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        REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL No.6262 OF 2010

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

VERSUS

Commissioner of Income Tax, Gwalior           …Respondent(s)

J U D G M E N T

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

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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

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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

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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

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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.

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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.

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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

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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

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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

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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

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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

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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

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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

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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.

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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