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TMI Blog2020 (9) TMI 443X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the loan account was ₹ 9,20,24,133/-. The bank 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 notiona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 23.02.2019. A copy of list of directors of petitioner-company is at Annexure A-8. The details of the officers of the petitioner-company who were responsible for the making and maintaining books of accounts and financial statements of the petitionercompany is / are filed as Annexure A-9. The statutory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 corresponding change in the profit nor the increase in the net profit and hence, change in the financial statements/change in the position of 'short term borrowings' and the balance sheet without the corresponding change with the imposition of the net profit would have adverse impact on the revenue for the relevant years; and accordingly prayed for dismissal of the CP. 12. The petitioner-company filed separate rejoinders to the ROC as well as Income Tax Department disputing contentions in the said reports. 13. The petitioner and the Income Tax Department have also filed written submissions. 14. Heard M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de; (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 application shall be filed in Form No. NCLT-1 within fourteen days of the decision taken by the Board. (2) In case the majority of the directors of company or the auditor of the company has been changed immediately before the decision is taken to apply under section 131, the company shall disclose such facts in the application. (3) The application shall, inter alia, set forth the following particulars, namely'- (a) financial year or period to which such accounts relates; (b) the name and contact details of the Managing Director, Chief Financial Officer, directors, Company Secretary and officer of the company responsible for making and maintaini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tified 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 prior to 2016-17 cannot be accepted. Further, once the Act itself provides for a voluntary revision of financial statements or Board's reports, in the circumstances mentioned therein, the contention of the Income Tax Department that allowing the petitioner-company to revise its financial statements affects the revenue adversely, also 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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