Strict limits on tax recovery stay discretion under section 45, with writ review confined to arbitrariness or mala fides.

Section 45 of the Income-tax Act, 1922 was read strictly as conferring discretion to treat an assessee as not in default only where an appeal under section 30 was pending and undisposed of; the power was held not to extend to recovery pending a further appeal before the Appellate Tribunal. The provision could not be enlarged on hardship or equity. Judicial review of a refusal to stay recovery was available only if the discretion was not genuinely exercised or was arbitrary, mala fide, capricious, or based on irrelevant considerations. On the stated facts, the officer had granted repeated concessions and no bad faith or extraneous ground was shown, so no writ relief was warranted.

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Issues: (i) Whether, under section 45 of the Income-tax Act, 1922, the Income-tax Officer could treat the assessee as not in default and stay recovery of tax pending an appeal to the Income-tax Appellate Tribunal. (ii) Whether the refusal to grant stay in the facts of the case was liable to be quashed in writ jurisdiction as arbitrary, mala fide, or contrary to judicial principles.

Issue (i): Whether, under section 45 of the Income-tax Act, 1922, the Income-tax Officer could treat the assessee as not in default and stay recovery of tax pending an appeal to the Income-tax Appellate Tribunal.

Analysis: The language of section 45 was treated as clear and confined the discretionary power to cases where an appeal had been presented under section 30 and remained undisposed of. The expression used in the provision was read as referring to the statutory appeal before the Appellate Assistant Commissioner and not to a further appeal before the Tribunal. The scope of the power could not be enlarged on grounds of hardship or equity.

Conclusion: The assessee had no statutory right to insist on stay of recovery during the pendency of the appeal before the Appellate Tribunal under section 45; the provision did not extend that far.

Issue (ii): Whether the refusal to grant stay in the facts of the case was liable to be quashed in writ jurisdiction as arbitrary, mala fide, or contrary to judicial principles.

Analysis: The discretionary power under section 45 was to be exercised honestly, fairly, and on relevant considerations, and writ interference was justified only where there was no real exercise of discretion or where the discretion was exercised capriciously, arbitrarily, mala fide, or on extraneous grounds. On the facts, repeated concessions had already been granted to the assessee, who had failed to comply with them, and nothing showed that the officer acted on irrelevant considerations or in bad faith.

Conclusion: The refusal to stay recovery was not shown to be arbitrary, mala fide, or otherwise illegal, and no writ relief was warranted.

Final Conclusion: The statutory stay provision was held inapplicable to the pendency of the Tribunal appeal, and the impugned refusal to stay recovery was upheld, leaving the assessee without relief.

Ratio Decidendi: Where the statutory language is clear, a tax authority's discretionary power to treat an assessee as not in default cannot be extended beyond the precise condition stated in the provision, and judicial review will not interfere with a discretionary tax recovery decision absent arbitrariness, mala fides, or extraneous considerations.

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