Income Tax Act, 1961 – s.12-A and s.12-AA(3) – Cancellation of registration certificate under the Act by CIT – Power of – Appellant-company filed application u/s.12-A to the Commissioner of Income Tax (CIT) for grant of registration – Registration certificate 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, CIT cancelled/withdrew the certificate vide order dated 29.04.2002 – Appellant filed rectification application and contended that the CIT had no power to cancel/recall the certificate – CIT held order of cancellation as legal and proper – Aggrieved, appellant filed appeal before Income Tax Appellate Tribunal (ITAT), which set aside the order of the CIT – However, High Court set aside the order of ITAT and restored the order of the CIT and held that since there is no express power in the Act for cancelling the registration certificate u/s.12-A and hence power to cancel can be traced from s.21 of the General Clauses Act to support such order – Propriety of – Held: Not proper – There was no express provision in the Act vesting the CIT with the power to cancel the registration certificate granted u/s.12-A and such power of cancellation could be exercised by the CIT 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Act 2004 – Order passed u/s.12-A by the CIT is a quasi judicial order and being quasi judicial in nature, it could be withdrawn/recalled by the CIT only when there was express power vested in him under the Act to do so – In instant case, there was no such express power – An order of the CIT passed u/s.12-A does not fall in the category of “orders” mentioned in s.21 of the General Clauses Act – The expression “order” employed in s.21 would show that such “order” must be in the nature of a “notification”, “rules” and “bye laws” – The order, which can be modified or rescinded by applying s.21 of the General Clauses Act, has to be either executive or legislative in nature whereas the order, which the CIT is required to pass u/s.12-A , is neither legislative nor an executive order but it is a quasi judicial order – It is for this reason, s.21 has no application in instant case – Order of the ITAT restored – General Clauses Act – s.21 – Finance (No-2) Act 2004.
Allowing the appeal, the Court
HELD: 1. The CIT had no express power of cancellation of the registration certificate once granted by him to the assessee under Section 12A of the Income Tax Act, 1961 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. 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. [Paras 21 and 22] [487-C-D]
2. 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. 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. [Paras 23 and 24] [487-E-G]
3. 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. [Para 25] [487-G-H; 488-A-B]
4. 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. [Para 27] [488-G]
Indian National Congress (I) v. Institute of Social Welfare & Ors. (2002) 5 SCC 685 : [2002] 3 SCR 1040 – relied on.
Director of Income Tax (Exemptions) v. Mool Chand Kairati Ram Trust (2011) 243 CTR (Del) 245; Welham Boys’ School Society v. CBDT, (2006) 285 ITR 74; Oxford Academy for Career Development v. Chief
Commissioner of Income Tax & Ors. (2009) 315 ITR
382 (All) – approved.
State of Bihar v. D.N. Ganguly & Ors. AIR 1958 SC 1018 : [1959] SCR 1191; State of Madhya Pradesh v. Ajay Singh AIR 1993 SC 825 : [1992] 2 Suppl. SCR 274; Ghaurul Hasan v. State of Rajasthan AIR 1967 SC 107 : [1962] 1 SCR 772; Hari Shanker Jain v. Sonia Gandhi AIR 2001 SC 3689 : [2001] 3 Suppl. SCR 38 – referred to.
Interpretation of Statutes, Ninth Edition by G.P. Singh page 893 – relied on.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
This page is for informational and research purposes only and does not constitute legal advice. Consult a qualified advocate for advice specific to your situation.