Sh. Makhan Singh v. Income Tax Officer, Ward 2(1), Amritsar And Another

ITA No. 241 of 2014 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 241 of 2014 (O & M)Date of decision : 27.8.2015 Sh. Makhan Singh Versus ........Appellant Income Tax Officer, Ward 2(1), Amritsar and another ......Respondents 1.Whether the Reporters of the local papers may be allowed to see the judgment?the judgment? 2.To be referred to the Reporters or not? Yes 3. Whether the judgment should be reported in the Digest? CORAM: HON'BLE MR. JUSTICE AJAY KUMAR MITTALHON'BLE MR. JUSTICE RAMENDRA JAIN Present :Mr. Avneesh Jhingan, Advocate, for the appellant Mr. Denesh Goyal, Advocate, for the respondents Ramendra Jain, J. The present appeal has been filed under Section 260A ofthe Income Tax Act, 1961 (hereinafter called as 'the Act') against theorder dated 28.1.2014 (Annexure A-3) passed by the Income TaxAppellate Tribunal, Amritsar (in short 'the Tribunal') in ITA No.440/ASR/2012 for the assessment year 2009-10 claiming the followingsubstantial questions of law:- i.Whether in the facts and circumstances of the casethe donation collected for specific project could havebeen added to the personal income of the appellant?the donation collected for specific project could havebeen added to the personal income of the appellant? ii.Whether in the facts and circumstances of the case in light of explanation to Section 2(24) (iia) of the Act, theDera is not a deemed trust? iii. Whether in the facts and circumstances of the casethe corpus donation received by the appellant is not alegal obligation giving a dual capacity to theappellant? iv.Whether in the facts and circumstances of the casedisallowance of expenses to the extent of one sixth issustainable in law? v.Whether in the facts and circumstances of the casethe adding back of ` 13,35,658/-is sustainable in law?vi.Whether in the facts and circumstances of the casethe disallowance of expenditure of ` 7,42,848/-andadding the same amount back is sustainable in law? 2.Brief facts of the case are that the appellant filed return ofhis income for the Assessment Year 2009-10 on 31.3.2010 declaringincome of ` 2,10,870/-. The said return was processed under Section143(1)(a) of the Act. Subsequently, the case was selected for scrutiny.Accordingly, notice under Section 143(2) of the Act was issued to theappellant, besides a notice under Section 139C(1)/139D(c) of the Act,requiring to file certain documents. In compliance thereto, the appellantfiled copy of his Income Expenditure Account and other documents whilesubmitting that no bank account was maintained by him in his name.Notice under Section 142(1) of the Act was served upon the appellantrequiring him to furnish necessary information. However, he did notrespond to the same. Thereafter, many questionnaires were issued tohim from time to time, which he duly replied that “he was a religious preacher doing no business activity and not maintaining any personalbank account. He was residing in Dera of Sant Amir Singh Ji, BazaarSatto Wala, Amritsar. Expenses towards electricity, telephone and waterwere being borne by aforesaid Dera. Some mobile phone expenseswere incurred by him in 2008-09, details of which were furnished in theIncome & Expenditure Account etc.” The Assessing Officervideassessment order dated 17.11.2011 (Annexure A-1) made an addition of` 1,21,67,653/- by treating the bank deposits as his income fromprofession and vocation while, inter alia, disallowing the expensestowards insurance and 1/5[th] expenses towards telephone, travelling andvehicle etc. amounting to ` 6,12,725/- besides, adding back `1,39,85,512/- claimed by the assessee towards donation of Chhattar ofgold weighing 12.670 Kgs. to Sri Hazur Sahib, Abchalnagar, Nanded,Maharashtra and ` 13,35,658/- spent towards air conditioner, computer,vehicle, television, purchase of generator etc. Aggrieved with the same,the appellant filed an appeal before the Commissioner of Income Tax(Appeals), Amritsar [for brevity “the CIT(A)”], who dismissed the samevide order dated 18.10.2012 (Annexure A-2). Still dissatisfied, theassessee filed an appeal before the Tribunal. The Tribunal vide orderdated 28.1.2014 (Annexure A-3) dismissed the appeal. Hence, thepresent appeal by the assessee. 3.Learned counsel for the appellant argued that theauthorities below have failed to appreciate the dual capacity of theappellant, first as Preacher and other as Mukh Sevadar of Dera, SantAmir Singh Ji Taksal. The said Dera is an old Historic Dera of about 100years old being managed by the appellant. The said Dera is carryingvarious charitable and religious activities by utilizing the donations made by the general public etc. and thus, the donations so received by theappellant were deposited in the bank account. Though the said bankaccounts are in the name of the appellant, but in fact, the same are ofthe Dera. The appellant was merely operating the same. The authoritiesbelow have miserably failed to appreciate that the appellant was onlyoperating the bank account and doing his duty as care taker. Theauthorities below have erred in not appreciating the fact that thedonations received from general public cannot be treated as incomefrom business of the appellant, more particularly, when the same were'corpus' donations. The Assessing Officer, the CIT(A) and the Tribunalhave wrongly ignored the certificate issued by Takhat Sachkhand SriHazur Sahib, Abchalnagar, Nanded Sahib, Maharashtra, regardingdonation of gold chhabba. In support of his contentions, learned counselhas relied upon the judgments in Commissioner of Income Tax-II,-Chandigarh v. The Punjab State EGovernance Society, Income TaxAppeal No. 75 of 2011,decided on 21.4.2011;Director of Income Taxv. Society for Development Alternatives, ITA Nos. 12 of 2012 and 18of 2012, decided on 13.1.2012; Sukhdeo Charity Estate, Landu v.CIT, Rajasthan, Jaipur, (1984 ) 149 ITR 470 (Raj); Commissioner ofIncome Tax (Central), New Delhi v. Bijli Cotton Mills (P) Ltd., AIR1979 SC 346; CIT, West Bengal v. Tollygunge Club Ltd., AIR 1979 SC1343; CIT, Kanpur v. Sant Baba Mohan Singh, (1979) 118 ITR 1015(All.);andCIT v. Baba Avtar Singh, (1972) 83 ITR 738 (Del.). 4.On the other hand, learned counsel for the respondentspleaded the legality and validity of the impugned order passed by theTribunal. ITA No. 241 of 2014 5.We have heard learned counsel for the parties. 4.On the other hand, learned counsel for the respondentspleaded the legality and validity of the impugned order passed by theTribunal. ITA No. 241 of 2014 5.We have heard learned counsel for the parties. 6.It is pertinent to mention here that to the questionnaireissued to the appellant-assessee by the Assessing Officer, he repliedthat he does not maintain any personal bank account in his name.However, being dissatisfied with the aforesaid reply, his bank accountopening documents were called from the City Bank, Ludhiana underSection 133(6) of the Act. In the account opening form, it was found thatin the 'Nomination Column' the appellant-assessee had nominated hisson Amandeep Singh as his nominee in case of his death. Upon beingasked from the appellant-assessee that when the account was in thename of Dera and not his personal account, then in what capacity, hecould nominate his son as his nominee, he could not submit anysatisfactory reply. In these circumstances, the Assessing Officer treatedthe aforesaid bank account as individual account of the appellant-assessee. 7.There is no force in the argument of learned counsel for theappellant that entire activities done by the appellant were of charitableand religious in nature and were being done in the name of Dera. It iscompletely devoid of any merit, because the Dera, Sant Amir Singh Ji, ofwhom, the appellant-assessee is claiming himself to be a Mukh Sevadar,is admittedly, not registered under Section 12AA of the Act or under theSocieties Registration Act, 1860. There is also no trust deed of it,showing its activities as charitable or religious nature. It has also notobtained any certificate under Section 10 (23C) (iv) of the Act. Itsaccount were never audited under any law. Even no approval underSection 80G(5) of the Act was ever obtained from any prescribedauthority. It was evident before the Revenue Authorities that the entire affairs of the Dera, i.e donations/collections were solely managed andcontrolled by the appellant-assessee, according to his own whims andfancies in his individual capacity. 8.The Tribunal has rightly observed that the collectioncertificates were also stereo-typed without any PAN etc. Even no effortwas made to produce any so called donation affirming the same. Bankaccounts were found in the sole name of the appellant-assessee withoutindicating any adverse eventuality. The nomination of his son by him inthe bank accounts, clearly required to draw an inference that all the bankaccounts were his personal accounts and not of the Dera. The appellanthas miserably failed to show before the authorities that any charitableactivities was ever been carried out by him as prescribed under Section2(15) of the Act. Its affiliation with any other charitable institution wasalso not proved. The Assessing Officer, the CIT(A) and the Tribunal aswell have found on the basis of material before them that the appellant-assessee had purchased LIC policy, gas connection, cylinder etc. fromthe so called funds of the Dera, which were indicative of the fact that thebank account was being operated by him for his personal use. Thecumulative effect of all these factors shows that all the transactions doneby the appellant-assessee, were in his individual capacity and thus, nocase to differ with any of the findings of the Tribunal upholding thedecision of the CIT(A) and that of the Assessing Officer has been madeout. 9.Adverting to the judgments relied upon by the learnedcounsel for the assessee, it may be noticed that in The Punjab State E- Governance Society's case (supra), the assessee was registeredunder the Societies Registration Act, 1860, besides under Section 12AA ITA No. 241 of 2014-7- 9.Adverting to the judgments relied upon by the learnedcounsel for the assessee, it may be noticed that in The Punjab State E- Governance Society's case (supra), the assessee was registeredunder the Societies Registration Act, 1860, besides under Section 12AA ITA No. 241 of 2014-7- of the Act. Its object was to promote the implementation of E-Governance using information technology in the State of Punjab. Itreceived many grants from the State Government and interest from thebanks on the deposits. The Assessing Officer assessed those grants asits taxable income, being failed to spent 85% out of it, as required underSection 111 of the Act, besides interests thereon as taxable income,being separate from the grants-in-aid. The CIT (A) set aside the aboveadditions holding that tied-up grants will not constitute income of theassessee. Further, the Tribunal also upheld the aforesaid decision of theCIT(A) by observing that the assessee had received certain grants fromGovernment with a stipulation that such grants are to be utilized only forthe stated purposes which are pre decided by the disbursing agency.The learned CIT(A) has also noted that unspent amount of such grantsis required to be refunded to the distributing agency and as suchconsidered by the assessee as income in its Income ExpenditureAccount, but has been shown in the balance sheet. The other types ofgrants received by the assessee as general grants, do not carry suchrestrictions, has been credited by the assessee as income in the IncomeExpenditure Account. A Coordinate Bench of this Court upholding thedecision of the Tribunal held that grants-in-aid received from theGovernment for specific purpose, cannot be treated as voluntarycontributions of the society. The interest received by the assessee onthe amount of such grants deposited in the bank was also in the natureof the grant in aids, whereas, there are no such circumstances in thepresent case, because as discussed above, the appellant is not aregistered society under the Act or the Societies Registration Act, 1860.Moreso, it could not produce the list of any genuine donors, who have ITA No. 241 of 2014 allegedly donated huge amount of more than rupees one crore to it. 10.In Society for Development Alternatives' case (supra),the respondent was again a registered society. It was undertaking theactivities related to research, development and dissemination. Whereas,in the instant case, the appellant has miserably failed to prove any of itsactivities as of religious or charitable nature. 11.In Sukhdeo Charity Estate's case (supra), it was held thatthe voluntary contributions received from another trust were notassessable as income. It is intention of the donor and donee at theinitial stage which is to be taken into consideration. In that case theassessee had taken donations of 1 lakh from another trust of Calcuttawhich remained unutilized. The Assessing Officer assessed the saidamount as income under Section 12(2) of the Act. However, the HighCourt of Rajasthan held that since the contribution was for specificcharitable purpose, therefore, even if the amount remained unutilized, ithardly makes any difference. In any circumstance, it cannot be termedas assessable income of the trust under the provisions of Section 12(2)of the Act 12.In Bijli Cotton Mills (P) Ltd's case (supra), the questionwas that whether the 'dharamada' collected from the customers on saleswas part of trading, whereas, there are no such circumstances in thepresent case. 13.In Tollygunge Club Ltd's case (supra), Sports Club-assessee took surcharge on charges for admission into the enclosure ofthe club at the time of horse races for local charities like, Red CrossSociety etc., whereas, there are no such circumstances in the presentcase. 12.In Bijli Cotton Mills (P) Ltd's case (supra), the questionwas that whether the 'dharamada' collected from the customers on saleswas part of trading, whereas, there are no such circumstances in thepresent case. 13.In Tollygunge Club Ltd's case (supra), Sports Club-assessee took surcharge on charges for admission into the enclosure ofthe club at the time of horse races for local charities like, Red CrossSociety etc., whereas, there are no such circumstances in the presentcase. 14.In Sant Baba Mohan Singh's case (supra), all the incomespent for religious and charitable purpose was held to be exempted fromtax, whereas, as discussed above, in the instant case, the assessee hasmiserably failed to prove any of its work as of religious and charitablenature. 15.In Baba Avtar Singh's case (supra), the cash offeringswere made at the feet of the religious head, who claimed that he had nointerest in the same, whereas, in the instant case the appellant-assesseehas miserably failed to prove that he had no interest in the donationsreceived in his bank account in his personal name nominating his realson as his nominee. 16.The principles of law enunciated in these pronouncementsis well recognized but in view of factual matrix noticed hereinbefore inthe present case, it does not advance the case of the assessee-appellant. 17.No illegality or perversity could be pointed out by the learnedcounsel for the assessee in the aforesaid findings of fact recorded by theauthorities below which may warrant interference by this Court.Accordingly, no substantial question of law arises in this appeal. 18.No other point was argued before us. 19.In view of the above, this appeal fails and is herebydismissed being completely devoid of any merit. (RAMENDRA JAIN) JUDGE 27.8.2015Ashwani/gbs (AJAY KUMAR MITTAL) JUDGE