LUNAWAT& CO. CA. PRAMOD JAINlunawat.com/.../CARO2016,IFC,ITSchemes-TNKPSC.pdf · • The system of...

CA. PRAMOD JAINFCA, FCS, FCMA, LL.B, MIMA, DISA

CA. PRAMOD JAINFCA, FCS, FCMA, LL.B, MIMA, DISA

LUNAWAT & CO.Chartered Accountants

LUNAWAT & CO.Chartered Accountants8th July 2016, TNKPSC8th July 2016, TNKPSC

AGENDAAGENDAAGENDAAGENDA

� Internal Financial Controls ReportingInternal Financial Controls ReportingInternal Financial Controls ReportingInternal Financial Controls Reporting

�CARO 2016CARO 2016CARO 2016CARO 2016

Lunawat & Co.

�DT Dispute Resolution SchemeDT Dispute Resolution SchemeDT Dispute Resolution SchemeDT Dispute Resolution Scheme

�Equalization LevyEqualization LevyEqualization LevyEqualization Levy

AUDIT REPORTSAUDIT REPORTSAUDIT REPORTSAUDIT REPORTS�Under Companies ActUnder Companies ActUnder Companies ActUnder Companies Act

�CAROCAROCAROCARO

�NonNonNonNon---- CAROCAROCAROCARO

�OthersOthersOthersOthers

�Tax AuditTax AuditTax AuditTax Audit

�Form 3 CAForm 3 CAForm 3 CAForm 3 CA

�Form 3 CBForm 3 CBForm 3 CBForm 3 CB

�LLPLLPLLPLLP

�SocietySocietySocietySociety

Lunawat & Co.

REPORT REPORT REPORT REPORT ---- COMPANIESCOMPANIESCOMPANIESCOMPANIES

� Inquiry u/s 143(1) Inquiry u/s 143(1) Inquiry u/s 143(1) Inquiry u/s 143(1) –––– 6 points 6 points 6 points 6 points –––– only only only only

to be reported when comments to be reported when comments to be reported when comments to be reported when comments

requiredrequiredrequiredrequired

�Report to include:Report to include:Report to include:Report to include:

�Matters specified u/s 143(3) Matters specified u/s 143(3) Matters specified u/s 143(3) Matters specified u/s 143(3) ---- 9 points9 points9 points9 points

�Matters specified in Rules Matters specified in Rules Matters specified in Rules Matters specified in Rules ---- 3 points3 points3 points3 points

�Any Any Any Any order made order made order made order made u/s 143(3) for u/s 143(3) for u/s 143(3) for u/s 143(3) for

specified Companies in consultation specified Companies in consultation specified Companies in consultation specified Companies in consultation

with NFRA with NFRA with NFRA with NFRA –––– CARO 2016 CARO 2016 CARO 2016 CARO 2016 –––– 16 points16 points16 points16 points

Lunawat & Co.

Lunawat & Co.

ICFR REPORTINGICFR REPORTINGICFR REPORTINGICFR REPORTING�Take Engagement LetterTake Engagement LetterTake Engagement LetterTake Engagement Letter

�Perform proceduresPerform proceduresPerform proceduresPerform procedures

�Take Representation LetterTake Representation LetterTake Representation LetterTake Representation Letter

�Issue Separate ReportIssue Separate ReportIssue Separate ReportIssue Separate Report

�UnmodifiedUnmodifiedUnmodifiedUnmodified

�ModifiedModifiedModifiedModified

�QualifiedQualifiedQualifiedQualified

�AdverseAdverseAdverseAdverse

�DisclaimerDisclaimerDisclaimerDisclaimer

Lunawat & Co.

ICFR REPORTING ICFR REPORTING ICFR REPORTING ICFR REPORTING ---- QUALIFIEDQUALIFIEDQUALIFIEDQUALIFIEDLunawat & Co.

Due to Due to Due to Due to adequacy adequacy adequacy adequacy

(and therefore (and therefore (and therefore (and therefore

operating operating operating operating

effectiveness)effectiveness)effectiveness)effectiveness)

• The Company The Company The Company The Company did not have an appropriate did not have an appropriate did not have an appropriate did not have an appropriate

internal control system internal control system internal control system internal control system for customer acceptance, for customer acceptance, for customer acceptance, for customer acceptance,

credit evaluation and establishing customer credit evaluation and establishing customer credit evaluation and establishing customer credit evaluation and establishing customer

credit limits for sales, which could potentially credit limits for sales, which could potentially credit limits for sales, which could potentially credit limits for sales, which could potentially

result in the Company recognising revenue result in the Company recognising revenue result in the Company recognising revenue result in the Company recognising revenue

without establishing reasonable certainty of without establishing reasonable certainty of without establishing reasonable certainty of without establishing reasonable certainty of

ultimate collectionultimate collectionultimate collectionultimate collection

• ..except for the effects/possible effects of the ..except for the effects/possible effects of the ..except for the effects/possible effects of the ..except for the effects/possible effects of the

material weakness/material weakness/material weakness/material weakness/eseseses described above on the described above on the described above on the described above on the

achievement of the objectives of the control achievement of the objectives of the control achievement of the objectives of the control achievement of the objectives of the control

criteria, criteria, criteria, criteria, the Company has maintained, in all the Company has maintained, in all the Company has maintained, in all the Company has maintained, in all

material respects, adequate internal financial material respects, adequate internal financial material respects, adequate internal financial material respects, adequate internal financial

controls over financial reporting as on..controls over financial reporting as on..controls over financial reporting as on..controls over financial reporting as on..

• …these material weakness/…these material weakness/…these material weakness/…these material weakness/eseseses do not affect our do not affect our do not affect our do not affect our

opinion on the standalone financial statements opinion on the standalone financial statements opinion on the standalone financial statements opinion on the standalone financial statements

of the Companyof the Companyof the Companyof the Company

ICFR REPORTING ICFR REPORTING ICFR REPORTING ICFR REPORTING ---- ADVERSEADVERSEADVERSEADVERSELunawat & Co.

Due to Due to Due to Due to adequacy adequacy adequacy adequacy

(and therefore (and therefore (and therefore (and therefore


effectiveness)effectiveness)effectiveness)effectiveness)


internal control system internal control system internal control system internal control system for customer acceptance, for customer acceptance, for customer acceptance, for customer acceptance,

credit evaluation and …...credit evaluation and …...credit evaluation and …...credit evaluation and …...


internal control system for inventory internal control system for inventory internal control system for inventory internal control system for inventory with regard with regard with regard with regard

to receipts, issue for production and physical to receipts, issue for production and physical to receipts, issue for production and physical to receipts, issue for production and physical

verification. Further, the internal control system verification. Further, the internal control system verification. Further, the internal control system verification. Further, the internal control system

for identification and allocation of overheads to for identification and allocation of overheads to for identification and allocation of overheads to for identification and allocation of overheads to

inventory was also not adequate. These could inventory was also not adequate. These could inventory was also not adequate. These could inventory was also not adequate. These could

potentially result in material misstatements in potentially result in material misstatements in potentially result in material misstatements in potentially result in material misstatements in

the Company’s trade payables, consumption, the Company’s trade payables, consumption, the Company’s trade payables, consumption, the Company’s trade payables, consumption,

inventory and expense account balances.inventory and expense account balances.inventory and expense account balances.inventory and expense account balances.

• …the Company …the Company …the Company …the Company has not maintained adequate has not maintained adequate has not maintained adequate has not maintained adequate

internal financial controls internal financial controls internal financial controls internal financial controls over financial reportingover financial reportingover financial reportingover financial reporting


opinion on the financial statements of the opinion on the financial statements of the opinion on the financial statements of the opinion on the financial statements of the

CompanyCompanyCompanyCompany

ICFR REPORTING ICFR REPORTING ICFR REPORTING ICFR REPORTING ---- QUALIFIEDQUALIFIEDQUALIFIEDQUALIFIEDLunawat & Co.

Qualified Qualified Qualified Qualified ---- Due to Due to Due to Due to


effectivenesseffectivenesseffectivenesseffectiveness

Unmodified Unmodified Unmodified Unmodified –––– On On On On

AdequacyAdequacyAdequacyAdequacy

• The Company’s The Company’s The Company’s The Company’s internal financial controls over internal financial controls over internal financial controls over internal financial controls over

customer acceptancecustomer acceptancecustomer acceptancecustomer acceptance, credit evaluation and , credit evaluation and , credit evaluation and , credit evaluation and

establishing customer credit limits for sales, establishing customer credit limits for sales, establishing customer credit limits for sales, establishing customer credit limits for sales,

were not operating effectively were not operating effectively were not operating effectively were not operating effectively which could which could which could which could

potentially result in the Company recognising potentially result in the Company recognising potentially result in the Company recognising potentially result in the Company recognising

revenue without establishing reasonable revenue without establishing reasonable revenue without establishing reasonable revenue without establishing reasonable

certainty of ultimate collectioncertainty of ultimate collectioncertainty of ultimate collectioncertainty of ultimate collection

• ..except for the effects/possible effects of the ..except for the effects/possible effects of the ..except for the effects/possible effects of the ..except for the effects/possible effects of the

material weakness/material weakness/material weakness/material weakness/eseseses described above on the described above on the described above on the described above on the


criteria, criteria, criteria, criteria, the Company’s internal financial controls the Company’s internal financial controls the Company’s internal financial controls the Company’s internal financial controls

over financial reporting were operating over financial reporting were operating over financial reporting were operating over financial reporting were operating

effectively as on..effectively as on..effectively as on..effectively as on..



of the Companyof the Companyof the Companyof the Company


Due to Due to Due to Due to operating operating operating operating

effectivenesseffectivenesseffectivenesseffectiveness

Unmodified Unmodified Unmodified Unmodified –––– On On On On

AdequacyAdequacyAdequacyAdequacy

• The Company’s The Company’s The Company’s The Company’s internal financial controls over internal financial controls over internal financial controls over internal financial controls over

customer acceptancecustomer acceptancecustomer acceptancecustomer acceptance, credit evaluation and , credit evaluation and , credit evaluation and , credit evaluation and

establishing customer credit limits for sales, establishing customer credit limits for sales, establishing customer credit limits for sales, establishing customer credit limits for sales,

were not operating effectively were not operating effectively were not operating effectively were not operating effectively which could which could which could which could

potentially result in the Company ….potentially result in the Company ….potentially result in the Company ….potentially result in the Company ….

• The Company’s The Company’s The Company’s The Company’s internal control system internal control system internal control system internal control system for for for for

inventory with regard to receipts, issue for inventory with regard to receipts, issue for inventory with regard to receipts, issue for inventory with regard to receipts, issue for

production and physical verification production and physical verification production and physical verification production and physical verification were not were not were not were not

operating effectivelyoperating effectivelyoperating effectivelyoperating effectively. Further, the internal control . Further, the internal control . Further, the internal control . Further, the internal control

system for identification and allocation of system for identification and allocation of system for identification and allocation of system for identification and allocation of

overheads to inventory overheads to inventory overheads to inventory overheads to inventory was also not operating was also not operating was also not operating was also not operating

effectively.effectively.effectively.effectively. These could potentially result ….These could potentially result ….These could potentially result ….These could potentially result ….

• …Company’s internal financial controls over …Company’s internal financial controls over …Company’s internal financial controls over …Company’s internal financial controls over

financial reporting financial reporting financial reporting financial reporting were not operating effectively were not operating effectively were not operating effectively were not operating effectively


opinion on the financial statements of Companyopinion on the financial statements of Companyopinion on the financial statements of Companyopinion on the financial statements of Company


Due to Due to Due to Due to ---- Essential Essential Essential Essential

components of components of components of components of

internal controls internal controls internal controls internal controls

not adequately not adequately not adequately not adequately

consideredconsideredconsideredconsidered

in the internal in the internal in the internal in the internal

financial controls financial controls financial controls financial controls

established by the established by the established by the established by the

companycompanycompanycompany


internal financial control system over financial internal financial control system over financial internal financial control system over financial internal financial control system over financial

reporting reporting reporting reporting since the internal controls adopted by since the internal controls adopted by since the internal controls adopted by since the internal controls adopted by

the Company did the Company did the Company did the Company did not adequately consider risk not adequately consider risk not adequately consider risk not adequately consider risk

assessment, assessment, assessment, assessment, which is one of the essential which is one of the essential which is one of the essential which is one of the essential

components of internal control, with regard to components of internal control, with regard to components of internal control, with regard to components of internal control, with regard to

the potential for fraud when performing risk the potential for fraud when performing risk the potential for fraud when performing risk the potential for fraud when performing risk

assessmentassessmentassessmentassessment

• …the Company …the Company …the Company …the Company has not maintained adequate has not maintained adequate has not maintained adequate has not maintained adequate

and effective internal financial controls over and effective internal financial controls over and effective internal financial controls over and effective internal financial controls over

financial reportingfinancial reportingfinancial reportingfinancial reporting as on..as on..as on..as on..

• …these material weaknesses …these material weaknesses …these material weaknesses …these material weaknesses do not affect our do not affect our do not affect our do not affect our

opinion on the financial statements of the opinion on the financial statements of the opinion on the financial statements of the opinion on the financial statements of the

CompanyCompanyCompanyCompany


Resulting in Resulting in Resulting in Resulting in

modified opinion modified opinion modified opinion modified opinion

of standalone of standalone of standalone of standalone

financial financial financial financial

statementsstatementsstatementsstatements

• The Company The Company The Company The Company did not have appropriate internal did not have appropriate internal did not have appropriate internal did not have appropriate internal

controls for reconciliation of physically inventory controls for reconciliation of physically inventory controls for reconciliation of physically inventory controls for reconciliation of physically inventory

with the inventory records, which has resulted in with the inventory records, which has resulted in with the inventory records, which has resulted in with the inventory records, which has resulted in

misstatement of inventory values in the books of misstatement of inventory values in the books of misstatement of inventory values in the books of misstatement of inventory values in the books of

account.…account.…account.…account.…

• because of the effect of the material because of the effect of the material because of the effect of the material because of the effect of the material

weaknesses described above on the weaknesses described above on the weaknesses described above on the weaknesses described above on the


criteria, the Company criteria, the Company criteria, the Company criteria, the Company has not maintained has not maintained has not maintained has not maintained

adequate and effective internal financial controls adequate and effective internal financial controls adequate and effective internal financial controls adequate and effective internal financial controls

over financial reporting as of..over financial reporting as of..over financial reporting as of..over financial reporting as of..

• …these material weakness/…these material weakness/…these material weakness/…these material weakness/eseseses has affected our has affected our has affected our has affected our


of the Company and we have issued a qualified of the Company and we have issued a qualified of the Company and we have issued a qualified of the Company and we have issued a qualified

(/ adverse / disclaimer of) opinion(/ adverse / disclaimer of) opinion(/ adverse / disclaimer of) opinion(/ adverse / disclaimer of) opinion on the on the on the on the

standalone financial statements.standalone financial statements.standalone financial statements.standalone financial statements.

ICFR REPORTING ICFR REPORTING ICFR REPORTING ICFR REPORTING ---- DISCLAIMERDISCLAIMERDISCLAIMERDISCLAIMERLunawat & Co.

Due to Due to Due to Due to ----

Framework for Framework for Framework for Framework for

internal financial internal financial internal financial internal financial

control over control over control over control over

financial reporting financial reporting financial reporting financial reporting

notnotnotnot

established but established but established but established but

does not impact does not impact does not impact does not impact

the audit opinion the audit opinion the audit opinion the audit opinion

on financial on financial on financial on financial


• the Company the Company the Company the Company has not established its internal has not established its internal has not established its internal has not established its internal

financial control over financial reporting on financial control over financial reporting on financial control over financial reporting on financial control over financial reporting on

criteria based on or considering the essential criteria based on or considering the essential criteria based on or considering the essential criteria based on or considering the essential

components components components components of internal control stated in the of internal control stated in the of internal control stated in the of internal control stated in the

Guidance Note on Audit of Guidance Note on Audit of Guidance Note on Audit of Guidance Note on Audit of IFCoFRIFCoFRIFCoFRIFCoFR issued by the issued by the issued by the issued by the

ICAI. Because of this reason, ICAI. Because of this reason, ICAI. Because of this reason, ICAI. Because of this reason, we are unable to we are unable to we are unable to we are unable to

obtain sufficient appropriate audit evidence to obtain sufficient appropriate audit evidence to obtain sufficient appropriate audit evidence to obtain sufficient appropriate audit evidence to

provide a basis for our opinion provide a basis for our opinion provide a basis for our opinion provide a basis for our opinion whether the whether the whether the whether the

Company had adequate internal financial Company had adequate internal financial Company had adequate internal financial Company had adequate internal financial

controls over financial reporting and whether controls over financial reporting and whether controls over financial reporting and whether controls over financial reporting and whether

such internal financial controls were operating such internal financial controls were operating such internal financial controls were operating such internal financial controls were operating

effectively as at…effectively as at…effectively as at…effectively as at…

• …the …the …the …the disclaimer does not disclaimer does not disclaimer does not disclaimer does not affect affect affect affect our opinion on our opinion on our opinion on our opinion on

the financial statements of the Companythe financial statements of the Companythe financial statements of the Companythe financial statements of the Company


Due to Due to Due to Due to ----Auditor Auditor Auditor Auditor

unable to obtain unable to obtain unable to obtain unable to obtain

sufficient sufficient sufficient sufficient

appropriate audit appropriate audit appropriate audit appropriate audit

evidence onevidence onevidence onevidence on


controls over controls over controls over controls over


but does not but does not but does not but does not

impact auditimpact auditimpact auditimpact audit

opinion on the opinion on the opinion on the opinion on the



• The system of internal financial controls over The system of internal financial controls over The system of internal financial controls over The system of internal financial controls over

financial reporting with regard to financial reporting with regard to financial reporting with regard to financial reporting with regard to one of the one of the one of the one of the

significant branches of the Company at _____ significant branches of the Company at _____ significant branches of the Company at _____ significant branches of the Company at _____

were not made available to us were not made available to us were not made available to us were not made available to us to enable us to to enable us to to enable us to to enable us to

determine if the Company has established determine if the Company has established determine if the Company has established determine if the Company has established

adequate internal financial control over financial adequate internal financial control over financial adequate internal financial control over financial adequate internal financial control over financial

reporting at the aforesaid branch and whether reporting at the aforesaid branch and whether reporting at the aforesaid branch and whether reporting at the aforesaid branch and whether

such internal financial controls were operating such internal financial controls were operating such internal financial controls were operating such internal financial controls were operating

effectively as at…effectively as at…effectively as at…effectively as at…

• …the …the …the …the disclaimer does not disclaimer does not disclaimer does not disclaimer does not affect affect affect affect our opinion on our opinion on our opinion on our opinion on

the financial statements of the Companythe financial statements of the Companythe financial statements of the Companythe financial statements of the Company


Due to Due to Due to Due to ----Auditor Auditor Auditor Auditor

unable to obtain unable to obtain unable to obtain unable to obtain

sufficient sufficient sufficient sufficient

appropriate audit appropriate audit appropriate audit appropriate audit

evidence onevidence onevidence onevidence on


controls over controls over controls over controls over


and impacting and impacting and impacting and impacting

auditauditauditaudit

opinion on the opinion on the opinion on the opinion on the



• The system of internal financial controls over The system of internal financial controls over The system of internal financial controls over The system of internal financial controls over

financial reporting with regard to financial reporting with regard to financial reporting with regard to financial reporting with regard to the Company the Company the Company the Company

were not made available to us were not made available to us were not made available to us were not made available to us to enable us to to enable us to to enable us to to enable us to

determine if the Company has established determine if the Company has established determine if the Company has established determine if the Company has established

adequate internal financial control over financial adequate internal financial control over financial adequate internal financial control over financial adequate internal financial control over financial

reporting and whether such internal financial reporting and whether such internal financial reporting and whether such internal financial reporting and whether such internal financial

controls were operating effectively as at…controls were operating effectively as at…controls were operating effectively as at…controls were operating effectively as at…

• … the disclaimer has affected our opinion on the … the disclaimer has affected our opinion on the … the disclaimer has affected our opinion on the … the disclaimer has affected our opinion on the

financial statements of the standalone Company financial statements of the standalone Company financial statements of the standalone Company financial statements of the standalone Company

and and and and we have issued a qualified (/ adverse / we have issued a qualified (/ adverse / we have issued a qualified (/ adverse / we have issued a qualified (/ adverse /

disclaimer of) opinion ondisclaimer of) opinion ondisclaimer of) opinion ondisclaimer of) opinion on the financial the financial the financial the financial

statements.statements.statements.statements.

Lunawat & Co.

CARO 2016 CARO 2016 CARO 2016 CARO 2016 –––– APPLICABILITYAPPLICABILITYAPPLICABILITYAPPLICABILITY

�Applicable to all including Foreign Co. Applicable to all including Foreign Co. Applicable to all including Foreign Co. Applicable to all including Foreign Co.

for a/for a/for a/for a/cingcingcingcing period after 1.4.15 except:period after 1.4.15 except:period after 1.4.15 except:period after 1.4.15 except:

�Banking Co. / Insurance Co.Banking Co. / Insurance Co.Banking Co. / Insurance Co.Banking Co. / Insurance Co.

�Section 8 Co.Section 8 Co.Section 8 Co.Section 8 Co.

�OPCOPCOPCOPC

�Small Co.Small Co.Small Co.Small Co.

�Not applicable on CFSNot applicable on CFSNot applicable on CFSNot applicable on CFS

�Branch auditor also covered, if applicable Branch auditor also covered, if applicable Branch auditor also covered, if applicable Branch auditor also covered, if applicable

to co.to co.to co.to co.

Lunawat & Co.


�P. Co P. Co P. Co P. Co not being sub. or holding of not being sub. or holding of not being sub. or holding of not being sub. or holding of

Pub. CoPub. CoPub. CoPub. Co. whose:. whose:. whose:. whose:

�Paid up Capital & Reserves < Paid up Capital & Reserves < Paid up Capital & Reserves < Paid up Capital & Reserves < 1 Cr 1 Cr 1 Cr 1 Cr as as as as

at B/s date; andat B/s date; andat B/s date; andat B/s date; and

�Bonus, Pref. shares to be included Bonus, Pref. shares to be included Bonus, Pref. shares to be included Bonus, Pref. shares to be included

�Share Application money !!Share Application money !!Share Application money !!Share Application money !!

�All reserves to be included including All reserves to be included including All reserves to be included including All reserves to be included including

revaluation reserverevaluation reserverevaluation reserverevaluation reserve

Lunawat & Co.

CARO 2016 CARO 2016 CARO 2016 CARO 2016 –––– APPLICABILITYAPPLICABILITYAPPLICABILITYAPPLICABILITY� P. Co P. Co P. Co P. Co not being sub. or holding of Pub. Conot being sub. or holding of Pub. Conot being sub. or holding of Pub. Conot being sub. or holding of Pub. Co. whose:. whose:. whose:. whose:

�Outstanding Loans Outstanding Loans Outstanding Loans Outstanding Loans ---- Bank or FIs < Bank or FIs < Bank or FIs < Bank or FIs < 1 Cr during 1 Cr during 1 Cr during 1 Cr during

FYFYFYFY; and; and; and; and

�All borrowings included All borrowings included All borrowings included All borrowings included –––– non fund based non fund based non fund based non fund based –––– to to to to

extent devolved, invoked guarantees & devolved extent devolved, invoked guarantees & devolved extent devolved, invoked guarantees & devolved extent devolved, invoked guarantees & devolved

LCsLCsLCsLCs

�TL TL TL TL –––– interest accrued & due only to be considered interest accrued & due only to be considered interest accrued & due only to be considered interest accrued & due only to be considered

�CC CC CC CC –––– balance on any day as per booksbalance on any day as per booksbalance on any day as per booksbalance on any day as per books

�OD against FD included OD against FD included OD against FD included OD against FD included

�Outstanding due of Credit card also includedOutstanding due of Credit card also includedOutstanding due of Credit card also includedOutstanding due of Credit card also included

�Foreign banks Foreign banks Foreign banks Foreign banks covered covered covered covered ---- FIs include NBFCFIs include NBFCFIs include NBFCFIs include NBFC

Lunawat & Co.


�Pvt.Pvt.Pvt.Pvt. Co Co Co Co not being sub. or holding of Pub. Conot being sub. or holding of Pub. Conot being sub. or holding of Pub. Conot being sub. or holding of Pub. Co. . . .

whose:whose:whose:whose:

�Total Revenue (including from discontinuing Total Revenue (including from discontinuing Total Revenue (including from discontinuing Total Revenue (including from discontinuing

operations < 10 crores as per Financial operations < 10 crores as per Financial operations < 10 crores as per Financial operations < 10 crores as per Financial

Statements as per Statements as per Statements as per Statements as per SchSchSchSch IIIIIIIIIIII

�Other income includedOther income includedOther income includedOther income included

Lunawat & Co.

CARO 2016 CARO 2016 CARO 2016 CARO 2016 ---- CLAUSESCLAUSESCLAUSESCLAUSES�1(a) 1(a) 1(a) 1(a) ---- PPPProper roper roper roper records records records records ---- full particulars, full particulars, full particulars, full particulars,

quantitative details and situation of quantitative details and situation of quantitative details and situation of quantitative details and situation of FA.FA.FA.FA.

� FAR in electronic form if FAR in electronic form if FAR in electronic form if FAR in electronic form if 2 2 2 2 conditions conditions conditions conditions satisfiedsatisfiedsatisfiedsatisfied::::

�CCCControls ontrols ontrols ontrols &&&& security measures in security measures in security measures in security measures in Co. are Co. are Co. are Co. are such that once such that once such that once such that once

finalised, finalised, finalised, finalised, FAR FAR FAR FAR cannot be altered without proper cannot be altered without proper cannot be altered without proper cannot be altered without proper

authorization authorization authorization authorization & & & & audit trail.audit trail.audit trail.audit trail.

�FAR can FAR can FAR can FAR can be retrieved in a legible formbe retrieved in a legible formbe retrieved in a legible formbe retrieved in a legible form....

� In case In case In case In case above conditions not satisfiedabove conditions not satisfiedabove conditions not satisfiedabove conditions not satisfied, , , , to obtain to obtain to obtain to obtain a a a a

duly authenticated printduly authenticated printduly authenticated printduly authenticated print----out of out of out of out of FAR. FAR. FAR. FAR. In case In case In case In case auditor auditor auditor auditor

decides to rely on decides to rely on decides to rely on decides to rely on electronically FAR electronically FAR electronically FAR electronically FAR ---- to maintain to maintain to maintain to maintain

adequate documentation adequate documentation adequate documentation adequate documentation evidencing evaluation evidencing evaluation evidencing evaluation evidencing evaluation of of of of

controls that seek to ensure controls that seek to ensure controls that seek to ensure controls that seek to ensure completenesscompletenesscompletenesscompleteness, accuracy , accuracy , accuracy , accuracy

& security & security & security & security of of of of registerregisterregisterregister.

Lunawat & Co.

CARO 2016 CARO 2016 CARO 2016 CARO 2016 ---- CLAUSESCLAUSESCLAUSESCLAUSES�1(b) 1(b) 1(b) 1(b) –––– Physical verification Physical verification Physical verification Physical verification –––– material material material material

discrepancydiscrepancydiscrepancydiscrepancy

�1(c1(c1(c1(c) ) ) ) ---- Whether Whether Whether Whether title deeds of immovable title deeds of immovable title deeds of immovable title deeds of immovable

properties properties properties properties are held in the name of the are held in the name of the are held in the name of the are held in the name of the

company. If not, provide details thereof company. If not, provide details thereof company. If not, provide details thereof company. If not, provide details thereof

� TDR / TDR / TDR / TDR / PltPltPltPlt & Mach imbedded in land not & Mach imbedded in land not & Mach imbedded in land not & Mach imbedded in land not immimmimmimm. Prop.. Prop.. Prop.. Prop.

� In case of conversionIn case of conversionIn case of conversionIn case of conversion

� In case of mortgage In case of mortgage In case of mortgage In case of mortgage –––– banksbanksbanksbanks

�Online if availableOnline if availableOnline if availableOnline if available

�Details Details Details Details –––– no. of cases, leasehold/freehold, gross/net no. of cases, leasehold/freehold, gross/net no. of cases, leasehold/freehold, gross/net no. of cases, leasehold/freehold, gross/net

block, remarksblock, remarksblock, remarksblock, remarks

Lunawat & Co.

CARO 2016 CARO 2016 CARO 2016 CARO 2016 ---- CLAUSESCLAUSESCLAUSESCLAUSES�2(a2(a2(a2(a)(b)(c) merged into 2 )(b)(c) merged into 2 )(b)(c) merged into 2 )(b)(c) merged into 2 ---- Whether physical Whether physical Whether physical Whether physical

verification of inventory has been verification of inventory has been verification of inventory has been verification of inventory has been

conducted at reasonable intervals by the conducted at reasonable intervals by the conducted at reasonable intervals by the conducted at reasonable intervals by the

management management management management & & & & whether any material whether any material whether any material whether any material

discrepancies were noticed and if so, how discrepancies were noticed and if so, how discrepancies were noticed and if so, how discrepancies were noticed and if so, how

they have been dealt with in they have been dealt with in they have been dealt with in they have been dealt with in books books books books of of of of a/ca/ca/ca/c

�3 3 3 3 ---- Whether company has granted any Whether company has granted any Whether company has granted any Whether company has granted any

loans, secured or unsecured to cos, firms, loans, secured or unsecured to cos, firms, loans, secured or unsecured to cos, firms, loans, secured or unsecured to cos, firms,

LLPLLPLLPLLP or other parties covered is registered or other parties covered is registered or other parties covered is registered or other parties covered is registered

maintained u/s 189maintained u/s 189maintained u/s 189maintained u/s 189....[MBP[MBP[MBP[MBP----4] 4] 4] 4] –––– 184(2)/188184(2)/188184(2)/188184(2)/188

Lunawat & Co.

CARO 2016 CARO 2016 CARO 2016 CARO 2016 ---- CLAUSESCLAUSESCLAUSESCLAUSES�3 3 3 3 –––– MBP 4 MBP 4 MBP 4 MBP 4 ---- If If If If so, so, so, so,

� (a) (a) (a) (a) Whether Whether Whether Whether terms terms terms terms & conditions of grant of such & conditions of grant of such & conditions of grant of such & conditions of grant of such

loans are not prejudicial to loans are not prejudicial to loans are not prejudicial to loans are not prejudicial to company’s interestcompany’s interestcompany’s interestcompany’s interest; ; ; ;

�CY only, terms s. 186(7), ability to lend, borrower standingCY only, terms s. 186(7), ability to lend, borrower standingCY only, terms s. 186(7), ability to lend, borrower standingCY only, terms s. 186(7), ability to lend, borrower standing

� (b) (b) (b) (b) Whether the schedule of repayment of principal & Whether the schedule of repayment of principal & Whether the schedule of repayment of principal & Whether the schedule of repayment of principal &

interest is stipulated interest is stipulated interest is stipulated interest is stipulated & whether repayments & & whether repayments & & whether repayments & & whether repayments &

interest are regular. interest are regular. interest are regular. interest are regular.

�Opening + CY, squared up loans covered Opening + CY, squared up loans covered Opening + CY, squared up loans covered Opening + CY, squared up loans covered –––– no. of cases no. of cases no. of cases no. of cases

� (c) If overdue amount (c) If overdue amount (c) If overdue amount (c) If overdue amount for more than 90 daysfor more than 90 daysfor more than 90 daysfor more than 90 days, whether , whether , whether , whether

reasonable steps taken by Co. for recovery of the reasonable steps taken by Co. for recovery of the reasonable steps taken by Co. for recovery of the reasonable steps taken by Co. for recovery of the

principal & interest principal & interest principal & interest principal & interest

�Opening Opening Opening Opening + + + + CY CY CY CY –––– no. of cases, principal no. of cases, principal no. of cases, principal no. of cases, principal amtamtamtamt overdue, overdue, overdue, overdue, inttinttinttintt

overdue, steps takenoverdue, steps takenoverdue, steps takenoverdue, steps taken

Lunawat & Co.

CARO 2016 CARO 2016 CARO 2016 CARO 2016 ---- CLAUSESCLAUSESCLAUSESCLAUSES�4 4 4 4 –––– Internal control on purchase Internal control on purchase Internal control on purchase Internal control on purchase etcetcetcetc not not not not

requiredrequiredrequiredrequired

�4 4 4 4 ---- In respect of loans, investments and In respect of loans, investments and In respect of loans, investments and In respect of loans, investments and

guarantees, whether provisions of Section guarantees, whether provisions of Section guarantees, whether provisions of Section guarantees, whether provisions of Section

185 and 186 185 and 186 185 and 186 185 and 186 have have have have been complied with. If been complied with. If been complied with. If been complied with. If

not, provide details thereofnot, provide details thereofnot, provide details thereofnot, provide details thereof.

� 185 Details 185 Details 185 Details 185 Details –––– maximum amount and closing Bal.maximum amount and closing Bal.maximum amount and closing Bal.maximum amount and closing Bal.

� 186 186 186 186 –––– more than 2 layers, exceeding limits, rate of more than 2 layers, exceeding limits, rate of more than 2 layers, exceeding limits, rate of more than 2 layers, exceeding limits, rate of

interest, other defaultsinterest, other defaultsinterest, other defaultsinterest, other defaults

5 5 5 5 –––– Deposits Deposits Deposits Deposits –––– no no no no change 73change 73change 73change 73----76767676

Lunawat & Co.

CARO 2016 CARO 2016 CARO 2016 CARO 2016 ---- CLAUSESCLAUSESCLAUSESCLAUSES�6 6 6 6 –––– Cost Records Cost Records Cost Records Cost Records –––– no no no no changechangechangechange

�7 7 7 7 –––– Statutory Dues Statutory Dues Statutory Dues Statutory Dues –––– Wealth tax Wealth tax Wealth tax Wealth tax (c) (c) (c) (c) IEPFIEPFIEPFIEPF

� Statutory Statutory Statutory Statutory due due due due arises arises arises arises out of a statuteout of a statuteout of a statuteout of a statute, rather , rather , rather , rather than than than than on on on on

an independent contractual or legal relationshipan independent contractual or legal relationshipan independent contractual or legal relationshipan independent contractual or legal relationship

� Advance tax, TDS, Custom duty… if Advance tax, TDS, Custom duty… if Advance tax, TDS, Custom duty… if Advance tax, TDS, Custom duty… if inttinttinttintt –––– irregular. irregular. irregular. irregular.

� Instalments granted by authority, penalty/Instalments granted by authority, penalty/Instalments granted by authority, penalty/Instalments granted by authority, penalty/inttinttinttintt coveredcoveredcoveredcovered

� Irregularity vs. due more than 6 monthsIrregularity vs. due more than 6 monthsIrregularity vs. due more than 6 monthsIrregularity vs. due more than 6 months

�Mere show cause Mere show cause Mere show cause Mere show cause –––– not disputed, S. 154 not disputed, S. 154 not disputed, S. 154 not disputed, S. 154 –––– disputeddisputeddisputeddisputed

� If no appeal filed If no appeal filed If no appeal filed If no appeal filed –––– undisputed duesundisputed duesundisputed duesundisputed dues

�Disclose disputed amounts even if provision made or Disclose disputed amounts even if provision made or Disclose disputed amounts even if provision made or Disclose disputed amounts even if provision made or

amount deposited under protestamount deposited under protestamount deposited under protestamount deposited under protest

Lunawat & Co.

CARO 2016 CARO 2016 CARO 2016 CARO 2016 ---- CLAUSESCLAUSESCLAUSESCLAUSES�8 8 8 8 –––– AccumAccumAccumAccum. /cash losses. /cash losses. /cash losses. /cash losses–––– not requirednot requirednot requirednot required

�8 8 8 8 –––– Earlier 9 Earlier 9 Earlier 9 Earlier 9 –––– Default to Bank, FIs, Default to Bank, FIs, Default to Bank, FIs, Default to Bank, FIs, Govt.Govt.Govt.Govt. & & & &

debenture holders debenture holders debenture holders debenture holders ---- (in case of (in case of (in case of (in case of banks, banks, banks, banks, Govt. Govt. Govt. Govt.

and and and and FIs, FIs, FIs, FIs, lender wise details to be provided). lender wise details to be provided). lender wise details to be provided). lender wise details to be provided).

�Default Default Default Default –––– non payment of dues, FIs include NBFCsnon payment of dues, FIs include NBFCsnon payment of dues, FIs include NBFCsnon payment of dues, FIs include NBFCs

� Period of default and amount lender wisePeriod of default and amount lender wisePeriod of default and amount lender wisePeriod of default and amount lender wise

� All defaults existing on B/S date All defaults existing on B/S date All defaults existing on B/S date All defaults existing on B/S date –––– even earlier yearseven earlier yearseven earlier yearseven earlier years

�Debentures Debentures Debentures Debentures –––– lenderlenderlenderlender----wise detail not requiredwise detail not requiredwise detail not requiredwise detail not required

�Govt. does not include Govt. does not include Govt. does not include Govt. does not include –––– Foreign govt., Govt. Co, PSU, Foreign govt., Govt. Co, PSU, Foreign govt., Govt. Co, PSU, Foreign govt., Govt. Co, PSU,

Boards, Boards, Boards, Boards, CCCCorporationsorporationsorporationsorporations

Lunawat & Co.

CARO 2016 CARO 2016 CARO 2016 CARO 2016 ---- CLAUSESCLAUSESCLAUSESCLAUSES� 9 9 9 9 –––– NewNewNewNew ---- Whether moneys raised by way of Whether moneys raised by way of Whether moneys raised by way of Whether moneys raised by way of IPO IPO IPO IPO

/ FPO (including / FPO (including / FPO (including / FPO (including debt instruments) &debt instruments) &debt instruments) &debt instruments) & term loans term loans term loans term loans

were applied for were applied for were applied for were applied for purposes purposes purposes purposes for which those are for which those are for which those are for which those are

raised. If not, raised. If not, raised. If not, raised. If not, details details details details together with delays / together with delays / together with delays / together with delays /

default default default default & & & & subsequent subsequent subsequent subsequent rectification.rectification.rectification.rectification.

�Default Default Default Default ---- amount involved amount involved amount involved amount involved , nature , nature , nature , nature of of of of default, delay default, delay default, delay default, delay in in in in

utilizationutilizationutilizationutilization

� Co. to disclose end Co. to disclose end Co. to disclose end Co. to disclose end use of use of use of use of IPO/FPO in notes & auditor IPO/FPO in notes & auditor IPO/FPO in notes & auditor IPO/FPO in notes & auditor

to to to to verify verify verify verify –––– see see see see SEBI (Listing SEBI (Listing SEBI (Listing SEBI (Listing Obl. & Dis. Req.) Reg.Obl. & Dis. Req.) Reg.Obl. & Dis. Req.) Reg.Obl. & Dis. Req.) Reg.

� Temporary investment (FDR) to be reportedTemporary investment (FDR) to be reportedTemporary investment (FDR) to be reportedTemporary investment (FDR) to be reported

� Term Loans from Private PartiesTerm Loans from Private PartiesTerm Loans from Private PartiesTerm Loans from Private Parties

� If against property, FDR, If against property, FDR, If against property, FDR, If against property, FDR, etcetcetcetc –––– no specific purposeno specific purposeno specific purposeno specific purpose

Lunawat & Co.

CARO 2016 CARO 2016 CARO 2016 CARO 2016 –––– CHANGESCHANGESCHANGESCHANGES�10 10 10 10 ---- Whether any fraud by Co. or any fraud Whether any fraud by Co. or any fraud Whether any fraud by Co. or any fraud Whether any fraud by Co. or any fraud

on Co. by its on Co. by its on Co. by its on Co. by its officers/ employees officers/ employees officers/ employees officers/ employees has been has been has been has been

noticed or reported during the year; If yes, noticed or reported during the year; If yes, noticed or reported during the year; If yes, noticed or reported during the year; If yes,

nature and amount involved be indicatednature and amount involved be indicatednature and amount involved be indicatednature and amount involved be indicated

�Only to report ‘noticed or reported’ frauds. Only to report ‘noticed or reported’ frauds. Only to report ‘noticed or reported’ frauds. Only to report ‘noticed or reported’ frauds. 143(12143(12143(12143(12) ) ) )

frauds to frauds to frauds to frauds to CG/AC. Reported frauds u/s 143(12) to be CG/AC. Reported frauds u/s 143(12) to be CG/AC. Reported frauds u/s 143(12) to be CG/AC. Reported frauds u/s 143(12) to be

reported not suspected fraudsreported not suspected fraudsreported not suspected fraudsreported not suspected frauds

�Management fraud vs. Employee fraud Management fraud vs. Employee fraud Management fraud vs. Employee fraud Management fraud vs. Employee fraud

� Fraudulent Fraudulent Fraudulent Fraudulent Financial Reporting Financial Reporting Financial Reporting Financial Reporting vs. Misappropriation vs. Misappropriation vs. Misappropriation vs. Misappropriation

of assetsof assetsof assetsof assets

Lunawat & Co.

CARO 2016 CARO 2016 CARO 2016 CARO 2016 ---- CLAUSESCLAUSESCLAUSESCLAUSES� 11 11 11 11 –––– NewNewNewNew ---- Whether Whether Whether Whether managerial remuneration managerial remuneration managerial remuneration managerial remuneration

has been paid / provided in accordance with the has been paid / provided in accordance with the has been paid / provided in accordance with the has been paid / provided in accordance with the

requisite approvals mandated by the provisions requisite approvals mandated by the provisions requisite approvals mandated by the provisions requisite approvals mandated by the provisions

of of of of s. s. s. s. 197 197 197 197 r.w.r.w.r.w.r.w. schedule schedule schedule schedule V? V? V? V? If not, state the If not, state the If not, state the If not, state the

amount involved amount involved amount involved amount involved & & & & steps taken steps taken steps taken steps taken for for for for securing securing securing securing

refund of the same. refund of the same. refund of the same. refund of the same.

�Only Public CosOnly Public CosOnly Public CosOnly Public Cos

� Exclusion Exclusion Exclusion Exclusion –––– sitting sitting sitting sitting fee, fee, fee, fee, for professional servicesfor professional servicesfor professional servicesfor professional services

� Entitled persons, limits, procedure and approvalEntitled persons, limits, procedure and approvalEntitled persons, limits, procedure and approvalEntitled persons, limits, procedure and approval

�Reporting Reporting Reporting Reporting –––– payment to MD, WTD, MD, Manager, payment to MD, WTD, MD, Manager, payment to MD, WTD, MD, Manager, payment to MD, WTD, MD, Manager,

Excess amount Excess amount Excess amount Excess amount paid/ provided, Due for recovery &paid/ provided, Due for recovery &paid/ provided, Due for recovery &paid/ provided, Due for recovery &

steps takensteps takensteps takensteps taken

Lunawat & Co.

CARO 2016 CARO 2016 CARO 2016 CARO 2016 ---- CLAUSESCLAUSESCLAUSESCLAUSES�12 12 12 12 –––– NidhiNidhiNidhiNidhi Co.. Co.. Co.. Co..

�13 13 13 13 –––– NewNewNewNew ---- Whether Whether Whether Whether all transactions with all transactions with all transactions with all transactions with

related parties are in compliance with S. related parties are in compliance with S. related parties are in compliance with S. related parties are in compliance with S.

177 177 177 177 and and and and 188 and 188 and 188 and 188 and details have been details have been details have been details have been

disclosed in FS disclosed in FS disclosed in FS disclosed in FS etcetcetcetc as required by as required by as required by as required by

applicable AS. applicable AS. applicable AS. applicable AS.

� To see s. 177 & 188 and AS 18To see s. 177 & 188 and AS 18To see s. 177 & 188 and AS 18To see s. 177 & 188 and AS 18

� S. 188 applicable to all companies other than on S. 188 applicable to all companies other than on S. 188 applicable to all companies other than on S. 188 applicable to all companies other than on

arm’s length transactions entered into in ordinary arm’s length transactions entered into in ordinary arm’s length transactions entered into in ordinary arm’s length transactions entered into in ordinary

course of businesscourse of businesscourse of businesscourse of business

�May test May test May test May test on TP mechanism per on TP mechanism per on TP mechanism per on TP mechanism per IT ActIT ActIT ActIT Act

Lunawat & Co.

CARO 2016 CARO 2016 CARO 2016 CARO 2016 ---- CLAUSESCLAUSESCLAUSESCLAUSES�13 13 13 13 –––– SA 550 Related Parties SA 550 Related Parties SA 550 Related Parties SA 550 Related Parties ---- transactions transactions transactions transactions

not in normal course of not in normal course of not in normal course of not in normal course of business (business (business (business (EgEgEgEg):):):):� Complex equity transactions, such as corporate Complex equity transactions, such as corporate Complex equity transactions, such as corporate Complex equity transactions, such as corporate

restructurings or acquisitionsrestructurings or acquisitionsrestructurings or acquisitionsrestructurings or acquisitions

� Transactions with offshore entities in jurisdictions with Transactions with offshore entities in jurisdictions with Transactions with offshore entities in jurisdictions with Transactions with offshore entities in jurisdictions with

weak corporate lawsweak corporate lawsweak corporate lawsweak corporate laws

� LLLLeasing easing easing easing of premises or of premises or of premises or of premises or rendering rendering rendering rendering of management services of management services of management services of management services

by by by by entity entity entity entity to another party if no consideration is exchangedto another party if no consideration is exchangedto another party if no consideration is exchangedto another party if no consideration is exchanged

� Sales transactions with unusually large discounts or returnsSales transactions with unusually large discounts or returnsSales transactions with unusually large discounts or returnsSales transactions with unusually large discounts or returns

� Transactions with circular arrangements, for example, sales Transactions with circular arrangements, for example, sales Transactions with circular arrangements, for example, sales Transactions with circular arrangements, for example, sales

with a commitment to repurchasewith a commitment to repurchasewith a commitment to repurchasewith a commitment to repurchase

� Transactions under contracts whose terms are changed Transactions under contracts whose terms are changed Transactions under contracts whose terms are changed Transactions under contracts whose terms are changed

before expirybefore expirybefore expirybefore expiry.

Lunawat & Co.

CARO 2016 CARO 2016 CARO 2016 CARO 2016 ---- CLAUSESCLAUSESCLAUSESCLAUSES�14 14 14 14 ––––NewNewNewNew ---- Whether Co. has made Whether Co. has made Whether Co. has made Whether Co. has made

preferential allotment / PP of shares or preferential allotment / PP of shares or preferential allotment / PP of shares or preferential allotment / PP of shares or

fully or partly fully or partly fully or partly fully or partly convertible convertible convertible convertible deb. during deb. during deb. during deb. during yryryryr. . . .

Whether Whether Whether Whether SSSS. 42 complied & . 42 complied & . 42 complied & . 42 complied & amount amount amount amount raised raised raised raised

used for purposes for which funds were used for purposes for which funds were used for purposes for which funds were used for purposes for which funds were

raised. raised. raised. raised.

� If not, details of amount involved and If not, details of amount involved and If not, details of amount involved and If not, details of amount involved and

nature of nonnature of nonnature of nonnature of non----compliance.compliance.compliance.compliance.

Lunawat & Co.

CARO 2016 CARO 2016 CARO 2016 CARO 2016 ---- CLAUSESCLAUSESCLAUSESCLAUSES

�15 15 15 15 –––– NewNewNewNew ---- Whether Whether Whether Whether the company has the company has the company has the company has

entered into any nonentered into any nonentered into any nonentered into any non----cash transactions with cash transactions with cash transactions with cash transactions with

directors or persons connected with him directors or persons connected with him directors or persons connected with him directors or persons connected with him

and if so, whether provisions of and if so, whether provisions of and if so, whether provisions of and if so, whether provisions of S. 192 S. 192 S. 192 S. 192

complied complied complied complied withwithwithwith

� Persons connected Persons connected Persons connected Persons connected ---- 185(1) 185(1) 185(1) 185(1) ExplExplExplExpl. . . . –––– check MBP 1check MBP 1check MBP 1check MBP 1

� Loan, guarantee, Loan, guarantee, Loan, guarantee, Loan, guarantee, etcetcetcetc –––– MBP 2; Contracts MBP 2; Contracts MBP 2; Contracts MBP 2; Contracts –––– MBP 4MBP 4MBP 4MBP 4

� FAR, BOD Meetings, EGM, AGMFAR, BOD Meetings, EGM, AGMFAR, BOD Meetings, EGM, AGMFAR, BOD Meetings, EGM, AGM

�Merger under court schemes Merger under court schemes Merger under court schemes Merger under court schemes –––– Not nonNot nonNot nonNot non----cashcashcashcash

� Acquisition of asset in one year, settlement of liability Acquisition of asset in one year, settlement of liability Acquisition of asset in one year, settlement of liability Acquisition of asset in one year, settlement of liability

in another year in another year in another year in another year –––– Not nonNot nonNot nonNot non----cashcashcashcash

Lunawat & Co.

CARO 2016 CARO 2016 CARO 2016 CARO 2016 ---- CLAUSESCLAUSESCLAUSESCLAUSES

�16 16 16 16 –––– NewNewNewNew ---- Whether Co is required to be Whether Co is required to be Whether Co is required to be Whether Co is required to be

registered u/s 45registered u/s 45registered u/s 45registered u/s 45----IA of RBI and if so IA of RBI and if so IA of RBI and if so IA of RBI and if so

whether the registration has been obtained whether the registration has been obtained whether the registration has been obtained whether the registration has been obtained

� Understanding business, if principal business is Understanding business, if principal business is Understanding business, if principal business is Understanding business, if principal business is

Financing activityFinancing activityFinancing activityFinancing activity

� 50505050----50 Test 50 Test 50 Test 50 Test ---- Financial Assets > 50% of total assets Financial Assets > 50% of total assets Financial Assets > 50% of total assets Financial Assets > 50% of total assets

and income from Financial assets > 50% of Gross and income from Financial assets > 50% of Gross and income from Financial assets > 50% of Gross and income from Financial assets > 50% of Gross

IncomeIncomeIncomeIncome

� If required and registration not obtained reasons to If required and registration not obtained reasons to If required and registration not obtained reasons to If required and registration not obtained reasons to

be statedbe statedbe statedbe stated

Lunawat & Co.

CARO 2016 CARO 2016 CARO 2016 CARO 2016 –––– FINER POINTSFINER POINTSFINER POINTSFINER POINTS

�Comply SAsComply SAsComply SAsComply SAs–––– DDDDocumentation, Materialityocumentation, Materialityocumentation, Materialityocumentation, Materiality

�Assess Assess Assess Assess the the the the effect effect effect effect of failure to complyof failure to complyof failure to complyof failure to comply

� It’s not It’s not It’s not It’s not a separate audit engagementa separate audit engagementa separate audit engagementa separate audit engagement

�Have Check Have Check Have Check Have Check lists lists lists lists

�Need to document basis of reaching at Need to document basis of reaching at Need to document basis of reaching at Need to document basis of reaching at

adverse opinionadverse opinionadverse opinionadverse opinion

�Management RepresentationManagement RepresentationManagement RepresentationManagement Representation

�Cross check with Board ReportCross check with Board ReportCross check with Board ReportCross check with Board Report

Lunawat & Co.

Lunawat & Co.

EQUALIZATION LEVYEQUALIZATION LEVYEQUALIZATION LEVYEQUALIZATION LEVY

• New levy under Chapter VIII of Finance Act New levy under Chapter VIII of Finance Act New levy under Chapter VIII of Finance Act New levy under Chapter VIII of Finance Act w.e.fw.e.fw.e.fw.e.f. . . .

1111stststst June 2016June 2016June 2016June 2016

• Applicable to whole of India except J&KApplicable to whole of India except J&KApplicable to whole of India except J&KApplicable to whole of India except J&K

• Applicable on consideration received or Applicable on consideration received or Applicable on consideration received or Applicable on consideration received or

receivable for specified services providedreceivable for specified services providedreceivable for specified services providedreceivable for specified services provided

• Specified service means: Specified service means: Specified service means: Specified service means:

• online advertisement, online advertisement, online advertisement, online advertisement,

• any provision for digital advertising space or any provision for digital advertising space or any provision for digital advertising space or any provision for digital advertising space or

• any other facility or service for the purpose of any other facility or service for the purpose of any other facility or service for the purpose of any other facility or service for the purpose of

online advertisement online advertisement online advertisement online advertisement

• any other service as may be notifiedany other service as may be notifiedany other service as may be notifiedany other service as may be notified

Lunawat & Co.

EQUALIZATION LEVYEQUALIZATION LEVYEQUALIZATION LEVYEQUALIZATION LEVY

• Levy @ 6% to be deducted by a:Levy @ 6% to be deducted by a:Levy @ 6% to be deducted by a:Levy @ 6% to be deducted by a:

• Person resident in India & carrying on Person resident in India & carrying on Person resident in India & carrying on Person resident in India & carrying on

business or profession; orbusiness or profession; orbusiness or profession; orbusiness or profession; or

• NonNonNonNon----resident having a PE in Indiaresident having a PE in Indiaresident having a PE in Indiaresident having a PE in India

• Not applicable when:Not applicable when:Not applicable when:Not applicable when:

• NonNonNonNon----resident service provider has PE in India resident service provider has PE in India resident service provider has PE in India resident service provider has PE in India

& income is connected to such PE& income is connected to such PE& income is connected to such PE& income is connected to such PE

• Where payment is not for carrying out Where payment is not for carrying out Where payment is not for carrying out Where payment is not for carrying out

business or professionbusiness or professionbusiness or professionbusiness or profession

• Aggregate amount of consideration does not Aggregate amount of consideration does not Aggregate amount of consideration does not Aggregate amount of consideration does not

exceed exceed exceed exceed RsRsRsRs. 1 Lac in any PY. 1 Lac in any PY. 1 Lac in any PY. 1 Lac in any PY

Lunawat & Co.

EQUALIZATION LEVYEQUALIZATION LEVYEQUALIZATION LEVYEQUALIZATION LEVY• Non deduction Non deduction Non deduction Non deduction –––– Expenditure not allowable Expenditure not allowable Expenditure not allowable Expenditure not allowable

u/s 40(a)(u/s 40(a)(u/s 40(a)(u/s 40(a)(ibibibib))))

• To be deposited by 7th of next month To be deposited by 7th of next month To be deposited by 7th of next month To be deposited by 7th of next month

• Amounts to be rounded off to nearest Amounts to be rounded off to nearest Amounts to be rounded off to nearest Amounts to be rounded off to nearest RsRsRsRs. . . .

10/10/10/10/----

• Late payment interest @ 1% p.m. Late payment interest @ 1% p.m. Late payment interest @ 1% p.m. Late payment interest @ 1% p.m.

• Penalty for non deduction Penalty for non deduction Penalty for non deduction Penalty for non deduction –––– 100% of the 100% of the 100% of the 100% of the

amount to be deducted apart from tax & amount to be deducted apart from tax & amount to be deducted apart from tax & amount to be deducted apart from tax & InttInttInttIntt....

• Penalty for late deposit Penalty for late deposit Penalty for late deposit Penalty for late deposit –––– RsRsRsRs. 1000/. 1000/. 1000/. 1000/---- per day per day per day per day

subject to maximum of tax to be depositedsubject to maximum of tax to be depositedsubject to maximum of tax to be depositedsubject to maximum of tax to be deposited

Lunawat & Co.

EQUALIZATION LEVYEQUALIZATION LEVYEQUALIZATION LEVYEQUALIZATION LEVY• Annual statement of Specified services to Annual statement of Specified services to Annual statement of Specified services to Annual statement of Specified services to

be filed by 30th June every year using DSC be filed by 30th June every year using DSC be filed by 30th June every year using DSC be filed by 30th June every year using DSC

or EVCor EVCor EVCor EVC

• Belated / Revised statement can be filed Belated / Revised statement can be filed Belated / Revised statement can be filed Belated / Revised statement can be filed

at any time before the expiry of two years at any time before the expiry of two years at any time before the expiry of two years at any time before the expiry of two years

from the end of the FY in which the from the end of the FY in which the from the end of the FY in which the from the end of the FY in which the

specified service was provided.specified service was provided.specified service was provided.specified service was provided.

• In case statement not filed, then on notice In case statement not filed, then on notice In case statement not filed, then on notice In case statement not filed, then on notice

to be filed within 30 daysto be filed within 30 daysto be filed within 30 daysto be filed within 30 days

Lunawat & Co.

EQUALIZATION LEVYEQUALIZATION LEVYEQUALIZATION LEVYEQUALIZATION LEVY• Penalty Penalty Penalty Penalty ---- not filing in time or not filing on notice not filing in time or not filing on notice not filing in time or not filing on notice not filing in time or not filing on notice

–––– RsRsRsRs. 100/. 100/. 100/. 100/---- p.dp.dp.dp.d. unless reasonable cause proved. unless reasonable cause proved. unless reasonable cause proved. unless reasonable cause proved

• Imprisonment Imprisonment Imprisonment Imprisonment uptouptouptoupto 3 3 3 3 yrsyrsyrsyrs & fine if false & fine if false & fine if false & fine if false

statementstatementstatementstatement

• Statement to be processed within 1 Statement to be processed within 1 Statement to be processed within 1 Statement to be processed within 1 yryryryr from end from end from end from end

of the FY in which statement furnished. of the FY in which statement furnished. of the FY in which statement furnished. of the FY in which statement furnished.

• Rectification can be done within 1 Rectification can be done within 1 Rectification can be done within 1 Rectification can be done within 1 yryryryr from end from end from end from end

of the FY in which statement furnishedof the FY in which statement furnishedof the FY in which statement furnishedof the FY in which statement furnished

• Notice of demand to be in Form 2Notice of demand to be in Form 2Notice of demand to be in Form 2Notice of demand to be in Form 2

• Appeal to CIT(A) in Form 3 to be filed Appeal to CIT(A) in Form 3 to be filed Appeal to CIT(A) in Form 3 to be filed Appeal to CIT(A) in Form 3 to be filed

electronicallyelectronicallyelectronicallyelectronically

• Appeal to ITAT in Form 4Appeal to ITAT in Form 4Appeal to ITAT in Form 4Appeal to ITAT in Form 4

DIRECT TAX DISPUTE DIRECT TAX DISPUTE DIRECT TAX DISPUTE DIRECT TAX DISPUTE

RESOLUTION SCHEME RESOLUTION SCHEME RESOLUTION SCHEME RESOLUTION SCHEME

2016201620162016

DIRECT TAX DISPUTE DIRECT TAX DISPUTE DIRECT TAX DISPUTE DIRECT TAX DISPUTE

RESOLUTION SCHEME RESOLUTION SCHEME RESOLUTION SCHEME RESOLUTION SCHEME

2016201620162016

Lunawat & Co.

DT DISPUTE RESOLUTION SCHEMEDT DISPUTE RESOLUTION SCHEMEDT DISPUTE RESOLUTION SCHEMEDT DISPUTE RESOLUTION SCHEME

• Chapter X of Finance Act 2016Chapter X of Finance Act 2016Chapter X of Finance Act 2016Chapter X of Finance Act 2016

• Starts from 1Starts from 1Starts from 1Starts from 1stststst June 2016June 2016June 2016June 2016

• Ends on 31Ends on 31Ends on 31Ends on 31stststst December 2016December 2016December 2016December 2016

• Scheme is forScheme is forScheme is forScheme is for

• Tax ArrearsTax ArrearsTax ArrearsTax Arrears

• Specified TaxSpecified TaxSpecified TaxSpecified Tax

• Declaration to be made in Form 1Declaration to be made in Form 1Declaration to be made in Form 1Declaration to be made in Form 1

• Undertaking in FormUndertaking in FormUndertaking in FormUndertaking in Form----2 in case of specified tax 2 in case of specified tax 2 in case of specified tax 2 in case of specified tax

• To be signed by the person referred in s. 140To be signed by the person referred in s. 140To be signed by the person referred in s. 140To be signed by the person referred in s. 140

• A certificate in FormA certificate in FormA certificate in FormA certificate in Form----3 within 60 days of the declaration 3 within 60 days of the declaration 3 within 60 days of the declaration 3 within 60 days of the declaration

• Payment proof thereof in FormPayment proof thereof in FormPayment proof thereof in FormPayment proof thereof in Form----4 within 30 days4 within 30 days4 within 30 days4 within 30 days

• Order shall be in FormOrder shall be in FormOrder shall be in FormOrder shall be in Form----5 for Tax Arrears5 for Tax Arrears5 for Tax Arrears5 for Tax Arrears

• Order shall be in Form 6 in respect of Specified Tax.Order shall be in Form 6 in respect of Specified Tax.Order shall be in Form 6 in respect of Specified Tax.Order shall be in Form 6 in respect of Specified Tax.

Lunawat & Co.

DISPUTE RESOLUTION SCHEME DISPUTE RESOLUTION SCHEME DISPUTE RESOLUTION SCHEME DISPUTE RESOLUTION SCHEME –––– TAX ARREARTAX ARREARTAX ARREARTAX ARREAR

• Applicable for dispute of which appeal is pending Applicable for dispute of which appeal is pending Applicable for dispute of which appeal is pending Applicable for dispute of which appeal is pending

before the CIT (A) or CWT(A) as on 29th February, 2016.before the CIT (A) or CWT(A) as on 29th February, 2016.before the CIT (A) or CWT(A) as on 29th February, 2016.before the CIT (A) or CWT(A) as on 29th February, 2016.

• The pending appeal could be against an assessment The pending appeal could be against an assessment The pending appeal could be against an assessment The pending appeal could be against an assessment

order or a penalty order.order or a penalty order.order or a penalty order.order or a penalty order.

• Pay tax and interest Pay tax and interest Pay tax and interest Pay tax and interest uptouptouptoupto date of assessment. (in case date of assessment. (in case date of assessment. (in case date of assessment. (in case

of disputed tax > of disputed tax > of disputed tax > of disputed tax > RsRsRsRs. 10,00,000/. 10,00,000/. 10,00,000/. 10,00,000/----, 25% of the , 25% of the , 25% of the , 25% of the

minimum penalty shall also be paid).minimum penalty shall also be paid).minimum penalty shall also be paid).minimum penalty shall also be paid).

• For Penalty Order, 25% of minimum penalty shall be For Penalty Order, 25% of minimum penalty shall be For Penalty Order, 25% of minimum penalty shall be For Penalty Order, 25% of minimum penalty shall be

payable along with tax & interest on assessment or payable along with tax & interest on assessment or payable along with tax & interest on assessment or payable along with tax & interest on assessment or

reassessment.reassessment.reassessment.reassessment.

• Consequent to such declaration, appeal in respect of Consequent to such declaration, appeal in respect of Consequent to such declaration, appeal in respect of Consequent to such declaration, appeal in respect of

the disputed income pending before the Commissioner the disputed income pending before the Commissioner the disputed income pending before the Commissioner the disputed income pending before the Commissioner

(Appeals) shall be deemed to be withdrawn(Appeals) shall be deemed to be withdrawn(Appeals) shall be deemed to be withdrawn(Appeals) shall be deemed to be withdrawn

Lunawat & Co.

DISPUTE RESOLUTION SCHEME DISPUTE RESOLUTION SCHEME DISPUTE RESOLUTION SCHEME DISPUTE RESOLUTION SCHEME –––– SPECIFIED TAX SPECIFIED TAX SPECIFIED TAX SPECIFIED TAX

• Means Means Means Means ---- Tax determined in consequence of or validated Tax determined in consequence of or validated Tax determined in consequence of or validated Tax determined in consequence of or validated

by any amendment made to IT Act or Wealthby any amendment made to IT Act or Wealthby any amendment made to IT Act or Wealthby any amendment made to IT Act or Wealth----tax Act tax Act tax Act tax Act

with retrospective effect & relates to a period prior to with retrospective effect & relates to a period prior to with retrospective effect & relates to a period prior to with retrospective effect & relates to a period prior to

date of enactment of such amendment and a dispute date of enactment of such amendment and a dispute date of enactment of such amendment and a dispute date of enactment of such amendment and a dispute

in respect of such tax is pending as on 29th February, in respect of such tax is pending as on 29th February, in respect of such tax is pending as on 29th February, in respect of such tax is pending as on 29th February,

2016201620162016

• To pay only amount of such tax To pay only amount of such tax To pay only amount of such tax To pay only amount of such tax

• Has to withdraw any writ petition or any appeal filed. Has to withdraw any writ petition or any appeal filed. Has to withdraw any writ petition or any appeal filed. Has to withdraw any writ petition or any appeal filed.

• IfIfIfIf violatesviolatesviolatesviolates anyanyanyany ofofofof thethethethe conditionsconditionsconditionsconditions ofofofof schemeschemeschemescheme orororor furnishesfurnishesfurnishesfurnishes

falsefalsefalsefalse particularsparticularsparticularsparticulars inininin declaration,declaration,declaration,declaration, itititit shallshallshallshall bebebebe presumedpresumedpresumedpresumed asasasas

ifififif thethethethe declarationdeclarationdeclarationdeclaration waswaswaswas nevernevernevernever mademademademade andandandand allallallall thethethethe

consequencesconsequencesconsequencesconsequences underunderunderunder thethethethe ActActActAct shallshallshallshall reviverevivereviverevive....

Lunawat & Co.DISPUTE RESOLUTION SCHEME DISPUTE RESOLUTION SCHEME DISPUTE RESOLUTION SCHEME DISPUTE RESOLUTION SCHEME

NON ELIGIBILITYNON ELIGIBILITYNON ELIGIBILITYNON ELIGIBILITY• Cases where prosecution initiated before date of filing Cases where prosecution initiated before date of filing Cases where prosecution initiated before date of filing Cases where prosecution initiated before date of filing

of declaration. of declaration. of declaration. of declaration.

• SearchSearchSearchSearch orororor SurveySurveySurveySurvey casescasescasescases wherewherewherewhere declarationdeclarationdeclarationdeclaration isisisis inininin respectrespectrespectrespect

ofofofof taxtaxtaxtax arrearsarrearsarrearsarrears....

• CasesCasesCasesCases relatingrelatingrelatingrelating totototo undisclosedundisclosedundisclosedundisclosed foreignforeignforeignforeign incomeincomeincomeincome andandandand

assetsassetsassetsassets....

• CasesCasesCasesCases basedbasedbasedbased onononon informationinformationinformationinformation receivedreceivedreceivedreceived underunderunderunder DTAADTAADTAADTAA u/su/su/su/s

90909090//// 90909090AAAA wherewherewherewhere declarationdeclarationdeclarationdeclaration isisisis inininin respectrespectrespectrespect ofofofof taxtaxtaxtax arrearsarrearsarrearsarrears....

• PersonPersonPersonPerson notifiednotifiednotifiednotified underunderunderunder SpecialSpecialSpecialSpecial CourtsCourtsCourtsCourts Act,Act,Act,Act, 1992199219921992....

• CasesCasesCasesCases coveredcoveredcoveredcovered underunderunderunder NarcoticNarcoticNarcoticNarcotic DrugsDrugsDrugsDrugs andandandand PsychotropicPsychotropicPsychotropicPsychotropic

SubstancesSubstancesSubstancesSubstances Act,Act,Act,Act, IndianIndianIndianIndian PenalPenalPenalPenal Code,Code,Code,Code, PreventionPreventionPreventionPrevention ofofofof

CorruptionCorruptionCorruptionCorruption ActActActAct orororor ConservationConservationConservationConservation ofofofof ForeignForeignForeignForeign ExchangeExchangeExchangeExchange

andandandand PreventionPreventionPreventionPrevention ofofofof SmugglingSmugglingSmugglingSmuggling ActivitiesActivitiesActivitiesActivities Act,Act,Act,Act, 1974197419741974....

Lunawat & Co.

DISPUTE RESOLUTION SCHEME DISPUTE RESOLUTION SCHEME DISPUTE RESOLUTION SCHEME DISPUTE RESOLUTION SCHEME ---- EFFECTSEFFECTSEFFECTSEFFECTS

• Immunity from instituting any proceedings in respect Immunity from instituting any proceedings in respect Immunity from instituting any proceedings in respect Immunity from instituting any proceedings in respect

of an offence under IT Act / WT Act of an offence under IT Act / WT Act of an offence under IT Act / WT Act of an offence under IT Act / WT Act

• Immunity from imposition or waiver, as the case may Immunity from imposition or waiver, as the case may Immunity from imposition or waiver, as the case may Immunity from imposition or waiver, as the case may

be, of penalty under IT Act / WT Act, in respect of be, of penalty under IT Act / WT Act, in respect of be, of penalty under IT Act / WT Act, in respect of be, of penalty under IT Act / WT Act, in respect of

specified tax / tax arrear covered in the declaration to specified tax / tax arrear covered in the declaration to specified tax / tax arrear covered in the declaration to specified tax / tax arrear covered in the declaration to

the extent the penaltythe extent the penaltythe extent the penaltythe extent the penalty

• Waiver of interest under the IT Act / WT Act, in respect Waiver of interest under the IT Act / WT Act, in respect Waiver of interest under the IT Act / WT Act, in respect Waiver of interest under the IT Act / WT Act, in respect

of specified tax / tax arrear covered in the of specified tax / tax arrear covered in the of specified tax / tax arrear covered in the of specified tax / tax arrear covered in the

declaration to the extent the interest declaration to the extent the interest declaration to the extent the interest declaration to the extent the interest

• Amount paid in pursuance of a declaration shall not Amount paid in pursuance of a declaration shall not Amount paid in pursuance of a declaration shall not Amount paid in pursuance of a declaration shall not

be refundable under any circumstancesbe refundable under any circumstancesbe refundable under any circumstancesbe refundable under any circumstances

CA. Pramod JainCA. Pramod JainCA. Pramod JainCA. Pramod Jain

www.lunawat.comwww.lunawat.comwww.lunawat.comwww.lunawat.compramodjain@[email protected]@[email protected]

+91 9811073867+91 9811073867+91 9811073867+91 9811073867

© 2016 CA. Pramod Jain, Lunawat & Co

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