Sushil Gupta Vs PCIT (Supreme Court of India)
The appeal before the High Court was admitted to consider whether the Income Tax Appellate Tribunal was justified in holding that redemption fine of ₹75 lakh was allowable as business expenditure under Section 37 of the Income-tax Act. The dispute arose from the assessment year 1988-89. The assessee had originally filed a return declaring income of ₹1,47,020, which was accepted without scrutiny. The assessment was later reopened under Section 148 after the Assessing Officer received information that the assessee had paid ₹75 lakh towards redemption fine imposed in connection with the import of almonds, which was not a permissible import.
During reassessment proceedings, the assessee contended that the imports had been made by M/s. Rajnikant Bros., whose import licence was used, and that he had merely acted as an agent. He further asserted that the redemption fine had been imposed on and paid by M/s. Rajnikant Bros. The Assessing Officer summoned M/s. Rajnikant Bros., whose accountant produced the agreement dated 14 October 1985 and stated that although the imports were made in the name of M/s. Rajnikant Bros., all transactions, including payment of the redemption fine of ₹75 lakh, had been undertaken by the assessee, while M/s. Rajnikant Bros. received only agreed service charges. The assessee subsequently claimed that he had merely advanced funds to M/s. Rajnikant Bros., but failed to produce books of account.
