s decision to change its accounting period without seeking the authority of the Respondent was fraudulent.
Click Link for full case Nairobi Judicial Review No. 19 of 2012. Iron Art Ltd. vs KRA, Section: 27, Income Tax Act. Issue in Dispute: Change of accounting period, must the consent of the Commissioner be obtained?