PCIT Vs Canara Bank Securities Limited (Bombay High Court)
Material Facts
The respondent-assessee, Canara Bank Securities Limited, is a private limited company. For the assessment year (AY) 2008-09, the assessee filed its return of income, wherein an issue arose before the Assessing Officer (AO) regarding income generated from the assessee’s investment funds placed in fixed deposits.
The assessee was previously engaged in the business of primary dealing of securities and was in the process of switching over to a new business of stock broking. The assessee had liquidated its investments from the past business and parked the surplus funds in fixed deposits awaiting the commencement of activities in the new business. On this factual basis, the assessee claimed the interest income as arising out of its business activity.
Read SC Judgment in this case: Section 263 Revision Unsustainable When AO Takes Plausible View on Business Income: SC
Procedural History
Assessment Proceedings: The AO accepted the assessee’s stand that the interest income arose out of its business activity and passed an assessment order dated 08.10.2010.
Revision under Section 263: The Commissioner of Income Tax (CIT) took the assessment order into suo-moto revision under Section 263 of the Income Tax Act. The CIT held that the AO had not undertaken proper inquiries and had not examined whether the interest income was to be assessed under the head “Income from business” or “Income from other sources”. The CIT deemed the assessment order erroneous and prejudicial to the interest of the revenue, and passed an order directing the AO to complete the assessment by examining the issue afresh.
