Akil Kureshi, J.

1. This appeal was admitted for consideration of following substantial question of law:-

“Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in holding that the redemption fine of Rs.75,00,000/- is allowable as business expenditure under Section 37 of the Income Tax Act?”

2. The appeal arises in following background:-

2.1 Respondent assessee is an individual. For the assessment year 1988-89, the assessee had filed return of income declaring total income of Rs.1,47,020/-. The return was accepted without scrutiny. Subsequently, information was received by the Assessing Officer that the assessee had made payment of Rs.75 lacs in two separate installments towards penalty for import of almonds which import was not permissible. On the basis of such information, the Assessing Officer reopened the assessment for the said assessment year 1988-89 by issuing the notice under Section 148 of the Income Tax Act, 1961 (“the Act” for short).

2.2 During the course of such assessment proceedings, the assessee was called upon