Madras HC confirms 150% Penalty imposed u/s 16(2)(d) of TNGST Act for Sales/Purchase Suppression Despite Deleting Speculative Additions [Read Order]

In a recent ruling, the Madras High Court confirmed a 150% penalty imposed under Section 16(2)(d) of the Tamil Nadu General Sales Tax Act, 1959 (TNGST Act) for sales/purchases suppression despite deleting speculative additions.

Ruckmani Electricals, the petitioner is a registered dealer under the Tamil Nadu General Sales Tax Act, 1959 (TNGST Act). An inspection was conducted on 13.12.2000 at the petitioner’s premises where various discrepancies had been found.

After hearing from the assessee, an assessment order was passed for the period 2000-2001 on 30.09.2002, the assessing authority added a sum of Rs. 41,356 for purchase suppression of aluminum winding wires, along with 15% freight and Gross Profit.

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Additions for probable omissions for the previous period were also made, alongside suppression in sales and second sales of electrical goods. A penalty at the rate of 150% under Section 16(2)(d) of the TNGST Act was imposed for purchase/sales suppression.

On appeal, the first appellate authority (FAA) allowed the appeal on 14.11.2002. Revenue appealed the FAA order before the Tamil Nadu Sales Tax Appellate Tribunal (STAT) which reversed the order of the first appellate authority allowing the State appeal.

Aggrieved by the tribunal decision, the assessee challenged the STAT order before the Madras High Court arguing that the additions made for the suppression of sales and purchases were unwarranted as the amounts had already been accounted for in the closing balance of the previous assessment year (1999-2000). The petitioner’s counsel presented a single-page "trading account" as evidence to support this claim.

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On the contrary, the revenue counsel argued that additional evidence (trading account) submitted by the petitioner was not produced during the inspection or the assessment proceedings and should not be accepted at this stage.

The bench comprising Justice Anita Sumanth and Justice G. Arul Murugan observed that the trading account was produced only during the appellate proceedings and had not been shown during the inspection or assessment. Thus, the court upheld the tribunal's decision to reject the additional evidence since there was no reasonable justification for its delayed submission.

While confirming the additions made for the suppression of purchase/sales, the court found that the two equal-time additions made by the assessing authority were based on speculation and were not backed by any concrete evidence. In the absence of new evidence, the court deleted the additional estimates.

The penalty imposed under Section 16(2)(d) of the TNGST Act for suppression was upheld, as the court found no fault in the original penalty decision.

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Therefore, the court upheld the additions made towards purchase and sales suppression and penalty but deleted the speculative double additions made by the assessing authority. The writ petition was disposed of and the Connected miscellaneous petition was closed.

To Read the full text of the Order CLICK HERE

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