ANNUAL REPORT 2005-2006
The Members of
KABSONS INDUSTRIES LIMITED
1) We have audited the attached Balance Sheet of KABSONS INDUSTRIES
LIMITED, HYDERABAD (A.P.) as at 31st March, 2006 and also the Profit and
Loss Account for the year ended on that date annexed thereto and the cash
flow statement for the period ended on that date. 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.
2) 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 our opinion.
3) As required by the Companies (Auditors' Report) order, 2003, issued by
the Central Government of India in terms of Section 227(4A) of the
Companies Act, 1956, we enclose in the Annexure a statement on the matters
specified in paragraphs 4 and 5 of the said order.
4. 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 audit.
ii) In our opinion, proper books of accounts as required by law have been
kept by the company so far as appears from our examination, of those books.
iii) The Balance' Sheet, Profit & Loss account and Cash flow statement
dealt with by this report are in agreement with the books of account.
iv) In our opinion, the Balance Sheet Profit & 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 the written representations received from the Directors
as on 31st March, 2006 and taken on record by the Board of Directors, we
report that, none of the Directors is disqualified as on 31st March, 2006
from being appointed as a Director in terms of Clause (g) of sub-section(1)
of section 274 of the Companies Act, 1956.
5. a) Interest for the year and for earlier years Rs.7,04,453/- and
Rs.32,82,576/- respectively against trade deposits of Dealers/Distributors
are not provided resulting in understating the loss for the year by
Rs.7,04,453/- and understating the liabilities by Rs.39.87,029/- (Refer
Note No.7 of (Votes on Accounts).
b) We draw attention to note no.2 of Notes on accounts in the financial
statements. The company incurred a loss of Rs.26.40 Lakhs through
operations (previous year Rs.131.67 Lakhs) for the current year and as on
31st March, 2006 the company's current liabilities exceeded its current
assets by Rs.687.98 Lakhs. These factors along with the other matters as
setforth in the note referred raise substantial doubt that whether the
company will be able to continue as a 'Going Concern'.
6. In our opinion and to the best of our information and according to the
explanations given to us, the said accounts, subject to our comments in
para 5 above, give the information as 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.
i) In the case of the Balance Sheet of the state of affairs of the company
as at 31st March, 2006;
ii) In case of the Profit & Loss account, of the Profit of the company for
the year ended on that date; and
iii) In the case of Cash flow statement of the cash flows for the year
ended on that date.
For BRAHMAYYA & CO.,
Place: Hyderabad Partner
Date : 05.07.2006 Membership No.: 2907
Statement on the Companies (Auditor's Report) Order 2003
Re: KABSONS INDUSTRIES LIMITED
i) a) The Company has maintained proper records showing full particulars
including quantitative details and situation of fixed assets.
b) All the assets have not been physically verified by the management
during the year but there is a regular program of verification which, in
our opinion, is reasonable having regard to the size of the company and the
nature of its assets. No material discrepancies were noticed on such
c) During the year, the company has not disposed off fixed assets other
than a small part of Plant & Machinery.
ii) The inventory has been physically verified during the year by the
management. In our opinion, the frequency of verification is reasonable.
b) The procedures 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) The Company is maintaining proper records of inventory. The
discrepancies noticed on verification between the physical stocks and the
book records have been properly dealt with in the books of account.
iii) a) The Company has not granted any loans, secured or unsecured to
Companies, firms or other parties covered in the register maintained u/s.
301 of the Act.
b) The Company had taken loan from three companies and from a party covered
in the register maintained under section 301 of the companies Act, 1956.
The maximum amount involved during the year was Rs.102.50 Lakhs and the
year-end balance of loans taken from such parties was Rs.89.50 Lakhs.
c) In our opinion, the rate of interest and other terms and conditions on
which loans have been taken from companies, firms or other parties listed
in the register maintained under section 301 of the Companies Act, 1956 are
not, prima facie, prejudicial to the interest of the company.
d) The Company is not regular in repaying as stipulated the principal
amounts as well as the interest amounts.
iv) In our opinion and according to the information and explanations given
to us, there are adequate internal control systems commensurate with the
size of the company and the nature of its business with regard to purchases
of inventory, fixed assets and with regard to the sale of goods. During the
course of our audit, we have not observed any continuing failure to correct
major weaknesses in internal control systems.
v) a) According to the information and explanations given to us, we are of
the opinion that the particulars of contracts or arrangements referred to
in section 301 of the Act have been entered in the register required to be
maintained under that section and
b) In our opinion and according to the information and explanations given
to us the transactions made in pursuance of contracts or arrangements
entered in the register maintained under section 301 of the companies Act,
1956 have been made at prices which are reasonable having regard to
prevailing market prices at the relevant time.
vi) The company has not accepted the deposits from the public within the
meaning of section 58A and 58AA of the Companies Act, 1956 and the Rules
vii) The company has no internal audit system.
viii) Central Government has not prescribed maintenance of cost records
under clause (d) of sub-section(1) of the section 209(1)(d) of the
companies Act, 1956 for the products/items dealt with by the company.
ix) a) The company is not regular in depositing with appropriate
authorities undisputed statutory dues including provident fund, investor
education protection fund, employee's state insurance, income tax, sales
tax. The extent of the arrears of outstanding statutory dues as at the last
day of the financial year for a period of more than six months from the
date they become payable is given below:
A B C D E F
Companies Act Investor Education 22,550 1994-95 19.10.2001 }
and protection Fund
ESI Act Employees state
Insurance 12,917 2000-01 21.04.2001 }
Sales Tax Act Karnataka Sales Tax 3,467 1999-00 15.05.1999 } Un-
Sales Tax }
Act Karnataka Sales Tax 1,209 2004-05 15.03.2005 }
Sales Tax Bombay Sales Tax 190 2000-01 15.05.2000 }
Sales Tax }
Act Jharkhand Sales Tax 3,271 2001-02 15.03.2002 }
Act Andhra Pradesh }
Sales tax 7,525 2000-01 15.04.2001 }
Act Maharastra }
Sales Tax 5,817 2005-06 15.05.2005 }
Tax Act Maharastra }
Sales Tax 9,538 2004-05 15.04.2005 }
Sale Tax Act Maharastra Sales Tax 800 2003-04 15.01.2004 }
Sales Tax Act Maharastra Sales Tax 5,535 2004-05 05.11.2004 }
West Bengal }
Sales Tax Act West Bengal Sales Tax 547 2004-05 15.01.2004 }
West Bengal }
Sales Tax Act West Bengal Sales Tax 23 2005-06 15.09.2005 }
Sales Tax Act Gujarat Sales Tax 669 2005-06 15.10.2005 }
A = Name of statute
B = Nature of the dues
C = Amount Rs.
D = Period to which the amount relates
E = Due date
F = Date of Payment
b) According to the information and explanations given to us, there are no
dues of sales tax, income tax, customs duty, wealth tax, excise duty,
service tax and cess which have not been deposited on account of any
x) To our opinion, the accumulated losses of the company are more than
fifty percent of its networth. The Company has not incurred cash losses
during the financial year covered by our audit and incurred cash loss in
the immediately proceeding financial year.
xi) The Company has not defaulted in repayment of dues to the financial
xii) The Company has not granted any loans and advances on the basis of
security by way of pledge of shares, debentures and other securities.
xiii) The Company is neither a chit fund nor a nidhi mutual benefit fund
society. Therefore, the provisions of clause 4(xiii) of the above referred
order are not applicable to the company.
xiv) The company is not dealing in or trading in shares, securities,
debentures and other investments. Accordingly, the provisions of clause
4(xiv) of the above referred order are not applicable to the company.
xv) The company has not given any guarantee for loans taken by others from
banks or financial institutions.
xvi) During the year the company has not availed any term loans from banks
or financial institutions. Accordingly, the provisions of clause 4(xvi) of
the above referred order are not applicable to the company.
xvii) According to the information and explanations given to us and on all
overall examination of the balance sheet of the company, we report that no
funds raised on short-term basis have been used for long term investment.
xviii) The Company has not made preferential allotment of shares to patties
and companies covered in the register maintained under section 301 of the
Act during the year.
xix) The Company has not issued any debentures. Accordingly, the provisions
of Clause 4(xix) of the above referred order are not applicable to the
xx) During the year the company has not raised money by public issue.
Accordingly, the provisions of clause 4(xx) of the above referred order are
not applicable to the company.
xxi) According to the information and explanations given to us no fraud on
or by the company has been noticed or reported during the course of our
For BRAHMAYYA & CO.,
Place: Hyderabad (D. SEETHARAMAIAH)
Date : 05.07.2006 Partner