Industrial Infrastructure Development Corporation (Gwalior) M.p. Ltd v. Commissioner Of Income Tax, Gwalior

INDUSTRIAL INFRASTRUCTURE DEVELOPMENTCORPORATION (GWALIOR) M.P. LTD. COMMISSIONER OF INCOME TAX, GWALIOR (Civil Appeal No. 6262 of 2010) FEBRUARY 16, 2018 [R. K. AGRAWAL AND ABHAY MANOHAR SAPRE, JJ.] Income Tax Act, 1961 – s.12-A and s.12-AA(3) – Cancellationof registration certificate under the Act by CIT – Power of –Appellant-company filed application u/s.12-A to the Commissionerof Income Tax (CIT) for grant of registration – Registrationcertificate was granted by the CIT vide order dated 13.04.1999 –However, on 27.11.2000 the CIT issued show cause notice to cancel/withdraw the registration certificate granted – Thereafter, CITcancelled/withdrew the certificate vide order dated 29.04.2002 –Appellant filed rectification application and contended that the CIThad no power to cancel/recall the certificate – CIT held order ofcancellation as legal and proper – Aggrieved, appellant filed appealbefore Income Tax Appellate Tribunal (ITAT), which set aside theorder of the CIT – However, High Court set aside the order of ITATand restored the order of the CIT and held that since there is noexpress power in the Act for cancelling the registration certificateu/s.12-A and hence power to cancel can be traced from s.21 of theGeneral Clauses Act to support such order – Propriety of – Held:Not proper – There was no express provision in the Act vesting theCIT with the power to cancel the registration certificate grantedu/s.12-A and such power of cancellation could be exercised by theCIT only on and after 01.10.2004 vide s.12AA(3) by Finance (No.2)Act 2004 – Order passed u/s.12-A by the CIT is a quasi judicialorder and being quasi judicial in nature, it could be withdrawn/recalled by the CIT only when there was express power vested inhim under the Act to do so – In instant case, there was no suchexpress power – An order of the CIT passed u/s.12-A does not fallin the category of “orders” mentioned in s.21 of the General ClausesAct – The expression “order” employed in s.21 would show thatsuch “order” must be in the nature of a “notification”, “rules” and 481 481 A“bye laws” – The order, which can be modified or rescinded byapplying s.21 of the General Clauses Act, has to be either executiveor legislative in nature whereas the order, which the CIT is requiredto pass u/s.12-A , is neither legislative nor an executive order but itis a quasi judicial order – It is for this reason, s.21 has noapplication in instant case – Order of the ITAT restored – GeneralBClauses Act – s.21 – Finance (No-2) Act 2004. Allowing the appeal, the Court HELD: 1. The CIT had no express power of cancellation ofthe registration certificate once granted by him to the assesseeCunder Section 12A of the Income Tax Act, 1961 till 01.10.2004.It is for the reasons that, first, there was no express provision inthe Act vesting the CIT with the power to cancel the registrationcertificate granted under Section 12A of the Act. Second, the orderpassed under Section 12A by the CIT is a quasi judicial orderand being quasi judicial in nature, it could be withdrawn/recalledDby the CIT only when there was express power vested in himunder the Act to do so. In this case there was no such expresspower. Indeed, the functions exercisable by the CIT under Section12A are neither legislative and nor executive but as mentionedabove they are essentially quasi judicial in nature. [Paras 21 andE22] [487-C-D] 2. Third, an order of the CIT passed under Section 12Adoes not fall in the category of “orders” mentioned in Section 21of the General Clauses Act. The expression “order” employedin Section 21 would show that such “order” must be in the natureFof a “notification”, “rules” and “bye laws” etc. In other words,the order, which can be modified or rescinded by applying Section21, has to be either executive or legislative in nature whereasthe order, which the CIT is required to pass under Section 12Aof the Act, is neither legislative nor an executive order but it isa “quasi judicial order”. It is for this reason, Section 21 has noGapplication in this case. [Paras 23 and 24] [487-E-G] 3. The general power, under Section 21 of the GeneralClauses Act, to rescind a notification or order has to beunderstood in the light of the subject matter, context and theeffect of the relevant provisions of the statute under which theHnotification 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 orreview a quasi judicial order. A quasi judicial order can be generallyvaried or reviewed when obtained by fraud or when such poweris conferred by the Act or Rules under which it is made. [Para 25][487-G-H; 488-A-B] 4. It is not in dispute that an express power was conferredon the CIT to cancel the registration for the first time by enactingsub-Section (3) in Section 12AA only with effect from 01.10.2004by the Finance (No.2) Act 2004 (23 of 2004) and hence such powercould be exercised by the CIT only on and after 01.10.2004, i.e.,(assessment year 2004-2005) because the amendment in questionwas not retrospective but was prospective in nature. [Para 27][488-G] Indian National Congress (I) v. Institute of SocialWelfare & Ors. (2002) 5 SCC 685 : [2002] 3 SCR 1040– relied on. Director of Income Tax (Exemptions) v. Mool ChandKairati Ram Trust (2011) 243 CTR (Del) 245; WelhamBoys’ School Society v. CBDT, (2006) 285 ITR 74;Oxford Academy for Career Development v. ChiefCommissioner of Income Tax & Ors. (2009) 315 ITR382 (All) – approved. State of Bihar v. D.N. Ganguly & Ors. AIR 1958 SC1018 : [1959] SCR 1191; State of Madhya Pradesh v.Ajay Singh AIR 1993 SC 825 : [1992] 2 Suppl. SCR274; Ghaurul Hasan v. State of Rajasthan AIR 1967SC 107 : [1962] 1 SCR 772; Hari Shanker Jain v. SoniaGandhi AIR 2001 SC 3689 : [2001] 3 Suppl. SCR 38 – referred to. Interpretation of Statutes, Ninth Edition by G.P. Singhpage 893 – relied on. Case Law Reference CIVIL APPELLATE JURISDICTION: Civil Appeal No. 6262of 2010 From the Judgment and Order dated 14.03.2007 of the High Courtof Madhya Pradesh at Gwalior in MAIT No. 6 of 2005.C Mrs. Rani Chhabra, Adv. for the Appellants. K. Radhakrishnan, Sr. Adv., Rupesh Kumar, H. R. Rao,Ms. Sadhana Sandhu, Ms.Snidha Mehra (for Mrs. Anil Katiyar), B. V.Balaram Das, Advs. for the Respondent. The Judgment of the Court was delivered by ABHAY MANOHAR SAPRE, J. 1. This appeal is directedagainst the final judgment and order dated 14.03.2007 passed by theHigh Court of Madhya Pradesh at Gwalior in Misc. Appeal(IncomeTax) No.6 of 2005 whereby the Division Bench of the High Court allowedEthe appeal filed by the respondent and set aside the order passed by theITAT 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. F3. The appellant is a limited company registered under theCompanies Act. It is a State Government Undertaking which isestablished with a view to develop and assist the State in the developmentof industrial growth centers/areas, to promote, encourage and assist theestablishment growth and development of industries in the State of M.P.The appellant is an “assesse” under the Income Tax Act, 1961G(hereinafter referred to as “the Act”). 4. On 10.02.1999, the appellant filed an application in the formatprescribed under Section 12-A of the Act to the Commissioner of IncomeTax (hereinafter referred to as “the CIT”) for grant of registration.According to the appellant, since they were engaged in public utility INDUSTRIAL INFRASTRUCTURE DEV. CORP. v. COMMNR.OF INCOME TAX, GWALIOR [ABHAY MANOHAR SAPRE, J.] activity which, according to them, was for a charitable purpose underSection 2(15) of the Act, they were entitled to claim registration asprovided under Section 12 (A) of the Act. Since the application forregistration was delayed in its filing, the appellant also made an applicationfor condonation of delay in filing the application. 5. By order dated 13.04.1999, the CIT (Gwalior) condoned thedelay and granted the registration certificate as prayed for by theappellant. In clause 3 of the registration certificate, it was mentionedthat the certificate is granted without prejudice to the examination onmerits of the claim of exemption after the return is filed. 6. On 27.11.2000, the CIT issued a show cause notice to theappellant stating therein as to why the registration certificate granted tothe appellant by order dated 10.02.1999 under Section 12A of the Act benot cancelled/withdrawn. The show cause notice also set out the factualgrounds for the withdrawal of the registration certificate. The appellantwas asked to reply the show cause notice. The appellant accordinglyfiled 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 substancein 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 applicationunder Section 154 of the Act before the CIT on 04.07.2002 contendingtherein that the order of the CIT dated 29.04.2002 cancelling/withdrawingthe registration certificate contains an error apparent and, therefore, it isrequired to be rectified or/and recalled. It was contended that once theCIT grants the registration certificate under Section 12A, he has nopower to cancel/recall the certificate granted to the Assessee. 9. On 20.12.2002, the CIT rejected the application filed by theappellant for rectification holding that there was no error in his ordercancelling the registration certificate granted to the appellant. In otherwords, the CIT held that he had the power to cancel the certificate oncegranted by him and, therefore, the order for cancelling the registrationcertificate is legal and proper. 10. Aggrieved by the said order, the appellant filed an appeal beforethe Income Tax Appellate Tribunal, Agra Bench. By order dated A26.08.2004, the ITAT allowed the appellant’s appeal and set aside theorder 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 filedappeal in the High Court at Gwalior Bench under Section 260-A of theBAct. The High Court, by impugned order, allowed the appeal filed by theRevenue and set aside the order passed by the ITAT and restored theorder of the CIT. 12. The Division Bench of the High Court placed reliance onSection 21 of the General Clauses Act and held that since there is noCexpress power in the Act for cancelling the registration certificate underSection 12A of the Act and hence power to cancel can be traced fromSection 21 of the General Clauses Act to support such order. In otherwords, in the opinion of the High Court, Section 21 is the source ofpower to pass cancellation of the certification granted by the CIT whenthere is no express power available under Section 12A of the Act.D 13. It is against this order, the assessee felt aggrieved and filedthis 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).E15. Having heard the learned counsel for the Revenue and onperusal of the record of the case, we are inclined to allow the appeal andwhile setting aside the impugned order, restore the order of the ITAT.16. The main questions, that arise for consideration in this appeal,are four:F 17. First, whether the CIT has express power to cancel/withdraw/recall the registration certificate once granted by him under Section 12Aof the Act and, if so, under which provision of the Act? 18. Second, when the CIT grants registration certificate underSection 12A of the Act to the assessee, whether grant of certificate isGhis quasi judicial function and, if so, its effect on exercise of his power ofcancellation of such grant of registration certificate? 19. Third, whether Section 21 of the General Clauses Act can beapplied to support the order of cancellation of the registration certificategranted by the CIT under Section 12A of the Act, in case, if it is heldH that there is no express power of cancellation of registration certificateavailable to the CIT under Section 12A of the Act? and 20. Fourth, what is the effect of the amendment made in Section12AA introducing sub-clause(3) therein by Finance (No-2) Act 2004w.e.f. 01.10.2004 conferring express power on the CIT to cancel theregistration certificate granted to the assessee under Section 12A of theAct. 21. In our considered opinion, the CIT had no express power ofcancellation of the registration certificate once granted by him to theassessee 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 thepower to cancel the registration certificate granted under Section 12Aof the Act. Second, the order passed under Section 12A by the CIT is aquasi judicial order and being quasi judicial in nature, it could be withdrawn/recalled by the CIT only when there was express power vested in himunder the Act to do so. In this case there was no such express power. 22. Indeed, the functions exercisable by the CIT under Section12A are neither legislative and nor executive but as mentioned abovethey are essentially quasi judicial in nature. 23. Third, an order of the CIT passed under Section 12A does notfall in the category of “orders” mentioned in Section 21 of the GeneralClauses Act. The expression “order” employed in Section 21 would showthat such “order” must be in the nature of a “notification”, “rules” and“bye laws” etc. ( see – Indian National Congress(I) vs. Instituteof Social Welfare & Ors., 2002 (5) SCC 685).