Thief cannot be recognised as owner of property under Section 69A of Income Tax Act: Supreme Court

The Supreme Court recently ruled that a thief cannot be recognised as the owner of a property under Section 69A of the Income Tax Act [M/S DN Singh v Commission of Income Tax]..A Bench of Justices KM Joseph and Hrishikesh Roy took the view that for Section 69A IT Act to apply, the assessing officer must find the assessee to be the owner of the article or goods under the provision. "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," the Court observed..Section 69A of the IT Act deals with "unexplained money" wherein the assessee is found to be the owner of any money or valuable articles which are not recorded in the books of account..Before the Court was an appeal challenging a decision of the Patna High Court upholding additions made by the Assessing Officer towards the bitumen lifted by the assessee from the consignor as a carriage contractor, which was allegedly not delivered by it to the consignee as instructed.The High Court found the assessee to be the owner of the bitumen allegedly misappropriated. Thus, it upheld additions made under Section 69A IT Act. According to the High Court, having lifted the bitumen, the appellant would be liable to pay tax on such bitumen which not delivered. This decision came to be appealed before the apex court. .The issue before the top court was whether a thief can be considered an ‘owner’ of the goods under Section 69A IT Act. .To answer this question, the Court placed reliance on the commentary titled Sampath Iyengar’s Law of Income Tax which states that the assessee must be the owner before anything in his possession can be deemed to be his income. Therefore, in case of a stolen property, a thief cannot be its owner. The Court also placed reliance on the decision in the case of Additional Commissioner of Income Tax v S Pichaimanickan Chettiar wherein it was observed that the assessee, convicted under the Customs Act for being in possession of gold, could not be assessed under Section 69A IT Act..However, the Court also noted the decision in Commissioner of Income Tax v. KI Pavunny wherein the apex court observed that simply because the law prohibits retention of a property does not mean that such property is without ownership. Therefore, even contraband or prohibited articles can be owned and possessed unlawfully, the Court had said.These two views can be reconciled, the Court said.The question, the Court said, is 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, whether he could be found to be the owner of the goodsIn other words, can a thief become the owner, the Court asked.It then held that it would be straining the law beyond justification if the Court recognises a thief as the owner of the property within the meaning of Section 69A. 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, the bench made it clear..Therefore, it was concluded that a thief could not be recognised as the owner of the property within the meaning of Section 69A.With this, the Court held that the appellant could not be regarded to be the owner of the bitumen and the appeal was allowed. .Senior Advocate Ramesh P Bhatt and advocates Diggaj Pathak, Shweta Sharma, Rohit Priya Ranjan and Prachi Kohli appeared for the appellant.Additional Solicitor General N Venkataraman, and advocate Raj Bahadur Yadav, Udai Khanna, Saurabh Mishra, Diksha Rai and Shubranshu Padhi appeared for the respondents..[Read Judgment]