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

Bench: K. M. JOSEPH AND HRISHIKESH ROY, JJ.

Judgment text

SUPREME COURT OF INDIA M/s. D. N. SINGH v. COMMISSIONER OF INCOME TAX, CENTRAL, PATNA AND 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 530 M/s. D. N. SINGH v. COMMISSIONER OF INCOME TAX, CENTRAL, PATNA AND ANOTHER 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 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. M/s. D. N. SINGH v. COMMISSIONER OF INCOME TAX, CENTRAL, PATNA AND ANOTHER 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 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 M/s. D. N. SINGH v. COMMISSIONER OF INCOME TAX, CENTRAL, PATNA AND ANOTHER 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 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, M/s. D. N. SINGH v. COMMISSIONER OF INCOME TAX, CENTRAL, PATNA AND ANOTHER 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-Tax1993 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 Chettiar1984 (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 464Kerala andDhanush 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 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][594- G-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] M/s. D. N. SINGH v. COMMISSIONER OF INCOME TAX, CENTRAL, PATNA AND ANOTHER Dhanush General Stores v.

Commissioner of Income Tax (2011) 339 ITR 651 - approved. Banarsi Debi v. ITO [1964] 7 SCR 539 andAugustan 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 64referred 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 CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 3738- 3739 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. M/s. D. N. SINGH v. COMMISSIONER OF INCOME TAX, CENTRAL, PATNA AND ANOTHER [K. M. JOSEPH, J. ] 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 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 M/s. D. N. SINGH v. COMMISSIONER OF INCOME TAX, CENTRAL, PATNA AND ANOTHER [K. M. JOSEPH, J. ] 154 of the Act, sought rectification of the Order dated 15. 09. 2000. 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 - 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 M/s. D. N. SINGH v. COMMISSIONER OF INCOME TAX, CENTRAL, PATNA AND ANOTHER [K.

M. JOSEPH, J. ] (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. 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 M/s. D. N. SINGH v. COMMISSIONER OF INCOME TAX, CENTRAL, PATNA AND ANOTHER [K. M. JOSEPH, J. ] 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. The fact that for the same assessee but for the different assessment year, the same Bench of the ITAT had accepted their plea of short supply of bitumen as it was not within its knowledge as to whether the case travelled in appeal before the High Court or not, whereas the decision rendered by the Tribunal for the assessment year 1995-96 had "travelled upto this Court in M. A. 214 OF 2002". It is against the order dated 05. 03. 2009 in M. A. 214 of 2002 and the order dated 18. 12.

2017 in the Review Petition 102 of 2009 that the appellant is before this Court. B. SUBMISSIONS OF PARTIES 17. The Court heard Shri Ramesh P. Bhat, learned Senior Advocate on behalf of the appellant and Shri N. Venkatraman, learned Additional Solicitor General on behalf of the Revenue. 18. Shri Ramesh P Bhat strenuously urged before us that impugned Orders betray palpable errors. When the error was pointed out in Review though it is taken note of, the High Court has failed to rectify the fallacy. In short, the error on facts is as follows: "There are two assessment years involved namely 1995-96 and 1996-97. In the assessment year 1995-96, an addition 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 Court has rejected the same without just cause.

In the Order, it is pointed out that the Court observed that the matter for the year 1995-1996 had travelled to the Court in M. A. 214 of 2012, when it actually related to 1996-1997. More importantly, the learned Senior Counsel would contend that bitumen cannot be treated as other valuable article within the meaning of Section 69A of the Act. The very company of words, in which the words 'other valuable article' is found, viz. , money, bullion and gold, should have persuaded the Court to find the addition illegal. It was also canvassed before us that the appellant cannot be treated as the owner, as appellant was a carrier. It fulfilled its obligations by lifting the goods in question and delivered the same. In fact, it is the contention of the appellant that the goods had been delivered and there was no misappropriation. There was no complaint by the oil companies from whom, the bitumen had been lifted, about there being short delivery.

There was even no complaint from the Consignee Department. The right to cross-examination should have been offered. The burden shifted to the Department to prove its case. The learned Senior Counsel would draw support from the following case law: i. (1984) Vol 147 ITR 251; Addl. Commissioner of Income Tax v. S. Pichaimanickan Chettiar. ii. (1993) Vol 199 ITR 370; Mohan B. Samtani v. Commissioner of Income-Tax. 20. The appellant would contend that the finding that the photocopies of the delivery challans were fabricated was a gross error. The appellant has a case that this is more so as the two Junior Engineers had failed to appear for cross-examination. 21. The appellant also relied upon Judgment of this Court in Kotak Mahindra Bank Ltd. v. A. Balakrishnan and another3. He further drew our attention to the Judgment of this Court in Kishinchand 3 (2022) 9 SCC 186 M/s. D. N. SINGH v. COMMISSIONER OF INCOME TAX, CENTRAL, PATNA AND ANOTHER [K. M. JOSEPH, J. ] Chellaram v.

Commissioner of Income Tax, Bombay City II, Bombay4. 22. Shri N. Venkatraman, learned Additional Solicitor General countered the submissions and submitted that no case was made out. He would rely upon Chuharmal (supra). The view taken by the High Court represents the correct position in law. C. ANALYSIS 23. Section 69 deals with unexplained investments. It reads as follows: "69. Unexplained investments Where in the financial year immediately preceding 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 deemed to be the income of the assessee for such financial year. " 25. Section 69B provides for power with the Assessing Officer to deal with investments made by an assessee in bullion, jewellery and other valuable article, when such assets are found to be owned by the 4 (1980) Suppl.

SCC 660 assessee and he finds a mismatch between the amount spent for acquiring them or investing in them and the amount recorded in the Books of Accounts for any source of income and no explanation is offered or the explanation offered is not found satisfactory, the excess amount can be brought to tax. Section 69C, inserted w. e. f. 01. 04. 1976, deals with unexplained expenditure, being deemed to be the income of the assessee. 26. Section 69 and Section 69A, apart from being close neighbours, do bear resemblance with one another. Section 69 deals with unexplained investment. Section 69A deals with unexplained money, bullion, jewellery or other valuable articles. Section 69A was inserted by Amending Act 5 of 1964 and it came into effect w. e. f. 01. 04. 1964. Both Sections require that the subject matter of the provisions, viz.

, investments in the case of Section 69 and money, bullion, jewellery or other valuable articles in the case of Section 69A are not recorded in the Books of Account. That is, in a case where Books of Accounts are maintained. In the case of investments under Section 69, necessarily, the Law-Giver contemplates the Assessing Officer finding that the assessee had made the investments. In the case of Section 69A, the assessee must be found to be the owner of the money, bullion, jewellery or other valuable articles. In both cases, if the assessee is able to offer an explanation for the nature and the source for the investments and money, bullion, jewellery or other valuable articles, respectively, and it is not found unsatisfactory, there can be no deemed income under either Section. 27. Turning more to Section 69A, it may be broken down into the following essential parts: a. The assessee must be found to be the owner; b.

He must be the owner of any money, bullion, jewellery or other valuable articles; c. The said articles must not be recorded in the Books of Account, if any maintained; d. The assessee is unable to offer an explanation regarding the nature and the source of acquiring the articles in question; or The explanation, which is offered, is found to be, in the opinion of the Officer, not satisfactory; M/s. D. N. SINGH v. COMMISSIONER OF INCOME TAX, CENTRAL, PATNA AND ANOTHER [K. M. JOSEPH, J. ] 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 carrier to deliver the bitumen, after having lifted the same from the Oil Companies to the various Divisions of the Road Construction Department of the Government of Bihar. Before the Court proceeds to deal with this aspect, we may bear in mind, what this Court held in the decision reported in Chuharmal S/O Takarmal Mohnani v.

Commissioner of Income Tax, M. P. , Bhopal5. In the said case, the Court was dealing with wrist watches being seized from the assessee during a search conducted by the Customs Authorities from the bedroom of the assessee. The question fell for consideration, as to whether the principles underlying Section 110 of the Evidence Act, 1872, would assist the Revenue to conclude that a person, in possession, could be treated as the owner. This Court held, inter alia, as follows: "6. ... In other words, it follows from well settled principle of law that normally, unless contrary is established, title always follows 5 (1988) 3 SCC 588 possession. In the facts of this case, indubitably, possession of the wrist-watches was found with the petitioner. The petitioner did not adduce any evidence, far less discharged the onus of proving that the wrist-watches in question did not belong to the petitioner.

Hence, the High Court held, and in our opinion rightly, that the value of the wrist-watches is the income of the assessee. " 30. After referring to the Judgment of the High Court of Bombay reported in J. S. Parkar v. V. B. Palekar6, which dealt with seizure of gold, the Court, held as follows: "6. ... There a contention was raised that the provision in Section 110 of the Evidence Act where a person was found in possession of anything, the onus of proving that he was not the owner was on the person who affirmed that he was not the owner, was incorrect and inapplicable to taxation proceedings. This contention was rejected.

The High Court of Bombay held that what was meant by saying that the Evidence Act did not apply to the proceedings under the Act was that the rigour of the rules of evidence contained in the Evidence Act, was not applicable but that did not mean that the taxing authorities were desirous in invoking the principles of the Act in proceedings before them, they were prevented from doing so. Secondly, all that Section 110 of the Evidence Act does is that it embodies a salutary principle of common law jurisprudence 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. Chinnathamban7. 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 6 (1974) 94 ITR 616 (Bom HC) 7 (2007) 7 SCC 390 M/s. D. N. SINGH v. COMMISSIONER OF INCOME TAX, CENTRAL, PATNA AND ANOTHER [K. M. JOSEPH, J. ] 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 under sub-section (1), the common carrier may, (a) if such consignment is perishable in nature, have the right to sell the consignment; or (b) if such consignment is not perishable in nature, cause a notice to be served upon the consignee or upon the consignor if the consignee is not available, requiring him to remove the goods within a period of fifteen days from the date of receipt of the notice and in case of failure to comply with the notice, the common carrier shall have the right to sell such consignment without any further notice to the consignee or the consignor, as the case may be. (3) The common carrier shall, out of the sale proceeds received under sub-section (2), retain a sum equal to the freight, storage and other charges due including expenses incurred for the sale, and the surplus, if any, from such sale proceeds shall be returned to the consignee or the consignor, as the case may be.

(4) Unless otherwise agreed upon between the common carrier and consignor, the common carrier shall be entitled to detain or dispose off the consignment in part or full to recover his dues in the event of the consignee failing to make payment of the freight and other charges payable to the common carrier at the time of taking delivery. " 33. Therefore, under Section 15, if the consignee fails to take delivery of any consignment of goods within thirty days, the consignment is to be treated as unclaimed. The period of thirty days is declared inapplicable to perishable consignments, in which case, a period of twentyfour hours' notice or any lesser period, as may be agreed between the consignor and the common carrier, suffices. In the case of perishable consignment, following such notice, the consignment can be sold.

In a case where the goods are not perishable, if there is failure by the consignee to remove the goods after the receipt of a notice of fifteen days from the carrier, the common carrier is given a right to sell the consignment without further notice. Section 15(3) enables the carrier to retain a sum equal to the freights, storage and other charges, due, including expenses incurred for the sale. The surplus from the sale proceeds is to be returned to the consigner or the consignee. Section 15(4) clothes the carrier with a right to sell in the event of failure by the consignee to make payment of the freight and other 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-Tax8, 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 State Trading Corporation of Sikkim. The assessee also claimed that the Chogyal of Sikkim was the owner and, under his verbal instruction conveyed through his A. D. C.

, he arranged for despatch thereof by signing the papers. In fact, the Chogyal also claimed ownership of the said packages on the basis of the letter by the Under Secretary of the Chogyal of Sikkim addressed to the Assistant Collector of Customs dated May 30, 1973. The Chogyal was the head of an independent State at the relevant time and it was necessary, if the claim for ownership of the Chogyal is to be disputed, to have the said letter verified by obtaining the original from the customs authorities. Merely because the packages were presented before the customs authority, it does not ipso facto prove the ownership of the assessee of the goods. 8 1993 Vol. 199 ITR 370 Calcutta M/s. D. N. SINGH v. COMMISSIONER OF INCOME TAX, CENTRAL, PATNA AND ANOTHER [K. M. JOSEPH, J. ] 7. In our view, it has not been established or found that the assessee is the owner of the said idol and pedestal.

On the contrary, the said letter dated May 30, 1973, addressed to the Assistant Collector of Customs shows that the Chogyal is the owner of the said articles. Under such circumstances, there is no reason to hold the assessee liable and to add Rs. 80,000 being the value of the said articles to his income. 36. The High Court went on to distinguish Chuharmal (supra) by holding that in the case before the High Court, the assessee had produced the evidence to substantiate that the article found in his possession belonged to the Chogyal of Sikkim. D. A CARRIER, A BAILEE? 37. 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. [See Pullock and Mulla in the Indian Contract and Specific Relief Act]. 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. In Patel Roadways Ltd. v. Birla Yamaha Ltd. 9, 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. " 9 (2000) 4 SCC 91 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. 10. 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 words, it was a mere matter of negligence on which the liability was founded. If a person was negligent and did not take as much care as he would have taken of his own goods, he would be liable in damages. These principles of the English common law rule were also applied in this country as indicated in the decision of the Privy Council in Irrawaddy Flotilla Co. Ltd. v. Bugwandass in which, it was, inter alia, observed as under: "For the present purpose it is not material to inquire how it was that the common law of England came to govern the duties and liabilities of common carriers throughout India. The fact itself is beyond dispute. It is recognised by the Indian Legislature in the Carriers Act, 1865, an Act framed on the lines of the English Carriers Act of 1830. " "15.

In the meantime, Parliament intervened and the Carriers Act, 1865 was enacted with the result that the liability of a common carrier came to be considered in the light of the provisions contained in that Act. It is true that Section 158 of the Indian Contract Act speaks of bailment of the goods for being carried on behalf of that bailor, but it is also to be noticed that the bailment spoken of in that section is gratuitous as it is specifically provided "bailment" as set out in Section 148 of the Indian Contract Act may be said to be wide enough so as to cover "entrustment of goods" to a carrier for carriage. But as pointed out above, with the enactment of the Carriers Act, 1865, the extent of liability of the carrier has to be found in that Act. " "25. We have already reproduced the provisions of Section 6, 8 and 9 above. Section 6 enables the common carrier to limit his 10 (2000) 4 SCC 553 M/s. D. N. SINGH v. COMMISSIONER OF INCOME TAX, CENTRAL, PATNA AND ANOTHER [K. M. JOSEPH, J.

] liability by a special contract. But the special contract will not absolve the carrier if the damage or loss to the goods, entrusted to him, has been caused by his own negligence or criminal act or that of his agents or servants. In that situation, the carrier would be liable for the damage to or loss or non-delivery of goods. In this situation, if a suit is filed for recovery of damages, the burden of proof will not be on the owner or the plaintiff to show that the loss or damage was caused owing to the negligence or criminal act of the carrier as provided by Section 9. The carrier can escape his liability only if it is established that the loss or damage was due to an act of God or enemies of the State (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 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. E. THE CARRIAGE BY ROAD ACT, 2007 40. Under Section 15 of the Carriage by Road Act, 2007, the carrier can, after issuing notice as provided, when there is a failure by the consignee to take delivery, sell the goods in the case of a sale which is so authorised by a statute. The buyer from the carrier would acquire a good title even as against the consignee. It may be true that as far as the sale proceeds received by the common carrier from the sale, he would be accountable to the consignee as provided in Section 15 of the Act. Likewise, in a case covered under Section 15(4), the common carrier would have the power to dispose of the consignment for recovery of dues from the consignee.

In such cases if the other ingredients of Section 69A are satisfied, there may be no fallacy involved if an assessee is found to be the owner of the goods which he disposes of under the authority of law. F. CRIMINAL BREACH OF TRUST 41. Section 405 of the Indian Penal Code, 1860 reads as follows: "405. Criminal Breach of Trust Whoever, being in any manner entrusted with property, or with any dominion over property, dishonestly misappropriates or converts to his own use that property, or dishonestly uses or disposes of that property in violation of any direction of law prescribing the mode in which such trust is to be discharged, or of any legal contract, express or implied, which he has made touching the discharge of such trust, or wilfully suffers any other person so to do, commits "criminal breach of trust". Illustration (f) under Section 405 is apposite and it reads as follows: - "Illustration f. A, a carrier, is entrusted by Z with property to be carried by land or by water.

A dishonestly misappropriates the property. A has committed a criminal breach of trust. " G. THE SALE OF GOODS ACT, 1930 42. Section 39 of the Sale of Goods Act, 1930,inter alia, 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. Section 27 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 M/s. D. N. SINGH v. COMMISSIONER OF INCOME TAX, CENTRAL, PATNA AND ANOTHER [K. M. JOSEPH, J.

] 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 impugning the title of the buyer.

Under Section 15 of the Carriage by Road Act, 2007, a sale by a carrier is permitted and it can convey good title to the buyer. H. IS A THIEF AN OWNER? OWNERSHIP BEING ILLEGAL. 44. Can a thief be treated as the owner of the goods? In this regard, this Court notices the following discussion in the commentary on Sampath Iyengar's, Law of Income Tax. "12. Sine qua non is "ownership". - The words "is found to be the owner" appearing in this section clearly show that the mere fact that, on a search, certain articles are found in the possession of a person cannot be said to attract the provisions of this section unless it is established that the person in whose possession articles were found is the owner thereof. An assessee is to be the owner before anything in his possession can be deemed to be his income. It cannot be said in the case of stolen property that the thief is the owner thereof.

Section 69A was enacted to treat the value of certain items as income by a deeming provision but facts must be found to bring a case within that deeming provision. In the case of a deeming provision the court has to assume an unreal state of things to be real. " 45. In Commissioner of Income Tax v. K. I. Pavunny11, a Division Bench was dealing with the case where excise authorities found articles covered by Section 69A in a box. The assessee sought to attribute ownership to another person with whom he was on inimical terms. The High Court of Kerala found that the assessee did not discharge his onus to establish that the articles belonged to someone else. What is of interest to this Court is the following discussion: "13. ... But for the prohibitory law, any article being a property can be owned by a person. Simply because the law prohibits retention of a property that does not mean that such property is without ownership.

Even contraband or prohibited articles can be owned and possessed unlawfully. It is entirely a different thing that the law may not permit the owner of given articles to retain possession of them or the articles may be liable under law to be confiscated. " 46. Appellant places reliance on judgment in Addl. Commissioner of Income Tax vs. S. Pichaimanickan Chettiar reported in 1984 (147) ITR 251. In the said case, it is noted that Section 69A of the Act was invoked after finding the assessee 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 11 (1998) 232 ITR 837 M/s. D. N. SINGH v. COMMISSIONER OF INCOME TAX, CENTRAL, PATNA AND ANOTHER [K. M. JOSEPH, J. ] 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. I. THE CIRCULAR DATED 07. 07. 1964 48. In this regard, the following are the contents of the Circular issued by the Board, dated 7th July 1964, namely, Circular No. 20 of 1964. It reads as follows: "86. This provision is complementary to the provisions in Section 69 which enables the assessment of the value of investments which have not been recorded in the books of account of the assessee and the source of which has not been explained by him satisfactorily. 87.

It has to be carefully noted that the conditions precedent to the application of the provisions of Section 69A are that (i) the money, bullion, jewellery or other valuable articles in question are not recorded in the books of account, if any, maintained by the assessee concerned for any source of income; and (ii) that the assessee either offers no explanation as to the nature and source of acquisition thereof or the explanation offered by him is, in the opinion of the Income-tax Officer (now Assessing Officer), not satisfactory. In coming to the conclusions that 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 middle class man at all in this way, because we will get what is our due in other ways.

They are not paying the taxes at all..... we will give them notice..... we shall bring them on the tax rolls. But big assesses as are contemplated in this provision cannot be allowed to escape. " J. THE DEPARTMENTAL INSTRUCTIONS DATED 11. 05. 1994 49. This Court notices Departmental Instruction No. 1916 dated 11th May, 1994. "2. Departmental instructions. - Instruction read as under: "Seizure of Jewellery and Ornaments in Course of Search Operations- Guidelines for. - Instances of seizure of jewellery of small quantity in course of operations under section 132 have come to the notice to the Board. The question of a common approach to situations where search parties come across items of jewellery, has been examined by the Board and following guidelines are issued for strict compliance:- M/s. D. N. SINGH v. COMMISSIONER OF INCOME TAX, CENTRAL, PATNA AND ANOTHER [K. M. JOSEPH, J.

] (i) In the case of a wealth-tax assessee, gold jewellery and ornaments found in excess of the gross weight declared in the wealth-tax return only need be seized. (ii) In the case of a person not assessed to wealth-tax, gold jewellery and ornaments to the extent of 500 gms. Per married lady, 250 gms. Per unmarried lady and 100 gms. Per male member of the family, need not be seized. (iii) The authorised officer may, having regard to the status of the family and the custom and practices of the community to which the family belongs and other circumstances of the case, decide to exclude a larger quantity of jewellery and ornaments from seizure. This should be reported to the Director of Income-tax/ Commissioner authorising the search at the time of furnishing the search report. In all cases, a detailed inventory of the jewellery and ornaments found must be prepared to be used for assessment purposes. " K. R. B. JODHA MAL DISTINGUISHED BY HIGH COURT 50.

The High Court has distinguished the judgment of this Court in R. B. Jodha Mal Kuthiala Vs. Commissioner of Income Tax, Punjab, Jammu and Kashmir, Himachal Pradesh and Patiala12. In the said case, the appellant claimed losses for three assessment years. The losses were claimed on account of interest payable to the bank. The appellant assessee had availed the loan in connection with his business which was being conducted in erstwhile Pakistan. With the creation of Pakistan, the 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: 12 (1971) 3 SCC 369 "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.

Hence 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. 10. For a minute, let us look at things from the practical point of view. If the thousands of evacuees who left practically all their properties as well as businesses in Pakistan had been considered as the owners of those properties and businesses as long as the "Ordinance" was in force then those unfortunate persons would have had to pay income tax on the basis of the annual letting value of their properties and on the income, gains and profits of the businesses left by them in Pakistan though they did not get a paisa out of those properties and businesses. Fortunately no one in the past interpreted the law in the manner Mr Mahajan wants us to interpret. It is true that equitable considerations are irrelevant in interpreting tax laws.

But those laws, like all other laws have to be interpreted reasonably and in consonance with justice. 14. For determining the person liable to pay tax, the test laid down by the court was to find out the person entitled to that income. An attempt was made by Mr Mahajan to distinguish this case on the ground that under the corresponding English statute the liability to tax in respect of income from property is not laid on the owner of the property. It is true that Section 82 of the English Income Tax Act, 1952, is worded differently. But the principles underlying the two statutes are identical. This is clear from the various provisions in that Act. 17. Those observations have to be understood in the context in which they were made. Therein, Their Lordships were considering whether the right of an evacuee in respect of the property left by him in the country from which he migrated was property right for the purpose of Article 19(1)(f) of the Constitution.

No one denies that an evacuee from Pakistan has a residual right in the property that he left in Pakistan. But the real question is, can that right be M/s. D. N. SINGH v. COMMISSIONER OF INCOME TAX, CENTRAL, PATNA AND ANOTHER [K. M. JOSEPH, J. ] considered as ownership within the meaning of Section 9 of the Act. As mentioned earlier that section seeks to bring to tax income of the property in the hands of the owner. Hence the focus of that s