Discretionary stay on tax realisation: filing an appeal does not automatically prevent recovery and is subject to officer discretion.

Section 45 confers a discretionary power on the Income-tax Officer to treat an appellant as not being in default; filing an appeal under section 30 does not automatically stay realisation or prevent deeming an assessee a defaulter. Where substantial demands remained unpaid, limited payments were made and instalment proposals were not accepted, the officer's refusal to grant non-default treatment and order for recovery was held not arbitrary. Review of such discretion is confined to cases of arbitrariness or unreasonable exercise; the recovery order therefore stood.

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Issues: (i) Whether filing an appeal under section 30 prevents an assessee from being treated as a defaulter and from the realisation of tax under section 45 of the Income-tax Act; (ii) Whether the Income-tax Officer's exercise of discretion in refusing to treat the assessee as not being in default (and ordering realisation/penalty) was arbitrary in the facts of the case.

Issue (i): Whether filing an appeal operates as an automatic stay of realisation or prevents deeming an assessee in default under section 45 of the Income-tax Act, 1922.

Analysis: Section 45 permits the Income-tax Officer, in his discretion, to treat an assessee who has presented an appeal under section 30 as not being in default while the appeal is undisposed of. The provision does not create an automatic or absolute right to stay recovery by mere filing of an appeal; the power not to treat an assessee as a defaulter is explicitly discretionary.

Conclusion: The filing of an appeal does not automatically prevent deeming the assessee a defaulter or stay realisation; the Income-tax Officer's discretion under section 45 governs the matter. Conclusion against the assessee.

Issue (ii): Whether the Income-tax Officer acted arbitrarily in exercising his discretion to refuse non-default treatment and to order payment/penalty.

Analysis: The facts show that substantial outstanding demands remained unpaid, the assessee had made only minimal payments, a show-cause notice was issued and responded to, and offers to permit payment by instalments were not accepted by the assessee's representative. The authorities also took steps to realise sums due from a third party (section 46(5A)). On these facts there is no basis to characterise the discretion exercised as arbitrary or unreasonable.

Conclusion: The exercise of discretion by the Income-tax Officer was not arbitrary. Conclusion against the assessee.

Final Conclusion: Both contentions of the petitioner are rejected and the petition seeking quashing of the recovery order and a mandamus to stay realisation is dismissed; the order of the Income-tax Officer stands.

Ratio Decidendi: Section 45 of the Income-tax Act, 1922, confers a discretionary power on the Income-tax Officer to treat an assessee who has appealed as not being in default, and the mere filing of an appeal does not create an absolute right to stay recovery; review of such discretion is limited to cases of arbitrariness or lack of reasonable exercise.

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