A special audit committee formed by the government has investigated the books of accounts of DLF Ltd, India's largest realtor.

The panel has asked DLF to respond to questions raised within 120 days or by April 30. One of the questions pertain to possible evasion of tax by changing the revenue recognition method. DLF said it will respond to the queries in the next two months.

"The assessment is still to be done; it will be wrong to say that any action is being taken against DLF," the developer said.

Earlier in the day, the finance ministry said a special audit under section 142(2A) of the Income Tax Act was ordered in DLF for the assessment year 2006-07. In fiscal 2006, DLF revised its accounting standards as a prerequisite for listing the company. It changed its accounting standard to use percentage of completion method to recognise revenue and the related profits.

This accounting change led to DLF realising an additional profit of Rs 314 crore and taxable income

of Rs 334 crore for that period.

"DLF Ltd (as a standalone entity) paid tax of Rs 114 crore on the same, which is more than the tax paid by the company in the past years," DLF official said.

Meanwhile, DLF's vice-chairman Rajiv Singh said after their quarterly results that "DLF has never evaded tax, never fudged accounts and would respond to the government queries soon."

Vivek Seal/ DNA-Daily News & Analysis Source: 3D Syndication