‘Bitumen’ isn’t ‘Valuable Article’; No Sec. 69A addition if Transporter doesn’t deliver it to Govt.: SC

Case Details: D. N. Singh v. Commissioner of Income-tax, Central - [2023] 150 taxmann.com 301 (SC)

Judiciary and Counsel Details

• • Hrishikesh Roy, J.

Facts of the Case

Assessee carried on business as a carriage contractor for bitumen. It was involved in a scam of misappropriating the bitumen and not delivering the quantity lifted to the various Divisions of the Road Construction Department of the Government of Bihar. Finding out that the actual quantity was not delivered, the Assessing Officer (AO) invoked section 69A and made additions on account of the short supply of bitumen.

The matter reached the Supreme Court of India.

Supreme Court Held

The Apex court held that the instant case was short delivery of bitumen by the transporter (assessee) to Govt. Department. The ownership right over the bitumen, that wasn’t delivered, wasn’t claimed by the assessee at any point. It was also not a case where the assessee exercising rights available in law entitling it to possess goods as of right or pass on the title to another under law as permitted.

At best, the assessee’s possession was a shade better than that of a thief as the possession had its origin under a contract of bailment.

It would be straining the law beyond justification if the court recognised a thief as the property owner within the meaning of Section 69A. Recognising a thief as the property owner would also mean that the owner would cease to be recognised as the owner, which would indeed be the most startling result.

When the facts are clear that the assessee is not the owner and somebody else is the owner, then treating the assessee as the owner may produce the most illegal results apart from being unjust.

The intention of the law-giver in introducing Section 69A was to get at income which has not been reflected in the books of account but found to belong to the assessee. Not only must it belong to the assessee, but it must be other valuable articles.

Applying the Principle of Ejusdem Generis, bitumen would stand out as a strange bedfellow in the company of its immediate predecessor words, viz., money, bullion, and jewellery. Bitumen is a clear misfit and could not have been the legislative intention to treat it as another valuable article.

Bitumen is a residual product in petroleum refineries and is usually used in road construction. It 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’. If this is so, Section 69A would then stand attracted.

But if treating it as a ‘valuable article’ requires ownership in large quantity and multiplying the value in large quantity, a ‘good price’ or ‘great deal of money’ is arrived at, then it would not be a valuable article.

Thus, the AO acted illegally in holding that assessee was the ‘owner’ and made the addition under section 69A on the said basis.