* The main opposition BJP demanded that the case against Mr Quattrocchi be reopened, insisting that there had been a "huge cover-up operation" while closing the case against him.
* The Italian businessman has always denied any involvement, arguing he was the victim of a political vendetta in India.
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| (Ottavio Quattrocchi has always maintained his innocence) |
It said over $9m (£6m) in kickbacks were paid to Ottavio Quattrocchi and an Indian arms dealer, Win Chadha.
In 2009, India dropped a graft case against Mr Quattrocchi and withdrew his name from Interpol's wanted list.
The main opposition BJP has now demanded the case be reopened.
Mr Quattrocchi was an accused in the high profile Bofors corruption case, one of the longest-running criminal investigations in India.
The Swedish firm AB Bofors was alleged to have paid $1.3bn in bribes during the sale of 400 howitzers to India in 1986, when Rajiv Gandhi of the Congress party was prime minister.
Politically sensitive
The Bofors issue is extremely sensitive politically for the governing Congress party, as Mr Quattrocchi was known to be a friend of Italian-born party leader Sonia Gandhi.
Now an income tax investigation has found that commissions were paid to Mr Quattrocchi and a now deceased Indian arms dealer Win Chadha, and that tax should be paid 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 said in its order.
Correspondents say the ruling will embarrass the Congress party.
A party spokesman told reporters it will give a response after examining the income tax ruling.
The main opposition BJP demanded that the case against Mr Quattrocchi be reopened, insisting that there had been a "huge cover-up operation" while closing the case against him.
The Italian businessman has always denied any involvement, arguing he was the victim of a political vendetta in India.
Indian investigators have tried unsuccessfully for much of the past decade to get Mr Quattrocchi extradited to India.
The case contributed to the election defeat of Rajiv Gandhi in 1989, two years before he was assassinated.
In 2004, he was posthumously cleared of any wrongdoing in the deal.
@ BBC News
INDIAN ENVIRONMENTAL OFFICIAL FUELS DEBATE ABOUT THE COST OF ECONOMIC GROWTH
[He is known for his one-liners and sarcasm. He recently called India's attitude toward China "paranoid" and said India should get a Nobel Prize for filth. In October, the steel minister, Virbhadra Singh, advised him to be "pragmatic" instead of "dogmatic." Ramesh replied in a letter that the problem arises because everybody expects the environment ministry to be "automatic." ]
[He is known for his one-liners and sarcasm. He recently called India's attitude toward China "paranoid" and said India should get a Nobel Prize for filth. In October, the steel minister, Virbhadra Singh, advised him to be "pragmatic" instead of "dogmatic." Ramesh replied in a letter that the problem arises because everybody expects the environment ministry to be "automatic." ]
By Rama Lakshmi
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| Audio: India's ancient Vedic tradition passed down |
The job has rarely attracted so much attention, but Ramesh has turned a sleepy and apathetic ministry into a controversial one in recent months.
His pronouncements have stopped projects worth billions of dollars, creating powerful enemies in industry and business. His political colleagues have also turned against him, saying he has rejected proposals that would eradicate poverty.
But Ramesh says he is not not against industrial expansion and that he is enforcing laws. "We cannot afford to pollute our way to prosperity," he said in an interview.
In the latest flare-up, the coal ministry sought the government's permission last week to mine 203 coal fields to generate 660 million tons of coal. But Ramesh rejected the plan, declaring the heavily forested areas where the fields are located "no-go" zones.
"We are not allergic to the no-go concept of environment," said Sriprakash Jaiswal, India's coal minister. "But the government has to decide: Do we want to pursue economic growth or not? We need electricity."
About 70 percent of India's power supply comes from coal, and new nuclear power plants will take more than a decade to build.
Jaiswal pledged that trees would be planted in the coal fields in 20 years, after the mining is done. But Ramesh said he would not jeopardize the 4.3 million acres of dense forest left in India.
"Protecting the last bastion of good quality forests in India is more important than generating power from coal," he said. "This is an absolute no."
An engineer by training, Ramesh, 56, was one of India's earliest advocates of privatization and economic reform and helped shape several pro-business policies.
"There is no conflict between economic growth and environment protection. It is a question of adhering to the existing environment laws," said Ramesh, who was appointed 19 months ago. "We Indians delight in passing new laws and then bypassing them. That has to stop."
He has denounced profligate consumption and the emerging suburban SUV-driving lifestyle. But he loves electronic gizmos, and his colleagues privately call him "PowerPoint politician."
He is known for his one-liners and sarcasm. He recently called India's attitude toward China "paranoid" and said India should get a Nobel Prize for filth. In October, the steel minister, Virbhadra Singh, advised him to be "pragmatic" instead of "dogmatic." Ramesh replied in a letter that the problem arises because everybody expects the environment ministry to be "automatic."
In recent months, he has set up special environment courts to expedite cases. He is also forming an independent environment monitoring and assessment agency and will soon launch an emissions trading scheme among Indian states to manage air pollution.
At the Copenhagen and Cancun climate talks, Ramesh offered to allow international inspection of India's measures to mitigate climate change. But back home, he was accused of selling out India's national interest to Western nations without getting anything in return.
"The same environmentalists who give me bouquets in the morning often give brickbats in the evening," Ramesh said. "But today, we are in a pivotal position to play a constructive role in the climate talks."
The projects he has canceled include a four-lane highway that passed through a tiger reserve and construction of a dam in the Himalayas that would have destroyed thousands of trees. He denied permission for a $ 7 billion bauxite mining project in the impoverished eastern state of Orissa because, he said, it would destroy forests. He has also delayed giving the go-ahead to a coastal steel factory in Orissa on environmental grounds.
"We don't have the luxury of turning down projects," said Jai Panda, a lawmaker from Orissa. "We need to tap every possible source of investment for growth. Thousands of jobs would have been created."
In November, Ramesh halted construction on a $9 billion project to build a hillside township in western India because he said it violated environmental laws. The builder said it had obtained all clearances from the Maharashtra state government.
"We have been building there for over eight years with all the necessary environment permissions. All of a sudden, now he says we should raze it to the ground and destroy all the trees we have planted," said Ajit Gulabchand, chairman of Hindustan Construction, which built the town with American and Australian conservation consultants. "Without giving us a hearing, how did he pass such a harsh order?"
Ramesh acknowledges that his work comes with a huge political risk. He told reporters that he had a "friendless and thankless job."
Environmentalists hail Ramesh for fixing a ministry that has long been seen as a rubber stamp for most projects. But many fear that the energy Ramesh has injected into the environment ministry might not last, especially now that the government is under pressure to move him to a another ministry.
"Jairam Ramesh has won a lot of praise for all his decisions," said D. Raghunandan, secretary of the Delhi Science Forum. "But the real test is to see if he has altered the decision-making structures and processes in a way that will outlast him."
