TMI Blog1956 (4) TMI 56X X X X Extracts X X X X X X X X Extracts X X X X ..... 952, to a tax of ₹ 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 ₹ 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 ₹ 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 ₹ 1,70,083-15-0. Out of that amount, a sum of ₹ 1,900 was realised. In regard to the 1945-46 assessment, another sum of ₹ 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 Revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cted 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: Statutes which authorise persons to do acts for the benefit of others, or, as it is sometimes said for the public good or the advancement of justice, have often given rise to controversy when conferring the authority in terms simply enabling and not mandatory. In enacting that they 'may' or 'shall if they think fit' or 'shall have power,' or that 'it shall be lawful' for them to do such acts, a statute appears to use the language of mere permission but it has been so often decided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hority to discharge his duty, or, to put it differently, to exercise his discretion honestly and objectively. There is also an essential distinction between a refusal to exercise the discretion and the manner of its exercise. If the authority fails to discharge his duty by refusing to exercise his discretion when facts calling for its exercise exist, or, if he exercises discretion under the circumstances mentioned above, which is not an exercise of discretion in law, the Court will compel him to do so. If the authority concerned exercises his discretion honestly and in the spirit of the statute, no mandamus will be issued directing him to exercise his discretion in a particular way. See Lord Krishna Sugar Mills Ltd. v. Income-tax Officer, Ambala, Julius v. Bishop of Oxford, Allcroft v. Lord Bishop of London. The application of the aforesaid principles to cases under section 45 of the Income-tax Act is illustrated in some of the cases cited at the Bar. In Ladhuram Taparia v. B.K. Bagchi#, Bose, J., of the Calcutta High Court considered the question in some detail. There, the petitioners carried on business in co-partnership under the name and style of Ladhuram Taparia from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fit the power is to be exercised, which may couple the power with a duty, and make it the duty of the person in whom the power is reposed, to exercise that power when called upon to do so. Relying upon this authority and the others, which followed it, Bose, J., observed: In this case also a discretion was conferred on the Revenue authority but it was pointed out that if in a proper case he did not exercise that power he could be compelled to do so by an order under section 45 of the Specific Relief Act. When it was contended before him that the Court has no power to interfere with the exercise of discretion by public officers in pursuance of a discretionary power vested in them, the learned Judge, relying upon the decision of Queen v. Bishop of London, pointed out that an arbitrary or capricious exercise of discretion would be no exercise at all. This decision is, therefore, authority for the position that the discretionary power conferred upon an Income-tax Officer is coupled with a duty and, if he did not exercise it when the occasion called for it or if he exercised it in such a manner that it is no exercise of discretion at all, he can be compelled t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the issue, it is not open to this Court to interfere in its supervisory jurisdiction. Soni, J., expressed the same idea in the following terms: If these Tribunals or the functionaries appointed under the special Acts do not perform their duties they may be compelled by an appropriate writ to do so. Where, however, they are acting within the limits of the powers assigned to them by the Legislature and have exercised their discretion, this Court will not sit in judgment over them and will not ordinarily interfere unless the discretion has been exercised so capriciously or in such an outrageous manner as to attract the extraordinary jurisdiction of this Court. This decision also lays down the same principle. The learned Judges refused to issue the writ as the Income-tax authorities exercised their discretion reasonably and without caprice or arbitrariness. The Allahabad High Court in Goverdhan v. Commissioner of Income tax [1956] 29 I.T.R. 591refused to issue a writ when the Income-tax Officer did not treat an assessee as not being in default. In that case, the assessee was assessed by the Income-tax Officer to tax amounting to ₹ 75,477 for the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cast upon the Income-tax Officer not to regard the assessee as a defaulter, I have no hesitation in differing from that opinion. With great respect to the learned Judge, Bose, J., in the Calcutta case did not say that the mere filing of an appeal would cast a duty on the Income-tax Officer to stay enforcement of demand. Bose, J., only held that, under certain compelling circumstances, a duty is cast upon an Income-tax Officer to exercise his discretion in staying the enforcement of demand. The existence of such duty would depend not upon the filing of an appeal but upon other facts. It is not necessary to express our view whether the discretion exercised by the Commissioner on the facts found in that case was capricious or arbitrary. The aforesaid authorities support the view already expressed by me earlier. Learned counsel then relied upon the words in his discretion and argued that the said words confer an absolute discretion, authorising the Income-tax Officer to show indulgence or not depending upon administrative convenience. He also referred to the analogous provisions in other statutes such as section 9(4)(a), section 15(2) and section 51(1) of the Estates Abolitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, the respondents filed an application for a writ of mandamus. The High Court declined to investigate and pronounce on the rights of the parties and left the rights of the parties to be decided in a suit. But, as the respondents could not file a suit till after the expiry of sixty days required for the purpose under section 80 of the Civil Procedure Code the High Court passed an order that till three months from the date of the order or one week after the institution of their contemplated suit, whichever was earlier, the Government of the State of Orissa should refrain from disturbing the petitioners' possession over the mining areas in question. The Supreme Court held that article 226 could not be used for the purpose of giving interim relief as the only and final relief on the application. At page 14 their Lordships observed : An interim relief can be granted only in aid of and as ancillary to the main relief which may be available to the party on final determination of his rights in a suit or proceeding. That decision has no bearing on the present case. This Court is not asked to give any interim relief pending some contemplated proceedings by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e from him. In the circumstances, we cannot say that the Income-tax Officer did not discharge his duty or exercise his discretion arbitrarily in not treating him as a person who had not made a default. The appeal is, therefore, dismissed with costs. Advocate's fee ₹ 200. VISWANATHA SASTRI, J.--The facts of the case have been stated in the judgment of my Lord and it is unnecessary for me to recapitulate them. The meaning of the words shall and may found in legislative enactments has been the subject of constant and conflicting interpretation by the Courts. Section 45 of the Income-tax Act in which both these words are found, has been brought into the arena of this controversy and its interpretation has been the subject of a difference of opinion among the High Courts. Under section 45 an assessee failing to pay the tax specified as payable in a notice of demand issued by the Income-tax Officer under section 29 shall be deemed to be in default, provided that, when an assessee has presented an appeal under section 30, the Income-tax Officer may, in his discretion, treat the assessee as not being in default as long as such appeal is undisposed of. There is a se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In 1877 the judicial Committee, construing section 21 of Act XIV of 1859, observed: There is no doubt that in some cases the word 'must,' or the word 'shall', may be substituted for the word 'may', but that can be done only for the purpose of giving effect to the intention of the Legislature; but in the absence of proof of such intention, the word 'may' must be taken to be used in its natural, and therefore in a permissive, and not in an obligatory, sense: Delhi and London Bank v. Orchard*. The principle was expressed in a somewhat different form in the well known and of cited case of Julius v. Bishop of Oxford** which arose on the construction of the words it shall be lawful in section 3 of the Church Discipline Act, 1840. Lord Cairns stated the law in these terms: The words 'it shall be lawful' are not equivocal. They are plain and unambiguous. They confer a faculty or power, and they do not of themselves do more than convey a faculty or power. But there may be something in the nature of the thing empowered to be done, something in the object for which it is to be done, something in the title of the person or persons for who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here, interpreting the word may in section 51 of the Indian Income- tax Act, 1918, empowering the Commissioner to state a case to the High Court, Lord Phillimore observed: And as the learned counsel for the respondent rightly urged, 'may' does not mean 'shall'. Neither are the words 'it shall be lawful' those of compulsion. Only the capacity or power is given to the authority. But when a capacity or power is given to the public authority, there may be circumstances which couple with the power a duty to exercise it. The learned Lord followed the exposition of the law by Lord Cairns in Julius v. Bishop of Oxford# already cited. In Province of Bombay v. K.S. Advani, Das, J., summed up the result of the authorities thus: The authorities show that in construing a power the court will read the word 'may' as 'must' when the exercise of the power will be in furtherance of the interest of a third person for securing which the power was given. Enabling words are always potential and never in themselves significant of any obligation. They are read as compulsory where they are words to effectuate a legal rig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... make an order for that purpose ex debito justitiae. Discretion, when applied to a Court of justice, means sound discretion guided by law and in accordance with precedents. It must be governed by rule, not by humour; it must not be arbitrary, vague, and fanciful, but legal and regular. Per Lord Mansfield in R. v. Wilkes*. Where a discretionary power is given not to a court but deposited with a public officer for the purpose of being used for the benefit of persons who are specifically pointed out, and with regard to whom a definition is supplied by the legislature, of the conditions upon which they are entitled to call for its exercise, that power ought to be exercised and the court will require it to be exercised. See Lord Cairns in Julius v. Bishop of Oxford. This is not to say that a mandamus will issue in every such case irrespective of other considerations. Section 45 of the Income-tax Act does not give an absolute right to, an assessee who has preferred an appeal to get an order from the Income-tax Officer treating him as not in default pending the appeal, independently of the judgment or discretion of the Officer. At the same time cases might easily be conceived and d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to determine what is fair and just in respect of the matter under consideration-when he is required to exercise his powers by those for whose protection the power is conferred upon him. He must act in a judicial spirit and not capriciously or arbitrarily. His discretion must be exercised according to common sense and according to justice. As there is no indication in section 45 of the Income-tax Act of the grounds upon which the discretion has to be exercised, it is not desirable to lay out any rules indicating the particular grooves in which the discretion should run. It is not proper to limit the operation of a rule expressed in such general terms by stating the circumstances or all the circumstances under which the Income-tax Officer should exercise his discretion to treat the assessee as not being in default. Though it is not within the province of the Court to give general directions or lay down general rules for the exercise of the power conferred by section 45 and though this Court is not authorised to sit as a Court of appeal for review of orders passed by Income-tax Officers under that section, still there may be occasion for this Court's interference by a it of ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not exercised his discretion in a judicial manner and he can be compelled by mandamus to do so. Where the Income-tax Officer in refusing the assessee's application has allowed himself to be influenced by irrelevant and extraneous matters or considerations, in point of fact he would have exercised no discretion or lie would have exceeded his jurisdiction, and whichever way it is put, this Court will interfere by a writ: R. v. Bowman**, R. v. London County Council, Queen v. Bishop of London. I would go a step further. If the exercise of discretion by the Income-tax Officer is so arbitrary and capricious that no reasonable man would have acted likewise, in other words, if there has been no exercise of discretion at all, in such a case too this Court might interfere: Queen v. Bishop of London#. Three decisions of the Calcutta, Punjab and Allahabad High Courts in which the scope and effect of section 45 of the Income-tax Act were considered have been cited to us. In Ladhurain Taparia v. B.K. Bagchi, Bose, J., issued a mandamus directing the Income-tax Officer to forbear from taking any steps for enforcing a notice of demand issued under section 29 of the Income-tax Act until th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch a contention would indeed be opposed to the plain provision of section 45 of the Income-tax Act that the tax should be paid within the time mentioned in the notice of demand. Lastly, it has to be observed that section 45 of the Income-tax Act is somewhat cryptic in its terms and merely gives the Income-tax Officer power to declare a person to be not in default pending the appeal. There is no provision for stay similar to Order XLI, rules 5 and 6, of the Civil Procedure Code. There is no conferment of an express power of granting a stay of realisation of the tax, though the effect of an order in favour of the assessee under section 45 of the Act is a stay. Nor is there a provision for allowing the tax to be paid in instalments or for taking security for deferred payment. Neither the Appellate Assistant Commissioner nor the Appellate Tribunal is given the power to stay the collection of tax. Whether the law should not be made more liberal so as to enable an assessee who has prefered an appeal, to obtain from the appellate forum, a stay of collection of the tax, either in whole or in part, on furnishing suitable security, is a matter for the Legislature to consider. I agree ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
