We have audited the attached Balance Sheet of SOMA TEXTILES &
INDUSTRIES LIMITED, as at 31st March, 2011 and also the Profit and Loss
Account and Cash Flow statement for the year ended on that date annexed
thereto. These financial statements are the responsibility of the
Company''s management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in India. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for
As required by the Companies (Auditors'' Report) Order, 2003 as amended
by the Companies (Auditors'' Report) (Amendment) Order, 2004 (together
the ''Order'') issued by the Central Government of India in terms of
sub-Section (4A) of Section 227 of the Companies Act, 1956 of India and
on the basis of such checks of the books and records of the Company as
we considered appropriate and according to the information and
explanations given to us, we enclose in the Annexure a statement on the
matters specified in paragraphs 4 and 5 of the said Order.
Further to our comments in the Annexure referred to above, we report
(i) We have obtained all the information and explanations, which to the
best of our knowledge and belief were necessary for the purposes of our
(ii) In our opinion, proper books of account as required by law have
been kept by the Company so far as appears from our examination of
those books and proper report adequate for the purposes of our audit
have been received from the branch not audited by us. The financial
records of Baramati branch of Company have been audited by Shankarlal
Jain & Associates, Chartered Accountants, Mumbai, (Firm Registration
No. 109901W) a copy of whose report has been forwarded to us. We have
relied on that report and have appropriately dealt with the same in our
(iii) The Balance Sheet, Profit and Loss Account and cash flow
statement dealt with by this report are in agreement with the books of
account and with the audited reports from the branch;
(iv) In our opinion, the Balance Sheet, Profit and Loss Account and
cash flow statement dealt with by this report comply with the
accounting standards referred to in sub-Section(3C) of Section 211 of
the Companies Act, 1956;
(v) On the basis of written representations received from the
directors, as on 31st March, 2011, and taken on record by the Board of
Directors, we report that none of the directors is disqualified as on
31st March, 2011 from being appointed as a director in terms of
clause(g) of sub-Section(l) of Section 274 of the Companies Act, 1956;
(vi) In our opinion and to the best of our information and according to
the explanations given to us, and subject to our observations in Note
No. 23 of Schedule 22(B) - Notes on Accounts, relating to income of Rs.
26,724,438/- shown by the Company under the head Prior Period in the
Profit and Loss Account, pertaining to its claims for Deemed Duty
Drawback for the period 1st April, 1994 to 31st March, 2003; and
further Note No. 24 of Schedule 22(B) - Notes on Accounts, pertaining
to amount of investment as well as amount advanced by the Company to
Soma Textile FZC, the said accounts read together with the notes
thereon give the information required by the Companies Act, 1956, in
the manner so required and give a true and fair view in conformity with
the accounting principles generally accepted in India;
(a) In the case of the Balance Sheet, of the state of affairs of the
Company as at 31 st March, 2011;
(b) In the case of the Profit and Loss Account, of the LOSS for the
year ended on that date; and
(c) In the case of Cash Flow Statement, of the Cash Flows for the year
ended on that date.
Annexure referred to in paragraph 3 of our report of even date to the
members of SOMA TEXTILES & INDUSTRIES LIMITED on the accounts for the
year ended on 31st March 2011.
(i) (a) The Company has maintained proper records showing full
particulars, including quantitative details and situation of fixed
(b) The Company has a phased programme of physical verification of
fixed assets which, in our opinion, is reasonable having regard to the
size of the Company and nature of its assets. In accordance with this
programme, the management has verified fixed assets during the year and
no material discrepancies have been noticed on such verification.
(c) In our opinion, the Company has not disposed off a substantial part
of its fixed assets during the year and the going concerns status of
the Company is not affected.
(ii) (a) The management conducts regular physical verification of
inventory at reasonable intervals.
(b) In our opinion, the procedures of physical verification of
inventory followed by the management are reasonable and adequate in
relation to the size of the Company and the nature of its business.
(c) The Company is maintaining proper records of inventory. Some
immaterial discrepancies were noticed on physical verification which
have been properly dealt with in the books of account.
(iii) (a) The Company has granted interest free loan to its Associate,
Soma Textile FZC. Total amount outstanding on 31st March 2011 was
(b) There are no terms and conditions set out by the Company as on date
for the loans given to Soma Textile FZC and therefore, we are unable to
comment on terms and conditions of the said loan.
(c) As there is no stipulation made for repayment of loan by Associate,
we are unable to report on regularity of receipt of principal amount.
(d) As there is no stipulation of repayment of loan by Associate, we
are unable to report on overdue amount.
(e) According to the information and explanations given to us the
Company has taken unsecured loans from companies, firm or other parties
covered in the register maintained under Section 301 of the Companies
Act, 1956 and the same are as under.
No. of Parties involved Three Parties
Loan Taken Rs. 35,500,000
Balance Outstanding at the end of year Rs. 35,500,000
(f) Interest free unsecured loan taken from promoters to fulfill
stipulation of Financial Institution so there is no rate of interest
specified. Terms and conditions of loans taken are prima facie not
prejudicial to the interest of the Company;
(g) No stipulation has been specified for the repayment of these loan.
(iv) There is an adequate internal control system commensurate with the
size of the Company and the nature of its business, for the purchase of
inventory and fixed assets and for the sale of goods and service.
(v) (a) According to the information and explanations given to us, we
are of the opinion that the transactions that need to be entered into
the register maintained under Section 301 of the Companies Act, 1956
have been so entered.
(b) In our opinion and as explained to us, the transactions made in
pursuance of contracts or arrangements entered in the register
maintained under Section 301 of the Companies Act 1956 and exceeding
value of Rupees Five Lacs in respect of any party during the year have
been made at prices which are reasonable having regard to the
prevailing market prices at the relevant time.
(vi) The Company has not accepted any deposits from the public.
Therefore the provisions of Sections 58A, 58AA or any other relevant
provisions of the Act and the rules framed thereunder or any order
passed by Company Law Board or National Company Law Tribunal or Reserve
Bank of India or any Court or any other Tribunal do not apply to
(vii) In our opinion and according to information and explanations
given to us, the Company has a interna! audit system communsurate with
its size and nature of its business, which may be further strengthened.
(viii) In our opinion, the Company has maintained proper cost records
prescribed by the Central Government under clause (d) of sub-Section
(1) of Section 209 of the Act. However, we are not required to carry
out and have not carried out any detailed examination of such accounts
(ix) (a) According to the information and explanations given to us and
on the basis of our examination of books of account, we are of the
opinion that the Company is generally regular in depositing undisputed
statutory dues including Provident Fund, Investor Education and
Protection Fund, Employees'' State Insurance, Income-tax, Sales-tax,
Wealth Tax, Service Tax, Custom Duty, Excise Duty, cess and any other
statutory dues with the appropriate authorities. At the end of the
year, there were no undisputed dues payable for a period of more than
six months from the date they became payable.
(b) As on 31st March 2011, according to records of the Company, some
statutory dues were disputed and not deposited as given below:
Name of Statute Nature of Dues Amount (Rs.) Period to Forum where
dispute is pending
Act, Penalty for
filing 25,428 1996-97 CEGAT, Mumbai and
the Hon''ble High
1944 wrong declaration 1997-98 of Gujarat,
Act, Recovery of
CENVAT 158,973 2004-05 The Dy.
C. Excise, Div-I,
Act, Recovery of
additional 2,485,486 2002-03 The Dy.
1944 TTA duty of Yam Ahmedabad.
Act, Refund claim for 97,711 2005-06 Commissioner of
1944 amount short
claim of yarn
Act, Demand for
old duty 50,179 2008-09 OESAT, West Zone,
The Income Tax Demand of Income 976,730 A.Y. Asst. Commissioner
of Income Tax,
Act-1961 Tax 2006-07 Cir.-8, Ahmedabad
The Income Tax Demand of
Income 26,076,000 A.Y. Asst. Commissioner
of Income Tax, Cir
Act-1961 Tax 2008-09 8, Ahmedabad
The Income Tax Demand for
Penalty 1,742,070 A.Y. Commissioner of
Act-1961 U/s. 271(1)(C) 2006-07 Ahmedabad
The Income Tax Demand of
Income 2,213,276 A.Y. Commissioner of
Act-1961 Tax 2007-08 Ahmedabad
Sales Tax 617,257 1997-98 Gujarat Value
Added Tax Tribunal
Act, 1969 1998-99
(x) The Company has accumulated losses at the end of the financial year
not exceeding 50% of its net worth. It has not incurred cash losses in
the financial year but incurred cash losses in the immediately
preceding financial year.
(xi) Company is under Corporate Debt Restructuring (CDR) package under
scheme of RBI which was duly approved and implemented. Company has not
defaulted in repayment of dues to any financial institution or bank as
per reschedulement under CDR package. '' , ''
(xii) In our opinion and according to explanations given to us, the
Company Has not granted loans and advances on the basis of security by
way of pledge of shares, debentures and other securities. Accordingly
this clause does not apply.
(xiii) The Company is not a chit fund / nidhi Company / mutual
benefit, fund or society which would be governed by any special statute.
Accordingly this clause along with sub clauses do As not’ apply.
(xiv) In our opinion and according to explanation TO given to us, the
Company is not dealing or trading in shares, securities, debentures and
other investments. Accordingly this clause does not apply.
(xv) In our opinion and according to explanations given to us, the
Company has not given any guarantee for loans taken by others from bank
or financial institutions. Accordingly this clause does not apply.
(xvi) In our opinion and according to explanations given to us, the
term loans were applied only for the purpose for which they were
(xvii) In our opinion and according to explanations given to us, the
funds raised on short-term basis have not been used for long-term
(xviii) The Company has not made any preferential allotment of shares
to parties and companies covered in the Register maintained under
Section 301 of the Act during the year and accordingly this clause does
(xix) The Company has not issued debentures during the year.
Accordingly this clause does not apply.
(xx) The Company has not raised any money from public issue during the
financial year. Accordingly this clause does not apply.
(xxi) In our opinion and according to explanations given to us, no
fraud on or by the Company has been noticed or reported during the
For PIPARA & COMPANY
Place : Ahmedabad Membership No.034289
Date : 18th May, 2011 Firm Registration No. 107929W