I-T dept orders special audit of DLF accounts of FY06
February, 02nd 2009
The income tax (I-T) department has ordered a special audit of the accounts of Indias biggest real estate firm DLF Ltd for allegedly trying to lower its tax liability by understating sales for 2005-06.
After noticing the books of accounts of the company there were a number of discrepancies and we could not ascertain the true income and profits of the company, said a senior tax official.
Speaking about the special audit, a DLF spokesperson said, Income Tax department conducts special audit on thousands of companies every year and is a routine affair. Financial year 2005-06 was the first year in which PoCM method of accounting was first introduced as per Accounting Standard number 9 issued by ICAI.
While the assessment was in progress, IT department decided to institute a special audit for DLF Ltd (as a standalone entity) for fy 2005-06 to understand PoCM in a better way, he added.
He said there existed no discrepancy between the figures reported in the DLFs Red Herring Prospectus and the accounts filed with the tax department.
There are no allegations for misrepresentation in the accounts. The audit report contains only observations, which have been suitably responded, the spokesperson said.
The tax official, however, said that the companys turnover figures in its IT returns filed for the assessment year 2006-07 with the department were lower by more than Rs500 crore from the project-wise sales figure made public at the time of launching its initial public offer (IPO) in 2007.
As per DLFs prospectus filed with Sebi at the time of launching its IPO, it had said its turnover in fiscal 2006 stood at Rs1,242 crore and a profit before tax of Rs359.5 crore.
A special audit is conducted by the IT department for the accounts of any assessee, which is found to be inaccurate under Section 142 (2A) of the Income Tax Act. Under that Act, an assessing officer in the interest of revenue can order a special audit of the accounts of a company.
The official said IT department could not complete assessment of tax liability of the company as per scheduled deadline of December 2008 because of the alleged misrepresentation by DLF.
Subsequently, the assessment has been extended by another 180 days, the official added. The department had appointed Sanjay Satpal & Co, chartered accountants as special auditor to give its assessment. The CA firm also did not respond to e-mails and repeated phone calls for its comments.
The Central Board of Direct Taxes (CBDT) also declined to comment on this specific issue, but a spokesperson said that generally in case of a special audit into the accounts of a company, the issues raised in the audit are considered by the assessing officer in his assessment order.