Fines and Penalties paid for redemption of goods confiscated for breach of import regulations is not Deductible

Facts : The assessee filed an individual filed his return for the Assessment Year 1988-89. The return was accepted without scrutiny. Subsequently, information was received by the AO that the assessee had made payment of Rs. 75 Lakhs in two separate instalments towards penalty for import of almonds which was not permissible. On the basis of such information, the AO reopened the assessment for the assessment year and disallowed the amount. The AO in the order of assessment after giving ample opportunities to the assessee came to the conclusion that the assessee was the user of the licence in the name of R and all transactions including the payment of penalty had been carried out by him. He did not accept the version of the assessee that the assessee had merely advanced the money to R in time of its need. It was held that the assessee had paid the customs fine of Rs. 75 Lakhs. The tribunal allowed deduction of the amount.  On appeal :

Held, that the Tribunal, without proper justification or detailed examination of the material on record had allowed the deduction. There was ample evidence on record suggesting that the assessee had made imports through his direct involvement by using import licence of R and R merely received an agreed commission. The assessee could not disassociate or divest himself from the irregularities or illegalities committed in the process of importing goods. Thus, the penalty was for the infraction of the law committed by the assessee. The amount of Rs. 75 Lakhs was not deductible.

Pr CIT Vs Sushil Gupta [2019] 411 ITR 678 (Bom).