1956 (4) TMI 56 - HC - Income Tax

Summary

Issues Involved:
1. Validity of the Income-tax assessments for the years 1947-48 and 1951-52.
2. Discretionary power of the Income-tax Officer under Section 45 of the Income-tax Act.
3. Exercise of discretion by the Income-tax Officer and judicial review.
4. Issuance of writ of mandamus to compel the Income-tax Officer to exercise discretion.

Issue-wise Detailed Analysis:

1. Validity of the Income-tax assessments for the years 1947-48 and 1951-52:
The appellant contested the validity of the assessments for 1947-48 and 1951-52. For 1951-52, the assessment was challenged on the grounds that it was made on the basis of a joint family despite the Income-tax Officer's knowledge of a family division. For 1947-48, the appellant argued that the Income-tax Officer had no right to reject registered deeds accepted in another firm's assessment, leading to double taxation. The Income-tax Officer countered that no application under Section 25-A was filed to claim partition, thus treating the family as undivided. The Officer also stated that the other firm was assessed as a precaution and was asked not to pay tax until the appellant's appeal was resolved.

2. Discretionary power of the Income-tax Officer under Section 45 of the Income-tax Act:
The appellant's counsel argued that Section 45 imposes a duty on the Income-tax Officer to treat an assessee not as a defaulter under certain circumstances, which was not exercised in this case. The counsel for the Commissioner contended that the discretion under Section 45 is narrow and primarily against the State, asserting that the Officer's discretion is absolute and cannot be questioned in court. Section 45 states that any amount specified in a notice of demand must be paid within the prescribed time, failing which the assessee is deemed in default. However, pending an appeal, the Officer may, in his discretion, treat the assessee as not being in default.

3. Exercise of discretion by the Income-tax Officer and judicial review:
The court discussed the scope of discretionary power, emphasizing that it must be exercised according to "rules of reason and justice," not arbitrarily or capriciously. The discretionary power conferred on a public authority is coupled with a duty to perform it under relevant circumstances. If the discretion is exercised arbitrarily or unreasonably, the authority is deemed not to have exercised it at all. The court cited various cases to illustrate that discretionary power must be exercised fairly and without caprice or arbitrariness. The Income-tax Officer's discretion under Section 45 is not absolute but must be exercised considering relevant facts.

4. Issuance of writ of mandamus to compel the Income-tax Officer to exercise discretion:
The court held that if the Income-tax Officer fails to exercise discretion or does so arbitrarily, a writ of mandamus can compel him to discharge his duty. The discretion under Section 45 must be exercised honestly and in the spirit of the statute. The court referred to several cases where mandamus was issued to compel public authorities to exercise their discretion fairly. However, if the Officer has considered the application and exercised discretion reasonably, the court will not interfere.

Conclusion:
The court dismissed the appeal, finding that the Income-tax Officer had reasonably exercised his discretion. The appellant failed to demonstrate that substantial questions of law were raised in his appeals or that he offered security for the disputed amount. The court emphasized that the Officer's discretion must be exercised fairly and without caprice, and in this case, there was no evidence of arbitrary or unreasonable exercise of discretion.