TO THE MEMBERS OF PENTAMEDIA GRAPHICS LIMITED
REPORT ON THE FINANCIAL STATEMENTS
We have audited the accompanying financial statements of Pentamedia Graphics Limited(the Company) which comprise the Balance Sheet as at March 31 2018 the statement ofProfit and Loss the Statement of Changes in Equity and Cash Flow Statement for the yearthen ended and a summary of significant accounting policies and other explanatoryinformation.
MANAGEMENT'S RESPONSIBILITY FOR THE FINANCIAL STATEMENTS
The Company's Management is responsible for the matters stated in Section 134(5) of theCompanies Act 2013 (the Act) with respect to the preparation of these financialstatements that give a true and fair view of the financial position financial performanceand cash flows of the Company in accordance with the Accounting Standards notified underSection 133 of Companies Act 2013 read with rule 7 of the Companies (Accounts) Rules2014 and in accordance with the accounting principles generally accepted in India.
This responsibility includes the maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding the assets of the Company andfor preventing and detecting frauds and other irregularities; selection and application ofappropriate accounting policies; making judgments and estimates that are reasonable andprudent; and design implementation and maintenance of adequate internal financialcontrol that were operating effectively ensuring the accuracy and completeness of theaccounting records relevant to the preparation and presentation of the financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.
Our responsibility is to express an opinion on these financial statements based on ouraudit. We have taken into account the provisions of the Act the accounting and auditingstandards and the matters which are required to be included in the audit report under theprovisions of the Act and the Rules made thereunder and the Order under section 143(11) ofthe Act.
We conducted our audit of the financial statements in accordance with the Standards onAuditing specified under section 143(10) of the Act. Those Standards require that wecomply with ethical requirements and plan and perform the audit to obtain reasonableassurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the financial statements. 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. In making those risk assessments the auditorconsiders internal financial control relevant to the Company's preparation and fairpresentation of the financial statements in order to design audit procedures that areappropriate in the circumstances but not for the purpose of expressing an opinion on theeffectiveness of the internal control. An audit also includes evaluating theappropriateness of accounting policies used and the reasonableness of the accountingestimates made by management as well as evaluating the overall presentation of thefinancial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion.
Basis for Qualified Opinion
Attention is invited to:
1. Depreciation is charged on Digital Content for Rs.181.31 Lacs by increasing the lifeof asset from 3 years to 6 years otherwise the depreciation would have been Rs.366.73Lacs. The difference of the same results in profit. The impact of the same on the Profit/Loss Statement and Balance Sheet is ascertainable and hence quantified.
2. Deferred Tax Asset of Rs. 16.82 Lacs arises due to change in the rate ofdepreciation as per Income Tax act resulting profit. The impact of the same is ascertainedand quantified in the Profit/Loss Statement and Balance Sheet
In our opinion and to the best of our information and according to the explanationsgiven to us except for the effects of the matter described in the Basis for QualifiedOpinion para the aforesaid financial statements give the information required by the Actin the manner so required and give a true and fair view in conformity with the accountingprinciples generally accepted in India:
(a) In the case of the Balance Sheet of the state of affairs of the Company as atMarch 31 2016 (b) In the case of Statement of Profit and Loss of the profit of theCompany for the year ended on that date; and (c) In the case of the Cash Flow Statementof the cash flows of the Company for the year ended on that date.
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
1. As required by Section 143(3) of the Act we report that:
a. We have obtained all the information and explanations which to the best of ourknowledge and belief were necessary for the purpose of our audit;
b. In our opinion proper books of account as required by law have been kept by theCompany so far as appears from our examination of those books.
c. The Balance Sheet the Statement of Profit and Loss the statement of changes inequity and the Cash Flow Statement dealt with by this Report are in agreement with thebooks of account.
d. In our opinion the Balance Sheet the Statement of Profit and Loss and the CashFlow Statement comply with Accounting Standards prescribed under section 133 of the Actas applicable.
e. On the basis of the written representations received from the directors as on March31 2017 taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2017 from being appointed as a director in terms of Section 164(2) of theAct.
f. With respect to adequacy of the internal financial controls over the financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate report in annexure A. Our respect expresses an unmodified opinion onthe adequacy and operating effectiveness of the Company's internal financial controls overfinancial reporting.
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) Rule2014 in our opinionand to the best of our information and according to the explanation given to us:
a) The Company has disclosed the impact of profit in Profit and Loss Account asreferred to Note to the financial statements.
2. As required by the Companies (Auditor's Report) Order 2016 (the Order) issued bythe Central Government in terms of Section 143(11) of the Act we give in Annexure B astatement on the matters specified in the paragraphs 3 and 4 of the Order.
For Babu Peram and Associates. Chartered Accountants
CA. Babu Peram
(Firm Registration No. 012721S)
TO THE INDEPENDENT AUDITORS' REPORT
(Referred to in paragraph 1(f) under Report on Other Legal and RegulatoryRequirements' of our report of even date)
Report on the Internal Financial Controls Over Financial Reporting under Clause (i) ofSub-section 3 of Section 143 of the Companies Act 2013 (the Act)
We have audited the internal financial controls over financial reporting of PentamediaGraphics Limited (the Company) as of 31st March 2018 in conjunction with ouraudit 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. 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 over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting(the Guidance Note) issued by the Institute of Chartered Accountants of Indiaand the Standards on Auditing prescribed under Section 143(10) of the Companies Act 2013to the extent applicable to an audit of internal financial controls. Those Standards andthe Guidance Note require that we comply with ethical requirements and plan and performthe audit to obtain reasonable assurance about whether adequate internal financialcontrols over financial reporting was established and maintained and if such controlsoperated effectively in all material respects. Our audit involves performing procedures toobtain audit evidence about the adequacy of the internal financial controls system overfinancial reporting and their operating effectiveness. Our audit of internal financialcontrols over financial reporting included obtaining an understanding of internalfinancial controls over financial reporting 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 auditors'judgment 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 haveobtained is sufficient and appropriate to provide a basis for our audit opinion on theCompany's internal financial controls system over financial reporting.
MEANING OF INTERNAL FINANCIAL CONTROLS OVER FINANCIAL REPORTING
A company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A company's internal financial control over financialreporting includes those policies and procedures that
(1) pertain to the maintenance of records that in reasonable detail accurately andfairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accountingprinciples and that receipts and expenditures of the company are being made only inaccordance with authorizations of management and directors of the company; and
(3) provide reasonable assurance regarding prevention or timely detection ofunauthorized acquisition use or disposition of the company's assets that could have amaterial effect on the financial statements.
INHERENT LIMITATIONS OF INTERNAL FINANCIAL CONTROLS OVER FINANCIAL REPORTING
Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.
In our opinion to the best of our information and according to the explanations givento us the Company has in all material respects an adequate internal financial controlssystem over financial reporting and such internal financial controls over financialreporting were operating effectively as at 31st March 2017 based on the internal controlover financial reporting 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.
For Babu Peram and Associates
CA. Babu Peram
(Firm Registration No. 012721S)
TO THE INDEPENDENT AUDITORS' REPORT
(Referred to in paragraph 2 under Report on Other Legal and Regulator)Requirements' of our report of even date)
1. Fixed Assets:
a) The company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
b) The fixed assets are physically verified during the year by the management atreasonable intervals. According to the information and explanation given to us nomaterial discrepancies were noticed on such verification
2. As per our verification we opine that there are no immovable properties held in thename of the company. The company sold the land and building during the year.
The inventories were physically verified during the year by the management atreasonable intervals and according to the information and explanation given by themanagement no material discrepancies were noticed on physical verification.
3. The company has not granted or taken any loans secured or unsecured to or fromcompanies firms Limited Liability Partnerships and other parties except from MayajaalEntertainment Ltd covered in the register maintained under Sec 189 of Companies Act 2013.
4. The company has not provided any loans investments guarantees or securities whichfall under the purview of Section 185 and Section 186 of the Companies Act 2013.
5. In our opinion and according to the information given to us the company has notaccepted any deposits from the public during the year. Therefore Clause 5 of this orderis not applicable.
6. As per the information and explanations given to us maintenance of cost records hasnot been prescribed by the Central Government under Sub-section (1) of Section 148 of thecompanies Act 2013.
7. According to the information and explanations given to us there are no dues ofIncome Tax Sales Tax Customs duty Excise Duty Service Tax Provident Fund and Cesswhich have not been deposited on account of any dispute except the following cases:
Claims against the company which has not been acknowledged as debt for the year ended31st March 2016 includes demands from the Income Tax Authorities for payment ofTax including interest for the issues mentioned hereinafter. Rs. 8.89 crores pertaining tothe assessment years 1996-97 1997-98 and 1998-99. The demands for these years are due todisallowance of Training Income in STP/EHTP. The matters are pending to these years in theSupreme Court of India. So also demand and interest of Rs. 21.53 pertaining to theassessment year 2000-01 is due to the treatment of Goodwill which is now pending in theHigh Court of Madras. For the assessment year 2001-02 2002-03 and 2003-04 the demand andincluding interest is Rs. 109.09 crores due to the treatment of unrealized sales andopening of fresh cases u/s 263. These matters are pending in the Supreme Court of India.For the assessment years 2004-05 2005-06 and 2006-07 the demands inclusive interest areRs. 48.03 crores which arose due to opening of the files afresh u/s 147 due to nondeduction of TDS for some matters rate of depreciation etc. The company has appealedagainst the same in the High Court of Madras and has obtained a stay order. For theassessment years 2008-09 2009-10 2010-11 2012-13 2013-14 2014-15 there is a totaldemand of Rs. 10.15 crores including interest because of the dispute in the ratedepreciation deduction of TDS in some matters and these matters are now with theCommissioner of Income Tax (Appeals) There is also matter pending for PentasoftTechnologies (now merged with Pentamedia Graphics) where demand inclusive interest is Rs.6.30 crores for issues pertaining to unrealized sales.
CASES FILED BY THE COMPANY AGAINST INCOME TAX THE DEPARTMENT
1. The Company has filed a WP 2357/2010 and got a stay order dated 15.07.2010 and todispose of all the issues /appeals from 1996 to 2000 -07 within 8 weeks from the date ofthe order.
2. Revised returns has been filed by the company for the AYs 2001-02 to 2004-05 on31.03.2008 writing off Rs. 690 Crores of impaired assets is still pending with thedepartment . The Madras High Court vide order/ direction dated 11.01.2010 has asked thedepartments to consider the revised returns.
3. The company has filed a WP 25120/2010 for Pentasoft Technologies and got a stayorder dated 18.12.2009 till such time all the issues /appeals from 1996 to 2000 -07 aredisposed off.
CASES FILED BY THE INCOME TAX THE DEPARTMENT AGAINST THE COMPANY
1. Department has filed in the Supreme Court of India against Pentasoft Technologies(now merged with Pentamedia Graphics) for Assessment Years 2001-02 and 2002-03 challengingthe Depreciation on Non Compete Fees upheld by the Madras High Court.
8. The company has not obtained any loans or borrowings from financial institutionsbanks Government and debenture holders hence this Clause is not applicable.
9. In our opinion and according to the information given to us the company has notraised any money by way of initial public offer or further public offer and hence thisclause is not applicable.
10. As per our verification and explanation given to us by the company no fraud on orby the company has been noticed or reported during the year.
11. The managerial remuneration paid by the company is as per Section 197 read withschedule V to the Companies Act 2013.
12. The company is not a Nidhi company and hence this clause is not applicable.
13. As per our verification it is opined that all the transactions with the relatedparties are in compliance with Sections 177 and 188 of the Companies Act 2013 whereapplicable and the details have been disclosed in the financial statements.
14. The company has not made any preferential allotment or private placement of sharesor fully or partly convertible debentures during the year hence this clause is notapplicable.
15. According to the information and explanations given to us the company has notentered into any non - cash transactions with the directors or persons connected withthem. Hence provisions of Section 192 of the Companies Act 2013 are not applicable to thecompany.
16. The company is not required to be registered under Section 45-IA of the ReserveBank of India Act 1934.
For Babu Peram and Associates
CA. Babu Peram
(Firm Registration No. 012721S)