AZADI BACHAO ANDOLAN Vs. UNION OF INDIA

JUDGEMENT

(1.) Alleging that certain actions/inactions on the part of the Income-tax authorities have caused huge loss to the public exchequer, this petition stated to be in public interest has been filed.

(2.) In a nutshell, the allegations are that in early 1994 Income-tax Department received reliable information to the effect that many multi-national companies operating in India are not fully declaring salaries/perks paid to. their expatriate employees posted in India and in particular portion of the salaries paid to them outside India. Under the Income-tax Act, 1961 (in short the Act) the entire salaries received by such expatriate employees posted in India are liable to be declared irrespective of the fact whether it was paid in India or abroad and has to be taxed in India. The only condition requisite for such declaration was that stay of such. employee in India for the relevant financial year exceeds 183 days in aggregate. Income-tax authorities issued notices to some foreign companies seeking information regarding salaries of expatriate employees which were paid to them outside India. On getting such notice, some of the companies deposited tax and some companies disclosed that they had earlier not declared, salary paid abroad and thereafter declared that amount and deposited taxes on it. However, most of the multi-national companies did not do so. Circular No. 685 was also issued by the Central Board of Direct Taxes (in short the Board) on 17/ 20/06/1994 highlighting such non-deduction of tax at source on salaries and allowances paid. However, in order to encourage immediate compliance, the Board decided that procedure under Sections 221 and 271-C for levy of penalties and proceedings under Section 276B need not be resorted to in case an employer voluntarily comes forward and pays whole of the tax due under Section 192 along with interest liabilities under Section 201 (1A) on or before 31.7.1994. Despite this circular, few foreign companies' expatriate employees came forward and paid taxes. In 1997, Voluntary Disclosure of Income Scheme, also described as Amnesty Scheme, was launched giving chance to those- who had not complied with requirements of law. An opportunity was given to pay tax by declaring concealed/undeclared income under the said Scheme and avoid penalty and prosecution. Some of the companies disclosed taxes that had been evaded on salaries paid abroad to their expatriate employees under the Scheme and paid taxes; while some of the companies did this partially, and some others who had been evading payment of such taxes did not even avail of this scheme. Survey was conducted on premises of various companies in 1998-99. It is alleged that despite all these actions by giving premium to defaulters, penalties which were leviable have not been levied; on the other hand, by resorting to Section 273B of the Act orders have been passed not to levy penalties. A list of 95 cases has been annexed to show that in these cases requisite action has not been taken. It has also been stated that action against individual employees has not been taken though available to be taken. It has been urged that such action on the part of the income tax authorities has resulted in huge loss to public exchequer and has been done under pressure from Japanese Chamber of Commerce and Industry (in short the Chamber of Commerce). Further, the penalties have not been levied/proceedings have been dropped on the basis of a letter written by the Commissioner of Income-tax, Delhi VI indicating that penalties were not to be levied in non-survey cases. It is asserted that the letter was written pursuant to an agreement arrived at in a meeting held in the chambers of Chairman of the Board. In other words, it has been urged that there was no application of mind and only account of unauthorized interference by the Board and other high placed officials, penalties have not been levied/proceedings have been dropped,

(3.) In the counter-affidavit filed by the Income-tax authorities, allegations of illegal pressure have been denied. It is, on the other hand, stated that action was bona fide and in many cases penalty has been levied and in those cases where voluntary and bona fide action was taken by the assessee to deposit the tax and interest, it was decided not to levy penalties. Each case was considered on merits and after being satisfied that reasonable cause existed for non-compliance penalty has not been levied/proceedings have been dropped.