MAKHAN SINGH vs. INCOME TAX OFFICER WARD 2(1)

ITA/241/2014HC Punjab & HaryanaPHHC01109377201427 August 2015Author: MR. JUSTICE SURINDER GUPTA,MRS JUSTICE DAYA CHAUDHARY9 pages
AI SummaryDismissed

What were the facts?

The assessee, Sh. Makhan Singh, filed his income tax return for Assessment Year 2009-10 declaring an income of ₹2,10,870. His case was selected for scrutiny. The Assessing Officer (AO) noted that the assessee claimed to be a religious preacher not maintaining a personal bank account, with expenses borne by a Dera. However, bank account opening documents revealed the assessee had nominated his son as nominee, which he could not satisfactorily explain if the account belonged to the Dera. Consequently, the AO treated the bank deposits as income from profession and vocation, adding ₹1,21,67,653. Expenses were disallowed, and donations of gold and other purchases were added back. The Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal upheld the AO's order. The assessee appealed to the High Court.

What did the High Court hold?

The High Court held that the appeal was devoid of any merit and dismissed it. The Court found no force in the appellant's argument that his activities were charitable and religious, as the Dera was not registered under Section 12AA or the Societies Registration Act, 1860, nor did it have a trust deed or certificates under Section 10(23C)(iv) or Section 80G(5). The Court noted that the appellant solely managed the Dera's affairs and collections in his individual capacity. The nomination of his son as a nominee in a bank account, claimed to be of the Dera, could not be satisfactorily explained. The Court distinguished the judgments relied upon by the assessee, finding that their factual matrix did not apply to the present case, particularly regarding the lack of registration and proof of charitable activities. The Court concluded that no substantial question of law arose, as no illegality or perversity in the findings of fact by the lower authorities could be pointed out.

What were the issues?

The High Court had to decide the following substantial questions of law: 1. Whether donation collected for a specific project could be added to the personal income of the appellant (Section 2(24)(iia)). 2. Whether the Dera is not a deemed trust in light of the explanation to Section 2(24)(iia). 3. Whether corpus donation received by the appellant is not a legal obligation giving a dual capacity to the appellant. 4. Whether disallowance of expenses to the extent of one-sixth is sustainable in law. 5. Whether the adding back of ₹13,35,658 is sustainable in law. 6. Whether the disallowance of expenditure of ₹7,42,848 and adding the same amount back is sustainable in law. Assessee's Contentions: The appellant argued that the authorities below failed to appreciate his dual capacity as a preacher and Mukh Sevadar of the Dera. He contended that the bank accounts, though in his name, belonged to the Dera, which conducted charitable and religious activities using public donations. He asserted that these were corpus donations and not business income. He relied on judgments like *CIT-II v. The Punjab State E-Governance Society*, *DIT v. Society for Development Alternatives*, and others. Revenue's Contentions: The revenue's counsel pleaded the legality and validity of the impugned order passed by the Tribunal.

Which sections of the Income-tax Act were involved?

Section 260A,Section 2(24)(iia),Section 143(1)(a),Section 143(2),Section 139C(1),Section 139D(c),Section 142(1),Section 11,Section 12(2),Section 10 (23C) (iv),Section 80G(5),Section 111

AI-generated summary — verify with the full judgment below

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 ........Appellant Versus 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?

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 MITTAL HON'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 of the Income Tax Act, 1961 (hereinafter called as 'the Act') against the order dated 28.1.2014 (Annexure A-3) passed by the Income Tax Appellate Tribunal, Amritsar (in short 'the Tribunal') in ITA No. 440/ASR/2012 for the assessment year 2009-10 claiming the following substantial questions of law:- i. Whether in the facts and circumstances of the case the donation collected for specific project could have been added to the personal income of the appellant? ii. Whether in the facts and circumst

The order continues below.

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