To the Members of
Deepak Spinners Limited
Report on the Audit of the Financial Statements
We have audited the accompanying financial statements of Deepak Spinners Limited("the Company") which comprise the Balance sheet as at March 31 2020 theStatement of Profit and Loss including the statement of Other Comprehensive Income theCash Flow Statement and the Statement of Changes in Equity for the year then ended andnotes to the financial statements including a summary of significant accounting policiesand other explanatory information (hereinafter referred to as "the financialstatements").
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid financial statements give the information required by theCompanies Act 2013 ("the Act") in the manner so required and give a true andfair view in conformity with the accounting principles generally accepted in India of thestate of affairs of the Company as at March 31 2020 its profit including othercomprehensive income its cash flows and the changes in equity for the year ended on thatdate.
Basis for Opinion
We conducted our audit of the financial statements in accordance with the Standards onAuditing (SAs) as specified under section 143(10) of the Act. Our responsibilities underthose Standards are further described in the 'Auditor's Responsibilities for the Audit ofthe Financial Statements' section of our report. We are independent of the Company inaccordance with the 'Code of Ethics' issued by the Institute of Chartered Accountants ofIndia together with the ethical requirements that are relevant to our audit of thefinancial statements under the provisions of the Act and the Rules thereunder and we havefulfilled our other ethical responsibilities in accordance with these requirements and theCode of Ethics. We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our audit opinion on the financial statements.
Key Audit Matters
Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the financial statements for the financial year ended March31 2020. These matters were addressed in the context of our audit of the financialstatements as a whole and in forming our opinion thereon and we do not provide aseparate opinion on these matters. For each matter below our description of how our auditaddressed the matter is provided in that context.
We have determined the matters described below to be the key audit matters to becommunicated in our report. We have fulfilled the responsibilities described in theAuditor's responsibilities for the audit of the financial statements section of ourreport including in relation to these matters. Accordingly our audit included theperformance of procedures designed to respond to our assessment of the risks of materialmisstatement of the financial statements. The results of our audit procedures includingthe procedures performed to address the matters below provide the basis for our auditopinion on the accompanying financial statements.
|S. N. Key Audit Matter ||Auditor's Response |
|1. Valuation of inventories ||How our audit addressed the key audit matter: |
|We refer to Note 2 and 7 to the financial statements. ||We have analyzed the ageing of the inventories reviewed the historical trend on whether there were significant inventories written off or reversal of the allowances for inventories obsolescence. We conducted a detailed discussion with the key management and considered their views on the adequacy of allowances for inventories obsolescence considering the current economic environment. We have also verified the subsequent selling prices in the ordinary course of business and compared against the carrying amounts of the inventories on a sampling basis at the reporting date. We found management's assessment of the allowance for inventory obsolescence to be reasonable based on available evidence. |
|As at March 31 2020 the total carrying amount of inventories was Rs. 7507 Lakhs. The assessment of impairment of inventories involves significant estimation uncertainty subjective assumptions and the application of significant judgment. || |
|Reviews are made periodically by management on inventories for obsolescence and decline in net realizable value below cost. Allowances are recorded against the inventories for any such declines based on historical obsolescence and slow-moving history. Key factors considered include the nature of the stock its ageing shelf life and turnover rate. || |
|2. Trade and other receivables ||How our audit addressed the key audit matter: |
|As disclosed in Note 56811 and 13 to the financial statements. ||We obtained an understanding of the Company's credit policy for trade receivables and evaluated the processes for identifying impairment indicators. We have reviewed and tested the ageing of trade and other receivables. We have reviewed management's assessment on the credit worthiness of selected customers for trade receivables. We further discussed with the key management on the adequacy of the allowance for impairment recorded by the Company and reviewed the supporting documents provided by management in relation to their assessment. We have also reviewed the adequacy and appropriateness of the impairment charge based on the available information. Based on our audit procedures performed we found management's assessment of the recoverability of trade and other receivables to be reasonable and the disclosures to be appropriate. |
|The Company assesses periodically and at each financial year end the expected credit loss associated with its receivables. When there is expected credit loss the amount and timing of future cash flows are estimated based on historical current and forward-looking loss experience for assets with similar credit risk characteristics. We focused on this area because of its significance and the degree of judgement required to estimate the expected credit loss and determining the carrying amount of trade and other receivables as at the reporting date. || |
|3. Evaluation of uncertain tax positions ||How our audit addressed the key audit matter: |
|Refer Notes 2 23 and 36 to the Financial Statements. ||We have obtained details of complete tax assessments and demands as at March 31 2020 from management. |
|The Company has material uncertain tax positions including matters under dispute which involves significant judgment to determine the possible outcome of these disputes. ||We considered management's assessment of the validity and adequacy of provisions for uncertain tax positions evaluating the basis of assessment and reviewing relevant correspondence and legal advice where available including any information regarding similar cases with the relevant tax authorities. We assessed validity and adequacy of provisions for uncertain tax positions in respect of various tax demands and liabilities and found the appropriateness of management's assumptions and estimates reasonable. |
The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the Annual report but does not includethe financial statements and our auditor's report thereon. We have obtained all otherinformation prior to the date of this auditors' report. Our opinion on the financialstatements does not cover the other information and we do not express any form ofassurance conclusion thereon.
In connection with our audit of the financial statements our responsibility is to readthe other information identified above when it becomes available and in doing soconsider whether the other information is materially inconsistent with the financialstatements or our knowledge obtained in the audit or otherwise appears to be materiallymisstated.
If based on the work we have performed we conclude that there is a materialmisstatement of
about whether the financial statements as a whole are free from material misstatementwhether 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 auditconducted in accordance with SAs will always detect a material misstatement when itexists. Misstatements can arise from fraud or error and are considered material ifindividually or in the aggregate they could reasonably be expected to influence theeconomic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financialstatements whether due to fraud or error design and perform audit procedures responsiveto those risks and obtain audit evidence that is sufficient and appropriate to provide abasis for our opinion. The risk of not detecting a material misstatement resulting fromfraud is higher than for one resulting from error as fraud may involve conclusionforgery intentional omissions misrepresentations or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order todesign audit procedures that are appropriate in the circumstances. Under section 143(3)(i)of the Act we are also responsible for expressing our opinion on whether the Company hasadequate internal financial controls system in piece and the operating effectiveness ofsuch controls.
Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basisof accounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the Company'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe financial statements this other information; we are required to report that fact. Wehave nothing to report in this regard. When we read the Annual Report if we conclude thatthere is a material misstatement therein we are required to communicate the matter tothose charged with governance and take necessary actions as applicable under theapplicable laws and regulations Responsibilities of Management for the FinancialStatements
The Company's Board of Directors is responsible for the matters stated in section134(5) of the Act with respect to the preparation of these financial statements that givea true and fair view of the financial position financial performance including othercomprehensive income cash flows and changes in equity of the Company in accordance withthe accounting principles generality accepted in India including the Indian AccountingStandards (Ind AS) specified under section 133 of the Act read with the Companies (IndianAccounting Standards) Rules 2015 as amended. This responsibility also includesmaintenance of adequate accounting records in accordance with the provisions of the Actfor safeguarding of the assets of the Company and for preventing and detecting frauds andother irregularities; selection and application of appropriate accounting policies; makingjudgments and estimates that are reasonable and prudent; and the design implementationand maintenance of adequate internal financial controls that were operating effectivelyfor ensuring the accuracy and completeness of the accounting records relevant to thepreparation and presentation of the financial statements that give a true and fair viewand are free from material misstatement whether due to fraud or error.
In preparing the financial statements management is responsible for assessing theCompany's ability to continue as a going concern disclosing as applicable mattersrelated to going concern and using the going concern basis of accounting unless managementeither intends to liquidate the Company or to cease operations or has no realisticalternative but to do so. The Board of Directors are also responsible for overseeing theCompany's financial reporting process
Auditor's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance or if such disclosures areinadequate to modify our opinion. Our conclusions are based on the audit evidenceobtained up to the date of our auditor's report. However future events or conditions maycause the Company to cease to continue as a going concern.
Evaluate the overall presentation structure and content of the financialstatements including the disclosures and whether the financial statements represent theunderlying transactions and events in a manner that achieves fair presentation.
Materiality is the magnitude of misstatements in the financial statements thatindividually or in aggregate makes it probable that the economic decisions of areasonably knowledgeable user of the financial statements may be influenced. We considerquantitative materiality and qualitative factors in (!) planning the scope of our auditwork and in evaluating the results of our work; and (ii) to evaluate the effect of anyidentified misstatements in the financial statements.
We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit. We alsoprovide those charged with governance with a statement that we have complied with relevantethical requirements regarding independence and to communicate with them allrelationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.
From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the financial statements for thefinancial year ended March 31 2020 and are therefore the key audit matters. We describethese matters in our auditor's report unless law or regulation precludes public disclosureabout the matter or when in extremely rare circumstances we determine that a mattershould not be communicated in our report because the adverse consequences of doing sowould reasonably be expected to outweigh the public interest benefits of suchcommunication.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government of India in terms of sub-section (11) of section 143 ofthe Act we give in the "Annexure A" a statement on the matters specified inparagraphs 3 and 4 of the Order.
2. As required by Section 143(3) of the Act we report that;
(a) 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;
(b) In our opinion proper books of account as required by law have been kept by theCompany so far as it appears from our examination of those books;
(c) The Balance Sheet the Statement of Profit and Loss including the Statement ofOther Comprehensive Income the Cash Flow Statement and Statement of Changes in Equitydealt with by this Report are in agreement with the books of account;
(d) In our opinion the aforesaid financial statements comply with the AccountingStandards specified under Section 133 of the Act read with Companies (Indian AccountingStandards) Rules 2015 as amended;
(e) On the basis of the written representations received from the directors as on March31 2020 taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2020 from being appointed as a director in terms of Section 164 (2) of theAct;
(f) With respect to the adequacy of the internal financial controls over financialreporting of the Company with reference to these financial statements and the operatingeffectiveness of such controls refer to our separate Report in "Annexure B" to
(g) In our opinion the managerial remuneration for the year ended March 31 2020 hasbeen paid / provided by the Deepak Spinners Limited Company to its directors in accordancewith the provisions of section 197 read with Schedule V to the Act
(h) With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 as amended inour opinion and to the best of our information and according to the explanations given tous:
i. The Company has disclosed the impact of pending litigations on its financialposition in its financial statements - Refer Note 36 to the financial statements;
ii. The Company did not have any long- term contracts including derivative contractsfor which there were any material foreseeable losses;
iii. There were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company. Annexure referred to in paragraph 1 of ourreport of even date on the other legal and regulatory requirements (Re: Deepak SpinnersLimited)
(i) (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of property plant and equipment.
(b) The Company has a regular programme of physical verification of its property plantand equipment by which property plant and equipment are verified in a phased manner overa period of three years which in our opinion is reasonable having regard to the size ofthe company and nature of its property plant and equipment. In accordance with thisprogramme property plant and equipments were not physically verified during the year.
(c) The title deeds of immovable properties included in property plant and equipmentare held in the name of the company except freehold land for Rs. 2.42 Lakhs for whichregistration in the name of the Company is pending.
(ii) The management has conducted physical verification of inventories except stock intransit during the year at reasonable interval and no material discrepancies were noticedon such physical verification.
(iii) The Company has not granted any loan to companies firms limited liabilitypartnership or other parties covered in the register maintained under section 189 of theCompanies' Act 2013. Therefore the provisions of clause 3(iii) of the Order are notapplicable.
(iv) The Company has no transaction with respect to loan investment guarantee andsecurity covered under section 185 and 186 of the Companies Act 2013.Therefore theprovisions of clause 3(iv) of the Order are not applicable.
(v) The Company has not accepted any deposits covered under section 73 to 76 of theCompanies Act'2013 and the Companies (Acceptance of Deposits) Rules 2014 (as amended)during the year. Therefore the provisions of clause 3(v) of the Order are not applicable.
(vi) We have broadly reviewed the books of account maintained by the Company pursuantto the rules made by the Central Government for the maintenance of cost records undersection 148(1) of the Companies Act 2013 and are of the opinion that prima facie theprescribed records have been made and maintained. We have however not made a detailedexamination of the said records with a view to determine whether they are accurate orcomplete.
(vii) a. According to the records of the Company the Company is regular in depositingamounts deducted/ accrued in the books of account in respect of undisputed statutory duesincluding Provident Fund Employee's State Insurance Income-tax Sales-tax Service TaxGoods and Service Tax Duty of customs. Duty of excise. Value Added Tax Cess and othermaterial statutory dues with the appropriate authorities. There was no undisputedoutstanding statutory dues as at the year end for a period of more than six months fromthe date they became payable.
b. According to the records of the Company there are no dues outstanding on account ofIncome-tax Sales-tax Value Added Tax Service Tax Duty of customs. Duty of excise andCess on account of any dispute except the followings:
|Name of Statue ||Nature of dues ||Amount * (Rs. in Lakhs) ||Forum where dispute is pending ||Period |
|The Central Excise Act1944 ||Demand for excise duty ||7.97 ||CESTAT ||2004-05 to 2007-08 |
|Income Tax Act 1961 ||Dispute relating to carry forward unabsorbed depreciation and provision for doubtful debts. ||6.25 ||CIT (Appeals) Kolkata ||Assessment year 2011-12 |
| ||Short allowance of Credit of TDS and Excess charge of Interest ||0.76 ||ITAT ||Assessment year 1998-99 |
| ||Disallowance of expenses etc. ||1.21 ||DCIT (Appeal) Kolkata ||Assessment Year 2012-13 |
| ||MAT Credit Disallowance ||21.39 ||CIT (Appeals) Kolkata ||Assessment year 2015-16 |
|Himachal Pradesh Tax on Entry of Goods into Local Area Act'2010 ||Entry Tax ||553.05 ||Additional Commissioner of Central Excise Jammu ||2010-11 to 2017-18 |
* net of deposited
(xiv) The Company has not made any preferential allotment or private placement ofshares or fully or partly convertible debentures during the year. Therefore theprovisions of clause 3(xiv) of the Order are not applicable.
(xv) According to the information and explanations given to us the Company has notentered into non-cash transactions with directors or persons connected with directors.Therefore the provisions of clause 3(xv) of the Order are not applicable.
(xvi) The Company is not required to be registered under section 45-IA of the ReserveBank of India Act 1934. Therefore the provisions of clause 3(xvi) of the Order are notapplicable.
(viii) The Company has not defaulted in repayment of dues to bank. The Company did nothave any borrowing from any financial institution or Government and dues to debentureholders.
(ix) During the year the company did not raise any money by way of initial publicoffer or further public offer (including debt instruments) and loans or borrowing frombanks and financial institutions. Therefore the provision of clause 3(ix) of the orderare not applicable.
(x) Based upon the audit procedures performed for the purpose of reporting the true andfair view of the financial statements and according to the information and explanationsgiven to us no fraud by the Company or no fraud on the Company by its officers andemployees has been noticed or reported during the year.
(xi) The managerial remuneration has been paid / provided in accordance with therequisite approvals mandated by the provisions of section 197 read with Schedule V to theAct.
(xii) In our opinion the Company is not a nidhi company. Therefore the provisions ofclause 3(xii) of the Order are not applicable.
(xiii) According to the information and explanations given to us and based on ourexamination of the records of the Company transactions with the related parties are incompliance with sections 177 and 188 of the Act where applicable and details of suchtransactions have been disclosed in the financial statements as required by the applicableaccounting standards.
Annexure-B to the Auditor's Report
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013 ("the Act")
We have audited the internal financial controls with reference to financial statementsof Deepak Spinners Limited ("the Company") as of March 31 2020 in conjunctionwith our audit of the financial statements of the Company for the year ended on that date.
Management's Responsibility for Internal Financial Controls
The Company's management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls over Financial Reportingissued by the Institute of Chartered Accountants of India ('ICAI'). These responsibilitiesinclude the design implementation and maintenance of adequate internal financial controlsthat were operating effectively for ensuring the orderly and efficient conduct of itsbusiness including adherence to company's policies the safeguarding of its assets theprevention and detection of frauds and errors the accuracy and completeness of theaccounting records and the timely preparation of reliable financial information asrequired under the Companies Act 2013.
Our responsibility is to express an opinion on the Company's internal financialcontrols with reference to financial statements based on our audit. We conducted our auditin accordance with the Guidance Note on Audit of Internal Financial Controls overFinancial Reporting (the "Guidance Note") and the Standards on Auditing issuedby ICAI and deemed to be prescribed under section 143(10) of the Companies Act 2013 tothe extent applicable to an audit of internal financial controls both applicable to anaudit of Internal Financial Controls and both issued by the Institute of CharteredAccountants of India. Those Standards and the Guidance Note require that we comply withethical requirements and plan and perform the audit to obtain reasonable assurance aboutwhether adequate internal financial controls with reference to financial statements wasestablished and maintained and if such controls operated effectively in all materialrespects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system with reference to financial statements and theiroperating effectiveness. Our audit of internal financial controls with reference tofinancial statements included obtaining an understanding of internal financial controlswith reference to financial statements assessing the risk that a material weaknessexists and testing and evaluating the design and operating effectiveness of internalcontrol based on the assessed risk. The procedures selected depend on the auditor'sjudgment including the assessment of the risks of material misstatement of the financialstatements whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's internal financial controls systemwith reference to financial statements.
Meaning of Internal Financial Controls with reference to financial statements
A company's internal financial control with reference to financial statements is aprocess designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles. A company's internal financial control withreference to financial statements includes those policies and procedures that (1) pertainto the maintenance of records that in reasonable detail accurately and fairly reflectthe transactions and dispositions of the assets of the company; (2) provide reasonableassurance that transactions are recorded as necessary to permit preparation of financialstatements in accordance with generally accepted accounting principles and that receiptsand expenditures of the company are being made only in accordance with authorizations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorized acquisition use or disposition of thecompany's assets that could have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls over Financial Reporting and suchinternal financial controls over financial reporting were operating effectively as atMarch 31 2020 based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls Over Financial Reportingissued by the Institute of Chartered Accountants of India however needs to be furtherstrengthened.
Because of the inherent limitations of internal financial controls with reference tofinancial statements including the possibility of collusion or improper managementoverride of controls material misstatements due to error or fraud may occur and not bedetected. Also projections of any evaluation of the internal financial controls overfinancial reporting to future periods are subject to the risk that the internal financialcontrol over financial reporting may become inadequate because of changes in conditionsor that the degree of compliance with the policies or procedures may deteriorate.
In our opinion the Company has in all material respects an adequate internalfinancial controls system with reference to financial statements
| ||For JKVS & CO. |
| ||Chartered Accountants |
| ||Firm Reg. No.318086E |
| ||Sajal Goyal |
| ||Partner |
|Place; New Delhi ||Membership No. 523903 |
|Date: 30th June 2020 ||Udin: 20523903AAAABA7724 |