(1) There are two petitions for the issue of separate writs in the nature of certiorari quashing orders dated 31-7-1963 in appeal No. B-1 4602 of 1963 and B-14603 of 1963 passed by the Asst. Commissioner of Commercial Taxes, Hyderabad, South Division and for directing further the 1st respondent to stay the demand of tax, entertain the petitioner's appeals filed on 14th May 1963 and dispose them of on merits according to law.
(2) The facts giving rise to these proceedings may be shortly stated:-
The petitioner, Ghanshamdas, son of Laduram, resident of Nizamabad carried on business in grains and as commission agents, as the kartha of the joint family under the name and style of 'Shivnarayan Laduram' for several years. The said firm is an assesee on the record of the Sales Tax Department and has been ever submitting its returns regularly. For the assessment year 1956-57 it was assessed to a tax of about Rs. 25,000/- on a turnover of Rs. 7,05,081/2 nP. For the succeeding year on a gross turnover of Rs. 32,35,186/5/3 it was assessed to a tax of only Rs. 23,277/07nP as second point purchase exemption was allowed on a turnover of Rs. 23,63,213/119. On appeal this tax was further reduced and eventually the tax payable for that year was only Rs. 16,311/67nP. In this was also included the central sales tax to the extent of Rs. 75/-. For the assessment year 1958-59 with which we are concerned in this proceeding, the said firm is said to have submitted in the office of the Commercial Tax Officer, Nizamabad its returns in form A-2 every month as required by the Andhra Pradesh General Sales Tax Act and Nil returns in respect of central sales tax. The Petitioner complains that the Commercial Tax Officer, towards the end of the year 1958 seized all these accounts books for the year 1955-56, 1957-58 and the Special Commercial Tax Officer, likewise, took away the account books, purchase books etc., maintained up to date for the period 1958-59, and that these books were not returned as a result of which he could not submit his income-tax returns etc., nor could he make recoveries of his outstanding. It is his further case that the Commercial Tax Officer, Nizamabad after a lapse of more than 3 years on 20th February 1963 called upon the petitioner to produce the necessary evidence in support of A-2 returns for completing the final assessment for the year 1958-59 fixing the date of hearing as 5th March 1963. As the account books and purchase vouchers were in possession of the Commercial Tax Officer the Petitioner requested a fortnight's time for completing the list of second purchases and allied statements. Only two days' time was granted which was insufficient for the purpose. However, with great difficulty he submitted the list of second point purchases relating to the period in question, claimed exemption therefore and objected to the proposed estimate.
The Commercial Tax Officer estimated the total turnover at Rs. 36,19,666.78np and proposed to levy tax aggregating to Rs. 1,23,733.77np without allowing exemption for the second point purchases. The Petitioner requested the officer to examine the list of the second point purchases and verify the same with the account books and purchases vouchers which were with him (the officer). He also said that his business was seasonal in character and could not therefore be uniform for all the months throughout the year. The officer, according to the Petitioner, declined to examine the list of second point purchases and to verify the same from the vouchers mostly in his possession and eventually made his order dated 7th March 1963 which was served on the petitioner on 15th April 1963. The case of the petitioner is that the levy was arbitrary and unreasonable and bore no relation to the tax paid either in the earlier or in the subsequent years for even for the assessment year 1959-60 notwithstanding that the Commercial Tax Officer had added 15% to the gross turnover returned by the Petitioner the assessed tax was only Rs. 51,605-16 paise. The tax being excessive, the petitioner prefered his appeal under the Andhra Pradesh General Sales Tax Act before the Asst. Commissioner Taxes, Hyderabad. He made grievance against the assessment under the Central Sales Tax Act as well for the same year. That was levied after the Commercial Tax Officer, Nizamabad had issued a notice dated 20th February 1963 (which was served on the petitioner on 2-3-1963) calling upon him to produce the necessary evidence in support of his contention., The case of the Petitioner was that he did not do any business which attracted the levy of tax under the Central Sales Tax Act in that year. The Commercial Tax Officer, however, assessed the petitioner in this behalf to a tax of Rs. 1,00,570/63nP on a turnover of Rs. 21,93,195. The petitioner thereupon filed his appeal under the Central Sales Tax Act. In the memoranda filed in both the appeals, the Petitioner characterized the assessment as grossly unjust, arbitrary and illegal. Heavy as the tax was, levied under two Acts for the same year, he expressed his utter inability to pay the same and requested the appellate authority to stay the payment of the pending disposal of appeals in view of the circumstances mentioned by him. These memoranda were submitted on the 14th May 1963.
The case of the Petitioner is that the appellate authority did not apply its mind to the facts stated by him to come to the conclusion whether it was fit case for exercise of its discretion and eventually made an order summarily rejecting the appeal on the ground that the Petitioner in response to notice dated 20-5-1963 failed to pay the balance of tax levied and to produce proof of such payment within 10 days after receipt of the said notice. The petitioner contends that it was obligatory on the part of the appellate authority to consider the grounds stated in the memorandum of appeal before he could pass any order. It is also his complaint that the Petitioner could not know till the order of rejection of the appeals was communicated to him on 20-10-1963 that the say order has not been granted and the whole tax was demanded to be paid for entertaining the appeals.As under the provisions of law he could not appeal to the Appellate Tribunal without payment of the entire tax, which is beyond his capacity and as he has no other efficacious alternative remedy available to him, he has come to this court for the issue of a writ of certiorari.
(3) The respondent in the counter said that the assessee himself has voluntarily deposited the books for the year 1958-59 and that the books of account seized by the Special Commercial Tax Officer related only to the period from 11-11-1958 to 31-3-1959 and 1-4-1959 to 2-5-1959. The Petitioner failed to produce the books for the period 1-4-1958 to 10-11-1958. For the said assessment the case was first posted to 19-8-1959 and again to 30-11-1959. But the assessee failed to respond to the notices. The matter was taken up ultimately in the year 1963. A show cause notice was issued on 20-2-1963 and the assessment was finalised in accordance with law. The Petitioner no doubt climax exemption; but that could not be allowed in the absence of proof of secondary purchases. The petitioner did not produce books. So the turnover for the period from 1-4-1958 to 10-11-1958 was estimated on the basis of information available.
(4) As regards he appeals filed, it was said that since the petitioner in spite of notices given to him on 25-3-1963 to produce proof of payment of tax within 10 days of the receipt of notice did not comply with the said order, the appeals were rightly rejected. It was open to the petitioner to prefer an appeal before the Tribunal. As there is effective remedy thus open to the petitioner, he cannot invoke the jurisdiction of this Court under Article 226 of the Constitution.
(5) The rival contentions raise two points for determination:-
(1) Whether it is a case where the appellate authority failed to exercise his power of discretion conferred on him by law; if so, whether such a failure warrants interference by this Court?
(2) When a regular appeal is open to the aggrieved party, can he invoke the writ jurisdiction of this Court under Article 226 of the Constitution?
(5-A) The two conditions that were attached to the appeal were that it should be filed within 30 days from the date of the service of the order and should be accompanied by satisfactory proof of payment of tax. The appeals filed by the petitioner satisfied the first condition; but not the second. However, even that is not a condition which could not be waived. Section 19(1)(b) which is relevant for the purpose reads thus:-
'no appeal against an order of assessment shall be entertained under this sub-section unless it is accompanied by satisfactory proof of the payment of the tax assessed and the penalty, if any, levied or of such installments thereof as have become payable; but the appellate authority may in its discretion stay the payment of the whole or part of the tax assessed or any penalty levied.'
Thus it was open to the appellate authority to direct stay of the payment either of the whole or a part of the tax and entertain the appeal. Indeed it was left to his discretion to do so; albeit it is a discretion to be excised judicially and not arbitrarily or capriciously. The expression 'may in its discretion stay the payment' employed in the above provision does not mean that he can exercise his discretion at will. The discretion conferred by the Statute was not absolute. It was couple with duty for when the legislature has given discretion it is not given in vain. It has been certainly given with the avowed object of being exercised in proper cases. The authority was bound to consider all the circumstances of the case and come to a conclusion whether it is a fit case where in exercise of his discretion he should stay the payment either of the whole amount or part of the amount pending appeal. It is a different thing if after applying his mind he came to a conclusion that the payment cannot be stayed; but he cannot forget that it is his duty to apply his mind to the facts and circumstances alleged to come to a conclusion. If he forgets to do so, he abdicates his function. The superior Court in that case shall rouse, him to his duty.
(6)The record in this case discloses that the appellate authority did not advent to the facts of the case to come to the conclusion whether he should exercise his discretion in favour of the appellant in these appeals. There is nothing to suggest that he considered the grounds raised in the appeals and the reasons given in support of the plea of stay. All that could be gathered is that the assessee was served with a notice that he should pay the balance of tax levied and produce proof of payment within 10 days of the receipt of that notice. Even if that is correct, though the petitioner denied such service, it does not appear that the issuance of notice was not a mere official routine but was the consequence of a considered opinion of the appellate authority after applying its mind to the circumstances referred to in the memorandum of appeal. There is no speaking order of the appellate authority. The notice given does not suggest in the least that the plea of stay was ever noticed or considered. In these circumstances. The inference is irresistible that the appellate authority failed to do its duty cast upon it by the statute thus rendering itself amenable to writ jurisdiction. There is a large consensus of judicial opinion in support o this conclusion. Of course in most of these cases the conclusions were based on the construction of a similar expression 'may in its discretion' occurring in Section 45 of the Income-Tax Act, 1922. In Vetcha Sreeramamurthy v. Income Tax Officer AIR 1957 AP 114 Subba Rao, C. J. , (as he then was) while construing the said expression observed as follows:-
'The discretionary statutory power conferred upon an authority for the public good is coupled with a duty to perform it under relevant circumstances. The fact that the exercise of the power is left to the discretion of the authorised person does not exonerate him from discharging his duty. If the discretionary power so conferred is exercised arbitrarily, capriciously or unreasonably or by taking into consideration extraneous and irrelevant considerations, in the eye of law, the authority concerned must be deemed not to have exercised the discretion at all, that is, he has not discharged his duty.'
Viswanatha Sastri, J., (in the same case) expressed himself thus:-
'If an Income-tax Officer declines to hear and consider the application of an assessee under Section 45 for an order of stay of collection of the tax pending an appeal from the order of assessment, he fails to perform a duty case on him by the section and which is enforceable by mandamus. In such a case the officer refuses to exercise a jurisdiction given to him.'
A similar point had arisen in connection with Section 31(5) of the Madras General Sales Tax Act in Krishnappa Naicker v Deputy Commercial Tax Officer, Thiruvannamalai (1963) 14 STC 162 (Mad) Supra, which sub-section was to the following effect:-
'Notwithstanding that an appeal has been preferred under Sub-section (1), the tax shall be paid in accordance with the order of assessment against which the appeal has been preferred.
Provided that the appeal Assistant Commissioner may, in his discretion, give such direction as he thinks fit in regard to the payment of the tax before the disposal of the appeal, if the appellant furnishes sufficient security to his satisfaction, in such form and in such manner as may be prescribed.'
Therein Jagadisan, J., cited with approval the observations of Subba Rao, C. J., (as he then was) in AIR 1957 A P 114 supra and observed thus:-
'Undoubtedly the Appellate Asst. Commissioner has discretion to stay the collection of tax pending the appeal on such terms as he thinks fit, if the appellant furnishes security to his satisfaction. It is however wrong to assume that the exercise of discretion is only a naked arbitrary power to reject the applications for stay of recovery of tax pending the appeal......
The statute has conferred upon him the power to grant stay. He therefore owes a duty to examine and scrutinize the grounds on which the stay is asked for by the appellant. If the duty is ignored or perfunctorily performed, it cannot be said that the power has been properly exercised. Imposition of tax and penalty on the assessee is sometimes heavy and onerous and it is but just and fair that the assessee should get some respite in a proper case until him appeal against the order of assessment is heard and disposed of.'
In Aluminium Corporation of India Ltd. V. Balakrishnan : 37ITR267(Cal) the Calcutta High Court construing the expression 'may in its discretion' emploed under S. 31(3) of the Wealth Tax Act, came to similar conclusion. That provision reads thus:
Notwithstanding anything contained in Section 31, where an assessee has presented an appeal under Section 23, the Wealth-tax Officer may in his discretion treat the assessee as not being in default as long as such appeal is disposed of.'
Sinha, J., in his judgment referred to the following dictum of Das Gupta, J. In Kashiram Agarwalla v. Collector of 24-Parganas : AIR1958Cal524 :
'......... Whether or not an assessee would be considered to be in default after an appeal is filed against the assessment is a matter entirely in the discretion of the Income-tax Officer, who has, however, to exercise his discretion after due regard to the circumstances of the case. If in a particular case, the question of exercise of discretion has not been considered properly by the Income-tax Officer that might be good ground for issuing a writ directing him to treat the assessee to be not in default'
Then the learned Judge observed:-
'In my opinion, the law has been rightly laid down by Das Gupta, J., and there can be no doubt that the matter is one of discretion to be exercised judicially. A judicial exercise of discretion involves a consideration of the fact and circumstances of the case in all its aspects. The difficulties involved in the issues raised in the case and the prospects of the appeal being successful is one such aspect. The position and economic circumstances of the assessee is another. If the Officer feels that the stay would put the realization of the amount in jeopardy that would-be a cogent factor to be taken into consideration. The amount involved is also a relevant factor. If it is a heavy amount, it should be presumed that immediate payment, pending an appeal in which there may be a reasonable chance of success, would constitute a hardship.'
(7) The learned Judge finally held that the authority concerned did not apply his mind judicially to the question and did not consider all the possible aspects of the matter that are relevant in making his order. On that ground he quashed the order of the rejection and sent case back to the officer to consider the matter in accordance with law.
(8) In another case Laduram Taparia v. B. K. Bagchi, 1951 20 ITR 61 Bose, J. Construed the expression ' may in his discretion' in Section 45 of the Income-tax Act and held in the circumstances of that case that there was a duty on the respondent to refrain from enforcing payment of tax under the notice of demand and to grand extension of time till the appeal is disposed of by the appellate authority.
(9) These authorities make it abundantly clear that the discretion confer by the statute is coupled with duty which the authority can neither ignore nor perfunctorily perform but has to exercise it properly and with judicious care. The expression 'may in its discretion' employed in Section 19 (1) (b) of the Andhra Pradesh General Sales Tax Act indeed has the same connotations and implications. A duty therefore was cast upon the Appellate Asst. Commissioner to apply his mind to the various circumstances referred to in the grounds of appeal and come to a conclusion whether the should exercise his discretion in favour of the appellant or not. This duty he has failed to discharge, as a result of which the appeals eventually suffered the fate of summary rejection. In such cases it is perfectly within the powers of this Court to interfere with the order passed, in exercise of its extraordinary jurisdiction and direct the officer to act in accordance with law. Such power is exercisable notwitstanding that an appeal against the order of summary rejection lay to the Appellate Tribunal for it is obvious that that remedy is not quite handy and is onerous, besides. The writ petitions are therefore allowed with costs in W. P.No. 240/64. The order dated 31-7-63 rejecting the appeal is quashed and the appellate authority is directed to deal with the appeals in accordance with law from the stage immediately prior to the notice dated 20-5-63 calling upon the petitioner to pay the balance of tax or produce proof within 10 days of the reference. Advocate's fee Rs. 100.
(10) Petition allowed.