HP Cotton Textile Mills Faces Old Tax Bill Amid Insolvency

HP Cotton Textile Mills Ltd announced it received a Notice of Assessment on May 7, 2026, from tax authorities concerning alleged unpaid dues for the assessment years 2008-09 through 2014-15.

Tax Assessment Details

The textile manufacturer informed exchanges about receiving the notice from the Excise and Taxation Officer-cum-Assessing Authority in Hisar. This notice flags alleged non-filing of tax returns and non-payment of dues over seven assessment years. HP Cotton Textile Mills stated that the full financial implications, including potential penalties and interest, are currently unascertained.

Impact on Insolvency Process

This development adds a new layer of complexity for HP Cotton Textile Mills, which is already undergoing the Corporate Insolvency Resolution Process (CIRP). Potential significant tax liabilities, interest, and penalties could impact the ongoing resolution plan and the company's financial recovery. The lack of clarity on the exact amount of these liabilities creates considerable uncertainty for stakeholders.

Company's Recent History

HP Cotton Textile Mills was admitted into CIRP in December 2023 following financial distress. The company was also delisted from the National Stock Exchange (NSE) in November 2023. The tax notice covers a period dating back over a decade, raising questions about why these old dues are resurfacing now.

Next Steps and Implications

HP Cotton Textile Mills must now formally respond to the tax authorities, likely providing documentation and arguments regarding the assessment. The potential financial liability will need to be assessed and potentially accounted for within the CIRP framework. Shareholders will await clarity on whether this old tax demand will be treated as a creditor claim in the CIRP.

Key Risks

The primary risks include a significant financial burden from potential tax demands, penalties, and accumulated interest for the assessment years 2008-2015. Adverse adjudication by tax authorities could lead to substantial unforeseen liabilities. The unresolved tax issue also risks complicating or delaying the ongoing CIRP and the final resolution plan.

Monitoring the Situation

Investors will track the company's formal response and engagement with tax authorities. They will also look for the ascertainment and disclosure of the specific financial implications and potential liabilities. How this tax claim is treated within the ongoing CIRP and resolution plan will be crucial. Any further directives or outcomes from the adjudication process will also be monitored.