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. 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.
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. 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 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.
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 7 4064.28 MT of Bitumen out of total short supply of 4443.80 MT of Bitumen as reported by engineer in chief… 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. Ahiya Ansari have been examined in respect of reported short supply of Bitumen of 4443.01 MT. 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 hand writing experts to establish the genuineness or otherwise of such signatures, after carrying out these directions any addition, if called for shall be made.” As noticed, the Revenue had filed an Appeal before the ITAT for the Assessment Year 1995-1996 (ITA 358 9 Patna/2000). 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.
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 remitted 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 back, the Appeal of the Revenue and the Appeal of the appellant, challenging the Rectification Order, came to be dismissed. Commissioner of Income Tax (Central), Bombay
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 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. 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?
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. 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.
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 16 be considered by the Assessing Officer. 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. Commissioner of Income Tax v. The appellant has a case 18 that this is more so as the two Junior Engineers had failed to appear for cross-examination. Commissioner of Income Tax, Bombay City II, Bombay. 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 (2022) 9 SCC (1980) Suppl. SCC 660 19 source of the investments or the explanation offered by him is not, in the opinion of the Assessing] Officer, satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year.” Section 69A came to be inserted by Finance Act, 1964 (Act 5 of 1964) w.e.f. 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.” 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 assessee and he finds a mismatch between the amount spent for acquiring them or investing in them and the amount 20 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.
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. 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. The question would arise, as to whether the appellant could be treated as the owner of the bitumen; II. The petitioner did not adduce (1988) 3 SCC 588 24 any evidence, far less discharged the onus of proving that the wrist-watches in question did not belong to the petitioner. 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. … 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.” 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. (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.” 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 27 unclaimed.
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. 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. 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. 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 Court held inter alia as follows: – “31. 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. 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 . Ltd., the Assam decision in River steam Navigation Co. and the Kerala decision in Kerala Transport Co. 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. 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. — 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 37 contract of sale notice that the seller has not authority to sell.” 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. 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. 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. 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 40 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. 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. 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.
Any way this (Section 69A) is not intended to hurt the middle class persons. The 43 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:- (i)
Also Read: https://newslaw.in/case-type/civil/application-of-code-of-civil-procedure-in-small-causes-court/
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. The High Court has distinguished the judgment of this Court in R.B. In the said case, the appellant (1971) 3 SCC 369 44 claimed losses for three assessment years. 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.
It must be remembered that Section 9 brings to tax the income from property and not the interest of a person in the property. 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. 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.
This Court formed the view that since Section 9 of the Income Tax Act, 1922 required that in order that a person be assessed to tax in the form of income from house property, he should be the owner and as the custodian in Pakistan was the owner, the High Court was right in the view it took. Did the assets in the circumstances mentioned hereinbefore namely, the properties in respect of which registered sale deeds had not been executed but consideration for sale of which had been received and possession in respect of which had been handed over to the purchasers belonged to the assessee for the purpose of inclusion in his net wealth? It is not necessary, in our opinion, for the purpose of this case to be tied down with the controversy whether in India there is any concept of legal ownership apart from equitable ownership or not or whether under Sections 9 and 10 of the Indian Income Tax Act, 1922 and Sections 22 to 24 of the Indian income Tax Act 1961, where ‘owner’ is spoken in respect of the house properties, the legal owner is meant and not the equitable or beneficial owner. 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 common law. The courts of common law in England refused to recognise equitable ownership and denied the equitable owner as an owner at all.”
This Court had occasion to discuss Section 9 of the Income Tax Act, 1922 and the meaning of the expression “owner” in the case of R.B. Therefore, specially in view of the fact that the expression used by the 51 legislature has deliberately and significantly not used the expression “assets owned by the assessee” but assets “belonging to the assessee”, in our opinion, is an aspect which has to be borne in mind.” 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.
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. Enjoyment as an owner only in a practical sense can be attributed to the term ‘owner’ in the context of this section — a person who can exercise the rights of the owner and is entitled to the income from the property for his own benefit. We have, therefore, to judge and interpret the language of Section 22 of the Act in the context of that particular section, and that context we shall come back to hereinafter at a more appropriate place.
577 in clause ( x ): ‘To acquire possession of a thing it is necessary to exercise such physical control over the thing as the thing is capable of, and to evince an intention to exclude others:….’ Reference in this connection has been made to the case of Tubantia : Young v. A trust implies the existence of two kinds of concurrent ownerships, that of the trustee at law and that of the beneficiary at equity.’ We are not concerned in this case with any case of trust either under the equitable principles or under the law as engrafted in the Indian Trusts Act. So, when described in terms of ownership, the distinction between legal and equitable ownership lies in the historical factors that govern their creation and function; in terms of advantage, the distinction is between the bare right, whether legal or equitable, and the beneficial right’ (vide pp. Yet another definition that has been given by Stroud is that: ‘“Owner” applies to every person in possession or receipt either of the whole, or of any part, of the rents or profits of any land or tenement; or in the occupation of such land or tenement, other than as a tenant from year to year or for any less term or as a tenant at will.’ 2060) Thus the juristic principle from the viewpoint of each one is to determine the true 57 connotation of the term ‘owner’ within the meaning of Section 22 of the Act in its practical sense, leaving the husk of the legal title beyond the domain of ownership for the purpose of this statutory provision. A plain reading of clause 4 of the agreement, as extracted above, clearly goes to show that the physical possession of the properties has passed on or is deemed to have passed on to the assessee to have and to hold for ever and absolutely with the power to use the same in whatsoever manner it thinks best and the assessee shall derive all income and benefits together with full power of disposal of the properties as well as the income thereof. Can it then be said that the recipient of the income being the assessee only having an absolute and exclusive control over the 58 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?
Section 54 of the Transfer of Property Act would, therefore, exclude the conferment of absolute title by transfer to the assessee.
In the instant case, having reference to clause 5 of the agreement it would be seen that the option was given to the assessee to demand at its pleasure a conveyance duly registered being executed in its favour by the Sahay family (the vendor) and to get its name mutated in the official records. Having taken all the advantages and still taking all the advantages under the 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 60 was not an owner within the meaning of Section 22 of the Act. In our view, any decision to the contrary would not be in consonance with the juristic principle either at common law or in equity. (Emphasis supplied)
Further, it is found that the Court also noticed the memorandum explaining provisions in Finance Bill 1987 concerning Section 27 and found that the amendment was intended to supply an obvious omission or clear up the doubts surrounding the word owner in Section 22 of the Act. The provision should be so interpreted and the words used therein should be assigned such meaning as would enable the assessee to secure the benefit intended to be given by the legislature to the assessee.
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. Yet another definition that has been given by Stroud is: “ ‘owner’ applies ‘to every person in possession or receipt either of the whole, or of any part, of the rents or profits of any land or tenement; or in the occupation of such land or tenement, other than as a tenant from year to year or for any less term or as a tenant at will’.” On the other hand, the Housing Board would be denied the benefit of Section 32 because in spite of its being the legal owner it was not using the building for its business or profession. The finding of fact arrived at in the case at hand is that though a document of title was not executed by the Housing Board in favour of the assessee, but the houses were allotted to the assessee by the Housing Board, part-payment 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. The claim of depreciation made under Section 32 of the Act was rejected on the basis that the assessee was not the owner of the vehicles. The Court went on to hold that in the facts it was the appellant-assessee which could be treated as the owner of the vehicles entitling it to claim the benefit of depreciation under Section 32. The claim of the assessee in the said case was that the custodian was owner only for the purpose of administration and that the assessee still continued to be the owner in the sense that he had the ultimate right to the property. 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. 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. 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. 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.
Unlike the possession of a person who for all intents and purposes, and in his own right, earns income from house property, lawfully otherwise, and falls short of ownership only for want of a formal conveyance as 72 required under Section 54 of Transfer of Property Act, a carrier who clings on to possession not only without having a shadow of a right, but what is more, both contrary to the contract as also the law cannot be found to be the owner. Section 69A was inserted in 1964 to get at income which was sought to be screened from tax by purchasing valuable articles such as bullion and gold and jewellery besides keeping it in the form of money also. The rationale of the 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 74 the intention to misappropriate the same, which further involves the sale of the bitumen for which there is no material as such.
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. In other words, it is the case of the appellant that bitumen is a clear misfit and it could not have been the legislative intention to treat bitumen as other valuable article. As already pointed out by us in the foregoing discussion, it is evident from the scheme of sub-section (5) of section 132 that the “assets”, which are seized during the course of an authorised search under section 132, are expected to be retained only for the purpose of satisfying the tax liability of an assessee as ascertained from his undisclosed income. 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. Gabrial Babu and others, the High Court of Kerala was dealing with the question, as to whether immovable property would be covered within the expression ‘other value article or thing’ within the meaning of Section 132(1) of the Act. Money, bullion, jewellery, which precede “other valuable article or thing” forge a genus and, consequently, the words “other valuable article or thing” assume a constricted meaning and interpretation in that context. 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. Worth a good price; having financial or market value.” The word ‘valuable’ has been defined in the Concise Oxford Dictionary as follows: – The word ‘valuable’ has been defined as again an adjective. The Word ‘bullion’ has been defined in the Concise Oxford Dictionary as ‘gold or silver in bulk before coining, or valued by weight’ M. We quote hereinbelow Explanation 3 to Section 32(1) of the Act: “ Explanation 3.—For the purposes of this sub-section, the expressions ‘assets’ and ‘block of assets’ shall mean— ( a ) tangible assets, being buildings, 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”. 873-74) “This rule, according to Maxwell, means that, when two or more words which are susceptible of analogous meaning are coupled together they are understood to be used in their cognate sense. 207): “Associated words take their meaning from one another under the doctrine of noscitur a sociis, (1990) 3 SCC 447 84 the philosophy of which is that the meaning of a doubtful word may be ascertained by reference to the meaning of words associated with it; such doctrine is broader than the maxim ejusdem generis ”.
Also Read: https://newslaw.in/case-type/criminal/bail-application-decision-co-accuseds-surrender-not-relevant/
It can also be applied where the meaning of the words of wider import is doubtful; but, where the object of the legislature in using wider words is clear and free of ambiguity, the rule of construction in question cannot be pressed into service.” CST
Case Title: M/S D. N. SINGH THROUGH PARTNER DUDHESHWAR NATH SINGH Vs. COMMISSIONER OF INCOME TAX (2023 INSC 543)
Case Number: C.A. No.-003738-003739 / 2023
