Vikran Engineering Limited received a GST demand cum show cause notice totaling ₹5.34 crore from the CGST & CX authority in Patna-I, relating to the fiscal year 2022-23. The notice was issued on September 22, 2026, under Section 73 of the CGST Act, 2017.

The regulatory filing, submitted to stock exchanges on September 23, 2026, details that the tax demand raised amounts to ₹5,34,45,785, with an additional penalty of ₹53,44,579 levied. The authorities cited discrepancies between GSTR-2A and GSTR-3B returns, non-payment of tax on a reverse charge mechanism (RCM) basis, and turnover differences regarding TDS supplies as the primary grounds for the action.

Nature of the Regulatory Action

The Office of the Additional Commissioner, CGST & CX, Patna-I, issued the notice in Form GST DRC-01. The company has acknowledged receipt and stated its intention to respond within the specified time period. Despite the significant quantum of the demand relative to typical small-cap operational scales, Vikran Engineering asserted that it does not foresee any material impact on its financial or operational activities.

What the Numbers Show

The total financial exposure disclosed in the notice is approximately ₹5.88 crore, comprising the primary tax demand and the associated penalty. A notable pattern in the source data is the penalty structure: the penalty amount of ₹53,44,579 represents exactly 10% of the principal tax demand of ₹5,34,45,785. This precise ratio suggests the authorities may have applied a standard penalty calculation method often seen in initial show cause notices under Section 73, rather than a discretionary higher penalty, which could imply the case is at an early procedural stage pending the company's response.

Vikran Engineering Limited received a favorable order from the Income Tax Appellate Tribunal (ITAT), dropping an income tax demand of ₹3.97 crore and reversing an addition of ₹6.80 crore for Assessment Year 2016-17.

The ITAT "F" Bench, Mumbai, passed the order on September 15, 2026, which was received by the company on September 22, 2026. The tribunal accepted the company's submissions regarding unsecured loans availed from four lender entities, holding that the company discharged its onus of proving identity, creditworthiness, and genuineness under Section 68 of the Income Tax Act, 1961.

Background of the Dispute

The dispute originated from a search action conducted under Section 132 of the Income Tax Act on March 24, 2021. Following this, the Assessing Officer framed an assessment under Section 153A for AY 2016-17 and made significant additions to the company's taxable income.

The additions were initially upheld by the Commissioner of Income Tax (Appeals)-11, Pune, in an order dated November 8, 2024. Vikran Engineering subsequently preferred an appeal before the ITAT, which has now allowed the appeal in entirety.

Breakdown of Dropped Additions

The tribunal's order resulted in the deletion of the following amounts previously added to the company's income:

The total demand of ₹3,96,75,696 comprised the tax liability and consequential interest arising from these additions.

Impact on Financial Position

The company stated that it does not foresee any material impact on its financial or operational activities. However, the order leads to the extinguishment of a contingent liability of ₹3.97 crore currently disclosed in its books.

What the Numbers Show

The reversal of the entire addition of ₹6.80 crore highlights the successful defense of the company's capital structure disclosures for AY 2016-17. By proving that the loans, along with interest, stood repaid during the relevant year, the tribunal removed the basis for treating the inflows as unexplained cash credits. This outcome eliminates the associated tax demand and interest, directly improving the company's contingent liability profile without altering historical reported profits.