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Judgment
Veeraswami, J.—This is a petition under Article 226 of the Constitution to forbid the respondent from taking any recovery proceedings
against the petitioner''s husband in pursuance of an order of assessment made against him on March 22, 1966. The petitioner is the wife of the
assesses and she says that though her husband is a citizen of India, he has been prevented from coming over to India, from Malaya since
September 6, 1965. For the year 1961-62, he returned an income of Rs. 4,500/-, but the respondent added a sum of Rs. 58,000/- and charged
him to tax on a total income of Rs. 62,002/-. A demand was made on the assessee on March 28, 1966, for payment of the balance tax due, that
is, Rs. 32.282.10. Against the order of assessment, the assessee filed an appeal on April 8, 1966, and on the same day, his power-of-attorney
applied for stay of collection of the tax pending disposal of the appeal. The respondent, by his order dated April 15, 1966, granted time till May
15, 1966, for payment of one-half of the tax demanded and wanted security for the balance, so that the collection thereof might be stayed until the
disposal of the appeal or a specified date, whichever was earlier. But the conditions for the stay were not complied with. The respondent accepted
the offer on behalf of the assessee to pay a sum of Rs. 5.000/-, but even this amount was not paid. Once again time was granted by the respondent
to pay the one-half, but there was default. On June 25, 1966, the Inspecting Assistant Commissioner of Income Tax, Tiruchirapalli, was moved for
stay. This officer, by an order of his dated July 25, 1966, granted time for payment of Rs. 16,000/- on or before August, 1966, and on condition
of such payment, agreed to stay recovery of the balance of the tax arrear till after the disposal of the appeal, provided security was furnished
therefor, on or before August 15, 1966, These conditions were again not complied with, but, instead, on behalf of the assessee, an application was
filed before the Commissioner of Income Tax on August 10, 1966, for stay of collection. On December 21, 1966, the Commissioner directed that
on payment of Rs. 16,000/-immediately, the demand of the balance of the tax would be stayed till February, 1967, or till the disposal of the appeal
by the Appellate Assistant Commissioner, whichever was earlier. It appears pursuant to the Commissioner''s orders, the respondent issued two
chalans three days latter, one for Rs. 16,000/- and the other for the balance of arrears, and also issued a certificate to the District Collector,
Thanjavur, for recovery of the arrears, but with a request not to proceed immediately with the collection, in view of the Commissioner''s orders
aforesaid. Even then the assessee failed to pay any amount towards the tax arrears. In view of the default, the first respondent on January 11,
1967, levied a penalty of Rs. 1,500/- for the persistent failure to pay the arrears or any part thereof. When the recovery proceedings were
proceeded with, the assessee preferred objections thereto on certain grounds. By an order dated May 15, 1967, the Commissioner would appear
to have permitted the assessee to pay the sum of Rs. 16,000/- immediately and the holding over of the balance till July, 30, 1967, or the disposal
of the appeal, whichever was earlier, subject to the furnishing of adequate security. It is not in dispute even this chance was not availed of and the
entire tax continues to be in arrears. The petitioner''s contention before us is that the respondent and the officers higher up failed to exercise their
discretion properly u/s 220(6) of the Income Tax Act, 1961. According to the petitioner, the conditions contemplated by this provision can only be
furnishing of security and not instalmental payments of the arrears. On this view of the scope of Section 220(6), it is said that the refusal to stay the
collection of the tax is illegal.
In our view, the narrow view of the scope of Section 220(6) cannot be accepted. What is said is that Sub-section (6) should be given a limited
scope, as it has to be read in the light of Sub-section (3), which gives discretion to the Income Tax Officer in certain circumstances to extend the
time for payment or allow payment by instalments. As a specific provision has been made in the form of Sub-section (3), so runs the arguments for
the petitioner, for payment by instalments of the arrears. It stands to reason that read in the light of this provision, Sub-section (6) should be read
not as a repetition but as being limited to granting stay on furnishing security.
Section 220 deals with collection and recovery of tax, it provides that on service of the demand notice, the tax should be paid within the period
of 35 days and that if the demand is not complied with within the time limit, the assessee should be treated as being in default. Sub-section (3)
provides that an assessee may, before the expiry of the tune fixed in the demand notice for payment, apply for stay and the Income Tax Officer
may on such application extend the time for payment or allow payment by instalments, subject to such conditions as he may think fit to impose in
the circumstances of the case. Where, however, the assessee has preferred an appeal u/s 246, the Income Tax Officer is given the discretion to
treat the assessee as not being in default in respect of the amount in dispute in the appeal, subject to such conditions as he may think fit to impose in
the circumstances of the case. When a statute entrusts to an officer, who is a creature of such a statute, a discretion of that nature, it is obviously
coupled with a duty to exercise it. The officer has to exercise his discretion according to law and reason, neither arbitrarily nor capriciously. He
cannot in exercising his power, take into account any irrelevant or extraneous matter, not germane to the occasion and the exercise of his
discretion. This posit tion is well settled and we do not think it necessary to make extensive citation of authority in support. VETCHA
SREERAMAMURTHY Vs. THE Income Tax OFFICER VIZIANAGARAM, AND ANOTHER., deals with this question with reference to
Section 45 of the Income Tax Act, 1922, which corresponds to Section 220 of the present Income Tax Act Subba Rao, C.J., (as he then was)
and Viswanatha Sastri, J., refer to all the relevant authorities in their judgments and they hold that the discretion conferred by Section 45 of the
Income Tax Act on the Income Tax Officer to treat the assessee, who has not paid the tax demanded, as not being in default, if he has preferred
an appeal, was a power exercisable both against and in favour of the assessee or the State, as the case may be, and that the power was coupled
with a duty to exercise his discretion when the facts which called for its exercise existed and that the fact that the exercise of the power was left to
the discretion of the officer did not exonerate him from discharging his duty. Reference was made by the learned Chief Justice to the classical
dictum in Maxwell:
''According to his discretion'' means. It has been said, according to the rules of reason and justice, not private opinion, according to law and not
humour; it is to be not arbitrary, vague and fanciful, but legal and regular; to be exercised, not capriciously, but on judicial grounds and for
substantial reasons. And it must be exercised within the limits to which an honest man competent to the discharge of his office ought to confine
himself, that is, within the limits and for the objects intended by the legislature. These dicta may be summed up in the statement of Lord Esher that
the discretion must be exercised without taking into account any reason which is not a legal one. If people who have to exercise a public duty by
exercising their discretion take into account matters which the Courts consider not to be proper for the guidance of their discretion, then in the eye
of the law, they have not exercised their discretion.
These principles, which we unhesitatingly accept, can be put in no better words. The petitioner''s submission before us is not that the respondent
declined to exercise his discretion but in doing so, he has not kept in view the correct intent and scope of Sub-section (6) of Section 220, On her
behalf, reliance is placed on the following observations of Viswanatha Sastri, J., in the decision referred to:
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 u/s 45 of the Act is a stay. Nor is there a provision for allowing the tax to be paid in instalments or for taking a security for deferred
payment.
And it is argued that in view of this position, the discretion given to the Income Tax Officer, under Sub-section (6) of Section 220 is limited to grant
of stay in the sense that the assessee will not be treated as being in default in respect of the disputed amount in the appeal, subject only to the
condition that security is furnished for that amount. It is true that the power of the Income Tax Officer under Sub-section (6) is in his discretion to
treat the assessee as not being in default in respect of the disputed amount in the appeal, but in a sense and in effect, when the Income Tax Officer
treats an assessee as not being in default, it amounts to stay of collection of the amount in dispute. Sub-section (6), if regard is had to the language
employed therein, does not in so many words say that the discretion entrusted to the Income Tax Officer is to be exercised in a particular manner
and not in any other. Sub-section (6) specifically says that he may exercise his power in his discretion and subject to such conditions as he may
think fit to impose in the circumstances of the case. That, in our opinion, gives a very wide scope to the discretion entrusted to the officer as well as
to the conditions which he may stipulate in the exercise of his discretion. The only limitations appear to be that the conditions stipulated must, in his
opinion, be fit in the circumstances before him. He is not limited, therefore, to treating the assessee as not being in default in respect of the disputed
amount only on condition that the assessee should furnish security. In our opinion, Sub-section (6) is wide enough to cover a stay on condition that
the assessee should pay the disputed amount by instalments either in whole or in part and should furnish security for ''the balance.
We are also unable to import any limitation into Sub-section (6) through a reading of Sub-section (3). As we said, learned Counsel for the
petitioner compared and contrasted the two provisions and stated that because Sub-section (3) specifically provided for a stay subject to the
condition that the amount in arrear might be paid by instalments, so it followed that in the absence of a repetition of that provision in Sub-section
(6), it will be proper to construe the latter provision as not including a power to impose a condition for instalmental payment. The argument seems
to us to overlook the mutual scope and purpose of the two sub-sections. Sub-section (3) deals with not the disputed tax but the whole amount in
arrear. The power given to the officer is to extend the time for payment or allow payment by instalments, and even then subject to such conditions
as he may think fit to impose in the circumstances of the case. But, in Sub-section (6), the language employed is even wider and the discretion to
be exercised is not limited to extension of tune for payment on condition that it will be paid by instalments.
It has not been suggested that the respondent or the officers higher up failed to take relevant circumstances or exercised their discretion
arbitrarily. As we said, all that has been said for the petitioner is that under Sub-section (6), the first respondent has no option but to treat the
assessee as not being in default in respect of the disputed amount on condition that he furnished security. We are unable to accept the contention
for the reason we have mentioned.
The petition is dismissed with costs. Counsel''s fee Rs. 150/-. Learned Counsel for the assessee prays that we may direct the Appellate
Assistant Commissioner concerned to dispose of the appeal expeditiously. We think that this is a reasonable request and we grant it. The
Appellate Assistant Commissioner will dispose of the appeal within three months from to-day.