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Issues Involved:
1. Jurisdiction of the High Court to grant stay of tax recovery pending disposal of references. 2. Merits of the application for stay of tax recovery. Issue-Wise Detailed Analysis: 1. Jurisdiction of the High Court to Grant Stay of Tax Recovery Pending Disposal of References: The primary issue for determination was whether the High Court, in a reference under section 66(1) of the Indian Income-tax Act, 1922, or section 256(1) of the Income-tax Act, 1961, has the jurisdiction to pass an order granting stay of recovery of tax pending the disposal of the references. The court analyzed the provisions of section 66(1) and section 256(1), which allow for a reference to the High Court on a question of law arising out of the order of the Appellate Tribunal. The court noted that the Acts do not contain any express provision empowering the High Court to grant stay of recovery of tax. Consequently, the assessee invoked the inherent jurisdiction of the High Court under section 151 of the Code of Civil Procedure. The court referred to the decision of the Andhra High Court in Polisetti Narayana Rao v. Commissioner of Income-tax, which held that the High Court has inherent power under section 151 of the Code of Civil Procedure and article 227 of the Constitution to order stay of recovery of tax pending the disposal of the reference. The court emphasized the inherent powers of a court to act ex debito justitiae to do real and substantial justice. The court also considered the argument that the High Court's jurisdiction in a reference is advisory or consultative and not original, appellate, or revisional. However, it held that the inherent jurisdiction of the High Court is independent of the nature of its jurisdiction in the reference. The High Court, as a "court," has inherent jurisdiction to act ex debito justitiae if the circumstances of a case so demand. The court further examined the provisions of sections 260(1), 262(1), and 265 of the Income-tax Act, 1961, and their corresponding provisions in the Act of 1922. It concluded that these provisions do not preclude or prohibit the High Court from exercising its inherent jurisdiction to stay the recovery of tax. Section 265, which states that tax shall be payable notwithstanding a reference or appeal, was interpreted to mean that the liability to pay the tax continues and is not automatically suspended by the making of a reference or filing of an appeal. However, it does not imply that the High Court cannot stay the recovery of tax in a proper case. The court rejected the preliminary objection raised by the revenue and held that the High Court has inherent jurisdiction to stay the recovery of tax pending the disposal of the reference. 2. Merits of the Application for Stay of Tax Recovery: On the merits of the application for stay, it was admitted that the tax for the assessment years 1960-61 and 1962-63 had already been paid in full by L. Bansi Dhar in his personal assessment. The court acknowledged the considerable hardship that would be caused to the assessee if the H.U.F. were required to pay the tax again in respect of the same income, especially when the liability of the H.U.F. to pay the tax had not yet been finally decided. The court considered this a fit case for granting the stay but imposed a condition. The recovery of the amounts of tax demanded for the assessment years 1960-61 and 1962-63 was stayed on the condition that the assessee should furnish adequate security for the said amounts to the satisfaction of the concerned Income-tax Officer within six weeks. Conclusion: The High Court has inherent jurisdiction to stay the recovery of tax pending the disposal of a reference under section 66 of the Indian Income-tax Act, 1922, or section 256 of the Income-tax Act, 1961. The stay was granted on the condition of furnishing adequate security.
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