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Soma Textiles and Industries

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« Mar 14
Auditor's Report (Soma Textiles and Industries) Year End : Mar '15
 We have audited the accompanying financial statements of SOMA TEXTILES
 & INDUSTRIES LIMITED, which comprise the Balance Sheet as at March 31,
 2015, the Statement of Profit and Loss and Cash Flow Statement for the
 year then ended, and a summary of significant accounting policies and
 other explanatory information.
 
 2.  Management''s Responsibility for the Financial Statements
 
 The Company''s Board of Directors is responsible for the matters stated
 in Section 134(5) of the Companies Act, 2013 with respect to the
 preparation and presentation of these financial statements that gives a
 true and fair view of the financial position, financial performance and
 cash flows of the Company in accordance with the accounting principles
 generally accepted in India, including the Accounting Standards
 specified under Section 133 of the Act, read with Rule 7 of the
 Companies (Accounts) Rules, 2014.
 
 This responsibility also includes maintenance of adequate accounting
 records in accordance with the provisions of the Act for safeguarding
 of the assets of the Company and for preventing and detecting frauds
 and other irregularities; selection and application of appropriate
 accounting policies; making judgments and estimates that are reasonable
 and prudent; and design, implementation and maintenance of adequate
 internal financial controls, that were operating effectively for
 ensuring the accuracy and completeness of the accounting records,
 relevant to the preparation and presentation of the financial
 statements that give a true and fair view and are free from material
 misstatement, whether due to fraud or error.
 
 3.  Auditor''s Responsibility
 
 Our responsibility is to express an opinion on these financial
 statements based on our audit.
 
 We have taken into account the provisions of the Act, the accounting
 and auditing standards and matters which are required to be included in
 the audit report under the provisions of the Act and the Rules made
 there under.
 
 We conducted our audit in accordance with the Standards on Auditing
 specified under section 143(10) of the Act.  Those Standards require
 that we comply with ethical requirements and plan and perform the audit
 to obtain reasonable assurance about whether the financial statements
 are free from material misstatement.
 
 An audit involves performing procedures to obtain audit evidence about
 the amounts and the disclosures in the financial statements. The
 procedures selected depend on the auditor''s judgment, including the
 assessment of the risks of material misstatement of the financial
 statements, whether due to fraud or error. In making those risk
 assessments, the auditor considers internal financial control relevant
 to the Company''s preparation of the financial statements that give a
 true and fair view in order to design audit procedures that are
 appropriate in the circumstances.  An audit also includes evaluating
 the appropriateness of accounting policies used and the reasonableness
 of the accounting estimates made by the Company''s Directors, as well as
 evaluating the overall presentation of the financial statements.
 
 We believe that the audit evidence we have obtained is sufficient and
 appropriate to provide a basis for our audit opinion on the financial
 statements.
 
 4.  Opinion
 
 In our opinion and to the best of our information and according to the
 explanations given to us, the aforesaid financial statements give the
 information required by the Act 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 March 31, 2015;
 
 (b) In the case of the Statement of Profit and Loss, of the Loss for
 the year ended on that date and;
 
 (c) In the case of the Cash Flow Statement, of the cash flows of the
 Company for the year ended on that date.
 
 5.  Emphasis of Matter
 
 (a) We draw attention to Note 12.2 to the Financial Statement, relating
 to Account Receivables of Soma Textiles FZC, an associate enterprise of
 the company, whereby the debtors have requested the company for 2 years
 cooling period i.e. till March 2016. The amount of such debtors is AED
 6,26,31,823. We are unable to comment on said receivables of Soma
 Textiles FZC, which are deemed to be good by Independent Auditor of
 Soma Textiles FZC-''Business Management World Auditors & Business
 Consultants''. The company has shown a loan amount of Rs.9852.39 lakhs
 (Previous year Rs.9444.17 lakhs) given to Soma Textile FZC (UAE) out of
 GDR proceeds, classifies as long term loan. This loan had been advanced
 by the company as a Quasi- Equity (Note 12) in addition to the capital
 of Soma Textile FZC when the said loan was given, the said company was
 a wholly owned subsidiary, however, with effect from 31st March 2010,
 the company''s holding in this company has diluted from 100% to 40%. In
 the financial statements of Soma Textile FZC ended as at 31.03.2015 the
 accumulated loss reflects at AED 5,64,690 as against Total Capital of
 AED 9,00,000 (including Statutory Reserves). Our opinion is not
 qualified in this matter.
 
 (b) Attention to the following is invited:
 
 As per the provisions of Section 23 of SICA Act, 1985 the Accumulated
 Losses of the company as at 31st March, 2015 have resulted in erosion
 of more than 50% of its peak net worth during the four financial years
 immediately preceding the financial year ended on 31st March, 2015.
 Consequent upon, the company has become a Potentially Sick Company
 under the said provision.
 
 6.  Report on Other Legal and Regulatory Requirements
 
 (i) As required by the Companies (Auditor''s Report) Order, 2015 (the
 Order) issued by the Central Government of India in terms of
 sub-section (11) of section143 of the Act, we give in the Annexure a
 statement on the matters specified in paragraph 3 & 4 of the said Order
 to the extent applicable.
 
 (ii) As required by section 143 (3) of the Act, we report that:
 
 (a) We have sought and obtained all the information and explanations
 which to the best of our knowledge and belief were necessary for the
 purposes of our audit;
 
 (b) 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;
 
 (c) The Balance Sheet, Statement of Profit and Loss and Cash Flow
 Statement dealt with by this Report are in agreement with the books of
 account;
 
 (d) In our opinion, the aforesaid financial statements comply with the
 Accounting Standards specified under Section 133 of the Act, read with
 Rule 7 of the Companies (Accounts) Rules, 2014;
 
 (e) On the basis of the written representations received from the
 directors as on 31st March, 2015 taken on record by the Board of
 Directors, none of the directors is disqualified as on 31st March, 2015
 from being appointed as a director in terms of Section 164 (2) of the
 Act;
 
 (f) With respect to the other matters to be included in the Auditor''s
 Report in accordance with Rule 11 of the Companies (Audit and Auditors)
 Rules, 2014, in our opinion and to the best of our information and
 according to the explanations given to us:
 
 I.  The company has disclosed the impact of pending litigation on its
 financial position in its financial statements- (Refer Note 31 to the
 financial statements).
 
 II.  The Company did not have any long-term contracts including
 derivative contracts for which there were any material foreseeable
 losses.
 
 III. There has been no delay in transferring amounts, required to be
 transferred, to the Investor Education and Protection Fund by the
 company.
 
 ANNEXURE TO INDEPENDENT AUDITOR''S REPORT
 
 (Reffered to in paragraph 1 under ''Report on Other Legal and Regulatory
 Requirements'' section of our report of even date)
 
 (i) In respect of its fixed assets :
 
 (a) The Company has maintained proper records showing full particulars,
 including quantitative details and situation of fixed assets.
 
 (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.
 
 (ii) In respect of its inventory:
 
 (a) The management conducts regular physical verification of inventory
 at reasonable intervals commensurate and adequate to the size of its
 operations. In our openion the frequency of physical verification is
 reasonable having regard to the size and nature of business of company.
 
 (b) In our opinion and according to the information and explanation
 given to us, the procedure of physical verification of inventories
 followed by the management are reasonable and adequate in relation to
 the size of the company and the nature of its business.
 
 (c) In our opinion and according to the information and explanation
 given to us, the Company has maintained proper records of its
 inventories. 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 (quasi-equity) to
 its Associate, Soma Textile FZC. Total amount
 
 outstanding on 31st March 2015 was Rs. 9852.39 lakhs.
 
 (b) There are no terms and conditions set out by the Company as on date
 for the loans given to Soma Textile FZC therefore, we are unable to
 report on regularity of receipt of principal amount.
 
 (c) As there is no stipulation of repayment of loan by Associate, we
 are unable to report on overdue amount and reasonability of the steps
 taken by the company for the recovery of the principal.
 
 (iv) In our opinion, and according to the information and explanations
 given to us, there is an adequate internal control procedures
 commensurate with the size of the Company and the nature of its
 business with regard to purchases of inventory and fixed assets and the
 sale of goods and services. During the course of our audit, we have not
 observed any major weakness in such internal control system.
 
 (v) According to the information and explanations given to us,the
 Company has not accepted any deposits from the public thus, directives
 issued by Reserve Bank of India the Provisions of the section 73 to 76
 and other relevant provisions of the Companies Act, 2013 and the rules
 framed there under 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 Company.
 
 (vi) We have broadly reviewed the books of accounts maintained by the
 company pursuant to the rules made by the Central Government of India,
 regarding the maintenance of cost record under sub-section (1) of
 section 148 of the Companies Act, 2013 and are of opinion that, prima
 facie, the prescribed accounts & records have been maintained.  We
 have, however, not made a detailed examination of the cost records with
 a view to determine whether they are accurate or complete.
 
 (vii) According to information and explanation given to us in respect
 of statutory dues:
 
 (a) According to the information and explanations given to us, and on
 the basis of our examination of the books of accounts, the Company has
 generally been regular in depositing the undisputed statutory dues
 including Income- Tax, Sales Tax, Wealth Tax, Service Tax, Excise Duty,
 Custom Duty, Cess and other material Statutory dues during the period
 with the appropriate authorities. At the end of the year, there were no
 undisputed amount payable for a period of more than six months from the
 date they became payable.
 
 (b) Details of dues of Income Tax, Sales Tax, Wealth Tax, Service Tax,
 Custom Duty, Excise Duty and Cess which have not been deposited as on
 31.03.2015 on account of dispute are given below:
 
 Name of          Nature of          Amount     Period to       Forum
 Statute          Dues              (Rs. in     which it        where
                                     Lacs)                      dispute
                                                                is
                                                                pending
                                                                relates
 
 Central          Recovery           1.59       2004-05      The Dy.
 Excise Act,      of CENVAT                                  Commissi
 1944                                                        oner of C.
                                                             Excise,
                                                             Div-I,
                                                             Ahmedabad.
 
 Central          Recovery          24.85       2002-03      The Dy.
 Excise Act,      of additional                              Commissi
 1944             TTA duty                                   oner of C.
                  of Yarn                                    Excise,
                  captively                                  Div-III,
                  consumed                                   Ahmedabad.
 
 Central Refund   claim for          0.98       2005-06      Commissioner
 Excise Act,      amount                                     of Central
 1944             short                                      Excise,
                  received                                  (Appeals),
                  against                                    Ahmedabad
                  refund
                  claim of
                  yarn duty
                  after
                  adjusting
                  the old
                  recovery
 
 Central          Demand for         0.50       2008-09      CESAT, West
 Excise Act,      old duty                                   Zone,
 1944                                                        Ahmedabad
 
 Central          Recovery           5.81       2012-13      CESAT,
 Excise Act,      of                                         West
 1944             transit                                    Zone,
                  ional Cenvat                               Ahmedabad
                                                             (Appeal)
 
 The Income       Demand of          9.77      A.Y.Asst.     Commissioner
 Tax              Income Tax                                 of Income
 Act-1961                                       2006-07      Tax,Cir.-8,
                                                             Ahmedabad
 
 The Income       Demand of         14.55       A.Y          Commissioner
 Tax              Income Tax                                 of Income
 Act-1961                                       2007-08      Tax(Appeal),
                                                             Ahmedabad
 
 Gujarat          Additional         6.17       1997-98,     Gujarat
 Sales Tax       Sales Tax                      1998-99      Value
 Act-1969                                      & 2000-01     Added
                                                             Tax
                                                             Tribunal
 
 (c) There has been no delay in transferring amount, required to be
 transferred, to the Investor Education and  Protection Fund By Company.
 
 (viii) The accumulated loss of the Company at the end of the financial
 year exceeds fifty percent of its net worth and also the company has
 incurred cash losses in the current financial year.
 
 (ix) In our opinion and according to the information & explanations
 given to us, the company has defaulted in repayment of dues to
 financial institution and banks. (Please Refer Note 3.3 to Financial
 Statements)
 
 (x) In our opinion and according to the information and explanations
 given to us, the Company has not given any guarantee for loans taken by
 others from bank or financial institutions.
 
 (xi) In our opinion and according to the explanations given to us the
 term loans were applied only for the purpose for which they were
 obtained.
 
 (xii) To the best of our knowledge and according to the information and
 explanations given to us, we report that no fraud on or by the company
 has been noticed or reported during the year under audit and even up to
 the date of our audit.
 
                                                  For PIPARA & COMPANY
                                                 Chartered Accountants
                                              Firm Regn. No. : 107929W
 
 
 
                                                           GYAN PIPARA
 Place : Ahmedabad                                           (Partner)
 Date : 30th May, 2015                            Membership No.034289
 
 
Source : Dion Global Solutions Limited
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