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TMI Blog2011 (8) TMI 1308X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 'income from other sources'. Appellant submits that on the facts and in law the income is required to be assessed under the head 'income from business' and not under the head 'income fro other sources'. 2. The Learned CIT (A) erred on facts and in law in confirming the 50% of the miscellaneous expenses except loss of car due to accident and loss due to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, 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 assessment under the head Income from other sources , the AO disallowed various business expenditure claimed by the assessee and as against the NIL income returned by the assess, the assessment was made at the sum of ₹ 2,57,36,248/-. He therefore submitted that the AO should be directed to assess the assessee s income under the head Income from b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 application for registration as registered housing finance has been rejected by National Housing Bank. And hence the company has been prohibited to carry on the business activities and also prohibited from acceptance and renewal of Public Deposit. However, the company is still carrying on the business and has been acceptin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alty 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, despite not being registered, as a housing finance company, its income is to be assessed under the head Income from business . It is not di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 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 income in set aside proceedings, if so warrants. 10. In result, appeals of the assessee being ITA No. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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