Seth Gopaldas Paliwal vs Wealth-tax Officer and Another

G.P. Singh, C.J.—By this petition under Article 226 of the Constitution, the petitioner challenges the orders passed by the WTO, F-Ward, Bhopal, on March 20, 1980, and March 27, 1980, (Annexures D and J), refusing to exercise his discretion in favour of the petitioner u/s 31(6) of the W.T. Act, 1957. Notice for admission of this petition was issued to the respondents. The standing counsel has appeared for the Department. With the consent of the learned counsel the petition is heated on merits.

The facts briefly stated are that the petitioner was assessed to wealth-tax for the years 1964-65 to 1974-75 in the status of an HUF and the total demand outstanding against the petitioner is Rs. 9,65,000. The petitioner''s case of partial partition was rejected on the ground that the father has no right to create a partial partition in the family without the consent of the adult members relying upon Commissioner of Income Tax Vs. Seth Gopaldas (H.U.F.), . Leave to appeal against this decision has been granted by this court and the matter is pending in appeal before the Supreme Court. The aforesaid decision was rendered by this court in Income Tax assessment and the same was followed by the WTO in the wealth-tax assessment. The petitioner''s appeal against the assessment made by the WTO for the aforesaid years are pending before the CWT (Appeals). In view of the pendency of these appeals, the petitioner applied u/s 31(6) of the W.T. Act to the WTO for stay of demand and not to treat him in default during the pendency of appeals. It is this application which has been dismissed by the impugned orders mentioned above.

The impugned orders of the WTO contained no reasons. No hearing was given to the petitioner before passing the said orders. Section 31(6) of the W.T. Act, corresponds to Section 220(6) of the I.T. Act, 1961. It is now well-settled law that the exercise of the discretion by the ITO u/s 220(6) is a quasi-judicial function and that he has to exercise his power fairly and reasonably and not arbitrarily or capriciously. The nature of the quasi-judicial function requires that the ITO should give reasons for dismissing an application made by an assessee for invoking his discretion and should also hear the assessee (Kanga and Palkhivala''s Income Tax, Vol. 1, 7th edition, p. 1075). The same principle must apply in the application of Section 31(6) of the W.T. Act. As the WTO passing the impugned orders did not hear the petitioner and did not give any reasons, the orders cannot be allowed to stand.

The petition is allowed. The impugned orders are quashed. The WTO is directed to decide the petitioner''s application u/s 31(6), judicially in the light of the observations made above. There will be no order as to costs of this petition.