Judgment:
1. An interesting question of law has arisen in this appeal as to whether CIT can rescind/withdraw the registration granted earlier under Section 12A in 1974.
2. The assessee is a trust which was allowed registration as a charitable trust under Section 12A by the CIT, Kanpur, vide order dt.
6th Aug., 1974. On certain information gathered, it was felt by the CIT that assessee was not carrying out any charitable activity and was not disclosing its full receipts in the accounts and, therefore, it was being run in violation of the provisions of the IT Act, 1961 (in short Act). Therefore, notice dt. 4th Dec., 2002, was issued to the assessee to show-cause as to why the registration granted earlier should not be withdrawn on the following grounds : (i) That the trust is being run as a private trust of Shri K.N. Gupta.
(ii) The interest income is (not) being utilized for the purpose of the trust and it is illegally credited to the corpus account.
(iii) Raising of overdrafts from the bank against the security of FDRs tantamounts to misuse of the corpus fund.
(iv) There have been changes in the constitution of the trust from time to time which were not communicated to the Department.
(v) The trust property is being used for business purposes violating the purpose of Sections 11 and 12. Also receipts from the business are not being disclosed in the accounts submitted to the Department.
(vi) The trust is maintaining temples, activities of which are limited to a particular religious community viz., Hindus only and only religious activities are undertaking in these temples. No charitable activities are going on in these temples.
3. The assessee-trust filed its reply dt. 30th Dec., 2002, on all the points raised by the CIT. In addition, it challenged the power of the CIT to withdraw the registration granted under Section 12A. It was contended that there is no provision for review of the order granting registration under Section 12A. This contention was rejected by holding that the authority which can grant the registration can also withdraw it after giving proper opportunity of being heard. According to him, this could be done by virtue of the provisions of Section 21 of General Clauses Act, 1897 (in short GCA). It was also observed by him that the review of the activities of the institution is necessary so as to ensure that such institution does not become fraud on the law of the land and does not misuse the benevolent legislation for denying the exchequer of its due revenue. He also observed that there is no prohibition provision, he supported his action by invoking the provisions of Section 21 of GCA. Since, according to the CIT, there were huge financial discrepancies and misappropriation of trust funds, he rescinded and withdrew the registration granted on 6th Aug., 1974, vide his order dt. 27th Feb., 2003. Aggrieved by the same, the assessee is in appeal before the Tribunal.
4. The learned counsel for the assessee has vehemently assailed the order of CIT by contending that the impugned order is without jurisdiction inasmuch as no power of review is vested with the CIT under the Act. According to him, the IT Act is an independent code by itself and, therefore, the provisions of another Act cannot be looked into. Hence, provisions of Section 21 of GCA cannot be invoked for justifying the exercise of power of Revenue. Reliance was placed on the following decisions :Rao Bahadur Ravulu Subba Rao and Ors. v. CIT (1956) 30 ITR 163 (SC)Shailendra Kumar v. Union of India and Ors. (1989) 175 ITR 494 (All) Proceeding further, it was contended by him that fiscal statute should be strictly construed. Hence, in the absence of any provision conferring the power of review on IT authorities, such power cannot be exercised by implication. The CIT, being a creature of statute can exercise powers which are conferred on him by statute. Hence, in the absence of such powers, it is not possible to assume such powers. It was also submitted that no authority has inherent power to review.
Reliance was placed on the following judgments : 3. East India Hotels Ltd. v. C.R. Shekhar Reddy, Dy. CIT (1998) 230 ITR 622 (Kar) 6. CIT v. Bhawani Prasad Girdhari Lal and Co. (1991) 187 ITR 257 (All) Regarding the application of Section 21 of GCA, it was contended by him that it is applicable to subordinate legislation. The word "orders" is associated by the words "notifications, rules and bye-laws". Therefore, the word "orders" would not include judicial orders. He also drew our attention to the commentaries of Shri G.B. Singh and B.D. Mahajan on this subject and the case law mentioned therein. Hence, it was pleaded that provisions of Section 21 cannot be invoked for cancelling or withdrawing the orders passed under Section 12A of the Act. It was also contended by him that from the tenor of the impugned order, it appears that CIT rescinded/withdrew the earlier order with retrospective effect while no authority has such powers.
5. On the other hand, the learned Senior Departmental Representative has submitted that Section 12A is only a procedural section and the CIT is required to satisfy himself about the genuineness of the trust and its objects. According him, the activity of a trust is an ongoing process and, therefore, can always be looked into even after the grant of registration. If the trust is found at any time not carrying out the objects for which registration was granted, the CIT can always review the earlier order, otherwise the very purpose of the registration would be defeated. Proceeding further, it was contended that no doubt the IT Act is an independent code, but there is no bar to look into the other enactments. He relied on the following judgments :H.H. Sri Jaya Chamaraja Wadiyar, Maharaja of Mysore and Ors. v. Union of India and Anr.
Regarding the application of Section 21 of GCA, he relied on the commentary of GCA by N.S. Bindia for the proposition that judicial orders are included within the scope of Section 21 and, therefore, CIT, who granted the registration, can withdraw or cancel the registration.
6. Contentions of the rival parties have been considered carefully in the light of case law referred to. The first question to be considered is whether the CIT can review its earlier order Normal rule is that the remedy by way of review is a creature of statute and if the statute does not contain such powers then no authority under the Act can review his own order. As a result thereof, no authority can be said to have an inherent right of review. Similar is the position with the right of appeal. The Hon'ble Supreme Court has repeatedly said that right of appeal inheres in no one and, therefore, an appeal for its maintainability must have the clear authority of law, Reference can be made to the decision of the Hon'ble Supreme Court in the case of CIT v.Ashoka Engineering Co. (1992) 194 ITR 645 (SC) wherein at p. 649 it has been held "It is true that there is no inherent right of appeal to any assessee and that it has to be spelt from the words of the statute, if any, providing for an appeal". What is true to an appeal is also true to review since both the remedies are creature of statutes.
7. Now, we may directly refer to the case law dealing with the powers of review. In Fernandes v. Ranganayakule AIR 1953 Mad 236, the Hon'ble Madras High Court ruled as under : "So far as the invocation of the inherent powers of Court is concerned, it has been held repeatedly and has now become well-settled law that the power to review is not an inherent power of a judicial officer but such a right must be conferred by statute.
This is based upon the commonsense principle that prima facie a party who has obtained a decision is entitled to keep it unassailed unless the legislature has indicated the mode by which is can be set aside. A review is practically the hearing of an appeal by the same officer who decided the case. Therefore, the course of decisions in this country has been to the effect that a right to review is not an inherent power : See David Nadar v. Manicka Vachaka Desika Gnuna Sambanda Pandaia Sannathi (1910) ILR 33 Mad 65, Lala Prayag Lal v. Jai Narayan Singh (1895) ILR 22 Cal 419, Baijnath Ram Goenka v. Nand Kumar Singh (1895) ILR 34 Cal 677 and Anantharaju Shetty v. Appu Hegade (1919) 37 MLJ 162." Further, there is a direct judgment of Hon'ble Supreme Court on this issue. In the case of P.N. Thakershi v. Pradyumansinghji AIR 1979 SC 1273, the Court had to consider whether the CIT had inherent power to review the earlier order passed under the provisions of Saurashtra Land Reforms Act, 1951. The apex Court ruled as under: "The first question that we have to consider is whether Mr. Mankodi had competence to quash the order made by the Saurashtra Government on 22nd Oct., 1956. It must be remembered that Mr. Mankodi was functioning as the delegate of the State Government. The order passed by Mr. Mankodi, in law amounted to a review of the order made by Saurashtra Government. It is well settled that the power to review is not an inherent power. It must be conferred by law either specifically or by necessary implication. No provision in the Act was brought to our notice from which it would be gathered that the Government had power to review its own order. If the Government had no power to review its own order, it is obvious that its delegate could not have reviewed its order." In our view, the above judgment concludes the issues. It is on the basis of this principle, it has been repeatedly held by the Courts that neither the Tribunal under Section 254(2) nor any other IT authority under Section 154 can review its earlier order. It is not necessary to cite various judgments on this issue and it would be sufficient to cite the jurisdictional High Court judgment in the case of Bhavani Prasad Girdhari Lal & Co. (supra), wherein it has been held that an ITO under Section 154 can only rectify the mistake but cannot review his order.
In view of these binding judgments, it is held that CIT could not exercise the power of review inasmuch as neither he had any such power under the Act nor he had any inherent powers of review.
8. The next question for consideration is whether the CIT could rescind/withdraw the registration granted earlier under Section 12A in 1974 on the basis of Section 21 of GCA. This section reads as under : "21 : Where by any Central Act or Regulation, a power to issue notifications, orders, rules or bye-laws is conferred, then that power includes a power, exercisable in the like manner and subject to the like sanctions and conditions (if any) to add to, amend, vary or rescind any notifications, orders, rules or bye-laws so issued." The perusal of the above section shows that the word 'orders' is coupled with other words "notifications, rules and bye-laws". The word 'order' is of widest amplitude and would include all kinds of orders including administrative orders, judicial orders and legislative orders. It is not clear whether the word 'order' was used by the legislature in widest sense or in restricted sense. Therefore, to resolve such issue, the Courts/Tribunals have resorted to the rules of interpretation. In such cases, rule of noscitur a socus is applied As per Black's Dictionary (Sixth Edn , p 1060) this rule is stated thus: "It is known from its associates. The meaning of the word is or may be known from the accompanying words. Under the doctrine of noscitur a sociis, the meaning of questionable or doubtful words or phrases in a statute may be ascertained by reference to the meaning of other words or phrases associated with it".
According to Maxwell on interpretation of statutes, this rule is stated as under: "When two or more words which are susceptible of analogous meaning are coupled together, they are understood to be used in their cognate sense and they take their colour from each other, i.e., the more general is restricted to a sense analogous to less general".
This rule has been applied by the Hon'ble Supreme Court in various cases. Reference can be made to the judgment of Hon'ble Supreme Court in the case of Pradeep Agarbati v. State of Punjab 109 STC 561. In this judgment the apex Court at p. 565 observed as under: "Entries m the schedules of sales-tax and excise statute list some articles separately and some articles are grouped together When they are grouped together, each word in the entry draws colour from the other words therein This is the principle of noscitur a socus" In this case, the Court was required to consider as to whether Dhoop and Agarbati could be included within the meaning of the word 'perfumery' associated with other words 'cosmetics and toilet goods' Applying the principle of noscitur a socus, it was held that the word 'perfumery' was used in restricted sense and would include only those items which are used as cosmetics and toilet goods, upon the person and consequently, would not include Dhoop and Agarbati 9. If the aforesaid principle is applied to the provisions of Section 21 of GCA, we are of the view that the word 'orders' would not include judicial or quasi-judicial orders This word is associated with the words 'notification, rules and bye-laws' So the word 'order' should be construed m the context m which the associated words are used Associated words are m the nature of subordinate legislation Therefore, the word 'order' contemplated in this section would be restricted to such orders which are issued by way of delegated/subordinate legislation For example, orders issued by Central Board of Direct Taxes under Section 119 of the Act would fall within the scope of Section 21 of GCA as such orders would be in the nature of subordinate legislation This view is also fortified by the Supreme Court judgment in the case of Ghaurul Hasan and Ors v. State of Rajasthan AIR 1967 SC 107 wherein it was held as under "The only other point that was taken by the respondents was that the Collector having the power to grant the registration certificate under the Citizenship Act and by virtue of Section 21 of the General Clauses Act, and apart from Section 10(2) of the Citizenship Act, the power to cancel it We are entirely unable to agree that Section 21 conferred on the Collector any such power The orders mentioned in that section are not orders of the kind contemplated in Section 5 of the Civizenship Act" In Bhemmal v. Motumal AIR 1956 Ajm 67, it has been held that the word 'order' in Section 21 of GCA refers to subordinate legislation and not to judicial orders The jurisdictional High Court in the case of Bachchu Lal AIR 1951 All 36 has held that the word order' must be limited to non-judicial orders 10. In view of the above discussion, it is held that Section 21 of GCA would include only those orders which are in the nature of subordinate legislation and would not include other orders particularly judicial or quasi-judicial orders Consequently, the order of CIT passed under Section 12A in 1974 could not be rescinded/withdrawn by the impugned order by virtue of Section 21 of GCA Hence, the impugned order was without jurisdiction 11. At this stage, it may be mentioned that the legislature was well aware of the concept of cancellation of an order This is apparent from the fact that it specifically conferred power to AO to cancel the registration under Section 186 of the IT Act So, if the legislature had intended so, it could have easily conferred similar powers to the CIT under Section 12A. In the absence of such enactment, by implication, the CIT has no power to cancel registration granted earlier The reason is obvious as the legislature has specifically granted power to deny exemption under Section 11 on year to year basis if there is any contravention of the provisions of Section 11 or 13 If under given facts of the case, the funds of the trust are being misused, the AO is fully equipped with the power to deny exemption to such trust But registration, once granted, cannot be cancelled by the CIT in the absence of any specific power 12. The case law referred to in the Commentary of GCA by NS Bindra are with reference to notifications, rules and bye-laws and, therefore, such cases do not advance the case of Revenue Even the commentary at p 396 has specifically stated that judicial and quasi judicial orders are outside the ambit of Section 21 13. In the course of hearing, a query was raised from the Bench as to whether the impugned order was retrospective or with prospective effect The learned Departmental Representative was unable to comment Therefore, in the interest of justice, it would be appropriate to say few words on this aspect In our opinion, it is only the legislature which has power to legislate retrospectively No other authority has such powers and, therefore, any order cannot be given effect to retrospectively The Hon'ble Supreme Court in the case of Kazi Lhendup Dorji v. CBI (1994) Supp. 2 SCC 116 has held that power under Section 21 of GCA cannot be exercised retrospectively. Hence, in any circumstances, the order of CIT under Section 12A cannot be given effect to retrospectively even assuming for the sake of argument that such section was applicable.
14. In view of the above discussion, we are unable to uphold the impugned order of CIT under Section 12A. Consequently, the impugned order is quashed.