Income Tax Notice Issued to Harish Textile Engineers

Information from the Directorate General of GST Intelligence (DGGI) has prompted the Income Tax Department to issue a notice to Harish Textile Engineers Limited. The notice, dated March 30, 2026, concerns Assessment Year (AY) 2021-22 and requires a company response by April 28, 2026.

The Notice Details

The tax department's inquiry is based on information received from the Directorate General of GST Intelligence (DGGI). This data relates to the company's Goods and Services Tax (GST) compliance between January and March 2021.

Why the Tax Department is Investigating

This notice indicates the Income Tax Department plans to examine if any income chargeable to tax for AY 2021-22 was not properly assessed. Such reviews can lead to reassessments and potential tax liabilities.
The reference to DGGI findings suggests the scrutiny may involve alleged irregularities in GST compliance, possibly including issues with delayed deposit of GST collected or problems related to Input Tax Credit (ITC).

Past Regulatory Engagements

Harish Textile Engineers, which manufactures textile processing machinery, has a history of interacting with tax authorities. In recent years, the company has faced GST scrutiny regarding its returns and alleged excess Input Tax Credit claims.

Additionally, the company has been involved in Income Tax Appellate Tribunal cases addressing additions related to expenditure and sale of scrap for periods dating back decades. These instances highlight a pattern of engagement with tax authorities.

While the textile industry globally faces GST complexities, Harish Textile Engineers' past tax issues are a specific point of attention.

What Harish Textile Engineers Must Do Now

The company is required to prepare and submit a detailed response to the Income Tax Department by April 28, 2026.
Harish Textile Engineers is consulting with its tax advisors to formulate this reply.
Shareholders should monitor further communications from the company and tax authorities.
If the department finds discrepancies, it could lead to a reassessment of past tax liabilities.

Key Risks for the Company

• Income Tax Examination: The primary risk is the Income Tax Department's investigation into potential underreported income, which could result in additional tax demands.
• GST Compliance Issues: Allegations regarding GST compliance, including potential problems with delayed GST deposits and Input Tax Credit (ITC), could lead to penalties or interest.
• Financial Impact: While currently unascertainable, adverse findings could create significant financial liabilities, affecting the company's profitability and cash flow.

Industry Peers and Harish Textile Engineers

Harish Textile Engineers operates in the textile machinery sector, a niche area within the broader textile ecosystem. Major players like Vardhman Textiles Ltd. and Arvind Ltd. are significantly larger and diversified, focusing on fabrics, garments, or home textiles. While these peers face their own industry challenges, they often have more robust compliance frameworks. HTEL's machinery business segment places it in a unique position, but its past tax issues remain a notable concern.

Financial Context

• Harish Textile Engineers reported a revenue of ₹132.59 Cr for FY24.
• The company registered a profit growth of -766.99% in FY24.

Next Steps to Monitor

Key developments to watch include Harish Textile Engineers' submission of its response by April 28, 2026, and any subsequent requests for information from the Income Tax Department. Investors should also monitor the final outcome of the AY 2021-22 assessment process and updates on the company's GST compliance status.