M/S. D. N. SINGH versus COMMISSIONER OF INCOME TAX, CENTRAL, PATNA AND ANOTHER on 16 May 2023

SUPREME COURT REPORTS[2023] 7 S.C.R. 530

[2023] 7 S.C.R.

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M/s. D. N. SINGH

v.

COMMISSIONER OF INCOME TAX, CENTRAL, PATNA ANDANOTHER

B(Civil Appeal No(s). 3738-3739 of 2023)

MAY 16, 2023

[K. M. JOSEPH AND HRISHIKESH ROY, JJ.]

Income Tax Act, 1961 – s.69A – Scope and applicability of –Cs.69A deals with unexplained money, bullion, jewellery or othervaluable articles – Deeming effect of the provision – Whenapplicable – Ambit of the word ‘owner’ in s.69A – Held (per K.M.Joseph, J.) : To apply s.69A of the Act, it is indispensable that theOfficer must find that the other valuable article is owned by theassessee – A bailee who is a common carrier is not the owner of theDgoods – A bailee who is a common carrier would necessarily beentrusted with the possession of the goods – The purpose of bailmentis the delivery of the goods by the common carrier to the consigneeor as per the directions of the consignor – During the subsistenceof the contract of carriage of goods, the bailee would not becomeEthe owner of the goods – In the case of an entrustment to the carrierotherwise than under a contract of sale of goods also, the possessionof the carrier would not convert it into the owner of the goods –The full rights of an owner include the power of enjoyment whichfurther includes the power to destroy; the right to possession whichfurther includes the right to exclude others; the power to alienateFinter vivos or to charge as security and the power to bequeath theproperty – A carrier has none of these rights or powers – Sale by acarrier does not pass title except when it is immunised by the conductof the owner of the good which would in turn estop the owner fromimpugning the title of the buyer – Held (per Hrishikesh Roy, J.)G(concurring): s.69A provides as a rule of evidence that for thedeeming effect to apply- the assessee must be the owner of money,bullion, jewellery and other valuable articles on which he is unableto proffer a satisfactory explanation – Determining ownership ofgoods is an important factor to impute tax liability – Someone havingmere possession and without legal ownership or title over the goodsH

will not be covered within the ambit of s.69A – An assessee maynevertheless be also regarded as deemed owner if possession isimputed on the assessee and no other person having a better claimis contesting the assessee’s claim – In the present case, the assesseewas certainly not the owner of the bitumen - but was the carrierwho was supplying goods from the consignor- oil marketingcompanies to the consignee-Road Construction Department –Notably, due to short delivery of goods, the possession of theassessee was unlawful – The inevitable conclusion therefore is thatthe assessee is not the owner, for the purposes of s.69A – ContractAct, 1872 – ss.148, 151 – Sale of Goods Act, 1930 – ss. 39, 27.

Income Tax Act, 1961 – s.69A – ‘Other valuable article’ withinmeaning of s.69A – Whether it must be intrinsically costly – Whetherbitumen- the residual offshoot material during processing of crudeoil, excluding its valuable constituents like petrol, diesel, LPG,aviation fuel etc., can be covered within the category of ‘othervaluable article’ alongside money, bullion and jewellery within themeaning of s.69A – Held (per K.M. Joseph, J.): Bitumen may befound in small quantities or large quantities – If the ‘article’ is to befound ‘valuable’, then in small quantity it must not just have somevalue but it must be ‘worth a good price’ or ‘worth a great deal ofmoney’ and not that it has ‘value’ – s.69A would then stand attracted– ‘Bitumen’ as such cannot be treated as a ‘valuable article’ – Held(per Hrishikesh Roy, J.) (concurring): When the principle of EjusdemGeneris is applied, the preceding words in s.69A such as money,bullion, jewellery would suggest that the phrase ‘other valuablearticle’ which follows those words, would justify inclusion of onlyhigh value goods – Any other way of reading the phrase ‘othervaluable article’ or ‘valuable article’ by ignoring the kind of specificgoods mentioned in the preceding part of s.69A, would be incorrectand would do violence to the plain language of the provision andwill travel beyond the legislative intent – Additionally, the maxim‘noscitur a sociis’ i.e. (a word is known by its associates) would alsosupport the above view that the other valuable articles should beitems in the nature of silver bars, or jewellery or money i.e. onlyhigh priced item – It is given, that no law could possibly provide foran exhaustive list of all valuable items that may facilitate high incomeassessees to adjust their income – Only an indicative list of valuable AB

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Aarticles can practically be mentioned in the Section – But to includebitumen within the expression ‘other valuable article’ in s.69A, wouldresult in absurdities, that one needs to eschew – The common placeitems from kirana store and bitumen are intrinsically dissimilar tothe high value items in s.69A and through an interpretive exercise,one should not categorise them with items such as gold bars andBjewellery.

Income Tax Act, 1961– s.69A – Can a thief be the owner ofthe goods – Held (per K.M. Joseph, J.): The illegality of theownership may not ill square with the requirement of s.69A that theassessing officer must find the assessee to be the owner of the articleC– However, that is not to say that without finding ownership orwhen it is obvious that someone else is the owner, a person found inpossession, which is illegal, can be found to be the owner unders.69A – It would be straining the law beyond justification if theCourt were to recognise a thief as the owner of the property withinDthe meaning of s.69A – Recognising a thief as the owner of theproperty would also mean that the owner of the property wouldcease to be recognised as the owner, which would indeed be themost startling result – While possession of a person may inappropriate cases, when there is no explanation forthcoming aboutthe source and quality of his possession, justify an assessing officerEfinding him to be the owner, when the facts are known that thecarrier is not the owner and somebody else is the owner, then todescribe him as the owner may produce results which are most illegalapart from being unjust.

Income Tax Act, 1961 – s.69A – Article and Valuable ArticleF– Distinguished – Held (per Hrishikesh Roy, J.): Articles of valueare a genus of which valuable articles are a species i.e. a subset ofhigh priced items – An article having value may not be a valuablearticle – Categorising all sundry items as valuable articles will leadto an interpretation which will be foreign to the purpose of the lawGand the intention of the legislature in so far as s.69A is concerned.Doctrines/Principles – Noscitur a Sociis and ejusdem generis –Discussed.

Maxims – Absoluta sententia expositore non indiget – Explained.

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Allowing the appeals, the Court

HELD: (Per K. M. Joseph, J.):

1. When goods are entrusted to a common carrier, theentrustment would amount to a contract of bailment within themeaning of Section 148 of the Contract Act, 1872 when it is forbeing carried by road, as in this case. A contract for bailment maynot involve any consideration being payable in which case Section58 of the Contract Act obliges the bailor to repay to the baileethe necessary expenses incurred by him for the purpose ofbailment. Possession is central to bailment. Section 151 of theContract Act declares that ‘in all cases of bailment the bailee isbound to take as much care of the goods bailed to him as a man ofordinary prudence would, under similar circumstances, take ofhis own goods of the same bulk, quality and value as the goodsbailed.’ Can it be said that the standard of care as declared inSection 151 is alone applicable to the common carrier. The subjectmatter is not res integra. [Para 37][555-D-F]

2. To apply Section 69A of the Income Tax Act, it isindispensable that the Officer must find that the other valuablearticle, inter alia, is owned by the assessee. A bailee, who is acommon carrier, is not an owner of the goods. A bailee who is acommon carrier would necessarily be entrusted with thepossession of the goods. The purpose of the bailment is thedelivery of the goods by the common carrier to the consignee oras per the directions of the consignor. During the subsistence ofthe contract of carriage of goods, the bailee would not becomethe owner of the goods. In the case of an entrustment to thecarrier otherwise than under a contract of sale of goods also, thepossession of the carrier would not convert it into the owner ofthe goods. [Para 39][557-E-F]

3. Section 39 of the Sale of Goods Act, 1930 contemplatesdelivery pursuant to a contract of sale by the seller to the carrieras prima facie to be deemed to be the delivery of the goods tothe buyer. It becomes the responsibility of the buyer of a carrierto fulfil its contractual obligations and deliver the goods to theconsignee or as per its instructions. Sale by a carrier does not A

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Apass title except when it is immunised by the conduct of the ownerof the good which would in turn estop the owner from impugningthe title of the buyer. [Paras 42 & 43][558-F-G; 559-D]

4. A person may own, contraband or prohibited articles andstill be within the embrace of Section 69A. In other words, theBillegality of the ownership may not ill square with the requirementof Section 69A that the assessing officer must find the assesseeto be the owner of the article. However, that is not to say thatwithout finding ownership or when it is obvious that someoneelse is the owner, a person found in possession, which is illegal,can be found to be the owner under Section 69A. The questionCwould arise pointedly, as to, when a common carrier refuses todeliver the consignment and continues to possess it contrary tocontract and law and converts it into his use and presumably sellsthe same, as to whether he could be found to be the owner of thegoods. Would he be any different from a person who commitsDtheft and sells it claiming to be the owner. Can a thief become theowner? It would be straining the law beyond justification if theCourt were to recognise a thief as the owner of the propertywithin the meaning of Section 69A. Recognising a thief as theowner of the property would also mean that the owner of theproperty would cease to be recognised as the owner, which wouldEindeed be the most startling result. While possession of a personmay in appropriate cases, when there is no explanationforthcoming about the source and quality of his possession, justifyan assessing officer finding him to be the owner, when the factsare known that the carrier is not the owner and somebody else isFthe owner, then to describe him as the owner may produce resultswhich are most illegal apart from being unjust. [Para 47][560-G;561-A-D]

5. The full rights of an owner as set out in AdditionalCommissioner of Income Tax, Bihar v. M/s. Sahay Properties andGInvestment Co.(P) Ltd. may again be reiterated as: (1) The powerof enjoyment which includes the power to destroy. (2) The rightto possession which includes the right to exclude others. (3) Thepower to alienate inter vivos or to charge as security. (4) Thepower to bequeath the property. A carrier has none of these rightsor powers. It may be true that in order to be an owner, all theH

rights and powers of an owner need not be present at the samepoint of time in the same person. It may be true that ownershipmay be associated with a better right to be in possession andactual possession in a given case may be harmonised withownership. Being in possession with a right to be possessionmay lead to a presumption that the possessor is the owner, unlessit be that there are indications to the contrary. The beneficialvesting may in the context clothe the person with title as theowner. Another concept which emerges is a person in receipt ofmoney having actual control over the property with no personhaving a better right to defeat his claim of possession may openthe doors to a finding that he is the owner within the meaning ofSection 69A. A person in actual physical control of the propertyand realising the entire income for his own use may indicate thepresence of ownership. The absence of the conveyance neededto complete the transfer may not detract from a person beingfound to be the owner. The soul of the reasoning appears to bethe entitlement to receive the income from the property ‘in hisright’. [Paras 58 & 59][579-B-G]

6. Appellant as a carrier was entrusted with the goods. Thepossession of the appellant began as a bailee. The Court proceedsfurther on the basis that instead of delivering the goods, theappellant did not deliver the goods to the concerned divisions ofthe department in the State of Bihar. Ownership of the goods inquestion by no stretch of imagination stood vested at any point oftime in the appellant. Property would pass from the consignor tothe consignee on the basis of the principles which are declaredin the Sale of Goods Act. It is inconceivable that any of thoseprovisions would countenance passing of property in the goodsto the appellant who was a mere carrier of the goods. Section 406of the IPC makes it an offence for a person entrusted with propertywhich includes goods entrusted to a carrier being misappropriatedor dishonestly being converted to the use of the carrier. A specificillustration under Section 406 makes it abundantly clear that anysuch act by a carrier attracts the offence under Section 406. TheCourt in other words would have to allow the commission of anoffence by the appellant in the process of finding that the appellantis the owner of the goods. In other words, proceeding on the ABC

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Abasis that there was short delivery of the goods by the appellant,inevitably, the Court must find that the act was not a mere omissionor a mistake but a deliberate act by a carrier involving it in thecommission of an offence under Section 406. In other words, theCourt must necessarily find that the appellant continued topossess the bitumen and misappropriated and it is in this stateBthat assessing officer would have to find that the appellant by thedeliberate act of short delivering the goods and continuing withthe possession of the goods not only contrary to the contract butalso to the law of the land, both in the Carriers Act 1865 andbreaking the penal law as well, the appellant must be treated asCthe owner. [Para 60][579-H; 580-A-E]

7. Bitumen may be found in small quantities or largequantities. If the ‘article’ is to be found ‘valuable’, then in smallquantity it must not just have some value but it must be ‘worth agood price’ or ‘worth a great deal of money’ and not that it hasD‘value’. Section 69A would then stand attracted. But if to treat it

as ‘valuable article’, it requires ownership in large quantity, inthe sense that by multiplying the value in large quantity, a ‘goodprice’ or ‘great deal of money’ is arrived at then it would not bevaluable article. This Court would conclude that ‘bitumen’ as suchcannot be treated as a ‘valuable article’. [Para 79][590-D-E]

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Kotak Mahindra Bank Ltd. v. A. Balakrishnan andanother (2022) 9 SCC 186; Kishinchand Chellaram v.Commissioner of Income Tax, Bombay City II, Bombay(1980) Suppl. SCC 660 : [1981] 1 SCR 720; ChuharmalS/O Takarmal Mohnani v. Commissioner of Income Tax,FM.P., Bhopal (1988) 3 SCC 588; Commissoiner ofIncome Tax, Salem v. K. Chinnathamban (2007) 7 SCC390 : [2007] 8 SCR 496; Patel Roadways Ltd. v. BirlaYamaha Ltd. (2000) 4 SCC 91 : [2000] 2 SCR 665;Nath Bros. Exim International Ltd. v. Best RoadwaysGLtd. (2000) 4 SCC 553 : [2000] 2 SCR 538; R.B. JodhaMal Kuthiala v. Commissioner of Income Tax, Punjab,Jammu and Kashmir, Himachal Pradesh and Patiala(1971) 3 SCC 369 : [1972] 1 SCR 639; Late NawabSir Mir Osman Ali Khan v. Commissioner of Wealth Tax, G

M/s. D. N. SINGH v. COMMISSIONER OF INCOME TAX,CENTRAL, PATNA AND ANOTHER

Hyderabad (1986) Suppl. SCC 700 : [1986] 3SCR 1072; Commissioner of Income Tax, Bombay &Ors. v. Podar Cement Pvt. Ltd. & Ors. (1997) 5 SCC482 : [1997 ] 1 Suppl. SCR 394; Additional MysoreMinerals Ltd. M.G. Road, Bangalore v. Commissionersof Income Tax, Karnataka, Bangalore (1999) 7 SCC106 : [1999] 2 Suppl. SCR 182; Industrial Credit andDevelopment Syndicate Ltd. v. Commissioner of IncomeTax, Mysore & Anr. (2013) 3 SCC 541 : [2013] 3SCR 1082; Commissioner of Income Tax, Kolkata v.SMIFS Securities Limited (2012) 13 SCC 488 and RohitPulp and Paper Mills Limited v. Collector of CentralExcise, Baroda (1990) 3 SCC 447 : [1990] 2 SCR 797– referred to.

Dhirajlal Haridas v. Commissioner of Income Tax(Central), Bombay (1982) 138 ITR 570; Commissionerof Income Tax v. Amrit lal Chunilal (1984) 40 CTRBombay 387; Addl. Commissioner of Income Tax v. S.Pichaimanickan Chettiar (1984) Vol 147 ITR 251;Mohan B. Samtani v. Commissioner of Income–Tax(1993) Vol 199 ITR 370; J.S. Parkar v. V.B. Palekar(1974) 94 ITR 616 (Bom HC); Mohan B. Samtani v.Commissioner of Income-Tax 1993 Vol. 199 ITR 370Calcutta; Commissioner of Income Tax v. K.I. Pavunny(1998) 232 ITR 837; Addl. Commissioner of IncomeTax v. S. Pichaimanickan Chettiar 1984 (147) ITR 251;Commissioner of Income Tax, Bihar v. M/s. SahayProperties and Investment Co.(P) Ltd. 1983 (144) ITR357; Bhagwandas Narayandas v. Commissioner ofIncome Tax, Ahmedabad and others 1973 Vol. 98 ITR194; Commissioner of Income Tax v. M.K. Gabrial Babuand others (1991) 188 ITR 464 Kerala and DhanushGeneral Stores v. Commissioner of Income Tax (2011)339 ITR 651 Chhattisgarh – referred to.

HELD: (Per Hrishikesh Roy, J.) (Concurring):

1. If all sundry articles of nominal value are bracketed inthe category of valuable article, it will lead to an absurdity andwill also be inconsistent with the legislative intent. Focusing on C

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Athe high total value of an article, ignoring its lowly per unit pricewould mean including low-cost ordinary articles also in thevaluable category, under Section 69A. This would defy thelegislature’s logic. In this context, when the principle of EjusdemGeneris is applied, the preceding words in Section 69A such asmoney, bullion, jewellery would suggest that the phrase ‘otherBvaluable article’ which follows those words, would justify inclusionof only high value goods. Any other way of reading the phrase‘other valuable article’ or ‘valuable article’ by ignoring the kindof specific goods mentioned in the preceding part of Section 69A,would be incorrect and would do violence to the plain languageCof the provision and will travel beyond the legislative intent.Additionally, the maxim ‘noscitur a sociis’ i.e. (a word is known byits associates) would also support the above view that the othervaluable articles should be items in the nature of silver bars, orjewellery or money i.e. only high priced item. [Paras 10 & 11][594-G-H; 595-A-B]D

2. For purposes of interpreting Section 69A of the IncomeTax, Act 1961- the ordinary and literal meaning should be optedas the words in the statute are clear and unambiguous. Theprovision does not need any addition or subtraction and standson its own legs. The phrase ‘valuable article’ would simply meanEan item ‘worth a great deal of money’. It cannot mean, as is saidin the impugned order, to include ‘any article of value’. In thecontext of Section 69A, unexplained valuable article has to behigh priced item which are procured to hide income, to avoid taxliability. To adopt a wide interpretation for the phrase- ‘valuableFarticle’ and thereby include within its scope any sundry article ofwhatever value, is found to be unjustified. It needs to be alsoreiterated that, ordinarily, fiscal laws including taxation statutes,are to be strictly interpreted and tax must not be imposed throughanalogy, inference or by extension of phrases used by thelegislature. [Para 15][596-E-G]G

3. Bitumen is not a valuable article in the context of Section69A and the assessee here was not the owner of the concernedbitumen for the purpose of section 69A of the Income Tax Act,1961. [Para 19][597-H]

M/s. D. N. SINGH v. COMMISSIONER OF INCOME TAX,CENTRAL, PATNA AND ANOTHER

Dhanush General Stores v. Commissioner of Income Tax(2011) 339 ITR 651 – approved.

Banarsi Debi v. ITO [1964] 7 SCR 539 and AugustanTextile Colours Ltd. v. Director of Industries & Anr. (CivilAppeal No. 2830/2022) (2022) 6 SCC 626; CIT v.Kasturi 237 ITR 24 (SC); DN Singh v. Commissionerof Income Tax & Anr. (2010) 324 ITR 304; NewShorrock Spinning and Manufacturing Co. Ltd. v. N.V.Raval (1959) 37 ITR 41 and Capy Brandy Syndicate v.Inland Revenue (1921) 1 KB 64– referred to.

Case Law Reference

In the judgment of K.M. Joseph, J.

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ACIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 3738-3739 of 2023.

From the Judgment and Order dated 18.12.2017 in CR No. 102of 2009 and dated 05.03.2009 in MA No. 214 of 2002 of the High Courtof Judicature at Patna.

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Ramesh P. Bhatt, Sr. Adv., Diggaj Pathak, Mrs. Shweta Sharma,Rohit Priya Ranjan, Ms. Prachi Kohli, Advs. for the Appellant.

N. Venkatraman, ASG, Ms. Diksha Rai, Shubranshu Padi, SourabhMishra, Uday Khanna, Raj Bahadur Yadav, Advs. for the Respondents.

CThe Judgments of the Court were delivered by

K. M. JOSEPH, J.

Index[*]

A.THE FACTS.............................................................................. 2DB.SUBMISSIONS OF PARTIES............................................... 15C.ANALYSIS ............................................................................. 18

D.A CARRIER, A BAILEE? ..................................................... 30

E.THE CARRIAGE BY ROAD ACT, 2007 ............................. 34EF.CRIMINAL BREACH OF TRUST ....................................... 35

G.THE SALE OF GOODS ACT, 1930 ...................................... 36

H.IS A THIEF AN OWNER? OWNERSHIP BEING ILLEGAL . 37I.THE CIRCULAR DATED 07.07.1964 .................................. 41F

J.THE DEPARTMENTAL INSTRUCTIONS DATED11.05.1994 ............................................................................... 42

K.R.B.JODHA MAL DISTINGUISHED BY HIGH COURT . 43

L.“OTHER VALUABLE ARTICLE” ....................................... 75GM.PRINCIPLE OF EJUSDEM GENERIS; NOSCITUR ASOCIIS.................................................................................... 81

N.WHETHER BITUMEN IS ‘OTHER VALUABLEARTICLE’ .............................................................................. 85

H*Ed. Note: Pagination in the Index is as per the original judgment.

1. Delay condoned.

2. Leave granted.

A. THE FACTS

3. The appellant-assessee carried on business as carriagecontractor for bitumen loaded from oil companies namely HPCL, IOCLand BPCL from Haldia. The goods were to be delivered to variousdivisions of the Road Construction Department of the Government ofBihar. According to the appellant, it has been in the business for roughlythree decades.

4. By the impugned Order dated 05.03.2009 in M.A. 214 of 2002,the High Court has dismissed the Appeal filed by the appellant underSection 260A of the Income-Tax Act, 1961 (hereinafter referred to as,‘the Act’, for short). The assessment year involved in the impugnedOrder is 1996-1997. Appellant filed a Review Petition, i.e., ReviewPetition No. 102 of 2009. By Order dated 18.12.2017, the Review Petitioncame to be dismissed. It is, accordingly, that the present Special LeavePetition has been filed, challenging both the Orders.

5. A scam was reported in the media. The scam consisted oftransporters of bitumen, lifted from oil companies, misappropriating thebitumen and not delivering the quantity lifted to the various Divisions ofthe Road Construction Department of the Government of Bihar. Thescam had its repercussion in the assessments under the Act.

6. It all began, as far as the appellant is concerned, in theassessment year 1995-1996.By an Assessment Order dated 27.03.1998being passed, the Assessing Officer, taking note of the scam, issuedShow-Cause Notice dated 23.01.1998, alleging that the appellant hadlifted 14507.81 metric tonnes of bitumen but delivered only 10064.1 metrictonnes. This meant that the appellant had not delivered 4443.1 metrictonnes. The appellant produced photocopies of challans to establish thatthe bitumen had been delivered. Summons was issued by the AssessingOfficer to the Executive Engineers and Junior Engineers. It is the caseof the appellant that all Junior Engineers, except Shri Madan Prasad andAhia Ansari accepted the factum of delivery of bitumen. The AssessingOfficer, in fact, noticed that only those Junior Engineers accepted receiptof bitumen, where the Engineer In-charge or the Executive Engineeraccepted the delivery. Shri Madan Prasad denied that the signaturealleged to be his, was not his signature. The Assessing Officer found A

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Athat the Junior Engineers denied putting stamp and took the position thatif there was stamp, then, it must indicate the name of the section. TheAssessing Officer added a sum of Rs.21985700/- being the figure arrivedat, by finding that 4443.80 metric tonnes of bitumen had not beendelivered. This was done by invoking Section 69A of the Act.

B7. Chronologically, this Court notices that for the assessment year1996-1997, the Assessing Officer passed Order dated 31.03.1999. Theappellant, in its Return, disclosed a net profit of Rs.676133/-. On scrutiny,the Assessing Officer, again, noticing the scam and finding that, while10300.77 metric tonnes had been lifted by the appellant, only 8206.25metric tonnes had been delivered. Accordingly, it was found that 2094.52Cmetric tonnes had not been delivered. On the said basis and again invokingSection 69A of the Act, a sum of Rs.10471720.30 was added as incomeof the appellant.

8. As against the Order dated 27.03.1998 for the AssessmentYear 1995-1996, in Appeal, by Order dated 15.09.2000, the CommissionerDAppeals found that all Junior Engineers, except two, had accepteddelivery. After finding that the addition made by the Assessing Officer inrespect of quantity, where Junior Engineers had accepted delivery, wasuntenable, the Appellate Authority ordered deletion of a sum ofRs.20114659/-. This amount represented the value of 4064.28 metricEtonnes. In regard to the disputed quantity, viz., the dispute raised by ShriMadan Prasad and Ahia Ansari, Junior Engineers, the matter wasremanded back for affording an opportunity for cross-examination. ThisOrder related to the Assessment Year 1995-1996.

9. Next in chronological order, is the Order dated 18.12.2000Fpassed by the Appellate Authority in Appeal carried by the appellantagainst the Order dated 31.03.1999, relating to the Assessment Year1996-1997. The Appellate Authority referred to the assessment for theprevious year. It found merit in the case of the appellant that except twoJunior Engineers, the others had accepted the delivery. The addition ofRs.10471720/- was ordered to be deleted.G

10. The Revenue knocked at the doors of the Income-Tax AppellateTribunal (hereinafter referred to as, ‘the ITAT’, for short) for both theAssessment Years, viz., 1995-1996 and 1996-1997. In regard to the Orderpassed by the Appellate Authority for the Assessment Year 1995-1996,another development took place during the pendency of the Appeal beforeHthe ITAT. By Application dated 07.02.2001, the Revenue, invoking Section M/s. D. N. SINGH v. COMMISSIONER OF INCOME TAX,CENTRAL, PATNA AND ANOTHER [K. M. JOSEPH, J.]

154 of the Act, sought rectification of the Order dated 15.09.2000. ThisApplication came to be allowed by Order dated 31.05.2001. It is, atonce, noticed:

“It is also seen that although my learned predecessor on page 4 ofthe appellate order has noted that “the Assistant Commissioner ofIncome Tax also stated that only those Junior Engineers hadaccepted that they had received the Bitumen in which cases theExecutive Engineer of the division and Engineer in Chief had alsoshown that Bitumen had been received. But while giving the findingon pages 7 and 8 of ‘the appellate order he has missed this factwhile presuming that the Junior Engineers had confirmed thereceipt of 4064.28 MT of Bitumen out of total short supply of4443.80 MT of Bitumen as reported by engineer in chief… Acareful reading of the relevant para as reproduced above makesit clear that while giving this finding the CIT(A) was under theimpression that in respect of total short supply of 4443.01 MT asreported by Engineer in Chief and the Jr. Engineer had acceptedthe receipt of Bitumen barring two namely -I) Mr. Madan Prasadand II) Mr. Ahiya Ansari during the course of independentenquiries held by the A.O through issue of summons. Thus, I holdthat my predecessor has given relief of Rs. 2,01,14,659/- in respectof 40.64.28 MT. Of Bitumen under the wrong presumption offact that the Jr. Engineers had confirmed the receipt of 4064.98MT. Of Bitumen in their statements before the A.O. Since in thecases Shri Madan Pd. and Mr. Ahiya Ansari who had denied tohave received the Bitumen, my ld. Predecessor had set aside thematter to the file of the A.O. with the direction to re-decide thematter after allowing the appellant an opportunity to cross- examinethese two Jr. Engineers and after making further enquiries toestablish the genuineness or otherwise of their signatures on thechallans, I deem it proper to set aside this addition of Rs.2,01,14,659/- in respect of 4064.98 MT of Bitumen also to the file of the A.O.with the direction that he shall issue summons to the concernedJr. Engineers who have received 4064.98 MT of Bitumen as perchallans furnished by the appellant, record their statements, allowthe appellant an opportunity to cross examine them and, ifnecessary, refer their signatures to the handwriting experts toestablish the genuineness of otherwise of such signatures. In viewof these directions, in order the substitution of last para on page - AB

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A7 extending up to 1st as page 8 of CIT(A) is or which has alreadybeen reproduced above by the following para:

I have carefully considered the above submissions in the courseof independent enquiries made by the A.O. by issue summonsonly 2 Jr. Engineers namely, l. Mr. Madan Prasad, 2. Mr. AhiyaBAnsari have been examined in respect of reported short supply ofBitumen of 4443.01 MT. Sri Madan Prasad and Mr. Ahiya Ansarihave denied receipt of Bitumen to the extent of 204.45 MTand174.37 MT, respectively. In respect of remaining quantity ofreported short supply of Bitumen i.e. 4064.28 MT. (-) 378.82=4064.28MT of Bitumen no independent enquiries have been made byCthe A.O. barring the report received from Engineer in Chief/Executive Engineer regarding this short supply. On the basis ofsuch report of Engineer in Chief/Executive Engineers alone; theA.O. is not justified in making the addition on account of shortsupply of 4064.28 MT of Bitumen valued at Rs.2,01,14,659/-, IDdeem it proper to set aside this addition of Rs.2,01,14,659/- to thefile of the A.O. with the direction that he shall issue summons tothe concerned Jr. Engineers, who have received 4064.28 MT ofBitumen as per challans furnished by the appellant, record theirstatement, allow the appellant an opportunity to cross- examinethem and, if necessary, refer their signatures to the handwritingEexperts to establish the genuineness or otherwise of suchsignatures, after carrying out these directions any addition, if calledfor shall be made.”

11. As noticed, the Revenue had filed an Appeal before the ITATfor the Assessment Year 1995-1996 (ITA 358 Patna/2000). The appellantFhad filed cross-objection (2/2001) in the said Appeal. The appellant alsofiled ITA 319 (Patna/2001) before the ITAT. The cross-objection of theappellant purported to support the deletion of the addition of Rs.20114559/-. It also purported to ventilate the objection of the appellant in regard toother matters. The Appeal filed by the appellant was directed againstGthe Order of Rectification passed under Section 154 of the Act. TheITAT dismissed the Appeals filed by the Revenue and the appellant. Thecross-objection came to be disposed of. This Order is dated 11.01.2002.

12. For the Assessment Year 1996-1997, the ITAT disposed ofthe Appeal filed by the Revenue and also the cross-objection filed againstHthe Order dated 18.12.2000. The Appeal filed by the Revenue [ITA 240

(Patna/2001)] was allowed. The Tribunal finds that the appellant hadnot disputed the lifting of the bitumen. The claim made by the appellantthat full supply was made, stood demolished, when photocopies of deliverychallans were found to be false and fabricated. The Executive Engineers,it was further found, had confirmed non-delivery to the tune of 2090.40metric tonnes. The Commissioner Appeals, it was found, reached a wrongconclusion, as he did not address himself to the explanation offered bythe Junior Engineers. It was found that all Executive Engineers of theConsignee Divisions presented a case of non-delivery before theAssessing Officer. Thus, on the same day, i.e., on 11.01.2002, the ITATallowed the Appeal filed by the Revenue and sustained the Order of theAssessing Officer relating to addition on account of short supply ofbitumen for the Assessment Year 1996-1997, whereas, for theAssessment Year 1995-1996, taking note of the Order of theCommissioner Appeals, passed under Section 154 of the Act, by which,the matter stood remitted back, the Appeal of the Revenue and the Appealof the appellant, challenging the Rectification Order, came to bedismissed.

13. This, in turn, triggered the Appeal, i.e., M.A. 214 of 2002before the High Court by the appellant under Section 260A of the Act.The High Court, inter alia, refers to the appellant filing Return for theAssessment Year 1996-1997, disclosing total income of Rs.576133/-.

14. Reference is made to the addition of Rs.1,04,72,720.30 on thebasis of short supply of bitumen. After referring to the submissions, thecourt focussed on the scope of Section 69A of the Act. The High Courtfound that the word ‘owner’ has different meaning in different contextsand when a transporter sells the goods and receives money for that noton behalf of the real owner, it became the owner for the purpose of tax.Having lifted bitumen and not supplied to the Road ConstructionDepartment to which it was to be supplied, the appellant would be liableto pay tax on the bitumen lifted and not delivered. The High Courtdistinguished the Judgment in Dhirajlal Haridas v. Commissioner ofIncome Tax (Central), Bombay1 by noting that for determining the personliable to pay tax, the test laid down by this Court was to find out theperson entitled to that income. The Court also went on to distinguish thejudgment in Commissioner of Income Tax v. Amrit lal Chunilal2 It 1 (1982) 138 ITR 570

2 (1984) 40 CTR Bombay 387.

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2 (1984) 40 CTR Bombay 387.

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Awas found that in the said case the assessee therein was not found to bethe owner whereas the ITAT found the appellant to be the owner. TheHigh court agreed with the said finding. Thereafter, the High Court wenton to deal with the argument that the words ‘other valuable articles’ inSection 69A could not include ‘bitumen’. The argument of the appellantwhich is noted is that for applying Section 69A bitumen should haveBsome nexus with money, bullion or jewellery. It was found that any articlewhich has value would come under the expression ‘valuable article’under Article 69A and the value of such article can be deemed to be theincome of the assessee, should the assessee fail to offer any explanationor the explanation offered be unsatisfactory. The argument that SectionC69A would not apply as the appellant had offered an explanation wasnot accepted as it was found that an explanation though offered, beingnot accepted, would lead to the invocation of Section 69A, if theexplanation was not satisfactory. In other words, Section 69A applied.Lastly, in regard to the argument of the appellant that the cost of thebitumen and not the value thereof was added as income, the High CourtDfinds that the appellant did not have a case that it had sold the bitumen atthe price lower than the cost. The appellant was found to be the ownerof the bitumen and the addition was sustained. This order was passed on05.03.2009.

15. Thereupon, the appellant filed Review Petition No. 102 ofE2009.The appellant purported to point out that in separate appeals filedfor assessment year 1995-96 and 1996-97 on the same set of facts, theITAT had allowed the appeal of the Revenue for the year 1996-97, butfor the assessment year 1995-96, the matter was remanded back. Thisargument was rejected by the High court in the review on the followingFreasoning:

“However, the question would be whether the fact that the appellatetribunal had passed another order correctly or incorrectly, the samemay have any effect rendering the judgment of the tribunal passedin present matter to be erroneous despite the same having beenGupheld in appeal by this Court? Answer has to be in negative. Forthe assessment year 1995-96, the matter has attained finality asthe Division Bench has already accepted the view of the appellatetribunal to be correct in M.A. No.214 of 2002. The view of thesame Tribunal or the same Bench of the Tribunal was correct orincorrect for a different assessment year was not the subject matterH

of the appeal. If one of the views of the appellate tribunal is infavour of the assessee that does not mean that the said viewwould be correct and the view taken in the present case wasincorrect. The view formed by the revenue in the present casefor the assessment year 1995-96 has been scrutinized not only bythe appellate tribunal but also by the Division Bench of this Courtand the same has been found to be correct.”

16. The court found that there was no patent error. The fact thatfor the same assessee but for the different assessment year, the sameBench of the ITAT had accepted their plea of short supply of bitumen asit was not within its knowledge as to whether the case travelled in appealbefore the High Court or not, whereas the decision rendered by theTribunal for the assessment year 1995-96 had “travelled upto this Courtin M.A. 214 OF 2002”. It is against the order dated 05.03.2009 in M.A.214 of 2002 and the order dated 18.12.2017 in the Review Petition 102of 2009 that the appellant is before this Court.

B. SUBMISSIONS OF PARTIES

17. The Court heard Shri Ramesh P. Bhat, learned Senior Advocateon behalf of the appellant and Shri N. Venkatraman, learned AdditionalSolicitor General on behalf of the Revenue.

18. Shri Ramesh P Bhat strenuously urged before us that impugnedOrders betray palpable errors. When the error was pointed out in Reviewthough it is taken note of, the High Court has failed to rectify the fallacy.In short, the error on facts is as follows:

“There are two assessment years involved namely 1995-96and 1996-97. In the assessment year 1995-96, an addition wasmade in a sum of Rs.20114659/- towards short delivery of bitumenwhich the appellant as carrier was obliged to transport and deliverto the Department in Bihar. In the assessment year 1996-97,likewise the appellant was multed with an addition in a sum ofRs.10471720/-.”

19. It is pointed out that for the Assessment Year 1995-1996, asnoticed earlier, by virtue of the Order of Rectification dated 31.05.2001,on the basis of which, the Appeal filed by the Revenue, was dismissedby the ITAT and Appeal filed by the appellant, against which, Ordercame to be dismissed, the matter was to be considered by the AssessingOfficer. The same Tribunal, on the same day, i.e., 11.01.2002, on the A

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Aother hand, allowed the Appeal of the Revenue and set aside the Orderdated 18.12.2000, by which, the Commissioner Appeals had ordered thedeletion based on the alleged non-delivery of bitumen. In fact, it is pointedout that the High Court notes in the Order dated 05.03.2009, as if theAppeal was filed by the appellant against the Assessment Year 1995-1996. Even when the conflicting views taken by the Tribunal was pointedBout in the Review Petition, despite noticing the argument, the High Courthas rejected the same without just cause. In the Order, it is pointed outthat the Court observed that the matter for the year 1995-1996 hadtravelled to the Court in M.A. 214 of 2012, when it actually related to1996-1997.More importantly, the learned Senior Counsel would contendCthat bitumen cannot be treated as other valuable article within the meaningof Section 69A of the Act. The very company of words, in which thewords ‘other valuable article’ is found, viz., money, bullion and gold,should have persuaded the Court to find the addition illegal. It was alsocanvassed before us that the appellant cannot be treated as the owner,as appellant was a carrier. It fulfilled its obligations by lifting the goods inDquestion and delivered the same. In fact, it is the contention of theappellant that the goods had been delivered and there was nomisappropriation. There was no complaint by the oil companies fromwhom, the bitumen had been lifted, about there being short delivery.There was even no complaint from the Consignee Department. TheEright to cross-examination should have been offered. The burden shiftedto the Department to prove its case. The learned Senior Counsel woulddraw support from the following case law:

i.(1984) Vol 147 ITR 251; Addl. Commissioner of IncomeTax v. S. Pichaimanickan Chettiar.

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ii.(1993) Vol 199 ITR 370; Mohan B. Samtani v.Commissioner of Income-Tax.

20. The appellant would contend that the finding that thephotocopies of the delivery challans were fabricated was a gross error.The appellant has a case that this is more so as the two Junior EngineersGhad failed to appear for cross-examination.

21. The appellant also relied upon Judgment of this Court inKotak Mahindra Bank Ltd. v. A. Balakrishnan and another3. Hefurther drew our attention to the Judgment of this Court inKishinchand H3 (2022) 9 SCC 186

Chellaram v. Commissioner of Income Tax, Bombay City II,4Bombay.

22. Shri N. Venkatraman, learned Additional Solicitor Generalcountered the submissions and submitted that no case was made out.He would rely upon Chuharmal (supra). The view taken by the HighCourt represents the correct position in law.

C. ANALYSIS

23. Section 69 deals with unexplained investments. It reads asfollows:

“69. Unexplained investments Where in the financial yearimmediately preceding the assessment year the assessee has madeinvestments which are not recorded in the books of account, ifany, maintained by him for any source of income, and the assesseeoffers no explanation about the nature and source of theinvestments or the explanation offered by him is not, in the opinionof the[ 2] Assessing] Officer, satisfactory, the value of theinvestments may be deemed to be the income of the assessee ofsuch financial year.”

24. Section 69A came to be inserted by Finance Act, 1964 (Act 5of 1964) w.e.f. 01.05.1964. It reads as follows:

“69A. Unexplained money, etc. Where in any financial year theassessee is found to be the owner of any money, bullion, jewelleryor other valuable article and such money, bullion, jewellery orvaluable article is not recorded in the books of account, if any,maintained by him for any source of income, and the assesseeoffers no explanation about the nature and source of acquisitionof the money, bullion, jewellery or other valuable article, or theexplanation offered by him is not, in the opinion of the[ 4] Assessing]Officer, satisfactory, the money and the value of the bullion,jewellery or other valuable article may be deemed to be the incomeof the assessee for such financial year.”

25. Section 69B provides for power with the Assessing Officerto deal with investments made by an assessee in bullion, jewellery andother valuable article, when such assets are found to be owned by the 4 (1980) Suppl. SCC 660

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Aassessee and he finds a mismatch between the amount spent foracquiring them or investing in them and the amount recorded in theBooks of Accounts for any source of income and no explanation isoffered or the explanation offered is not found satisfactory, the excessamount can be brought to tax. Section 69C, inserted w.e.f. 01.04.1976,deals with unexplained expenditure, being deemed to be the income ofBthe assessee.

26. Section 69 and Section 69A, apart from being close neighbours,do bear resemblance with one another. Section 69 deals with unexplainedinvestment. Section 69A deals with unexplained money, bullion, jewelleryor other valuable articles. Section 69A was inserted by Amending Act 5Cof 1964 and it came into effect w.e.f. 01.04.1964. Both Sections requirethat the subject matter of the provisions, viz., investments in the case ofSection 69 and money, bullion, jewellery or other valuable articles in thecase of Section 69A are not recorded in the Books of Account. That is,in a case where Books of Accounts are maintained. In the case ofDinvestments under Section 69, necessarily, the Law-Giver contemplatesthe Assessing Officer finding that the assessee had made the investments.In the case of Section 69A, the assessee must be found to be the ownerof the money, bullion, jewellery or other valuable articles. In both cases,if the assessee is able to offer an explanation for the nature and thesource for the investments and money, bullion, jewellery or other valuableEarticles, respectively, and it is not found unsatisfactory, there can be nodeemed income under either Section.

27. Turning more to Section 69A, it may be broken down into thefollowing essential parts:Fa.The assessee must be found to be the owner; b.He must be the owner of any money, bullion, jewellery orother valuable articles;

c.The said articles must not be recorded in the Books ofAccount, if any maintained; G

d.The assessee is unable to offer an explanation regardingthe nature and the source of acquiring the articles in question;or

The explanation, which is offered, is found to be, in theopinion of the Officer, not satisfactory; H

e.If the aforesaid conditions are satisfied, then, the value ofAthe bullion, jewellery or other valuable article may bedeemed as the income of the financial year in which theassessee is found to be the owner; f.In the case of money, the money can be deemed to be theincome of the financial year; B

28. Applying the provision to the facts of the case, it is noticedthat the points that arise are as follows:

I.The question would arise, as to whether the appellant couldbe treated as the owner of the bitumen; C

II.The further question would arise, as to whether bitumencould be treated as other valuable articles;

III.Thirdly, the question arises, as to how the value of thebitumen is to be ascertained; D

IV.Whether the ITAT erred in passing contradictory Ordersqua the Assessment Years 1995-1996 and 1996-1997, byOrders passed on the same day and whether the facts werethe same?

29. As regards the first question, viz., whether the appellant couldbe treated as the owner of the bitumen is concerned, it is indisputablethat the appellant was engaged as a carrier to deliver the bitumen, afterhaving lifted the same from the Oil Companies to the various Divisionsof the Road Construction Department of the Government of Bihar. Beforethe Court proceeds to deal with this aspect, we may bear in mind, whatthis Court held in the decision reported in Chuharmal S/O TakarmalMohnani v. Commissioner of Income Tax, M.P., Bhopal5. In the saidcase, the Court was dealing with wrist watches being seized from theassessee during a search conducted by the Customs Authorities fromthe bedroom of the assessee. The question fell for consideration, as towhether the principles underlying Section 110 of the Evidence Act, 1872,would assist the Revenue to conclude that a person, in possession, couldbe treated as the owner. This Court held, inter alia, as follows:

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“6. … In other words, it follows from well settled principle of lawthat normally, unless contrary is established, title always follows H

Apossession. In the facts of this case, indubitably, possession of thewrist-watches was found with the petitioner. The petitioner didnot adduce any evidence, far less discharged the onus of provingthat the wrist-watches in question did not belong to the petitioner.Hence, the High Court held, and in our opinion rightly, that thevalue of the wrist-watches is the income of the assessee.”B

30. After referring to the Judgment of the High Court of Bombayreported in J.S. Parkar v. V.B. Palekar6, which dealt with seizure ofgold, the Court, held as follows:

“6. … There a contention was raised that the provision in SectionC110 of the Evidence Act where a person was found in possessionof anything, the onus of proving that he was not the owner was onthe person who affirmed that he was not the owner, was incorrectand inapplicable to taxation proceedings. This contention wasrejected. The High Court of Bombay held that what was meantby saying that the Evidence Act did not apply to the proceedingsDunder the Act was that the rigour of the rules of evidence containedin the Evidence Act, was not applicable but that did not mean thatthe taxing authorities were desirous in invoking the principles ofthe Act in proceedings before them, they were prevented fromdoing so. Secondly, all that Section 110 of the Evidence Act doesEis that it embodies a salutary principle of common law jurisprudencewhich could be attracted to a set of circumstances that satisfy itscondition.”

31. The said view has been followed by this Court inCommissoiner7of Income Tax, Salem v. K. Chinnathamban. Therein the Court interalia held:F

“8. … The High Court has rightly held that the expression“income” as used in Section 69-A of the Act, has wide meaningwhich meant anything which came in or resulted in gain.”

32. It may be noticed that Section 15 of the Carriage by RoadAct, 2007, which repealed the Carriers Act, 1865, provides as follows:G

“15 Right of common carrier in case of consignee’s default.

(1) If the consignee fails to take delivery of any consignment ofgoods within a period of thirty days from the date of notice given 6 (1974) 94 ITR 616 (Bom HC)H7 (2007) 7 SCC 390

by the common carrier, such consignment may be deemed asunclaimed: Provided that in case of perishable consignment, theperiod of thirty days shall not apply and the consignment shall bedeemed unclaimed after a period of twenty-four hours of serviceof notice or any lesser period as may be mutually agreed to byand between the common carrier and the consignor.

(2) In the case of an unclaimed consignment under sub-section (1),the common carrier may, (a) if such consignment is perishable in nature, have the rightto sell the consignment; or (b) if such consignment is not perishable in nature, cause anotice to be served upon the consignee or upon the consignorif the consignee is not available, requiring him to remove thegoods within a period of fifteen days from the date of receiptof the notice and in case of failure to comply with the notice,the common carrier shall have the right to sell such consignmentwithout any further notice to the consignee or the consignor,as the case may be.

(3) The common carrier shall, out of the sale proceeds receivedunder sub-section (2), retain a sum equal to the freight, storageand other charges due including expenses incurred for the sale,and the surplus, if any, from such sale proceeds shall be returnedto the consignee or the consignor, as the case may be.

(4) Unless otherwise agreed upon between the common carrierand consignor, the common carrier shall be entitled to detain ordispose off the consignment in part or full to recover his dues inthe event of the consignee failing to make payment of the freightand other charges payable to the common carrier at the time oftaking delivery.”

33. Therefore, under Section 15, if the consignee fails to takedelivery of any consignment of goods within thirty days, the consignmentis to be treated as unclaimed. The period of thirty days is declaredinapplicable to perishable consignments, in which case, a period of twenty-four hours’ notice or any lesser period, as may be agreed between theconsignor and the common carrier, suffices. In the case of perishableconsignment, following such notice, the consignment can be sold. In acase where the goods are not perishable, if there is failure by the consignee AB

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Ato remove the goods after the receipt of a notice of fifteen days from thecarrier, the common carrier is given a right to sell the consignment withoutfurther notice. Section 15(3) enables the carrier to retain a sum equal tothe freights, storage and other charges, due, including expenses incurredfor the sale. The surplus from the sale proceeds is to be returned to theconsigner or the consignee. Section 15(4) clothes the carrier with a rightBto sell in the event of failure by the consignee to make payment of thefreight and other charges, at the time of taking delivery.

34. This Court, in this case, is dealing with the assessment years1996-1997. The law applicable was contained in the Carriers Act, 1865.It is unnecessary for us to dwell further, as it is not the case of eitherCparty that the appellant had become the owner of the bitumen in questionin a manner authorised by law. On the other hand, the specific case ofthe appellant is that the appellant never became the owner and it remainedonly a carrier. However, as noticed, if it is found that there has beenshort delivery, this would mean that the appellant continued in possessionDcontrary to the terms of contract of carriage.

35. In Mohan B. Samtani v. Commissioner of Income-Tax8, theappellant, who was found in possession of a package, which, when openedat the airport, contained a bronze idle of Nataraja and its pedestal, wassought to be roped in as owner with the aid of Section 69A of the Act:

E“6. From the facts on record, there cannot be any dispute that theconsignor was the State Trading Corporation of Sikkim and theconsignee was the Chogyal of Sikkim and the assessee was arepresentative of the State Trading Corporation of Sikkim. Theassessee also claimed that the Chogyal of Sikkim was the ownerand, under his verbal instruction conveyed through his A.D.C., heFarranged for despatch thereof by signing the papers. In fact, theChogyal also claimed ownership of the said packages on the basisof the letter by the Under Secretary of the Chogyal of Sikkimaddressed to the Assistant Collector of Customs dated May 30,1973. The Chogyal was the head of an independent State at theGrelevant time and it was necessary, if the claim for ownership ofthe Chogyal is to be disputed, to have the said letter verified byobtaining the original from the customs authorities. Merely becausethe packages were presented before the customs authority, it doesnot ipso facto prove the ownership of the assessee of the goods.

7. In our view, it has not been established or found that the assesseeis the owner of the said idol and pedestal. On the contrary, thesaid letter dated May 30, 1973, addressed to the Assistant Collectorof Customs shows that the Chogyal is the owner of the said articles.Under such circumstances, there is no reason to hold the assesseeliable and to add Rs. 80,000 being the value of the said articles tohis income.

36. The High Court went on to distinguishChuharmal (supra) byholding that in the case before the High Court, the assessee had producedthe evidence to substantiate that the article found in his possessionbelonged to the Chogyal of Sikkim.

D. A CARRIER, A BAILEE?

37. When goods are entrusted to a common carrier, the entrustmentwould amount to a contract of bailment within the meaning of Section148 of the Contract Act, 1872 when it is for being carried by road, as inthis case. A contract for bailment may not involve any considerationbeing payable in which case Section 58 of the Contract Act obliges thebailor to repay to the bailee the necessary expenses incurred by him forthe purpose of bailment. Possession is central to bailment. [See Pullockand Mulla in the Indian Contract and Specific Relief Act]. Section 151of the Contract Act declares that ‘in all cases of bailment the bailee isbound to take as much care of the goods bailed to him as a man ofordinary prudence would, under similar circumstances, take of his owngoods of the same bulk, quality and value as the goods bailed.’ Can it besaid that the standard of care as declared in Section 151 is alone applicableto the common carrier. The subject matter is not res integra. In PatelRoadways Ltd. v. Birla Yamaha Ltd.9, the Court held inter alia asfollows: - “31. Coming to the question of liability of a common carrier forloss of or damage to goods, the position of law has to be taken asfairly well settled that the liability of a carrier in India, as in England,is more extensive and the liability is that of an insurer. The absoluteliability of the carrier is subject to two exceptions: an act of Godand a special contract which the carrier may choose to enter withthe customer.”

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A38. In the same year, and what is more, in the same volume, thisCourt spoke on the subject in the decision reported in Nath Bros. EximInternational Ltd. v. Best Roadways Ltd.10. The Court held, inter alia,as follows: - “14. These provisions, in effect, embody the English common lawBrule as to the liability of the bailee. Under the English commonlaw rule, the measure of care required of the person to whom thegoods were bailed, was the same as a man of ordinary prudencewould take of his own goods. In other words, it was a mere matterof negligence on which the liability was founded. If a person wasnegligent and did not take as much care as he would have takenCof his own goods, he would be liable in damages. These principlesof the English common law rule were also applied in this countryas indicated in the decision of the Privy Council in IrrawaddyFlotilla Co. Ltd. v. Bugwandass in which, it was, inter alia, observedas under:

D“For the present purpose it is not material to inquire how it wasthat the common law of England came to govern the dutiesand liabilities of common carriers throughout India. The factitself is beyond dispute. It is recognised by the Indian Legislaturein the Carriers Act, 1865, an Act framed on the lines of theEEnglish Carriers Act of 1830.”

“15. In the meantime, Parliament intervened and the Carriers Act,1865 was enacted with the result that the liability of a commoncarrier came to be considered in the light of the provisionscontained in that Act. It is true that Section 158 of the IndianFContract Act speaks of bailment of the goods for being carried onbehalf of that bailor, but it is also to be noticed that the bailmentspoken of in that section is gratuitous as it is specifically provided“bailment” as set out in Section 148 of the Indian Contract Actmay be said to be wide enough so as to cover “entrustment ofgoods” to a carrier for carriage. But as pointed out above, withGthe enactment of the Carriers Act, 1865, the extent of liability ofthe carrier has to be found in that Act.”

“25. We have already reproduced the provisions of Section 6, 8and 9 above. Section 6 enables the common carrier to limit his liability by a special contract. But the special contract will notabsolve the carrier if the damage or loss to the goods, entrusted tohim, has been caused by his own negligence or criminal act orthat of his agents or servants. In that situation, the carrier wouldbe liable for the damage to or loss or non-delivery of goods. Inthis situation, if a suit is filed for recovery of damages, the burdenof proof will not be on the owner or the plaintiff to show that theloss or damage was caused owing to the negligence or criminalact of the carrier as provided by Section 9. The carrier can escapehis liability only if it is established that the loss or damage was dueto an act of God or enemies of the State (or the enemies of King,a phrase used by the Privy Council). The Calcutta decision inBritish & Foreign Marine Insurance Co. v. India GeneralNavigation and Rly. Co. Ltd., the Assam decision in River steamNavigation Co. Ltd. v. Syam Sunder Tea Co. Ltd., the Rajasthandecision in Vidya Ratan v. Kota Transport Co. Ltd. and the Keraladecision in Kerala Transport Co. v. Kunnath Textiles which havealready been referred to above, have considered the effect ofspecial contract within the meaning of Sections 6 and 8 of theCarriers Act, 1865 and in, our opinion, they lay down the correctlaw.”

39. To apply Section 69A of the Act, it is indispensable that theOfficer must find that the other valuable article, inter alia, is owned bythe assessee. A bailee, who is a common carrier, is not an owner of thegoods. A bailee who is a common carrier would necessarily be entrustedwith the possession of the goods. The purpose of the bailment is thedelivery of the goods by the common carrier to the consignee or as perthe directions of the consignor. During the subsistence of the contract ofcarriage of goods, the bailee would not become the owner of the goods.In the case of an entrustment to the carrier otherwise than under acontract of sale of goods also, the possession of the carrier would notconvert it into the owner of the goods.

E. THE CARRIAGE BY ROAD ACT, 2007

40. Under Section 15 of the Carriage by Road Act, 2007, thecarrier can, after issuing notice as provided, when there is a failure bythe consignee to take delivery, sell the goods in the case of a sale whichis so authorised by a statute. The buyer from the carrier would acquirea good title even as against the consignee. It may be true that as far as ABC

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Athe sale proceeds received by the common carrier from the sale, hewould be accountable to the consignee as provided in Section 15 of theAct. Likewise, in a case covered under Section 15(4), the common carrierwould have the power to dispose of the consignment for recovery ofdues from the consignee. In such cases if the other ingredients of Section69A are satisfied, there may be no fallacy involved if an assessee isBfound to be the owner of the goods which he disposes of under theauthority of law.

F. CRIMINAL BREACH OF TRUST

41. Section 405 of the Indian Penal Code, 1860 reads as follows:C“405. Criminal Breach of Trust Whoever, being in any manner entrusted with property, or withany dominion over property, dishonestly misappropriates orconverts to his own use that property, or dishonestly uses or disposesof that property in violation of any direction of law prescribing theDmode in which such trust is to be discharged, or of any legalcontract, express or implied, which he has made touching thedischarge of such trust, or wilfully suffers any other person so todo, commits “criminal breach of trust”.

Illustration (f) under Section 405 is apposite and it reads asEfollows: - “Illustration f. A, a carrier, is entrusted by Z with property to becarried by land or by water. A dishonestly misappropriates theproperty. A has committed a criminal breach of trust.”

G. THE SALE OF GOODS ACT, 1930F

42. Section 39 of the Sale of Goods Act, 1930,inter alia,contemplates delivery pursuant to a contract of sale by the seller to thecarrier as prima facie to be deemed to be the delivery of the goods to thebuyer. It becomes the responsibility of the buyer of a carrier to fulfil itscontractual obligations and deliver the goods to the consignee or as perGits instructions. Section 27 of the Sale of Goods Act deals with sale by aperson who is not the owner. It reads as follows: - “27. Sale by person not the owner. —

Subject to the provisions of this Act and of any other law for theHtime being in force, where goods are sold by a person who is not the owner thereof and who does not sell them under the authorityor with the consent of the owner, the buyer acquires no better titleto the goods than the seller had, unless the owner of the goods isby his conduct precluded from denying the seller’s authority tosell:

Provided that, where a mercantile agent is, with the consent ofthe owner, in possession of the goods or of a document of title tothe goods, any sale made by him, when acting in the ordinarycourse of business of a mercantile agent, shall be as valid as if hewere expressly authorised by the owner of the goods to make thesame; provided that the buyer acts in good faith and has not at thetime of the contract of sale notice that the seller has not authorityto sell.”

43. Sale by a carrier does not pass title except when it is immunisedby the conduct of the owner of the good which would in turn estop theowner from impugning the title of the buyer. Under Section 15 of theCarriage by Road Act, 2007, a sale by a carrier is permitted and it canconvey good title to the buyer.

H. IS A THIEF AN OWNER? OWNERSHIP BEINGILLEGAL.

44. Can a thief be treated as the owner of the goods? In thisregard, this Court notices the following discussion in the commentary onSampath Iyengar’s, Law of Income Tax.

“12. Sine qua non is “ownership”.- The words “is found to be theowner” appearing in this section clearly show that the mere factthat, on a search, certain articles are found in the possession of aperson cannot be said to attract the provisions of this section unlessit is established that the person in whose possession articles werefound is the owner thereof. An assessee is to be the owner beforeanything in his possession can be deemed to be his income. Itcannot be said in the case of stolen property that the thief is theowner thereof.Section 69A was enacted to treat the value ofcertain items as income by a deeming provision but facts must befound to bring a case within that deeming provision. In the case ofa deeming provision the court has to assume an unreal state ofthings to be real.”

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A45. In Commissioner of Income Tax v. K.I. Pavunny11, a DivisionBench was dealing with the case where excise authorities found articlescovered by Section 69A in a box. The assessee sought to attributeownership to another person with whom he was on inimical terms. TheHigh Court of Kerala found that the assessee did not discharge his onusto establish that the articles belonged to someone else. What is of interestBto this Court is the following discussion:

“13. …But for the prohibitory law, any article being a propertycan be owned by a person. Simply because the law prohibitsretention of a property that does not mean that such property iswithout ownership. Even contraband or prohibited articles can beCowned and possessed unlawfully. It is entirely a different thingthat the law may not permit the owner of given articles to retainpossession of them or the articles may be liable under law to beconfiscated.”

46. Appellant places reliance on judgment inAddl. CommissionerDof Income Tax vs. S. Pichaimanickan Chettiarreported in 1984 (147)ITR 251. In the said case, it is noted that Section 69A of the Act wasinvoked after finding the assessee and one Ameen were found to be inpossession of gold at railway station and were convicted under Section135(b)(ii) of the Customs Act. The Court held against the revenue afterEholding as follows:

“In this case, the assessee has been convicted only as a carrierby the Chief Presidency Magistrate and not as the owner of thegold. The Chief Presidency Magistrate has specifically observedthat the actual owners of the goods or financial magnates areFunderground. Therefore, merely on the basis of s. 110 of theEvidence Act, the value of the gold cannot be taken to be hisincome. Merely because the assessee has kept silent and has notdisclosed the name of the owners of the gold, he cannot be assessedunder s. 69A of the I.T. Act. Liability to be taxed under s. 69Acan arise only if he is shown to be the owner of the goods.”G47. Both views can be reconciled. No doubt, it may be true that aperson may own, contraband or prohibited articles and still be within theembrace of Section 69A. In other words, the illegality of the ownershipmay not ill square with the requirement of Section 69A that the assessing

officer must find the assessee to be the owner of the article. However,that is not to say that without finding ownership or when it is obvious thatsomeone else is the owner, a person found in possession, which is illegal,can be found to be the owner under Section 69A.The question wouldarise pointedly, as to, when a common carrier refuses to deliver theconsignment and continues to possess it contrary to contract and lawand converts it into his use and presumably sells the same, as to whetherhe could be found to be the owner of the goods. Would he be any differentfrom a person who commits theft and sells it claiming to be the owner.Can a thief become the owner? It would be straining the law beyondjustification if the Court were to recognise a thief as the owner of theproperty within the meaning of Section 69A. Recognising a thief as theowner of the property would also mean that the owner of the propertywould cease to be recognised as the owner, which would indeed be themost startling result. While possession of a person may in appropriatecases, when there is no explanation forthcoming about the source andquality of his possession, justify an assessing officer finding him to bethe owner, when the facts are known that the carrier is not the ownerand somebody else is the owner, then to describe him as the owner mayproduce results which are most illegal apart from being unjust.

I. THE CIRCULAR DATED 07.07.1964

48. In this regard, the following are the contents of the Circularissued by the Board, dated 7[th] July 1964, namely, Circular No. 20 of1964. It reads as follows:

“86. This provision is complementary to the provisions in Section69 which enables the assessment of the value of investments whichhave not been recorded in the books of account of the assesseeand the source of which has not been explained by himsatisfactorily.

87. It has to be carefully noted that the conditions precedent tothe application of the provisions of Section 69A are that (i) themoney, bullion, jewellery or other valuable articles in question arenot recorded in the books of account, if any, maintained by theassessee concerned for any source of income; and (ii) that theassessee either offers no explanation as to the nature and sourceof acquisition thereof or the explanation offered by him is, in theopinion of the Income-tax Officer (now Assessing Officer), notsatisfactory. In coming to the conclusions that the explanation ABC

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offered by the assessee in support of his case is not satisfactory,all the facts, circumstances and the evidence in the case have tobe considered very carefully, and for this purpose, the assesseeshould be given due opportunity to adduce evidence in support ofhis explanations.

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88. In this connection, the following statement made by the Ministerof Finance in the Lok Sabha on 18[th] April, 1964 in reply to somecriticism that the provisions of this section might result in hardshipto persons whose ornaments or jewellery were given to them bytheir forefathers, have to be borne in mind:

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C“Often times, people convert their black money into gold. Theymake gold jewellery or gold vessels and then say it is heirloom.This is the common way of bringing unaccounted money intosomething which is reputable and can be cashed…..Any waythis (Section 69A) is not intended to hurt the middle class persons.Generally, it will be used in dealing with cases of persons who payDwealth-tax, who probably have declared Rs.25,000 as jewels, andwe could ask them ‘How did you get more jewels?’…. I canpromise that this department shall not go and hurt any lower middleclass man at all in this way, because we will get what is our due inother ways. They are not paying the taxes at all….. we will giveEthem notice….. we shall bring them on the tax rolls. But bigassesses as are contemplated in this provision cannot be allowedto escape.”

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J. THE DEPARTMENTAL INSTRUCTIONS DATED11.05.1994F49. This Court notices Departmental Instruction No. 1916 dated11[th] May, 1994.

“2. Departmental instructions. – Instruction read as under:

“Seizure of Jewellery and Ornaments in Course of SearchGOperations- Guidelines for.- Instances of seizure of jewellery ofsmall quantity in course of operations under section 132 have cometo the notice to the Board. The question of a common approach tosituations where search parties come across items of jewellery,has been examined by the Board and following guidelines areissued for strict compliance:- H

(i) In the case of a wealth-tax assessee, gold jewellery andornaments found in excess of the gross weight declared in thewealth-tax return only need be seized.

(ii) In the case of a person not assessed to wealth-tax, goldjewellery and ornaments to the extent of 500 gms. Per marriedlady, 250 gms. Per unmarried lady and 100 gms. Per male memberof the family, need not be seized.

(iii) The authorised officer may, having regard to the status of thefamily and the custom and practices of the community to whichthe family belongs and other circumstances of the case, decide toexclude a larger quantity of jewellery and ornaments from seizure.This should be reported to the Director of Income-tax/Commissioner authorising the search at the time of furnishing thesearch report.

In all cases, a detailed inventory of the jewellery and ornamentsfound must be prepared to be used for assessment purposes.”

K. R. B. JODHA MAL DISTINGUISHED BY HIGHCOURT

50. The High Court has distinguished the judgment of this CourtinR.B. Jodha Mal Kuthiala Vs. Commissioner of Income Tax, Punjab,Jammu and Kashmir, Himachal Pradesh and Patiala12. In the saidcase, the appellant claimed losses for three assessment years. The losseswere claimed on account of interest payable to the bank. The appellantassessee had availed the loan in connection with his business which wasbeing conducted in erstwhile Pakistan. With the creation of Pakistan,the hotel which was a part of the appellant’s business came to be declaredas evacuee property and vested in the custodian in Pakistan. The claimof the appellant assessee in the said case was resisted by the AssessingOfficer on the basis of that no income or loss from that hotel could beconsidered as the property stood vested with the custodian. In otherwords, since the appellant was resting his claim made under Section 9 ofthe Income Tax act, 1922 (which corresponds to Section 22 of the Act)as the appellant was not the owner, no relief could be granted to theappellant. The contention of the appellant was that the property vestedin the custodian wholly for the purpose of administration and the assesseecontinued to an owner. This Court, inter alia, held as under:

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“9. The question is who is the “owner” referred to in thissection? Is it the person in whom the property vests or is it hewho is entitled to some beneficial interest in the property? It mustbe remembered that Section 9 brings to tax the income fromproperty and not the interest of a person in the property. A propertycannot be owned by two persons, each one having independentand exclusive right over it. Hence for the purpose of Section 9,the owner must be that person who can exercise the rights of theowner, not on behalf of the owner but in his own right.

10. For a minute, let us look at things from the practical pointof view. If the thousands of evacuees who left practically all theirproperties as well as businesses in Pakistan had been consideredas the owners of those properties and businesses as long as the“Ordinance” was in force then those unfortunate persons wouldhave had to pay income tax on the basis of the annual lettingvalue of their properties and on the income, gains and profits ofthe businesses left by them in Pakistan though they did not get apaisa out of those properties and businesses. Fortunately no onein the past interpreted the law in the manner Mr Mahajan wantsus to interpret. It is true that equitable considerations are irrelevantin interpreting tax laws. But those laws, like all other laws have tobe interpreted reasonably and in consonance with justice.

14. For determining the person liable to pay tax, the test laiddown by the court was to find out the person entitled to that income.An attempt was made by Mr Mahajan to distinguish this case onthe ground that under the corresponding English statute the liabilityto tax in respect of income from property is not laid on the ownerof the property. It is true that Section 82 of the English IncomeTax Act, 1952, is worded differently. But the principles underlyingthe two statutes are identical. This is clear from the variousprovisions in that Act.

17. Those observations have to be understood in the context inwhich they were made. Therein, Their Lordships were consideringwhether the right of an evacuee in respect of the property left byhim in the country from which he migrated was property right forthe purpose of Article 19(1)(f) of the Constitution. No one deniesthat an evacuee from Pakistan has a residual right in the propertythat he left in Pakistan. But the real question is, can that right be considered as ownership within the meaning of Section 9 of theAct. As mentioned earlier that section seeks to bring to tax incomeof the property in the hands of the owner. Hence the focus of thatsection is on the receipt of the income. The word “owner” hasdifferent meanings in different contexts. Under certaincircumstances a lessee may be considered as the owner of theproperty leased to him. In Stroud’s Judicial Dictionary (3rd Edn.),various meanings of the word “owner” are given. It is notnecessary for our present purpose to examine what the word“owner” means in different contexts. The meaning that we giveto the word “owner” in Section 9 must not be such as to makethat provision capable of being made an instrument of oppression.It must be in consonance with the principles underlying the Act.

18. Mr Mahajan next invited our attention to the observationsin Pollock on Jurisprudence (6th Edn. 1929) pp. 178-80:“Ownership may be described as the entirety of the powers ofuse and disposal allowed by law .... The owner of a thing is notnecessarily the person who at a given time has the whole powerof use and disposal; very often there is no such person. We mustlook for the person having the residue of all such power when wehave accounted for every detached and limited portion of it; andhe will be the owner even if the immediate power of control anduse is elsewhere”.

[Emphasis supplied]

51. This Court formed the view that since Section 9 of the IncomeTax Act, 1922 required that in order that a person be assessed to tax inthe form of income from house property, he should be the owner and asthe custodian in Pakistan was the owner, the High Court was right in theview it took.

52. In Late Nawab Sir Mir Osman Ali Khan v. Commissionerof Wealth Tax, Hyderabad13; the matter arose under the Wealth TaxAct, 1957. Section 2(m) of the said Act defined net wealth as beingpredicated with reference to assets “belonging to” the assessee. Theassessee in the said case had sold out the property without executing thesale deed. The possession was handed over to the buyer after receivingfull consideration. The Court notices the following statement:

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“11. The material expression with which we are concerned inthis appeal is ‘belonging to the assessee on the valuation date’.Did the assets in the circumstances mentioned hereinbeforenamely, the properties in respect of which registered sale deedshad not been executed but consideration for sale of which hadbeen received and possession in respect of which had been handedover to the purchasers belonged to the assessee for the purposeof inclusion in his net wealth? Section 53-A of the Transfer ofProperty Act gives the party in possession in those circumstancesthe right to retain possession. Where a contract has been executedin terms mentioned hereinbefore and full consideration has beenpaid by the purchasers to the vendor and where the purchasershave been put in the possession by the vendor, the vendees haveright to retain that possession and resist suit for specificperformance. The purchasers can also enforce suit for specificperformance for execution of formal registered deed if the vendorwas unwilling to do so. But in the eye of law, the purchaserscannot and are not treated as legal owners of the property inquestion. It is not necessary, in our opinion, for the purpose of thiscase to be tied down with the controversy whether in India thereis any concept of legal ownership apart from equitable ownershipor not or whether under Sections 9 and 10 of the Indian IncomeTax Act, 1922 and Sections 22 to 24 of the Indian income TaxAct, 1961, where ‘owner’ is spoken in respect of the houseproperties, the legal owner is meant and not the equitable orbeneficial owner. Salmond On Jurisprudence, 12[th] edn.,discusses the different ingredients of ‘ownership’ from pages 246to 264. ‘Ownership’, according to Salmond, denotes the relationbetween a person and an object forming the subject-matter of hisownership. It consists of a complex of rights, all of which arerights in rem, being good against all the world and not merelyagainst specific persons. Firstly, Salmond says, the owner willhave a right to possess the thing which he owns. He may notnecessarily have possession. Secondly, the owner normally hasthe right to use and enjoy the thing owned: the right to manage it,i.e., the right to decide how it shall be used; and the right to theincome from it. Thirdly, the owner has the right to consume, destroyor alienate the thing. Fourthly, ownership has the characteristic ofbeing indeterminate in duration. The position of an owner differs from that of a non-owner in possession in that the latter’s interestis subject to be determined at some future time. Fifthly, ownershiphas a residuary character. Salmond also notes the distinctionbetween legal and equitable ownership. Legal ownership is thatwhich has its origin in the rules of the common law, while equitableownership is that which proceeds from rules of equity differentfrom the common law. The courts of common law in Englandrefused to recognise equitable ownership and denied the equitableowner as an owner at all.”

53. The Court further took the view that it was not concernedwith the expression ‘owner’ but it was dealing with the issue as to whetherthe assets belonged to the assessee anymore. It was found that “merepossession or joint possession unaccompanied by the right of possessionor ownership of property would not bring the property within the definitionof net wealth for it would not be an asset belonging to “the assessee”.The decisions under the Income Tax Act were distinguished. In regardto R.B. Jodha Mal (supra),this Court finds the following discussion:

“17. This Court had occasion to discuss Section 9 of the IncomeTax Act, 1922 and the meaning of the expression “owner” in thecase of R.B. Jodha Mal Kuthiala v. CIT [(1971) 3 SCC 369 : AIR1972 SC 126 : (1971) 82 ITR 570] . There it was held that for thepurpose of Section 9 of the Indian Income Tax Act, 1922, theowner must be the person who can exercise the rights of theowner, not on behalf of the owner but in his own right. An assesseewhose property remained vested in the Custodian of EvacueeProperty was not the owner of the property. This again as observeddealt with the expression of Section 9 of the Indian Income TaxAct, 1922. At p. 575 (SCC p. 373, para 11) of the report certainobservations were relied upon in order to stress the point thatthese observations were in consonance with the observations ofthe Gujarat High Court which we shall presently note. We are,however, not concerned in this controversy at the present moment.It has to be borne in mind that in interpreting the liability for wealthtax normally the equitable considerations are irrelevant. But it iswell to remember that in the scheme of the administration of justice,tax law like any other laws will have to be interpreted reasonablyand whenever possible in consonance with equity and justice.Therefore, specially in view of the fact that the expression usedby the legislature has deliberately and significantly not used the AB

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Aexpression “assets owned by the assessee” but assets “belongingto the assessee”, in our opinion, is an aspect which has to beborne in mind.”

The question was, therefore, answered in favour of the revenueand it was found that the asset continued to belong to the assessee forBthe purpose of Wealth Tax.

54. In Commissioner of Income Tax, Bombay & Ors. v. PodarCement Pvt. Ltd. & Ors.[14], a Bench of three learned Judges had occasionto revisit the issue in the following set of facts. The matter arose by wayof reference under Section 257 of the Act to the Supreme Court in viewCof the conflicting judgment of the High Courts. The assessee in one ofthe cases claimed that the rental income was assessable as income fromother sources in as much as the assessee company was not the legalowner of the flats. This was for the reason that the title of the propertyhad not been conveyed to the cooperative society which was formed bythe purchaser of the flats. In one of the appeals, the assessee claimedDthat the income must be assessed under Section 22. The claim wasrejected on the ground that assessee was only a lessee and had onlytenancy rights. The common question which arose in all the cases wasthe scope of Section 22 of the Act vis-à-vis Section 56 of the Act.Section 22 of the Act brings to tax income from house property and theEsection expressly declares that the assessee must be the owner of thebuilding or lands. Section 27 purports to define the expression owner ofhouse property, inter alia, for the purpose of Sections 22 to 26. It includesa person who is allowed to take or retain possession of any building orpart thereof, in part performance of a contract of the nature referred toin Section 53(A) of the Transfer of Property Act. The Court distinguishedFJodha Mal (supra).This Court further referred to in great detail thejudgment of the Patna High Court in Additional Commissioner ofIncome Tax, Bihar v. M/s. Sahay Properties and Investment Co.(P)Ltd.15. Since this Court has approved the reasoning adopted by the PatnaHigh Court, it is deemed appropriate to refer to the same:G“32. The learned Judges observed at page 361:

“The emphasis, therefore, in this statutory provision is that thetax under the section is in respect of ownership. But this matter is 14 (1997) 5 SCC 482H15 1983 (144) ITR 357

not as simple as it looks. This leaves us to a more vexed questionas to what is ownership. Should the assessment be made at thehands of the person who has the bare husk of the legal title or atthe hands of the person who has the rights of an owner of aproperty in a practical sense? Enjoyment as an owner only in apractical sense can be attributed to the term ‘owner’ in the contextof this section — a person who can exercise the rights of theowner and is entitled to the income from the property for his ownbenefit. It is well settled, and learned counsel for either side werenot at loggerheads, that the section cannot be so construed as tomake it an instrument of oppression, to use the language of Hegde,J., in the case of Jodha Mal [(1971) 3 SCC 369 : (1971) 82 ITR570] .

We are very much alive to the legal position that it is true thatthere is no equity about a tax, there is no presumption as to a tax.Nothing is to be read in — nothing is to be implied. We can lookonly fairly at the language used. Nonetheless, the tax laws haveto be interpreted reasonably and in consonance with justice. Thisis well settled by numerous decisions of the Supreme Court itself.

We have, therefore, to judge and interpret the language ofSection 22 of the Act in the context of that particular section, andthat context we shall come back to hereinafter at a moreappropriate place.

In the meantime, it would not be irrelevant to go into the conceptof ‘ownership’. What is ownership after all? Read from the Romanlaw up to the English law at the present stage, medieval stagehaving been interspersed with different formulae, the position thatnow juristically emerges is this. The full rights of an owner asnow recognised are:

‘(a) The power of enjoyment (e.g., the determination of theuse to which the res is to be put, the power to deal with produceas he pleases, the power to destroy); (b) possession which includes the right to exclude others;

(c) power to alienate inter vivos, or to charge as security; (d) power to leave the res by will.’

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AOne of the most important of these powers is the right to excludeothers. The property right is essentially a guarantee of the exclusionof other persons from the use or handling of the thing…. Butevery owner does not possess all the rights set out above — aparticular owner’s powers may be restricted by law or by anagreement he has made with another.’(Refer to G.W. PatonBon Jurisprudence, 4th Edn., pp. 517-18.)

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‘To acquire possession of a thing it is necessary to exercisesuch physical control over the thing as the thing is capable of, andto evince an intention to exclude others:….’

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Reference in this connection has been made to the caseof Tubantia: Young v. Hichens and of Pierson v. Post [(1805) 3Caines 175 (Supreme Court of New York)] .

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It would thus be seen that where the possession of a propertyis acquired, with a right to exercise such necessary control overthe property acquired which it is capable of, it is the intention toexclude others which evinces an element of ownership.

To the same effect and with a more vigorous impact is thesubject dealt with by Dias on Jurisprudence, (4th Edn., at p.400):

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‘The position, therefore, seems to be that the idea of ownershipof land is essentially one of the ‘better right’ to be in possessionand to obtain it, whereas with chattels the concept is a moreFabsolute one. Actual possession implies a right to retain it until thecontrary is proved, and to that extent a possessor is presumed tobe owner.’

“Again, at p. 404, the learned author says:

‘Special attention should also be drawn to the distinction between“legal” ownership recognised at common law and “equitable”ownership recognised at equity. This occurs principally when thereis a trust, which is purely the result of the peculiar historicaldevelopment of English law. A trust implies the existence of twokinds of concurrent ownerships, that of the trustee at law and thatof the beneficiary at equity.’

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We are not concerned in this case with any case of trust eitherunder the equitable principles or under the law as engrafted in theIndian Trusts Act. Because, the ‘beneficiary might himself be atrustee of his interest for a third person, in which case his equitableownership is as devoid of advantage to him as the legal ownershipis to the trustee. So, when described in terms of ownership, thedistinction between legal and equitable ownership lies in thehistorical factors that govern their creation and function; in termsof advantage, the distinction is between the bare right, whetherlegal or equitable, and the beneficial right’ (vide pp. 404-405 of Diason Jurisprudence, 4th Edn.).

We, therefore, need not go into the questions involving trustswhere a person holds the property and receives the income intrust for others who are the legal beneficiaries. The crux of thematter is as to whether, as already stated above, the actualpossession in a given particular case gives a right to retain such apossession until the contrary is proved and so long as that is notdone, to that extent a possessor is presumed to be the owner.

Incidentally, although the Supreme Court in the case of JodhaMal [(1971) 3 SCC 369 : (1971) 82 ITR 570] merely mentionedthat Stroud’s Judicial Dictionary had given several definitionsand illustrations of ownership, it refrained from going into the detailson account of the practical approach that was made in that case,to which we shall hereinafter refer and dilate upon. We think itworthwhile, the matter having been canvassed at length at theBar, to give a full illustration of the definitions of ‘ownership’ asStroud puts it. One such definition is that the ‘owner’ or ‘proprietor’of a property is the person in whom (with his or her assent) it isfor the time being beneficially vested, and who has the occupation,or control, or usufruct, of it, e.g., a lessee is, during the term, theowner of the property demised. Yet another definition that hasbeen given by Stroud is that:

‘“Owner” applies to every person in possession or receipt eitherof the whole, or of any part, of the rents or profits of any land ortenement; or in the occupation of such land or tenement, otherthan as a tenant from year to year or for any less term or as atenant at will.’(Stroud’s Judicial Dictionary, 3rd Edn., Vol. 3, p.2060)

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Thus the juristic principle from the viewpoint of each one is todetermine the true connotation of the term ‘owner’ within themeaning of Section 22 of the Act in its practical sense, leaving thehusk of the legal title beyond the domain of ownership for thepurpose of this statutory provision. The reason is obvious. Afterall, who is to be taxed or assessed to be taxed more accurately —a person in receipt of money having actual control over the propertywith no person having better right to defeat his claim of possessionor a person in legal parlance who may remain a remainder man,say, at the end or extinction of the period of occupation after,again say, a thousand years? The answer to this question in favourof the assessee would not merely be doing palpable injustice butwould cause absurd inconvenience and would make the legislatureto be dubbed as being a party to a nonsensical legislation. Onecannot reasonably and logically visualise as to when a person inactual physical control of the property realising the entire incomeand usufructs of the property for his own use and not for the useof any other person, having the absolute power of disposal of theincome so received, should be held not liable to tax merely becausea vestige of legal ownership or a husk of title in the long run mayyet clothe another person with the power of a residual ownershipwhen such contingency arises which is not a case even here. Aplain reading of clause 4 of the agreement, as extracted above,clearly goes to show that the physical possession of the propertieshas passed on or is deemed to have passed on to the assessee tohave and to hold for ever and absolutely with the power to use thesame in whatsoever manner it thinks best and the assessee shallderive all income and benefits together with full power of disposalof the properties as well as the income thereof. Can it then besaid that the recipient of the income being the assessee only havingan absolute and exclusive control over the property without anylet or hindrance on the part of the so-called vendor which, indeed,under law it was not entitled to do, as we shall presently show,shall be immune from the taxing provision in Section 22 of theAct? The answer in our view is clearly in the negative. The reasonis simple. The consideration money has been paid in full. Theassessee has been put in exclusive and absolute possession of theproperty. It has been empowered to deal with the income as itlikes. It has been empowered to dispose of and even to alienate

the property. Reference to Section 54 or, for that matter, Section55 of the Transfer of Property Act by the Tribunal merelyemphasises the fact that the legal title does not pass unless thereis a deed of conveyance duly registered. The agreement is inwriting and the value of the property is admittedly worth morethan hundred rupees. Section 54 of the Transfer of Property Actwould, therefore, exclude the conferment of absolute title bytransfer to the assessee. That, however, would not take away theright of the assessee to remain in possession of the property, torealise and receive the rents and profits therefrom and toappropriate the entire income for its own use. The so-called vendoris not permitted in law to dispossess or to question the title of theassessee (the so-called vendee). It was for this very practicalpurpose that the doctrine of the equity of part performance wasintroduced in the Transfer of Property Act, 1882, by insertingSection 53-A therein. The section specifically allows the doctrineof part performance to be applied to the agreements which, thoughrequired to be registered, are not registered and to transfers notcompleted in the manner prescribed therefor by any law. Thesection is, therefore, applicable to cases where the transfer is notcompleted in a manner required by law unless such a non-compliance with the procedure results in the transfer being void.There is, however, a distinction between an agreement void assuch and an agreement void in the absence of something whichthe vendor could do and had expressly or impliedly contracted todo, and where a vendor agrees to sell his share of property,including sir land, there is an implied term in the contract that hewill apply for sanction to the revenue authorities necessary forsuch transfers and the court will direct him to do so. It cannot besaid that such an agreement is void because no sanction has beenobtained. In the instant case, having reference to clause 5 of theagreement it would be seen that the option was given to theassessee to demand at its pleasure a conveyance duly registeredbeing executed in its favour by the Sahay family (the vendor) andto get its name mutated in the official records. The assessee hasnot exercised its option for reasons best known to it — presumablyto have a double weapon in its hands to be used as and whencircumstances so demanded. Can it yet be said that for the defaulton the part of the assessee itself it would be entitled to say that it AB

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Ais not the owner of the property for all practical purposes, receivingthe rent all the time, appropriating the usufructs for its own purposesall the time and having no interference at the instance of thevendor? Can that be a practical and logical approach to the trueconstruction and purport of the substance and spirit of Section 22of the Act? The answer, in our view, is clearly in the negative andBagainst the assessee. Having taken all the advantages and stilltaking all the advantages under the contract without any hindranceor obstruction on the part of anyone including the vendor whichthe vendor could not do in view of Section 53-A of the Transfer ofProperty Act, the assessee cannot now turn back and say thatCbecause of its default in having a deed registered at its sweet willit was not an owner within the meaning of Section 22 of the Act.It may bear repetition to say that it was on account of these factsthat juristic principles have now emerged saying that one of themost important of the powers of ownership is the right to excludeothers from possession and the property right is essentially aDguarantee of the exclusion of other persons from the use or handlingof the thing. In that sense, therefore, the assessee itself becamethe owner of the property in question. In our view, any decision tothe contrary would not be in consonance with the juristic principleeither at common law or in equity. In either case, it would not beEsubservient to the intent and purpose of Section 22 of the Act,with regard to which, as we have already stated, we can fairlylook at the language used and the tax laws have to be interpretedreasonably and in consonance with justice. So far we have dealtwith the case in this respect on juristic principles as if it were amatter of first impression. We have, therefore, now to refer to theFcase-law on the subject.”

Further, it is found that the Court also noticed the memorandumexplaining provisions in Finance Bill 1987 concerning Section 27 andfound that the amendment was intended to supply an obvious omissionGor clear up the doubts surrounding the word owner in Section 22 of theAct. The Court answered the reference in favour of the Revenue byholding that “in the context of Section 22 of the Act having regard to theground realities and to the object of the Act, namely, to tax the income ofthe “owner as a person who is entitled to receive income from the propertyHin his own right.”

55. In Mysore Minerals Ltd. M.G. Road, Bangalore v.Commissioners of Income Tax, Karnataka, Bangalore16 the assesseecompany though allotted houses by delivery of possession by the HousingBoard, an actual deed of conveyance had not been executed in its favour.The houses so allotted were for the use of its staff. Assessee claimeddepreciation under Section 32 of the Act. Section 32 of the Act alsocontemplates ownership of the asset as a condition for claiming the benefitof depreciation. The Court, inter alia, held as follows:

“4. Section 32 of the Income Tax Act confers a benefit on theassessee. The provision should be so interpreted and the wordsused therein should be assigned such meaning as would enablethe assessee to secure the benefit intended to be given by thelegislature to the assessee. It is also well settled that where thereare two possible interpretations of a taxing provision the one whichis favourable to the assessee should be preferred.

5. What is ownership? The terms “own”, “ownership”,“owned” are generic and relative terms. They have a wide andalso a narrow connotation. The meaning would depend on thecontext in which the terms are used. Black’s Law Dictionary (6thEdn.) defines “owner” as under:

“Owner.—The person in whom is vested the ownership,dominion, or title of property; proprietor. He who has dominion ofa thing, real or personal, corporeal or incorporeal, which he has aright to enjoy and do with as he pleases, even to spoil or destroy it,as far as the law permits, unless he be prevented by someagreement or covenant which restrains his right.

The term is, however, a nomen generalissimum, and itsmeaning is to be gathered from the connection in which it is used,and from the subject-matter to which it is applied. The primarymeaning of the word as applied to land is one who owns the feeand who has the right to dispose of the property, but the term alsoincludes one having a possessory right to land or the personoccupying or cultivating it.

The term ‘owner’ is used to indicate a person in whom one ormore interests are vested for his own benefit.”

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6. In the same dictionary, the term “ownership” has beendefined to mean, inter alia, as—

“Collection of rights to use and enjoy property, including rightto transmit it to others. … The right of one or more persons topossess or use a thing to the exclusion of others. The right bywhich a thing belongs to someone in particular, to the exclusion ofall other persons. The exclusive right of possession, enjoyment,and disposal; involving as an essential attribute the right to control,handle, and dispose.”

7. Dias on Jurisprudence (4th Edn., at p. 400) states:

“The position, therefore, seems to be that the idea of ownershipof land is essentially one of the ‘better right’ to be in possessionand to obtain it, whereas with chattels the concept is a moreabsolute one. Actual possession implies a right to retain it until thecontrary is proved, and to that extent a possessor is presumed tobe owner.”

8. Stroud’s Judicial Dictionary gives several definitions andillustrations of ownership. One such definition is that the “owner”or “proprietor” of a property is the person in whom (with his orher assent) it is for the time being beneficially vested, and whohas the occupation, or control, or usufruct, of it;e.g., a lessee is,during the term, the owner of the property demised. Yet anotherdefinition that has been given by Stroud is:

“ ‘owner’ applies ‘to every person in possession or receipteither of the whole, or of any part, of the rents or profits of anyland or tenement; or in the occupation of such land or tenement,other than as a tenant from year to year or for any less term or asa tenant at will’.”

19. It is well settled that there cannot be two owners of theproperty simultaneously and in the same sense of the term. Theintention of the legislature in enacting Section 32 of the Act wouldbe best fulfilled by allowing deduction in respect of depreciationto the person in whom for the time being vests the dominion overthe building and who is entitled to use it in his own right and isusing the same for the purposes of his business or profession.Assigning any different meaning would not subserve the legislative

intent. To take the case at hand it is the appellant assessee whohaving paid part of the price, has been placed in possession of thehouses as an owner and is using the buildings for the purpose ofits business in its own right. Still the assessee has been denied thebenefit of Section 32. On the other hand, the Housing Board wouldbe denied the benefit of Section 32 because in spite of its beingthe legal owner it was not using the building for its business orprofession. We do not think such a benefit-to-none situation couldhave been intended by the legislature. The finding of fact arrivedat in the case at hand is that though a document of title was notexecuted by the Housing Board in favour of the assessee, but thehouses were allotted to the assessee by the Housing Board, part-payment received and possession delivered so as to conferdominion over the property on the assessee whereafter theassessee had in its own right allotted the quarters to the staff andthey were being actually used by the staff of the assessee. It iscommon knowledge, under the various schemes floated by bodieslike Housing Boards, houses are constructed on a large scale andallotted on part-payment to those who have booked them.Possession is also delivered to the allottee so as to enable enjoymentof the property. Execution of document transferring title necessarilyfollows if the schedule of payment is observed by the allottee. Ifonly the allottee may default the property may revert back to theBoard. That is a matter only between the Housing Board and theallottee. No third person intervenes. The part-payments made bythe allottee are with the intention of acquiring title. The deliveryof possession by the Housing Board to the allottee is also a steptowards conferring ownership. Documentation is delayed only withthe idea of compelling the allottee to observe the schedule ofpayment.”

56. Lastly, there is the judgment of this Court inIndustrial Creditand Development Syndicate Ltd. v. Commissioner of Income Tax,Mysore & Anr.[17]. The assessee was engaged in the business of hirepurchase, leasing and real estate etc. As part of its business, it leasedout vehicles to its customers, and thereafter, had no physical connectionwith the vehicles. What is more, the lessees were registered as the ABC

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Aowners of the vehicles in the Certificate of Registration under the MotorVehicles Act. The claim of depreciation made under Section 32 of theAct was rejected on the basis that the assessee was not the owner ofthe vehicles. The Court found from the lease agreement that it wasagreed that the assessee was to be the exclusive owner of the vehicle atall points of time. The argument of the Revenue that the name of theBlessee was entered in the Certificate of Registration under Motor VehicleAct, and therefore, it must be treated as the owner under Section 2(30)was rejected. It was further found that if the lessee was in fact theowner, he would have claimed depreciation, which was not done. It wasalso found that the entire lease rent was assessed as business income inCthe hands of the assessee. The Court went on to hold that in the facts itwas the appellant-assessee which could be treated as the owner of thevehicles entitling it to claim the benefit of depreciation under Section 32.

57. This Court is called upon to decide the ambit of the word‘owner’ in section 69A in the facts before us. This Court agrees withDthe High Court that the concept of ‘owner’ cannot be divorced from thecontext in which the expression is employed. In the case of Jodha Mal(supra), the property undoubtedly stood vested as evacuee property withthe custodian in Pakistan. The assessee wanted to claim the benefit ofthe losses it had made at a time when he had ceased to be the owner.

This Court bore in mind the effect of the Act under which the custodianEin Pakistan became the owner. The claim of the assessee in the saidcase was that the custodian was owner only for the purpose ofadministration and that the assessee still continued to be the owner inthe sense that he had the ultimate right to the property. This Court tooka practical view as well noticing that thousands of evacuees who hadFleft all the properties in Pakistan would be visited with tax even thoughthey had left Pakistan and they did not get a paisa out of those propertiesand businesses. It was found that for the purpose of Section 9, the ownermust be that person who can exercise the rights of the owner, not onbehalf of the owner, but in his own right. The Court also accepted thatGan evacuee from Pakistan had a residual right in the property. It was inthis context that the Court considered as to whether that residual rightcan be considered as ownership for the purposes of Section 9 of theearlier Act. It was still further in the said context that the Court held thatthe focus of the Section is on the receipt of the income and that the wordowner had different meanings in different contexts.H

58. When it came to the Podar Cement Pvt. Ltd. (supra), thisCourt took into consideration the ground reality in the context of Section22 of the Act and approved of taxing the income of a person who isentitled to receive income from the property in his own right under Section22. We have elaborately referred to the judgment of the Patna HighCourt in the Sahay Properties case. The full rights of an owner as setout therein may again be reiterated as:

(1) The power of enjoyment which includes the power todestroy.

(2) The right to possession which includes the right to excludeothers.

(3) The power to alienate inter vivos or to charge as security.

(4) The power to bequeath the property.

59. This Court may at this juncture observe that a carrier hasnone of these rights or powers. It may be true that in order to be anowner, all the rights and powers of an owner need not be present at thesame point of time in the same person. It may be true that ownershipmay be associated with a better right to be in possession and actualpossession in a given case may be harmonised with ownership. Being inpossession with a right to be possession may lead to a presumption thatthe possessor is the owner, unless it be that there are indications to thecontrary. The beneficial vesting may in the context clothe the personwith title as the owner. Another concept which emerges is a person inreceipt of money having actual control over the property with no personhaving a better right to defeat his claim of possession may open thedoors to a finding that he is the owner within the meaning of Section69A. A person in actual physical control of the property and realising theentire income for his own use may indicate the presence of ownership.The absence of the conveyance needed to complete the transfer maynot detract from a person being found to be the owner. The soul of thereasoning appears to be the entitlement to receive the income from theproperty ‘in his right’.

60. Let us apply these tests and ascertain whether the appellantcan be treated as the owner in any sense of the expression. Appellant asa carrier was entrusted with the goods. The possession of the appellantbegan as a bailee. The Court proceeds further on the basis that insteadof delivering the goods, the appellant did not deliver the goods to the AB

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Aconcerned divisions of the department in the State of Bihar. Ownershipof the goods in question by no stretch of imagination stood vested at anypoint of time in the appellant. Property would pass from the consignor tothe consignee on the basis of the principles which are declared in theSale of Goods Act. It is inconceivable that any of those provisions wouldcountenance passing of property in the goods to the appellant who wasBa mere carrier of the goods. Section 406 of the IPC makes it an offencefor a person entrusted with property which includes goods entrusted to acarrier being misappropriated or dishonestly being converted to the useof the carrier. A specific illustration under Section 406 makes it abundantlyclear that any such act by a carrier attracts the offence under SectionC406. The Court in other words would have to allow the commission ofan offence by the appellant in the process of finding that the appellant isthe owner of the goods. In other words, proceeding on the basis thatthere was short delivery of the goods by the appellant, inevitably, theCourt must find that the act was not a mere omission or a mistake but adeliberate act by a carrier involving it in the commission of an offenceDunder Section 406. In other words, the Court must necessarily find thatthe appellant continued to possess the bitumen and misappropriated andit is in this state that assessing officer would have to find that the appellantby the deliberate act of short delivering the goods and continuing withthe possession of the goods not only contrary to the contract but also toEthe law of the land, both in the Carriers Act 1865 and breaking the penallaw as well, the appellant must be treated as the owner.

61. There is no equity about a tax. Equally, a person cannot betaxed based on intendment. Unlike the possession of a person who forall intents and purposes, and in his own right, earns income from house Fproperty, lawfully otherwise, and falls short of ownership only for wantof a formal conveyance as required under Section 54 of Transfer ofProperty Act, a carrier who clings on to possession not only withouthaving a shadow of a right, but what is more, both contrary to the contractas also the law cannot be found to be the owner. The possession of the carrier who deliberately refuses to act under the contract but contraryGto it, is not only wrongful, but more importantly, makes it a case wherethe possession itself is without any right with the carrier to justify hispossession. Recognising any right with the carrier in law would involvenegation of the right of the actual owner which if the property in thegoods under the contract has passed on to the consignee is the consigneeHand if not the consignor. This Court has already found that the appellant is bereft of any of the rights or powers associated with ownership ofproperty. The only aspect was the alleged possession of the goods whichis clearly wrongful when it continued with the appellant contrary to theterms of the contract and the law.

62. The Court is conscious of the fact that income derived froman illegal business can be legitimately brought to tax [See AIR 1980 SC1271]. However, that is a far cry from justifying invocation of Section69A of the Act as it is indispensable to invoke the said provision that theassessing officer must find that the articles in question was under theownership of the assessee in the financial year. This is apart from otherrequirements being met.

63. This Court may approach the issue from another angle. Section69A was inserted in 1964 to get at income which was sought to bescreened from tax by purchasing valuable articles such as bullion andgold and jewellery besides keeping it in the form of money also. Theobject of such assessee would also be achieved by becoming the ownersof other valuable articles. In this case, is it a case where the appellantwas attempting to conceal taxable income by illegally possessing thebitumen? Proceeding further and assuming again that the assesseepossessed the bitumen albeit illegally and proceeded to dispose of thesame. The rationale of the Revenue involves ownership of the bitumenbeing ascribed to the appellant based on possession of the bitumencontrary to the contract of carriage and with the intention tomisappropriate the same, which further involves the sale of the bitumenfor which there is no material as such. But this Court proceeds on thebasis that such a sale also took place. What is however important is, therequirement in Section 69A that the assessing officer must find that theassessee is the owner of the bitumen. This Court is unable to agree thatin the facts it could be found that the appellant could be found to theowner. It is further found that the appellant could not be said to be inpossession in his own right, accepting the case of the Revenue thatthere was short delivery. This Court finds that the appellant did notpossess the power of alienation. Quite clearly, if the case of short deliveryis accepted, the consignee if property had passed to it had every rightover the bitumen and proceeding on the basis that the assessing officer’sreasoning is correct, the department definitely had a case that it had notreceived the bitumen in question. The right over the bitumen as an ownerat no point of time could have been claimed by the appellant. The A

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Apossession of the appellant at best is a shade better than that of a thiefas the possession had its origin under a contract of bailment. This is alsonot a case where any case is set up of the carrier exercising rightsavailable in law entitling it possess goods as of right or pass on title toanother under law as permitted. Hence, this Court would hold that theAssessing Officer acted illegally in holding that one appellant was theB‘owner’ and on the said basis made the addition.

L. “OTHER VALUABLE ARTICLE”

64. It is a case of the appellant that applying the Principle ofEjusdem Generis, bitumen would stand out as a strange bed fellow inCthe company of its immediate predecessor words, viz., money, bullionand jewellery. In other words, it is the case of the appellant that bitumenis a clear misfit and it could not have been the legislative intention totreat bitumen as other valuable article. Our attention is drawn to theCircular No. 20D dated 07.07.1964 issued by Central Board of DirectTaxes, which has been adverted to. {see paragraph 48}D

65. In Bhagwandas Narayandas v. Commissioner of IncomeTax, Ahmedabad and others18, the question, which, inter alia, fell forconsideration before a learned Single Judge of High Court of Gujarat,was, whether fixed deposit receipts and title deeds of immovable propertywere ‘valuable things or articles’, which required a show-cause noticeEunder Rule 112A of the Income-Tax Rules, 1962. Section 132 if the Actalso employs the expression ‘other valuable articles’. The Court, interalia, held as follows:

“18. On close consideration of the scheme of sub-section (5) ofsection 132, we find that the above referred contention of ShriFBhatt is not acceptable. As already pointed out by us in theforegoing discussion, it is evident from the scheme of sub-section(5) of section 132 that the “assets”, which are seized during thecourse of an authorised search under section 132, are expectedto be retained only for the purpose of satisfying the tax liability ofan assessee as ascertained from his undisclosed income.GTherefore, by using the words “valuable article or thing”, whatthe legislature has intended to imply is that the assets covered bythese words should be such as could be converted into cash sothat the tax liability of the assessee concerned, as revealed from his undisclosed income, could be duly satisfied. In other words,-the thing or article which can be retained under subsection (5) ofsection 132 should be the one which is carrying its own intrinsicvalue in terms of money. Therefore, the question is whether thefixed deposit receipts and documents of title relating to animmovable property are the things or articles which can beevaluated in terms of money. Obviously, a document of title relatingto an immovable property or even a fixed deposit receipt issuedby a bank in favour of a particular person are merely thedocuments of title which, though possessing much evidentiaryvalue, do not passes any intrinsic market value. They do supplyevidence of assets which by themselves are valuable but theybeing mere documents of title, they can neither be negotiated norbe transferred for a valuable consideration. Under thecircumstances, we are of the opinion that documents of title, whichhave no greater value than an evidentiary one, and which do notcarry any saleable interest, are not the “valuable things or articles”contemplated either by subsection (5) of section 132 of the Act orby rule 112A of the Rules. There is nothing in the record to showthat the fixed deposit receipts, which are seized in this case, carryany inherent market value with them. They are merely thedocuments evidencing the debt due to the assessee. Similarly, thedocuments of title relating to an immovable property also containno more value than an evidentiary one. Thus, since none of thosedocuments has got any intrinsic value in terms of money, we areof the opinion that they are not covered by sub-section (5) ofsection 132 of the Act or rule 112A of the Rules.”

66. Unlike a document of title or a fixed deposit receipt, whichcannot, by itself, be disposed of or alienated, bitumen would be goods,which can be transferred. It would have a value in the market dependingupon its quality. In Commissioner of Income Tax v. M.K. Gabrial Babuand others19, the High Court of Kerala was dealing with the question,as to whether immovable property would be covered within the expression‘other value article or thing’ within the meaning of Section 132(1) of theAct. The Court held:

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A“4. … A word in a statue is quite often judged by the company itskeeps. The preceding words of Section 132(1), cannot be ignoredor overlooked. Money, bullion, jewellery, which precede “othervaluable article or thing” forge a genus and, consequently, thewords “other valuable article or thing” assume a constrictedmeaning and interpretation in that context. The general principlesBof interpretation of a restricted meaning being given to certainwords, whether it be by applying the principles of ejusdem generisor otherwise restricting it, had been followed by judicial decisionscovering much area and many topics. They are not necessarilyconfined to Income Tax legislation. Those connected with theCterms under the Income Tax enactment have been referred to bythe learned judge in support of his conclusion. We concur withthat view. It is unnecessary, therefore, to supplement it byadventitious decisions available from other jurisdictions as well.We affirm the judgment of the learned Single Judge (M.K. GabrielBabu v. Asst. Director of I.T. (Investigation) [(1990) 186 ITRD435 (Ker.).]”

67. In contrast to the view taken in the impugned order before us,in Dhanush General Stores v. Commissioner of Income Tax20, theCourt, inter alia, on facts, held as follows:

E“13. If there is undisclosed investment in bullion, jewellery or othervaluable articles, which are not fully disclosed in the books ofaccount the case would fall under the ambit of s. 69B of the Act,1961. In the case on hand, there was excess stock, which can beheld as unexplained investment, not investment in bullion, jewelleryor other valuable articles. In the entire survey, it was not foundFthat any bullion, jewellery or other valuable articles has been found.The Kirana articles cannot be held as other valuable articles.

14. “Valuable article” means an article which is valuable and havinga high price, not other ordinary articles, as in the instant case.

G15. The surrendered income ought to have been treated as deemedincome under the provisions of s.69 of the Act, 1961, however, onthe wrong provision applied in the assessment order though theeffect is one and the same the surrendered income cannot beheld that it was not an income under the provisions of s.69 of the H20 (2011) 339 ITR 651 Chhattisgarh Act, 1961. As such, the substantial question of law, i.e., (i) and(iii) are answered accordingly.”

68. The word ‘valuable’ has been defined in Black’s LawDictionary as follows: - “Valuable adjective. Worth a good price; having financial or marketvalue.”

69. The word ‘valuable’ has been defined in the Concise OxfordDictionary as follows: - The word ‘valuable’ has been defined as again an adjective. “worth”a great deal of money.Very useful or important.

70. The word ‘money’ has been described in Black’s LawDictionary as follows: - “money. 1. The medium of exchange authorized or adopted by agovernment as part of its currency; esp. domestic currency <coinsand currency are money>.2. Assets that can be easily convertedto cash <demand deposits are money>. 3. Capital that is investedor traded as a commodity <the money market>. 4. Funds; sumsof money <investment moneys>. – Also spelled (in sense4) monies.See Medium of Exchange; Legal Tender.”

71. The word ‘article’ has been defined in Black’s Law Dictionaryas “Generally, a particular item or thing <article of clothing>.

72. The Word ‘bullion’ has been defined in the Concise OxfordDictionary as ‘gold or silver in bulk before coining, or valued by weight’

M. PRINCIPLE OF EJUSDEM GENERIS; NOSCITUR ASOCIIS

73. Section 69A provides for unexplained ‘money, bullion,jewellery’. It is thereafter followed by the words ‘or other valuablearticles’. Does this mean that the words ‘other valuable articles’ mustbe read e jusdem generis? The principle applies when the followingconditions are present [Principles of Statutory Interpretation by JusticeG P Singh, 14[th] Edition]:

“(1) the statue contains an enumeration of specific words; (2) thesubjects of enumeration constitutes a class or category; (3) that A

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Aclass or category is not exhausted by the enumeration;(4) thegeneral terms follow the enumeration; and (5) there is no indicationof a different legislative intent”. If the subjects of enumerationbelong to a broad based genus as also to a narrower genus, thereis no principle that the general words should be confined to thenarrower genus.”B74. In the context of Explanation 3(b) to Section 32(1) of the Act,this Court in Commissioner of Income Tax, Kolkata v. SMIFSSecurities Limited21, held as follows:

“8. We quote hereinbelow Explanation 3 to Section 32(1) ofCthe Act:

“Explanation 3.—For the purposes of this sub-section, theexpressions ‘assets’ and ‘block of assets’ shall mean—

(a) tangible assets, being buildings, machinery, plant orfurniture; D

(b) intangible assets, being know-how, patents,copyrights, trademarks, licences, franchises or any otherbusiness or commercial rights of similar nature.”

Explanation 3 states that the expression “asset” shall mean anintangible asset, being know-how, patents, copyrights, trademarks,Elicences, franchises or any other business or commercial rights ofsimilar nature. A reading of the words “any other business orcommercial rights of similar nature” in clause (b) of Explanation3 indicates that goodwill would fall under the expression “anyother business or commercial right of a similar nature”. TheFprinciple of ejusdem generis would strictly apply while interpretingthe said expression which finds place in Explanation 3(b).

9. In the circumstances, we are of the view that “goodwill” isan asset under Explanation 3(b) to Section 32(1) of the Act.”

75. In Rohit Pulp and Paper Mills Limited v. Collector ofGCentral Excise, Baroda22, the Court was dealing with an exceptionclause in an exemption notification and considered the applicability ofthe Principle of Noscitur a Sociis, to the facts:

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“12. The principle of statutory interpretation by which a genericword receives a limited interpretation by reason of its context iswell established. In the context with which we are concerned, wecan legitimately draw upon the “noscitur a sociis” principle. Thisexpression simply means that “the meaning of a word is to bejudged by the company it keeps.” Gajendragadkar, J. explainedthe scope of the rule in State of Bombay v. Hosptial MazdoorSabha [(1960) 2 SCR 866 : AIR 1960 SC 610 : (1960) 1 LLJ 251]in the following words: (SCR pp. 873-74)

“This rule, according to Maxwell, means that, when two ormore words which are susceptible of analogous meaning arecoupled together they are understood to be used in their cognatesense. They take as it were their colour from each other, thatis, the more general is restricted to a sense analogous to a lessgeneral. The same rule is thus interpreted in “Words andPhrases” (Vol. XIV, p. 207): “Associated words take theirmeaning from one another under the doctrine of noscitur asociis, the philosophy of which is that the meaning of a doubtfulword may be ascertained by reference to the meaning of wordsassociated with it; such doctrine is broader than themaxim ejusdem generis”. In fact the latter maxim “is only anillustration or specific application of the broader maxim noscitura sociis”. The argument is that certain essential features ofattributes are invariably associated with the words “businessand trade” as understood in the popular and conventional sense,and it is the colour of these attributes which is taken by theother words used in the definition though their normal importmay be much wider. We are not impressed by this argument.It must be borne in mind that noscitur a sociis is merely arule of construction and it cannot prevail in cases where it isclear that the wider words have been deliberately used in orderto make the scope of the defined word correspondingly wider.It is only where the intention of the legislature in associatingwider words with words of narrower significance is doubtful,or otherwise not clear that the present rule of construction canbe usefully applied. It can also be applied where the meaningof the words of wider import is doubtful; but, where the objectof the legislature in using wider words is clear and free ofambiguity, the rule of construction in question cannot be pressedinto service.”

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AThis principle has been applied in a number of contexts in judicialdecisions where the court is clear in its mind that the larger meaningof the word in question could not have been intended in the contextin which it has been used. The cases are too numerous to needdiscussion here. It should be sufficient to refer to one of them byway of illustration. In Rainbow Steels Ltd. v. CST [(1981) 2 SCCB141 : 1981 SCC (Tax) 90] this Court had to understand the meaningof the word ‘old’ in the context of an entry in a taxing trafficwhich read thus:

“Old, discarded, unserviceable or obsolete machinery, storesor vehicles including waste products......”C

Though the tariff item started with the use of the wide word‘old’, the court came to the conclusion that “in order to fall withinthe expression ‘old machinery’ occurring in the entry, the machinerymust be old machinery in the sense that it has become non-functional or non-usable”. In other words, not the mere age of theDmachinery, which would be relevant in the wider sense, but thecondition of the machinery analogous to that indicated by the wordsfollowing it, was considered relevant for the purposes of thestatute.”

76. About Noscitur a Sociis and how it compares with ejusdemEgeneris, the following statement in G.P. Singh (supra) on StatutoryInterpretation is apposite:

“It is a rule wider than the rule of ejusdem generis; rather thelatter rule is only an application of the former.”

FN. WHETHER BITUMEN IS ‘OTHER VALUABLEARTICLE’

77. This Court has referred to the Principles of Ejusdem Generisand Noscitur a Sociis, which undoubtedly are rules of construction thelatter being described as having treacherous underpinnings and the formerGrequiring the existence of a genus which is not exhausted by the categoriescatalogued in the statute. This Court has also referred to the definitionof the words, money, bullion valuable and article. The Court approvesthe view taken by the High Court of Gujarat in BhagwandasNarayandas(supra) that a document of title to immovable property ora fixed deposit receipt would not qualify as other valuable article. The H

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reasons which have been given appear to us to be sound. A document oftitle or a fixed deposit receipt would not be ‘articles’ which can be boughtand sold in a market. An article, would also not encompass an item ofimmovable property. This Court can safely conclude that an article mustbe movable property. One strong indication that the Principle of EjusdemGeneris may not apply is a decision of this Court inChuharmal(supra),where the articles involved were watches. Watches by no stretch ofimagination can be brought in on the basis of ejusdem generis. They donot belong to the so-called genus of money or bullion or jewellery. Thehallmark of a watch in the context of the expression ‘other valuablearticle’ would be that it is marketable and it has value. When it comes tovalue, it is noticed that in the definition of the word ‘valuable’ in Black’sLaw Dictionary, it is defined as ‘worth a good price; having a financialor market value’. The word ‘valuable’ has been defined again as anadjective and as meaning worth a great deal of money in the ConciseOxford Dictionary. Valuable, therefore, cannot be understood as anythingwhich has any value. The intention of the law-giver in introducing Section69A was to get at income which has not been reflected in the books ofaccount but found to belong to the assessee. Not only it must belong tothe assessee, but it must be other valuable articles. Let us consider afew examples. Let us take the case of an assessee who is found to bethe owner of 50 mobile phones each having a market value of Rs.2lakhs each. The value of such articles each having a price of Rs.2 lakhswould amount to a sum of Rs.1 crore. Let us take another examplewhere the assessee is found to be the owner of 25 highly expensivecameras. Could it be said that despite having a good price or worth agreat deal of money, they would stand excluded from the purview ofSection 69A. On the other hand, let us take an example where a personis found to be in possession of 500 tender coconuts. They would have avalue and even be marketable but it may be wholly inapposite to describethe 500 tender coconuts as valuable articles. It goes both to themarketability, as also the fact that it may not be described as worth a‘good’ price. Each case must be decided with reference to the facts tofind out that while articles or movables worth a great deal of money orworth a good price are comprehended articles which may not commandany such price must stand excluded from the ambit of the words ‘othervaluable articles’. The concept of ‘other valuable articles’ may evolvewith the arrival in the market of articles, which can be treated as othervaluable articles on satisfying the other tests.

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A78. Bitumen is defined in the Concise Oxford English Dictionaryas ‘a black viscous mixture of hydrocarbons obtained naturally or as aresidue from petroleum distillation, used for road surfacing and roofing’.Bitumen appears to be a residual product in the petroleum refineries andit is usually used in road construction which is also probabalised by theBfact that the appellant was to deliver the bitumen to the Road ConstructionDepartment of the State. Bitumen is sold in bulk ordinarily. In theAssessment Order, the Officer has proceeded to take Rs. 4999.58 permetric ton as taken in the AG Report on bitumen scam. Thus, it is thatthe cost of bitumen for 2094.52 metric ton has been arrived at as Rs.1,04,71,720.30. This would mean that for a kilogram of bitumen, theCprice would be only Rs.5 in 1995-1996 (F.Y).

79. Bitumen may be found in small quantities or large quantities.If the ‘article’ is to be found ‘valuable’, then in small quantity it must notjust have some value but it must be ‘worth a good price’ {See Black’sLaw Dictionary (supra)} or ‘worth a great deal of money’ {See ConciseDOxford Dictionary (supra)} and not that it has ‘value’. Section 69A wouldthen stand attracted. But if to treat it as ‘valuable article’, it requiresownership in large quantity, in the sense that by multiplying the value inlarge quantity, a ‘good price’ or ‘great deal of money’ is arrived at thenit would not be valuable article. Thus, this Court would conclude thatE‘bitumen’ as such cannot be treated as a ‘valuable article’. In view ofthese findings, this Court need not pronounce on points III and IV. Theappeals are allowed. The impugned judgment will stand set aside andthough on different grounds, the order by the Commissioner Appealsdeleting the addition made on the aforesaid basis will stand restored.

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HRISHIKESH ROY, J.

1. I have perused the erudite opinion of my esteemed brotherJustice KM Joseph. I am in accord with his judgment that for the purposesof Section 69A of the Income Tax Act, 1961-the deeming effect of theGprovision will only apply, if the assesseeis the owner of the impugnedgoods and secondly, for any article to be considered as ‘valuablearticle’under Section 69A, it must be intrinsically costly, and it will notbe regarded as valuable if huge mass of a non precious and commonplace article is taken into account, for imputing high value. I wish to addHthe following reasoning to justify my opinion.

2. Two principal questions arise in this matter.Firstly,whether theassessee herein can be regarded as an ‘owner’for the concerned goods,and, secondly, whether ‘bitumen’ can be covered within the category of‘other valuable article’, alongside money, bullion and jewellery, asmentioned in Section 69A of the Income Tax Act, 1961.

3. In the general scheme of the Income Tax Act, 1961, directtaxation, except in areas such as e-commerce, is inextricably connectedto the ownership and not just possession of the underlying asset, creatingincome. Section 22 of the Act, which provides for taxation of incomefrom house property provides that the assessee must be the owner ofsuch property generating income. Section 45 provides for income tax oncapital gains to be imputed on owners of capital assets who transfersuch assets and those who convert them for lawful gains. Likewise,section 69A provides as a rule of evidence that for the deeming effect toapply- the assessee must be the owner of money, bullion, jewellery andother valuable articles on which he is unable to proffer a satisfactoryexplanation. Section 69B provides that in cases of understatedinvestments the assessee should be the owner of money, bullion, jewelleryand other valuable article(s). Hence, determining ownership of impugnedgoods is an important factor to impute tax liability. Someone having merepossession and without legal ownership or title over the goods, will notbe covered within the ambit of Section 69A.An assessee maynevertheless be also regarded as deemed owner if possession is imputedon the assessee and no other person having a better claim is contestingthe assessee’s claim. In the present case, the assessee was certainlynot the owner of the bitumen - but was the carrier who was supplyinggoods from the consignor- oil marketing companies to the consignee-Road Construction Department. Notably, due to short delivery of goods,the possession of the assessee was unlawful. The inevitable conclusiontherefore is that the assessee is not the owner, for the purposes of Section69A.

4. To address the second question on whether bitumen is a valuablearticle under Section 69A,we must understand whatsort of article isbitumen. Commonly, bitumen is described as a sticky, black, highly viscous,liquid or a semi-solid form of petroleum and a crude oil by-product,whichis also known as asphalt.When crude oil is subjectedto refining- byfractional distillation, i.e.before it is converted into industrially viablefinished petroleum products, midway, several useful articles are obtained.

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AIn the process of distillation of crude oil in the fractionating column-top distillates like liquified petroleum gas (LPG), middle distillates like-kerosene, diesel, jet fuel and paraffin are obtained and in the lowercolumn, distillates like lubricants and greases, are collected. At theresidual level at the bottom of the column, bitumen and asphalt are theoffshoot of the distillation process. Bitumen, the highly viscous complexBof hydrocarbons is mostly used for road surfacing, roofing and forwater and alkaline resistant painting. The question is whether thisresidual offshoot from crude oil refining, can be categorised as avaluable article, in the context of Section 69A of the Income Tax Actkeeping in mind that the section, specifically lists three items i.e. money,Cjewellery and bullion. To provide more clarity it is relevant to quote thesection in full. It reads as follows:

“69A. Unexplained money, etc. Where in any financial year theassessee is found to be the owner of any money, bullion, jewelleryor other valuable article and such money, bullion, jewellery orDvaluable article is not recorded in the books of account, if any,maintained by him for any source of income, and the assesseeoffers no explanation about the nature and source of acquisitionof the money, bullion, jewellery or other valuable article, or theexplanation offered by him is not, in the opinion of the AssessingEOfficer, satisfactory, the money and the value of the bullion,jewellery or other valuable article may be deemed to be the incomeof the assessee for such financial year.”

5. The Patna High Court in the order challenged before us- heldthat under Section 69A “any article which has value will come underFthe expression “valuable article” as mentioned in Section 69A ofthe Act…”[1 ]According to the Division Bench, for purposes of Section69A, it will not be relevant whether the article in question is generallyconsidered to be of high value and is a precious item. It possibly could bea commonplace and ordinary article but all that will be relevant is thatthe considered item has some value. The article can be a run-of-the-millGitem or it can be a high priced one. According to the High Court thenature of the article is immaterial so long as it is of some value whichmay be accounted only by volume. In this case, the addition to assessee’sincome related to Rs. 1.05 crores worth of bitumen. In particular, the H1 DN Singh Vs. Commissioner of Income Tax &Anr. (2010) 324 ITR 304

impugned judgement also noted that in Section 69A the word ‘valuablearticle’ is a ‘separate item’ from bullion, money and jewellery andconcluded that it may include any article of value.

6. At this juncture, it is also relevant to consider,the decision of theChhattisgarh High Court in Dhanush vs. CIT[2 ]under a related anti-avoidance provision, i.e. Section 69B of the Act. However, beforeadverting to the decision, it is pertinent to note that on the question ofinterpretation of the phrase ‘other valuable article’ in Section 69A, thefindings, will alsobe applicable to Section 69B. Although Section 69Adeals with unexplained ownership of valuable articles, and the provisionin Section 69B covers cases of understatement of expenditure incurredon acquisition of valuable articles, both provisions deal with the ownershipof valuable articles. Section 69B, inserted by virtue of the Finance Act,1965 (10 of 1965), reads as follows:

“69B. Amount of investments, etc., not fully disclosed in books ofaccount.Where in any financial year the assessee has madeinvestments or is found to be the owner of any bullion, jewelleryor other valuable article, and the Assessing Officer finds that theamount expended on making such investments or in acquiring suchbullion, jewellery or other valuable article exceeds the amountrecorded in this behalf in the books of account maintained by theassessee for any source of income, and the assessee offers noexplanation about such excess amount or the explanation offeredby him is not, in the opinion of the Assessing Officer, satisfactory,the excess amount may be deemed to be the income of theassessee for such financial year.”

7. Now returning to the facts of Dhanush (supra), the learnedDivision Bench, in contrast, held that the stock in kirana store is not avaluable article for the purposes of Section 69B.The Court noted thatkirana store items are not valuable articles having a high price and arerather in the nature of ordinary articles. In that case the excess stockworked out to around Rs. 87,000/-.

8. Between the two contrary opinions, on the applicability ofSection 69A/69B as mentioned above, on the nature of the article forthe purpose of tax liability, I feel that the Chhattisgarh High Court in 2 Dhanush General Stores vs. Commissioner of Income Tax (2011) 339 ITR 651

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ADhanush (supra) propagates the correct view. I do not see any basis togive a wide interpretation to Section 69A and include within its ambit,any and every article of value. Notably, it can be seen that- articles ofvalue- are a genus of which valuable articles are a species i.e. a subsetof high priced items. To put it differently, an article having value, maynot be a valuable article. As for instance, a bag of cement, a sack of riceBor a diamond stone will certainly have some value. But only the diamondstone can be regarded as a high costvaluable item. To categorise allsundry items as valuable articles will mean an interpretation which willbe foreign to the purpose of the law and the intention of the legislature inso far as Section 69A is concerned.C

9. At this point, it may also be useful to refer to the CircularNo. 20 of 1964- Dated 7.7.1964.In this Circular the then Minister ofFinance, while defending the insertion of Section 69A- stated thatthe 1964 Amendment is enacted not to subject lower middle-classpeople to taxation by taxing gold or jewellery inherited fromDforefathers, but provision is mandated for ‘big assessees’ who converttheir black money and unaccounted wealth into gold jewellery andgold vessels and claim it to be heirloom. This makes it clear that thelegislature never intended that any and every article of value shouldbe brought within the ambit of Section 69A.It is only the high pricedprecious items- that command a premium price and are often usedEby high wealth individuals to park their unaccounted income- byconverting it into gold and bullion - that the Section 69A was insertedto address and to make such articles taxable under the Income TaxAct. Therefore, theintent of the legislature,through the Amendment– was to subject articles like gold, jewellery and other valuable items, Fto income tax, where such articles are typically owned with theintention of avoiding income tax.

10. Conversely, if all sundry articles of nominal value arebracketed in the category of valuable article, it will lead to an absurdityand will also be inconsistent with the legislative intent. Focusing on theGhigh total value of an article, ignoring it slowly per unit price wouldmean including low-cost ordinary articles also in the valuable category,under Section 69A. This would defy the legislature’s logic. In thiscontext, when the principle of Ejusdem Generis is applied, thepreceding words in Section 69A such as money, bullion, jewellery wouldsuggest that the phrase ‘other valuable article’ which follows thoseH

words, would justify inclusion of only high value goods. Any other wayof reading the phrase ‘other valuable article’ or ‘valuable article’ byignoring the kind of specific goods mentioned in the preceding part ofSection 69A, would be incorrect and would do violence to the plainlanguage of the provision and will travel beyond the legislative intent.

11. Additionally, the maxim ‘noscitur a sociis’ i.e. (a word isknown by its associates) would also support the above view that theother valuable articles should be items in the nature of silver bars, orjewellery or money i.e. only high priced item. It is given, that no lawcould possibly provide for an exhaustive list of all valuable items thatmay facilitate high income assessees to adjust their income. Only anindicative list of valuable articles can practically be mentioned in theSection. But to include bitumen- the residual offshoot material duringprocessing of crude oil, excluding its valuable constituents like petrol,diesel, LPG, aviation fuel etc., within the expression ‘other valuable article’in Section 69A, would in my opinion, result in absurdities, that we needto eschew. The common place items from kirana store and bitumen areintrinsically dissimilar to the high value items in Section 69A and throughan interpretive exercise, we should not categorise them with items suchas gold bars and jewellery.

12. At this stage it may also be beneficial to advert to the principle-“absoluta sententia expositore non indiget” i.e. (a simple propositionneeds no expositor). The maxim provides that if the language employedby the legislature provides for adequate comprehensibility, then nothingadditional is required. In New Shorrock Spinning and ManufacturingCo. Ltd. vs. N.V. Raval[3 ]the Division Bench of the Bombay High Court,dealt with the construction of sub-section (10) of section 35 of the IncomeTax Act, 1922, introduced by Amendment through the Finance Act, 1956.In this regard the Court held that- “One safe and infallible principle which is of guidance inthese matters is to read the words through and see if the ruleis clearly stated. If the language employed gives the rule inwords of sufficient clarity and precision, no more requires tobe done.”

3 New Shorrock Spinning and Manufacturing Co. Ltd. vs. N.V. Raval(1959) 37ITR 41

4 See CIT vs. Kasturi 237 ITR 24 (SC)

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A13. Furthermore, the principle that a fiscal statute should bestrictly construed is, well settled.[4] The classical words of Justice Rowlattin the 1920s case of Cape Brandy Syndicate[5] would be of valuableassistance here. Justice Rowlatt while interpreting the phrase- ‘pre-war trade years’ in context of the British Finance Act,1915-16,observed as follows:B

“…….…in a taxing Act one has to look merely at what is clearlysaid. There is no room for any intendment. There is no equityabout a tax. There is no presumption as to a tax. Nothing is tobe read in, nothing is to be implied. One can only look fairlyat the language used………”

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14. The above opinion of Justice Rowlatt was approvingly citedby former Chief Justice Koka Subba Rao, writing fora three judge benchof this Court in the case of Banarsi Debi vs. ITO.[6 ]The principle thatprovisions and exemptions under taxation statutes are to be strictlyDinterpreted in accordance with legislative intent was also upheld by oneof us recently in 2022, in Augustan Textile Colours.[7]

15. Following the aforesaid discussion, it must be said that forpurposes of interpreting Section 69A of the Income Tax, Act 1961-the ordinary and literal meaning should be opted as the words in theEstatute are clear and unambiguous. The provision does not need anyaddition or subtraction and stands on its own legs. The phrase‘valuable article’ would simply mean an item ‘worth a great deal ofmoney’. It cannot mean, as is said in the impugned order, to’include‘any article of value. Therefore, in the context of Section69A, unexplained valuable article has to be high priced item whichFare procured to hide income, to avoid tax liability. To adopt a wideinterpretation for the phrase- ‘valuable article’ and thereby includewithin its scope any sundry article of whatever value, is found tobe unjustified. It needs to be also reiterated that, ordinarily, fiscallaws including taxation statutes, are to be strictly interpreted and taxGmust not be imposed through analogy, inference or by extension ofphrases used by the legislature.

5 Capy Brandy Syndicate vs. Inland Revenue (1921) 1 KB 646 Banarsi Debi vs. ITO (1964) 7 SCR 539- See paragraph 6.7 Augustan Textile Colours Ltd. vs. Director of Industries &Anr. (Civil AppealHNo. 2830/2022) per Justice Hrishikesh Roy. See paragraphs 13 & 14

16. For purpose of Section 69A of Income Tax Act, it is thereforedeclared that- an ‘article’ shall be considered ‘valuable’ if the concernedarticle is a high-priced article commanding a premium price. As a corollary,an ordinary ‘article’ cannot be bracketed in the same category as theother high-priced articles like bullion, gold, jewellery mentioned in Section69A by attributing high value to the run-of-the-mill article, only on thestrength of its bulk quantity. To put it in another way, it is not the ownershipof huge volume of some low cost ordinary article but the precious goldand the like, that would attract the implication of deemed income underSection 69A.

17. Earlier, it is the high value, less bulky items which were owneddiscreetly, that aided the assessee in avoiding tax. The 1964 Amendmentwas primarily enacted to address mischief of this nature. The wisdom ofthe legislature as reflected in the Amendment – was to subject to incometax, articles like gold, jewellery and other valuable items- typically ownedwith the intention of avoiding income tax-by translating income into buyingand then hiding such precious high value items. Premium price cannotbe attributed to an otherwise ordinary and common place article likebitumen only on the basis of huge mass of bitumen. It would be anincorrect way to categorize bitumen as a ‘valuable article’, under Section69A of the Income Tax, Act.

18. While doing the above analysis,the 1976 song “The First Hello,The Last Goodbye” written & sung by the British singer Roger Whittakeris buzzing in my mind. The singer here goes lyrical while crooning aboutthings of great value andaptly sings”…gold would not be precious ifwe all had gold to spare…..”. Taking a cue from the song’s lyrics, itcan be appropriately said that the legislature while introducing section69A to the Income Tax, Act, 1961 by the Finance Act, 1964, wasconcerned only with such precious and aspirational articles like bullionand jewellery which are capable of being repositories of hidden earningsbut were not really concerned about commonplace stuff like “bitumen”,which would not attract a second glance, on any road surface of ourcountry.

19. In conclusion, it is held that bitumen is not a valuable articlein the context of Section 69A and the assessee here was not theowner of the concerned bitumen for the purpose of section 69A of AB

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[2023] 7 S.C.R.

Athe Income Tax Act, 1961.With the additional reasoning in thepreceding paragraphs, I concur with the judgment delivered by mybrother Justice K.M. Joseph.

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Bibhuti Bhushan Bose

(Assisted by : Neha Sharma, LCRA)

Appeals allowed.

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