1. The assessees in this case are doing business in stationery. They returned a taxable turnover of Rs. 21,38,873.70 for the assessment year 1975-76. They have maintained during that year all the required books of account except stock book, which every wholesale dealer is bound to maintain under rule 26(9) of the Tamil Nadu General Sales Tax Rules, 1959. On the ground that the assessees have not maintained any stock account for the goods dealt in by them, which is a material defect warranting an addition of 1 per cent of the taxable turnover to the book turnover, the assessing authority added a turnover over of a sum of Rs. 20,977 (1 per cent of Rs. 20,97,749) to the book turnover of the assessees, while making the assessment on the best judgment basis. Against the said addition of 1 per cent, the assessees filed an appeal before the Appellate Assistant Commissioner, who, however, sustained the addition on the ground that the assessees who are bound to maintain the stock account, have not maintained the same. The matter was taken to the Tribunal and the Tribunal also held that the absence of stock book warranted an addition, but reduced the addition to Rs. 10,000, as against Rs. 20,977. Aggrieved by the order of the Tribunal the assessees have come before us.
2. The main contention of the learned counsel for the assessees is that no omission or suppression either in purchases or in sales has been pointed out by the assessing authority warranting an estimation in sales turnover. He further states that merely because the assessees have not maintained a stock register, that will not enable the assessing authority to assume that there was suppression warranting an addition towards such suppression. According to the learned counsel for the assessees, if there is any non-compliance with the statutory rules regarding maintenance of accounts, it may be a case for levying penalty or compounding fee, but the non-maintenance of the stock account by itself will not justify an addition to the sales turnover being made and such addition towards suppression can be made only when the accounts produced by the assessees are found to be defective or are not true or correct. In support of his submission that merely because the stock account is not maintained by the assessees, as required by rule 26(9) of the Rules, an addition towards suppression is not called for, the learned counsel refers to the following decisions, namely :
(i) the decisions of this Court in Ratna Cafe, Madras-5 v. State of Madras  33 STC 39; and
(ii) the decisions of the Allahabad High Court in Devi Charan Sri Mohan Dass v. Commissioner of Sales Tax, U.P.  33 STC 547; Kamal Industries v. Commissioner of Sales Tax  38 STC 348 and Luxco Electronics v. Commissioner of Sales Tax, U.P.  48 STC 540.
The learned Government Pleader, however, contends that the principles laid down in the above decisions cannot be applied to the facts of this case, where the assessing authority has specifically and expressly rejected the accounts, in the absence of the stock account. He further contends that in the absence of stock account, the quantitative verification of the stocks was not possible at the time of inspection and that when the assessing authority has specifically rejected the accounts, it is entitled to make the best judgment assessment, taking the book turnover and asking an addition thereto towards possible suppression.
3. In Ratna Cafe, Madras-5 v. State of Madras  33 STC 39, this Court has observed that when the Tribunal accepts the correctness of the accounts, there is no reason as to why the sales turnover reported by the assessee and reflected by the accounts should be rejected merely on the ground that the gross profit is low.
4. In Devi Charan Sri Mohan Dass v. Commissioner of Sales Tax, U.P.  33 STC 547, a Division Bench of the Allahabad High Court set aside the addition made to the book turnover for non-conformity with rule 72 of the U.P. Sales Tax Rules, 1948, in the absence of any finding by the sales tax authority that the account books are defective and the turnover has not been correctly recorded therein. The same view has been taken in Kamal Industries v. Commissioner of Sales Tax  38 STC 348 by the same Court.
5. In Luxco Electronics v. Commissioner of Sales Tax, U.P.  48 STC 540, a question arose whether the provision in section 12(2) of the U.P. Sales Tax Act, 1948, requiring the maintenance of accounts is mandatory or directory. While holding that section 12(2) is mandatory, the Court has expressed the view that the account books can be rejected merely for the breach of the said section, and they can also be rejected for the reason that such accounts maintained under section 12(1) cannot be taken as reflecting the true and correct value of purchase and sales, for want of corroboration in the manner required by section 12(2).
6. We are of the view that the decision in Luxco Electronics v. Commissioner of Sales Tax, U.P.  48 STC 540 applies to the facts of this case. In this case there is a specific observation by the assessing authority in the order of assessment that in the absence of stock account, no quantitative verification of the stocks is possible and therefore the account books are liable to be rejected. If, in the absence of the stock account, which is required to be maintained by the assessees as wholesale dealers under rule 26(9) the truth or correctness of the entries in the assessees' accounts could not be verified then the assessing authority is entitled to reject the accounts and proceed to make best judgment assessment. If the assessing authority has proceeded to make an addition without rejecting the accounts, it would be a different matter, and it is only under those circumstances the principle laid down by the Allahabad High Court in Devi Charan Sri Mohan Dass v. Commissioner of Sales Tax, U.P.  33 STC 547 and Kamal Industries v. Commissioner of Sales Tax  38 STC 348 would apply.
7. The learned counsel for the assessees then contends, that the assessees will not come under the definition of 'wholesale dealer' in rule 3(1), for they mainly deal in retail and therefore they are not covered by rule 3(1)(ii). Rule 3(1) defines 'wholesale dealer' to mean any dealer who sells goods or keeps goods sale - (i) to other dealer exclusively; or (ii) to other dealers and also to consumers. As we understand the definition, all persons except persons who deal exclusively in retail will come under the definition of 'wholesale dealer'. Rule 3(1)(ii) takes in all dealers who sell to other dealers as also to consumers. According to the learned counsel for the assessees, sub-clause (ii) of rule 3(1) will take in only those dealers who mainly deal in wholesale and it will not include those who mainly deal in retail. We do not know how the concept of main and ancillary businesses will come in, in the interpretation of the said clause, when it specifically refers to persons who sell goods to other dealers as also to consumers. Admittedly in this case, the assessees not only sell to consumers but also to other dealers. Therefore they will clearly come within the definition of 'wholesale dealer'. If once the assessees are held to be wholesale dealers, then they are bound to maintain stock account under rule 26(9) which provides that every wholesale dealer, importer and manufacturer shall maintain separate stock accounts of goods dealt in by him in his own name and stock accounts of goods dealt in by him as agent separately for each principal so as to enable identification of the goods of the different principals at any given time. In view of the fact that the stock account is a corroborative material to find out the truth or otherwise of the other accounts maintained by the assessees, in the absence of the stock account, the assessing authority was right in rejecting the account books maintained by the assessees in this case. If the account books have been rejected on the ground that the truth or otherwise of the entries therein cannot be verified in the absence of the corroborative material like the stock account, then the best judgment assessment is called for, and while making the best judgment assessment, it is open to the assessing authority to take the book turnover and make an addition towards possible suppression. In this case the assessing authority has added 1 per cent of the book turnover as possible suppression. But when the matter went before the Tribunal, the Tribunal restricted the addition to Rs. 10,000.
8. On the facts and in the circumstances of this case, we are not in a position to interfere with the order of the Tribunal. The tax revision case is therefore dismissed. There will be no order as to costs.