Court quashes Income-tax Officer's decision, emphasizes need for proper discretion in application rejections.

The court quashed the decision of the Income-tax Officer to reject the petitioner's application under section 45 of the Indian Income-tax Act, 1922, to be treated as not in default pending appeal. The court found that the Income-tax Officer failed to properly exercise discretion in refusing the application, emphasizing the need for a thorough consideration of relevant factors. The court directed the Income-tax Officer to reconsider the application in accordance with the law, highlighting the importance of exercising discretionary power responsibly. The court allowed the petition without issuing any order as to costs.

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Issues:
Petition under article 226 to quash exhibit P-2 dated March 2, 1959 by the Income-tax Officer. Assessment discrepancy, refusal to treat petitioner as not in default pending appeal, discretionary power under section 45 of the Indian Income-tax Act, 1922.

Analysis:
The petitioner submitted a return of income for about ten thousand rupees, but the Income-tax Officer assessed him on seventy-nine thousand odd rupees, imposing tax over thirty-four thousand rupees. The petitioner deposited two thousand rupees as admitted income-tax and appealed against the assessment. The Income-tax Officer adjusted nearly six thousand rupees due to the petitioner by way of refund, leaving a balance of over twenty-four thousand rupees in tax payable. The petitioner applied under section 45 of the Act to be treated as not in default pending appeal, citing business discontinuation, financial difficulties, and potential appeal success. The Income-tax Officer, through exhibit P-2, rejected the application but allowed payment in two instalments in March and April 1959.

The petitioner contended that the Income-tax Officer failed to exercise discretion under section 45 of the Act. The counter-affidavit did not provide further clarity on the grounds for the decision. The court emphasized that the discretionary power must be properly exercised, as failure to do so can lead to invoking jurisdiction under article 226. Referring to a similar case under the Wealth-tax Act, the court highlighted the necessity for proper consideration of various points while exercising discretion under section 45. The court also stressed that quick tax realization should not be the sole basis for refusing a stay, and the authority should not act as a mere tax-gatherer.

Citing precedents, the court emphasized that the discretionary power under section 45 is coupled with a duty to exercise it properly. In this case, the court found that the Income-tax Officer did not exercise any discretion in rejecting the application under section 45. Consequently, the court quashed exhibit P-2 and directed the Income-tax Officer to reconsider the application in accordance with the law. The court noted that despite the appeal being heard, it remained undisposed of. The court made no order as to costs, ultimately allowing the petition.

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