Mandatory stock records under sales tax law: missing corroboration can justify rejection of accounts without presuming concealment.

Section 12(2) of the U.P. Sales Tax Act was treated as a mandatory requirement for manufacturers to maintain prescribed stock books in addition to true and correct accounts of purchases and sales. The absence of that statutory corroboration could justify rejection of the account books because it undermines the reliability and verifiability of turnover. No separate presumption of dishonesty or concealment arises merely from non-maintenance of the stock register; the defect is evidentiary and relates to the absence of corroborative material required to test the primary accounts.

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Issues: (i) Whether section 12(2) of the U.P. Sales Tax Act is mandatory or directory; (ii) whether account books can be rejected merely for breach of section 12(2); (iii) whether a presumption arises that account books are not maintained in the ordinary course of business and sales and purchases are not verifiable merely because the prescribed stock register is not maintained.

Issue (i): Whether section 12(2) of the U.P. Sales Tax Act is mandatory or directory.

Analysis: The provision uses imperative language and is part of the statutory scheme requiring a manufacturer to maintain stock books in addition to true and correct accounts of purchases and sales. Its object is to secure corroboration of the primary accounts and to aid verification of turnover. The availability of a penalty for default does not by itself make the provision directory. The legislative intent, viewed with the scheme of the Act and the necessity of ensuring correct turnover, shows that compliance with section 12(2) is compulsory.

Conclusion: Section 12(2) is mandatory.

Issue (ii): Whether account books can be rejected merely for breach of section 12(2).

Analysis: The required stock books are not an empty formality; they provide the corroborative material on which the correctness of the main accounts is tested. If the statutory corroboration is absent, the assessing authority cannot safely accept the accounts as true and correct. Breach of the provision therefore affects the reliability of the accounts themselves and justifies rejection.

Conclusion: Account books can be rejected for breach of section 12(2).

Issue (iii): Whether a presumption arises that account books are not maintained in the ordinary course of business and sales and purchases are not verifiable merely because the prescribed stock register is not maintained.

Analysis: The rejection of accounts in such a case is not founded on any artificial presumption. It rests on the absence of the statutory corroboration needed to establish the correctness of the accounts under section 12(1). The defect is evidentiary and goes to the inability of the accounts to reflect the true turnover, rather than to any deemed presumption of dishonesty.

Conclusion: No such presumption arises; the accounts are rejected for want of the corroboration required by section 12(2).

Final Conclusion: The statutory requirement to maintain manufacturing stock books was held to be compulsory, and non-compliance justified rejection of the assessee's accounts, with the consequence that the revision failed.

Ratio Decidendi: Where a taxing statute requires a manufacturer to maintain stock books as statutory corroboration of the primary accounts, non-compliance renders the accounts unreliable and permits rejection of those accounts without any separate presumption of concealment.

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