Tax recovery discretion may become a duty to forbear enforcement where appeal pending and revenue is already safeguarded.

The High Court considered whether the Income-tax Officer's discretion under Section 45 to treat an assessee as not in default pending appeal could, in the circumstances, require suspension of recovery. It held that where the assessee had filed an appeal raising substantial questions of fact and law, and related firms were assessed protectively so that the revenue was already safeguarded, the discretion could not be exercised arbitrarily or capriciously. In such a case, the discretion was coupled with a duty to grant extension of time and forbear enforcement of the demand until the appeal was decided. Interim protection against recovery was therefore secured pending disposal of the appeal.

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Issues: Whether the Income-tax Officer's discretion under Section 45 of the Income-tax Act to treat the assessee as not in default pending appeal was capable, in the circumstances of the case, of becoming a duty to forbear enforcement of the notice of demand until the appeal was disposed of.

Analysis: The assessee had preferred an appeal against the assessment and the refusal to renew registration, raising substantial questions both of fact and law. The assessments of the connected firms were also made protectively, which safeguarded the revenue and showed that immediate coercive recovery was not necessary. In those circumstances, the power under Section 45, though expressed in discretionary form, could not be exercised arbitrarily or capriciously. Where the circumstances justified it, the discretion was coupled with a duty to grant extension of time and to refrain from enforcing the demand until the appeal was decided.

Conclusion: The respondent was bound to forbear from taking steps to enforce the notice of demand until disposal of the appeal.

Final Conclusion: The petition succeeded only to the extent of securing interim protection against recovery under the demand notice pending the appeal, and the assessee obtained costs.

Ratio Decidendi: A statutory discretion relating to recovery of tax may, in a proper case, be controlled by the circumstances so that it becomes a duty to suspend enforcement pending a substantive appeal, especially where immediate recovery is unnecessary to protect the revenue.

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