This Court's Ruling Puts The Opinion In Auditor's Internal Control Opinion
By Keith Paul Bishop on August 6, 2014 in Accountants
A brief ruling issued this week by U.S. District Court Judge James C. Mahan makes it clear that an auditor isn't always liable even when a subsequent auditor uncovers fraud. In Oaktree Capital Mgmt., L.P. v. KPMG, 2014 U.S. Dist. LEXIS 106538 (D. Nev. 2014), the plaintiffs had purchased notes issued by a company that later defaulted and went bankrupt. One of the defendants had audited the issuer's 2007 financial statements that were included in the issuer's filings with the Securities and Exchange Commission. A different firm (KPMG) later discovered that the issuer had been providing fake addresses to the auditors for sending confirmation requests. The note purchasers brought suit under Section 18 of the Securities Exchange Act of 1934, arguing that even though KPMG's discovery was made in 2010, it could be inferred that the practice had occurred in 2007. The plaintiffs made similar allegations regarding the issuer's reported sales and cash balances.
Judge Mahan, however, found that these allegations were "merely consistent with, not indicative of, a failure to follow GAAS standards [the opinion misdescribes GAAS as Generally Accepted Accounting Standards]". He further found that it was "very possible" that the first auditor "complied with GAAS and did not discover the fraudulent activities that may have been occurring". Judge Mahan also dismissed plaintiffs' claim that the auditor made a false statement about the issuer's internal controls, noting that an "auditor's opinion on internal controls is just that – an opinion". (citing Deephaven Private Placement Trading, Ltd. v. Grant Thornton & Co., 454 F.3d 1168 (10th Cir. 2006).
This may be escape to Auditors intentionally from liability!!!
This Court's Ruling Puts the Opinion in Auditor's Internal Control Opinion
posted on: Wednesday, August 6, 2014
A brief ruling issued this week by U.S. District Court Judge James C.
Mahan makes it clear that an auditor isn't always liable even when a
subsequent auditor uncovers fraud. In Oaktree Capital Mgmt., L.P. v.
KPMG, 2014 U.S. Dist. LEXIS 106538 (D. Nev. 2014), the plaintiffs had
purchased notes issued by a company that later defaulted and went
bankrupt. One of the defendants had audited the issuer's 2007
financial statements that were included in the issuer's filings with
the Securities and Exchange Commission. A different firm (KPMG) later
discovered that the issuer had been providing fake addresses to the
auditors for sending confirmation requests. The note purchasers
brought suit under Section 18 of the Securities Exchange Act of 1934,
arguing that even though KPMG's discovery was made in 2010, it could
be inferred that the practice had occurred in 2007. The plaintiffs
made similar allegations regarding the issuer's reported sales and
cash balances.
Judge Mahan, however, found that these allegations were "merely
consistent with, not indicative of, a failure to follow GAAS standards
[the opinion misdescribes GAAS as Generally Accepted Accounting
Standards]". He further found that it was "very possible" that the
first auditor "complied with GAAS and did not discover the fraudulent
activities that may have been occurring". Judge Mahan also dismissed
plaintiffs' claim that the auditor made a false statement about the
issuer's internal controls, noting that an "auditor's opinion on
internal controls is just that – an opinion". (citing Deephaven
Private Placement Trading, Ltd. v. Grant Thornton & Co., 454 F.3d 1168
(10th Cir. 2006).
© 2010-2014 Allen Matkins Leck Gamble Mallory & Natsis LLP
--
posted on: Wednesday, August 6, 2014
A brief ruling issued this week by U.S. District Court Judge James C.
Mahan makes it clear that an auditor isn't always liable even when a
subsequent auditor uncovers fraud. In Oaktree Capital Mgmt., L.P. v.
KPMG, 2014 U.S. Dist. LEXIS 106538 (D. Nev. 2014), the plaintiffs had
purchased notes issued by a company that later defaulted and went
bankrupt. One of the defendants had audited the issuer's 2007
financial statements that were included in the issuer's filings with
the Securities and Exchange Commission. A different firm (KPMG) later
discovered that the issuer had been providing fake addresses to the
auditors for sending confirmation requests. The note purchasers
brought suit under Section 18 of the Securities Exchange Act of 1934,
arguing that even though KPMG's discovery was made in 2010, it could
be inferred that the practice had occurred in 2007. The plaintiffs
made similar allegations regarding the issuer's reported sales and
cash balances.
Judge Mahan, however, found that these allegations were "merely
consistent with, not indicative of, a failure to follow GAAS standards
[the opinion misdescribes GAAS as Generally Accepted Accounting
Standards]". He further found that it was "very possible" that the
first auditor "complied with GAAS and did not discover the fraudulent
activities that may have been occurring". Judge Mahan also dismissed
plaintiffs' claim that the auditor made a false statement about the
issuer's internal controls, noting that an "auditor's opinion on
internal controls is just that – an opinion". (citing Deephaven
Private Placement Trading, Ltd. v. Grant Thornton & Co., 454 F.3d 1168
(10th Cir. 2006).
© 2010-2014 Allen Matkins Leck Gamble Mallory & Natsis LLP
--
Could Not File Income Tax Return? Don't Worry
Dr. Sanjiv Agarwal
Individual assessees were required to file their income tax returns on or before 31st July, 2014. While most of the assessees would have filed the return, yet there may be many who could not file their returns by the due date for any reason – being on vacation, on official tour, for want of preparedness or even as a habit. Well, the last date is over but you have reasons not to worry on this account and be just cool. One can still file income tax return without any penalty and still be compliant if return is filed upto 31st March, 2015. So cheer up ! as you still have enough time about eight months to file you returns. This is contrary to perception of many persons that once delayed, return cannot be filed or that it will attract penalty. While there is no penalty on return filed after 31st July but before 31st March 2015, yet there are some implications. If the returns are filed after 31st July, it should be ensured that return is error free as one looses the privilege to revise the return and rectifications are not possible. It would be advisable to collect all papers including TDS (Tax deducted at source) certificates so that return could be filed smoothly. This would also ensure that all details pertaining to filing of return are verified and return is filed correctly.
Sometimes, though late, it might not be wise to wait till 31st March to file return and it may make sense to file return as early as possible. This is so because if any income tax is payable, it would attract interest of one percent per month for every month of delay on the tax due. Not only this, you will have to forego the benefit of carrying forward the losses and setting them off in future years, if in case you have to return business losses or loss from capital gain. In some cases, it may be a big loss. In case one has a refund due from the Department, filing late return would also mean late processing of refund, besides losing interest on such tax refund.
However, if you have already paid all your taxes or tax dues but failed to file returns by 31st July, there is no reason to panic or worry because there is no interest or penalty. Yes, if you delay beyond 31st March, 2015, there could be a penalty of Rs. 5000 at the discretion of assessing officer. The penalty may be waived if reasonable cause which prevented from filing return is explained.
All said and done, returns should be filed, sooner the better. However, rule of 'better late than never' must be followed.
why list of Liquidation Companies List ajnd accounts are not available on M C A?
MCA displays list of companies not filed Form 5INV
Posted In Company Law | No Comments »
MCA has started to display list of Companies who have not filed Form 5INV. Form 5 INV is required to be filed by the company/Corresponding New Bank which shall contain investor wise details of unclaimed and unpaid amounts in respect of dividends, debentures, deposits, etc. The details of unclaimed and unpaid amounts shall need to be provided as on the Annual General Meeting (AGM) date. This form is to be filed annually within 90 days from the date of AGM.
MCA is displaying the list of Companies not filed Form 5INV ROC wise and Consolidated. Link for the same is as follows :-
 GOODS AND SERVICE TAX REPORTS (GSTR) HIGHLIGHTSF Imposition of penalty simultaneously on firm and its partner whether permissible, matter referred to larger Bench : Amritlakshmi Machine Works v. Commissioner of Customs (Bom) p. 370
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ITR'S TRIBUNAL TAX REPORTS (ITR (TRIB))--PRINT AND ONLINE EDITION
Business expenditure --Allowance of expenditure in ratio of domestic turnover to global turnover--Indirect expenditure as reflected in assessee’s global audited accounts legally firm basis for applying it to Indian operations--No need for production of vouchers--Income-tax Act, 1961--Double Taxation Avoidance Agreement between India and Mauritius, art. 7(3)-- Renoir Consulting Ltd . v. Deputy DIT (International Taxation) (Mumbai) . . . 137
----Non-resident--Head office expenses--Disallowance of salary expenses in view of section 44C--Section 44C not applicable in view of Circular No. 333--Income-tax Act, 1961, ss. 40(a)(iii), 44C--Circular No. 333 of 1982, dated 2-4-1982-- Renoir Consulting Ltd. v. Deputy DIT (International Taxation) (Mumbai) . . . 137
Deduction of tax at source --Payment to doctors--Payees income-tax assessees having permanent account numbers and payments accounted for in their books of account--Assessee not in default--Income-tax Act, 1961, s. 201(1), (1A)-- Deputy CIT v. Quality Care India Ltd. (Hyd) . . . 121
----Salary or professional fee--Remuneration to consulting doctors--Appointment of doctors is contract for service and not contract of service--Service of doctors a professional service--No employer-employee relationship between assessee and professionals--Tax to be deducted at source from payment to doctors as professional fees under section 194J not salary under section 192(1)--Assessee not in default--Income-tax Act, 1961, ss. 192(1), 194J, 201-- Deputy CIT v. Quality Care India Ltd. (Hyd) . . . 121
Non-resident --Taxability in India--Permanent establishment--Frequent visits of principal consultants--Regular meeting of steering committee--Communications between assessee and head office in India--Regular interviews, interactions, meetings, training sessions and seminars in India--Inference of existence of permanent establishment in India--Assessee liable to tax in India--Income-tax Act, 1961--Double Taxation Avoidance Agreement between India and Mauritius, art. 5-- Renoir Consulting Ltd. v. Deputy DIT (International Taxation) (Mumbai) . . . 137
Assessment --Valuation of stock--No proper valuation by Assessing Officer--Failure on Department to bring evidence to prove sales conducted outside books of account--Addition to be deleted--Income-tax Act, 1961-- Safari Bikes Ltd. v. Joint CIT (OSD) (Chandigarh) . . . 665
Business expenditure --Capital or revenue expenditure--Film producer--Films not doing well in theatres--Assessee making payments to compensate for loss--Failure by assessee to prove that payments received by persons who suffered losses--Assessee not proving genuineness of payment--Payment capital in nature--Not allowable under section 37--Income-tax Act, 1961, s. 37-- Asst. CIT v. Seven Arts Films (Chennai) . . . 694
----Expenditure on wages--Duplication of attendance cards--Assessee failing to give full explanation for workers leaving job--Inflation of salary and wages not ruled out--Disallowance of expenditure to partial extent--Income-tax Act, 1961-- Safari Bikes Ltd. v. Joint CIT (OSD) (Chandigarh) . . . 665
Capital or revenue expenditure --Assessee running chain of restaurants--Legal expenses incurred on consultancy for acquisition of “brand†related to food business--Expenditure with respect to existing line of business--Revenue expenditure--Income-tax Act, 1961-- Deputy CIT v. Pan India Food Solutions P. Ltd. (Mumbai) . . . 630
Capital or revenue receipt --Receipt on sale of carbon credits--Capital receipt--Income-tax Act, 1961-- Deputy CIT v. My Home Power Ltd. (Hyd) . . . 731
----Subsidy from Government to export-oriented unit for installation of plant and machinery--Capital receipt--Income-tax Act, 1961-- Safari Bikes Ltd. v. Joint CIT (OSD) (Chandigarh) . . . 665
Charitable purpose --Computation of income--Adjustment of carried forward unabsorbed depreciation and deficit against income of subsequent year--To be allowed--Income-tax Act, 1961-- Addl. DIT (Exemption) v. Sri Shanmukhananda Fine Arts and Sangeetha Sabha (Mumbai) . . . 639
----Registration of trusts--Exemption--Cancellation of registration set aside by Tribunal--Trust entitled to exemption under section 11--Exemption cannot be denied on ground appeal against order of Tribunal pending before High Court--Income-tax Act, 1961, ss. 11, 12A-- Addl. DIT (Exemption) v. Sri Shanmukhananda Fine Arts and Sangeetha Sabha (Mumbai) . . . 639
Export --Exemption--Telecommunication charges and foreign currency excluded from export turnover--To be excluded from total turnover--Income-tax Act, 1961, s. 10A-- July Systems and Technologies P. Ltd. v. ITO (Bangalore) . . . 643
Industrial undertaking --Special deduction--Infrastructure facility--Income from sale of water to cargo ships for cleaning engines--Part of activity of operation and maintenance of port--Deductible--Income from storage facility and transportation charges--Not part of infrastructure facility development by assessee at port--Not deductible--Income-tax Act, 1961, s. 80-IA-- Dahej Harbour and Infrastructure Ltd. v. Deputy CIT (OSD) (Mumbai) . . . 634
International transactions --Arm’s length price--Determination--Segregating activities into different segments and computing arm’s length price separately--Trading in spare parts closely inter-linked with manufacturing segment --Assessee and comparable companies at par with regard to nature and scale of combined activities--No need for segregation--Income-tax Act, 1961-- Toyota Kirloskar Motor P. Ltd. v. Asst. CIT (LTU) (Bangalore) . . . 700
----Arm’s length price--Determination--Transactional net margin method--Software development services--Filters to be used in selection of comparables--Companies having turnover falling within particular range to be considered--Functionally different companies to be excluded--Profit margin of software development segment alone to be compared--Income-tax Act, 1961, s. 92CA-- July Systems and Technologies P. Ltd. v. ITO (Bangalore) . . . 643
S. 10A --Export--Exemption--Telecommunication charges and foreign currency excluded from export turnover--To be excluded from total turnover-- July Systems and Technologies P. Ltd. v. ITO (Bangalore) . . . 643
S. 11 --Charitable purposes--Registration of trusts--Exemption--Cancellation of registration set aside by Tribunal--Trust entitled to exemption under section 11--Exemption cannot be denied on ground appeal against order of Tribunal pending before High Court-- Addl. DIT (Exemption) v. Sri Shanmukhananda Fine Arts and Sangeetha Sabha (Mumbai) . . . 639
S. 12A --Charitable purposes--Registration of trusts--Exemption--Cancellation of registration set aside by Tribunal--Trust entitled to exemption under section 11--Exemption cannot be denied on ground appeal against order of Tribunal pending before High Court-- Addl. DIT (Exemption) v. Sri Shanmukhananda Fine Arts and Sangeetha Sabha (Mumbai) . . . 639
S. 37 --Business expenditure--Capital or revenue expenditure--Film producer--Films not doing well in theatres--Assessee making payments to compensate for loss--Failure by assessee to prove that payments received by persons who suffered losses--Assessee not proving genuineness of payment--Payment capital in nature--Not allowable under section 37-- Asst. CIT v. Seven Arts Films (Chennai) . . . 694
S. 80-IA --Industrial undertaking--Special deduction--Infrastructure facility--Income from sale of water to cargo ships for cleaning engines--Part of activity of operation and maintenance of port--Deductible--Income from storage facility and transportation charges--Not part of infrastructure facility development by assessee at port--Not deductible-- Dahej Harbour and Infrastructure Ltd. v. Deputy CIT (OSD) (Mumbai) . . . 634
S. 92CA --International transactions--Arm’s length price--Determination--Transactional net margin method--Software development services--Filters to be used in selection of comparables--Companies having turnover falling within particular range to be considered--Functionally different companies to be excluded--Profit margin of software development segment alone to be compared-- July Systems and Technologies P. Ltd. v. ITO (Bangalore) . . . 643
ITAT follows AS-10 to include one-time vehicle tax in cost of vehicle treating it as capital expenditure
August 9, 2014[2014] 48 taxmann.com 190 (Mumbai - Trib.)
IT : Para 20 of Accounting Standard (AS)10 Accounting for Fixed Assets requires that the cost of a fixed asset should comprise its purchase price and any attributable cost of bringing the asset to its working condition for its intended use. One-time tax for the life time of "all motor cars and omnibuses used or kept for use" in the State of Maharashtra under the Bombay Motor Vehicles Tax Act, 1958 is a tax for user, active or passive, of the motor vehicle in the territory of Maharashtra . Therefore, payment of tax, in-as-much as it only enables the vehicle being put to its intended use; in fact, represents a condition therefor, shall form part of its cost
No section 80P relief to a co-operative society towards interest on deposit made with banks
August 9, 2014[2014] 47 taxmann.com 189 (Bangalore - Trib.)
IT : Interest income on deposits made with banks is not attributable to income of co-operative society and outside realim of section 80P
Land in hilly and rocky area unfit for cultivation couldn't be deemed as agricultural land; subject to cap gains
August 9, 2014[2014] 47 taxmann.com 64 (Panaji)
IT : Requirement of new material or fresh tangible material coming in possession of Assessing Officer as a pre-requisite condition for reassessment is applicable only where Assessing Officer has made an assessment under section 143(3)
IT : In case of mere processing of return under section 143(1), action under section 147 can be initiated even on basis of material available with Assessing Officer in return of income filed by assessee
IT : Primary condition for treating a land as an agricultural land is that it has to be cultivable
IT : Where assessee did not disclose income from sale of land taking a plea that it was an agricultural land, in view of fact that major area of land was hilly and rocky on which cultivation was not possible, it could not be regarded as agricultural land and, thus, income arising from said portion of land was taxable under head 'capital gain'
AO couldn't rescind trust's registration if assessee-society had complied with requirements of sec. 12AA
August 9, 2014[2014] 47 taxmann.com 184 (Allahabad)
IT: Where there was no whisper that assessee-society did not fulfill any conditions mentioned in section 12AA(3), cancellation of registration only on ground that society did not solely exists for charitable purpose, was unjustified
No sec. 269SS violation on acceptance of cash loan from spouse due to business exigencies; ITAT deletes penalty
August 9, 2014[2014] 47 taxmann.com 143 (Jaipur - Trib.)
IT : Where assessee running a proprietorship concern, took cash loans from her husband carrying on another proprietorship business on account of business exigencies for making payments to labourers and lenders, there being no violation of provisions of section 269SS, impugned penalty order passed under section 271D was to be set aside
Addition affirmed as assessee-firm had diverted its funds to partners for bringing it back as capital into the firm
August 9, 2014[2014] 47 taxmann.com 185 (Punjab & Haryana)
IT: Where money introduced in names of partners was infact earned by firm from its business of cold storage, same was to be treated as unaccounted income of firm
AO isn't bound to follow municipal valuation of property to determine its Annual Value, rules HC
August 9, 2014[2014] 48 taxmann.com 191 (Bombay)
IT: In order to determine annual value of property, municipal rateable value may not be binding on Assessing Officer but that is only in cases where he is convinced that interest free security deposit and monthly compensation do not reflect prevailing rate and, in such a case, Assessing Officer can himself resort to enquire about prevailing rate in locality
IT: Where a premises is covered by Rent Control Act, Assessing Officer must undertake exercise to fix rent himself in terms of said Act or have it determined by Court or Tribunal and, until then he may not be justified in applying any other formula or method and determine 'fair rent' by abiding with same
Income Tax
Whether when assessee discontinues manufacturing activities and commences trading from part of premises and also earns rental income by leasing out remaining part, it is entitled to set off business loss from trading against rental income on which Sec 24 benefit was also availed - NO: HC
THE assessee was in the business of manufacture of air conditioners. The assessee had given building as well as land on lease for the production of printing inks and received total rental income at Rs.39lacs. Assessee filed return of income declaring income. The assesse made a claim of expenditure under the head repair & maintenance. Assesse had also claimed traveling and conveyance expenses which were disallowed by itself in the computation of income. Except for these expenses consisted of remuneration to director, salary & wages, visiting fees, insurance expenses and interest expenses. Assessee had also shown sales against which cost of goods sold was shown. Assessee had also shown purchase of one AC, which had been shown as part of the closing stock. Assessee's case was processed under Section 143(1).
THE issue before the Bench is - Whether when assessee discontinues manufacturing activities and commences trading from part of premises and also earns rental income by leasing out remaining part, it is entitled to set off business loss from trading against rental income on which Sec 24 benefit was also availed. NO is the HC's answer
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