Madras High Court
Mahalakshmi Hardware & Electrical vs State Of Tamil Nadu on 1 April, 2025
Author: Mohammed Shaffiq
Bench: Mohammed Shaffiq
T.C.No.11 of 2025
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 01.04.2025
CORAM :
THE HON'BLE MR.K.R.SHRIRAM, CHIEF JUSTICE
AND
THE HON'BLE MR.JUSTICE MOHAMMED SHAFFIQ
Tax Case (Revision) No.11 of 2025
and C.M.P.No.4508 of 2025
Mahalakshmi Hardware & Electrical
No.83-24-2A, Trichy Main Road
Villupuram. .. Petitioner
Vs
State of Tamil Nadu
rep. by the Joint Commissioner (CT)
Vellore Division, Vellore. .. Respondent
PRAYER: Revision under Section 60(1) of the TNVAT Act, 2006 to revise
the order dated 9.12.2024 passed in S.T.A.No.495 of 2018, by the Tamil
Nadu Sales Tax Appellate Tribunal (Main Bench), Chennai.
For Petitioner(s): Mr.Adithya Reddy
For Respondent(s): Mr.C.Harsha Raj
Special Government Pleader
___________
Page 1 of 8
https://www.mhc.tn.gov.in/judis ( Uploaded on: 03/04/2025 08:02:10 pm )
T.C.No.11 of 2025
ORDER
(Order of the Court was made by the Hon'ble Chief Justice)
By consent, the revision is taken up for hearing.
2. The tax case revision impugns an order dated 9.12.2024 passed by
the Tamil Nadu Sales Tax Appellate Tribunal (Main Bench), Chennai
[Tribunal].
3. One Mohan carries on business as sole proprietor in the name and
style of Mahalakshmi Hardwares & Electrical. Petitioner trades in hardware
and electricals. Petitioner is an assessee on the file of the Commercial Tax
Officer, Villupuram-I Assessment Circle.
4. On 28.12.2015, 29.12.2015 and 30.12.2015, there was an
inspection by the officials of the Enforcement Wing of the Commercial Tax
Department. In the course of inspection, there was an allegation of stock
difference and, consequently, an estimation of sales suppression to the tune
of Rs.79,42,350/- was made and the tax effect was Rs.5,48,022/-.
___________
https://www.mhc.tn.gov.in/judis ( Uploaded on: 03/04/2025 08:02:10 pm )
5. Subsequently, the Assessing Authority passed an assessment order
dated 3.12.2016 for the assessment year 2015-2016 confirming the demand
on a turnover of Rs.79,42,350/- and the tax effect of Rs.5,48,022/-. There
was an equal addition to the tune of Rs.84,05,096/- to the tax effect of
Rs.5,71,159/-; and penalty of Rs.8,56,739/- was imposed under Section
27(3) of the Tamil Nadu Value Added Tax Act, 2006 [TNVAT Act].
6. Petitioner filed a first appeal before the Appellate Deputy
Commissioner (CT), Cuddalore. The Appellate Authority set aside the sale
suppression, equal addition and penalty under Section 27(3) of the TNVAT
Act, but made an ad-hoc addition of Rs.20,00,000/- to the book turnover in
order to meet the ends of justice.
7. The department filed a second appeal before the Tribunal. The
Tribunal confirmed the order of the Assessing Authority and set aside the
order passed by the Appellate Authority. It is against this order dated
9.12.2024 of the Tribunal that petitioner has approached this court on
___________
https://www.mhc.tn.gov.in/judis ( Uploaded on: 03/04/2025 08:02:10 pm )
various grounds.
8. Petitioner's counsel, though has not questioned the stock difference
allegation and, consequently, the estimation of sale suppression to the tune
of Rs.79,42,350/-, has questioned the equal addition to the tune of
Rs.84,05,096/- and the imposition of penalty under Section 27(3) of the
TNVAT Act of Rs.8,56,739/-.
9. It is petitioner's case that the equal addition of alleged suppressed
turnover is purely a guess work. Shri Reddy submitted that there was no
basis for making equal amount addition and it was only an estimate and not
in accordance with law. According to Shri Reddy, equal addition was
unwarranted because it was for probable omission/suppression.
10. On the issue of penalty, Shri Reddy submitted that before the
issuance of the show cause notice amounts have been paid and, therefore,
there was no willful suppression.
___________
https://www.mhc.tn.gov.in/judis ( Uploaded on: 03/04/2025 08:02:10 pm )
11. Shri Harsha Raj, per contra, submitted that the equal addition is
justified and it is based on valid material. He submitted that a factual
finding has been given that assessee had failed to maintain correct accounts
and even the stock found was in excess on the date of inspection. Shri
Harsha Raj also submitted that only after the search was made did the
assessee make available documents and details and, therefore, the equal
addition is justified.
12. As regards penalty, Shri Harsha Raj submitted that the judgments
where it is held that when the tax has been paid before issuance of show
cause notice penalty need not be imposed would not help petitioner,
because petitioner paid the amount after the search and not because
petitioner found an error or volunteered to make the payment.
13. The following questions of law were proposed by Shri Reddy:
(a) Whether, in the facts and circumstances of the case,
the Tribunal has committed an error of law in restoring
equal addition on the turnover of Rs.84,05,096/-?
___________
https://www.mhc.tn.gov.in/judis ( Uploaded on: 03/04/2025 08:02:10 pm )
(b) Whether, in the facts and circumstances of the case,
the Tribunal has committed an error of law in restoring
the levy of penalty under Section 27(3) of the TNVAT
Act?
14. Having considered the submissions, we find that in respect of
equal addition made, the same is without any basis. The equal addition, in
our view, is unwarranted. It is only based on estimate and, that too, for
probable suppression, a guess work. There is no material for making equal
addition for probable suppression, rather addition is capricious. Therefore,
to the extent of equal addition made, we quash and set aside the impugned
order. Accordingly, the first question of law is answered in favour of
petitioner.
15. As regards penalty, admittedly, the amount of tax has been paid
after the search was conducted and, therefore, the department is justified in
saying that there was willful suppression. Consequently, the second
question of law is answered against petitioner.
___________
https://www.mhc.tn.gov.in/judis ( Uploaded on: 03/04/2025 08:02:10 pm )
Tax case is disposed of accordingly. There shall be no order as to
costs. Consequently, interim application stands closed.
(K.R.SHRIRAM, C.J.) (MOHAMMED SHAFFIQ,J.)
01.04.2025
Index : Yes/No
NC : Yes/No
sasi
To:
1. The Manager
Tamil Nadu Sales Tax Appellate Tribunal
Chennai – 600 104.
2. The Appellate Deputy Commissioner (CT)
Cuddalore.
3. The Commercial Tax Officer
Villupuram-1.
___________
https://www.mhc.tn.gov.in/judis ( Uploaded on: 03/04/2025 08:02:10 pm )
THE HON'BLE CHIEF JUSTICE
AND
MOHAMMED SHAFFIQ,J.
(sasi)
Tax Case (Revision) No.11 of 2025
01.04.2025
___________
https://www.mhc.tn.gov.in/judis ( Uploaded on: 03/04/2025 08:02:10 pm )
