The main contention in the case, in which Cosino Associates has gone to court to compel Chandaria Industries Ltd to pay them the balance of Sh1, 995,000.00 from the transaction in dispute, is that Chandaria did not make the payments to Cosino Associates as it claims, even as it confesses through a letter by their lawyer that it helps clients evade taxes. Civil case no. 3883/2018 was filed at the Chief Magistrate’s court, Milimani Commercial Court on the 22/05/2018 by lawyers Ombati Otieno & Opondo advocates.
 |
| Kenya Revenue Authority Commissioner General Mr. John Njiraini |
On the 5th of April 2018, the Kenya Revenue Authority Commissioner General Mr. John Njiraini issued a press statement in which he announced the arrest of two individuals for tax evasion. The two, Mr Kavalkumar Navin Maisura and Ms Arti Jagdlesh Bakaria, were part of a syndicate suspected to have been involved in the falsification of documents including invoices used to claim fraudulent VAT input deductions.
The Weekly Vision has established that many companies could be involved in the syndicate as the CG had indicated. One of this is Chandaria Industries Ltd. According to documents in our possession, the company is alleging that it paid a consultant more than Sh2 million in cash to help him escape paying VAT.
 |
| Mr. Darshan Chandaria, CEO of Chandaria Industries Ltd |
The background of the transaction is that, on the 10th of February 2015, Chandaria Industries Ltd entered into a contract with a privately owned investigations company, Cosino Associates, specialized in private investigations. The deal was worth for Sh2.1 million and was for Cosino Associates to carry out a confidential and covert assignment about the illegal activities that were being conducted by the competitor to Chandaria Industries Ltd; the competitor was then based in Thika. This Chinese owned company was not playing by the rules of the industry.
 |
| Letter from Soita & Associates advocates |
Cosino Associates successfully conducted their investigations after being paid a down payment of 10% (200,000.00) in cash in which they signed for. They submitted a detailed report to the management of Chandaria Industries Ltd. Based on the finding contained in the report; the Kenya government had no choice but to close down the Chinese company for non-compliance. That is the last payment they received. The management of Chandaria then started dodging to pay the balance as stipulated in contract.
Then out of the blue Chandaria Industries Ltd remitted to KRA 5% of Sh2, 1000,000.00 as withholding tax, purporting to have paid Cosino Associates, a fact that they knew was untrue. Chandaria Industries Ltd claim that Cosino Associates insisted on being paid in cash so as to avoid paying VAT. A claim Chandarian Industries Ltd says they agreed with. They claim that they paid Cosino Associates the balance of Sh1, 995,000.00 in cash. The problem here is that Chandaria Industries Ltd is admitting to have been an accomplice in cheating KRA out of taxes.
In a letter dated the 9th of November 2017 Ref. S2200/01/139 from Chandaria Industries lawyers of Soita & Associates Advocates written to Ombati Otieno & Opondo advocates acting for Cosino Associates, at paragraph four, the lawyers say and we quote; “It is your client (Cossino Associates) who was probably attempting to evade tax by insisting that payments for the contract sum be made in cash”.
This confession raises several questions about the financial management of Chandaria Industries Ltd. How many clients have they helped evade tax by making payments in cash? Only God knows. The company is also in violation of Central Bank regulations requiring all payments above Sh1 million to be made by RTGS.
Moreover, Chandaria claims to have made the payment in two installments, all in different months, yet its withholding tax to KRA was in one transaction. The law requires that tax returns be filed monthly, which means after each payment was made by the company. Chandaria surely never did this on two occasions, as per they claim. In fact they never made any payment to Cosino Associates after the report was submitted. The 5% withholding tax remitted by Chandaria industries Ltd to KRA in this case should therefore be scrutinized by the KRA.
While the case by Cosino is before the court of law, the revenue authority should move with speed to conduct a forensic audit on Chandaria’s books to unearth tax evasion, since its single confession in this case could only be a tip of the iceberg.
 |
| A memorandum of appearance filed in court by Cosino Associates THE STORY CONTINUES NEXT WEEK. |
0 Comments