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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 also 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 the management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
1) As required by the Companies (Auditor's Report) Order, 2003 issued by the Central Government of India in terms of Section-227(4A) of the Companies Act, 1956. We annex hereto a statement on the matters specified in paragraph 4 of the said order, to the extent applicable to the company.
2) There has been change in the management control of the company by purchase of 2616517 nos shares of the company i.e. 68.74% of the issued capital of the company by M/s Padma Impex Pvt. Ltd. vide order of the Hon'ble Bombay High Court in arbitration petition no. 304 of 2011 dated 22-02-2012. Further, the company has transferred all its old outstanding debit & credit balances including all contingent liabilities (except statutory taxes) at book value to one of its sister concern namely M/s Kailash Motors Finance Pvt. Ltd. Jabalpur vide assignment deed executed on 13-02-2012.
3) The physical existence and the valuation of repossessed stock and documentation of repossessed stocks sold and/or refinanced during the year is based on the management certificate. We could not physically verify the same since located in far off places.
4) The provision for gratuity and leave encashment has been done on estimated basis and not as per Actuarial valuation required as per accounting standard 15 issued by ICAI. Therefore in light of the above, correctness of provision cannot be commented upon.
5) On account of expired lease asset and non availability of information regarding terms of lease and stock on lease , the compliance with accounting standard 19 on leases issued by ICAI could not be commented upon.
6) As we are not able to visit branches of the company as they are located at far off places, we have relied upon the information submitted by the branches and accounts maintained at H.O. at Jabalpur and certified by the management.
7) Subject to our comments in Para - 2, 3, 4, 5, & 6 above :-
(a) We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purpose of our audit.
(b) 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.
(c) The Balance Sheet and Profit & Loss Account and the Cash Flow Statement dealt with by. this report are in agreement with the books of accounts.
(d) In our opinion, the Balance Sheet and Profit and Loss Account and the Cash Flow Statement dealt with by this report comply with the Accounting Standard referred to in Sub-section-(3C) of Section-211 of the Companies Act. 1956.
(e) On the basis of the written representation received from the Directors, and taken on record by the Board of Directors of the Company, we report that none of the directors is disqualified as on 31st March, 2012 from being appointed as a director in terms of clause (g) of Sub Sec-(1) of Sec-274 of the Companies Act, 1956.
(f) In our opinion and to the best of our information and recording to the explanations given to us the said accounts read with the notes thereon given 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 ;
(i) In the case of Balance Sheet of State of Affairs of the Company as at 31.03.2012.
(ii) In the case of Profit & Loss Account of the 'LOSS' for the year ended on that date; and
(iii) In the case of cash flow statement of the cash flow for the year ended on that date.
ANNEXURE TO THE AUDITORS REPORT REFERRED TO IN PARAGRAPH-1 OF OUR REPORT OF EVEN DATE.
(i) (a) The Company is maintaining proper records showing full particulars including quantitative details and situation of fixed assets, except in respect of lease assets, however there exist Nil fixed assets as on 31-03-2012.
(b) The fixed assets of the company other than lease assets are physically verified by the management at the end of the year. To the best of our knowledge no material discrepancies were noticed on such physical verification as compared with the book records, however there exist Nil fixed assets as on 31-03-2012
(c) During the year, the company has disposed no assets
(ii) (a) The repossessed stocks has been physically verified by the management at the end of the year. In our opinion, the frequency of verification is reasonable; however the repossessed stock had been assigned during the year to M/s Kailash Motors finance Pvt. Ltd. Jabalpur vide assignment deed dated 13-02-2012.
(b) The procedures of physical verification of repossessed stock followed by the management are reasonable and adequate in relation to the size of the company and nature of its business;
(c) The company is maintaining proper records of repossessed stocks. To the best of our knowledge no material discrepancies were noticed on such verification between the physical stocks and the book records ;
(iii) (a) The company had granted no unsecured loans/advances during the year to companies, firm or other parties covered in the register maintained U/s-301 of the Companies Act, 1956,
(b) In our opinion, the rate of interest and other terms and conditions on which loans have been granted to companies, firms or other parties listed in the register maintained U/s-301 of the Companies Act, 1956 are not, prima facie, prejudicial to the interest of the Company.
(c) As per the information made available to us, the aforesaid loans granted by the company are repayable on demand and no such demand has been made during the year.
(d) There is no overdue amount more than rupees one lacs in respect of the aforesaid loans (please refer to Point-iii) (c) above);
(iv) (a) The company had taken unsecured loans/advances during the year from companies, firm or other parties covered in the register maintained U/s-301 of the Companies Act, 1956, the details required are given hereunder
No. of Parties involved 3
Total Transactions Net (Rs. in Lacs) 141.14
Closing Balance (Rs. in Lacs) 170.55
(b) 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 U/s-301 of the Companies Act, 1956 are not prima facie prejudicial to the interest of the company ;
(c) As per the information made available to us the aforesaid loans taken by the company are repayable on demand and no such demand has been made during the year;
(d) There is no overdue amount more than Rupees One Lac in respect of the aforesaid loans (Please refer to Point-iv (c) above);
(v) In our opinion and according to the information and explanations given to us, there are adequate internal control system commensurate with the size of the company and the nature of its business with regard to purchase of fixed assets, and with regard to the sale of goods and services. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in internal control;
(vi) (a) According to the information and explanations given to us by the company, we are of the opinion that the particulars of contracts or arrangements referred to in Sec-301 that need to be entered into the register maintained U/s-301 of the Companies Act, 1956 have been so entered ;
(b) In our opinion and according to the information and explanations given to us, there are no transactions (excluding loans referred under Para-(iii) above) made in pursuance of contracts or arrangements entered in the register maintained U/s-301 of the Companies Act, 1956, exceeding the value of rupees five lacs in respect of any party during the year;
(vii) In the case of public deposit received by the company the directives issued by the Reserve Bank of India and the provisions of Sections-58AA and other relevant provisions of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975 have been complied with except for delay in filing of returns and as per information made available to us no order has been passed by the Company law Board or National Company Law Tribunal or RBI or any court of any other Tribunal with regard to the deposits;
(viii) The company has an Internal Audit System commensurate with the size and nature of its business which should be strengthened in respect of reporting and action thereon ;
(ix) The company is in the business of financing and hence maintenance of cost records under Clause-(d) of sub-section-(1) of Section-209 of the Companies Act, 1956 is not applicable;
(x) (a) According to the records, information and explanations given to us, the company is not regular in depositing with appropriate authorities undisputed amount of provident fund, investor education and protection fund, employees state insurance, income tax, sales tax, wealth tax, service tax, custom duty, excise duty, cess and other statutory dues applicable to it and no undisputed amounts payable were outstanding as at 31st March, 2012, for a period of more than six months from the date they become payable.
(b) According to the records of the company, dues in respect of income tax, wealth tax, sales tax, custom duty and excise duty, cess, which have not been deposited on account of any dispute are as under
1. INTEREST TAX:
Assessment Year 1998-99, 1999-2000 and 2000-2001 cases are pending before Allahabad High Court by the Income tax Department against the order of ITAT where in it is held that the Finance Charges on Hire Purchase is not interest but a profit.
2. INCOME TAX:
a. Assessment Year 2001-2002 and 2002-2003 are pending before Allahabad High Court (by the Deptt.) against the order of the ITAT wherein depreciation is allowed at the rate of 40% on leased vehicles.
b. Assessment Year 1996-1997 is pending before Allahabad High Court against the penalty order passed by the ITAT.
c. Assessment Year 2004-05: Case is pending before ITAT(u/s 254) and before High Court against the legal ground that case can not be opened u/s 148 before completion of 12 month time from the month in which return of income was originally filed.
d. Assessment Year 2006-07: Case is pending before CIT (Appeals) kanpur against the order of the Assessing Officer.
e. Assessment Year 2007-08: Case is pending for assessment before DCIT- 6 kanpur.
f. Assessment Year 1995-96: We have filed a Writ Petition before Lucknow High Court under the KAR VIVAD SAMADHAN SCHEME and matter is pending before Lucknow High Court.
g. Assessment Year 1992-93: Application is pending for appeal effect to be given before the Assessing Officer . The quantification of above liabilities has not been done on account of cases pending before the authority.
3. LEGAL CASES
a. Disputed Case of Bhubaneswar Branch for recovery of Rs. 4.45/- Lacs deposited in court
b. Disputed Case of Citi Corp for recovery of Rs. 3.04/- Lacs of Alwar Branch
c. Disputed Case liabilities of Rs. 3.08/- lacs repayable if claimed by the customer.
(xi) The accumulated losses at the end of the year of the company are more than fifty percent of its net worth and the company has incurred cash losses in the current financial year and there was no cash loss in immediately preceding financial year;
(xii) The company has not defaulted in repayment of dues to Financial Institutions, Banks or Debenture holders.
(xiii) The company has not granted any loans or advances on the basis of security by way of pledge of shares, debentures and other securities;
(xiv) In our opinion, the company is not a chit fund, nidhi or mutual benefit fund/societies. Therefore, the provisions of the Clause-4 (xiii) of the Companies (Auditors' Report) Order, 2003 are not applicable to the Company;
(xv) In our opinion, the company is not dealing or trading in shares, securities, debentures and other investments. In respect of investment in shares, the same has been transferred to M/s Kailash Motors Finance Pvt. Ltd. Jabalpur on its book value during the year.
(xvi) 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 banks and financial institutions;
(xvii) The company has not taken any term loan during the year accordingly the provisions of para 4 (xvi) of the Companies (Auditors' Report) Order 2003 are not applicable to the Company.
(xviii) According to the information and explanations given to us and on the basis of an overall examination of the balance sheet of the company, in our opinion, there are no funds raised on a short-term basis which have been used for long-term investment, and vice-versa;
(xix) The company has not made any preferential allotment of shares to parties and companies covered in the register maintained U/s-301 of the Act during the year;
(xx) The company has not issued any debentures, hence the provisions of Para-4 (xix) of Companies (Auditors' Report) Order, 2003 are not applicable ;
(xxi) The company has not raised any money by public issue during the year; however M/s Padma Impex Pvt. Ltd. had purchases 68.74% share of the company during the year and taken control of the management.
(xxii) During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the year by the Company;
For Anil Agrawal Chartered Accountants
Anil Agrawal Proprietor M No. 079054
Place : Jabalpur Dated : 14-05-2012