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

- **Citation:** [2023] 7 S.C.R. 530
- **Court:** Supreme Court of India
- **Decided:** 2023-05-16
- **Case number:** Civil Appeal Nos. 37383739 of 2023
- **Bench:** K. M. Joseph, Hrishikesh Roy
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/m-s-d-n-singh-v-commissioner-of-income-tax-central-patna-and-another-37487
- **Pages:** 69

## Headnote

Income Tax Act, 1961 - s.69A - Scope and applicability of -
s.69A deals with unexplained money, bullion, jewellery or other
valuable articles - Deeming effect of the provision - When
applicable - 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 the
Officer must find that the other valuable article is owned by the
assessee - A bailee who is a common carrier is not the owner of the
goods - A bailee who is a common carrier would necessarily be
entrusted with the possession of the goods - The purpose of bailment
is the delivery of the goods by the common carrier to the consignee
or as per the directions of the consignor - During the subsistence
of the contract of carriage of goods, the bailee would not become
the owner of the goods - In the case of an entrustment to the carrier
otherwise than under a contract of sale of goods also, the possession
of the carrier would not convert it into the owner of the goods -
The full rights of an owner include the power of enjoyment which
further includes the power to destroy; the right to possession which
further includes the right to exclude others; the power to alienate
inter vivos or to charge as security and the power to bequeath the
property - A carrier has none of these rights or powers - Sale by a
carrier does not pass title except when it is immunised by the conduct
of the owner of the good which would in turn estop the owner from
impugning the title of the buyer - Held (per Hrishikesh Roy, J.)
(concurring): s.69A provides as a rule of evidence that for the
deeming effect to apply- the assessee must be the owner of money,
bullion, jewellery and other valuable articles on which he is unable
to proffer a satisfactory explanation - Determining ownership of
goods is an important factor to impute tax liability - Someone having
mere possession and without legal ownership or title over the goods
[2023] 7 S.C.R. 530
530
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will not be covered within the ambit of s.69A - An assessee may
nevertheless be also regarded as deemed owner if possession is
imputed on the assessee and no other person having a better claim
is contesting the assessee's claim - In the present case, the assessee
was certainly not the owner of the bitumen - but was the carrier
who was supplying goods 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 conclusion therefore is that
the assessee is not the owner, for the purposes of s.69A - Contract
Act, 1872 - ss.148, 151 - Sale of Goods Act, 1930 - ss. 39, 27.
Income Tax Act, 1961 - s.69A - 'Other valuable article' within
meaning of s.69A - Whether it must be intrinsically costly - Whether
bitumen- the residual offshoot material during processing of crude
oil, excluding its valuable constituents like petrol, diesel, LPG,
aviation fuel etc., can be covered within the category of 'other
valuable article' alongside money, bullion and jewellery within the
meaning of s.69A - Held (per K.M. Joseph, J.): Bitumen may be
found in small quantities or large quantities - If the 'article' is to be
found 'valuable', then in small quantity it must not just have some
value but it must be 'worth a good price' or 'worth a great deal of
money' 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 Ejusdem
Generis is applied, the preceding words in s.69A such as money,
bullion, jewellery would suggest that the phrase 'other valuable
article' which follows those words, would justify inclusion of only
high value goods - Any other way of reading the phrase 'other
valuable article' or 'valuable article' by ignoring the kind of specific
goods mentioned in the preceding part of s.69A, would be incorrect
and would do violence to the plain lan

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SUPREME COURT REPORTS
[2023] 7 S.C.R.
M/s. D. N. SINGH
v.
COMMISSIONER OF INCOME TAX, CENTRAL, PATNA AND
ANOTHER
(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 -
s.69A deals with unexplained money, bullion, jewellery or other
valuable articles - Deeming effect of the provision - When
applicable - 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 the
Officer must find that the other valuable article is owned by the
assessee - A bailee who is a common carrier is not the owner of the
goods - A bailee who is a common carrier would necessarily be
entrusted with the possession of the goods - The purpose of bailment
is the delivery of the goods by the common carrier to the consignee
or as per the directions of the consignor - During the subsistence
of the contract of carriage of goods, the bailee would not become
the owner of the goods - In the case of an entrustment to the carrier
otherwise than under a contract of sale of goods also, the possession
of the carrier would not convert it into the owner of the goods -
The full rights of an owner include the power of enjoyment which
further includes the power to destroy; the right to possession which
further includes the right to exclude others; the power to alienate
inter vivos or to charge as security and the power to bequeath the
property - A carrier has none of these rights or powers - Sale by a
carrier does not pass title except when it is immunised by the conduct
of the owner of the good which would in turn estop the owner from
impugning the title of the buyer - Held (per Hrishikesh Roy, J.)
(concurring): s.69A provides as a rule of evidence that for the
deeming effect to apply- the assessee must be the owner of money,
bullion, jewellery and other valuable articles on which he is unable
to proffer a satisfactory explanation - Determining ownership of
goods is an important factor to impute tax liability - Someone having
mere possession and without legal ownership or title over the goods
[2023] 7 S.C.R. 530
530
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will not be covered within the ambit of s.69A - An assessee may
nevertheless be also regarded as deemed owner if possession is
imputed on the assessee and no other person having a better claim
is contesting the assessee's claim - In the present case, the assessee
was certainly not the owner of the bitumen - but was the carrier
who was supplying goods 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 conclusion therefore is that
the assessee is not the owner, for the purposes of s.69A - Contract
Act, 1872 - ss.148, 151 - Sale of Goods Act, 1930 - ss. 39, 27.
Income Tax Act, 1961 - s.69A - 'Other valuable article' within
meaning of s.69A - Whether it must be intrinsically costly - Whether
bitumen- the residual offshoot material during processing of crude
oil, excluding its valuable constituents like petrol, diesel, LPG,
aviation fuel etc., can be covered within the category of 'other
valuable article' alongside money, bullion and jewellery within the
meaning of s.69A - Held (per K.M. Joseph, J.): Bitumen may be
found in small quantities or large quantities - If the 'article' is to be
found 'valuable', then in small quantity it must not just have some
value but it must be 'worth a good price' or 'worth a great deal of
money' 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 Ejusdem
Generis is applied, the preceding words in s.69A such as money,
bullion, jewellery would suggest that the phrase 'other valuable
article' which follows those words, would justify inclusion of only
high value goods - Any other way of reading the phrase 'other
valuable article' or 'valuable article' by ignoring the kind of specific
goods mentioned in the preceding part of s.69A, would be incorrect
and would do violence to the plain language of the provision and
will travel beyond the legislative intent - Additionally, the maxim
'noscitur a sociis' i.e. (a word is known by its associates) would also
support the above view that the other valuable articles should be
items in the nature of silver bars, or jewellery or money i.e. only
high priced item - It is given, that no law could possibly provide for
an exhaustive list of all valuable items that may facilitate high income
assessees to adjust their income - Only an indicative list of valuable
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SUPREME COURT REPORTS
[2023] 7 S.C.R.
articles can practically be mentioned in the Section - But to include
bitumen within the expression 'other valuable article' in s.69A, would
result in absurdities, that one needs to eschew - The common place
items from kirana store and bitumen are intrinsically dissimilar to
the high value items in s.69A and through an interpretive exercise,
one should not categorise them with items such as gold bars and
jewellery.
Income Tax Act, 1961- s.69A - Can a thief be the owner of
the goods - Held (per K.M. Joseph, J.): The illegality of the
ownership may not ill square with the requirement of s.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 that someone else is the owner, a person found in
possession, which is illegal, can be found to be the owner under
s.69A - It would be straining the law beyond justification if the
Court were to recognise a thief as the owner of the property within
the meaning of s.69A - Recognising a thief as the owner of the
property would also mean that the owner of the property would
cease to be recognised as the owner, which would indeed be the
most startling result - While possession of a person may in
appropriate cases, when there is no explanation forthcoming about
the source and quality of his possession, justify an assessing officer
finding him to be the owner, when the facts are known that the
carrier is not the owner and somebody else is the owner, then to
describe him as the owner may produce results which are most illegal
apart from being unjust.
Income Tax Act, 1961 - s.69A - Article and Valuable Article
- Distinguished - Held (per Hrishikesh Roy, J.): Articles of value
are a genus of which valuable articles are a species i.e. a subset of
high priced items - An article having value may not be a valuable
article - Categorising all sundry items as valuable articles will lead
to an interpretation which will be foreign to the purpose of the law
and 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, the
entrustment would amount to a contract of bailment within the
meaning of Section 148 of the Contract Act, 1872 when it is for
being carried by road, as in this case. A contract for bailment may
not involve any consideration being payable in which case Section
58 of the Contract Act obliges the bailor to repay to the bailee
the necessary expenses incurred by him for the purpose of
bailment. Possession is central to bailment. Section 151 of the
Contract Act declares that 'in all cases of bailment the bailee is
bound to take as much care of the goods bailed to him as a man of
ordinary prudence would, under similar circumstances, take of
his own goods of the same bulk, quality and value as the goods
bailed.' Can it be said that the standard of care as declared in
Section 151 is alone applicable to the common carrier. The subject
matter is not res integra. [Para 37][555-D-F]
2. To apply Section 69A of the Income Tax Act, it is
indispensable that the Officer must find that the other valuable
article, inter alia, is owned by the assessee. A bailee, who is a
common carrier, is not an owner of the goods. A bailee who is a
common carrier would necessarily be entrusted with the
possession of the goods. The purpose of the bailment is the
delivery of the goods by the common carrier to the consignee or
as per the directions of the consignor. During the subsistence of
the contract of carriage of goods, the bailee would not become
the owner of the goods. In the case of an entrustment to the
carrier otherwise than under a contract of sale of goods also, the
possession of the carrier would not convert it into the owner of
the goods. [Para 39][557-E-F]
3. Section 39 of the Sale of Goods Act, 1930 contemplates
delivery pursuant to a contract of sale by the seller to the carrier
as prima facie to be deemed to be the delivery of the goods to
the buyer. It becomes the responsibility of the buyer of a carrier
to fulfil its contractual obligations and deliver the goods to the
consignee or as per its instructions. Sale by a carrier does not
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pass title except when it is immunised by the conduct of the owner
of the good which would in turn estop the owner from impugning
the title of the buyer. [Paras 42 & 43][558-F-G; 559-D]
4. A person may own, contraband or prohibited articles and
still be within the embrace of Section 69A. In other words, the
illegality of the ownership may 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 that someone
else is the owner, a person found in possession, which is illegal,
can be found to be the owner under Section 69A. The question
would arise pointedly, as to, when a common carrier refuses to
deliver the consignment and continues to possess it contrary to
contract and law and converts it into his use and presumably sells
the same, as to whether he could be found to be the owner of the
goods. Would he be any different from 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 beyond justification if the
Court were to recognise a thief as the owner of the property
within the meaning of Section 69A. Recognising a thief as the
owner of the property would also mean that the owner of the
property would cease to be recognised as the owner, which would
indeed be the most startling result. While possession of a person
may in appropriate cases, when there is no explanation
forthcoming about the source and quality of his possession, justify
an assessing officer finding him to be the owner, when the facts
are known that the carrier is not the owner and somebody else is
the owner, then to describe him as the owner may produce results
which 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 Additional
Commissioner of Income Tax, Bihar v. M/s. Sahay Properties and
Investment Co.(P) Ltd. may again be reiterated as: (1) The power
of enjoyment which includes the power to destroy. (2) The right
to possession which includes the right to exclude others. (3) The
power to alienate inter vivos or to charge as security. (4) The
power to bequeath the property. A carrier has none of these rights
or powers. It may be true that in order to be an owner, all the
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rights and powers of an owner need not be present at the same
point of time in the same person. It may be true that ownership
may be associated with a better right to be in possession and
actual possession in a given case may be harmonised with
ownership. Being in possession with a right to be possession
may lead to a presumption that the possessor is the owner, unless
it be that there are indications to the contrary. The beneficial
vesting may in the context clothe the person with title as the
owner. Another concept which emerges is a person in receipt of
money having actual control over the property with no person
having a better right to defeat his claim of possession may open
the doors to a finding that he is the owner within the meaning of
Section 69A. A person in actual physical control of the property
and realising the entire income for his own use may indicate the
presence of ownership. The absence of the conveyance needed
to complete the transfer may not detract from a person being
found to be the owner. The soul of the reasoning appears to be
the entitlement to receive the income from the property 'in his
right'. [Paras 58 & 59][579-B-G]
6. Appellant as a carrier was entrusted with the goods. The
possession of the appellant began as a bailee. The Court proceeds
further on the basis that instead of delivering the goods, the
appellant did not deliver the goods to the concerned divisions of
the department in the State of Bihar. Ownership of the goods in
question by no stretch of imagination stood vested at any point of
time in the appellant. Property would pass from the consignor to
the consignee on the basis of the principles which are declared
in the Sale of Goods Act. It is inconceivable that any of those
provisions would countenance passing of property in the goods
to the appellant who was a mere carrier of the goods. Section 406
of the IPC makes it an offence for a person entrusted with property
which includes goods entrusted to a carrier being misappropriated
or dishonestly being converted to the use of the carrier. A specific
illustration under Section 406 makes it abundantly clear that any
such act by a carrier attracts the offence under Section 406. The
Court in other words would have to allow the commission of an
offence by the appellant in the process of finding that the appellant
is the owner of the goods. In other words, proceeding on the
M/s. D. N. SINGH v. COMMISSIONER OF INCOME TAX,
CENTRAL, PATNA AND ANOTHER
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basis that there was short delivery of the goods by the appellant,
inevitably, the Court must find that the act was not a mere omission
or a mistake but a deliberate act by a carrier involving it in the
commission of an offence under Section 406. In other words, the
Court must necessarily find that the appellant continued to
possess the bitumen and misappropriated and it is in this state
that assessing officer would have to find that the appellant by the
deliberate act of short delivering the goods and continuing with
the possession of the goods not only contrary to the contract but
also to the law of the land, both in the Carriers Act 1865 and
breaking the penal law as well, the appellant must be treated as
the owner. [Para 60][579-H; 580-A-E]
7. Bitumen may be found in small quantities or large
quantities. If the 'article' is to be found 'valuable', then in small
quantity it must not just have some value but it must be 'worth a
good price' or 'worth a great deal of money' and not that it has
'value'. Section 69A would then stand attracted. But if to treat it
as 'valuable article', it requires ownership in large quantity, in
the sense that by multiplying the value in large quantity, a 'good
price' or 'great deal of money' is arrived at then it would not be
valuable article. This Court would conclude that 'bitumen' as such
cannot be treated as a 'valuable article'. [Para 79][590-D-E]
Kotak Mahindra Bank Ltd. v. A. Balakrishnan and
another (2022) 9 SCC 186; Kishinchand Chellaram v.
Commissioner of Income Tax, Bombay City II, Bombay
(1980) Suppl. SCC 660 : [1981] 1 SCR 720; Chuharmal
S/O Takarmal Mohnani v. Commissioner of Income Tax,
M.P., Bhopal (1988) 3 SCC 588; Commissoiner of
Income Tax, Salem v. K. Chinnathamban (2007) 7 SCC
390 : [2007] 8 SCR 496; Patel Roadways Ltd. v. Birla
Yamaha Ltd. (2000) 4 SCC 91 : [2000] 2 SCR 665;
Nath Bros. Exim International Ltd. v. Best Roadways
Ltd. (2000) 4 SCC 553 : [2000] 2 SCR 538; R.B. Jodha
Mal Kuthiala v. Commissioner of Income Tax, Punjab,
Jammu and Kashmir, Himachal Pradesh and Patiala
(1971) 3 SCC 369 : [1972] 1 SCR 639; Late Nawab
Sir Mir Osman Ali Khan v. Commissioner of Wealth Tax,
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Hyderabad (1986) Suppl. SCC 700 : [1986] 3
SCR 1072; Commissioner of Income Tax, Bombay &
Ors. v. Podar Cement Pvt. Ltd. & Ors. (1997) 5 SCC
482 : [1997 ] 1 Suppl. SCR 394; Additional Mysore
Minerals Ltd. M.G. Road, Bangalore v. Commissioners
of Income Tax, Karnataka, Bangalore (1999) 7 SCC
106 : [1999] 2 Suppl. SCR 182; Industrial Credit and
Development Syndicate Ltd. v. Commissioner of Income
Tax, Mysore & Anr. (2013) 3 SCC 541 : [2013] 3
SCR 1082; Commissioner of Income Tax, Kolkata v.
SMIFS Securities Limited (2012) 13 SCC 488 and Rohit
Pulp and Paper Mills Limited v. Collector of Central
Excise, Baroda (1990) 3 SCC 447 : [1990] 2 SCR 797
- referred to.
Dhirajlal Haridas v. Commissioner of Income Tax
(Central), Bombay (1982) 138 ITR 570; Commissioner
of Income Tax v. Amrit lal Chunilal (1984) 40 CTR
Bombay 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 370
Calcutta; Commissioner of Income Tax v. K.I. Pavunny
(1998) 232 ITR 837; Addl. Commissioner of Income
Tax v. S. Pichaimanickan Chettiar 1984 (147) ITR 251;
Commissioner of Income Tax, Bihar v. M/s. Sahay
Properties and Investment Co.(P) Ltd. 1983 (144) ITR
357; Bhagwandas Narayandas v. Commissioner of
Income Tax, Ahmedabad and others 1973 Vol. 98 ITR
194; Commissioner of Income Tax v. M.K. Gabrial Babu
and others (1991) 188 ITR 464 Kerala and Dhanush
General 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 in
the category of valuable article, it will lead to an absurdity and
will also be inconsistent with the legislative intent. Focusing on
M/s. D. N. SINGH v. COMMISSIONER OF INCOME TAX,
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the high total value of an article, ignoring its lowly per unit price
would mean including low-cost ordinary articles also in the
valuable category, under Section 69A. This would defy the
legislature's logic. In this context, when the principle of Ejusdem
Generis is applied, the preceding words in Section 69A such as
money, bullion, jewellery would suggest that the phrase 'other
valuable article' which follows those words, would justify inclusion
of only high value goods. Any other way of reading the phrase
'other valuable article' or 'valuable article' by ignoring the kind
of specific goods mentioned in the preceding part of Section 69A,
would be incorrect and would do violence to the plain language
of the provision and will travel beyond the legislative intent.
Additionally, the maxim 'noscitur a sociis' i.e. (a word is known by
its associates) would also support the above view that the other
valuable articles should be items in the nature of silver bars, or
jewellery or money i.e. only high priced item. [Paras 10 & 11][594G-H; 595-A-B]
2. For purposes of interpreting Section 69A of the Income
Tax, Act 1961- the ordinary and literal meaning should be opted
as the words in the statute are clear and unambiguous. The
provision does not need any addition or subtraction and stands
on its own legs. The phrase 'valuable article' would simply mean
an item 'worth a great deal of money'. It cannot mean, as is said
in the impugned order, to include 'any article of value'. In the
context of Section 69A, unexplained valuable article has to be
high priced item which are procured to hide income, to avoid tax
liability. To adopt a wide interpretation for the phrase- 'valuable
article' and thereby include within its scope any sundry article of
whatever value, is found to be unjustified. It needs to be also
reiterated that, ordinarily, fiscal laws including taxation statutes,
are to be strictly interpreted and tax must not be imposed through
analogy, inference or by extension of phrases used by the
legislature. [Para 15][596-E-G]
3. Bitumen is not a valuable article in the context of Section
69A and the assessee here was not the owner of the concerned
bitumen for the purpose of section 69A of the Income Tax Act,
1961. [Para 19][597-H]
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Dhanush General Stores v. Commissioner of Income Tax
(2011) 339 ITR 651 - approved.
Banarsi Debi v. ITO [1964] 7 SCR 539 and Augustan
Textile Colours Ltd. v. Director of Industries & Anr. (Civil
Appeal No. 2830/2022) (2022) 6 SCC 626; CIT v.
Kasturi 237 ITR 24 (SC); DN Singh v. Commissioner
of Income Tax & Anr. (2010) 324 ITR 304; New
Shorrock 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.
(2022) 9 SCC 186
referred to
Para 21
[1981] 1 SCR 720
referred to
Para 21
(1988) 3 SCC 588
referred to
Para 29
[2007] 8 SCR 496
referred to
Para 31
[2000] 2 SCR 665
referred to
Para 37
[2000] 2 SCR 538
referred to
Para 38
[1972] 1 SCR 639
referred to
Para 50
[1986] 3 SCR 1072
referred to
Para 52
[1997] 1 Suppl. SCR 394
referred to
Para 54
[1999] 2 Suppl. SCR 182
referred to
Para 55
[2013] 3 SCR 1082
referred to
Para 56
(2012) 13 SCC 488
referred to
Para 74
[1990] 2 SCR 797
referred to
Para 75
In the judgment of Hrishikesh Roy, J.
[1964] 7 SCR 539
referred to
Para 14
(2022) 6 SCC 626
referred to
Para 14
M/s. D. N. SINGH v. COMMISSIONER OF INCOME TAX,
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CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 37383739 of 2023.
From the Judgment and Order dated 18.12.2017 in CR No. 102
of 2009 and dated 05.03.2009 in MA No. 214 of 2002 of the High Court
of Judicature at Patna.
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, Sourabh
Mishra, Uday Khanna, Raj Bahadur Yadav, Advs. for the Respondents.
The Judgments of the Court were delivered by
K. M. JOSEPH, J.
Index*
A.
THE FACTS.............................................................................. 2
B.
SUBMISSIONS OF PARTIES............................................... 15
C.
ANALYSIS ............................................................................. 18
D.
A CARRIER, A BAILEE? ..................................................... 30
E.
THE CARRIAGE BY ROAD ACT, 2007 ............................. 34
F.
CRIMINAL BREACH OF TRUST ....................................... 35
G.
THE SALE OF GOODS ACT, 1930 ...................................... 36
H.
IS A THIEF AN OWNER? OWNERSHIP BEING ILLEGAL . 37
I.
THE CIRCULAR DATED 07.07.1964 .................................. 41
J.
THE DEPARTMENTAL INSTRUCTIONS DATED
11.05.1994 ............................................................................... 42
K.
R.B.JODHA MAL DISTINGUISHED BY HIGH COURT . 43
L.
"OTHER VALUABLE ARTICLE" ....................................... 75
M.
PRINCIPLE OF EJUSDEM GENERIS; NOSCITUR A
SOCIIS.................................................................................... 81
N.
WHETHER BITUMEN IS 'OTHER VALUABLE
ARTICLE' .............................................................................. 85
*Ed. Note: Pagination in the Index is as per the original judgment.
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1. Delay condoned.
2. Leave granted.
A. THE FACTS
3. The appellant-assessee carried on business as carriage
contractor for bitumen loaded from oil companies namely HPCL, IOCL
and BPCL from Haldia. The goods were to be delivered to various
divisions of the Road Construction Department of the Government of
Bihar. According to the appellant, it has been in the business for roughly
three 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 under
Section 260A of the Income-Tax Act, 1961 (hereinafter referred to as,
'the Act', for short). The assessment year involved in the impugned
Order is 1996-1997. Appellant filed a Review Petition, i.e., Review
Petition No. 102 of 2009. By Order dated 18.12.2017, the Review Petition
came to be dismissed. It is, accordingly, that the present Special Leave
Petition has been filed, challenging both the Orders.
5. A scam was reported in the media. The scam consisted of
transporters of bitumen, lifted from oil companies, misappropriating the
bitumen and not delivering the quantity lifted to the various Divisions of
the Road Construction Department of the Government of Bihar. The
scam had its repercussion in the assessments under the Act.
6. It all began, as far as the appellant is concerned, in the
assessment year 1995-1996.By an Assessment Order dated 27.03.1998
being passed, the Assessing Officer, taking note of the scam, issued
Show-Cause Notice dated 23.01.1998, alleging that the appellant had
lifted 14507.81 metric tonnes of bitumen but delivered only 10064.1 metric
tonnes. This meant that the appellant had not delivered 4443.1 metric
tonnes. The appellant produced photocopies of challans to establish that
the bitumen had been delivered. Summons was issued by the Assessing
Officer to the Executive Engineers and Junior Engineers. It is the case
of the appellant that all Junior Engineers, except Shri Madan Prasad and
Ahia Ansari accepted the factum of delivery of bitumen. The Assessing
Officer, in fact, noticed that only those Junior Engineers accepted receipt
of bitumen, where the Engineer In-charge or the Executive Engineer
accepted the delivery. Shri Madan Prasad denied that the signature
alleged to be his, was not his signature. The Assessing Officer found
M/s. D. N. SINGH v. COMMISSIONER OF INCOME TAX,
CENTRAL, PATNA AND ANOTHER [K. M. JOSEPH, J.]
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that the Junior Engineers denied putting stamp and took the position that
if there was stamp, then, it must indicate the name of the section. The
Assessing Officer added a sum of Rs.21985700/- being the figure arrived
at, by finding that 4443.80 metric tonnes of bitumen had not been
delivered. This was done by invoking Section 69A of the Act.
7. Chronologically, this Court notices that for the assessment year
1996-1997, the Assessing Officer passed Order dated 31.03.1999. The
appellant, in its Return, disclosed a net profit of Rs.676133/-. On scrutiny,
the Assessing Officer, again, noticing the scam and finding that, while
10300.77 metric tonnes had been lifted by the appellant, only 8206.25
metric tonnes had been delivered. Accordingly, it was found that 2094.52
metric tonnes had not been delivered. On the said basis and again invoking
Section 69A of the Act, a sum of Rs.10471720.30 was added as income
of the appellant.
8. As against the Order dated 27.03.1998 for the Assessment
Year 1995-1996, in Appeal, by Order dated 15.09.2000, the Commissioner
Appeals found that all Junior Engineers, except two, had accepted
delivery. After finding that the addition made by the Assessing Officer in
respect of quantity, where Junior Engineers had accepted delivery, was
untenable, the Appellate Authority ordered deletion of a sum of
Rs.20114659/-. This amount represented the value of 4064.28 metric
tonnes. In regard to the disputed quantity, viz., the dispute raised by Shri
Madan Prasad and Ahia Ansari, Junior Engineers, the matter was
remanded back for affording an opportunity for cross-examination. This
Order related to the Assessment Year 1995-1996.
9. Next in chronological order, is the Order dated 18.12.2000
passed by the Appellate Authority in Appeal carried by the appellant
against the Order dated 31.03.1999, relating to the Assessment Year
1996-1997. The Appellate Authority referred to the assessment for the
previous year. It found merit in the case of the appellant that except two
Junior Engineers, the others had accepted the delivery. The addition of
Rs.10471720/- was ordered to be deleted.
10. The Revenue knocked at the doors of the Income-Tax Appellate
Tribunal (hereinafter referred to as, 'the ITAT', for short) for both the
Assessment Years, viz., 1995-1996 and 1996-1997. In regard to the Order
passed by the Appellate Authority for the Assessment Year 1995-1996,
another development took place during the pendency of the Appeal before
the ITAT. By Application dated 07.02.2001, the Revenue, invoking Section
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154 of the Act, sought rectification of the Order dated 15.09.2000. This
Application came to be allowed by Order dated 31.05.2001. It is, at
once, noticed:
"It is also seen that although my learned predecessor on page 4 of
the appellate order has noted that "the Assistant Commissioner of
Income Tax also stated that only those Junior Engineers had
accepted that they had received the Bitumen in which cases the
Executive Engineer of the division and Engineer in Chief had also
shown that Bitumen had been received. But while giving the finding
on pages 7 and 8 of 'the appellate order he has missed this fact
while presuming that the Junior Engineers had confirmed the
receipt of 4064.28 MT of Bitumen out of total short supply of
4443.80 MT of Bitumen as reported by engineer in chief... A
careful reading of the relevant para as reproduced above makes
it clear that while giving this finding the CIT(A) was under the
impression that in respect of total short supply of 4443.01 MT as
reported by Engineer in Chief and the Jr. Engineer had accepted
the receipt of Bitumen barring two namely -I) Mr. Madan Prasad
and II) Mr. Ahiya Ansari during the course of independent
enquiries held by the A.O through issue of summons. Thus, I hold
that my predecessor has given relief of Rs. 2,01,14,659/- in respect
of 40.64.28 MT. Of Bitumen under the wrong presumption of
fact that the Jr. Engineers had confirmed the receipt of 4064.98
MT. Of Bitumen in their statements before the A.O. Since in the
cases Shri Madan Pd. and Mr. Ahiya Ansari who had denied to
have received the Bitumen, my ld. Predecessor had set aside the
matter to the file of the A.O. with the direction to re-decide the
matter after allowing the appellant an opportunity to cross- examine
these two Jr. Engineers and after making further enquiries to
establish the genuineness or otherwise of their signatures on the
challans, 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 concerned
Jr. Engineers who have received 4064.98 MT of Bitumen as per
challans furnished by the appellant, record their statements, allow
the appellant an opportunity to cross examine them and, if
necessary, refer their signatures to the handwriting experts to
establish the genuineness of otherwise of such signatures. In view
of these directions, in order the substitution of last para on page -
M/s. D. N. SINGH v. COMMISSIONER OF INCOME TAX,
CENTRAL, PATNA AND ANOTHER [K. M. JOSEPH, J.]
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7 extending up to 1st as page 8 of CIT(A) is or which has already
been reproduced above by the following para:
I have carefully considered the above submissions in the course
of independent enquiries made by the A.O. by issue summons
only 2 Jr. Engineers namely, l. Mr. Madan Prasad, 2. Mr. Ahiya
Ansari have been examined in respect of reported short supply of
Bitumen of 4443.01 MT. Sri Madan Prasad and Mr. Ahiya Ansari
have denied receipt of Bitumen to the extent of 204.45 MT
and174.37 MT, respectively. In respect of remaining quantity of
reported short supply of Bitumen i.e. 4064.28 MT. (-) 378.82=4064.
28MT of Bitumen no independent enquiries have been made by
the A.O. barring the report received from Engineer in Chief/
Executive Engineer regarding this short supply. On the basis of
such report of Engineer in Chief/Executive Engineers alone; the
A.O. is not justified in making the addition on account of short
supply of 4064.28 MT of Bitumen valued at Rs.2,01,14,659/-, I
deem it proper to set aside this addition of Rs.2,01,14,659/- to the
file of the A.O. with the direction that he shall issue summons to
the concerned Jr. Engineers, who have received 4064.28 MT of
Bitumen as per challans furnished by the appellant, record their
statement, allow the appellant an opportunity to cross- examine
them and, if necessary, refer their signatures to the handwriting
experts to establish the genuineness or otherwise of such
signatures, after carrying out these directions any addition, if called
for shall be made."
11. As noticed, the Revenue had filed an Appeal before the ITAT
for the Assessment Year 1995-1996 (ITA 358 Patna/2000). The appellant
had filed cross-objection (2/2001) in the said Appeal. The appellant also
filed ITA 319 (Patna/2001) before the ITAT. The cross-objection of the
appellant purported to support the deletion of the addition of Rs.20114559/
-. It also purported to ventilate the objection of the appellant in regard to
other matters. The Appeal filed by the appellant was directed against
the Order of Rectification passed under Section 154 of the Act. The
ITAT dismissed the Appeals filed by the Revenue and the appellant. The
cross-objection came to be disposed of. This Order is dated 11.01.2002.
12. For the Assessment Year 1996-1997, the ITAT disposed of
the Appeal filed by the Revenue and also the cross-objection filed against
the Order dated 18.12.2000. The Appeal filed by the Revenue [ITA 240
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(Patna/2001)] was allowed. The Tribunal finds that the appellant had
not disputed the lifting of the bitumen. The claim made by the appellant
that full supply was made, stood demolished, when photocopies of delivery
challans were found to be false and fabricated. The Executive Engineers,
it was further found, had confirmed non-delivery to the tune of 2090.40
metric tonnes. The Commissioner Appeals, it was found, reached a wrong
conclusion, as he did not address himself to the explanation offered by
the Junior Engineers. It was found that all Executive Engineers of the
Consignee Divisions presented a case of non-delivery before the
Assessing Officer. Thus, on the same day, i.e., on 11.01.2002, the ITAT
allowed the Appeal filed by the Revenue and sustained the Order of the
Assessing Officer relating to addition on account of short supply of
bitumen for the Assessment Year 1996-1997, whereas, for the
Assessment Year 1995-1996, taking note of the Order of the
Commissioner Appeals, passed under Section 154 of the Act, by which,
the matter stood remitted back, the Appeal of the Revenue and the Appeal
of the appellant, challenging the Rectification Order, came to be
dismissed.
13. This, in turn, triggered the Appeal, i.e., M.A. 214 of 2002
before the High Court by the appellant under Section 260A of the Act.
The High Court, inter alia, refers to the appellant filing Return for the
Assessment Year 1996-1997, disclosing total income of Rs.576133/-.
14. Reference is made to the addition of Rs.1,04,72,720.30 on the
basis of short supply of bitumen. After referring to the submissions, the
court focussed on the scope of Section 69A of the Act. The High Court
found that the word 'owner' has different meaning in different contexts
and when a transporter sells the goods and receives money for that not
on behalf of the real owner, it became the owner for the purpose of tax.
Having lifted bitumen and not supplied to the Road Construction
Department to which it was to be supplied, the appellant would be liable
to pay tax on the bitumen lifted and not delivered. The High Court
distinguished the Judgment in Dhirajlal Haridas v. Commissioner of
Income Tax (Central), Bombay1 by noting that for determining the person
liable to pay tax, the test laid down by this Court was to find out the
person entitled to that income. The Court also went on to distinguish the
judgment in Commissioner of Income Tax v. Amrit lal Chunilal2 It
1 (1982) 138 ITR 570
2 (1984) 40 CTR Bombay 387.
M/s. D. N. SINGH v. COMMISSIONER OF INCOME TAX,
CENTRAL, PATNA AND ANOTHER [K. M. JOSEPH, J.]
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was found that in the said case the assessee therein was not found to be
the owner whereas the ITAT found the appellant to be the owner. The
High court agreed with the said finding. Thereafter, the High Court went
on to deal with the argument that the words 'other valuable articles' in
Section 69A could not include 'bitumen'. The argument of the appellant
which is noted is that for applying Section 69A bitumen should have
some nexus with money, bullion or jewellery. It was found that any article
which has value would come under the expression 'valuable article'
under Article 69A and the value of such article can be deemed to be the
income of the assessee, should the assessee fail to offer any explanation
or the explanation offered be unsatisfactory. The argument that Section
69A would not apply as the appellant had offered an explanation was
not accepted as it was found that an explanation though offered, being
not accepted, would lead to the invocation of Section 69A, if the
explanation was not satisfactory. In other words, Section 69A applied.
Lastly, in regard to the argument of the appellant that the cost of the
bitumen and not the value thereof was added as income, the High Court
finds that the appellant did not have a case that it had sold the bitumen at
the price lower than the cost. The appellant was found to be the owner
of the bitumen and the addition was sustained. This order was passed on
05.03.2009.
15. Thereupon, the appellant filed Review Petition No. 102 of
2009.The appellant purported to point out that in separate appeals filed
for assessment year 1995-96 and 1996-97 on the same set of facts, the
ITAT had allowed the appeal of the Revenue for the year 1996-97, but
for the assessment year 1995-96, the matter was remanded back. This
argument was rejected by the High court in the review on the following
reasoning:
"However, the question would be whether the fact that the appellate
tribunal had passed another order correctly or incorrectly, the same
may have any effect rendering the judgment of the tribunal passed
in present matter to be erroneous despite the same having been
upheld in appeal by this Court? Answer has to be in negative. For
the assessment year 1995-96, the matter has attained finality as
the Division Bench has already accepted the view of the appellate
tribunal to be correct in M.A. No.214 of 2002. The view of the
same Tribunal or the same Bench of the Tribunal was correct or
incorrect for a different assessment year was not the subject matter
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of the appeal. If one of the views of the appellate tribunal is in
favour of the assessee that does not mean that the said view
would be correct and the view taken in the present case was
incorrect. The view formed by the revenue in the present case
for the assessment year 1995-96 has been scrutinized not only by
the appellate tribunal but also by the Division Bench of this Court
and the same has been found to be correct."
16. The court found that there was no patent error.