TMI Blog2020 (9) TMI 443X X X X Extracts X X X X X X X X Extracts X X X X ..... that the same was provided to meet the situations as mentioned in the petition, subject to fulfilling the requirements therein. Once Section 131 of the Act, provides for revision of the financial statements in respect of any of the three preceding financial years , it clearly encompasses three prior years upon notification of the concerned section. Thus the contention of the ROC that the petition is not maintainable in respect of any financial year prior to 2016-17 cannot be accepted. What is required to be seen is that whether the petitioner-company satisfies the requirements under Section 131 of the Act read with Rule 77 of the 2016 Rules. In any case, as per the Income Tax Returns of the petitioner-company, for the relevant years in question, copies of which are filed in Annexure A-6 (Colly) as already stated, it is seen that the relevant interest amounts for the particular years, being treated as accrued and not paid, is added back in computation to arrive at the assessable income. Thus there is no impact on revenue from the perspective of the Income Tax Department. The petitioner-company fulfilled the requirements under Section 131 of the Act and Rule 77 of the 2016 Ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k also sent a notice under Section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, for recovery of the said outstanding amount, vide notice dated 28.12.2015. However, thereafter, the petitioner-company entered into One Time Settlement ( OTS ) dated 31.08.2018 with the said bank and settled the total aforesaid outstanding amount as full and final settlement and made the payment as per the said OTS; and accordingly, the bank closed the said loan account and that there was no amount due with the bank by the petitioner-company as on date. The final sanction of the settlement i.e. OTS of the Bank is filed as Annexure A-3 dated 31.08.2018. 4. It is further stated that as per Prudential Norms on Income Recognition, Assets Classification and Provisioning- pertaining to Advances issued by the Reserve Bank of India, on an account becoming NPA, the bank cannot charge and take to income account, the interest charged on NPA account and the same has to be shown in a separate account, preferably suspense account, as the said interest charged upon a NPA account is a notional income and the said interest charged upon a NPA acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss statement of the respective financial statement and therefore, the profit and loss account of the petitioner-company for the said three financial years is also not showing the correct position and therefore, it is imperative that the profit and loss account of the said financial statements be also corrected, due to the accounting mistake committed at the ends of the bank and subsequently, ignored by the management of the petitioner-company, the financial statements for the years ended on 31.03.2016, 31.03.2017 and 31.03.2018 do not show a fair and true view of the affairs of the petitioner-company and hence, could not comply with the provisions of Section 129 of the Act and hence, the CP. 7. It is also stated that the Board of Directors of the petitioner-company has passed a resolution dated 22.07.2019 (Annexure A-7) for filing the present petition and the petition is filed on 05.08.2019, i.e. within 14 days from the date of decision of the Board, as per Rule 77 of 2016 Rules. Board Resolution dated 22.07.2019 is at Annexure A-7. There are no material changes in the composition of Board of Directors in the last three years except admission of four additional Directors on 23.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e under progress and no change in the financial statements/balance sheets can be made at this juncture as the same would affect the revenue adversely. It is also stated that the profit and loss account of the company reveals that yearly interest component has been claimed as an expense item in the profit and loss account with respect to financial years, hence, the interest for the financial years 2015-16, 2016-17 and 2017-18 is also required to be reduced from the expense side of the profit and loss account corresponding the increased net profit in the financial years and would have the following tax affect. S. No. Financial Year Increase in Profit (In Rs.) Approximate Tax Effect (In Rs.) 1. 2015-16 49,87,464 16,46,000 2. 2016-17 1,55,48,648 51,31,000 3. 2017-18 1,30,73,388 43,14,000 11. It is also stated that the petitioner has not disclosed the corresp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the revisions must be confined to-- (a) the correction in respect of which the previous financial statement or report do not comply with the provisions of section 129 or section 134; and (b) the making of any necessary consequential alternation. (3) The Central Government may make rules as to the application of the provisions of this Act in relation to revised financial statement or a revised director's report and such rules may, in particular-- (a) make different provisions according to which the previous financial statement or report are replaced or are supplemented by a document indicating the corrections to be made; (b) make provisions with respect to the functions of the company's auditor in relation to the revised financial statement or report; (c) require the directors to take such steps as may be prescribed. 16. It is also relevant to note Rule 77 of the 2016 Rules and the same reads as under:- 77. Application under section 131. - (1) Where it appears to the directors of a company that the financial statement of the company or the report of the Board do not comply with the provisions of section 129 or section 134, the appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disputed the existence of annexure A-4 i.e. Master Circular of Prudential Norms on Income Recognition, Assets Classification and Provisioning- pertaining to Advances Portfolio of the Reserve Bank of India and its applicability to the loans given by the banks when the said loans become NPA. The petitioner has filed Annexure A-5 i.e. statement of the loan account and the OTS letter issued by the bank to show that the bank has not followed the RBI Circular, while treating the loan which was classified as NPA and the subsequent OTS, whereunder the loan was closed on payment of the required amount as a full and final settlement of the loan account. A perusal of Section 131 of the Act, which was notified with effect from 01.06.2016, reveals that the same was provided to meet the situations as mentioned in the petition, subject to fulfilling the requirements therein. Once Section 131 of the Act, provides for revision of the financial statements in respect of any of the three preceding financial years , it clearly encompasses three prior years upon notification of the concerned section. Thus the contention of the ROC that the petition is not maintainable in respect of any financial year p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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