Edinburgh-based oil and gas producer Cairn Energy has confirmed it faces an investigation by the tax authorities in India over income tax assessments for the year ended 31 March 2007 relating to its former subsidiary in the country.

In a statement, the FTSE 250-listed oil and gas exploration and development group said it has been contacted by the Income Tax Department of India, and is 'co-operating to provide the necessary documentation and information as requested'.

In 2006, Cairn Energy transferred its Indian assets into Cairn India Ltd, which is one of the nation's largest oil producers and was listed on the stock exchanges through an initial public offering (IPO). In 2011, Cairn sold its majority stake to mining group Vedanta Group for $8.67bn (£5.22bn).

While discussions about its tax affairs are ongoing, Cairn Energy said the Indian Income Tax Department has instructed the company to hold its shares in Cairn India.