Re-opening of accounts on court’s or Tribunal’s orders
📚 Law Minded summary
Accounts once approved are normally final. This section is the narrow exception.
A court or the Tribunal can order a company to re-open its books and recast its financial statements — but only on an application by the Central Government, an income-tax authority, SEBI, another regulator, or a person the Tribunal permits.
The grounds are serious: the accounts were prepared fraudulently, or the company's affairs were mismanaged and the accounts cannot be relied on. Books cannot be re-opened beyond eight financial years back.
(1) A company shall not re-open its books of account and not recast its financial statements, unless an application in this regard is made by the Central Government, the Income -tax authorities, the Securities and Exchange Board, any other statutory regulatory body or authority or any person concerned and an order is made by a court of competent jurisdiction or the Tribunal to the effect that—
(i) the relevant earlier accounts were prepared in a fraudulent manner; or (ii) the affairs of the company were mismanaged during the relevant period, casting a doubt on the reliability of financial statements: Provided that the court or the Tribunal, as the case may be, shall give notice to the Central Government, the Income -tax authorities, the Securities and Exchange Bo ard or any other statutory regulatory body or authority concerned 1[or any other person concerned] and shall take into consideration the representations, if any, made by that Government or the authorities, Securities and Exchange Board or the body or authority concerned 1[or the other person concerned] before passing any order under this section.
(2) Without prejudice to the provisions contained in this Act the accounts so revised or re -cast under sub-section (1) shall be final. 2[
(3) No order shall be made under sub-section (1) in respect of re-opening of books of account relating to a period earlier than eight financial years immediately preceding the current financial year: Provided that where a direction has been issued by the Central Government under th e proviso to sub-section (5) of section 128 for keeping of books of account for a period longer than eight years, the books of account may be ordered to be re-opened within such longer period.]