2018 (2) TMI 1220 - SC - Income Tax

Supreme Court Rules CIT Lacked Authority to Cancel Registration Certificates Before 2004 Amendment.

Industrial Infrastructure Development Corporation (Gwalior) M.P. Ltd. Versus Commissioner of Income Tax, Gwalior

The SC allowed the appeal, overturning the HC's decision and reinstating the ITAT's order. It ruled that the CIT lacked jurisdiction to cancel ... Cancellation of Registration certificate u/s 12A - CIT's express power to cancel/withdraw/recall the registration certificate once granted by him under Section 12A - Held that:- 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the order passed under Section 12A by the CIT is a quasi judicial order and being quasi judicial in nature, it could be withdrawn/recalled by the CIT only when there was express power vested in him under the Act to do so.In this case there was no such express power. 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. - Decided n favour of assessee Issues:1. Jurisdiction of the Commissioner of Income Tax to cancel registration certificate under Section 12A of the Income Tax Act.2. Nature of the CIT's function in granting registration certificate and its effect on the power of cancellation.3. Applicability of Section 21 of the General Clauses Act to support cancellation of registration certificate.4. Effect of the amendment in Section 12AA introducing power to cancel registration certificate.Issue 1: Jurisdiction of CIT to Cancel Registration Certificate:The case involved a limited company seeking registration under Section 12-A of the Income Tax Act. The Commissioner of Income Tax (CIT) had granted the registration certificate but later issued a show cause notice for cancellation. The High Court upheld the CIT's power to cancel the certificate, relying on Section 21 of the General Clauses Act. However, the Supreme Court held that until the amendment in 2004, the CIT did not have express power to cancel the registration certificate granted under Section 12A. The Court emphasized that the CIT's order was quasi-judicial and could only be withdrawn if there was an explicit statutory provision allowing such cancellation.Issue 2: Nature of CIT's Function in Granting Registration Certificate:The Supreme Court clarified that the CIT's functions under Section 12A were quasi-judicial in nature. It highlighted that the CIT's order did not fall under the category of 'orders' mentioned in Section 21 of the General Clauses Act, which deals with executive or legislative orders. The Court emphasized that the power to cancel a quasi-judicial order could only be exercised if specifically provided for by the Act or Rules, which was not the case until the 2004 amendment.Issue 3: Applicability of Section 21 of the General Clauses Act:The High Court had relied on Section 21 of the General Clauses Act to support the cancellation of the registration certificate. However, the Supreme Court explained that Section 21 did not apply to quasi-judicial orders like the one passed by the CIT under Section 12A. The Court cited various precedents to illustrate that Section 21 could not be used to amend or rescind quasi-judicial orders unless specifically provided for by the relevant statute.Issue 4: Effect of Amendment in Section 12AA:The Supreme Court noted that the amendment in Section 12AA introduced in 2004 conferred explicit power on the CIT to cancel registration certificates granted under Section 12A. The Court emphasized that this power could only be exercised from the effective date of the amendment and not retrospectively. The Court approved the views of various High Courts that had considered similar issues, confirming that the CIT lacked jurisdiction to cancel registration certificates before the 2004 amendment.In conclusion, the Supreme Court allowed the appeal, setting aside the High Court's decision and restoring the order of the Income Tax Appellate Tribunal. The Court affirmed that the CIT could only cancel registration certificates under Section 12AA(3) of the Act from the date of the amendment, ensuring compliance with the law.