CIT has no Power to Cancel or Withdraw 12A Registration until It is Expressly Granted u/s. 12AA(3): SC [Read Judgment]

While hearing the case of Industrial Infrastructure Development Corporation (Gwalior) M.P. Ltd, a two-judge bench of the Supreme Court categorically held that the Commissioner of Income Tax (CIT) has no power to cancel or withdraw or recall the registration certificate granted under section 12A of the Income Tax Act 1961. The bench clarified that in order to recall the 12A registration so granted, the power to do so must be specifically provided under section 12AA(3) of the Act.

Assessee in the instant case, is a limited company registered under the Companies Act 1956 and it is state Government undertaking established with a view to develop and assist the State in the development of industrial growth centers or areas to promote, encourage and assist the establishment growth and development of industries in the state of Madhya Pradesh.

In the year 1999 the Assessee Company filed an application before the Commissioner of Income Tax (CIT) for grant of registration under section 12A of the Income Tax Act 1961 as a charity Trust by holding that they were engaged in public utility activity. Thereafter the Officer granted certificate of registration and in clause 3 of the 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.

In 2000, the CIT issued a show cause to the Assessee in order to cancel or withdraw the registration certificate granted to the Assessee under section 12A of the Act. However the Assessee opposed the grounds raised by the authority regarding the withdrawal. But the CIT did not found any merit in the stand taken by the Assessee in its reply and accordingly he cancelled the registration certificate under the said section.

Thereafter the Assessee filed a rectification application under section 154 of the Act and contended that once the CIT grants the registration certificate under section 12A of the Act, then he has no power to recall or cancel the same. But the Officer rejected the same and confirmed his action.

After considering the facts and circumstances the Supreme Court Justice R.K.Agarwal and Justice Abhay Manohar Sapre observed that “the CIT has no express power of cancellation of the registration certificate once granted by him to the Assessee under section 12A till 01.10.2004. because there was no express provision in the Act vesting the CIT with power to cancel the registration certificate granted under section 12A of the Act and the order passed by the CIT under the section is a quasi-judicial order and being quasi-judicial in nature, it could be withdrawn or cancel by the CIT only when there was express power vested in him under the Act to do so, but in the present case there was no such express power”.

The Court further observed that “section 21 of General Clause Act has no application to the order passed by the CIT under section 12A because the order is quasi-judicial in nature and 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”.