CBDT CS 04 Scrutiny Guidelines 2026-27: Trust Registration, 12AB, ITR-7 & Form 10BD

CBDT CS 04 Scrutiny Guidelines 2026-27: Trust Registration, 12AB Renewal, ITR-7 and Form 10BD Compliance

Recently, the Central Board of Direct Taxes has issued guidelines for compulsory selection of returns for complete scrutiny during the Financial Year 2026-27. These guidelines have been issued vide F. No. 225/56/2026/ITA-II dated 04.06.2026.

In this article, I have discussed the practical applicability, registration and renewal aspects, reporting requirements, ITR-7 compliance, Form 10BD / 10BE verification, and key precautions relating to CS 04 scrutiny cases involving trusts, institutions and NGOs. In case you have any doubt after reading this article, or if you feel that any practical aspect requires further discussion, you may contact me at the contact details mentioned at the end of this article.

The CBDT has prescribed specific categories under which returns will be selected for compulsory complete scrutiny. These categories have been coded as CS 01 to CS 06. Each category deals with a separate class of cases requiring detailed examination by the Department.

In this article, we are discussing only one such category, namely CS 04, which relates to cases involving registration, approval, renewal, cancellation or withdrawal under sections 12A, 12AB, 35 and 10(23C), where exemption or deduction has been claimed in ITR-7. Other categories under CS 01 to CS 06 may be discussed separately.

Introduction

CS 04 is one of the compulsory scrutiny selection parameters under the CBDT guidelines for selection of returns for complete scrutiny. It covers cases where an assessee filing ITR-7 has claimed exemption or deduction despite an issue in its registration, approval, renewal, cancellation or withdrawal under the relevant exemption provisions.

CS 04 is not itself a charging provision. It does not automatically deny exemption. It is only a scrutiny trigger. Once the case is selected, the Department will examine whether the assessee had a valid legal entitlement to claim exemption or deduction in the return of income.

The main mismatch targeted under CS 04 is:

Registration / approval not granted, cancelled or withdrawn on or before 31.03.2025, but exemption / deduction still claimed in ITR-7 filed during FY 2025-26.

This category is highly relevant for charitable trusts, religious institutions, educational institutions, hospitals, research institutions, NGOs and other entities claiming exemption or deduction in ITR-7.

What the CBDT Guideline Says

CS 04 applies to cases relating to registration or approval under sections 12A, 12AB, 35 and 10(23C), including charitable or religious trusts, approved research institutions, educational institutions, hospitals, medical institutions and other approved entities claiming exemption or deduction in ITR-7.

The case may be selected where registration or approval under the relevant provision:

1. has not been granted;

2. has been cancelled;

3. has been withdrawn by the competent authority on or before 31.03.2025;

and the assessee has still claimed exemption or deduction in ITR-7.

However, where the order of cancellation or withdrawal has been reversed or set aside in appellate proceedings, such case should not be selected under this parameter.

The cases are to be selected by the Directorate of Income-tax (Systems), with approval of DGIT(Systems), Delhi, based on returns filed by such entities during FY 2025-26. Notice under section 143(2) is to be served through NaFAC or the prescribed income-tax authority, as applicable.

Why CS 04 is Important in Trust and NGO Cases

In trust and institution cases, exemption generally depends upon valid registration, approval or renewal. Therefore, the Department will not merely see whether ITR-7 has been filed. It will examine whether the legal foundation for claiming exemption existed for the relevant assessment year.

The first scrutiny question will be:

Did the assessee have valid registration, approval or renewal for the relevant previous year and assessment year?

If registration or approval was absent, expired, cancelled, withdrawn or not renewed, the exemption claim may be questioned.

In the latest framework, this issue becomes more important because registration of charitable and religious trusts is no longer perpetual. The assessee must ensure that renewal / re-registration under the applicable provisions has been properly obtained or validly applied for.

Latest Position: Renewal / Re-registration of Trusts

After the new registration regime, a trust claiming exemption under sections 11 and 12 must ensure that its registration remains valid under the applicable renewal framework.

The following practical situations may create scrutiny risk under CS 04:

1. old registration was not migrated into the new regime;

2. registration expired and renewal was not filed in time;

3. provisional registration was not converted into regular registration;

4. renewal application was filed late;

5. renewal application was rejected;

6. registration was cancelled due to specified violations;

7. approval under section 10(23C) was not renewed or was withdrawn;

8. ITR-7 exemption claim does not match the Department’s registration database.

Thus, CS 04 should not be understood only as a “registration cancelled” category. It is also a “renewal failure / renewal mismatch / portal-status mismatch” scrutiny category.

Registration Period: 5 Years and 10 Years

Ordinarily, registration under the current trust registration framework is granted for 5 years.

However, after the latest amendment, certain smaller trusts or institutions may be eligible for a 10-year registration period where the prescribed income threshold condition is satisfied.

Therefore, in a CS 04 renewal case, the assessee should verify:

• whether registration was valid for the relevant assessment year;
• whether renewal was required;
• whether renewal application was filed within time;
• whether the trust falls under the 5-year or 10-year validity category;
• whether delay, if any, has been condoned or is capable of being condoned;
• whether renewal was granted, pending, rejected, appealed, stayed, restored or remanded.

Pending Renewal Application

Where the trust has filed renewal application within time and the order is pending, the exemption claim should not be treated in the same manner as a case where no renewal application was filed.

In such a case, the assessee should place on record:

1. copy of renewal application;

2. acknowledgement number;

3. old registration certificate;

4. date of expiry of registration;

5. computation showing that renewal application was filed within prescribed time;

6. replies filed before the authority, if any;

7. current portal status of the application.

The position should be that the assessee has complied with the renewal requirement, and no adverse conclusion should be drawn merely because the renewal order is pending at the Department’s end.

Delay in Renewal Application

If renewal application was filed late, the assessee should examine whether delay has been condoned or whether reasonable cause exists for condonation.

Common reasons may include:

1. technical issue on the portal;

2. wrong section code selected;

3. professional or administrative mistake;

4. illness or unavoidable circumstances;

5. confusion during transition from old registration to new registration regime;

6. bona fide delay without any intention to misuse exemption;

7. no loss to revenue.

If delay is condoned, the application is deemed to have been filed within time. In that situation, exemption should not be denied merely on the ground of delay.

Renewal Rejected but Appeal Pending

If renewal has been rejected and appeal is pending, the assessee must clearly state the exact legal position.

Where cancellation / withdrawal has been reversed or set aside in appellate proceedings, the CBDT guideline itself provides that such case should not be selected under CS 04.

Therefore, the assessee should not merely state that “appeal is pending”. It should file the exact appellate order, stay order, set-aside order, restoration order or remand order.

Verification through Books of Account, ITR-7, Form 10B / 10BB and Form 10BD / 10BE

CS 04 should not be treated only as a registration-status check. In practical scrutiny, the Department may also verify the exemption claim from books of account, audit report, ITR-7 schedules and statutory reporting forms.

In trust / NGO cases, the Assessing Officer may cross-check:

Form 10BD requires special care. It is not mandatory for every trust merely because the trust has section 12AB registration. It becomes relevant where the institution is a reporting person under section 80G or section 35 and has received reportable donations.

Where Form 10BD is applicable, donor-wise particulars of donations are required to be filed, and Form 10BE certificate is required to be issued to donors. These details may also have to be reconciled with ITR-7 and the books of account.

Therefore, in CS 04 scrutiny, the assessee should keep ready:

• books of account;
• donation ledger;
• donor-wise receipt details;
• bank statement mapping;
• Form 10BD acknowledgement, wherever applicable;
• Form 10BE copies / download proof, wherever applicable;
• ITR-7 Schedule VC reconciliation;
• Form 10B / 10BB reconciliation;
• 80G / section 35 approval order;
• registration / renewal order;
• activity report;
• application of income chart;
• corpus donation supporting letters;
• anonymous donation working, if applicable.

The assessee’s reply should clearly demonstrate that the exemption claim is supported by registration / renewal records, books of account, audit report, ITR-7 schedules and statutory donor reporting wherever applicable.

What the Assessing Officer Will Examine in CS 04 Cases

The Assessing Officer may broadly examine the following issues:

Application of Income, Section 13 and Section 2(15)

Even where registration exists, exemption can still be examined on merits.

The Department may verify whether:

1. income has been applied for charitable or religious objects;

2. 85% application condition has been satisfied;

3. accumulation is properly supported;

4. corpus donations are backed by specific direction;

5. capital expenditure is properly treated as application;

6. funds are invested in permitted modes;

7. any benefit has been given to trustees, founders or specified persons;

8. related-party payments are reasonable;

9. the assessee has violated section 13;

10. commercial receipts affect charitable character under section 2(15).

For entities claiming advancement of any other object of general public utility, the section 2(15) issue becomes important. If the entity is substantially engaged in trade, commerce or business, or renders services for consideration, the Department may examine whether the proviso to section 2(15) is attracted.

Consequences if the Assessee Fails to Establish Valid Entitlement

If the assessee fails to establish valid registration / approval / renewal or legal entitlement to claim exemption, the Department may:

1. deny exemption under sections 11 and 12;

2. deny exemption under section 10(23C);

3. disallow deduction linked to invalid approval under section 35, subject to statutory protection where applicable;

4. compute income under normal provisions;

5. levy interest;

6. initiate penalty proceedings;

7. make or recommend cancellation / withdrawal action where specified violations are found;

8. examine anonymous donations under section 115BBC;

9. examine section 13 violations separately.

Final Legal Position

CS 04 is targeted at exempt-entity returns where exemption or deduction is claimed despite registration, approval or renewal defects. In the latest trust-renewal framework, the decisive issue is not merely whether old registration existed, but whether the assessee had valid and legally effective registration / approval / renewal entitlement for the relevant assessment year.

The strongest position exists where:

1. registration / approval was valid for the relevant year;

2. renewal application was filed within time;

3. delay was condoned or is supported by reasonable cause;

4. renewal was pending with the Department;

5. cancellation / withdrawal / rejection was stayed, reversed or set aside;

6. fresh approval covers the relevant period;

7. Department portal mismatch caused incorrect selection;

8. ITR-7, Form 10B / 10BB, Form 10BD / 10BE and books of account are properly reconciled;

9. the assessee satisfies genuineness, application of income, section 13 and section 2(15) requirements.

Therefore, the correct approach in CS 04 scrutiny is:

First prove the legal validity of registration / approval / renewal, then reconcile ITR-7, audit report, books and Form 10BD / 10BE, and thereafter prove charitable activity and exemption compliance on merits.

CS 04 should not be treated as a mere technical scrutiny. It is a combined registration-status, renewal-compliance and data-reconciliation scrutiny for trusts, institutions and NGOs claiming exemption in ITR-7.

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