By TIOL News Service

THE ISSUE is - Whether the CIT order that grants registration u/s 12A, falls neither under the head legislative nor the head Executive. YES is the verdict.

Facts of the case:

The Assessee-company was established to assist the State in the development of industrial growth centers. The Assessee filed an application u/s 12A and submitted that since they were engaged in the public utility activities which were covered under the term of "charitable purpose" u/s 2(15) and hence, were entitled to claim registration u/s 12(A). The Assessee had also made an application for condonation of delay in filing the registration application. Accordingly, the CIT condoned the delay and granted the registration certificate to the Assessee without examining the Assessee's claim of exemption after the return was filed. Later, the CIT issued a SCN to the Assessee. In reply, the Assessee opposed the grounds on which the withdrawal/cancellation of the certificate was proposed. The CIT then failed to find any substance in the stand taken by the Assessee and hence, cancelled the certificate.

Aggrieved Assessee filed a rectification application u/s 154 before the CIT contending that once the registration certificate was granted u/s 12A, he had no power to cancel/recall the certificate granted to the Assessee. Therefore, the rectification application was rejected and held that he had the power to cancel the certificate once granted by him and, therefore, the order for cancelling the registration certificate was legal and proper. Again, the Assessee had also filed an appeal before the Tribunal wherein, the same was allowed and therein set aside the order passed by the CIT by which he had cancelled/withdrawn the registration certificate. Aggrieved by the order of the Tribunal, the Revenue preferred an appeal to the High Court where it was noted by the Court that sec 21 of the General Clauses Act was the source of power to pass cancellation of the certification granted by the CIT when there was no express power available u/s 12A. Accordingly, the HC set aside the order passed by the Tribunal and restored the order of the CIT.

the Apex Court held that,

++ the CIT had no express power of cancellation of the registration certificate once granted by him to the Assessee u/s 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 u/s 12A. Second, the order passed u/s 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 u/s 12A are neither legislative and nor executive but they are essentially quasi judicial in nature;

++ an order of the CIT passed u/s 12A does not fall in the category of "orders" mentioned in sec 21 of the General Clauses Act. The expression "order" employed in sec 21 would show that such "order" must be in the nature of a "notification", "rules" and "bye laws". In other words, the order, which can be modified or rescinded by applying sec 21, has to be either executive or legislative in nature whereas the order, which the CIT is required to pass u/s 12A, is neither legislative nor an executive order but it is a "quasi judicial order". It is for this reason, sec 21 has no application in this case;

++ the general power, u/s 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, sec 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. Relying upon the said rule of interpretation, this Court has held that the Government has no power to cancel or supersede a reference once made u/s 10(1) of the Industrial Disputes Act, 1947. Similarly, on the same principle it is held that the application of sec 21 of the General Clauses Act has no application to amend or rescind or vary a notification issued u/s 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;

++ it is also held while construing the provisions of Citizenship Act that the certificate of registration of citizenship issued u/s 5(1)C of the Citizenship Act cannot be cancelled by the authority granting the registration by recourse to sec 21 of the General Clauses Act. And lastly, while construing the provisions of the Representation of People Act, it is held that the Election Commission cannot, by recourse to sec 21 of the General Clauses Act, deregister or cancel the registration of a political party u/s 29A for the decision of the Commission to register a political party u/s 29A(7) is a quasi judicial in nature;

++ it is not in dispute that an express power was conferred on the CIT to cancel the registration for the first time by enacting sec 12AA(3) only w.e.f. 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.,(AY 2004-2005) because the amendment in question was not retrospective but was prospective in nature. The issue involved in this appeal had also come up for consideration before three High Courts, namely, Delhi, Uttaranchal and Allahabad High Courts;

++ all the three High Courts after examining the issue, in the light of the object of Ss 12A and 21 of the General Clauses Act held that the order of the CIT passed u/s 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, sec 21 of the General Clauses Act has no application to the order passed by the CIT u/s 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 u/s 12A till the power was expressly conferred on the CIT by sec 12AA(3) w.e.f. 01.10.2004;

++ therefore, the appeal succeeds and is allowed. The order so challenged is set aside and the order of Tribunal is restored. Needless to say, the CIT would be free to exercise his power of cancellation of registration certificate u/s 12AA(3) in the case at hand in accordance with law.

(See 2018-TIOL-63-SC-IT)