A.P. Sen, J.
1. By this application under article 226 of the Constitution, the petitioners, M/s. Badrilal Bholaram, Indore, and its partners, apply to this court for a writ of certiorari for quashing an order of the Income-tax Officer, Special Investigation Circle, Indore, dated 27th February, 1965, rejecting their application under Section 45 of the Income-tax Act, 1922 (Act No. XI of 1922), and for a writ of mandamus requiring him to forbear from enforcing the demands raised by him, for the assessment year 1959-60, till the disposal of the appeals filed by the partnership firm for the assessment years 1956-57 and 1958-59, and not to take any coercive measure for the enforcement of the demand.
2. The facts leading to this application, shortly stated, are these. The petitioners constituted a Hindu undivided family and were assessed n that status after the assessment year 1956-57. There was a partial partition of the family on 11th September, 1955, and on the next date, the petitioners entered into a partnership agreement to carry on the business which was previously carried on. The trend of assessment of the Hindu undivided family up to the assessment year 1956-57, is reflected in annexure 'A' to the petition. The assessments were arrived at only after making substantial additions to the result obtained from the books of accounts of the family. After the formation of the partnership firm, the income of thefirm and its individual partners for the assessment year 1956-57 onwards was determined by the Income-tax Officer, Special Investigation Circle, Indore, under Section 23(3) of the Income-tax Act, 1922, after rejecting the books of accounts and applying proviso to Section 13. The Income-tax Officer also made additions on account of profits from undisclosed sources and from the business carried on benami in other names. In the appeal for the assessment year 1956-57, preferred by the partnership firm, M/s Badrilal Bholaram, the Appellate Assistant Commissioner of Income-tax, by his order dated 7th February, 1963, remanded the case to the Income-tax Officer, Special Investigation Circle, Indore, with a direction to submit his report on certain points after an enquiry within six weeks from the receipt of the order. Similarly, in the appeal preferred by the firm for the assessment year 1957-58, the Appellate Assistant Commissioner remanded the case, by his order dated 22nd November, 1963, with a direction to submit a report within two months. Both these appeals were pending on the date this application was moved. In the meanwhile, the Income-tax Officer, Special Investigation Circle, Indore, made an assessment of the firm for the year 1958-59, and as against Rs. 85,521 returned as loss, he determined that profits amounting to Rs. 2,09,619 had been earned by the partnership firm, during the relevant year, and raised a demand for payment of Rs. 91,377-42 P. as tax. Against this order of assessment, the firm preferred an appeal which was still pending. Similarly, for the assessment year 1959-60, the Income-tax Officer, Special Investigation Circle, Indore, made an assessment of the partnership firm on 31st March, 1964, by which he rejected the books of accounts and resorted to the proviso to Section 13, whereby, he raised a tax demand to Rs. 3,16,423. The petitioners allege that the assessments were wholly arbitrary and unwarranted, and were deliberately made at the close of limitation. These are, however, matters not relevant for our present purposes. The appeals preferred against the assessments for these years are pending.
3. Before dealing with this application, it is necessary to set out a few more facts. For the three assessment years 1956-57, 1957-58 and 1958-59, the aggregated demand was Rs. 1,98,915.95 against the Hindu undivided family (now disrupted), the partnership firm and its individual partners. The Commissioner of Income-tax has admittedly granted instalments of Rs. 10,000 per month to the petitioners for payment of this tax. Thereafter, the petitioners applied to the Income-tax Officer, Special Investigation Circle, Indore, for staying the recovery of Rs. 3,16,423 due on account of the tax for the assessment year 1959-60, and, in the alternative, for merging this demand with the previous balance of Rs. 1,98,915.95 so that the entire amount could be paid off in instalments of Rs. 10,000 per month. This request was turned down by the Income-tax Officer andthereupon the petitioners approached the Inspecting Assistant Commissioner, the Commissioner of Income-tax, as also the Central Board of Revenue (Direct Taxes) with a request for staying the demand, but the authorities declined to interfere. , Thereafter, the petitioners again applied to the Income-tax Officer under Section 45 of the Income-tax Act, 1922. The Income-tax Officer called upon the petitioners to appear before him with their books of accounts on 25th February, 1965, and produce such other evidence as desired which would substantiate their allegation that they were really not in a position to pay the tax demanded. The petitioners, accordingly appeared before the Income-tax Officer and produced their books of accounts along with the abstracts showing their financial position and resources. The Income-tax Officer scrutinised the books of accounts and other papers, and ultimately passed the impugned order on 27th February, 1965, rejecting their application under Section 45 of the Income-tax Act, 1922.
4. This application must fail on the short ground that the discretion to treat an assessee as not being in default has to be exercised by the Income-tax Officer under Section 45 of the Income-tax Act, 1922, on the material before him, and this court cannot substitute its own discretion by issuing any writ or direction under article 226 of the Constitution if there is no failure on his part to discharge his duty. When an appeal is preferred against the assessment, that would not by itself entitle the assessee to withhold the payment of tax till the appeal is decided, but the Income-tax Officer, 'may in his discretion.... treat the assessee as not being in default' as long such appeal remains undisposed of. The Income-tax Officer's power to treat the assessee as not being in default is a power coupled with a duty, and in any event, it should be exercised fairly and reasonably and not arbitrarily or capriciously. Where the assessee has gone in appeal and the appeal is not frivolous, it may, in the special circumstances of a case, be the duty of the Income-tax Officer to refrain from enforcing payment of the tax under the notice of demand and to grant extension of time till the appeal is disposed of. If the Income-tax Officer fails to Discharge his duties, he may be compelled by a writ under Article 226 of the Constitution to stay his hands. See Kanga and Palkhivala's Income Tax (5th edition, pages 842-43, volume I). This principle is now well settled by the decisions of different courts in India: see, Vetcha Sreeramamurthy v. Income-tax Officer,  30 I.T.R. 252 (A.P.)., Vizianagaram, Vellore Govindarajulu Mudaliar v. Income-tax Officer, Adoni,  36 I.T.R. 133 (A.P.)., Aluminium Corporation of India Ltd. v. C. Balakrishnan,  37 I.T.R. 267 (Cal.)., Hardeodas Jagannath v. Income-tax Officer, Shillong,  43 I.T.R. 562 (Assam)., and P. C. Dwadesh Shreni and Co. (P.) Ltd. v. Income-tax Officer, Aligarh,  50 I.T.R. 622 (All.).
5. However, so long as the Income-tax Officer has exercised his discretion fairly and reasonably, the court should have no power to interfere. In the special circumstances of the present case, the Income-tax Officer, Special Investigation Circle, Indore, found on enquiry that the petitioners had wilfully failed to comply with the notice of demand although they were possessed of sufficient assets to enable them to meet the demand. The Income-tax Officer in holding them to be 'assessees in default', and in not staying the demand or granting any extension of time to them for payment of the tax by instalments or otherwise, has exercised his power fairly and reasonably. The entries in their books of accounts clearly show that the petitioners have been diverting very large sums of money with a view to withhold payment of tax in their design to defeat the tax demand.
6. There is no manner of doubt that the Income-tax Officer had afforded the petitioners a full and reasonable opportunity to substantiate by evidence, their alleged inability to make payment. He fixed a date of hearing and asked them to appear on that day before him with their books of accounts and other evidence and to satisfy him that any ground exists for granting them relief under Section 45 of the Income-tax Act. The books of accounts produced by the petitioners were scrutinised by the Income-tax Officer in their presence. The following observations from the Income-tax Officer's order clearly show that he has applied his mind to the requirements of the Section :
'It is seen that the assessees have been having large cash balances; have been making large investments in properties and have also been making payment in large amounts to others. At the same time they did not consider it necessary to make any payments towards the income-tax dues. In fact, I can see that in their scheme of avoiding the payment of tax, the partners have diverted large funds to investments in colonies where they are doing brisk business at the same time taking the plea that there are no liquid funds with the firm and the partners. I, therefore, feel convinced that the assessees have been deliberately withholding the payment. Their conduct also shows that they have been trying to gain time on one plea or the other. It was only when the last petition has been dismissed that they have given the threat that if the collection of tax was not stayed till decision of appeal, they will be taking particular steps. Certainly, the assessees have every right to seek protection of law available to them but the threat given at this stage and in the manner it has been done is, to say the least, most unreasonable.'
7. The result is that the application fails and is dismissed with costs. Hearing fee Rs. 100, if certified.