TO THE MEMBERS OF ARUNA HOTELS LIMITED
Report on the Standalone Financial Statements
We have audited the accompanying standalone financial statements of Aruna HotelsLimited which comprise the Balance Sheet as at 31st March 2017 the Statement of Profitand Loss and a summary of the significant accounting policies and other explanatoryinformation for the year then ended.
Managements Responsibility for the Standalone Financial Statements
The Companys Board of Directors is responsible for the matters stated in Section134(5) of the Companies Act 2013 ("the Act") with respect to the preparation ofthese standalone financial statements that give a true and fair view of the financialposition financial performance and cash flows of the Company in accordance with theaccounting principles generally accepted in India including the Accounting Standardsspecified under Section 133 of the Act read with Rule 7 of the Companies (Accounts)Rules 2014. This responsibility also includes maintenance of adequate accounting recordsin accordance with the preparation of the Act for safeguarding the assets of the Companyand for preventing and detecting frauds and other irregularities; selection andapplication of appropriate accounting policies; making judgments and estimates that arereasonable and prudent; and design implementation and maintenance ofadequateinternalfinancialcontrolsthatwereoperatingeffectivelyfor ensuring the accuracyand completeness of the accounting statements that giverecordsrelevanttothepreparationandpresentationof the financial a true and fair view andare free from material misstatement whether due to fraud or error.
Auditors Responsibility statements based on our audit. Our responsibilityistoexpress an opinion on these standalone financial We have taken into account the provisionsof the Act the accounting and auditing standards and matters which are required to beincluded 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 specifiedunderSection 143(10) of the Act. Those Standards require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetherthe financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts andthe disclosures in the financial statements. The procedures selected depend on theauditors judgment including the assessment of the risks of material misstatement ofthe financial statements whether due to fraud or error. In making those risk assessmentsthe auditorconsidersinternalfinancialcontrol relevant to the Companys preparation ofthe financial statements that give a true and fair view in order to design auditprocedures that are appropriate in the circumstances but not for the purpose ofexpressing an opinion on whether the Company has in place an adequate internal financialcontrol system over financial reporting and the operating effectiveness of such controls.An audit also includes evaluating the appropriateness of the accounting policies used andthe reasonableness of the accounting estimates made by the Companys Directors aswell as evaluating the overall presentation of the financial
We believe that the audit evidence we have obtainedissufficientandappropriatetoprovide qualifiedauditopinion on basisforour the standalone financial
*Basis for Qualified
i) Company has received advances towards share capital but shares were not issued sinceit is under listing process and will issue shares after listing at stock exchange. Thesame is not in conformity with the provisions of the Companies Act 2013.
ii) The closing balances of parties from whom loan was taken and from creditors aresubject to confirmationand reconciliation.
iii) The company is in the process of updating the details of various litigations filedby the third parties; hence we cannot ascertain the liability arising on thoselitigations.
iv) During our audit we have come across several notices / demand notes issued byvarious statutory authorities
Following are the notices and demand issued to the company during the financialyear2016-17:
a. IncomeTax notice received for AY 2009-10 2012-13& 2013-14. Outstanding duesbeing -Rs451445 for AY 09-10 Rs27332590 for AY 12-13 & Rs.23831782 for AY 13-14against which appeal has been filed and outcome is pending.
b. The company has received a Show Cause Notice from the Service Tax Department for FY2008-09 to FY 2013-14. The company has received a demand of Service Tax amounting to Rs25953777/-. Following points may be noted in this regard:
i. Payment of an amount of Rs 18160816/- has already been made by the assessee.
ii. The company has approached the Service Tax Settlement Commission to get waiver ofthe penalties & pending dues upto FY 2013-14imposed by the Service Tax authorities
c. Sales Tax notice was issued for FY 2006-07 to FY 2011-12on account on non-payment ofoutstanding Sales tax & Luxury Tax. The company has appealed against the order withthe Honble High Court of Madras which has set aside the Assessment Order and hasinstructed the Sales Tax Department to conduct a fresh assessment of the outstanding Salestax & Luxury taxes payable. The company has then received a provisional assessmentnotice from the Sales tax department. However payment of Rs. 28590365 was made by thecompany in this regard and the demand got nullified.
v) The contingent liability of the company towards the pending cases is notascertainable as on date but if the decision is unfavorable it would materially impactthe cash flow of the company.
vi) Based on our verification information and documents provided for ourverificationthe company has recorded a loss during the year. Further its total currentliabilities exceed total current assets as on balance sheet date. The company is currentlynot operating and hence no income has been recorded. The validity of the going concernassumption on which the financialstatements are prepared depends on the continuance of theability of the company to generate sufficient cash flows from their operations. We do nothave sufficientevidence to access whether the companys plans/projection wouldmaterialize.
vii) The company has shown an amount of inventory as Rs 28.63 lacs which is the same ascompared to FY 2015-16. However based on our opinion the net realizable value of theinventory as on 31.3.2017 is negligible and needs to be written off.
In our opinion and to the best of our information and according to the explanationsgiven to us except for the effects of the matter described in the Basis for QualifiedOpinion paragraph the financial statements give the information required by the Act inthe manner so required and give a true and fair view in conformity with the accountingprinciples generally accepted in India:
(a) In the case of the Balance Sheet of the state of affairs of the Company as atMarch 31 2017;
(b) In the case of the Profit and Loss Account of the loss for the year ended on thatdate;
(c) In the case of the Cash Flow Statement of the cash flows for the year ended on thatdate
a) As required by the Companies (Auditors Report) Order 2015 issued by theCentral Government of India in terms of section 143(11) of the Companies Act 2013 weenclose in the Annexure Aa statement on the matters specified inthe paragraph 3 and 4 of the order to the extent applicable.
b) We have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purposes of our audit.
c) Except for the effects of the matter described in the Basis for QualifiedOpinionparagraph above in our opinion proper books of account as required by law have been keptby the Company so far as it appears from our examination of those books
d) The Balance Sheet and the Statement of Profit and Lossdealt with by this Report arein agreement with the books of account.
e) Except for the effects of the matter described in the Basis for Qualified Opinionparagraph above in our opinion the aforesaid standalone financial statements comply withthe Accounting Standards specifiedunder Section 133 of the Act read with Rule 7 of theCompanies (Accounts) Rules 2014.
f) The matter described in the Basis for Qualified Opinion paragraph above in ouropinion may have an adverse effect on the functioning of the Company.
g) On the basis of the written representations received from the directors as on 31stMarch 2017 taken on record by the Board of Directors none of the directors isdisqualified as on 31st March 2017 from being appointed as a director in terms of Section164 (2) of the Act.
h) The qualification relating to the maintenance of accounts and other mattersconnected therewith are as stated in the Basis for Opinion paragraph above. Qualified
i) The company has not deposited any cash in Specified Bank Notes during the periodfrom 8th November 2016 to 30th De-cember 2016.
j) With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate Report in "Annexure B".
k) With respect to the other matters to be included in the Auditors Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand to the best of our information and according to the explanations given to us:
a. The Company has not disclosed the impact of pending litigations on its financialposition in its financial statements hence we are unable to comment on this.
b. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses.
c. There has been no transfer of amounts to the Investor Education and Protection Fundby the Company.
For Bala& Co.
FRN No: 000318S
"Annexure A" to the Independent Auditors Report
The annexure referred to in our report to the members of Aruna Hotels Limited forthe year ended on 31st March 2017. We report that:
i. a. The company has not maintained proper records of the quantitative details andsituation of fixed assets. The management is in the process of updating the Fixed AssetsRegister.
b. The fixed assets have been physicallyverifiedby the management during the year andsome discrepancies have been noted.
c. The management has confirmed that the title deeds of immovable properties by theManagement during the period. In our opinion the frequency was
ii. PhysicalVerification reasonable. However given the fact that most of the stock ofinventories have a negligible realizable value we are unable to comment on the proceduresof physical verification of inventoryfollowed by theManagement.The Company is notmaintaining proper records of Inventory. The management is in the process of updating theInventory Register.
iii. In our opinion and according to the information and explanations given to us theCompany has notgranted loans secured or unsecured to companies firms or other partiescovered in the register maintained under section 189 of the Companies Act 2013.Accordingly the provisions of clauses (iii) of the Order are not applicable.
iv. In our opinion and according to the information and explanations given to us theprovisions of section 185 and 186 of the Act with respect to the loans and investmentsmade are not applicable to the company.
v. The company has not accepted any deposits from the public covered under section 73to 76 of the Companies Act 2013.
vi. To the best of our knowledge and belief the Central Government has not prescribedthe maintenance of cost records under sub-section (1) of Section 148 of the Companies Act2013 in respect of services carried out by the Company. Accordingly the provisions ofclause (vi) are not applicable.
vii. a. Undisputed statutory dues except service tax for the current year have beenregularly deposited with the appropriate authority. b. There are dues of income tax andservice tax on accounts of various disputes which have been enlisted in Point iv) of ourauditors report above.
viii. Based on the audit procedures and on the information and explanations given bythe Management we are of the opinion that there has been no default in repayment of duesto Financial Institutions or Banks during the current year.
ix. Based on the audit procedures and on the information and explanations given by theManagement the moneys raised by way of initial public offer or further public offer(including debt instruments) and term loans where ever applicable were applied for thepurposes for which those are raised.In our opinion and according to information andexplanations given to us term loans taken by the company during the period under auditwere used for the purposes for which they were taken.
x. No fraud on or by thecompany officers or employees has been noticed or reportedduring the year covered by our audit. byits
xi. According to the information and explanations give to us and based on ourexamination of the records of the Company the Company has paid/provided for managerialremuneration in accordance with the requisite approvals mandated by the provisions ofsection 197 read with Schedule V to the Act. xii. In our opinion and according to theinformation and explanations given to us the Company is not a nidhi company. Accordinglyparagraph 3(xii) of the Order is not applicable.
xiii.AccordingtotheinformationandexplanationsgiventousandbasedonourexaminationoftherecordsoftheCompanytransactionswith the related parties are in compliance with sections 177 and 188 of the Act whereapplicable and details of such transactions as required by the applicable accountingstandards.
xiv. According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not made any preferentialallotment or private placement of shares or fully or partly convertible debentures duringthe year.
xv. According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not entered into non-cashtransactions with directors or persons connected with him. Accordingly paragraph 3(xv) ofthe Order is not applicable.
xvi. The company is not required to be registered under section 45-IA of the ReserveBank of India Act 1934 and hence this clause is not applicable.
For Bala& Co.
FRN No: 000318S
"Annexure B" to the Independent Auditors Report of even date on theStandalone Financial Statements of Aruna Hotels Limited Report on the Internal FinancialControls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act 2013("the Act")
We have audited the internal financialcontrols over financial reporting of Aruna HotelsLimited as of March 31 2017 in conjunction with our audit of the standalone financialstatements of the Company for the year ended on that date.
Managements Responsibility for Internal Financial Controls
The Companys management is responsible for establishing and maintaining internalfinancial controls based on "the internal control over financial reporting criteriaestablished by the Company considering the essential -ance Note on Audit of InternalFinancial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India".
These responsibilities include the design implementation and maintenance of adequateinternal financial controls that were operating effectively for ensuring the orderly andefficient conduct of its business including adherence to companys policies the ofits assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required under the Companies Act 2013.
Our responsibility is to express an opinion on the Companys internal financialcontrols over financial reporting based on our audit.
We conducted our audit in accordance with the Guidance Note on Audit of InternalFinancial Controls Over Financial Reporting (the "Guidance Note") and theStandards on Auditing issued by ICAI and deemed to be prescribed under section 143(10) ofthe Companies
Act 2013 to the extent applicable to an audit of internal financial controls bothapplicable to an audit of Internal Financial Controls and both issued by the Institute ofChartered Accountants of India. Those Standards and the Guidance Note require that wecomply with ethical requirements and plan and perform the audit to obtain reasonableassurance about whether adequate internal financial controls over financial reporting wasestablishedandmaintainedandifsuchcontrolsoperatedeffectivelyin all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditors judgement including the assessment of the risks ofmaterial misstatement of the financialstatements whether due to fraud or error.
Except for the effects of the matter described in the Basis for Qualified we haveobtained is sufficientand appropriate to provide a basis for our audit opinion on theCompanys internal system over financial reporting.
Meaning of Internal Financial Controls Over Financial Reporting
A companys internal financial control over financial reporting reliability offinancial reporting and the preparation of financial accounting principles. Acompanys internal financial control over financial reporting includes those policiesand procedures that (1) pertain to the maintenance of records that in reasonable detailaccurately and fairly reflect the transactions and dispositions of the assets of thecompany; (2) provide reasonable assurance that transactions are recorded as necessary topermit preparation of financial statements in accordance with generally acceptedaccounting principles and that receipts and expenditures of the company are being madeonly in accordance with authorizations of management and directors of the company; and (3)provide reasonable assurance regarding prevention or timely detection of unauthorizedacquisition use or disposition of the companys assets that could have a materialeffecton the financial statements.
Inherent Limitations of Internal Financial Controls Over Financial Reporting
Because of the inherent limitations of internal financial controls over financialmanagement override of controls material misstatements due to error or fraud may occurand not be detected. Also projections of any evaluation of the internalfinancial controlsover financial reporting to future periods are subject to the risk that the internalfinancial control over financial reporting may become inadequate because of changes inconditions or that the degree of compliance with the policies or procedures maydeteriorate.
In our opinion except for the effects of the matterdescribed QualifiedOpinion paragraphthe Company has in all ma theBasisfor -terial respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at March 31 2017 based on"the internal control over financial reporting criteria established by the Companyconsidering the essential components of internal control stated in the Guidance Note onAudit of Internal Financial Controls Over Financial Reporting issued by the Institute ofChartered Accountants of India".
For Bala& Co.
FRN No: 000318S