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2011 (8) TMI 1308

For The Assessee : Shri S.K. Gupta ORDER G.D. AGARWAL, VICE-PRESIDENT : These appeals are by the assessee against the orders of the Commissioner of Income-tax (Appeals)-VIII, Ahmedabad for the above assessment years arising out of the orders of the Assessing Officer under Section 144 and under Section 271(1)(c) of the Income Tax Act, 1961. Since in both the appeals grounds are similar except quantum, for the sake of convenience, we dispose of both the appeals by this common order. 2. First we shall take up ITA No.868/Ahd/2004 (A.Y.2000-2011). In this appeal following grounds are raised: 1. The learned CIT (Appeals) erred in upholding the decision of the Assessing Officer that income of the appellant is required to be assessed under the head .....

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continued to carry on the same business because the assessee has already accepted the deposits from various parties and had also advanced money to various parties. That the assessee is carrying on housing finance as regular and systematic business activity. That merely the NHB has refused to register the assessee as a registered housing finance company, it will not affect the nature of the business carried out by the assessee. If the assessee is carrying on the business of finance, even if the rejection of its application by the National Housing Bank, if there is a violation of any law or rule, it can be penalized under such law. But its income is to be assessed under the income from business. He also stated that as a consequence to the ass .....

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come of the assessee under the head Income from other sources has given the following findings: The assessee company claims to be engaged in the business of housing finance (refer 18a of Form no.3CD). However, the Chartered Accountants ha in his note specifically concluded that the assessee company has not been registered as a housing finance company. The Chartered Accountant has in fact clearly and categorically mentioned that the assessee company is not liable to carry on the business of housing finance. The relevant portion of the Chartered Accountants notes is reproduced below: ....15. The company has carried on the business in the nature of financing & investments in violation of the norms of National Housing Bank. The Company s ap .....

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sources Rs.46,86,882/- Thus, an amount of ₹ 46,86,882/- is added to the total income of the assessee company as Income from other sources . Penalty proceedings u/s.271(1)(c) of the IT Act are initiated separately for furnishing inaccurate particulars of income leading to concealment of income. From the above, it is evident that the only reason for the assessing the income under the head Income from other source was that the assessee company was not registered as a housing finance company. In our opinion, whether the assessee company is registered as a housing finance company or not is irrelevant for determining whether the assessee is carrying on the business of financing or not. If the assessee is carrying on the business of finance .....

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es and restore the matter back to the file of the AO with similar directions. ITA No.2701/Ahd/2004 : A.Y. 2000-2001 8. In this appeal, the assessee is aggrieved by the action of the AO in imposing the penalty under Section 271(1)(c) which was confirmed by the CIT(A). 9. Since we have set aside the assessment orders of the AO in ITANo.868 and 2699/Ahd/2004 and restored the matter back to the file of the AO with direction to assess the assessee s income from finance business under the head Income from business in accordance with law. Consequentially, the penalty based on such assessment cannot survive, accordingly, we delete the impugned penalty. However, the AO is at liberty to re-initiate the penalty proceedings after determination of the i .....

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