New Delhi, Apr 8 (IANS): British oil major Cairn Energy plc said on Thursday it faces a Rs.10,200 crore penalty from Indian income tax department in a dispute on applying retrospective tax of Rs.29,000 crore on it.

"The Indian tax department on February 4, 2016 issued a final assessment order, levying Rs.10,200 crore plus interest back dated to 2007 up to Rs.18,800 crore," the company said in a circular on Wednesday to its investors in London.

The latest order is based on a draft assessment note of January 22, 2014 on alleged capital gains Cairn made in a 2006 reorganisation of its India business.

The Edinburgh-based Cairn Energy still holds 9.8 percent equity stake in Cairn India through its UK Holdings Ltd (CUHL), after it sold majority stake in it to the London-based Vedanta mining group for $8.67 billion in 2011 though it raised Rs.8,616 crore ($1.9 billion) through a initial public offering (IPO) in mid-2006.

"The aggregate amount of Rs.29,000 crore excludes any applicable penalty, which may also be applied to the final assessment (potentially up to 100 per cent of the final assessment order, excluding interest)," Cairn said.

Asserting that it would contest the assessment proceedings, the company said it was pursuing its rights to appeal against the order under the Indian law on the retrospective tax and penalty, besides protecting its assets from any legal action.

The IT department notice was issued before (February 4) Finance Minister Arun Jaitley in his budget speech on February 29 made a one-time offer to waive interest and penalty if companies paid the principal amount to settle the retrospective tax disputes.

The circular also mentioned that the company had on March 11 filed a notice of dispute under the UK-India Investment Treaty to protect its legal position and shareholder interests.