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Bihar Sponge Iron

BSE: 500058|NSE: BIHARSPONG|ISIN: INE819C01011|SECTOR: Steel - Sponge Iron
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Mar 14
Auditor's Report (Bihar Sponge Iron) Year End : Mar '15
Report on the Financial Statements
 
 We have audited the accompanying financial statements of BIHAR SPONGE
 IRON LIMITED (the Company), which comprise the Balance Sheet as at
 31st March, 2015, the Statement of Profit and Loss, the Cash Flow
 Statement for the year then ended, and a summary of the significant
 accounting policies and other explanatory information.  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 (the Act) with respect
 to the preparation of these financial statements that give 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.
 
 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
 thereunder.
 
 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, but not for the purpose of expressing
 an opinion on whether the company has in place an adequate internal
 financial control system over the financial reporting and the operating
 effectiveness of such controls. An audit also includes evaluating the
 appropriateness of the 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 qualified audit opinion on the
 financial statements.
 
 Basis for Qualified Opinion
 
 The management has prepared the financial statements on the basis of
 going concern perhaps based on the facts that the Modified Draft
 Rehabilitation scheme has been submitted by the company on 03.12.2012
 and the same is under the consideration BIFR. In our opinion the going
 concern concept is likely to be appropriate only if the modified
 rehabilitation scheme referred to above is approved by the BIFR with or
 without modifications.
 
 In the mean while following liabilities may or may not materialised
 depending upon the final outcome of the dispute, have not been
 provided:-
 
 i.  Non recognition of liability on account of currency fluctuations on
 foreign currency loan and interest thereon (as required under
 Accounting Standard - 11, Revised) amounting to Rs. 2,32,381 thousand
 as provided in the BIFR Scheme dt. 29.07.2004 and also confirmed by
 AAIFR/ Single Bench of Jharkhand High Court, Ranchi since the company
 against the order of Single Bench of High Court, has filed Letters
 Patent Appellate Jurisdiction (LPA) before the Divisional Bench of High
 Court of Jharkhand, Ranchi (refer other note no. 3(II) appearing in
 Annexure-1)
 
 ii.  Non recognition penalty of Rs. 21,528 thousands recovered by South
 Eastern Coal Fields Ltd. On account of short lifting of coal quantity
 in terms of Fuel Supply Agreement since the matter has been disputed by
 the Company under writ petition filed before the Hon''ble High Court of
 Chhattisgarh (refer other note no 5 of Annexure I)
 
 iii. No provision has been made in the books of accounts in respect of
 the undernoted items of expense in view of Shutdown of the Plant &
 Suspension of operations since 10th August, 2013 as well as other
 reasons contented by the company:-
 
 a.  Interest on unsecured loan taken from Promoters and other parties
 from 10.08.2013 to 31.03.2015( amount unascertained) (refer note 10 (a)
 of Annexure I).
 
 b.  Interest on Soft Loan taken from the Government of Jharkhand under
 the Industrial Rehabilitation Scheme 2003 amounting to Rs. 81,331
 thousands from 10.08.2013 to 31.03.2015 which is subject to
 representation for waiver(refer note 10(b) of Annexure I) and approval
 thereof by the lender.
 
 c.  Salaries, Wages, Allowances, Contribution to PF including interest
 on overdue amount as well as employee benefit expenses w.e.f.
 10.08.2013 to 31.03.2015, (amount unascertained) (refer note 10(c) of
 Annexure I)
 
 Taking into consideration non provision of likely liabilities mentioned
 paragraph I, II and III(b) above.
 
 a) Loss for the year would have been more by Rs. 3,35,240 thousand as
 compared to the disclosed loss of Rs. 73,614 thousand.
 
 b) Accumulated losses would have been Rs.26,55,564 thousand as compared
 to disclosed losses of Rs. 23,20,324 thousand.
 
 c) The above losses is however subject to ascertainment of liabilities
 as mentioned in Para iii (a) and iii(c).
 
 Qualified Opinion
 
 In our opinion and to the best of our information and according to the
 explanations given to us, except for the effects of the matter
 described in the Basis of Qualified Opinion paragraph above, 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 for the
 year ended on that date.
 
 Report on Other Legal and Regulatory Requirements
 
 1.  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 section 143 of the Companies Act 2013, we give in
 the Annexure a statement on the matters specified in paragraphs 3 and 4
 of the Order to the extent applicable to the company.
 
 2.  As required by section 143(3) of the Act, we report that:
 
 a.  We have sought & obtained all the information and explanations
 which to the best of our knowledge and belief were necessary for the
 purpose of our audit;
 
 b.  Except for the effects of the matter described in the Basis for
 Qualified Opinion Paragraph above, in our opinion, proper books of
 account as required by law have been kept by the Company so far as it
 appears from our examination of those books;
 
 c.  The Balance Sheet, the Statement of Profit and Loss, and Cash Flow
 Statement dealt with by this Report are in agreement with the books of
 account:
 
 d.  Except for the effects of the matter described in the Basis of
 Qualified Opinion paragraph above, 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.  The matter described in the basis for Qualified Opinion paragraph
 above, in our opinion, may have an adverse effect on the functioning of
 the company.
 
 f.  On the basis of written representations received from the Directors
 as on 31st March, 2015 taken on record by the Board of Directors, we
 report that none of directors is disqualified as on 31st March, 2015
 from being appointed as a director in terms of section 164(2) of the
 Act.
 
 g.  The qualification relating to the maintenance of accounts and other
 matters connected therewith are as stated in the Basis for Qualified
 Opinion paragraph above.
 
 h.  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 possible impact of pending
 litigations on its financial position in its financial statements
 -Refer other notes III of Annexure I (1) (i) to (ix) 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 were no amounts which were required to be transferred to the
 Investor Education and Protection Fund by the company.
 
 Annexure referred to in paragraph 1 under the heading Report on Other
 Legal and Regulatory Requirements of Independent Auditors'' Report of
 even date on the financial statements for the year ended March 31, 2015
 
 i) Fixed Assets
 
 a) The Company has maintained proper records showing full particulars
 including quantitative details and situation of its fixed assets.
 
 b) The Company has a programme of verifying all of the fixed assets
 over a period of three years, which in our opinion is reasonable,
 having regard to the size of the Company and nature of assets. Since
 the plant is under shut down from the previous year, hence no physical
 verification of Fixed Asset has been carried out by the management
 during the year as such we are unable to comment on the discrepancies,
 if any,between the physical balance and book balance and their
 adjustment in the books of accounts at the year end.
 
 ii) Inventories
 
 a) The stock of finished goods, stores, spare parts and raw materials
 have not been physically verified by the management at reasonable
 intervals during the year since the plant has been under shut down and
 operations suspended w.e.f. 10.08.2013.
 
 b) The company has the procedures of physical verification of
 inventories followed by the management which are reasonable and
 adequate in relation to the size of the Company and nature of its
 business, however no physical verification has been carried out during
 the year ended 31.03.2015 in view of the fact stated at (ii) a) above.
 
 c) The company has maintained proper records of inventory showing full
 details regarding quantity of receipts, issues, balances and dates of
 transactions. Since no physical verification of inventories were
 carried out during the year hence the question of discrepancies, if
 any, observed and their adjustment in the books of account does not
 arise.
 
 iii) Transactions with parties u/s 189 of the Companies Act, 2013
 
 The company has not granted any loans secured or unsecured to
 companies, firms or other parties covered in the register maintained
 under section 189 of the Act as such Para (a) & (b) of clause 3 (iii)
 are not applicable.
 
 iv) Internal Control
 
 In our opinion and according to the information and explanations given
 to us, there is an adequate internal control procedure commensurate
 with the size of the Company and the nature of its business with regard
 to purchase of inventory, fixed assets, and for sale of goods and
 services. However, there is a need of strengthening internal control
 with respect to obtaining of confirmation of balances from major
 parties.
 
 There are no continuing failures to correct matters in respect of lack
 of adequacy of internal controls brought to the notice.
 
 v) Deposits
 
 The Company has not accepted any deposits from the public which are
 covered under the directives issued by the Reserve Bank of India and
 the provisions of section 73 to 76 or any other relevant provisions of
 the Act and the rules framed thereunder.
 
 vi) Cost Records
 
 The maintenance of Cost Records has been specified by the Central
 Government under sub section (1) of Section 148 of the Companies Act,
 2013. Since there have been no operations during the Financial year
 2014-15, no records have been made & maintained by the company.
 
 vii) Statutory Dues
 
 a) According to the books and records, examined by us and information
 and explanations given to us, the company has not been regular in
 depositing the undisputed Statutory dues with the appropriate
 authorities including Provident Fund, Income Tax(TDS &TCS), Sales Tax,
 Service Tax, Excise duty, Value Added Tax, Cess & other applicable
 statutory dues during the year except that, the amount of excise duty
 of earlier year has been deposited by the company during the financial
 year along with interest.
 
 The arrears on account of such statutory dues as at the end of the
 financial year 31st March 2015 for a period of more than six month from
 the date they become payable are Service Tax: Rs 2,348 thousand,
 Provident fund: Rs 5,123 thousand: Family Pension Scheme: Rs. 703
 thousand, Income Tax (TDS/TCS)Rs. 4054 thousand, Electricity Duty: 320
 thousand and Cess Rs. 100 thousand.
 
 b) The details of dues of sales tax, custom duty, excise duty, trade
 tax and cess etc. which have not been deposited on account of dispute
 are given hereunder:
 
    Name of the Statute     Forum where
                            Dispute pending
  
 1. The Customs Act, 1962   CESTAT, Kolkata
 
 2. JVAT Act, 2005          Jt. Commissioner of Commercial
                            Taxes (Appeals) Jamshedpur, who
                            has recommended case on 08.10.2013
                            to DCIT to verify and allow credit
                            for taxes, if any, paid earlier.
 
 3. The Central Sales Tax 
    Act, 1956               Jt. Commissioner of Commercial
                            Taxes (Appeals).
 
 4. JVAT Act, 2005          Disputed demand for JVAT for the
                            F.Y. 2010-11 u/s 70(5)(b) under appeal
                            before the Jt. Comm. of Commercial
                            Taxes (Appeals), Jsr. However stay
                            has been granted on 20.01.2012
                            (Amount paid on appeal Rs. 5.88 lacs)
 
                            Demand raised by DCCT, Jsr for tax 
                            due and/penality imposed or interst
                            payable under JVAT Act, 2005 of the
                            F.Y. 2010-11 under dispute before
                            JCCT, Jsr (Amount paid on appeal
                            Rs. 15 lacs on 19.10.2012)
 
 5. Finance Act, 1994       The Commissioner of Appeals
                            Central Excise & Service Tax, Ranchi
 
 6. Income Tax Act, 1961    The Commissioner of Income Tax
                            (Appeals), JSR
 
    Name of the Statute     Nature of dues         Period of    Amount
                                                    Dispute       Rs.
                                                               Thousand
  
 1. The Customs Act, 1962   Custom Duty & 
                            Demurrage               1981-92     10,427
 
                            Charges and interest 
                            on imported Stores &
                            spare parts             1994-95      5,032
 
 2. JVAT Act, 2005          Tax on non-submission 
                            of JVAT Forms           2006-07      2,397
                           
 3. The Central Sales Tax 
    Act, 1956               Tax on non-submission 
                            of ''C'' Forms            2006-07        311
                           
 4. JVAT Act, 2005          Tax on JVAT             2010-11      5,879
                           
                            Tax on JVAT             2010-11     24,786
                            
 5. Finance Act, 1994       Recovery of Irregular 
                            Cenvat Credit, Cess     2009-10        123
                            availed and Penalty 
                            thereon
 
 6. Income Tax Act, 1961    Short deduction/        2004-05 to   8,334
                            collection of Tax at    2008-09
                            Source with interest
                            and penalty 
                             
 The above does not include the amount of assessed tax & penalty demand
 for JVAT of Rs. 22,117 thousand, CST Rs. 73,645 thousand and
 Electricity Duty of Rs.2,281 thousand for which the company is
 contemplating to file appeals before the appropriate authorities (refer
 note on contingent liabilities (Annexure I/ para III on the Basis of
 Qualified Opinion of our report ).
 
 c) The Company is not required to transfer any amount to the Investor
 Education and Protection Fund in accordance with the relevant
 provisions of the Companies Act 2013 and rules made thereunder.
 
 viii) The accumulated losses of the company at the end of the financial
 year March 31,2015 substantially exceeds its net worth and the company
 was declared as Sick industrial undertaking in 1996. Further the
 Company has incurred cash losses during the current financial year and
 in the immediately preceding financial year
 
 ix) The company has not defaulted in payment of dues to financial
 institutions/Banks. There has been no debenture in the company.
 
 x) According to the information and explanations given to us, the
 Company has not given any guarantee for loans taken by others from
 banks or financial institutions during the year.
 
 xi) The term loans taken by the Company have been applied for the
 purpose for which they were obtained, however there has been no term
 loans obtained during the year under audit.
 
 xii) Based upon the audit procedures performed and on the basis of
 information and explanations provided by the management, we report that
 no fraud on or by the Company has been noticed or reported during the
 year under audit.
 
                                        For Thakur, VaidyanathAiyar& Co.
                                                   Chartered Accountants
                                                         [FRNo. 000038N]
 
                                                             M.P. Thakur
 Place : New Delhi                                             (Partner)
 Dated :12th May, 2015                             Membership No. 052473
Source : Dion Global Solutions Limited
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