Apex Court lays down principles of what is a “valuable article” as per Sec 69A

[Vivek Jalan]

Way back, a scam was reported in the West Bengal 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 Income Tax Act. The AO, taking note of the scam, issued SCNs, alleging that the transporters had lifted say 100 tonnes of bitumen but delivered only say 70 tonnes. This meant that the transporters had not delivered 30 tonnes. The AO added a corresponding sum by finding that 30 tonnes had not been delivered. This was done by invoking Section 69A of the Act.

The Apex Court has in an important judgement in the matter of M/S. D.N. SINGH VERSUS COMMISSIONER OF INCOME TAX, CENTRAL, PATNA AND ANOTHER - 2023 (5) TMI 746 - SUPREME COURT set aside the orders ruling that to apply Section 69A of the Act. It has held that it is indispensable there must be a “valuable article”. It has also thus laid down the basis of terming an article as a “valuable article”. It has held that Section 69A provides for unexplained ‘money, bullion, jewellery’. It is thereafter followed by the words ‘or other valuable articles’.

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 it must belong to the assessee, but it must be other valuable articles. 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. Thus, it was concluded that ‘bitumen’ as such cannot be treated as a ‘valuable article’. For purpose of Section 69A of Income Tax Act, it is therefore declared that an ‘article’ shall be considered ‘valuable’ if the concerned article is a high-priced article commanding a premium price.