The Indian Hume Pipe Co. Ltd. has received a penalty of ₹40.39 lakh from the Income Tax Department for Assessment Year 2024-25. The levy stems from an alleged under-reporting of income linked to an arithmetical error in the company's return.

The penalty, amounting to 200% of the tax difference of ₹20.19 lakh, was imposed by the Assessment Unit, NAFAC, Delhi, under Section 270A of the Income Tax Act, 1961. The order dated September 21, 2026, follows an assessment where the department claimed mis-reporting of income totaling ₹58.84 lakh.

Dispute over arithmetical error and tax rates

The company clarified that the discrepancy arose from an arithmetical error of ₹58.84 lakh in its filed return. This error was rectified during assessment proceedings, and the corresponding tax on the additional income was paid by March 31, 2026. Despite this, the department proceeded with the penalty notice issued in March 2026.

Indian Hume Pipe argued in its reply that penalties are not leviable for mere arithmetical errors. Furthermore, the company highlighted a significant procedural flaw: the penalty was calculated using a corporate tax rate of 30%, whereas the company is assessed at a lower rate of 22%. This discrepancy suggests the penalty quantum may be overstated relative to the actual tax liability.

Company challenges the order

The company intends to move a rectification petition to correct the quantification of the penalty. It will also file an appeal before the Commissioner of Income Tax (Appeals), NAFAC, Delhi. Management asserts it has adequate factual and legal grounds to substantiate its position and expects the entire demand to subside.

What the numbers show

A divergence exists between the tax rate applied for the penalty calculation and the company's actual assessed rate. The department computed the penalty base using 30%, while Indian Hume Pipe is liable at 22%. If the penalty were recalculated at the correct 22% rate, the base tax amount would be lower, potentially reducing the final penalty significantly. The company’s payment of the differential tax prior to the penalty order further strengthens its argument against the levy for a rectified arithmetical mistake.

Indian Hume Pipe Company Limited has been directed to pay a penalty of ₹63,10,816 by the Commissioner of Income Tax (Appeals), NAFAC, Delhi. The order, dated August 14, 2026, confirms the levy imposed under Section 271AAC(1) of the Income Tax Act, 1961, for Assessment Year 2023-2024.

The penalty arises from an addition of ₹10,51,80,264 in the assessment order, which the tax department classified as alleged unexplained purchases. This disallowance was originally made in the assessment order dated March 25, 2025, under Section 143(3) of the Act and was subsequently confirmed by the Commissioner of Income Tax (Appeals) on August 30, 2025.

Litigation Status

Indian Hume Pipe had challenged the disallowance by filing a quantum appeal before the Income Tax Appellate Tribunal (ITAT), Mumbai, on October 29, 2025. This appeal remains pending adjudication as of the date of the penalty order. The company noted that the penalty was imposed while ignoring the pendency of this quantum appeal.

Company Response

In its disclosure to stock exchanges under Regulation 30 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, Indian Hume Pipe stated it will prefer an appeal against the penalty order before the ITAT, Mumbai. The company believes it has adequate factual and legal grounds to substantiate its position.

Accordingly, management expects the entire demand to subside. The company asserted that there is no material impact on its financial, operational, or other activities due to this litigation.