TMI Blog1996 (9) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... he Income-tax Officer 11(3), Kanpur, respondent No. 5, asking for certain information in connection with the assessment for the assessment year 1983-84. A writ of prohibition is also sought to restrain the respondents from taking any further proceedings in pursuance of the various notices mentioned above. We have heard Sri S. P. Gupta, learned senior advocate, assisted by Sri Shakeel Ahmad for the petitioner, and Sri Bharat Ji Agarwal, learned senior standing counsel, for the respondents. The petitioner's case is that it is a society registered under the Societies Registration Act, and its object is to undertake scientific research in connection with sugarcane varieties, manuring, irrigation, soil testing and crop diseases, in pest control, etc. It has a research centre situate in village Masondha, Motinagar, in the District of Faizabad while its head office is situate at Moti Bhawan, Collectorganj, Kanpur. The petitioner applied to the prescribed authority, namely, Indian Council of Agriculture Research, for recognition for the purpose of section 35(1)(ii) of the Act and the prescribed authority after due care and scrutiny gave its approval, vide Notification No. 2739 (F. No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted the audited annual accounts of the research centre for the year ending September 30, 1982, along with a copy of the annual report for 1983-84 and also a note on the work relating to research and demonstration conducted under the auspices of the research centre. The petitioner in its meeting with respondent No. 1 strongly pleaded for continuation of the approval and exemption under section 35(1)(ii) and submitted that there was no case whatsoever for the proposed retrospective withdrawal which was granted only after full satisfaction regarding the various research activities being carried on by the petitioner. The petitioner was, however, informed by the Under Secretary to the Government of India by notification dated January 2, 1986, that the notifications dated August 20, 1981, and October 22, 1983, were withdrawn retrospectively with effect from June 7, 1980. The petitioner through a letter dated January 24, 1986, addressed to the third respondent, namely, the Under Secretary to the Government of India, submitted full facts about the research centre which had not been taken into account by the prescribed authority while withdrawing the approval and requested for a reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing Officer is Income-tax Officer II(3), Kanpur, who has already made assessments for some years and that the notification withdrawing the approval with retrospective effect is ultra vires and all his actions in pursuance thereof are illegal and the notice for the assessment year 1983-84 is also bad in law because the assessment proceedings for that year were pending before the Income-tax Officer II(3), Kanpur. It is claimed that the assessment orders were not erroneous and prejudicial to the interests of the Revenue when they were passed because at the time of making of the assessments the approval was in force and hence actions taken under section 263 are illegal. It is also claimed that the assessment orders that have been cancelled by the Commissioner of Income-tax under section 263 were no assessment orders in the eyes of law as there was neither income nor loss determined and, therefore, there was nothing for the Commissioner of Income-tax to cancel. It is claimed that the petitioner has no effective, adequate remedy against the aforesaid actions of the authorities concerned. Respondents Nos. 1, 2, 3 and 7 have filed a separate counter-affidavit while another counter-affi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch is annexure "C" to the counter-affidavit. Ultimately, a show-cause notice dated June 7, 1985, was issued to the petitioner by registered post to show cause why the approval be not withdrawn. The letter contained the reasons for the approval (sic) and the petitioner was asked to send a reply by July 8, 1985. No reply was received yet to afford another opportunity to the petitioner, a hearing was fixed at 10-11 a.m. on August 9, 1985. The petitioner sent a reply dated July 1, 1985, along with the annual progress report for the year 1982-83 and letter dated July 29, 1985, was received requesting for postponement of the hearing fixed for August 9, 1985. The hearing ultimately took place on September 9, 1985, in which the petitioner was represented by Sarvasri L. K. Jhunjhunwala and M. P. Mehrotra. The petitioner's representatives were asked to explain the following expenses incurred by the petitioner as to how they were relevant for conducting agricultural research: Rs. (in lakhs) " (a) Office building in Bombay 3.6 (b) Cash with bank 7.34 (c) Advance for immovable property 15.81 (d) Moti Chit and Finance Corporation 5.50 (e) FD in Bombay 1.00." It is alleged that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the Commissioner of Income-tax duly considered the petitioner's reply dated July 14, 1986, while passing the order dated July 31, 1986, under section 263 of the Act. It is claimed that the jurisdiction to assess the petitioner vests in the Income-tax Officer, Circle II(3), Kanpur. It is claimed that the order under section 263 is appealable to the Income-tax Appellate Tribunal and thus, the petitioner has an alternative remedy. In its counter-affidavit respondent No. 4 has contended that he was directed by the Commissioner of Income-tax, Allahabad, to issue notices under sections 148 and 139(2) of the Act and, accordingly, the impugned notices were issued by him and that since the petitioner had submitted that it was being assessed by the Income-tax Officer, Circle II(3), Kanpur, copies of the notices were sent to the said officer as well. It is further claimed that it is now for the Income-tax Officer, Circle II(3), Kanpur, to decide whether the proceedings for reassessment are to be initiated or not. At the hearing, Sri Bharat Ji Agarwal, learned counsel for the respondents, raised a preliminary issue that the High Court at Allahabad had no jurisdiction to entertain the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he purposes of that association." Then with effect from April 1, 1984, the following proviso was added by the Finance Act, 1983 : " Provided that nothing contained in this clause shall apply if for any period during the previous year-- (i) any sums by way of contributions received by the association are invested or deposited after the 28th day of February, 1983, otherwise than in any one or more of the forms or modes specified in sub-section (5) of section 11 ; or (ii) any funds of the association invested or deposited before the 1st day of March, 1983, otherwise than in any one or more of the forms or modes specified in sub-section (5) of section 11 continue to remain so invested or deposited after the 30th day of November, 1983, or (iii) any shares in a company (not being a Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956), or a corporation established by or under a Central, State or Provincial Act) are held by the association after the 30th day of November, 1983. " Thus, section 10(21) granted exemption to the income of a scientific research association subject to the conditions prescribed therein. Since the income of such associatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been mentioned in the counter affidavit and was not doing any research and that in spite of repeated opportunities it did not submit its accounts and annual returns of its scientific research activities as required by the last approval contained in the notification dated October 22, 1983, copy of which has been annexed to the writ petition as annexure-4 and that for this reason the prescribed authority was authorised to cancel the approval with retrospective effect. It was contended that the fact indicates that the petitioner obtained the approval by misrepresentation and, therefore, the action of the authorities was justified and that the court should not interfere in its extraordinary jurisdiction. On behalf of the petitioner reliance was placed on Seksaria Biswan Sugar Factory Ltd. v. IAC [1990] 184 ITR 123 (Bom) in which the same notification, which is impugned in the present writ petition, came up for consideration before a learned single judge of the Bombay High Court. The said sugar factory had made a donation of Rs. 12,00,000 to the present petitioner during the period relevant to the assessment year 1982-83 and was granted a deduction under section 35(1)(ii). On the with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... impugned notification was, for that reason, invalid as held by the Bombay High Court. However, it is necessary to examine whether under the provisions of the Act the prescribed authority has the power to revoke the approval once granted by it under section 35(1)(ii) of the Act. The language of clause (ii) of section 35(1), as reproduced above would show that approval can be granted to a scientific research association which has as its object the undertaking of scientific research. This clause does not require that at the relevant time, i.e., for the period for which the approval is sought, the scientific research association must be actually engaged in scientific research. In other words, the Act permits approval of an association which is in the process of establishing infrastructure for scientific research which will enable it to actually engage itself in the scientific research a few years hence. This is clear from the language of clause (21) of section 10 as well which requires application of the income solely to the purpose of that association. For example, a society is registered for the purposes of scientific research with an initial capital of Rs. 10,000 only. The nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibed authority to do so. The third proviso to section 35(1) introduced from April 1, 1989, provides that a notification of approval under section 35(1)(ii) shall not have effect for a period of more than three years meaning thereby that at one time approval can be granted for a maximum period of three years. Even while enacting the aforesaid second and third provisos the Legislature did not think it necessary to confer the power of rectification or revocation on the prescribed authority. The Act, therefore, seems to have the legislative policy that the prescribed authority which has indicated in the counter-affidavit is constituted by very senior scientific experts of the Government, would be made after due deliberation and would be final (sic). Wherever the Legislature has thought it necessary it has made such provision and conferred jurisdiction on the income-tax authorities to cancel or rectify their orders or to make reassessment. A specific instance is section 186 of the Act which confers jurisdiction on the Assessing Officer to cancel registration granted to a partnership firm if he is of the opinion that during the previous year no genuine firm is in existence as registered. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a genuine scientific research association and when it applies for approval for subsequent periods also to see whether the association is actually engaged in scientific research. The job of seeing how the research association earned its income and how it spent the same was assigned to the Assessing Officer. It was contended on behalf of the respondents that the power to grant exemption includes within its scope the power to revoke the exemption with retrospective effect. We are of the view that the administrative authorities have no general or inherent powers like this. In Nava Samaj Ltd. v. Registrar of Companies, AIR 1966 Bom 218, the question was whether exemption granted under sub-section (4) of section 89 of the Companies Act, 1956, could be subsequently withdrawn. The Bombay High Court on a detailed consideration of the matter held that the power to grant exemption exhausts itself with the grant and it is not permissible to the Central Government to revoke the exemption subsequently. In State of Bihar v. D. N. Ganguly, [1958-59] 15 FJR 118 ; AIR 1958 SC 1018, the question was whether the appropriate Government having referred an industrial dispute for adjudication under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciation does not comply with the aforesaid conditions it may be permissible to the prescribed authority not to grant approval for a subsequent period but it cannot use the default for revoking the approval already granted. The second proviso to section 35(1) clearly indicates that it is "before" granting the approval that the prescribed authority must call for the accounts or information. Calling for any information after the approval is already granted does not serve any purpose. It was also contended that the petitioner has misutilised its funds in making unauthorised investments unconnected with scientific research and has procured approval under section 35(1)(ii) by misrepresentation and has not conducted any research. The High Court should not, therefore, grant any relief to the petitioner in exercise of its extraordinary jurisdiction under article 226 of the Constitution of India. We have given our careful consideration to this submission. We find that the respondents have merely issued a notification under the signatures of an under Secretary to the Government of India, Ministry of Finance, who is admittedly, not the prescribed authority. The actual order and conclusions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the revocation of approval with retrospective effect is hit by the principle of promissory estoppel and is, therefore, invalid. In our view, the said principle cannot be invoked in the present case because the authorities have acted in the exercise of statutory power by granting the approval in exercise of the authority conferred by the statute. No promise can be said to have been held out to the petitioner and if the revocation had been authorised by the statute no question of estoppel would arise. It is established law that there is no estoppel against a statute and patently in this case there was no promise. This contention, therefore, is not tenable. In this writ petition, the petitioner has sought a writ of certiorari for quashing the notification dated, January 2, 1986, and in view of the above discussion the revocation of the approval is without jurisdiction and deserves to be quashed. The petitioner has also sought quashing of notices issued by the Income-tax Officer, Faizabad. The same are patently without jurisdiction and deserve to be quashed. The petitioner has sought quashing of the Commissioner's orders under section 263 of the Act by which he set aside the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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