Income Tax Act - Carrier of Goods Not An ‘Owner’; Bitumen Not A ‘Valuable Article’ Under S. 69A : Supreme Court

The Supreme Court has ruled that bitumen cannot be treated as a ‘valuable article’ under Section 69A of the Income Tax Act, 1961. The bench comprising Justices K.M. Joseph and Hrishikesh Roy made the observation while dealing with an appeal filed against the decision of the Patna High Court, who had upheld the additions made by the Assessing Officer (AO) towards the bitumen lifted by the assessee as a carriage contractor, which was allegedly not delivered by it to the consignee- the Road Construction Department of the Government of Bihar, as instructed. Upholding the additions, the High Court had held that the assessee was the owner of the bitumen. It had further ruled that any article which has value will come under the expression “valuable article” under Section 69A of the Act.While setting aside the additions made by the AO, the top court held that the ownership of the goods did not pass to the assessee, who was a mere carrier of goods and whose possession of bitumen began as a bailee. Thus, the assessee could not be said to be the ‘owner’ of bitumen so as to attract Section 69A. While dealing with the issue whether bitumen can be treated as a ‘valuable article’ under Section 69A of the Income Tax Act, Justice Joseph remarked that whether the goods fall within the ambit of the words ‘other valuable articles’ must be determined both on the basis of marketability of the goods as well as whether they can be described as ‘worth a good price’. He further held that the Principle of Ejusdem Generis may not apply to determine whether the goods fall within the category of ‘other valuable articles’.Justice Joseph held that for an ‘article’ to be ‘valuable’, even in small quantity it must be ‘worth a good price’ or ‘worth a great deal of money’, and it is not sufficient if it has some ‘value’. Considering the price of one kilogram of bitumen, he concluded that ‘bitumen’ cannot be treated as a ‘valuable article’.Justice Roy, in his separate but concurring judgment, noted that Section 69A of the Income Tax Act specifically lists three items i.e., money, jewellery, and bullion. Thus, he remarked that there is no basis to give a wide interpretation to Section 69A and include within its ambit, any and every article of value.Applying the principle of Ejusdem Generis, Justice Roy held that the preceding words in Section 69A- such as money, bullion, and jewellery- would suggest that the phrase ‘other valuable article’ would justify inclusion of only high value goods.Justice Roy remarked that the legislature never intended that any and every article of value should be brought within the ambit of Section 69A. He observed that Section 69A was inserted to address only the high-priced precious items that command a premium price, which are often used by high wealthy individuals to park their unaccounted income, by converting the same into gold and bullion. As a corollary, an ordinary ‘article’ cannot be bracketed in the same category as other high-priced articles like bullion, gold, and jewellery, by attributing high value to the run-of-the-mill articles, only on the strength of their bulk quantity. He thus concluded that a premium price cannot be attributed to an otherwise ordinary and common place article like bitumen, only on the basis of its huge mass/ quantity.Section 69A provides that where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article which is not recorded in its books of account, if any, maintained by him and the assessee offers no explanation about the nature and source of acquisition of such money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the said money and the value of such bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year.The appellant-assessee, M/s. D.N. Singh, carries the business of a carriage contractor. The assessee lifted bitumen loaded from various oil companies which were delivered to various divisions of the Road Construction Department of the Government of Bihar.Thereafter, a scam was reported in the media, alleging that the transporters of bitumen were misappropriating the bitumen and were not delivering the whole quantity lifted from oil companies.Taking note of the scam, the Assessing Officer (AO) issued a Show-Cause Notice to the assessee. The AO found that the appellant-assessee had not delivered the entire quantity of bitumen lifted by it from the oil companies. The AO thus passed an order making additions to the assessee’s income by invoking Section 69A of the Act. In appeal, the Commissioner (Appeals) set aside the additions made by the AO.The appeal filed by the revenue department against the order of the Commissioner (Appeals) was allowed by the ITAT who confirmed the additions made by the AO. The same was upheld by the High Court in appeal. In the appeal filed ...

Income Tax Act - Carrier of Goods Not An ‘Owner’; Bitumen Not A ‘Valuable Article’ Under S. 69A : Supreme Court

Parina Katyal

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