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Satyam ex-CFO gives clean chit to PwC in fraud
April, 06th 2009
In a significant development, former Satyam Computer CFO Vadlamani Srinivas has told representatives of the Institute of Chartered Accountants

of India (ICAI) — the apex regulatory body for chartered accountants in India — that auditors S Gopalakrishnan and Talluri Srinivas of audit firm Price Waterhouse had no role to play in the fraud, as they were given forged documents by the company management.
Mr Srinivas admitted that the fraud at the software company, which rocked the Indian corporate world, was entirely perpetrated by former chairman B Ramalinga Raju, with the active involvement of the CFO (Mr Srinivas himself), the company’s managing director B Rama Raju and cost accountant G Ramakrishna.
Mr Srinivas was interrogated on Sunday by a committee set up by the ICAI at Hyderabad’s Chanchalguda jail. “We heard his (Mr Srinivas’) admission today (Sunday) and we also spoke to the auditors. The high-powered committee will continue with its investigation and come out with its report later,” ICAI president Uttam Prakash Agarwal told ET after interrogating the former CFO and the two auditors.
Audit firm Price Waterhouse and the two auditors had been pulled up due to their alleged complicity in the Rs 7,000-crore fraud, ever since disgraced Satyam founder B Ramalinga Raju admitted on January 7 that accounts at his company had been falsified. When contacted, a Price Waterhouse spokesperson declined to comment.
The fraud at Satyam turned the spotlight on auditors and has now made the audit process in India Inc more stringent, with existing auditors of various companies delaying the finalisation of accounts in order to verify all statements given by managements. ICAI was given permission by the Andhra Pradesh High Court to question Mr Srinivas and the two auditors.
The ICAI president said the auditors were questioned mainly on accounting and auditing aspects and to check whether they followed the right methods of accounting.
According to Mr Srinivas, the accounts were allegedly tampered by the chairman and the managing director, along with cost accountant G Ramakrishna. “I regret the whole affair. I was just following the orders of my master,” Mr Srinivas is believed to have told the ICAI committee, which also consisted of ICAI central council member Shantilal Daga.
“I twice offered to resign, but was asked to stay back by the chairman, as it would have affected the interests of the over 54,000 employees,” Mr Srinivas added.
According to the CFO, sales invoices and bank statements were falsified, and interactions between Satyam auditors and the company’s banks were limited, as the correspondence was routed through the chairman and the MD.
“Mr Ramakrishna implemented the fraud under the direction of the chairman himself,” Mr Srinivas is reported to have said in his admission to the ICAI members.
The Central Bureau of Investigation (CBI), which is currently spearheading the investigations into the Satyam fraud case, jointly with Sebi and the Serious Fraud Investigation Office. CBI had recently said it was planning to file the first chargesheet on April 9. It also said B Ramalinga Raju and his brother B Rama Raju were not co-operating in the investigations, and that the agency was planning to put them through a lie-detector test.
The fraud came as a surprise to the entire corporate world, as Satyam Computer is an SEC-registered company. The accounting fraud, reportedly spread over five years, escaped the attention of SOX committees (panels that oversee the implementation of the Sarbanes-Oxley norms), Sebi, the stock exchanges and most regulatory agencies.

compiled by CA Rajesh P Langalia

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TDS/TCS LATEST CHANGES

Vide Notification SO 858 (E) dated 25-03-2009, rules on TDS and TCS had undergone numerous changes for ensuring proper control and better compliance. As the closing of financial year 2008-09 and the notification on TDS/TCS rules came together, this has become more relevant not only for the deductors and deuctees but also for the Income Tax Department. The importance of TDS/TCS is emphasized by issue of various circulars and notifications from time to time and the judicial pronouncements in favour of the Income Tax Department confirm to that effect. Some of the important features relating to issuance of TDS/TCS certificates and filing of quarterly returns after above notification are highlighted here.Compliance on remittancesThis change relates to the time and mode of payment to Government account of the tax deducted at sources or tax paid under Chapter XVII-B and tax collected at source under Chapter XVII-BB. When deduction is made by or on behalf of the Government, the sum deducted shall be paid to the credit of the Central Government on the same day is changed.Hence all sums deducted shall be paid to the credit of the Central Governmenta) within two months from the end of the month in which the amount is credited by the payer to the account of the payee, if the crediting is on the date up to which the accounts of the payer are made; and b) in any other case with in one week from the end of the month in which the deduction is made or income tax is due under section 192(1A) and under Chapter XVII-BB.c) the assessing officer may permit in special cases for the quarterly payment.Also with in the time specified every deductor has to a) electronically furnish an income tax challan in Form No.17; and b) pay the amount so deducted to the credit of the central government by electronically remitting it into the Reserve Bank of India, State Bank of India or any authorised bank. Further it shall be construed as electronically remitted only when the amount is remitted by way of -a) internet banking facility of the Reserve Bank of India, State Bank of India or of any authorized bank; or b) credit or debit card.Certificate of tax deducted at sourceAs per Rule 31(1), the certificate of deduction of tax at source or the certificate of payment of tax by the employer on behalf of the employee, under section 203 is to be furnished by any person deducting tax ina) Form No. 16 and in Form No.16AA where income from salaries before allowing deductions under section 16 of the Income-tax Act, 1961 does not exceed rupees one lakh fifty thousand.b) Form No.16A for all deductions under section 193 to section 196D Now this has been substituted after omission of Form No.16AA, as below c) Form No. 16 if the deduction or payment is under section 192; and d) Form No.16A if the deduction or payment is under any other provision of Chapter XVII-BIssue of CertificateThe certificate mentioned in sub-rule (1) shall be furnished to the deductee a) within one week after the date on which the TDS is paid to the credit of Central Government if the payment in respect of which the tax so deducted is by way of crediting on the date up to which the accounts of the deductors are made.b) within one month from the end of the financial year in which the payment is made to the deductee for deduction under section 192(1) or section 192(1A) or section 194D or when a consolidated certificate is to be issued for all the deduction made during the financial year.c) within fourteen days from the date of payment of income tax if the payment is made on quarterly basis under Rule 30(2)d) within one month from the end of the month in which the deduction of tax at source is made in all other cases.Revised Form No.16 and 16A The notable changes made in the forms are TDS Certificate number is introduced as an internal reference number to be given by the deductor as an optional. The status as to whether the form is original or duplicate or amended is to be indicated and if amended previous TDS Certificate number is to be given. Unique Transaction Number (UTN) which is generated at the time of remittance of challan replaces the Acknowledgement Number assigned by the NSDL earlier. Whether the PAN of the deductee is validated or not at the time of remittance of challan is to be indicated. Where the PAN of the deductee was not validated in any month, the total of TDS amount where PAN was found valid by Income Tax Department is to be shown separately. The details of tax deducted and deposited into Central Government Account are replaced with UTN, Gross amount paid/collected with TDS/TCS amount. Introduction of Form No.17After the introduction of e-remittance of income tax directly by the deductor, payment through challan like ITNS-281 etc. will become irrelevant and the new Form 17, which is an Income Tax Challan for payment of TDS and TCS introduced shall give the entire details of the payment. The details of the deductees are to be furnished can be uploaded directly where the number of records exceeds more than ten. Each deductee is to be identified as to having a valid PAN or not and this has to be indicated. Also the correct Challan Identification Number (CIN), BSR Code of the Bank and Transaction Reference Number helps to trace the deductor, hence it must be ensured that they are duly completed before uploading.Under the details of payment, it further ensures that the amount of TDS/TCS is made though the Bank Account of the deductor through which the amount is remitted electronically with the date of debit, name of the bank and account number are indicated. Quarterly statement of deduction/collectio n of tax As per the existing provisions of section 200(3) every person responsible for deducting tax under Chapter XVII-B shall file a quarterly statement to the Director-General of Income-tax (Systems) or the person authorised by the Director General of Income-tax (Systems), on or before the 15th July, the 15th October, the 15th January in respect of the first three quarters of the financial year and on or before the 15th June following the last quarter of the financial year.a) In Form No. 24Q in respect of deduction of tax at source under sub-sections (1) and (1A) of section 192; andb) In Form No. 27Q in respect of the deductee other than a company, being a non resident or resident but not ordinarily resident or the deductee being a foreign company; and c) In Form No. 26Q in respect of all other cases of deduction of tax at sourceAlso under section 206C, every person responsible for collecting tax under Chapter XVII-BB shall file a quarterly statement to the Director-General of Income-tax (Systems) or the person authorised by the Director General of Income-tax (Systems) in Form No 27EQ.This rule has been now amended to include a TDS Compliance statement in Form No.24C in addition to the above all quarterly statements.Introduction of TDS and TCS Compliance statement Form No.24Ca) This statement ensures that the deductor/collector of TDS/TCS makes his entire statutory obligations properly as per the rules for the timely remittance of proper amount.b) The SCH COM 1 gives the details for the TCS/TDS deducted and collected under section 192 to section 206C for the first month of the relevant quarter and accordingly SCH COM 2 and SCH COM 3 gives the details for the other months of the relevant quarter. In the absence of remittance for a particular month the details relating to the available month will be in the SCH COM 1 and like.c) The SCH PAY gives the details of payment deducted or collected at source with Challan Identification Number (CIN) and amount for the above three SCH COM 1 to SCH COM 3 separately.d) The deuctee wise break up of TDS is given as Annexure I is substituted for Form 24Q. Similarly for Form 26Q and 27Q the deuctee wise break up of TDS is substituted and given as an Annexure. e) The party wise break-up of TCS for Form No 27EQ is also given as Annexure. ConclusionThe following observations may be considered before the form is actually put in to use.Ø In Form No. 16 under the head Gross Salary cross reference is made to Form No. 12BA which is indicated as 12BB instead of 12BA.Ø Since the Income Tax Act specifically identifies "rounding off" as an item, it needs to be distinctively shown separately like surcharge or interest both on the gross amount and the income tax TDS/TCS. Ø As per the existing provisions quarterly statement in Form No 24Q, Form No 26Q, Form No 27Q, and Form No 27EQ are to be filed on or before the 15th July, the 15th October, the 15th January in respect of the first three quarters of the financial year and on or before the 15th June following the last quarter of the financial year. Now Form No 24C has to be filed on the above dates. The statements in Form No 24Q, Form No 26Q, Form No 27Q, and Form No 27EQ are to be filed on or before the 15th June of the following financial year, even though they are made as annexure to Form No 24C which needs clarification due to the reason of specifying the date separately.Ø Even though the issue of TDS certificate under section 192(1) or section 192(1A) are to be issued with in one month from the end of the financial year, the quarterly return in Form No 24 Q can be filed up to 15th June of the next financial year with out any purpose.Ø When a deductee submits his PAN in the second month of a particular quarter, the validation with PAN is for two months and validation without PAN is for one month, transforming the details in the quarterly returns requires a careful analysis.

compiled by CA Rajesh P Langalia