Sir Shadi Lal Enterprises Limited has received a penalty order from the Income Tax Department imposing a penalty of Rs 1.73 crore under section 271(1)(c) of the Income Tax Act, 1961. The company disclosed this development to the stock exchanges on March 30, 2026, in compliance with SEBI listing regulations.

Penalty Details and Background

The penalty pertains to Assessment Year 2015-16 and stems from alleged inaccurate particulars of income furnished by the company. The Income Tax Department imposed the penalty at 100% of the tax sought to be evaded, which amounts to Rs 1.73 crore.

Nature of Violation

The penalty relates to an addition of Rs 5.59 crores made by the tax authorities, with Rs 5.50 crores attributed to alleged non-consideration of sale amount in computing long-term capital gains. The violation involves the computation of capital gains from a slump sale transaction of the company's sugar unit.

Assessment and Appeal History

The company originally filed its return for Assessment Year 2015-16 declaring a loss of Rs 44.00 crores. During scrutiny assessment, the Income Tax Department made additions totaling Rs 27.10 crores, resulting in a revised assessed loss of Rs 16.81 crores. The company subsequently appealed the assessment order through various appellate forums.

ITAT Relief and Current Position

The Income Tax Appellate Tribunal (ITAT) partly allowed the company's appeal on July 16, 2025, providing some relief on the capital gains computation. However, the penalty proceedings continued based on the remaining addition of Rs 5.59 crores after considering the ITAT relief.

Company's Response

Sir Shadi Lal Enterprises Limited has indicated that it will contest the penalty order in appeal. The company expressed confidence in obtaining full relief through cancellation of the imposed penalty. The tax demand of Rs 1.74 crores will be contested through the appellate process.

Financial Impact

The company has disclosed that while a tax demand of Rs 1.74 crores has been raised, it will contest this demand in appeal. The company remains hopeful of obtaining complete relief and cancellation of the penalty through the appellate proceedings.

Sir Shadi Lal Enterprises Limited announced its unaudited financial results for the third quarter and nine months ended December 31, 2025, revealing continued operational challenges despite revenue improvements. The sugar and distillery company reported a net loss of ₹1699.37 lakhs for Q3 FY26, representing a 16.93% increase in losses compared to ₹1453.37 lakhs in the corresponding quarter of the previous year.

Financial Performance Overview

The company's revenue performance showed positive momentum with total income from operations reaching ₹7805.05 lakhs in Q3 FY26, marking a substantial 37.64% increase from ₹5671.35 lakhs in Q3 FY25. This growth trajectory extended to the nine-month period, where revenue surged 51.62% to ₹26635.84 lakhs compared to ₹17568.34 lakhs in the previous year.

Segment-wise Performance

The sugar segment dominated the company's operations, contributing ₹7797.63 lakhs to Q3 FY26 revenue compared to ₹5544.04 lakhs in Q3 FY25. However, the segment reported a loss of ₹1266.77 lakhs for the quarter. The distillery segment contributed minimal revenue of ₹7.42 lakhs and recorded a loss of ₹192.42 lakhs, with operations remaining largely suspended due to pending major repairs and replacements.

Operational Challenges and Exceptional Items

The company faced significant operational headwinds during the quarter, with total expenses rising to ₹10488.77 lakhs from ₹7874.78 lakhs in the previous year. Cost of materials consumed increased substantially to ₹13608.00 lakhs from ₹6457.49 lakhs, while finance costs rose to ₹875.84 lakhs from ₹354.53 lakhs.

An exceptional expense of ₹140.00 lakhs was recorded for Q3 FY26, attributed to the estimated impact of new Labour Codes notified by the Government of India on November 21, 2025. This amount represents the company's assessment of changes in employee benefit expenses resulting from the consolidation of 29 existing labour laws into four new codes.

Corporate Restructuring Progress

The company continues to advance its composite scheme of arrangement with Triveni Engineering & Industries Limited (TEIL). The scheme, approved by the Board on December 10, 2024, provides for the amalgamation of Sir Shadi Lal Enterprises into TEIL. Following approvals from shareholders and creditors meetings held on November 30, 2025, the company filed a petition with the National Company Law Tribunal on December 13, 2025. The next hearing is scheduled for February 5, 2026.

Going Concern and Future Outlook

Despite the losses, the company's financials are prepared on a going concern basis, supported by technical and financial assistance from holding company TEIL. The auditors noted the company's recognition of deferred tax assets of ₹5702.00 lakhs as of December 31, 2025, primarily related to unabsorbed losses and depreciation, based on management's expectation of future profitability and the proposed amalgamation scheme.