1.  DIRECTOR OF INCOME TAX Vs. MODERN CHARITABLE FOUNDATION, ITA No. 1501 of 2010, Dated: May 18, 2011 HIGH COURT OF DELHI

Whether when the AO objects to the admission of the additional evidence, even if the same is to be admitted, opportunity should be granted to the AO to verify the same.

The CIT (A) after admitting the evidence relied upon the same without any verification. No doubt, the remand report of the AO was called for and it was found that the AO did not go into to the veracity of the same and reproduced some facts from the assessment order. It was because of the reasons that the AO strongly felt that there was lapse on the part of the assessee in not producing the evidence before him when he had been given number of opportunities and therefore, he objected to the admission of the said evidence and did not do any further exercise to verify the same.

At the same time, we also find that even the CIT (A) did not go into these documents and simply relied upon these documents and gave benefit to the AO. Therefore, in order to balance the equities, we are of the opinion that on one hand, the assessee be permitted to rely upon the additional evidence produced before the CIT (A), at the same time, the AO also be given opportunity to verify these documents, accordingly, the issue is remitted back to the AO. The assessee shall also be entitled to show that the unsecured loans had been repaid. If the assessee is able to explain the donations as well as unsecured loans properly, the AO shall accept the same.

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2.  DIRECTOR OF INCOME TAX Vs. BRAHAMPUTRA CAPITAL FINANCIAL SERVICES LTD, ITA NO. 02 OF 2009, Dated: May 18, 2011 HIGH COURT OF DELHI

Whether when assessee advances interest-bearing loans to a sister concern but declares the same as NPA in the balance-sheet as per RBI guidelines, even then interest can be treated as realised and the same becomes taxable income.

Identical issue came up before this Court in a batch of appeals, the leading case being CIT Vs. M/s Vasisth Chay Vypapar Ltd. The theory of “real income” was discussed in detail. That was also a case of NBFC where loan/advance given by the said assessee had become NPA and keeping in view the guidelines of RBI interest was not treated as accrued. After taking note of various judgments on the subject, the question was answered in favour of the assessee. Following that judgment, no substantial question of law arises in these appeals.

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