Case: Industrial Infrastructure Development Corporation(Gwalior) M.P. Ltd Vs. Commissioner of Income Tax, Gwalior

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 filed by the respondent and set aside the order 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 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certificate granted to the appellant by order dated 10.02.1999 under Section 12A of the Act be not cancelled/withdrawn.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 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 appellants appeal and set aside the order dated 29.04.2002 passed by the CIT by which he had cancelled/withdrawn the registration certificate.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.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).

Decision reasoning: 1[ds]21. In our considered opinion, the CIT had no express power of cancellation of the registration 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 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 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).It is not in dispute that an express power was conferred on the CIT to cancel the registration for the first time by enacting(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 yearbecause the amendment in question was not retrospective but was prospective in nature.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.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 WelhamSchool Society vs. CBDT, (2006) 285 ITR 74(Uttaranchal) and Allahabad High Court in the case of Oxford 14 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.