No penalties under section 273B; section 273A criteria inapplicable; reasonable cause assessed by ordinary prudence

HC upheld the tax authorities' decision not to levy penalties and to drop proceedings, holding judicial interference in a writ petition is limited and permissible only where conclusions are perverse or made without relevant consideration. The court found no justification to apply section 273A criteria to cases governed by section 273B, recognised "reasonable cause" depends on facts and is judged by ordinary prudence, and accepted practical difficulties in pursuing individual employees. Transactional tax and interest were recovered by grossing up; the writ petition was disposed of.

---

---

Issues involved: Allegations of non-compliance by multinational companies with regard to declaring salaries of expatriate employees, non-levy of penalties by income-tax authorities, alleged unauthorized interference by higher officials, and non-action against individual employees.

Summary:
The petition raised concerns about multinational companies not fully declaring salaries of expatriate employees as per the Income-tax Act, leading to alleged loss to the public exchequer. Despite circulars and schemes encouraging compliance, penalties were not levied in many cases. The petitioner argued lack of application of mind by authorities, while the income-tax authorities defended their actions as bona fide, citing reasons for non-levy of penalties based on voluntary compliance and cooperation.

Upon examination, it was found that penalties were levied in some cases, while in others, reasons for non-levy included voluntary revision of TDS statements, cooperation with authorities, and belief of non-liability for tax deduction. The authorities also considered guidance from the Japanese Chamber of Commerce and Industry in certain cases. The judgment discussed the application of penalty waiver conditions under sections 273A and 273B, emphasizing the need for reasonable cause for non-levy.

The court concluded that the authorities' actions in not levying penalties or dropping proceedings were not unreasonable, considering the limited scope for interference in a writ petition. Regarding non-action against individual employees, practical difficulties were noted, but it was suggested that action should be taken against those still available in India. The writ petition was disposed of accordingly, highlighting the need for appropriate action by the income-tax authorities.

This judgment addressed concerns of non-compliance by multinational companies, the rationale behind non-levy of penalties, and the practical challenges in taking action against individual employees, emphasizing the importance of compliance with tax laws and the need for authorities to act in accordance with the law.

---