Bitumen not 'Valuable Article’, Carrier of Bitumen not ‘Owner' u/s 69A of Income Tax Act: Supreme Court [Read Judgement]

In a major ruling the Supreme Court of India observed that bitumen cannot be treated as a ‘valuable article’ under Section 69A of the Income Tax Act, 1961 and the ownership of the goods did not pass to the assessee, who was a mere carrier of goods and whose possession of bitumen began as a bailee.

The appellant-assessee, M/s. D.N. Singh, carries the business of a carriage contractor and lifted bitumen loaded from various oil companies. Later it was alleged that the transporters of bitumen were misappropriating bitumen and were not delivering the whole quantity lifted from oil companies.

The Assessing Officer (AO) found that the appellant-assessee had not delivered the entire quantity of bitumen lifted by it from the oil companies. The AO thus passed an order making additions to the assessee's income by invoking Section 69A of the Income Tax Act.

In appeal, the Commissioner (Appeals) set aside the additions made by the AO. The appeal filed by the Revenue Department was allowed by the Income Tax Appellate Tribunal (ITAT) who confirmed the additions made by the AO. The same was upheld by the High Court.

While considering whether bitumen is to be treated as valuable article, the Supreme Court Bench declared that- an ‘article’ shall be considered ‘valuable’ if the concerned article is a high-priced article commanding a premium price. As a corollary, an ordinary ‘article’ cannot be bracketed in the same category as the other high-priced articles like bullion, gold, jewellery mentioned in Section 69A of the Income Tax Act.

The Bench of the Supreme Court while considering the matter of whether the assessee could be said to be the owner of the bitumen allegedly lifted and not delivered by it, the Court noted that 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 Two-Judge Bench of the Supreme Court comprising Justices K.M. Joseph and Hrishikesh Roy made the observation while dealing with an appeal filed against the decision of the Patna High Court, who had upheld the additions made by the Assessing Officer (AO) towards the bitumen lifted by the assessee as a carriage contractor, which was allegedly not delivered by it to the consignee- the Road Construction Department of the Government of Bihar.

In conclusion, the Supreme Court it is held that bitumen is not a valuable article in the context of Section 69A of the Income Tax Act and the assessee here was not the owner of the concerned bitumen for the purpose of section 69A of the Income Tax Act,1961.

To Read the full text of the Order CLICK HERE

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