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Petition No. 254 of 1966, decided on 6th March 1968.

S. 45 read with Income‑tax Manual, Part III, page 227‑‑Exercise of discretion con templated by S. 45‑Can be manifest from specific order made on application or from action taken by Income‑tax Officer after filing of application‑Income‑tax Officer not bound to write out an order on application ‑ Demand notice for payment of tax after filing application ‑ Amounts to rejection of prayer for stay of realization of tax and such action sufficiently complies with requirement of law‑Discretion so exercised by Income‑tax officer, on making demand for payment of tax, cannot be said to have been exercised arbitrarily or capriciously‑Petitioner's prayer for staying realization of tax having been rejected by Commissioner of Income-tax in consultation with Income‑tax Officer ‑ Demand notice and distress warrant having been issued against petitioner‑Exercise of writ jurisdiction under Art. 98(2), on prayer to restrain Income‑tax Officer to realize tax, in circumstances, refused by High Court Constitution of Pakistan (1952), Art. 98 (2).

A. H. Mirza and M. Hassan for Petitioner.

Afzalul Haq for Respondent No. 1.

In this Rule obtained by the petitioner he prayed for a declaration that Memo. No. 2/10‑24/‑65‑66 dated 25‑5‑1966 issued by respondent No. 1 directing the petitioner to pa at least Rs. 50,000 by 15‑6‑66 and the balance in four equal monthly instalments beginning from July, 1966 was made without any lawful authority and of no legal effect and also for directing the respondent No. 1 to withdraw, cancel or rescind the same and respondent No. 3 to dispose of the petition filed by the petitioner on 31‑3‑66 in accordance with law and to forbear from realising the outstanding taxes for the assessment years 1959‑60, 1961‑62 and 1962‑63. A further prayer was for staying realisation of the outstanding taxes for the aforesaid years, which was granted by the Court for a period of two months from the date of the Rule, i.e., 20‑6‑66 and was later extended till the disposal of the Rule.

Petitioner's case is that respondent No. 3, the Income‑tax Officer, Dacca Circle A', assessed him for income for the assess ment years 1959‑60, 1960‑61, 961‑62 and 1962‑63. In respect of assessments for the year 1959-60 the petitioner filed an appeal challenging the assessment order. In regard to the assessments made for the years 1961‑62 and 1962‑63 no appeal had been bled by the Firm but appeals were filed by the partners of the Firm. On receipt of the Demand Notice for payment of taxes for the year 1959‑60, the petitioner, on 31‑3‑66, filed an application (Annexure E' to the petition) before the Income‑tax Officer (Respondent No. 3) praying for stay of realisation of the taxes till the disposal of the appeal filed and also for granting of instalments. 'This application related to the assessments for the years mentioned above. The petitioner filed similar applications to the Inspecting Assistant Commissioner as well as the Commis sioner of the Department. On 25th May 1966 the Assistant to Commissioner of Income‑tax (Admn.) Dacca Zone, by Memo. No. 2/10‑24/65-66 intimated the petitioner that he has been allowed to pay at least Rs. 50,0 t0 by 15‑6‑65 and the balance of the taxes in four equal monthly instalments beginning from July, 1966. It was further stated therein that if this direction for payment of tax was not complied with, the Income‑tax Officer would take necessary action in accordance with law for realisation of the outstanding demands.

Thereafter, it is said, that the petitioner not having paid any part of the taxes assessed, Distress Warrants were issued against him. On 20‑6‑66 the petitioner came to this Court and obtained the present Rule nisi as well as a stay order on the respondents restraining them from Realising the demands of the Department, as stated above.

Mr. A.H. Mirza, the 'learned Advocate for .the petitioner, submits that, in terms of the provisions of section 45 of the, Income‑tax Act (Act XI of 1922), the Income‑tax Officer (respon dent No. 3.) should not have treated the petitioner as being in default and issued the Distress Warrant and made any attempt to realise the taxes from the petitioner till the disposal of the Rule. His further submissions are that the, respondent No. 3 is bound, under section 45 of the Income‑tax Act read with the directions of the Central Board of Revenue to be found in Income‑tax Manual Part III at page 227 under heading "Sections 45, 46 and 47'", to stay realisation of the taxes till disposal of appeal, and also that he was bound to exercise his discretion, in disposing of the application of the petitioner dated 31‑3‑66, judiciously. He having not done so, there has been a violation of the provisions of section 45 of the, Income‑tax Act by respondent No. 3 and the impugned order (Annexure I') having been issued pursuant to such non‑observance of the provisions of section 45, is liable to be set aside, as it has no basis to be sustained in law.

The learned Advocate for respondent No. 1, Mr. Afzalul Haq, on the other hand, submitted that the application of the petitioner dated 31‑3‑66 was considered by the respondents including respondent No. 3 and the petitioner was given opportunity to pay up the dues in instalments as prayed for by him, although not for the amounts which he had wanted.

Mr. Mirza's contentions have been that discretion contemplated in section 45 of the Act must, udder all circumstances, be exercised by the Income‑tax Officer, whether in favour of the petitioner or not, and he cannot, without giving a specific order on the application made for staying realisation of the taxes, demand payment of the same from the petitioner. The issuance of mistress warrant after tiling of the petition lay the petitioner on 31‑3‑66 does not according to Mr. Mirza, constitute the disposal of the, said application by exercise of discretion by respondent No. 3. Further, he contended that the impugned order, having been passed by the Commissioner of Income‑tax and not by the Income‑tax Officer as contemplated by section 45 of the Income‑tax Act, the same cannot be said to have been legally done. He therefore, submits that, although it may be argued that by issuance of the Distress Warrant the application for the stay of realisation of taxes may have been disposed of, yet, the disposal having not been done by the Income‑tax Officer, he himself has not exercised the discretion as contemplated by law. Therefore, that application for stay of realisation of the taxes still remains to be disposed of and the respondents cannot proceed with the realisation of the taxes without first disposing of the said application.

Section 45 of the Income‑tax Act is in the following terms:-

"Any amount specified as payable in a notice of demand under subsection (3) of section 23‑A or under section 29 or an order under section 31 or section 33, shall be paid within the time, at the place and to the person mentioned in the notice or order, or if a time is not so mentioned, then on or before the first day of the second month following the date of the service of the notice or order, and any assessee failing so to pay shall be deemed to in default, provided that, when an assessee has presented an appeal under section 30 or clause (a) of subsection (1) of section 33, the Income‑tax Officer may subject to the 'provision of section 45‑A in his discretion treat the assessee as not being in default as long as such appeal is un-disposed of:

Provided further that where an assessee has been assessed in respect of income arising outside Pakistan in a country the laws of which prohibit or restrict the remittance of money to Pakistan the Income‑tax Officer shall not treat the assessee as in default in respect of that tax which is due in respect of that account of his income which by reason of such prohibition or restriction cannot be brought into Pakistan and shall continue to treat the assessse as not in default in respect of such part of the tax until prohibition or restriction if removed.

‑For the purposes of this section income shall be deemed to have been brought into Pakistan if it has been utilized or could have been utilized for the purposes of any expenditure actually incurred by the assessee without Pakistan or if the income whether capitalized or not has been brought into Pakistan in any form."

Reading the provisions of this section along with the instructions given by the Central Board of Revenue, it cannot be said that the Income‑tax Officer has got to write out an order, either short or long, in rejecting the application for stay of realisation of taxes in a case like this. The exercise of the discre tion contemplated by section 45 can be manifest from a specific order made on the petition or from the actions taken by the officer after filing of such petition. In the present case, from, the records which have been placed before us, it is found that the petitioner applied for stay of realisation of the taxes to the Income‑tax Officer as well as to the Inspecting Assistant Commissioner and the Commissioner of Income‑tax. Within a couple of days, after the receipt of the application dated 31‑3‑66, the matter was dealt with at the higher level by the Inspecting Assistant Commissioner and the Commissioner, and the petition for staying realisation of the penalties was rejected but the prayer of the petitioner for paying up the taxes in instalments was granted, as will be found from Annexure I, the impugned order. From this, it cannot be said, as has been contended by Mr. Mirza, the discretion exercised, if at all by the Income-tax Officer, was capricious or arbitrary.

No doubt the discretion has to be exercised by the Income tax Officer as contemplated by section 45, but in the present case it cannot also be said that the Income‑tax Officer did not apply his mind to the application of the petitioner. From the file it is clear that in the letter which he addressed to the Inspect ing Assistant Commissioner on the prayer of the petitioner he has clearly stated in short the facts of the case and the same was considered, as we have already observed, by the Income‑tax Officer, the Inspecting Assistant Commissioner and the Commis sioner himself thereafter, the impugned order was passed by the Commissioner and issued by his office under the signature of the Assistant to the Commissioner of Income‑tax (Admn.) who, are told, is a Class I Gazetted Officer of the Department. There fore, upon the facts of this case, it cannot be argued that the discretion contemplated under section 45 has not either been at all exercised or has been exercised capriciously or arbitrarily.

Apart from that, the petitioner having applied to the highest authority in the Department, namely, the Commissioner, for granting the same relief which he had asked from the Income‑tax Officer, and the Commissioner having himself passed the order rejecting the prayer for staying realisation of the taxes, the Income‑tax Officer had thereafter no further opportunity of exercising his discretion in any other manner.

In any view of the matter, we are of the opinion that the discretion, to be exercised under section 45 in a matter of this kind, cannot be said to have been arbitrarily or capriciously exercised when demands were made for payment of the taxes. That amounts to rejection of the prayer for stay of realisation of the taxes and such an act sufficiently complies with the requirements of law.

In cases of this nature, and on facts as are pertaining to the present case, we find very little rather no scope of exercise of jurisdiction under Article 98(2) of the Constitution.

In the result, therefore, we find no substance in this applica tion of the petitioner and the Rule obtained by him is accordingly discharged. We leave the parties to bear their own costs.

.‑I agree.

Rule discharged.

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