Industrial Infrastructure Development Corporation (Gwalior) M.P. Ltd vs. CIT (Supreme Court)

The Supreme Court had to consider the following questions:

(1) 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?

(2) Second, when the CIT grants registration certificate under Section 12A of the Act to the 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?

(3) 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

(4) 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.

HELD by the Supreme Court:

(i) 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the order passed under Section 12A by the CIT is a quasi judicial order and being quasi judicial in nature, it could be withdrawn/recalled by the CIT only when there was express power vested in him under the Act to do so.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.

(ii) 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.

(iii) 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).

(iv) 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.

(v) 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).

(vi) 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 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 Section 29A(7) of the Act is a quasi judicial in nature. [See Indian National Congress (I) (supra)]

(vii) 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.

(viii) 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 Academy for Career Development vs. Chief Commissioner of Income Tax & Ors. (2009) 315 ITR 382 (All).

(ix) 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.

(x) 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.

(xi) 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.

(xii) 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.