Chambal Fertilisers received an order on March 9, 2026, from the Income Tax Department, levying an aggregate penalty of Rs. 96,86,205/- under Section 271(1)(c) of the Income Tax Act for Assessment Year 2011-12. The penalty stems from alleged wrong claims regarding the capitalization of an anicut construction expenditure and the recognition of diminution in the fair market value of Fertilizer Bonds. The company maintains a strong case to contest this order on merits at the appellate forum.
Tax Authority Order Details
Chambal Fertilisers and Chemicals Limited has disclosed the receipt of an order from the Income Tax Department’s Assessment Unit dated March 9, 2026. This order pertains to the levy of an aggregate penalty amounting to Rs. 96,86,205/- under Section 271(1)(c) of the Income Tax Act, 1961, concerning Assessment Year (AY) 2011-12.
Basis for Penalty Imposition
The penalty was imposed due to alleged incorrect claims made in the income tax return for AY 2011-12, focusing on two primary areas:
1. Anicut Construction Expenditure
The company had claimed an expenditure related to the construction of an anicut over the Parwan River as revenue expenditure in the regular assessment. This claim was disallowed by the Assessing Officer (AO). Subsequent appellate proceedings determined the expenditure was capital in nature, making the company eligible for depreciation from the year of capitalization, rather than immediate revenue deduction.
2. Fertilizer Bond Valuation
The company recognized a diminution in the fair market value of Fertilizer Bonds, which the Government of India settled against subsidy dues, applying the principle of prudence. The AO disallowed this claim during assessment proceedings. Appellate proceedings subsequently held that the deduction for this loss is allowed only in the year the bonds are sold, not in the year the diminution is recognized. The loss was eventually allowed in the year of sale.
Financial Impact and Legal Recourse
The company confirms that there is no impact on its current financial, operational, or other activities, save for the specific amount of the penalty levied. Furthermore, management firmly believes the Company has a good case to contest the order on its merits and intends to challenge the levied penalty before the appropriate appellate forum.
Source: BSE
