New Delhi, Jan 03 (Agencies): The Bofors ghost has returned to haunt the Congress party with an income tax tribunal saying that kickbacks of Rs 41 crore were paid to late Win Chaddha and Italian businessman Ottavio Quattrocchi in the Howitzer gun deal and that they are liable to pay tax in India on such income.

"....inaction in this regard may lead to a non-existent undesirable and detrimental notion that India is a soft state and one can meddle with its tax laws with impunity," the Income Tax Appellate Tribunal (ITAT) said in its 98-page order.

The Tribunal gave this order while dismissing an appeal by Win Chaddha's son against income tax department's claim of Rs 52 crores and Rs 85 lakh from his father for the assessment years 1987-88 and 1988-89.

In the order, the Tribunal details the denials by gun maker Bofors about existence of middlemen in the 1986 deal valued at Rs 1,437 crore and the efforts by Quarterdeck to open a series of accounts to transfer funds in an attempt to obliterate the money trail.

Holding that Bofors should have reduced the commissions paid from the contract price, the Tribunal observed that government had to pay excess amount of about Rs 41 crore, which was passed to Chaddha and Quattrocchi against the terms of contract.

Quattrocchi was known to be close to the Gandhi family and tribunal's observations in the Bofors episode may have come at an inopportune time for the Congress and the government its head Whig are already battling various allegations of corruption. He left India in 1993 even as a CBI case was filed on kickbacks in the deal.

The order mentions that a commission of Rs 32.66 crore was transferred to M/s. Svenska Inc., Panama, which was traced to Chaddha, and was credited in an account of Swiss Bank Corporation, Geneva.