1952 (9) TMI 46 - HC - Income Tax

Summary

Issues Involved:
1. Jurisdiction of the Income-tax Officer
2. Validity of the assessment under Section 23(4) of the Income-tax Act
3. Discretion exercised by the Income-tax Officer regarding the stay of recovery of income-tax
4. Issuance of writ of mandamus

Issue-wise Detailed Analysis:

1. Jurisdiction of the Income-tax Officer:
The petitioners, Lord Krishna Sugar Mills Ltd., sought a writ commanding the Income-tax Officer, Ambala, to refrain from enforcing the Notice of Demand dated 6-10-1951 or the order contained in the letter dated 2-7-1952. The petitioners' sole business was at Saharanpur, with the registered office initially at Lahore, later shifted to Bupar due to pre-partition disturbances. The jurisdictional issue arose because the registered office was previously under the Income-tax Officer, Lahore, before the shift.

2. Validity of the assessment under Section 23(4) of the Income-tax Act:
The dispute centered on the accounting period from 1-6-1945 to 31-5-1946. The Income-tax Officer found defects in the accounts, including the non-production of the cash book and ledger for a specific period and certain vouchers. The officer also required the production of a judgment in liquidation proceedings and a petition for winding-up. The petitioners showed a profit of Rs. 1963, but the Income-tax Officer assessed the net income at Rs. 7,62,363 and imposed a tax of Rs. 3,33,533/13/-. The assessment was made under Section 23(4) of the Income-tax Act, and a Notice of Demand was issued on 6-10-1951. The petitioners' application for cancellation of the assessment under Section 27 was dismissed, and their appeal to the Appellate Assistant Commissioner was also dismissed, though the latter remarked that certain demands by the Income-tax Officer were unjustified. An appeal to the Appellate Income-tax Tribunal was pending.

3. Discretion exercised by the Income-tax Officer regarding the stay of recovery of income-tax:
The petitioners applied to the Income-tax Officer to not be treated as defaulters under Section 45 of the Income-tax Act and to stay the recovery of income-tax until their appeal was decided. The Income-tax Officer allowed payment by installments but imposed a penalty of Rs. 20,000 for non-payment. Subsequent appeals to higher authorities, including the Commissioner of Income-tax and the Central Board of Revenue, resulted in temporary stays and revised installment plans, but ultimately, the Income-tax Officer demanded payment by 8-7-1952, threatening further penalties.

4. Issuance of writ of mandamus:
Counsel for the petitioners argued that the Income-tax Officer did not exercise discretion properly and was influenced by extraneous matters. The Advocate-General countered that the officer's discretion under Section 45 was properly exercised and that a writ of mandamus could not be issued to control this discretion. The court referenced legal principles from Halsbury's Laws of England and American jurisprudence, emphasizing that mandamus is granted to compel the performance of a ministerial act but not to control discretion.

Conclusion:
The court held that the petitioners' objections to the Income-tax Officer's order did not justify exercising jurisdiction in their favor. The proper way to challenge the assessment was through the prescribed procedure in the Income-tax Act. The court found that the Income-tax Officer's discretion was neither mala fide, capricious, nor based on extraneous considerations. Therefore, the petition was dismissed with costs.

Separate Judgment:
Soni, J. concurred, emphasizing that the court would not interfere with the discretion exercised by tribunals or functionaries unless it was exercised capriciously or outrageously.