1972 (3) TMI 5 - HC - Income Tax

High Court quashes tax officer's denial of stay, stresses discretion for taxpayers. Fresh orders directed promptly.

The High Court of Madras quashed the Agricultural Income-tax Officer's orders denying stay of tax collection to appellants. The court emphasized the need ... Discretion under the proviso to section 40 - treating the assessee as not being in default pending disposal of appeal - limitations on arbitrary exercise of statutory discretion - filing of an appeal as a ground for non-defaultDiscretion under the proviso to section 40 - treating the assessee as not being in default pending disposal of appeal - limitations on arbitrary exercise of statutory discretion - Validity of the Agricultural Income-tax Officer's refusal to treat the assessees as not being in default despite their filing of appeals under section 31 - HELD THAT: - The proviso to section 40 vests a discretionary power in the Agricultural Income-tax Officer to treat an assessee who has presented an appeal under section 31 as not being in default so long as the appeal remains undisposed of. That discretion must not be exercised arbitrarily. Ordinarily, the filing of an appeal is a ground for treating the assessee as not being in default, and once the officer is satisfied that an appeal has been filed he should normally so treat the assessee. Denial of the benefit of the discretion is permissible only for sound and relevant reasons; the proviso itself does not enumerate such cases. The officer's reliance solely on reports that the assessee is financially sound and in a position to pay the tax does not constitute a sufficient reason to refuse to exercise the discretion conferred by the proviso.The orders refusing to treat the assessees as not being in default were unsustainable and are set aside.Filing of an appeal as a ground for non-default - limitations on arbitrary exercise of statutory discretion - Direction to the Agricultural Income-tax Officer to reconsider and pass fresh orders in accordance with the court's observations - HELD THAT: - Having found the earlier orders unsustainable for the reasons stated, the court remitted the matter to the Agricultural Income-tax Officer to exercise the discretion afresh in accordance with the legal principles articulated: ordinarily treating an assessee as not being in default where an appeal is filed unless there exist sound and relevant reasons to the contrary. The officer is required to pass fresh orders within one week from the date of the judgment, applying the correct standard for exercising the discretion under the proviso.Matter remitted to the Agricultural Income-tax Officer to pass fresh orders within one week in accordance with the judgment.Final Conclusion: The petitions are allowed; the Agricultural Income-tax Officer's orders dated January 11, 1972 are quashed and the officer is directed to pass fresh orders treating the filing of appeals as ordinarily warranting non-default status unless sound and relevant reasons justify denial, with fresh orders to be passed within one week. The High Court of Madras quashed the orders of the Agricultural Income-tax Officer for not granting stay of tax collection to assessees who had filed appeals. The court held that the officer's discretion must be exercised in favor of the assessee unless there is a valid reason not to do so. The officer was directed to pass fresh orders within a week. Petitions allowed.