C.I.T.,Jabalpur vs. Namra Mahila Avam Bal Kalyan Samiti

This appeal was admitted on 2.2.2006 for determination of the following substantial question of law by this Court :- ---2--- “Whether the Income Tax Appellate Tribunal is justified in coming to hold that the Commissioner of Income Tax has no jurisdiction to cancel the registration certification granted in favour of a trust in exercise of power under Section 12-A of the Act ?”

A few facts relevant for the decision of the controversy involved as narrated in the present appeal may be noticed. The assessee is a trust situated at Rewa in the State of Madhya Pradesh. The assessee was granted registration under Section 12A of the Act on 15.10.2001 by the CIT and vide order dated 18.3.2002 also granted exemption under Section 80G of the Act. On 3.9.2002, a survey was conducted in the premises of the assessee. After further investigation, the CIT issued a show cause notice to the assessee stating therein as to why the registration certificate granted to the assessee under section 12A of the Act as well as the exemption under Section 80G of the Act be not cancelled/withdrawn. The show cause notice also set out the factual grounds for the withdrawal of the registration certificate. The assessee was asked to reply to the show cause notice. The assessee, accordingly, filed its reply and opposed the grounds on which the withdrawal/cancellation of the certificate was proposed. Thereafter, the registration as well as the exemption granted to the assessee were cancelled/withdrawn by the CIT vide order dated 12.8.2003, on the ground that the assessee Trust was not charitable in nature within the meaning of proviso to Section 2(15) of the Act. Aggrieved by the order of CIT, the assessee filed an appeal before the Tribunal impugning the withdrawal of registration under Section 12A of the Act. Vide order dated 27.2.2004, the Tribunal allowed the appeal filed by the assessee and the order passed by the ---3--- CIT withdrawing registration already granted to the assessee Trust under Section 12A of the Act was held to be invalid and without jurisdiction. Hence, the instant appeal by the appellant – Revenue.

Learned counsel for the appellant-Revenue submitted that the Tribunal had not properly appreciated the relevant material available on record. It was argued that the objection raised by the assessee, regarding power of CIT to cancel/withdraw the order by which the registration was granted, should have been raised immediately after receiving the show cause notice and, therefore, the Tribunal has committed an error in entertaining such objection taken for the first time before it. Further, it was contended that sufficient opportunity of hearing was afforded to the assessee by the CIT before passing the order of cancellation/withdrawal of registration under the Act. Learned counsel also submitted that in view of the amendment in Section 12AA of the Act, the CIT had powers to cancel/withdraw the registration granted by it to any firm/trust/society. Accordingly, it was prayed that this appeal be allowed by setting aside the order impugned in this appeal.

On the contrary, learned senior counsel for the assessee supported the findings recorded by the Tribunal and submitted that the documents on the basis of which the CIT proceeded to cancel the registration were never confronted to the assessee, therefore, the Tribunal has rightly quashed the order passed by the CIT. It was stated that adequate opportunity of hearing was not provided to the assessee by the CIT before passing the order of cancellation of the said registration under Section 12A of the Act by it. Learned senior counsel argued that once the CIT had granted the registration certificate under the Act, at the relevant time, he had no express power to ---4--- cancel/recall/withdraw the said order granted in favour of the assessee. According to learned counsel, the amendment conferring powers to the CIT to withdraw such registration came into force w.e.f. 1.10.2004 and it could not be given retrospective effect. In support of his contentions, reliance was placed on the decision of the Supreme Court in the case of Industrial Infrastructure Development Corporation (Gwalior) M.P. Ltd. Vs. Commissioner of Income Tax, Gwalior – (2018) 4 SCC 494. 6. We have heard learned counsel for the parties and find that the present appeal deserves to be dismissed.

The Apex Court in Industrial Infrastructure Development Corporation (supra) has held that the CIT had no express power to cancel the registration once granted by him to the assessee under Section 12A of the Act till 1.10.2004. The order passed under Section 12A of the Act by the CIT is a quasi judicial order and it could be withdrawn when there was express power vested in him under the Act to do so. The relevant extract of the said decision reads as under:- “17. 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.”

It is not in dispute that the express power was conferred on the CIT to cancel the registration for the first time by enacting sub-section(3) in Section 12AA of the Act effective from 1.10.2004 by the Finance (No.2) Act 2004 ---5--- (23 of 2004). Thus, such power could be exercised by the CIT only on and after 1.10.2004 as the amendment in question was not retrospective but is prospective in nature. Similar is the position in the present case also. On 15.10.2001, the assessee was granted registration by the CIT under Section 12A of the Act and the exemption under Section 80G of the Act on 18.3.2002. The order withdrawing the said registration with retrospective effect was passed by the CIT on 12.8.2003 i.e. much prior to coming into force of the aforesaid amendment enacting sub-section (3) in Section 12AA of the Act conferring the powers on the CIT to withdraw/cancel/recall the registration granted by him to any firm/trust/society. Indeed, the functions exercisable by the CIT under Section 12A of the Act are neither legislative nor executive but as mentioned above they are essentially quasi judicial in nature. Therefore, it is for all these reasons the CIT had no jurisdiction to cancel the registration certificate once granted by him under Section 12A of the Act till the power was expressly conferred on the CIT by Section 12AA (3) of the Act w.e.f. 1.10.2004. 9. Since the Supreme Court in Industrial Infrastructure Development Corporation (supra) had already held that the amendment in question was not retrospective but was prospective in nature, it would be deemed that in the present case also the CIT at the time of passing the aforesaid orders had no express power to recall/withdraw registration certificate granted to the assessee trust. The substantial question of law framed is thus, answered accordingly.

No illegality or perversity could be pointed out by the learned counsel for the revenue in the findings recorded by the Tribunal in the appeal which may warrant interference by this Court.

Accordingly, the substantial question of law is answered against the revenue and in favour of the assessee. The appeals stand dismissed. (Ajay Kumar Mittal) (Vijay Kumar Shukla)