Rail Vihar Welfare Association, ... vs Assessee

Assessee By : Shri Ved Bhanu Arya, Advocate Department By : Shri Vikram Sahay, Sr. DR

ORDER PER R.S. SYAL, AM:

This appeal by the assessee is directed against the order passed by

the CIT(A) on 23.07.2013 confirming the penalty imposed by the AO

u/s 271(1)(c) of the Income-tax Act, 1961 (hereinafter also called 'the

Act') in relation to the assessment year 2004-05.

ITA No.5354/Del/2013

2. Briefly stated, the facts of the case are that the assessee, a society

registered under Societies Registration Act, received Transfer fees

amounting to Rs.9,05,000/- from its outgoing Members, which was

reflected in the Receipts and Payments account. This amount was not

offered for taxation. On being called upon to explain the reasons for not

disclosing this amount in the Income and Expenditure Account, the

assessee stated that a Transfer fee fund was created by a resolution

passed in the General Body meeting of Rail Vihar Welfare Association

held on 16.9.2002 so as to improve its financial position for providing

better services to its members. This amount of Transfer fee was taken to

'Capital fund' for utilization in execution of all works of capital nature.

A copy of resolution passed by the General Body meeting was also

placed before the AO, who came to hold that this amount to be in the

nature of revenue receipt chargeable to tax. This amount was added to

the assessee's total income and, eventually, the penalty imposed on

account of this addition came to be upheld in the first appeal.

2 ITA No.5354/Del/2013

3. After considering the rival submissions and perusing the relevant

material on record, it is observed that the assessee received the amount

of Transfer fee from its outgoing members to be utilized in execution of

works of capital nature. This amount was properly reflected in the

Receipt and Payment Account accompanying the return of income filed

by the assessee. However, the same was treated as not chargeable to tax

in the nature of a reserve to be utilized for providing better services to its

members, presumably on the principle of mutuality. That is how the

assessee treated this amount as not chargeable to tax by properly

disclosing all the necessary facts about it. The Hon'ble Supreme Court

in the case of CIT vs. Reliance Petroproducts Pvt. Ltd. (2010) 322 ITR

158 (SC), has held that the mere making of a claim which is not

sustainable in law, by itself will not attract penalty. When the assessee

furnishes all the particulars in return which are not found to be

inaccurate, it is only up to the authorities to accept the claim of the

assessee in the return or not. In no situation this can call for imposition

of any penalty. The Hon'ble Supreme Court in the case of Price

Waterhouse Coopers Pvt. Ltd. Vs. CIT (2012) 348 ITR 306 (SC) has held 3 ITA No.5354/Del/2013

that no penalty u/s 271(1)(c) can be imposed for a bona fide mistake

committed by the assessee. When we apply the ratio of the above two

judgments of the Hon'ble Summit Court to the factual position

prevailing before us, the only conclusion which can be drawn is that the

penalty is not exigible, for not offering the amount of 'Transfer fee' to

tax, which was otherwise properly reflected in Receipt and Payment

Account by the assessee. Overturning the impugned order, we order for

the deletion of penalty.

4. In the result, the appeal is allowed.

The order pronounced in the open court on 04.02.2015.

Sd/- Sd/-

[H.S. SIDHU] [R.S. SYAL] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated, 04th February, 2015. dk Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI. 4