2019 (10) TMI 925 - HC - Income Tax

High Court rules redemption fine as business expenditure under Income Tax Act, sets aside Tribunal judgment.

The High Court allowed the Revenue's appeal regarding a redemption fine as business expenditure under Section 37 of the Income Tax Act, setting aside the ... Redemption fine allowable as business expenditure u/s 37 - review petition is argued principally on the ground that the additions made by the assessing officer in the hands of the assessee were under Section 69C - HELD THAT:- The evidence necessary to examine this alternative contention was on record. However, the Tribunal had not carried out proper fact finding inquiries and therefore, the entire issue should be placed before the Tribunal for fresh consideration. It is also argued that the ratio of the decision in the case of Haji Aziz & Abdul Shakoor Bros. Vs. CIT [1960 (11) TMI 15 - SUPREME COURT] would dilute in view of the addition of explanation to Section 37(1) of the Act. No reason to entertain this review petition. Firstly, it is always open for an assessee to raise an alternate contention and if such contention is purely one of law, also at appellate stage. However, the assessee must either rely on the facts already brought on record or within the permissible limits, request the appellate Commissioner or the Tribunal to permit additional evidence to be brought on record. Thus, in the judgment in question having examined all aspects of the matter, there is no need to remand the appeal before the Tribunal. Further, the implications of the judgment of the Supreme Court in case of Haji Aziz (supra) in the light of further development of law has been examined in the said decision before arriving at final conclusions. This has not come for review. In the result, review petition is dismissed. Issues:Review petition filed by the original respondent -assessee to review/recall the judgment allowing Revenue's appeal regarding the redemption fine as business expenditure under Section 37 of the Income Tax Act.Analysis:The High Court, in the judgment dated 22.2.2019, allowed the Revenue's appeal regarding the redemption fine of Rs. 75,00,000 as business expenditure under Section 37 of the Income Tax Act. The Court noted that the Tribunal had followed a line of logic without proper justification, which did not align with the facts of the case. The Assessing Officer had summoned the import license holder, who confirmed that the assessee was directly involved in importing goods and responsible for the fine paid to the Custom House. It was established that the assessee cannot disassociate from the illegalities committed during the import process. Thus, the penalty was for the infractions committed by the assessee, and the Tribunal's judgment was set aside in favor of the Revenue.The review petition argued that the additions made by the assessing officer were under Section 69C of the Income Tax Act, and the assessee had raised an alternative contention that the expenditure should be allowable under Section 37. It was contended that the Tribunal did not conduct proper fact-finding inquiries, and the issue should be reconsidered. The petition also mentioned that the decision in the case of Haji Aziz & Abdul Shakoor Bros. Vs. CIT 41 ITR 350 (SC) might be diluted due to the addition of an explanation to Section 37(1) of the Act.The Court rejected the review petition, stating that an assessee can raise an alternate contention, especially of law, at the appellate stage. However, the assessee must rely on existing facts or request permission to introduce additional evidence. Since all aspects were examined in the original judgment, there was no need to remand the appeal to the Tribunal. The implications of the Supreme Court's decision in the case of Haji Aziz were considered in light of the development of the law before reaching the final conclusions. The dismissal of the review petition was based on the thorough examination of the matter and the existing legal framework.