To the Members of Jagatjit Industries Limited Report on the Standalone FinancialStatements Qualified Opinion
We have audited the accompanying standalone financial statements of Jagatjit IndustriesLimited ("the Company") which comprise the Balance Sheet as at March 31 2020the Statement of Profit and Loss (including Other Comprehensive Income) the Statement ofChanges in Equity and the Statement of Cash Flows for the year ended on that date andnotes to the standalone financial statements including a summary of the significantaccounting policies and other explanatory information (hereinafter referred to as"the standalone financial statements").
In our opinion and to the best of our information and according to the explanationsgiven to us except the effects of matter described in the Basis for Qualified Opinionsection of our report the aforesaid standalone financial statements give the informationrequired by the Companies Act 2013 as amended("the Act") in the manner sorequired and give a true and fair view in conformity with the accounting principlesgenerally accepted in India of the state of affairs of the Company as at March 31 2020its loss including other comprehensive loss changes in equity and its cash flows for theyear ended on that date.
Basis for qualified opinion
(i) In the opinion of the management Trade Receivable and Loans & Advances have avalue on realization in the ordinary course of business at least equal to the carryingamount in the books.
Company has a policy of providing for (a) all debts outstanding beyond 3 years or (b)where recovery is considered doubtful irrespective of the fact that legal action has beeninitiated or not instead on the method prescribed under IND AS 109. Company does not haveeffective system of obtention of confirmations from Trade Receivables/ Payables (includingconfirmation of Registered MSME Suppliers) and other Advances. The financial impact ofthis is not ascertainable and to that extent we cannot comment upon the adequacy ofprovision for Expected Credit loss/ doubtful debts/advances to the suppliers. Howevernon-moving debts and advances to suppliers outstanding beyond 1 year are to the extent of` 1564 Lakhs which is static balance for which confirmations and reconciliations are notavailable and have not been provided for.
Further Trade payables Loan & advance and trade receivable (other than above) aresubject to reconciliation & confirmation. The financial impact of all this is notascertainable and to that extent we cannot comment upon the veracity of such balances.
(ii) The Company has written back interest payable of Rs.216 Lakhs (provided prior toFY 2018-19) to unidentified MSME suppliers. Management is of view that these areunidentified and a liability no longer required.
(iii) Physical verification of inventories: Due to Covid-19 Pandemic lockdownmanagement could not conduct the physical verification of all inventories at reportingdate. It is informed by the management that physical verification was conductedsubsequently and no material discrepancy was found.
We were not able to attend the physical verification as lockdown was effectivetherefore we were unable to verify the existence/condition of inventories of Rs 1485Lakhs raw material Rs 243 Lakhs packing materials Rs 501 Lakhs work-in-progress Rs 1441Lakhs finished goods Rs 19 Lakhs stock-in-trade and ` 499 Lakhs stores and spares todetermine the adjustments that may be required to be made in the value of inventory andconsequential effect thereof on financial statement as on March 31 2020.
We conducted our audit of the standalone financial statements in accordance with theStandards on Auditing specified under section 143(10) of the Act. Our responsibilitiesunder those Standards are further described in the Auditor's Responsibilities for theAudit of the Standalone Financial Statements section of our report. We are independent ofthe Company in accordance with the Code of Ethics issued by the Institute of CharteredAccountants of India (ICAI) together with the independence requirements that are relevantto our audit of the standalone financial statements under the provisions of the Act andthe Rules made thereunder and we have fulfilled our other ethical responsibilities inaccordance with these requirements and the ICAI's Code of Ethics. We believe that theaudit evidence we have obtained is sufficient and appropriate to provide a basis for ourqualified opinion on the standalone financial statements.
Emphasis of Matter
(i) We draw attention to Note No. 4(vii) regarding fair value of investmentproperties Note No. 5(iii) regarding provision for investment in Subsidiary Note No.6(i)&(iii) regarding loan to employees & provision for loan to ex-employee NoteNo. 6(ii) regarding provision of loan to Subsidiary Note No 8(iv) regarding provision foradvances to others Note No 9(ii) regarding non-moving inventories Note No 11(i)regarding unidentified bank balances written off Note 14(i) regarding amount receivablefrom group company Note No 15 regarding assets held for sale Note No 18(iv) regardingclassification of loan Note No 18(v) regarding non stipulation of terms and conditions ofloan Note No. 22(ii) regarding provision of service tax Note No. 23(i)&(ii)regarding provision of interest on outstanding amount of MSME suppliers and classificationof outstanding of MSME supplier as other than MSME Note No 24(iii) regarding adjustmentof advances Note No 24(iv) regarding amount payable to ex-employee Note No.25(i)regarding advance from customers Note No 25(ii)(b) regarding adjustment of service taxpayable Note No 26(iii) regarding income from franchisee business Note No 27(iii)regarding other income Note No. 32(i) regarding interest paid on account of full &final settlement Note No 45(iii) regarding outbreak of COVID-19 and Note No. 45(iv)regarding internal audit issues.
(ii) Company has taken loan of Rs 4020 Lakhs (Rs 3672 Lakhs taken during the year)from its Associate Company and vide its Board Resolution dated 14.02.2020 loan amount ofRs 4000 Lakhs have been written back as not payable on confirmation of associate companyand treated as income. This has resulted in reduction of loss of the year by Rs 4000Lakhs.
(iii) Going Concern:
Without qualifying our opinion we draw attention to Note 2.1 (iii) in the financialstatements which indicates that the Company has been suffering losses for the last sevenyears and the net working capital of the company is negative. During the year March 312020 Company suffered net loss of Rs 5165 Lakhs. These conditions along with other mattersas set forth in Note 2.1 (iii) indicate the existence of a material uncertainty that maycast significant doubt about the company's ability to continue as a going concern. Companyhas disclosed the mitigating factors vide the said Note and we have relied upon the same.
(iv) The Internal Audit system of the company needs to be substantiallystrengthened in scope coverage and compliance in respect of Hamira Plant and Head Officeoperations. Our opinion is not modified in respect of these matters.
Key Audit Matters
Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the standalone financial statements of the current period.These matters were addressed in the context of our audit of the standalone financialstatements as a whole and in forming our opinion thereon and we do not provide a separateopinion on these matters. In addition to the matter described in the basis of qualifiedopinion section we have determined the matters described below to be the Key Audit Matterto be communicated in our report. For each matter mentioned below our description of howour audit addressed the matter is provided in that context.
|The Key Audit Matter ||How the matter was addressed in our audit |
|(a) Litigation Matters: || |
|The company operates in various states within India exposing it to a variety of different Central and State Laws regulations and interpretations thereof. In this regulatory environment there is an inherent risk of litigation and claims. ||Reviewing the outstanding litigations against the Company for consistency with the previous years. Enquire and obtain explanations for movement during the year. |
|Consequently provisions and contingent liability disclosures may arise from direct and indirect tax proceeding legal proceedings including regulatory and other government / department proceedings as well as investigations by authorities and commercial claims. ||Discussing the status of significant known actual and potential litigations with the Company's in-house officials and other senior management personnel who have knowledge of these matters and assessing their responses. |
|At March 31 2020 the Company's contingent liabilities for legal matters were Rs 1921 Lakhs (refer Note 37 to the standalone financial statement) and provision for service tax aggregated Rs353 Lakhs (refer Note 22(A)). The most significant contingent liability pertains to service tax of Rs 389 Lakhs and sales tax of Rs 1296 Lakhs. ||Reading the latest correspondence between the Company and the various tax/legal authorities and review of correspondence with/legal opinions obtained by the management from external legal advisors where applicable for significant matters and considering the same in evaluating the appropriateness of the Company's provisions or disclosures on such matters. |
|Management applies significant judgment in estimating the likelihood of the future outcome in each case when considering whether and how much to provide or in determining the required disclosure for the potential exposure of each matter. This is due to the highly complex nature and magnitude of the legal matters involved along with the fact that resolution of tax and legal proceedings may span over multiple years and may involve protracted negotiation or litigation. ||Examining the Company's legal expenses and reading the minutes of the board meetings in order to ensure that all cases have been identified. |
|These estimates could change substantially overtime as new facts emerge as each legal case progresses. ||With respect to tax matters involving our tax specialists and discussing with the Company's tax officers their views and strategies on significant cases as well as the related technical grounds relating to their conclusions based on applicable tax laws. |
|Given the inherent complexity and magnitude of potential exposures across the Company and the judgment necessary to estimate the amount of provisions required or to determine required disclosures this is a key audit matter. ||Assessing the decisions and rationale for provisions held or for decisions not to record provisions or make disclosures. |
| ||For those matters where management concluded that no provisions should be recorded considered the adequacy and completeness of the Company's disclosures. |
|(b) Loan to employees: ||Our procedures included: |
|Company has given loan of ` 474 Lakhs to its senior employees in earlier years. Stipulation of repayment is not laid out. Management has represented that the amount will be recovered during the course of time without specifying the time frame. ||We have perused the detail and have verified the repayments made by employers during the year. |
| ||We have verified balance confirmation. |
| ||We have advised the company to specify the time frame for recovery of the same. |
| ||We have disclosed the issue in the emphasis of matter paragraph. |
|(c) Revenue recognition from sale of products: ||Our audit procedures included amongst others assessing the Company's revenue recognition accounting policy including those relating to allowances discounts and incentives. |
|Revenue from sale of products is recognized when control of products has transferred to the customer and there is no unfulfilled obligation that could affect the customer's acceptance of products. Revenue from the sale of products is measured at the fair value of the consideration received and receivable net of returns and allowances discounts and incentives. ||We understood evaluated and tested the operating effectiveness of internal controls over recognition of revenue discounts and incentives. |
|Significant judgment is required in estimating accruals relating to allowances discounts and incentives recognized in relation to sales made during the year. ||We performed test of details on a sample basis and inspected the underlying documents relating to sales and accrual of discounts and incentives. |
| ||We tested sales transactions near year end date as well as credit notes issued after the year end date. We discussed and evaluated management assessment of estimates relating to allowances discounts and incentives. |
| ||We assessed the disclosures in the standalone financial statements in respect of revenue. |
Information Other than the Standalone Financial Statements and Auditor's Report Thereon
The Company's management and Board of Directors are responsible for the preparation ofthe other information. The other information comprises the information included in theCompany's annual report but does not include the financial statements and our auditor'sreport thereon.
Our opinion on the standalone financial statements does not cover the other informationand we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statements our responsibilityis to read the other information and in doing so consider whether the other informationis materially inconsistent with the standalone financial statements or our knowledgeobtained 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 misstatementof this other information we are required to report that fact. We have nothing to reportin this regard.
Responsibilities of Management and Those Charged with Governance for the StandaloneFinancial Statements
The Company's Board of Directors are responsible for the matters stated in section134(5) of the Act with respect to the preparation of these standalone financial statementsthat give a true and fair view of the financial position financial performance totalcomprehensive income changes in equity and cash flows of the Company in accordance withthe Ind AS and other accounting principles generally accepted in India. Thisresponsibility also includes maintenance of adequate accounting records in accordance withthe provisions of the Act for safeguarding the assets of the Company and for preventingand detecting frauds and other irregularities; selection and application of appropriateaccounting policies; making judgments and estimates that are reasonable and prudent; anddesign implementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the standalone financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.
In preparing the standalone financial statements management is responsible forassessing the Company's ability to continue as a going concern disclosing as applicablematters related to going concern and using the going concern basis of accounting unlessmanagement either intends to liquidate the Company or to cease operations or has norealistic alternative but to do so.
Those Charged with Governance are also responsible for overseeing the Company'sfinancial reporting process.
Auditor's Responsibilities for the Audit of the Standalone Financial Statements
Our objectives are to obtain reasonable assurance about whether the standalonefinancial statements as a whole are free from material misstatement whether due to fraudor error and to issue an auditor's report that includes our opinion. Reasonable assuranceis a high level of assurance but is not a guarantee that an audit conducted in accordancewith SAs will always detect a material misstatement when it exists. Misstatements canarise from fraud or error and are considered material if individually or in theaggregate they could reasonably be expected to influence the economic decisions of userstaken on the basis of these standalone 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 standalonefinancial statements whether due to fraud or error design and perform audit proceduresresponsive to those risks and obtain audit evidence that is sufficient and appropriate toprovide a basis for our opinion. The risk of not detecting a material misstatementresulting from fraud is higher than for one resulting from error as fraud may involvecollusion forgery intentional omissions misrepresentations or the override of internalcontrol.
Obtain an understanding of internal financial controls relevant to the audit inorder to design audit procedures that are appropriate in the circumstances. Under section143(3)(i) of the Act we are also responsible for expressing our opinion on whether theCompany has adequate internal financial controls system in place and the operatingeffectiveness of such controls.
Evaluate the appropriateness of accounting policies used and thereasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of the Board of Directors' use of the goingconcern basis of accounting and based on the audit evidence obtained a materialuncertainty exists relating to events or conditions that may cast significant doubt on theCompany's ability to continue as a going concern. We draw attention on emphasis of matterparagraph (stated above) in our audit report explaining indicator of existence of materialuncertainty that may cast significant doubt on the Company's ability to continue as agoing concern and mitigation factors given by the management in Note No 2.1(iii) of thefinancial statements.
Evaluate the overall presentation structure and content of the standalonefinancial statements including the disclosures and whether the standalone financialstatements represent the underlying transactions and events in a manner that achieves fairpresentation.
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 also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and to communicate with themall relationships 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 standalone financial statementsof the current period and are therefore the key audit matters. We describe these mattersin our auditor's report unless law or regulation precludes public disclosure about thematter or when in extremely rare circumstances we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonablybe expected to outweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor's Report) Order 2016 ("theOrder") issued by the Central Government of India in terms of sub-section (11) ofsection 143 of the Act we give in the "Annexure A" a statement on thematters specified in the paragraph 3 and 4 of the order.
2. With respect to matter to be included in the Auditor's report under section197(16) of the Act: In our opinion and according to the information and explanations givento us the managerial remuneration for the year ended March 31 2020 has beenpaid/provided by the Company to its directors in accordance with the provisions of section197 read with Schedule V to the Act.
3. 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 thebest 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 theCompany so far as it appears from our examination of those books;
(c) the balance sheet the statement of profit and loss including othercomprehensive income statement of changes in equity and the statement of cash flow dealtwith by this Report are in agreement with the books of account;
(d) in our opinion the aforesaid standalone financial statements comply with theAccounting Standards specified under Section 133 of the Act read with Companies (IndianAccounting Standards) Rules 2015 as amended;
(e) on the basis of the written representations received from the directors as on31 March 2020 taken on record by the Board of Directors none of the directors isdisqualified as on 31 March 2020 from being appointed as a director in terms of Section164 (2) of the Act;
(f) 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"; and
(g) 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 in our opinionand to the best of our information and according to the explanations given to us:
i. the Company has disclosed the impact of pending litigations on its financialposition in its financial statements;
ii. the Company did not have any long term contracts including derivative contractsfor which there were any material foreseeable losses;
iii. there has not been delay in transferring amounts which were required to betransferred to the Investor Education and Protection Fund by the Company.
ANNEXUREA'TO THE INDEPENDENT AUDITOR'S REPORT
Statement of the matters specified in paragraph 3 and 4 of the Companies (Auditor'sreport) Order 2016 (the Order')
The Annexure referred to in Independent Auditors' Report to the members of the JagatjitIndustries Limited ("the company") on the standalone financial statementsfor the year ended March 31 2020 we report that:
(i) In respect of fixed assets:
(a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
(b) The Company has a programme of annual verification of fixed assets which inour opinion is reasonable having regard to the size of the company and the nature of itsassets. It is informed by the management as per the said programme physical verificationwas scheduled at the year end but due to Covid-19 Pandemic lockdown management could notconduct the same. Therefore we are unable to comment on the existence of fixed assets.
(c) According to the information and explanations given to us and on the basis ofour examination of the records of the Company and certificate provided by the Company thetitle deeds of immovable properties are held in the name of the Company except in respectof Immovable properties situated at 4th and 5th Floor BhandariHouse Nehru Place New Delhi 9th & 10th Floor Ashoka EstateBarakhamba Road New Delhi 7th Floor Shanti Niketan Building Camac StreetKolkata 700017 and 4th Floor Embassy Centre Nariman Point Mumbai. It iscertified by the management that the company is in possession of these properties.
Title deeds in respect of Immovable Properties as mentioned in Note No. 18 are held bythe lenders as Equitable Mortgage against the borrowing. Confirmations from the bank arenot received.
Company has provided photocopies of the title deeds/ lease deeds in respect ofLeasehold Land situated at Sahibabad (U.P.) as the originals are held by Uttar PradeshState Industrial Development Corporation (UPSIDC).
(ii) In respect of inventories: Due to Covid-19 Pandemic lockdown management couldnot conduct the physical verification of all inventories at reporting date. It is informedby the management that physical verification was conducted subsequently and no materialdiscrepancy was found. We were not able to attend the physical verification as lockdownwas effective therefore we were unable to verify the existence/condition of inventoriesand accordingly we have qualified the report regarding this (refer basis for qualifiedopinion).
(iii) (a) According to Information and explanation given to us the Company hasgranted loan to its subsidiaries in earlier years. No loan was granted to any entitycovered in the register maintained u/s 189 of the Companies Act 2013 during the currentyear.
(b) In respect of above loans the Company has received Rs 1988 Lakhs from one of thesubsidiaries and made provision of ` 185 Lakhs during the year in respect of anothersubsidiary due to erosion of its net worth.
(iv) (a) In our opinion and according to the information and explanations given tous the Company has not given any loans and made any investment within the meaning ofsection 185 & 186 of the Act. Thus paragraph 3(iii) of the Order is not applicable tothe Company.
(b) Company has represented before us that provision of section 185/186 are notapplicable for advances given prior to Companies Act 2013 and are still outstanding.
(v) According to the information and explanation given to us the company has notaccepted any deposits during the year except advance of Rs 857 Lakhs from a customer whichis adjustable in 60 equal installments of Rs 15 Lakhs each w.e.f. July 2020. The companyhas adjusted the amount of current outstanding of Rs 642 Lakhs and shown Rs 215 Lakhs asadvance from customer. Management is of the view that the same is not a deposit within themeaning of Section 2(31) read with Acceptance of Deposit rules 2014.
In respect of amounts accepted in earlier years our observations are as under: (a)Advance from customers of Rs 422 Lakhs outstanding for more than 365 days. The Company isof the view that the amount is not deposit from customers but needs to be adjusted againstdebit balance of receivables. Pending reconciliation amount is shown as advance fromcustomers.
(b) Similarly company had received amount of ` 700 Lakhs in earlier years which isclaimed as exempted deposit..Company has informed us that it will re-examine the entireissue and take Legal opinion on the same.
Pending reconciliation and legal opinion we are unable to comment upon these deposits.Company is of the view that provision of Section 74(1)(b) of the Act are complied with inpursuance of Rule 19 of the Acceptance of Deposits Rules 2014. It is also confirmed bythe company that no order has been passed by the Company Law Board or National Company LawTribunal or Reserve Bank of India or any Court or any other Tribunal.
(vi) According to the information and explanations given to us and certified by themanagement provision of Section 148(1) of the Companies Act 2013 for maintenance of Costrecords are not applicable as products manufactured by the company as specified in TableA/Table B under rule 3 of Companies (Cost Records & Audit Rules) 2014 representby-product and no cost is incurred for the same.
(vii) In respect of statutory dues:
(a) According to the information and explanations given to us and on the basis ofour examination of the records of the Company the company has generally been regular indepositing undisputed statutory dues including provident Fund Employees State insuranceincome tax sales tax wealth tax service tax duty of customs duty of excise valueadded tax cess and other material statutory dues applicable to it with the appropriateauthorities. There were no undisputed amounts payable in respect of the aforesaidstatutory dues in arrears as at 31.03.2020 for a period of more than six months from thedate they became payable.
(b) (i) According to the information and explanations given to us there are nodues of income tax sales tax wealth tax service tax duty of customs duty of excisevalue added tax cess which have not been deposited as at 31.03.2020 on account of anydispute except as follows:
|Sr. No. Name of Statute ||Nature of Dues ||Amount (Rs) ||Period for which the amount relates ||Forum where dispute is pending. |
|SERVICE TAX || || || || |
|1 The Finance Act 1994 ||Wrong availment of Service ||5382166 ||October 2003 to ||CESTAT Chandigarh |
| ||Tax Cenvat Credit || ||September 2007 || |
|2 The Finance Act 1994 ||Penalty in the above matter ||5382166 ||October 2003 to ||CESTAT Chandigarh |
| || || ||September 2007 || |
|3 The Finance Act 1994 ||Wrong availment of Service ||6970632 ||October 2007 to ||CESTAT Chandigarh |
| ||Tax Cenvat Credit || ||March 2008 || |
|4 The Finance Act 1994 ||Penalty in the above matter ||6970632 ||October 2007 to ||CESTAT Chandigarh |
| || || ||March 2008 || |
|5 The Finance Act 1994 ||Demand and Penalty towards Management maintenance and Repair Services ||1797534 ||June 2005 ||CESTAT Chandigarh |
|6 The Finance Act 1994 ||Demand and Penalty towards conversion charge for SMP & Ghee under category of Supply of Tangible Goods ||6221720 ||May 2008 to ||CESTAT Chandigarh |
| || || ||April 2010 || |
|7 The Finance Act 1994 ||Penalty in the above matter ||6221720 ||May 2008 to ||CESTAT Chandigarh |
| || || ||April 2010 || |
|8 Sales Tax under ||Demand and Penalty on account ||10300000 ||2012-13 to ||Appellate Deputy Commissioner Hyderabad |
|Telangana VAT Act ||of VAT on Royalty Income || ||November 2014 || |
|9 Sales Tax under Punjab ||Demand and Penalty on account of disallowance of VAT input ||21967703 ||2010-11 ||Deputy Excise and Taxation |
|VAT Act & Central Sales Tax Act ||credit on Rice Husk || || ||Commissioner (Appeals) Jalandhar |
|10 Sales Tax under ||Demand and Penalty on account ||3969900 ||2011-12 ||Joint Excise & Taxation |
|Haryana VAT Act ||of disallowance of VAT input || || ||Commissioner (A) Rohtak |
| ||credit on Rice Husk || || || |
|11 Sales Tax under ||Demand in respect to VAT ||2032974 ||2013-14 ||Commissioner (Appeals) |
|Jharkhand VAT Act ||assessment || || ||Ranchi |
|12 Sales Tax under Punjab VAT Act & Central ||Disallowance of ITC on purchase of Rice Flour ||10754088 ||2011-13 ||VAT Appellate Tribunal |
|Sales Tax Act || || || || |
|13 Rajasthan VAT Act. ||Demand in respect of VAT ||379205 ||2015-16 & ||VAT Commissioner Rajasthan |
| || || ||2016-17 || |
|14 Jharkhand VAT Act ||Demand in respect of VAT ||397965 ||2014-15 ||Commissioner (Appeals) Ranchi |
|15 Rajasthan VAT Act. ||Demand in respect of VAT ||79676109 || ||VAT Commissioner Rajasthan |
(ii) Company made provision for service tax of ` 353 Lakhs demanded by Orissa StateBeverages Corporation Ltd. against their liability to service tax in earlier year. Thematter is pending before Service Tax Tribunal Orissa.
(viii) According to the information and explanations given to us the Company hasnot defaulted in repayment of loans or borrowing to a financial institution bankGovernment during the year.
(ix) In our opinion and according to the information and explanation given to usthe term loans have been applied by the company during the year for the purposes for whichthey were obtained.
(x) According to the information and explanations given to us no material fraudby the Company or on the Company by its officers or employees has been noticed or reportedduring the course of our audit.
(xi) According to the information and explanations given by the management themanagerial remuneration has been paid/ provided in accordance with the requisite approvalsmandated by the provisions of section 197 read with Schedule V to the Companies Act 2013.
(xii) In our opinion and according to the information and explanations given to usthe Company is not a nidhi company. Accordingly paragraph 3(xii) of the Order is notapplicable.
(xiii) According to the information and explanations given to us and on the basisof Legal opinion (regarding maintenance charges of ` 215 Lakhs paid to Corporate FacilityManagement) [refer Note No. 39B(iv)(b)] obtained by the company in earlier years and basedon our examination of the records of the Company transactions with the related partiesare in compliance with sections 177 and 188 of the Act where applicable and details ofsuch transactions have been disclosed in the financial statements as required by theapplicable Ind AS.
(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 them. Accordingly paragraph 3(xv)of the Order is not applicable.
(xvi) The Company is not required to be registered under section 45-IA of theReserve Bank of India Act 1934.
ANNEXURE B' TO THE INDEPENDENT AUDITOR'S REPORT OF EVEN DATE ON THE STANDALONEFINANCIAL STATEMENTS OF JAGATJIT INDUSTRIES LIMITED
Report on the Internal Financial Controls under Clause (i) of Subsection 3 of Section143 of the Companies Act 2013 (the Act')
We have audited the internal financial controls with reference to standalone financialstatements of Jagatjit Industries Limited ("the Company") as of March 312020 in conjunction with our audit of the standalone financial statements of the Companyfor 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 financial controls with reference to standalonefinancial statements criteria established by the Company considering the essentialcomponents of internal control stated in the Guidance Note. These responsibilities includethe design implementation and maintenance of adequate internal financial controls thatwere operating effectively for ensuring the orderly and efficient conduct of its businessincluding adherence to Company's policies the safeguarding of its assets the preventionand detection of frauds and errors the accuracy and completeness of the accountingrecords and the timely preparation of reliable financial information as required underthe Companies Act 2013.
Our responsibility is to express an opinion on the Company's internal financialcontrols with reference to standalone financial statements based on our audit. Weconducted our audit in accordance with the Guidance Note and the Standards on Auditing asprescribed under section 143(10) of the Act to the extent applicable to an audit ofinternal financial controls and both issued by the Institute of Chartered Accountants ofIndia. Those Standards and the Guidance Note require that we comply with the ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetheradequate internal financial controls with reference to standalone financial statements wasestablished and maintained and if such controls operated effectively in all materialrespects. Our audit involves performing procedures to obtain audit evidence about theadequacy of the internal financial controls with reference to standalone financialstatements and their operating effectiveness. Our audit of internal financial controlswith reference to standalone financial statements included obtaining an understanding ofsuch internal financial assessing the risk that a material weakness exists and testingand evaluating the design and operating effectiveness of internal control based on theassessed risk. The procedures selected depend on the auditor's judgment including theassessment of the risks of material misstatement of the financial statements whether dueto 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 withreference to standalone financial statements.
Meaning of Internal Financial Controls with reference to standalone financialstatements
A company's internal financial control with reference to standalone financialstatements is a process designed to provide reasonable assurance regarding the reliabilityof financial reporting and the preparation of financial statements for external purposesin accordance with generally accepted accounting principles. A company's internalfinancial control over financial reporting includes those policies and procedures that (1)pertain to the maintenance of records that in reasonable detail accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) providereasonable assurance that transactions are recorded as necessary to permit preparation offinancial statements in accordance with generally accepted accounting principles and thatreceipts and expenditures of the company are being made only in accordance withauthorizations of management and directors of the company; and (3) provide reasonableassurance regarding prevention or timely detection of unauthorized acquisition use ordisposition of the company's assets that could have a material effect on the financialstatements
Inherent Limitations of Internal Financial Controls with reference to standalonefinancial statements
Because of the inherent limitations of internal financial controls with reference tostandalone financial statements including the possibility of collusion or impropermanagement override of controls material misstatements due to error or fraud may occurand not be detected. Also projections of any evaluation of the internal financialcontrols with reference to standalone financial statements to future periods are subjectto the risk that the internal financial controls with reference to standalone financialstatements may become inadequate because of changes in conditions or that the degree ofcompliance with the policies or procedures may deteriorate.
In our opinion the Company generally has in all material respects an adequateinternal financial controls with reference to standalone financial statements and suchinternal financial controls over financial reporting were generally operating effectivelyas at March 31 2020 except in respect of trade receivable reconciliation/ confirmationprovision for bad and doubtful debts and accounts payable reconciliation/confirmationwhere controls were found to be ineffective and in respect of various areas namelyupdating of status of contingent liabilities Rolling Cash Plan (HO) recovery of loan& advances from employees/suppliers Full & Final settlement of employees Revenuerecognition of royalty income from franchise operation revenue recognition of third partysupply agreement and operating assessment of control regarding updating the SecretarialDepartment in respect of borrowings from Group entities where controls were effective butneed to be strengthened based on the internal control with reference to standalonefinancial statements criteria established by the Company considering the essentialcomponents of internal control stated in the Guidance Note on Audit of Internal FinancialControls Over Financial Reporting issued by the Institute of Chartered Accountants ofIndia (the "Guidance Note").
| ||for Madan & Associates |
| ||Chartered Accountants |
| ||Firm's registration number: 000185N |
| ||M. K. Madan |
|Place: New Delhi ||Proprietor |
|Date: 03.09.2020 ||Membership number: 082214 |
|UDIN: 20082214AAAACF7989 || |