Industrial Infrastructure Development Corpn. (Gwalior) M.P. Ltd. vs CIT

Industrial Infrastructure Development Corporation(Gwalior) M.P. Ltd. ….Appellant(s)

VERSUS

Commissioner of Income Tax, Gwalior …Respondent(s)

JUDGMENT

Abhay Manohar Sapre, J.

1. This appeal is directed against the final

judgment and order dated 14.03.2007 passed by

the High Court of Madhya Pradesh at Gwalior in

Misc. Appeal(Income Tax) No.6 of 2005 whereby the

Division Bench of the High Court allowed the appeal

Signature Not Verified filed by the respondent and set aside the order Digitally signed by ASHA SUNDRIYAL Date: 2018.02.16 15:47:09 IST Reason: 1 passed by the ITAT and restored the order of the

Commissioner of Income Tax.

2. The question involved in the appeal lies in a

narrow compass. Few facts, however, need mention

to appreciate the same.

3. The appellant is a limited company registered

under the Companies Act. It is a State Government

Undertaking which is established with a view to

develop and assist the State in the development of

industrial growth centers/areas, to promote,

encourage and assist the establishment growth and

development of industries in the State of M.P. The

appellant is an "assesse" under the Income Tax Act,

1961 (hereinafter referred to as “the Act”).

4. On 10.02.1999, the appellant filed an

application in the format prescribed under Section

12-A of the Act to the Commissioner of Income Tax

(hereinafter referred to as “the CIT”) for grant of

registration. According to the appellant, since they

2 were engaged in public utility activity which,

according to them, was for a charitable purpose

under Section 2(15) of the Act, they were entitled to

claim registration as provided under Section 12 (A)

of the Act. Since the application for registration was

delayed in its filing, the appellant also made an

application for condonation of delay in filing the

application.

5. By order dated 13.04.1999, the CIT (Gwalior)

condoned the delay and granted the registration

certificate as prayed for by the appellant. In clause

3 of the registration certificate, it was mentioned

that the certificate is granted without prejudice to

the examination on merits of the claim of exemption

after the return is filed.

6. On 27.11.2000, the CIT issued a show cause

notice to the appellant stating therein as to why the

registration certificate granted to the appellant by

order dated 10.02.1999 under Section 12A of the

3 Act be not cancelled/withdrawn. The show cause

notice also set out the factual grounds for the

withdrawal of the registration certificate. The

appellant was asked to reply the show cause notice.

The appellant accordingly filed their reply and

opposed the grounds on which the

withdrawal/cancellation of the certificate was

proposed.

7. By order dated 29.04.2002, the CIT did not

find any substance in the stand taken by the

appellant in their reply and accordingly

cancelled/withdrawn the certificate issued to the

appellant.

8. The appellant felt aggrieved and filed

rectification application under Section 154 of the

Act before the CIT on 04.07.2002 contending

therein that the order of the CIT dated 29.04.2002

cancelling/withdrawing the registration certificate

contains an error apparent and, therefore, it is

4 required to be rectified or/and recalled. It was

contended that once the CIT grants the registration

certificate under Section 12A, he has no power to

cancel/recall the certificate granted to the Assessee.

9. On 20.12.2002, the CIT rejected the

application filed by the appellant for rectification

holding that there was no error in his order

cancelling the registration certificate granted to the

appellant. In other words, the CIT held that he had

the power to cancel the certificate once granted by

him and, therefore, the order for cancelling the

registration certificate is legal and proper.

10. Aggrieved by the said order, the appellant filed

an appeal before the Income Tax Appellate Tribunal,

Agra Bench. By order dated 26.08.2004, the ITAT

allowed the appellant's appeal and set aside the

order dated 29.04.2002 passed by the CIT by which

he had cancelled/withdrawn the registration

certificate.

5

11. The Revenue felt aggrieved by the order of the

ITAT and filed appeal in the High Court at Gwalior

Bench under Section 260-A of the Act. The High

Court, by impugned order, allowed the appeal filed

by the Revenue and set aside the order passed by

the ITAT and restored the order of the CIT.

12. The Division Bench of the High Court placed

reliance on Section 21 of the General Clauses Act

and held that since there is no express power in the

Act for cancelling the registration certificate under

Section 12A of the Act and hence power to cancel

can be traced from Section 21 of the General

Clauses Act to support such order. In other words,

in the opinion of the High Court, Section 21 is the

source of power to pass cancellation of the

certification granted by the CIT when there is no

express power available under Section 12A of the

Act.

6

13. It is against this order, the assessee felt

aggrieved and filed this appeal by way of special

leave before this Court.

14. None appeared for the appellant (assessee). Mr.

Radhakrishan, learned Counsel appeared for the

respondent (Revenue).

15. Having heard the learned counsel for the

Revenue and on perusal of the record of the case,

we are inclined to allow the appeal and while setting

aside the impugned order, restore the order of the

ITAT.

16. The main questions, that arise for

consideration in this appeal, are four:

17. First, whether the CIT has express power to

cancel/withdraw/recall the registration certificate

once granted by him under Section 12A of the Act

and, if so, under which provision of the Act?

18. Second, when the CIT grants registration

certificate under Section 12A of the Act to the

7 assessee, whether grant of certificate is his quasi

judicial function and, if so, its effect on exercise of

his power of cancellation of such grant of

registration certificate?

19. Third, whether Section 21 of the General

Clauses Act can be applied to support the order of

cancellation of the registration certificate granted by

the CIT under Section 12A of the Act, in case, if it

is held that there is no express power of

cancellation of registration certificate available to

the CIT under Section 12A of the Act? and

20. Fourth, what is the effect of the amendment

made in Section 12AA introducing sub-clause(3)

therein by Finance (No-2) Act 2004 w.e.f.

01.10.2004 conferring express power on the CIT to

cancel the registration certificate granted to the

assessee under Section 12A of the Act.

21. In our considered opinion, the CIT had no

express power of cancellation of the registration

8 certificate once granted by him to the assessee

under Section 12A till 01.10.2004. It is for the

reasons that, first, there was no express provision in

the Act vesting the CIT with the power to cancel the

registration certificate granted under Section 12A of

the Act. Second, the order passed under Section

12A by the CIT is a quasi judicial order and being

quasi judicial in nature, it could be

withdrawn/recalled by the CIT only when there was

express power vested in him under the Act to do so.

In this case there was no such express power.

22. Indeed, the functions exercisable by the CIT

under Section 12A are neither legislative and nor

executive but as mentioned above they are

essentially quasi judicial in nature.

23. Third, an order of the CIT passed under

Section 12A does not fall in the category of "orders"

mentioned in Section 21 of the General Clauses Act.

The expression "order" employed in Section 21 9 would show that such "order" must be in the nature

of a "notification", "rules" and "bye laws" etc. ( see –

Indian National Congress(I) vs. Institute of

Social Welfare & Ors., 2002 (5) SCC 685).

24. In other words, the order, which can be

modified or rescinded by applying Section 21, has

to be either executive or legislative in nature

whereas the order, which the CIT is required to pass

under Section 12A of the Act, is neither legislative

nor an executive order but it is a "quasi judicial

order". It is for this reason, Section 21 has no

application in this case.

25. The general power, under Section 21 of the

General Clauses Act, to rescind a notification or

order has to be understood in the light of the

subject matter, context and the effect of the relevant

provisions of the statute under which the

notification or order is issued and the power is not

available after an enforceable right has accrued

10 under the notification or order. Moreover, Section

21 has no application to vary or amend or review a

quasi judicial order. A quasi judicial order can be

generally varied or reviewed when obtained by fraud

or when such power is conferred by the Act or Rules

under which it is made. (See Interpretation of

Statutes, Ninth Edition by G.P. Singh page 893).

26. Relying upon the aforementioned rule of

interpretation, this Court has held that the

Government has no power to cancel or supersede a

reference once made under Section 10(1) of the

Industrial Disputes Act, 1947. [See- State of Bihar

vs. D.N. Ganguly & Ors. (AIR 1958 SC 1018)].

Similarly, on the same principle it is held that the

application of Section 21 of the General Clauses Act

has no application to amend or rescind or vary a

notification issued under Section 3 of the

Commissions of Enquiry Act for reconstituting the

commission by replacement or substitution of its

11 sole member except applicable for a limited purpose

for extending the time for completing the enquiry. (See- State of Madhya Pradesh vs. Ajay Singh,

AIR 1993 SC 825). It is also held while construing

the provisions of Citizenship Act that the certificate

of registration of citizenship issued under Section

5(1)C of the Citizenship Act cannot be cancelled by

the authority granting the registration by recourse

to Section 21 of the General Clauses Act. (See-

Ghaurul Hasan vs. State of Rajasthan, AIR 1967

SC 107 and Hari Shanker Jain vs. Sonia Gandhi,

AIR 2001 SC 3689). And lastly, while construing

the provisions of the Representation of People Act, it

is held that the Election Commission cannot, by

recourse to Section 21 of the General Clauses Act,

deregister or cancel the registration of a political

party under Section 29A of the Act for the decision

of the Commission to register a political party under

12 Section 29A(7) of the Act is a quasi judicial in

nature. [See Indian National Congress(I) (supra)]

27. It is not in dispute that an express power was

conferred on the CIT to cancel the registration for

the first time by enacting sub-Section (3) in Section

12AA only with effect from 01.10.2004 by the

Finance (No.2) Act 2004 (23 of 2004) and hence

such power could be exercised by the CIT only on

and after 01.10.2004, i.e., (assessment year

2004-2005) because the amendment in question

was not retrospective but was prospective in nature.

28. The issue involved in this appeal had also

come up for consideration before three High Courts,

namely, Delhi High Court in the case of Director of

Income Tax (Exemptions) vs. Mool Chand Kairati

Ram Trust, (2011) 243 CTR(Del) 245, Uttaranchal

High Court in the case of Welham Boys’ School

Society vs. CBDT, (2006) 285 ITR 74(Uttaranchal)

and Allahabad High Court in the case of Oxford

13 Academy for Career Development vs. Chief

Commissioner of Income Tax & Ors. (2009) 315

ITR 382 (All).

29. All the three High Courts after examining the

issue, in the light of the object of Section 12A of the

Act and Section 21 of the General Clauses Act held

that the order of the CIT passed under Section 12A

is quasi judicial in nature. Second, there was no

express provision in the Act vesting the CIT with

power of cancellation of registration till 01.10.2004;

and lastly, Section 21of the General Clauses Act has

no application to the order passed by the CIT under

Section 12A because the order is quasi judicial in

nature and it is for all these reasons the CIT had no

jurisdiction to cancel the registration certificate

once granted by him under Section 12A till the

power was expressly conferred on the CIT by

Section 12AA(3) of the Act w.e.f. 01.10.2004.

14

30. We are of the considered view that the view

taken by the abovementioned three High Courts in

the respective cases is in conformity with law and

we accordingly approve the said view taken by these

High Courts in three aforementioned decisions.

31. In the light of the foregoing discussion, the

appeal succeeds and is allowed. Impugned order is

set aside and the order of ITAT is restored.

32. Needless to say, the CIT would be free to

exercise his power of cancellation of registration

certificate under Section 12AA(3) of the Act in the

case at hand in accordance with law.

………...................................J. [R. K. AGRAWAL]

…...……..................................J. [ABHAY MANOHAR SAPRE]

New Delhi;

February 16, 2018

15