Inherent and supervisory powers may not justify staying income-tax arrears where statutory payment duties and territorial limits remain decisive.

A High Court's inherent powers under section 151 CPC and supervisory jurisdiction under article 227 were considered as possible bases to stay collection of income-tax arrears pending a reference under section 66(2), but the statutory requirement to pay tax notwithstanding the reference remained operative. The court held that section 66(7) did not by itself exclude relief in an appropriate case, yet article 227 must be exercised sparingly and within territorial limits. On the facts, the assessee's financial difficulty and offer of security were not exceptional enough to justify interference, and stay of collection was declined.

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Issues: Whether the High Court could stay collection of income-tax arrears pending disposal of a reference under section 66(2) of the Income-tax Act by invoking its inherent powers under section 151 of the Code of Civil Procedure or its supervisory jurisdiction under article 227 of the Constitution, and whether the territorial location of the Commissioner barred such relief.

Analysis: The statutory scheme in section 66(7) required tax to be paid according to the assessment notwithstanding a reference, but the Court held that this did not by itself exclude the exercise of inherent powers in an appropriate case. It further held that article 227 confers judicial superintendence, though that power is to be used sparingly and only in suitable cases. At the same time, the Court recognised the territorial limits of its supervisory jurisdiction and the difficulty arising where the authority concerned functioned outside its territorial area. On the facts, the assessee's financial difficulty and offer of security were held insufficient to justify interference, especially as the case was not shown to be exceptional.

Conclusion: The High Court declined to grant stay of collection of the tax arrears.

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