Taxman asks Mahindra Satyam to re-audit accounts for Satyam's fraud years

The income-tax department has served a notice on Mahindra Satyam, asking it to go for an audit of its accounts for the assessment years from 2002-03 to 2007-08.

The company, formed after the Mahindra Group took over the fraud-hit Satyam Computer Services Ltd last year, told the stock exchanges on Tuesday that it has received a letter from the tax department to this effect, but did not provide further details.

However, it is learnt that the I-T department has invoked section 142 (2A) of the Income-Tax Act and asked the scam-hit company to go for re-audit for the two assessment years. Both the assessment years relate to the period during which Satyam founder and chairman B Ramalinga Raju fudged the books to fraudulently enrich himself and his family.

The section gives the assessing officer powers to call for a special audit if he perceives complexity in the accounts of the assessee. The officer, however, should give the assessee enough time to respond.

After addressing the financial mess, Mahindra Satyam under the new management had come out with financial results for the years up to 2009-10 in September. On 15 November, it announced the results for the first two quarters of this financial year. The re-statement of company's financials found that there were certain fictitious tax payments (advance tax and US federal tax), which were recorded in the books, amounting to Rs306 crore.

Further, tax payments / refunds (net) to the extent of Rs49.8 crore were unrecorded.