Equal additions and penalties are sustainable when systematic failure to maintain records proves willful suppression.

The petitioner, a manufacturer of hosiery garments in Tiruppur, underwent an inspection by the Enforcement Wing on 26.11.2015.

The inspection revealed unaccounted purchases of cotton yarn and a failure to maintain the statutory Stock Register in Form-H.

Using the "trading account method," the Assessing Officer determined a stock suppression of ₹20,42,659/-, added 20% for deemed profit, and imposed an "equal addition" for probable omission, along with a 150% penalty.

The Appellate Deputy Commissioner partly allowed the appeal, deleting the equal addition and penalty on the grounds that there was no tangible evidence of continuous suppression or willful non-disclosure.

The Revenue appealed to the Tamil Nadu Sales Tax Appellate Tribunal, which restored the equal addition and penalty, finding systematic tax evasion.

The petitioner challenged this restoration via the present Tax Case Revision.

1. Whether the value of stock-in-difference determined via the notional "trading account method" is legally sustainable?

2. Whether the Appellate Tribunal was correct in sustaining the "equal addition" for probable omission in the absence of a regular pattern of suppression?

3. Whether the levy of 150% penalty under Section 27(3)(c) of the TNVAT Act, 2006, is sustainable without a specific finding of willful non-disclosure?

Section 22(4) of the TNVAT Act, 2006, which empowers the authority to conduct a "Best Judgment Assessment" if returns are not submitted or are incorrect.

Section 27(3), which mandates a penalty of up to 150% if the escape from assessment is due to "wilful non-disclosure" of assessable turnover.

Principles from Nokia India (P) Ltd v. Deputy Commissioner (CT)-IV, holding that while best judgment involves guesswork, it must have a rational nexus with available material, and "equal addition" requires specific reasoning/material rather than being an automatic concomitant of suppression.

The court reasoned that while the "trading account method" might be notional/unscientific in some contexts, it is a recognized mode of verification when a dealer fails to maintain mandatory records like Form-H.

Since the petitioner accepted the stock difference before the Enforcement Wing and did not challenge the primary tax levy on suppression, the fact of suppression was established.

Unlike cases where suppression is marginal or a one-off error, the court found the quantum here "shockingly high"—with physical stock (₹24.95 lakhs) being nearly five times the book stock (₹4.52 lakhs).

The court held that the deliberate omission of purchase invoices and the failure to maintain Form-H provided sufficient material to conclude that the suppression was "wilful" and part of a systematic evasion, thereby justifying both the equal addition for probable omission and the consequential penalty under Section 27(3).

It held that the Appellate Tribunal correctly restored the equal addition and penalty because the vast discrepancy in stock and the failure to maintain statutory records constituted clear evidence of willful non-disclosure. The order of the Tribunal was upheld as the final fact-finding authority.