TO THE MEMBERS OF ARUNA HOTELS LIMITED
Report on the Audit of the Financial Statements
We have audited the accompanying financial statements of Aruna Hotels Limited (the Company) which comprise the Balance Sheet as at March 31 2019 the Statement of Profit and Loss (including Other Comprehensive Income) the Statement of Changes in Equity and the Statement of Cash Flows for the year ended on that date and notes to the financial statements including a summary of significant accounting policies and other explanatory information (hereinafter referred to as the financial statements).
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 Companies Act 2013 (the Act) in the manner so required and give a true and fair view in conformity with the Indian Accounting Standards prescribed under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules 2015 as amended (Ind AS) and other accounting principles generally accepted in India of the state of affairs of the Company as at March 31 2019 the loss changes in equity and its cash flows for the year ended on that date.
Basis of Opinion
We conducted our audit of the financial statements in accordance with the Standards on Auditing (SAs) specified under section 143(10) of the Companies Act2013. Our responsibilities under those Standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India (ICAI) together with the ethical requirements that are relevant to our audit of the financial statements under the provisions of the Companies Act2013 and the Rules thereunder and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ICAI's Code of Ethics. We believe that the audit evidences we have obtained are sufficient and appropriate to provide a basis for our opinion on the financial statements.
Key Audit Matters
Key audit matters are those matters that in our professional judgement were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole and in forming our opinion thereon and we do not provide a separate opinion on these matters. We have determined the matters described below to be the key audit matters to be communicated in our report.
|Sr. No.||Key Audit Matter||Auditor's Response|
|Going Concern Principle||Principal Audit Procedures|
|1.||The company is currently not operating and hence no operating income has been recorded since FY 15-16. The management and those charged with governance informed us that renovation work will be finished soon and the hotel will be reopened.||We assessed the Company's renovation process through the bills of vendors provided to us and the certificate provided by the architect on the status of the work completed. As per the discussion with the management the hotel will start its operations most likely in FY 2019-20.|
|Redemption of Preference Shares||Principal Audit Procedures|
|2.||The company had issued preference share in earlier years and were not redeemed in the year in which it had to been redeemed because it had no profits nor could it make any fresh issue of shares. No liability has been provided for Preference Share Dividend.||During audit we verified the details of preference shareholders. The management informed us that the Company is willing to repay the principal amount due to each preference shareholder (without any dividend) and the Company has sent out letters to preference shareholders in this regard for their acceptance in December'2018.|
|Litigations||Principal Audit Procedures|
|3.||The Company is involved in civil litigation and taxation litigation: Direct and indirect taxation.||During audit we have verified all the documents related to various litigations. Details of each case has been provided under Note no. 17 of notes to accounts.|
Information Other than the Financial Statements and Auditor's Report Thereon
The Company's Board of Directors is responsible for the preparation of the other information. The other information comprises the information included in the Management Discussion and Analysis Board's Report including Annexures to Board's Report Business Responsibility Report Corporate Governance and Shareholder's Information but does not include the financial statements and our auditor's report thereon.
Our opinion on the financial statements does not cover other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements our responsibility is to read the other information and in doing so consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained during the course of our audit or otherwise appears to be materially misstated.
If based on the work we have performed we conclude that there is a material misstatement of this other information we are required to report that fact. We have nothing to report in this regard.
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 Act with respect to the preparation of these financial statements that give a true and fair view of the financial position financial performance changes in equity and cash flows of the Company in accordance with the Ind AS and other accounting principles generally accepted in India. 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 judgements 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.
In preparing the financial statements management is responsible for assessing the Company's ability to continue as a going concern disclosing as applicable matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations or has no realistic alternative but to do so.
The Board of Directors are responsible for overseeing the Company's financial reporting process.
Auditor's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement whether due to fraud or error and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if individually or in the aggregate they could reasonable be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with SAs we exercise professional judgement and maintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial statements whether due to fraud or error design and perform audit procedures responsive to those risks and obtain audit evidence that is sufficient and appropriate to provide basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error as fraud may involve collusion forgery intentional omissions misrepresentations or the override of internal control.
Obtain an understanding of internal financial controls relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Companies Act2013 we are also responsible for expressing our opinion on whether the Company has adequate internal financial controls system in place and the operating effectiveness of such controls.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basis of accounting and based on the audit evidence obtained whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists we are required to draw attention in our auditor's report to the related disclosures in the financial statements or if such disclosures are inadequate to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However future events or conditions may cause the Company to cease to continue as a going concern.
Evaluate the overall presentation structure and content of the financial statements including disclosures and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Materiality is the magnitude of misstatements in the financial statements that individually or in aggregate makes it probable that the economic decisions of a reasonably knowledgeable user of the financial statements may be influenced.
We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in evaluating the result of our work and (ii) to evaluate the effect of any identified misstatements in the financial statements.
We communicate with those charged with governance regarding among other matters the planned scope and timing of audit and significant audit findings including any significant deficiencies in internal control that we identify in our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence and to communicate with them all relationships and other matters that may reasonably be thought to bear our independence and where applicable related safeguards.
From the matters communicated with those charged with governance we determine those matters that were of most in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when in extremely rare circumstances we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the pubic interest benefits of such communication.
Report on Other Legal and Regulatory Requirements
1 As required by Section 143(3) of the Act based on our audit 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 it appears from our examination of those books.
c. The Balance Sheet the Statement of Profit and Loss Statement of Changes in Equity and the Statement of Cash Flow dealt with by this Report are in agreement with the relevant books of account.
d. In our opinion the aforesaid financial statements comply with Ind AS 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 of the Company as on March 31 2019 taken on record by the Board of Directors none of the directors is disqualified as on March 31 2019 from being appointed as a director in terms of Section 164(2) of the Act.
f. With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls refer to our separate Report in Annexure A. Our report expresses an unmodified opinion on the adequacy and operating effectiveness of the Company's internal financial controls over financial reporting.
g. With respect to other matters to be included in the Auditor's Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 as amended in our opinion and to the best of our information and according to the explanations given to us:
1 The Company has disclosed the impact of pending litigations on its financial position in its financial statements.
2 The Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses.
3 There has been no transfer of amounts to the Investor Education and Protection Fund by the Company.
2 As required by the Companies (Auditor's Report) Order 2016 (the Order) issued by the Central Government in terms of Section 143(11) of the Act we give in Annexure B a statement on the matters specified in paragraphs 3 and 4 of the Order.
For Bala& Co.
(FRN No: 000318S)
Annexure A to the Independent Auditor's Report
(Referred to in paragraph 1(f) under `Report on Other Legal and Regulatory Requirements section of our report to the Members of Aruna Hotels Limited of even date)
Report on the Internal Financial Controls Over Financial Reporting under Clause (i) of Sub-section 3 of Section 143 of the Companies Act 2013 (the Act)
We have audited the internal financial controls over financial reporting of Aruna Hotels Limited(the Company) as of March 31 2019 in conjunction with our audit of the financial statements of the Company for the year ended on that date.
Management's Responsibility for Internal Financial Controls
The Board of Directors of the Company is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India. These responsibilities include the design implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business including adherence to respective company's policies the safeguarding of its assets the prevention and detection of frauds and errors the accuracy and completeness of the accounting records and the timely preparation of reliable financial information as required under the Companies Act 2013.
Our responsibility is to express an opinion on the internal financial controls over financial reporting of the Company based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the Guidance Note) issued by the Institute of Chartered Accountants of India and the Standards on Auditing prescribed under section 143(10) of the Companies Act 2013 to the extent applicable to an audit of internal financial controls. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting assessing the risk that a material weakness exists and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditor's judgement including the assessment of the risks of material misstatement of the financial statements whether due to fraud or error. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the internal financial controls system over financial reporting of the Company.
Meaning of Internal Financial Controls Over Financial Reporting
A company's internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal financial control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition use or disposition of the company's assets that could have a material effect on the financial statements.
Limitations of Internal Financial Controls Over Financial Reporting
Because of the inherent limitations of internal financial controls over financial reporting including the possibility of collusion or improper management override of controls material misstatements due to error or fraud may occur and not be detected. Also projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion to the best of our information and according to the explanations given to us the Company has in all material respects an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at March 31 2019 based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India.
For Bala& Co.
(FRN No: 000318S)
Annexure B to the Independent Auditor's Report
(Referred to in paragraph 2 under `Report on Other Legal and Regulatory Requirements' section of our report to the Members of Aruna Hotels Limited of even date)
1 In respect of the Company's fixed assets:
(a) The company has maintained proper records showing full particulars including quantitative details and situation of fixed assets.
(b) The fixed assets have been physically verified by the management during the year and no discrepancies have been noted in respect of assets added during the year.
(c) As a part of the ongoing renovation process of the Hotel during the year the company has shown the additions to fixed assets under Capital Work in Process. The details have been shown under the Fixed Assets schedule in the financial statements.
(d) The management has confirmed that the title deeds of immovable properties are held in the name of the company.
2 During the Financial Year 2018-19 the company does not have any physical inventories. Accordingly reporting under clause 3(ii) of the Order is not applicable to the Company.
3 In our opinion and according to the information and explanations given to us the Company has not granted loans secured or unsecured to companies firms or other parties covered in the register maintained under section 189 of the Companies Act 2013. Accordingly the provisions of clauses (iii) of the Order are not applicable.
4 In our opinion and according to the information and explanations given to us the provisions of section 185 and 186 of the Act with respect to the loans and investments made are not applicable to the company.
5 The company has not accepted deposits during the year and does not have any unclaimed deposits as on March 31 2019 and therefore the provisions of the clause 3(v) of the Order are not applicable to the Company.
6 To the best of our knowledge and belief the Central Government has not prescribed the maintenance of cost records under sub-section (1) of Section 148 of the Companies Act 2013 in respect of services carried out by the Company. Accordingly the provisions of clause (vi) are not applicable.
7 (a) According to the information and explanations given to us and on the basis of our examination of the records of the Company amounts deducted/ accrued in the books of account in respect of undisputed statutory dues including Income-tax Service tax Goods and Services tax and other material statutory dues have generally been regularly deposited during the year by the Company with the appropriate authorities. According to the information and explanations given to us no undisputed amounts payable in respect of Income-tax Service tax Goods and Services tax and other material statutory dues were in arrears as at 31 March 2019 for a period of more than six months from the date they became payable.
(b) According to the information and explanations given to us there are no dues of Income-tax or Sales tax or Service tax or Goods and Services tax or duty of Customs or duty of Excise or Value added tax which have not been deposited by the Company on account of disputes except for the following:
|Name of the Statute||Nature of the Dues||Amount (in Crores)||Period||Forum where dispute is Pending|
|The Finance Act 1994||Service Tax||2.59 Following points may be noted in this regard: Payment of an amount of Rs 18160816/- has already been made by the assessee. The company has approached the Service Tax Settlement Commission to get waiver of the penalties & pending dues upto FY 2013-14 imposed by the Service Tax authorities||FY 2008 - 2009 upto 2013 - 2014||Settlement Commission|
|The Income Tax Act 1961||Income Tax||NIL (Loss adjusted)||FY 2012 - 13||Commissioner of Income Tax (Appeals)|
|The Income Tax Act 1961||Income Tax||NIL (Loss adjusted)||FY 2011 - 12||Remanded back to ITO|
8 Based on the audit procedures and on the information and explanations given by the Management we are of the opinion that there has been no default in repayment of dues to Financial Institutions or Banks during the current year.
9 Based on the audit procedures and on the information and explanations given by the Management 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 the purposes for which those are raised. In our opinion and according to information and explanations given to us term loans taken by the company during the period under audit were used for the purposes for which they were taken.
10 No fraud on or by the company or by its officers or employees has been noticed or reported during the year covered by our audit.
11 According to the information and explanations give to us and based on our examination of the records of the Company the Company has not provided for managerial remuneration. Hence this clause is not applicable.
12 The Company is not a Nidhi Company and hence reporting under clause 3(xii) of the Order is not applicable.
13 According to the information and explanations given to us and based on our examination of the records of the Company transactions with the related parties are in compliance with sections 177 and 188 of the Act where applicable and details of such transactions have been disclosed in the financial statements as required by the applicable accounting standards.
14 According to the information and explanations given to us and based on our examination of the records of the Company the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year.
15 According to the information and explanations given to us and based on our examination of the records of the Company the Company has not entered into non-cash transactions with directors or persons connected to its directors and hence provisions of Section 192 of the Companies Act 2013 are not applicable to the Company.
16 The company is not required to be registered under section 45-IA of the Reserve Bank of India Act 1934 and hence this clause is not applicable.
For M/s Bala& Co.
FRN No: 000318S