Renewable Energy Systems Limited (hereinafter referred to as "RESL" or "the Company") is a prominent, publicly listed company incorporated in India…

Renewable Energy Systems Limited (hereinafter referred to as "RESL" or "the Company") is a prominent, publicly listed company incorporated in India having its registered Office in Noida. RESL has established itself as a leader in the manufacturing and export of advanced components, particularly those used in renewable energy systems. RESL also provides maintenance services of solar systems and sells its products through e-commerce platform, TRICON. Incorporated in 2008, RESL has consistently maintained robust growth, underpinned by technological innovation and strategic market penetration. As of 31st March 2025, RESL is a large-scale entity with a complex operational structure, requiring stringent adherence to the Companies Act, 2013, Securities and Exchange Board of India (SEBI) regulations, and Indian Accounting Standards (Ind AS). The Company maintains a strong equity position, with its equity shares listed on a recognized stock exchange, demanding high quality and timely financial disclosures. The Board of Directors (BoD) of RESL comprises 14 Directors, including both Executive and Non-Executive members. Currently, RESL's Articles of Association permit a maximum strength of 15 Directors. Recognizing the need for diverse expertise to oversee its complex financial structure (RESL's operational efficiency and stringent regulatory requirements), the BOD plans to induct two new specialized directors (Mr. P and Mr. Q) subject to necessary approvals. The Chief Financial Officer (CFO) is tasked with the advanced role of balancing financial goals vis-a-vis sustainable growth, overseeing adequate financial controls, and strategically allocating scarce capital resources among competing opportunities. Traditionally focused on wealth maximization, the management now embraces and advises CFO to use an overall approach, Strategic Financial Management, focusing on applying financial management techniques to strategic decisions, to maximize the organization's market value. RESL follows a policy of retaining 70% of its profit for future expansion reflecting a strategic financial policy decision that affects performance. However, achieving stability in dividend payment is also a desirable consideration as it can positively impact share prices, requiring the CFO to strike a balance between retained earnings and shareholder preference for dividends against capital gains. In April 2025, RESL finalized a service contract (overhauling of solar panels) with ABC Limited (a registered person under GST). The service was fully provided on 20/07/2025. Payment for 10 lakhs was received in advance on 15/07/2025. The invoice was issued on 22/07/2025. The GST rate applicable to this service changed from 12% to 18% with effect from 21/07/2025. Accounts department raised an invoice and charged GST @ 18%. Besides this, RESL received an order through TRICON, for supply of components to FG Industries (an unregistered person under GST and located in Rohtak, Haryana). FG Industries instructed RESL to deliver the components to VC Industries based, in Jalandhar, Punjab. Accounts department while raising an invoice, considered Rohtak (Haryana) as the place of supply for GST charge and recorded delivery address of Jalandhar (Punjab). In alignment with its strategy to gain a competitive advantage through technology, RESL, plans a major acquisition: the takeover of Tech Components Limited (TCL). This strategic move aims at backward integration by acquiring specific raw material supplier with core technology expertise. RESL intends to use a share-for-share exchange, but first requires a comprehensive business valuation. The valuation team, headed by the CFO, is considering methodologies, including the present value (PV) of future cash flows, aligning with the conceptual framework of valuation. TCL's current book value is 400 per share, Return on equity is 12% and it follows the same policy as followed by RESL for retained earnings. To finance the acquisition various financing options were discussed and it was decided to issue Optionally Convertible Preference Shares (OCPS) with a face value of 100, carrying a 5% non-cumulative dividend, convertible into 5 equity shares, redeemable after 8 years. The comparable market interest rate for a similar non-convertible instrument is 8%. After raising the funds from OCPS, balance amount, if any, will be funded by borrowings from company's bankers. Accordingly, bankers were requested to get the proposal sanctioned from bank's higher authorities. Bank asked for Audited Financial Statements for the Year ended 31.03.2025. M/s HK & Associates are the Statutory Auditors of RESL for the financial year 2024-25. As a listed entity, the audit engagement is subject to rigorous quality control standards (SQC 1 and SA 220). The engagement partner, CA. H, is responsible for overall quality procedures applicable to the audit. During the audit of RESL's revenue recognition policies for complex multi-year service contracts, a contentious issue arose. CA. H decided to consult the Engagement Quality Control Reviewer, CA. S on this matter. Also, CA. S enquired from CA. H as to whether Internal Audit reports have been reviewed or not. CA. H informs that CA. L is the internal auditor of the company. On perusal of internal audit reports, CA. H observed that internal auditor has pointed out some GST issues where GST on invoices raised to some of the related parties has not been paid as per the rates applicable. After going through the details of GST issues, it was observed that RESL supplied multiple goods with different rates but GST rate applicable on item carrying lowest rate has been applied on the entire invoice amount. With these deficiencies all the GST returns (GSTR 1 and GSTR 3B) for the concerned month have been filed. Department identified the misrepresentation of facts and proper officer before serving show cause notice, communicated the details of tax short paid (₹ 10.00 lakhs) along with interest and penalty to RESL. Management however after verifying the amount, paid - 8.00 lakhs along with interest and penalty amounting to 80,000. In view of the management, department now cannot issue SCN under GST provisions. However, to its surprise, SCN was issued even after the payment of tax. Multiple Choice Questions: [Provide the correct option to the following questions]