Discretion in tax recovery stays under section 45 must be fair and reasoned; pendency of appeal alone gives no automatic relief.

The High Court stated that an Income-tax Officer's discretion under section 45 to stay recovery or treat an assessee as not in default must be exercised fairly, reasonably, and on relevant material. Pendency of an appeal alone does not suspend the duty to pay tax. Judicial review under article 226 is available only if the officer acts arbitrarily, capriciously, or without proper consideration. On the facts, the officer heard the assessee, examined the financial material, and relied on findings of sufficient assets, diversion of funds, and wilful non-payment. The refusal to stay recovery or extend time was therefore upheld and no writ interference was warranted.

---

---

Issues: Whether the Income-tax Officer's refusal to stay recovery of tax demand under section 45 of the Income-tax Act, 1922, and to treat the assessee as not being in default, was arbitrary or illegal so as to justify interference under article 226 of the Constitution.

Analysis: The power under section 45 is discretionary, but it is coupled with a duty to be exercised fairly and reasonably on the material before the Income-tax Officer. The pendency of an appeal does not by itself entitle an assessee to withhold payment of tax. Judicial interference under article 226 is warranted only where the officer fails to discharge that duty or acts arbitrarily or capriciously. On the facts, the officer granted a hearing, examined the books and financial material produced, and found that the petitioners had sufficient assets, had diverted funds, and had wilfully withheld payment despite adequate opportunity. The discretion was therefore exercised on relevant material and not shown to be unreasonable.

Conclusion: The refusal to stay recovery or extend time was valid and no writ interference was called for; the decision was against the assessee.

Ratio Decidendi: A court will not interfere under article 226 with an Income-tax Officer's refusal to grant stay or treat an assessee as not in default under section 45 unless the discretion has not been exercised fairly, reasonably, and on relevant material.

---