Natural justice bars cancellation of tax exemption certificate without notice and hearing, even when original authority is questioned.

Cancellation of a certificate exempting a taxpayer from the operation of Sections 206C and 44AC of the Income-tax Act was held unsustainable because no show-cause notice was issued and no hearing was afforded before withdrawal. The High Court stated that even if the certificate had originally been issued by an officer lacking territorial authority, the holder had to be put on notice of the proposed cancellation and given an opportunity to contest that ground. The cancellation order was quashed for breach of natural justice, and the writ petition was allowed.

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Issues: Whether cancellation of the certificate exempting the petitioner from the operation of Section 206C read with Section 44AC of the Income-tax Act, 1961 was valid when effected without notice and without affording an opportunity of hearing.

Analysis: The cancellation record showed that no show-cause notice had been issued and no hearing had been afforded before withdrawal of the certificate. Even assuming that the certificate had been issued by an officer lacking territorial authority, the petitioner was entitled to be put on notice of the proposed cancellation and given an opportunity to meet that ground before any adverse action was taken.

Conclusion: The cancellation order was quashed for breach of natural justice, and the writ petition was allowed.

Ratio Decidendi: An administrative cancellation affecting an existing benefit cannot be sustained if it is made without prior notice and a meaningful opportunity of hearing, even where the proposed ground for cancellation is lack of authority in the original issuance.

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