The MCA vide its Notification No. G.S.R. 205(E), dtd. 24th March, 2021 notified a new set of Rules i.e., Companies (Accounts) Amendment Rules, 2021 to further amend the existing Companies (Accounts) Rules, 2014. The said notification came into force w.e.f. 1st April, 2021.
In regards to the same, there’s a confusion amongst Professionals and Companies regarding its applicability. To build a better understanding and to have a clear picture, let’s have a look at the amendments:
1. Insertion of proviso in Rule 3(1):
“Provided that for the financial year commencing on or after the 1st day of April, 2021, every company which uses accounting software for maintaining its books of account, shall use only such accounting software which has a feature of recording audit trail of each and every transaction, creating an edit log of each change made in books of account along with the date when such changes were made and ensuring that the audit trail cannot be disabled.”
Vide this amendment, the MCA introduced the concept of Audit Trail in the Corporate Environment which was missing from a long time and was essentially required for the purpose of maintaining transparency and minimizing frauds.
As it can be clearly noted that this amendment was ought to come into force w.e.f. 1st April, 2021, however, the MCA vide its Notification No. G.S.R. 247(E), dtd. 01st April, 2021, notified Companies (Accounts) Second Amendment Rules, 2021, and substituted “1st day of April, 2021” with “1st day of April, 2022” in the proviso.
Further, the MCA vide its Notification dtd. 31st March, 2022, notified Companies (Accounts) Second Amendment Rules, 2022, and substituted “1st day of April, 2022” with “1st day of April, 2023” Consequently, the applicability of this amendment got deferred.
2. Insertion of clauses (xi) & (xii) in Rule 8(5):
“(xi) the details of application made or any proceeding pending under the Insolvency and Bankruptcy Code, 2016 (31 of 2016) during the year along with their status as at the end of the financial year.
(xii) the details of difference between amount of the valuation done at the time of one-time settlement and the valuation done while taking loan from the Banks or Financial Institutions along with the reasons thereof.”
Vide this amendment, the MCA added 2 new matters to be included in the Board’s Report from F.Y. 2021-22 onwards.
CONCLUSION: Keeping in view the above points in consideration, it can be concluded that:
a. The provisions of Audit Trail are applicable w.e.f. 1st April, 2023.
b. The additional matters to be included in the Board’s Report are applicable w.e.f. 1st April, 2021.
Whether the newly introduced matters are to be included in the Board’s Report of F.Y. 2021-22?
Here, it is very clear from the language of the provision itself, that the amendments in Board’s Report are applicable w.e.f. 1st April, 2021. So, for the Board’s Report which is to be prepared for F.Y. 2021-22, matters as provided in clauses (xi) & (xii) of Rule 8(5) are to be included.
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