TaxTMI 
TaxTMI 
2023 (5) TMI 746
X X X X Extracts X X X X
X X X X Extracts X X X X
............................................................. 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" ........................................................
X X X X Extracts X X X X
X X X X Extracts X X X X
....r 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 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 da....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 al....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 (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.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e' 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....dition was made in a sum of Rs.20114659/- towards short delivery of bitumen which the appellant as carrier was obliged to transport and deliver to the Department in Bihar. In the assessment year 1996-97, likewise the appellant was multed with an addition in a sum of Rs.10471720/-." 19. It is pointed out that for the Assessment Year 1995-1996, as noticed earlier, by virtue of the Order of Rectification dated 31.05.2001, on the basis of which, the Appeal filed by the Revenue, was dismissed by the ITAT and Appeal filed by the appellant, against which, Order came to be dismissed, the matter was to be considered by the Assessing Officer. The same Tribunal, on the same day, i.e., 11.01.2002, on the other hand, allowed the Appeal of the Revenue and set aside the Order dated 18.12.2000, by which, the Commissioner Appeals had ordered the deletion based on the alleged non-delivery of bitumen. In fact, it is pointed out that the High Court notes in the Order dated 05.03.2009, as if the Appeal was filed by the appellant against the Assessment Year 1995-1996. Even when the conflicting views taken by the Tribunal was pointed out in the Review Petition, despite noticing the argument, the High ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the assessment year the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the 2 Assessing] Officer, satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year." 24. Section 69A came to be inserted by Finance Act, 1964 (Act 5 of 1964) w.e.f. 01.05.1964. It reads as follows: "69A. Unexplained money, etc. Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation 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 deeme....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d, is found to be, in the opinion of the Officer, not satisfactory; e. If the aforesaid conditions are satisfied, then, the value of the bullion, jewellery or other valuable article may be deemed as the income of the financial year in which the assessee is found to be the owner; f. In the case of money, the money can be deemed to be the income of the financial year; 28. Applying the provision to the facts of the case, it is noticed that the points that arise are as follows: I. The question would arise, as to whether the appellant could be treated as the owner of the bitumen; II. The further question would arise, as to whether bitumen could be treated as other valuable articles; III. Thirdly, the question arises, as to how the value of the bitumen is to be ascertained; IV. Whether the ITAT erred in passing contradictory Orders qua the Assessment Years 1995-1996 and 1996-1997, by Orders passed on the same day and whether the facts were the same? 29. As regards the first question, viz., whether the appellant could be treated as the owner of the bitumen is concerned, it is indisputable that the appellant was engaged as a carri....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rudence which could be attracted to a set of circumstances that satisfy its condition." 31. The said view has been followed by this Court in Commissoiner of Income Tax, Salem v. K. Chinnathamban (2007) 7 SCC 390. Therein the Court inter alia held: "8. ... The High Court has rightly held that the expression "income" as used in Section 69-A of the Act, has wide meaning which meant anything which came in or resulted in gain." 32. It may be noticed that Section 15 of the Carriage by Road Act, 2007, which repealed the Carriers Act, 1865, provides as follows: "15 Right of common carrier in case of consignee's default. (1) If the consignee fails to take delivery of any consignment of goods within a period of thirty days from the date of notice given by the common carrier, such consignment may be deemed as unclaimed: Provided that in case of perishable consignment, the period of thirty days shall not apply and the consignment shall be deemed unclaimed after a period of twenty-four hours of service of notice or any lesser period as may be mutually agreed to by and between the common carrier and the consignor. (2) In the case of an unclaimed consignment u....
X X X X Extracts X X X X
X X X X Extracts X X X X
....charges, at the time of taking delivery. 34. This Court, in this case, is dealing with the assessment years 1996-1997. 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 either party that the appellant had become the owner of the bitumen in question in a manner authorised by law. On the other hand, the specific case of the appellant is that the appellant never became the owner and it remained only a carrier. However, as noticed, if it is found that there has been short delivery, this would mean that the appellant continued in possession contrary to the terms of contract of carriage. 35. In Mohan B. Samtani v. Commissioner of Income-Tax 1993 Vol. 199 ITR 370 Calcutta, the appellant, who was found in possession of a package, which, when opened at the airport, contained a bronze idle of Nataraja and its pedestal, was sought to be roped in as owner with the aid of Section 69A of the Act: "6. From the facts on record, there cannot be any dispute that the consignor was the State Trading Corporation of Sikkim and the consignee was the Chogyal of Sikkim and the assessee was a representative of the S....
X X X X Extracts X X X X
X X X X Extracts X X X X
....are as declared in Section 151 is alone applicable to the common carrier. The subject matter is not res integra. In Patel Roadways Ltd. v. Birla Yamaha Ltd. (2000) 4 SCC 91, the Court held inter alia as follows: - "31. Coming to the question of liability of a common carrier for loss of or damage to goods, the position of law has to be taken as fairly 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 absolute liability of the carrier is subject to two exceptions: an act of God and a special contract which the carrier may choose to enter with the customer." 38. In the same year, and what is more, in the same volume, this Court spoke on the subject in the decision reported in Nath Bros. Exim International Ltd. v. Best Roadways Ltd. (2000) 4 SCC 553. The Court held, inter alia, as follows: - "14. These provisions, in effect, embody the English common law rule as to the liability of the bailee. Under the English common law rule, the measure of care required of the person to whom the goods were bailed, was the same as a man of ordinary prudence would take of his own goods. In other wor....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tate (or the enemies of King, a phrase used by the Privy Council). The Calcutta decision in British & Foreign Marine Insurance Co. v. India General Navigation and Rly. Co. Ltd., the Assam decision in River steam Navigation Co. Ltd. v. Syam Sunder Tea Co. Ltd., the Rajasthan decision in Vidya Ratan v. Kota Transport Co. Ltd. and the Kerala decision in Kerala Transport Co. v. Kunnath Textiles which have already been referred to above, have considered the effect of special contract within the meaning of Sections 6 and 8 of the Carriers Act, 1865 and in, our opinion, they lay down the correct law." 39. To apply Section 69A of the 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 entrust....
X X X X Extracts X X X X
X X X X Extracts X X X X
....7 of the Sale of Goods Act deals with sale by a person 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 the time being in force, where goods are sold by a person who is not the owner thereof and who does not sell them under the authority or with the consent of the owner, the buyer acquires no better title to the goods than the seller had, unless the owner of the goods is by his conduct precluded from denying the seller's authority to sell: Provided that, where a mercantile agent is, with the consent of the owner, in possession of the goods or of a document of title to the goods, any sale made by him, when acting in the ordinary course of business of a mercantile agent, shall be as valid as if he were expressly authorised by the owner of the goods to make the same; provided that the buyer acts in good faith and has not at the time of the contract of sale notice that the seller has not authority to sell." 43. 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 impugn....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and one Ameen were found to be in possession of gold at railway station and were convicted under Section 135(b)(ii) of the Customs Act. The Court held against the revenue after holding as follows: "In this case, the assessee has been convicted only as a carrier by the Chief Presidency Magistrate and not as the owner of the gold. The Chief Presidency Magistrate has specifically observed that the actual owners of the goods or financial magnates are underground. Therefore, merely on the basis of s. 110 of the Evidence Act, the value of the gold cannot be taken to be his income. Merely because the assessee has kept silent and has not disclosed the name of the owners of the gold, he cannot be assessed under s. 69A of the I.T. Act. Liability to be taxed under s. 69A can arise only if he is shown to be the owner of the goods." 47. Both views can be reconciled. No doubt, it may be true that 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. Howeve....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hat the explanation offered by the assessee in support of his case is not satisfactory, all the facts, circumstances and the evidence in the case have to be considered very carefully, and for this purpose, the assessee should be given due opportunity to adduce evidence in support of his explanations. 88. In this connection, the following statement made by the Minister of Finance in the Lok Sabha on 18th April, 1964 in reply to some criticism that the provisions of this section might result in hardship to persons whose ornaments or jewellery were given to them by their forefathers, have to be borne in mind: "Often times, people convert their black money into gold. They make gold jewellery or gold vessels and then say it is heirloom. This is the common way of bringing unaccounted money into something which is reputable and can be cashed..... Any way this (Section 69A) is not intended to hurt the middle class persons. Generally, it will be used in dealing with cases of persons who pay wealth-tax, who probably have declared Rs.25,000 as jewels, and we could ask them 'How did you get more jewels?'.... I can promise that this department shall not go and hurt any lower m....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e hotel which was a part of the appellant's business came to be declared as evacuee property and vested in the custodian in Pakistan. The claim of the appellant assessee in the said case was resisted by the Assessing Officer on the basis of that no income or loss from that hotel could be considered as the property stood vested with the custodian. In other words, since the appellant was resting his claim made under Section 9 of the 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 the appellant. The contention of the appellant was that the property vested in the custodian wholly for the purpose of administration and the assessee continued to an owner. This Court, inter alia, held as under: "9. The question is who is the "owner" referred to in this section? Is it the person in whom the property vests or is it he who is entitled to some beneficial interest in the property? It must be remembered that Section 9 brings to tax the income from property and not the interest of a person in the property. A property cannot be owned by two persons, each one having independent and exclusive right over it. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....dered as the owner of the property leased to him. In Stroud's Judicial Dictionary (3rd Edn.), various meanings of the word "owner" are given. It is not necessary for our present purpose to examine what the word "owner" means in different contexts. The meaning that we give to the word "owner" in Section 9 must not be such as to make that 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 observations in Pollock on Jurisprudence (6th Edn. 1929) pp. 178-80: "Ownership may be described as the entirety of the powers of use and disposal allowed by law .... The owner of a thing is not necessarily the person who at a given time has the whole power of use and disposal; very often there is no such person. We must look for the person having the residue of all such power when we have accounted for every detached and limited portion of it; and he will be the owner even if the immediate power of control and use is elsewhere". [Emphasis supplied] 51. This Court formed the view that since Section 9 of the Income Tax Act, 1922 required that in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ges 246 to 264. 'Ownership', according to Salmond, denotes the relation between a person and an object forming the subject-matter of his ownership. It consists of a complex of rights, all of which are rights in rem, being good against all the world and not merely against specific persons. Firstly, Salmond says, the owner will have a right to possess the thing which he owns. He may not necessarily have possession. Secondly, the owner normally has the 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 the income from it. Thirdly, the owner has the right to consume, destroy or alienate the thing. Fourthly, ownership has the characteristic of being indeterminate in duration. The position of an owner differs from that of a non-owner in possession in that the latter's interest is subject to be determined at some future time. Fifthly, ownership has a residuary character. Salmond also notes the distinction between legal and equitable ownership. Legal ownership is that which has its origin in the rules of the common law, while equitable ownership is that which proceeds from rules of equity different from the commo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g to the assessee for the purpose of Wealth Tax. 54. In Commissioner of Income Tax, Bombay & Ors. v. Podar Cement Pvt. Ltd. & Ors. (1997) 5 SCC 482, a Bench of three learned Judges had occasion to revisit the issue in the following set of facts. The matter arose by way of reference under Section 257 of the Act to the Supreme Court in view of the conflicting judgment of the High Courts. The assessee in one of the cases claimed that the rental income was assessable as income from other sources in as much as the assessee company was not the legal owner of the flats. This was for the reason that the title of the property had not been conveyed to the cooperative society which was formed by the purchaser of the flats. In one of the appeals, the assessee claimed that the income must be assessed under Section 22. The claim was rejected on the ground that assessee was only a lessee and had only tenancy rights. The common question which arose in all the cases was the scope of Section 22 of the Act vis-a-vis Section 56 of the Act. Section 22 of the Act brings to tax income from house property and the section expressly declares that the assessee must be the owner of the building or lands. S....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t is ownership after all? Read from the Roman law up to the English law at the present stage, medieval stage having been interspersed with different formulae, the position that now juristically emerges is this. The full rights of an owner as now recognised are: '(a) The power of enjoyment (e.g., the determination of the use to which the res is to be put, the power to deal with produce as 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.' One of the most important of these powers is the right to exclude others. The property right is essentially a guarantee of the exclusion of other persons from the use or handling of the thing.... But every owner does not possess all the rights set out above - a particular owner's powers may be restricted by law or by an agreement he has made with another.' (Refer to G.W. Paton on Jurisprudence, 4th Edn., pp. 517-18.) While dealing with the concept of possession and enumerating the illustrative cases and rules in this respect, Paton says at p. 577 in clause (....
X X X X Extracts X X X X
X X X X Extracts X X X X
....roperty and receives the income in trust for others who are the legal beneficiaries. The crux of the matter is as to whether, as already stated above, the actual possession in a given particular case gives a right to retain such a possession until the contrary is proved and so long as that is not done, to that extent a possessor is presumed to be the owner. Incidentally, although the Supreme Court in the case of Jodha Mal [(1971) 3 SCC 369 : (1971) 82 ITR 570] merely mentioned that Stroud's Judicial Dictionary had given several definitions and illustrations of ownership, it refrained from going into the details on account of the practical approach that was made in that case, to which we shall hereinafter refer and dilate upon. We think it worthwhile, the matter having been canvassed at length at the Bar, to give a full illustration of the definitions of 'ownership' as Stroud 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 is for the time being beneficially vested, and who has the occupation, or control, or usufruct, of it, e.g., a lessee is, during the term, the owner of the property demis....
X X X X Extracts X X X X
X X X X Extracts X X X X
....bsolute and exclusive control over the property without any let 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 the Act? The answer in our view is clearly in the negative. The reason is simple. The consideration money has been paid in full. The assessee has been put in exclusive and absolute possession of the property. It has been empowered to deal with the income as it likes. It has been empowered to dispose of and even to alienate the property. Reference to Section 54 or, for that matter, Section 55 of the Transfer of Property Act by the Tribunal merely emphasises the fact that the legal title does not pass unless there is a deed of conveyance duly registered. The agreement is in writing and the value of the property is admittedly worth more than hundred rupees. Section 54 of the Transfer of Property Act would, therefore, exclude the conferment of absolute title by transfer to the assessee. That, however, would not take away the right of the assessee to remain in possession of the property, to realise and receive the rents and profits therefr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....contract without any hindrance or obstruction on the part of anyone including the vendor which the vendor could not do in view of Section 53-A of the Transfer of Property Act, the assessee cannot now turn back and say that because of its default in having a deed registered at its sweet will it 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 facts that juristic principles have now emerged saying that one of the most important of the powers of ownership is the right to exclude others from possession and the property right is essentially a guarantee of the exclusion of other persons from the use or handling of the thing. In that sense, therefore, the assessee itself became the owner of the property in question. In our view, any decision to the contrary would not be in consonance with the juristic principle either at common law or in equity. In either case, it would not be subservient to the intent and purpose of Section 22 of the Act, with regard to which, as we have already stated, we can fairly look at the language used and the tax laws have to be interpreted reasonably and in consonance with justice. So far....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... agreement or covenant which restrains his right. The term is, however, a nomen generalissimum, and its meaning is to be gathered from the connection in which it is used, and from the subject-matter to which it is applied. The primary meaning of the word as applied to land is one who owns the fee and who has the right to dispose of the property, but the term also includes one having a possessory right to land or the person occupying or cultivating it. The term 'owner' is used to indicate a person in whom one or more interests are vested for his own benefit." 6. In the same dictionary, the term "ownership" has been defined to mean, inter alia, as- "Collection of rights to use and enjoy property, including right to transmit it to others. ... The right of one or more persons to possess or use a thing to the exclusion of others. The right by which a thing belongs to someone in particular, to the exclusion of all 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, therefor....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... received and possession delivered so as to confer dominion over the property on the assessee whereafter the assessee had in its own right allotted the quarters to the staff and they were being actually used by the staff of the assessee. It is common knowledge, under the various schemes floated by bodies like Housing Boards, houses are constructed on a large scale and allotted on part-payment to those who have booked them. Possession is also delivered to the allottee so as to enable enjoyment of the property. Execution of document transferring title necessarily follows if the schedule of payment is observed by the allottee. If only the allottee may default the property may revert back to the Board. That is a matter only between the Housing Board and the allottee. No third person intervenes. The part-payments made by the allottee are with the intention of acquiring title. The delivery of possession by the Housing Board to the allottee is also a step towards conferring ownership. Documentation is delayed only with the idea of compelling the allottee to observe the schedule of payment." (Emphasis supplied) 56. Lastly, there is the judgment of this Court in Industrial Credi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of those properties and businesses. It was found that for the purpose of Section 9, the owner must be that person who can exercise the rights of the owner, not on behalf of the owner, but in his own right. The Court also accepted that an evacuee from Pakistan had a residual right in the property. It was in this context that the Court considered as to whether that residual right can be considered as ownership for the purposes of Section 9 of the earlier Act. It was still further in the said context that the Court held that the focus of the Section is on the receipt of the income and that the word owner had different meanings in different contexts. 58. When it came to the Podar Cement Pvt. Ltd.(supra), this Court took into consideration the ground reality in the context of Section 22 of the Act and approved of taxing the income of a person who is entitled to receive income from the property in his own right under Section 22. We have elaborately referred to the judgment of the Patna High Court in the Sahay Properties case. The full rights of an owner as set out therein may again be reiterated as: (1) The power of enjoyment which includes the power to destroy. (2) ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ds 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 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. 61. There is no equity abo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Revenue involves ownership of the bitumen being ascribed to the appellant based on possession of the bitumen contrary to the contract of carriage and with the intention to misappropriate the same, which further involves the sale of the bitumen for which there is no material as such. But this Court proceeds on the basis that such a sale also took place. What is however important is, the requirement in Section 69A that the assessing officer must find that the assessee is the owner of the bitumen. This Court is unable to agree that in the facts it could be found that the appellant could be found to the owner. It is further found that the appellant could not be said to be in possession in his own right, accepting the case of the Revenue that there was short delivery. This Court finds that the appellant did not possess the power of alienation. Quite clearly, if the case of short delivery is accepted, the consignee if property had passed to it had every right over the bitumen and proceeding on the basis that the assessing officer's reasoning is correct, the department definitely had a case that it had not received the bitumen in question. The right over the bitumen as an owner at no po....
X X X X Extracts X X X X
X X X X Extracts X X X X
....essee concerned, as revealed from his undisclosed income, could be duly satisfied. In other words, the thing or article which can be retained under sub-section (5) of section 132 should be the one which is carrying its own intrinsic value in terms of money. Therefore, the question is whether the fixed deposit receipts and documents of title relating to an immovable property are the things or articles which can be evaluated in terms of money. Obviously, a document of title relating to an immovable property or even a fixed deposit receipt issued by a bank in favour of a particular person are merely the documents of title which, though possessing much evidentiary value, do not passes any intrinsic market value. They do supply evidence of assets which by themselves are valuable but they being mere documents of title, they can neither be negotiated nor be transferred for a valuable consideration. Under the circumstances, we are of the opinion that documents of title, which have no greater value than an evidentiary one, and which do not carry any saleable interest, are not the "valuable things or articles" contemplated either by subsection (5) of section 132 of the Act or by rule 112A of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sgarh, the Court, inter alia, on facts, held as follows: "13. If there is undisclosed investment in bullion, jewellery or other valuable articles, which are not fully disclosed in the books of account 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 be held as unexplained investment, not investment in bullion, jewellery or other valuable articles. In the entire survey, it was not found that 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 having a high price, not other ordinary articles, as in the instant case. 15. The surrendered income ought to have been treated as deemed income under the provisions of s.69 of the Act, 1961, however, on the wrong provision applied in the assessment order though the effect is one and the same the surrendered income cannot be held that it was not an income under the provisions of s.69 of the Act, 1961. As such, the substantial question of law, i.e., (i) and (iii) are answered accordingly." (Emphasis suppl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uildings, machinery, plant or furniture; (b) intangible assets, being know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature." Explanation 3 states that the expression "asset" shall mean an intangible asset, being know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature. A reading of the words "any other business or commercial rights of similar nature" in clause (b) of Explanation 3 indicates that goodwill would fall under the expression "any other business or commercial right of a similar nature". The principle of ejusdem generis would strictly apply while interpreting the said expression which finds place in Explanation 3(b). 9. In the circumstances, we are of the view that "goodwill" is an asset under Explanation 3(b) to Section 32(1) of the Act." 75. In Rohit Pulp and Paper Mills Limited v. Collector of Central Excise, Baroda (1990) 3 SCC 447, the Court was dealing with an exception clause in an exemption notification and considered the applicability of the Principle of Noscitur a Sociis, to the facts: "....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nnot be pressed into service." This principle has been applied in a number of contexts in judicial decisions where the court is clear in its mind that the larger meaning of the word in question could not have been intended in the context in which it has been used. The cases are too numerous to need discussion here. It should be sufficient to refer to one of them by way of illustration. In Rainbow Steels Ltd. v. CST [(1981) 2 SCC 141 : 1981 SCC (Tax) 90] this Court had to understand the meaning of the word 'old' in the context of an entry in a taxing traffic which read thus: "Old, discarded, unserviceable or obsolete machinery, stores or vehicles including waste products......" Though the tariff item started with the use of the wide word 'old', the court came to the conclusion that "in order to fall within the expression 'old machinery' occurring in the entry, the machinery must be old machinery in the sense that it has become non-functional or non-usable". In other words, not the mere age of the machinery, which would be relevant in the wider sense, but the condition of the machinery analogous to that indicated by the words following it, was cons....
X X X X Extracts X X X X
X X X X Extracts X X X X
....it must be other valuable articles. Let us consider a few examples. Let us take the case of an assessee who is found to be the owner of 50 mobile phones each having a market value of Rs.2 lakhs each. The value of such articles each having a price of Rs.2 lakhs would amount to a sum of Rs.1 crore. Let us take another example where the assessee is found to be the owner of 25 highly expensive cameras. Could it be said that despite having a good price or worth a great deal of money, they would stand excluded from the purview of Section 69A. On the other hand, let us take an example where a person is found to be in possession of 500 tender coconuts. They would have a value and even be marketable but it may be wholly inapposite to describe the 500 tender coconuts as valuable articles. It goes both to the marketability, 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 to find out that while articles or movables worth a great deal of money or worth a good price are comprehended articles which may not command any such price must stand excluded from the ambit of the words 'other valuable articles'. The concept of 'ot....
X X X X Extracts X X X X
X X X X Extracts X X X X
....it must be intrinsically costly, and it will not be regarded as valuable if huge mass of a non precious and common place article is taken into account, for imputing high value. I wish to add the following reasoning to justify my opinion. 2. Two principal questions arise in this matter. Firstly, whether the assessee 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',along side money, bullion and jewellery, as mentioned in Section 69A of the Income Tax Act, 1961. 3. In the general scheme of the Income Tax Act, 1961, direct taxation, except in areas such as e-commerce, is inextricably connected to the ownership and not just possession of the underlying asset, creating income. Section 22 of the Act, which provides for taxation of income from house property provides that the assessee must be the owner of such property generating income. Section 45 provides for income tax on capital gains to be imputed on owners of capital assets who transfer such assets and those who convert them for lawful gains. Likewise, section 69A provides as a rule of evidence that for the deeming effect t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lly lists three items i.e. money, jewellery and bullion. To provide more clarity it is relevant to quote the section in full. It reads as follows: "69A. Unexplained money, etc. Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year." 5. The Patna High Court in the order challenged before us- held that under Section 69A "any article which has value will come under the expression "valuable article" as mentioned in Section 69A of the Act..."DN Singh Vs. Commissioner of Income Tax & Anr. (2010) 324 ITR 304 According to the Division Bench, for purposes of Section 69A, it will not be....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Division Bench, in contrast, held that the stock in kirana store is not a valuable article for the purposes of Section 69B. The Court noted that kirana store items are not valuable articles having a high price and are rather in the nature of ordinary articles. In that case the excess stock worked out to around Rs. 87,000/-. 8. Between the two contrary opinions, on the applicability of Section 69A/69B as mentioned above, on the nature of the article for the purpose of tax liability, I feel that the Chhattisgarh High Court in Dhanush (supra) propagates the correct view. I do not see any basis to give a wide interpretation to Section 69A and include within its ambit, any and every article of value. Notably, it can be seen that- articles of value- are a genus of which valuable articles are a species i.e. a subset of high priced items. To put it differently, an article having value, may not be a valuable article. As for instance, a bag of cement, a sack of rice or a diamond stone will certainly have some value. But only the diamond stone can be regarded as a high cost valuable item. To categorise all sundry items as valuable articles will mean an interpretation which will be forei....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 articles can practically be mentioned in the Section. But to include bitumen- the residual offshoot material during processing 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 need to eschew. The common place items from kirana store and bitumen are intrinsically dissimilar to the high value items in Section 69A and through an interpretive exercise, we should not categorise them with items such as 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 proposition needs no expositor). The maxim provides that if the language employed by the legislature provides for adequate comprehensibility, then nothing ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....th a great deal of money'. It cannot mean, as is said in the impugned order, to include 'any article of value'. Therefore, 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. 16. For purpose of Section 69A of Income Tax Act, it is therefore declared that- an 'article' shall be considered 'valuable' if the concerned article is a high-priced article commanding a premium price. As a corollary, an ordinary 'article' cannot be bracketed in the same category as the other high-priced articles like bullion, gold, jewellery mentioned in Section 69A by attributing high value to the run-of-the-mill article, only on the strength of its bulk quantity. To put it in another way, it is not the ownership of huge v....