VIBHUTI GLASS WORKS Vs. INCOME-TAX OFFICER

JUDGEMENT

(1.) This is an appeal against the order of Ramaswami, J., dismissing the petition filed by the appellant under article 226 of the Constitution of India for quashing (i) the order of the Income-tax Officer, Vizianagaram, declaring the appellant a defaulter, and (ii) the sale notice dated 24th March, 1954, issued in pursuance thereof by the 2nd respondent, the Special Deputy Tahsildar, Vijayawada, attaching and bringing to sale the properties mentioned in the said sale notice for realising the tax assessed on the appellant The appellant carried on business in niger seeds, ground-nut, ground-nut kernel and jute on his own account and for commission at Vizianagaram. He had also income from other property. He was assessed to income-tax for three years. For the year 1947-48, he was assessed on 14th March, 1952, to a tax of Rs. 1, 41, 039-11-0 payable on or before the 28th of March, 1952. On 22nd January, 1953, the Income-tax Officer forwarded to the Collector a certificate specifying the amount of arrears due from the assessee. For the assessment year 1951-52, he was assessed on 29th February, 1952, to a tax of Rs. 40, 230-7-0 payable on or before 25th March, 1952. The relevant certificate was issued on 22nd June, 1953. For the assessment year 1945-46, he was assessed on 7th December, 1950, to a tax of Rs. 20, 113-13-0 payable on or before 31st January, 1951. The relevant certificate was issued on 9th May, 1951. The appellant preferred appeals in regard to the first two assessments but no appeal was filed in respect of the third. The total tax payable by him amounted to Rs. 1, 70, 083-15-0. Out of that amount, a sum of Rs. 1, 900 was realised. In regard to the 1945-46 assessment, another sum of Rs. 8, 000 was levied as penalty under section 46(2) on two occasions. Several adjournments were granted to the appellant for the payment of the tax but he did not pay even the admitted amount and, therefore, the certificates were issued. Proceedings were taken under the Revenue Recovery Act and the sale of the properties was posted to 24th May, 1954, 25th May, 1954, and 26th May, 1954. The petitions filed for quashing the aforesaid proceedings and for stay were dismissed by Ramaswami, J. The assessee filed the above appeal on 26th May, 1954, and got an interim stay of the sale of the properties fixed for the 15th, 16th and 17th of September, 1954 The assessee alleges that he was questioning the validity of the assessment for 1951-52 for the reason that the assessment was made on the basis of a joint family when to the knowledge of the Income-tax Officer there was a division in the family. He attacked the assessment for the year 1947-48, on the ground that the 1st respondent had no right to reject registered deeds accepted and acted upon by him in the matter of the assessment of another firm and thereby collect tax twice over from him and the other firm. The Income-tax Officer filed a counter stating the neither during nor after the completion of the assessment for the year 1951-52 did the assessee or any one of the several members of the family file any application under section 25-A claiming that a partition had taken place among the members of the family and, therefore, they were treated as a Hindu undivided family for the purpose of the Act. He also denies that there was a partition in the family. As regards the objection that the income from the business carried on by another firm was included in his income though, as a matter of fact, that firm was separately assessed, the Income-tax Officer pointed out that the said firm was assessed to tax only by way of abundant caution and that the said firm was asked not to pay the tax till the assessee's appeal was disposed of. The Income-tax Officer also alleges that, though several adjournments were granted to the assessee for the payment of tax, he did not care to pay even the admitted tax for the assessment year 1945-46, though four years have elapsed since the completion of the assessment. It may be mentioned that, as all the material papers are not placed before us, the above figures are only approximate and they are given only for the purpose of this writ. Ramaswami, J., dismissed the writ petition as in his view, there were no grounds for issuing the same. Hence the appeal Learned counsel for the appellant relies upon the provisions of section 45 of the Income-tax Act and contends that, under that section, a duty is cast upon the Income-tax Officer to treat an assessee not as a defaulter under certain circumstances and that, in the present case, he did not discharge his duty, though there were compelling reasons for doing so. Alternatively, he would say that the Income-tax Officer in not staying his hands before his rights have been finally decided by the Appellate Tribunal had acted capriciously and, therefore, has not exercised the discretion vested in him in law. The argument of the counsel for the Commissioner of Income-tax may be put thus. If an assessee does not pay the tax within the time prescribed, he shall be deemed to be in default under section 45 of the Act. The discretion vested in the Income-tax Officer is within narrow confines to be exercised only against the State and he cannot be compelled to exercise it in favour of the assessee as, by a statutory fiction, he is declared to be a defaulter. That apart, the words "may in his discretion" give to the Income-tax Officer an absolute and uncontrolled discretion to treat the assessee as not being in default and that it cannot be questioned in a court of law. The question falls to be decided on a construction of section 45 of the Income-tax Act. Section 45 runs thus

(2.) Under this section, if the amount specified as payable in the notice of demand is not paid within the prescribed time, the assessee would be deemed to be in default. But, the same section provides that, pending an appeal filed by the assessee, the income-tax Officer may, in his discretion, treat the assessee as not being in default

(3.) Before I consider the case law on the subject, it will be convenient at this stage to dispose of the argument of the learned counsel for the Commissioner of Income-tax in regard to the scope of the discretion. His argument that the discretion of the officer under this section is a very limited one and he can only exercise it against the State and he cannot be compelled to use it in favour of the assessee may be subtle but does not appeal to me. It is true the section in terms declares the assessee, under the circumstances mentioned in the section, as a person in default and the discretion conferred on the Income-tax Officer is to treat him as not being in default. By exercising his discretion in not treating him as a defaulter, he would be holding against the State and also in favour of the assessee. The discretionary power conferred upon the Income-tax Officer is in effect and substance one to give or not to give stay and it works both ways depending upon the manner in which it is exercised. If he treats him as not being in default, the assessee will not be proceeded against till the appeal is disposed of and the State will not be able to collect the amount till the result of the appeal is known. If he refuses to exercise his discretion, the assessee will be subjected to coercive process and the State will be in a position to recover the tax immediately. The power, therefore, if exercised, helps one and prejudices the other. In this view I must hold that the discretionary power conferred upon the Income-tax Officer is not limited as contended by the counsel for the Commissioner of Income-tax but is a power exercisable both against and in favour of the assessee or the State as the case may be The scope of a discretionary power conferred on a public authority is the subject matter of treatises and decisions. In Maxwell on the Interpretation of Statutes, 10th edition, the following passage appears at page 239