ITAT Delhi Quashes Retrospective 12AB Cancellation for Pre-2022 Violations

Sai Shikshan Sanstha Vs PCIT (ITAT Delhi)

Summary: The Income Tax Appellate Tribunal, Delhi Bench, allowed the appeal of Shri Sai Shikshan Sanstha against the Principal Commissioner of Income Tax (Central), Nagpur and quashed the order cancelling its registration retrospectively and the provisional registration under section 12AB(4) of the Income-tax Act, 1961. The dispute arose from search and seizure and survey action conducted on 17.09.2021, following which the Department relied on seized material, statements and other records to allege specified violations, including alleged cash refunds of salary, cash brokerage for student admissions, unrecorded miscellaneous and prospectus fees, routing of funds through Delhi-based companies and a loan from a paper/shell company. The assessee challenged the jurisdiction of the PCIT, the retrospective application of the specified-violation regime introduced by the Finance Act, 2022, the reference in the show-cause notice to section 12AA(3), the evidentiary basis of the allegations and the procedure followed. On jurisdiction, the Tribunal accepted the Department’s position that, after centralisation under section 127 and in light of Notification No. 70/2014 and the CBDT directive dated 19.01.2024, the PCIT (Central) could exercise the statutory functions over the centralised case. On the principal cancellation issue, however, the Tribunal held that the alleged acts and evidence relied upon related to periods before 01.04.2022, whereas the specified-violation framework in section 12AB(4), substituted by the Finance Act, 2022, operated prospectively. Relying on M.M. Patel Charitable Trust and other Tribunal decisions, and considering the statutory scheme and the decision in Industrial Infrastructure Development Corporation (Gwalior) M.P. Ltd., the Tribunal held that the new penal consequences could not be used as the basis for retrospective cancellation. The Tribunal further found that the notice and order did not clearly identify which specific specified-violation clause was invoked and that the statutory procedure under section 12AB(4) had not been followed. It distinguished Advantage India and considered the reasoning in Aggarwal Vidya Pracharni Sabha, Ram Saran Das Kishori Lal, Rukmini Educational Charitable Trust and Independent and Public Spirited Media Foundation, among others. The Tribunal also held that allegations concerning benefits to specified persons under section 13 could not, without more, be converted into specified violations under section 12AB(4), noting the separate statutory treatment of section 13 matters. On the evidentiary issue, the Tribunal found that the PCIT had substantially relied on search material and statements, while subsequent examination and cross-examination of employees had produced denials of salary refunds. It held that retracted statements relied upon for conclusive findings required fresh examination or an opportunity of cross-examination and could not, without independent corroboration, sustain the conclusions. The Tribunal further found no specific basis for treating the trust’s educational activities as non-genuine and no identified registration condition that had been violated. Consequently, the Tribunal decided the second and third issues in favour of the assessee, sustained the corresponding grounds, quashed the impugned order and allowed the appeal.

Retrospective cancellation of charitable trust registration under Section 12AB(4) cannot be sustained for alleged violations committed prior to 01.04.2022; besides, the cancellation proceedings must specifically identify the particular “specified violation” and follow the statutory procedure prescribed under Section 12AB(4). The ITAT also held that allegations falling essentially within Section 13(1)(c) cannot, merely by re-characterisation, be converted into “specified violations” under Section 12AB(4).

2. Core Citation.   Shri Sai Shikshan Sanstha v. Pr. CIT (Central), Nagpur, ITA No. 283/Nag/2023, Assessment Year 2008-09, order dated 08.09.2026, ITAT Nagpur Bench/“DB” Bench, Delhi. The appeal was against the order dated 16.06.2023 passed by the PCIT (Central), Nagpur cancelling the assessee’s registration under Section 12AB(4), including retrospectively.

3. Facts.   The assessee, Shri Sai Shikshan Sanstha, was an educational trust running three educational institutions and imparting education to approximately 2,800 students. Its registration under Section 12A had been granted with effect from 21.09.2007 and provisional registration under the new regime was granted on 31.05.2021. A search and seizure action was conducted on 17.09.2021, during which documents, digital records and statements were found/recorded. On the basis of such material, the Department alleged, inter alia, that the trust had siphoned off about ₹29.67 crore through alleged salary refunds, incurred ₹1.60 crore of cash brokerage, collected ₹37.41 lakh of unaccounted prospectus/miscellaneous fees, routed ₹4.62 crore through six Delhi-based companies, and received ₹5.94 crore as loan through alleged shell-company layering. On that basis, the PCIT proposed cancellation of registration under Section 12AB(4), ultimately cancelling the registration retrospectively as well as the provisional registration.

4. AO / PCIT Finding.  The AO/Department proceeded on the basis of the search material and statements and referred the matter to the PCIT, alleging occurrence of “specified violations”. The PCIT considered the alleged salary manipulation, cash brokerage, unaccounted fees and transactions through paper/shell companies as demonstrating diversion of trust funds and violation of the objects of the trust. The PCIT consequently invoked Section 12AB(4) and Section 13 and cancelled the registration. The Department defended the action by contending that the reference to Section 12AA(3) in the show-cause notice was merely a typographical error and that the substantive contents clearly referred to Section 12AB(4).

5. ITAT Finding.  The Tribunal held that retrospective cancellation was legally unsustainable. Section 12AB(4), containing the statutory concept of “specified violations”, came into effect from 01.04.2022, and the Tribunal, relying inter alia upon CBDT Circular No. 23 of 2022, held that the substituted provision operates prospectively. Therefore, violations allegedly committed before 01.04.2022 could not be retrospectively brought within the newly introduced concept of “specified violations” for cancellation under Section 12AB(4).

The Tribunal further held that the notice and order failed to identify which particular clause of the Explanation to Section 12AB(4)—clauses (a) to (g)—was actually attracted. Since each specified violation constitutes a distinct statutory category with different ingredients, a general allegation of “one or more specified violations” was insufficient, particularly when cancellation of registration carries serious and potentially catastrophic consequences.

The Tribunal also found that the statutory procedure under Section 12AB(4) had not been properly followed. The prescribed authority was required to undertake the necessary inquiry, reach satisfaction regarding the occurrence of a specific specified violation, and thereafter proceed to cancellation after providing the prescribed opportunity. Instead, the PCIT issued a broad notice without identifying the specific statutory clause or the precise procedural basis on which cancellation was proposed.

6. Cases Relied Upon.  The Tribunal relied upon and discussed M.M. Patel Charitable Trust; Open Door Welfare Society; Hyderabad Science Society; Little Pearl Charitable Society; Hemkunt Foundations; Shri Sridevi Charitable Trust; Amala Jyoti Vidya Kendra Trust; Ram Saran Das Kishori Lal; Rukmani Educational & Charitable Trust; Aggarwal Vidya Pracharni Sabha; M/s S.R. Trust; Richmond Educational Society; Yashaswi Academy for Skills; Santosh Trust; and G.D. Education Society. These authorities supported the propositions concerning prospective operation of Section 12AB(4), the necessity of identifying the specific specified violation, proper statutory procedure, and the distinction between Section 13 violations and cancellation under Section 12AB(4). In particular, the Tribunal considered Ram Saran Das Kishori Lal and Amala Jyoti Vidya Kendra Trust as supporting the proposition that the substituted Section 12AB regime applies from 01.04.2022 and cannot be used to impose retrospective penal consequences. It also considered S.R. Trust v. PCIT, where the Madras High Court interpreted “subsequently” in Section 12AB(4) to mean subsequent to registration under the new Section 12AB regime.

7. Additional ITAT Finding on Section 13.   An important additional finding was that allegations concerning benefit to specified persons under Section 13(1)(c)cannot automatically be converted into specified violations under Section 12AB(4). The Tribunal observed that Section 13 is a self-contained code dealing with such situations and that mere allegations of benefit to specified persons ordinarily result in denial/taxation of exemption at the assessment stage; they do not, by themselves, justify cancellation of registration.

The Tribunal also found that the PCIT had relied substantially upon search statements and material without conducting an independent inquiry. Where statements recorded during search are subsequently retracted or contradicted by affidavits, relying upon them for conclusive findings without independent corroboration or adequate opportunity of cross-examination was held insufficient. The assessment proceedings had, in fact, resulted in examination/cross-examination of 15 employees, who denied refunding salary in cash and produced their bank accounts.

8. Outcome. The appeal was allowed. The Tribunal held that the cancellation of registration under Section 12AB(4), including retrospective cancellation and cancellation of provisional registration, was not sustainable in law. The impugned order dated 16.06.2023 passed by the PCIT (Central), Nagpur was consequently quashed, and the corresponding grounds of appeal were allowed in favour of the assessee. The order was pronounced on 08.09.2026.

One-line ratio: A trust’s registration cannot be retrospectively cancelled under Section 12AB(4) for alleged “specified violations” pertaining to the pre-01.04.2022 period; the authority must identify the precise specified violation, follow the statutory inquiry procedure, and cannot merely re-characterise a Section 13(1)(c) allegation as a Section 12AB(4) violation.

List of Cases Discussed

• Advantage India Vs PCIT (Central) (ITAT Delhi), (2025) 178 taxmann.com 605 — relied upon by the Revenue on jurisdiction and retrospective cancellation under Section 12AA(3), but distinguished by the Tribunal.
• M.M. Patel Charitable Trust Vs PCIT (ITAT Pune) — relied upon to hold that the specified-violation regime introduced from 01.04.2022 cannot support cancellation for earlier alleged violations.
• Industrial Infrastructure Development Corporation (Gwalior) M.P. Ltd. Vs CIT (Supreme Court), (2018) 90 taxmann.com 281 — relied upon for the principle that registration cannot be cancelled in the absence of express statutory power.
• Open Door Welfare Society — relied upon regarding the prospective operation of the amended Section 12AB(4).
• Hyderabad Science Society — relied upon regarding the prospective application of the specified-violation provisions.
• Little Pearl Charitable Society — relied upon against retrospective cancellation under Section 12AB(4).
• Hemkunt Foundation Vs PCIT (ITAT Delhi) — considered on jurisdictional and procedural requirements governing cancellation under Section 12AB(4).
• Shri Shridevi Charitable Trust — relied upon against retrospective application of the specified-violation regime.
• Amala Jyothi Vidya Kendra Trust Vs PCIT (ITAT Bangalore) — relied upon to hold that the amended cancellation provisions operate prospectively.
• Ram Saran Das Kishori Lal Charitable Trust Vs CIT (Exemption) (ITAT Delhi), 180 taxmann.com 546 — relied upon on prospective operation, identification of the precise specified violation and observance of the prescribed procedure.
• Legal Initiative for Forest and Environment (LIFE Trust) — cited by the Revenue; the Tribunal held that an order passed in a stay application had no persuasive value for deciding the appeal on merits.
• Rukmini Educational and Charitable Trust Vs PCIT (Central) (ITAT Bangalore) — considered on prospective application of Section 12AB(4), independent satisfaction by the PCIT and the invalidity of cancellation based merely on the Assessing Officer’s reference.
• Independent and Public Spirited Media Foundation Vs PCIT (Central) (ITAT Bangalore) — relied upon by the Revenue but distinguished because the survey and relevant conduct arose after the Finance Act, 2022 amendments became effective.
• Shrinivas Education and Charitable Trust — considered through the decision in Rukmini Educational and Charitable Trust on the prospective operation of the amended cancellation provisions.
• Richmond Educational Society Vs DCIT/ACIT (ITAT Delhi) — relied upon to distinguish individual financial irregularities from non-genuineness of the institution’s charitable activities and to explain the separate operation of Sections 13 and 12AB(4).
• Yashaswi Academy for Skills Vs PCIT (ITAT Pune) — relied upon on the distinction between Section 13 violations and specified violations warranting cancellation under Section 12AB(4).
• Santosh Trust Vs ACIT (Central-6), Delhi (ITAT Delhi), ITA Nos. 3128 and 3570/Del/2026, order dated 31.08.2026 — relied upon on the treatment of alleged benefits to specified persons under Section 13.
• G.D. Education Society Vs DCIT/ACIT, Central Circle (ITAT Delhi), 2026 (5) TMI 1776 — relied upon to hold that disputed transactions involving specified persons ordinarily affect exemption at the assessment stage and do not automatically justify cancellation of registration.
• S.R. Trust Vs PCIT (Madras High Court) — relied upon for interpreting “subsequently” in Section 12AB(4) as referring to the period after registration under the new Section 12AB regime.
• M/s Ballar Marketing Pvt. Ltd., ITA No. 3094/Del/2023, order dated 18.03.2026 (ITAT Delhi) — cited by the assessee regarding the admissibility and evidentiary treatment of electronic records.
• Andaman Timber Industries Vs Commissioner of Central Excise (Supreme Court), 281 CTR 241 — relied upon regarding the right of cross-examination where third-party statements are used against the assessee.
• Vanita Vishram Trust Vs Chief Commissioner of Income Tax (Bombay High Court), (2010) 327 ITR 121 — cited for considering the institution’s actual educational activities and application of funds towards its objects.

FULL TEXT OF THE ORDER OF ITAT DELHI

This is appeal preferred by the Assessee against the order dated 16.06.2023 of the Principle Commissioner of Income-tax (Central), Nagpur (hereinafter referred as ‘Prescribed Authority’ or in short ‘ld.

PCIT’) against the cancellation of registration retrospectively and also provisional registration granted. 2. Heard and perused the record. The case of department as canvased by ld. DR is that in the course of search and seizure and survey action on 17.09.2021 several incriminating evidences were found and seized from the premises of the assessee. Copies of all the seized documents were handed over to the authorized representative on 03.10.2022. Also, statements on oath were recorded which are also incriminating. The seized material, statements on oath and other observations of the record revealed case for cancellation of registration of assessee u/s 12A of the Income Tax Act, 1961 (hereinafter referred to as “the Act’) and accordingly a show cause was issued to the assessee detailing therein the reasons for proposing cancellation of registration as well as the basis for the same as emanating from the incriminating material on record. It was seen that the assessee has prima facie made specified violations as mentioned in explanation to section 12AB(4) of the Act and has also committed violation as per section 13 of the Act, details of which are summarized as under:

a) The assessee trust has siphoned off an amount of Rs. 29,67,46,946/- in cash, by inflating salary expenditure, without entering these salary refunds in regular books of accounts, and same is not applied for the objects of the trust. As the said amount is taken back by the trustees of the trust, therefore it shows that the said amount has been utilized for the personal benefit of the persons mentioned in sub-section 3 of section 13 of the Act and not for the object of the trust.

b) The expenses incurred as a brokerage towards procuring the admission of the students by the assessee trust to the tune of Rs. 1,60,37,500/- in cash is out of books. It follows that the income derived by the trust is not applied on the object of trust.

c) The assessee trust has not entered in the books of accounts, the miscellaneous and prospectus fees collected to the tune of Rs. 37,41,600/- in cash, and thus not applied for the object of the trust, in specified violations as mentioned in explanation (a), of section 12AB(4) of the Act. As this amount is not recorded so it is remained with the trustees of the trust, therefore it shows that the said amount has been utilized for the personal benefit of the persons mentioned in sub-section 3 of section 13 of the Act and not for the object of the trust.

d) The assessee trust has routed unaccounted money to the tune of Rs. 4,62,42,973/- through Delhi based six companies through layering which is clear cut specified violation as the transaction are with paper/shell companies and these activity carried out by the trust is not being carried out in accordance with object of trust.

e) The assessee trust has shown Rs. 5,94,00,000/- as loan from shell company M/s Kinetic Vyapar Pvt. Ltd. through shell company M/s Zodiac Dealcom Pvt.Ltd., layering 150 companies. This is specified violation.

3. In view of the facts and circumstances of the case, it is alleged that the assessee trust was engaged in activities which are not in accordance with the objects of the Trust, and it was also a violation of section 12AB(4) and section 13 of the Act. Ld. DR has submitted that ld. PCIT(Central) has duly perused the incriminating documents and the statements recorded during the course of the search, analyzed the responses of the assessee Trust filed on the show cause issued to them and had considered the issues that have emerged from the show cause and responses of the assessee.

4. We find that the assessee is in appeal and has raised following grounds:

“1. The order passed by Pr. Commissioner of Income Tax (Central), Nagpur u/s 12AB(4) of I.T. Act 1961 is illegal, invalid and bad in law.

2. The learned PCIT(C) erred in holding that there are specified violation in terms of provisions of section 12AB(4) of I.T. Act 1961.

3. The learned PCIT(C) ought not to have cancelled the registration on the basis of facts and evidence on record.

4. The initiation of proceedings by the PCIT for cancellation of registration by issuance of notice u/s 12AA(3) is bad in law.

5. The learned PCIT(C) erred in cancelling the registration u/s 12A of I.T. Act 1961 with retrospective effect from 21/09/2007.

6. The PCIT has erred in cancelling the registration provisionally granted to the appellant trust on 31/05/2021 under section 12A of the Act by her order dated 16/06/2023 u/s 12AB(4) of the Act.

7. The PCIT has erred in cancelling the registration granted to the appellant trust u/s 12AA/12AB of the Act even on merit as neither the material found during the course of search nor the statements recorded on oath as referred to and relied upon by the learned PCIT, is sufficient to establish, even prima facie, that there is occurrence of one or more specified violations in the case of the appellant as specified in Explanation to Section12AB(4) of the Act.

8. Allegations in order passed cancelling registration based on information retrieved from USB Storage device (pen drive)having no evidentry value are unjustified and bad in law.

9. Utilisation of fees for payment to career counsellors and donations recorded in books of account or alleged violation under section13 are no reasons for cancellation of registration.

10. The order passed by learned PCIT(C) is in violation of principles of natural justice and deserves to be cancelled.”

5. Arguments of both sides were heard and record has been perused and written submissions as filed by the assesse and ld. DR, have also been taken into consideration.

6. The contention of ld. Counsel for assesse has primarily raised three issues. The first issue being that ld. PCIT, Central has no jurisdiction to pass the impugned order as the jurisdiction of registration u/s 12A/12AB rested with CIT(Exemption)(Pune) and therefore, the assumption of jurisdiction is vitiated and for this reliance has been placed on certain case laws including a decision of Hon’ble Delhi Benches in Aggarwal Vidya Pracharni Sabha, vs Pr.CIT Central, Gurgaon, ITA No. 1308 /DEL/2023 decided on 8 January, 2024. The same is rebutted by ld. DR by relying decision of Delhi Bench only in the case of Advantage India Vs. PCIT, Central, Delhi (2025) 178 taxman.com 605 (Delhi Trib).

7. In this context, we find substance in the contention of ld. DR as the judgment in Agarwal Vidya Pracharini Sabha (supra) is under challenge before Hon’blePunjab & Haryana High Court.

8. At the same time we find that in Agarwal Pracharini Mahasabha (supra) CBDT Circular on 22.10.2014 being notification No. 52/2014 was left out of consideration, by the Bench, as it was not cited by the department and subsequently that being brought to knowledge of the Bench in the case of Advance India (supra) the Bench had rejected this contention and held as follows:

“32. However, once the jurisdiction is assigned to an assessing officer of Central Charge vide order under section 127(2) of the Income Tax Act, the entire jurisdiction over the case is transferred to the assessing officer of the Central Charge and its superior officers like Joint Commissioner, Principal Commissioner and the Chief Commissioner or the Director General of Income Tax. The clause (b) of the Notification no. 70/2014 dated 13.11.2014, reproduced above, with absolute clarity, emphasizes this as under:

“(b) directs that the Director General of Income-tax or the Chief Commissioner of Income-tax specified in column (2) of the said Schedules or the Principal Commissioner/Commissioner of Income tax specified in column (4) of the said Schedules or Joint Commissioners of Income-tax subordinate to them, shall exercise powers and perform the functions as stipulated in the said Act in respect of such cases or classes of cases or such persons or classes of persons, assigned to Assessing Officers subordinate to them, under section 127 of the said Act, from the date of publication of this notification;”

33. A reading of clause(b) of the Notification 70/2014(supra) conjointly with the Explanation of section 127 leaves no room for doubt as to the intention of the Legislature as to the jurisdiction to be exercised by the authorities concerned over a class of case once order u/s 127 is issued. In the instant case, once the order u/s 127(2) dated 01.12.2016 was issued by the CIT(Exemptions), Delhi transferring the case of the assessee from ACIT(E), Delhi to Central Cir-16, Delhi under the charge of Pr. CIT(Central), Delhi, by virtue of Explanation to section 127 and Notification no 70/2014, the Pr. CIT(Central), Delhi assumes the jurisdiction over the assessee for all purposes and proceedings whether pending or completed or to be commenced, in respect of any year. In the instant case, the CIT(Exemptions), Delhi has specifically transferred the jurisdiction over the case to the Pr. CIT(Central)-2, Delhi, unlike the jurisdiction order passed Us 127 in the case of Aggarwal VidyaPracharniSabha (supra) where the transfer order did not specifically mentioned the transfer of jurisdiction to PCIT, Gurgaon. The explanation to section 127 of the Income Tax Act is reproduced again for abundance clarity:

“Explanation in section 120 and this section, the word “case”, in relation to any person whose name is specified in any order or direction issued there under, means all proceedings under this Act in respect of any year which may be pending on the date of such order or direction or which may have been completed on or before such date, and also includes also all proceedings under this Act which may be commenced after the date of such order or direction in respect of any year.”

34. We find that the CBDT had further issued a directive vide letter dated19.01.2024 on the issue of cancellation of registration u/s 12AA/10(23C) of the Income Tax Act in Trust cases by Pr. CIT other than CIT(Exemptions).The letter, referring to the Notification nos. 50/2014 and 52/2014 dated 22.10.2014 and 70/2014 dated 13.11.2014, further explains as under:

“2.3 A conjoint reading of the above mentioned Notifications and provisions of the Act makes it clear that the CIT (Exemption) does not exercise any jurisdiction in respect of persons claiming exemption under section 11, section 12 of the Act which have been assigned to the Assessing Officerssubordinate to Principal Commissioner of Income-tax (Central), under section 127 of the Act.

3. Therefore, by virtue of provisions of clause (b) of the notification no. 70/2014, S.O. 2915(E) dated 13.11.2014, the PCIT(C) has been empowered to perform/exercise powers and functions stipulated in the Act in respect of such cases or classes of cases or such persons or classes of persons, which were assigned to AO subordinate to him, under section 127 of the Act.

We are thus of the considered and firm view that a harmonious and constructive interpretation of Notification no. 70/2014 and the CBDT directive dated 19.01.2024 would show that the Pr.CIT(Central) assumes the power and indeed obligated to perform all the functions as stipulated in the Act, over the assessee once an order u/s 127 is issued transferring the jurisdiction to AOs subordinate to him.

Hon’ble Tribunal held that a harmonious and constructive interpretation of the CBDT notification No. 70/2014 and the CBDT directive dated 19.01.2024 would show that the PCIT(Central assumes the power, and is indeed obligated to perform all the functions. stipulated in the Act, over the assessee once an order u/s 127 is issued transferring the jurisdiction to Assessing Officers subordinate to him. The Tribunal further held that section 12AB(4) of the Act empowers “the Principal Commissioner or Commissioner” to cancel registration where specified violations are noticed and that the statute does not restrict this power exclusively to the Commissioner (Exemptions), the use of the general expression in the statute itself contemplates the exercise of this power by any officer of the rank of Principal Commissioner or Commissioner who has jurisdiction over the assessee, including the PCIT(Central) upon centralization under Section 127.”

9. Therefore, this contention of assesse deserves to be rejected outrightly.

10. Then, second issue arises out of contention of ld. Counsel for assesse that the impugned order has been passed beyond provision of Section 12AB(4) as there could not have been retrospective cancellation of the registration u/s 12A on the basis of specified violations which have come into effect from 01.04.2022.

11. It was contended that provision of Section 12AB(4) providing specified violation have been introduced w.e.f 01.04.2022. These provisions cannot be pressed into for invoking of cancellation of registration of earlier assessment years and thus, the show cause notice itself is bad in law. Reliance in this regard has been placed on the decisions in M.M. Patel Charitable Trust vide order dated 21.02.2025 in ITA No.1130/Pun/2024; Open Door Welfare Society in ITA No.811/Asr/2025 order dated 27.04.2026; Hyderabad Science Society in ITA No. 1128/Hyd/2024 order dated 11.03.2026; Little Pearl Charitable Society in ITA No.251/Del/2025 order dated 18.02.2026; Hemkunt Foundations in ITA No. 631/Del/2024 order dated 20.06.2025; Shri Sridevi Charitable Trust in ITA No. 709/Bang/2023 order dated 26.07.2024; M/s Amala Jyoti Vidya Kendra Trust in ITA No.458/Bang/2023 order dated 01.12.2023 and Ram Saran Das Kishori Lal in ITA No. 5290/Del/2024 order dated 12.11.2025

12. Ld. Counsel also submitted that the show cause notice dated 11.10.2022 indicates as such proceedings were initiated u/s 12AA(3) were initiated while provision of Section 12AB(4) are being invoked and the registration has been cancelled under the said provision of Section 12AB(4), thereby indicating that ld. PCIT has not applied its mind.

13. In this context, ld. DR had submitted that there is no illegality in exercise of jurisdiction u/s 12AB(4). Ld. DR at the time of arguments had vehemently defended the impugned findings of ld. PCIT and it was submitted that ld. PCIT very much exhibited intention to proceed u/s 12AB(4) of the Act. It was contended that once specified violations are found to be committed by an assesse than reference to previous years in Section 12AB(4) of the Act makes it apparent that cancellation can be made retrospectively. He took the bench across various findings of ld. PCIT, about the numerous specified violations, traced from the activities and financial of assessee, to contend that there is no infirmity in impugned order.

14. Then, on conclusion of the arguments and availing opportunity to file written submission ld. DR vide letter dated 04.08.2026 had filed written submission specially addressing queries of bench though a quite erroneously referring it as the queries raised by ld. Judicial member. Pertinent here is to put on record that queries when raised by the member leading the Bench are queries of the Bench and not of the particular member. Thus, merely for putting the records straight, these observations needed to be made part of the order.

15. As for completeness the contention of ld. DR addressing the queries raised have been taken into consideration and we find that ld. DR has primarily contended that the show cause notice is shown to be issued u/s 12AA(3) of the Act but the same is merely a typing mistake as the complete contents of the notice dated 11.10.2022 need to be taken into consideration.

16. Ld. DR has also submitted that such a contention should have been first raised before the first PCIT and cannot be raised at the first appellate stage before this Tribunal and thus there is estoppel from assessee’s conduct. Ld. DR has also relied references of appellant’s own reply to submit that assesse himself was aware that notice is issued u/s 12AB(4) and not u/s 12AA(3) of the Act. As for completeness para 2.5, 2.6 & 2.7 of the submissions of ld. DR are reproduced below:

“2.5. Without prejudice to the above and fully on the merits of the contention, the submission that the show cause notice dated 11.10.2022 was issued u/s 12AA(3) is entirely without substance. The show cause notice, reproduced in extenso at pages 2 to 21 of the impugned order dated 16.06.2023, is, on a plain and complete reading of its entire contents, a notice issued under and in accordance with section 12AB(4) of the Act. The reference to section 12AA(3) in the subject line is no more than a typographical or clerical error. This is conclusively established by the following:

(a) Paragraph 1 of the show cause notice itself records that a reference was received from the Assessing Officer “proposing cancellation of registration u/s 12AB of the trust on account of specified violations.” The very first operative sentence of the notice invokes section 12AB and the expression “specified violations,” which is the language exclusively of section 12AB(4).

(b) Paragraphs 4.1, 4.2, 4.3, and 4.4 of the show cause notice expressly and repeatedly invoke clauses (a), (b) and (c) of section 12AB(4) and the Explanation thereto in successive paragraphs. The three triggering conditions for exercise of power under section 12AB(4) — namely, the Pr. CIT’s own perception of a specified violation under clause (a), the reference from the Assessing Officerunder clause (b) and selection for scrutiny under risk management strategy under clause (c) – are each individually invoked in the notice.

(c) Paragraph 11.1 of the show cause notice records the specified violations “as mentioned in explanation to section 12AB(4) of the Act.” The expression “specified violations” is a defined term of art introduced into the statute exclusively by the Explanation to section 12AB(4) through the Finance Act 2022.It has no counterpart, no equivalent and no analogue in the erstwhile section 12AA(3). Its consistent use throughout the notice is wholly incompatible with any suggestion that the notice was intended to be issued under section 12AA(3).

(d) Paragraph 11.3 the operative concluding paragraph of the show cause notice calling upon the appellant to show cause, specifically refers to the registration “granted to the trust prior to the coming into the statute the provisions of section12AB of the Act vide Finance Act 2022.” This is an unambiguous and express invocation of the new section 12AB framework.

(e) The impugned final order dated 16.06.2023, passed by the Pr. CIT (Central), Nagpur, consequent to the show cause notice and the assessee’s response, is captioned, dated, signed, and passed under section 12AB(4) of the Act. The header of the order records “Order under section 12AB(4) of the Income Tax Act,1961.” The order in its entirety proceeds on section 12AB(4) of the Income Tax Act, 1961.

2.6. It is respectfully submitted that the show cause notice also contains, at paragraph4.5, an isolated sentence which reads: “…it is prima facie evident…that the trust has committed specified violations detailed in ‘Explanation to Section 12AA(4)’ of the Act.” This reference to “Section 12AA(4)” is, on a fair and holistic readingof the notice as a whole, a typographical/clerical mis-numbering and nothing more. The following submissions are made in this regard:

(a) Section 12AA was omitted from the statute with effect from 01.04.2021. Even when it was in force, sub-section (4) of section 12AA dealt with circumstances of cancellation that are now contained, in materially expanded form together with the Explanation defining “specified violations,” in section 12AB(4). The reference to “12AA(4)” in paragraph 4.5 is therefore, on a reasonable reading, an inadvertent transposition of “12AB(4)” to ” 12AA(4).”

(b) Critically, and this bears emphasis, the expression “Explanation to Section 12AA(4)” is itself a reference that has no meaning in law. Section 12AA(4), when it was in force, contained no “Explanation” whatsoever defining “specified violations.” It is only the Explanation to section 12AB(4) that contains such a definition. The reference in paragraph 4.5, read in its totality, can only make legal sense as a reference to the Explanation to section 12AB(4), which is the provision that actually defines the term “specified violations” used throughout the notice.

(c) The entirety of the notice, in its title, in its operative paragraphs 4.1 to 4.4, in paragraph 11.1 and in its concluding paragraph 11.3, proceeds consistently and exclusively on the basis of section 12AB(4). The single isolated reference in paragraph 4.5 does not reflect any change in the statutory provision being invoked and does not import the narrower grounds that were available under section 12AA(3), namely genuineness of activities and activities not in accordance with stated objects, to the exclusion of the wider and expanded categories of specified violations available under section 12AB(4).

2.7. It is also significant and deserving of emphasis that section 12AB(4), on a plain reading of its provisions, does not prescribe the issuance of any formal”notice” as a mandatory statutory step. The section requires only that the Principal Commissioner or Commissioner pass an order in writing, cancelling the registration, after affording a reasonable opportunity of being heard. The provision reads:

“..the Principal Commissioner or Commissioner shall…pass an order in writing, cancelling the registration of such trust or institution, after affording a reasonable opportunity of being heard…”

The statute, thus, does not mandate a notice per se. What it mandates is an opportunity of being heard. That opportunity was duly and fully afforded to the appellant through the document dated 11.10.2022, setting out in twenty one pages the entire case against the trust. The appellant availed itself of that opportunity in full by filing a detailed reply running to multiple pages and covering each of the five violation areas enumerated in the show cause notice. The form of thedocument granting the opportunity of being heard is entirely subordinate to its substance. The appellant received the case against it in complete detail, understood it fully, and responded to it comprehensively. The label on the document cannot be determinative.”

17. Further, ld. DR in the written submission filed has submitted as to how the decision relied by ld. Counsel for assesse are not applicable and on the contrary the decisions of the Coordinate Bench in Advantage India Vs. Pr.CIT (2025) 178 taxmann.com 605 (Delhi Tribunal) and Rukmini Educational Charitable Trust vs. PCIT (Central), Bengaluru (ITA No. 2106 to 2019/Bang/2024) were relied. Reliance is also placed in Bangaluru bench decision in Independent and Public Spirited Media Foundation Vs. PCIT (Central), Bengaluru, ITA No. 625/Bang/2023.

18. Ld. DR has then addressed the issue that the notice issued was proper and for completeness his contentions in para 4 are reproduced below:

“4. Reply to query raised by Hon’ble JM of ITAT as to whether PCIT (Central) issued proper notice and conducted inquiry and assessee’s submissions in this regard:

4.1. During the course of hearing on 19.06.2026 Hon’ble JM of ITAT has raised the query as to whether PCIT (Central), Nagpur has issued any notice in this case calling for document or information from assessee trust and whether PCIT (Central, Nagpur has made an enquiry in this case to satisfy himself about the occurrence or otherwise of any specified violation. Further, the assessee has also submitted that AO’s recommendation for cancellation was made solely based on seized materials from search and statements recorded and no independent verification was made before making reference to PCIT.

4.2. In respect of aforesaid query and assessee’s submissions, following is submitted:-

A careful reading of section 12AB(4) shows that the power to call for documents, information, or make inquiry is discretionary in nature, requiring the authority to satisfy himself “as he thinks necessary.” The legislature has intentionally used the words “as he thinks necessary” to vest wide discretion in the Principal Commissioner or Commissioner. There is no statutory requirement to issue multiple notices or to conduct a lengthy pre-show cause inquiry as a separate stage of proceedings. The PCIT (Central in the present case had extensive material before him in the form of seized documents, statements recorded on oath, digital and electronic records, and a detailed reference from the Assessing Officer, all of which formed the basis of the show cause notice. The show cause notice itself was a detailed document of 21 pages incorporating all the incriminating material and the proposed grounds for cancellation. Copies of allseized documents proposed to be relied upon were furnished to the authorised representative. The appellant filed a detailed reply to the show cause notice. The PCIT (Central thereafter conducted a hearing and passed the order. In these circumstances, the procedure followed was in full compliance with section 12AB(4) and with the principles of natural justice, and no prejudice can be said to have been caused to the appellant.”

19. Ld. DR has also relied provision of Section 292B and asserts in para 20 of the written submissions that technical objections cannot be allowed to obscure the gravity and the overwhelming weight of the evidence of violations established in this case. He has contended that the legislature, through section 12AB(4), has conferred a clear and express power upon the Principal Commissioner or Commissioner to safeguard the integrity of the charitable trust registration framework. The grant of registration is a privilege extended by the State to institutions that genuinely devote their resources to public benefit, in consideration of which substantial tax exemption is granted. Where an institution systematically abuses this privilege by diverting its funds for private benefit, using the trust as a vehicle for generating and deploying unaccounted cash and engaging in money-laundering transactions through accommodation entry networks, the withdrawal of the privilege of registration is not merely justified but is a necessary and mandatory consequence under the statute. He asserts, the impugned order correctly holds that “the pillars of charity stand demolished” in the present case. The words of the Pr. CIT (Central) reflect the reality of the situation as disclosed by the overwhelming evidence on record. The appellant trust was not a charitable institution in any meaningful sense; it was a vehicle for the commercial exploitation of education and the systematic generation of unaccounted funds for the personal benefit of its controlling trustees.

20. We have given a thoughtful consideration to the material on record in regard to this issue and as for completeness we would like to reproduce the complete content of the notice dated 11.10.2022 which forms basis for passing the impugned order:

22. Now, as we appreciate the aforesaid notice dated 11.10.2022 along with impugned order dated 16.06.2023 we find that it was only notice dated 11.10.2022 which forms fulcrum of allegations, discussions and reasoning in the impugned order dated 16.06.2023. Ld. PCIT has reproduced this notice extensively from para 3.1 to para 11.3 and mentions that based on this notice ld. PCIT has found violation as per Section 12AB(4) and Section 13 of the Act, therefore, in para 11.3 ld. PCIT has mentioned that accordingly, assesse was directed to show cause as to how the registration granted provisionally u/s 12A dated 31.05.2021 and also registration granted to the trust prior to coming into the statute the provisions of Section 12AB of the Act vide Finance Act, 2022 should not be cancelled.

22.1 We also found from the notice dated 11.10.2022 that in para 4.1 to 4.5 ld. PCIT has mentioned that he is assuming jurisdiction on the basis of clauses (a) to (c) of Section 12AB(4) of the Act as a reference was received from the ld. AO with the allegation of assesse trust committing specified violations and para 4.3 ld. PCIT mentions that on perusal of records including seized material and statement on oath recorded. Ld. PCIT has also noticed that there is occurrence of one or more specified violations as specified in explanation to Section 12AB(4) of the Act.

22.2 We thus, found that it is not just the reference of ld. AO but even based on his own observations from the seized material and statements of oath recorded during the search, Ld. PCIT has alleged occurrence of ‘one or more specified violations’.

22.3 As we appreciate these alleged violations which have been well described in the impugned notice as well as the impugned order, we find that in regard to alleged specified violations of manipulation in salary shown paid to employee ld. PCIT has observed that salary was shown to paid to individuals who do not exist. Salary was paid to individuals who are not employees and salaries paid to regular staff which was received back in cash, forms the basis of the allegation. We find that it is in the period of 2014-15 onwards till July 2021 the issue with regard to the portion salary collected back and allegedly siphoned off have been examined and made foundation and pass the impugned order.

22.4 In regard to alleged specified violation of issue of payment of brokerage in cash in the Financial Year 2014-15 to 2020-21, the year wise break-up of brokerage amount paid have been made basis to allege that this expenditure is against stated object of the trust and is therefore, specified violation in terms of Section 12AB(4) explanation.

22.5 Further, ld. PCIT has alleged that there is issue of other fees collected but not recorded in the books of accounts and in this regard particularly prospects fees collected and other fees so collected by NIT, GSM for Financial Year 2014-15 to 2020-21, became subject of examination and the allegation is that the fees collected is income of the trust but not accounted and therefore, not spent on the objects of the trust and consequently there is prima facie specified violation provided in explanation to Section 12AB(4) of the Act.

22.6 Ld. PCIT has then found that there is transfer of unaccounted money from some paper companies to the assesse. Allegedly, from VA Realcon Pvt. Ltd. the assesse had received money on 24.04.2019 & 09.03.2021. It was allegedly received from Reliable Finance Corporation Pvt. Ltd. funds on 13.05.2019, 13.11.2020, 17.11.2020, 19.11.2020, 20.11.2020, 15.02.2021, 17.02.2021, 10.03.2021, 11.03.2021. Funds were allegedly received from Utsav Securities Pvt. Ltd. on 09.03.2018, 16.03.2018 and two entries on 12.02.2021 and 12.02.2021. Further, funds were allegedly received from Sital Leasing and Finance Ltd. on 19.09.2020, 22.09.2020 and 15.02.2021 (page 15-16 notice). Further funds were received from Avail Financial Services Ltd. on 12.02.2021 and lastly funds were received from Destination Texofab Pvt. Ltd. on 27.08.2018 by way of two entries.

22.7 Ld. PCIT observes that the ld. AO has alleged that the unaccounted money have been transferred in the assesse through these companies and these companies are allegedly owned by Shri Surendera Jain along with his brother Shri Virendra Jain of New Delhi.

22.8 We find that ld. PCIT in para 9.6 of the impugned notice mentions that during the course of post search inquiries statement of Shri Sachin Nimodia who allegedly looks after consolidation of books of accounts of the assesse was recorded on 11.11.2021 and 30.11.2021 u/s 131(1A) of the Act and he had allegedly stated that funds received from Delhi based companies controlled by Shri Surendra Jain were in the form of development funds, CSR funds and loans. Thus, on the basis of these allegation in para 9.9 ld. PCIT had tabulated the quantum of the issue aggregating to Rs.36,32,12,519/-.

22.9 Thereafter, there is allegation that in the Financial Year 2011-12, the assesse trust had received Rs.5,94,00,000/- from paper/shell company Kinetic Vyapar Pvt. Ltd. operated by Shri Manoharlal Nangalia through Zodiac Dealcom Pvt. Ltd. The Ld. PCIT has made observations that the case of assessewas reopened for AY; 2012-13 and assessment order has passed was found to be erroneous so far as prejudicial to the interest of revenue and vide order dated 31.03.2022, ld. PCIT (C) Nagpur had set aside this order u/s 263 of the Act for framing fresh assessment giving specific directions.

22.10. The aforesaid discussion of the fact and allegation and the evidences relied by the ld. PCIT at the time of giving impugned notice dated 11.10.2022 and passing impugned order dated 16.06.2023, makes one thing very crystal clear that all these allegations and evidences are for a period prior to 01.04.2022. In fact, the search and seizure action u/s 132 and survey u/s 133A of the Act were undertaken on 17.09.2021 on the group including the assesse.

22.11 Thus, the foremost issue which we need to decide is if at all the provision of Section 12AB(4) of the Act, which had come into effect vide Finance Act, 2022 in regard to cancellation of registration on the basis of specified violation can at all be sustained. In this regard, we are of the considered view that provisions of Specified violation as introduced by way of Explanation to Section 12AB of the Act vide Finance Act, 2022 brings in place a complete code in itself and the consequences of the alleged violation is of penal in nature. Such penal consequences should always be taken to have come into effect prospectively and for any alleged act or omission prior to coming into effect of Finance Act, 2022 should not become basis for making an allegation of specified violation resulting into powers to be exercised for cancellation of the registration.

22.12 More particularly, the powers if at all can be exercised for the period prior to coming into effect of Finance Act, 2022 and cancelling registration for the period after new regime of registration and renewal of registration was introduced w.e.f 01.04.2021 have been considered by different benches of this Tribunal and the consistent view is that the provisions of specified violations brought into effect by Finance Act, 2022 cannot be applied prospectively and cannot thereby be made basis for cancellation of registration retrospectively, reliance in this regard is placed specially on the decision in of Pune Bench, in M.M. Patel Charitable Trust (supra) wherein in similar facts and circumstances the Bench relying the decision of Hon’ble Supreme Court in case of Industrial Infrastructure Development Corporation (Gwalior MP) Ltd. Vs. CIT (2018) 90 taxmann.com 281 (SC) has held that there cannot be any cancellation of registration granted u/s 12A of the Act by invoking provision of Section 12AB(4) of the Act. The Bench has also examined the issue that in fact no show cause notice u/s 12AB(4) can be issued after 01.04.2021 owing to Section 12AA(5) coming into place which has laid down that nothing contained in Section 12AA of the Act will apply on or after 01.04.2021. The co-ordinate Bench has also examined the applicability of specified violations for the Financial Year 2019-20 to 2021-22 and concluded that as for the alleged specified violations the registration could not have been cancelled retrospectively. As for completeness we reproduce para 19-22 of the order in the case of M.M. Charitable Trust (supra) of Pune Bench:

“19. Now we take up the third limb where it has been contended by the ld. Counsel for the assessee that in the show cause notice dated 21.07.2023 the ld. PCIT has referred to ‘specified violation’ committed by the assessee by virtue of which the assessee trust has not applied its income wholly and exclusively for the purpose for which it is established but using it directly or indirectly for the benefits of its trustees and other members of the trust. From perusal of section 12AB(4) of the Act extracted (supra) and specifically to section 12AB(4)(a)(ii) it has been provided that PCIT or CIT shall pass an order in writing cancelling the registration of such trust or institution after affording reasonable opportunity of bearing heard for such previous year and of subsequent previous years if he is satisfied that one or more specified violation have taken place. Now the word ‘specified violation’ was not appearing in the original section 12AB(4) w.e.f. 01.04.2021 but there was an amendment brought into by the Finance Act, 2022 w.e.f. 01.04.2022 inserting the word ‘specified violation’ and its definition. Now prior to 01.04.2022, there is no mention of the word ‘specified violation’ with regard to cancellation of registration granted u/s.12A, 12AA and 12AB of the Act. In theinstant case, the allegation made by the Revenue authorities is with regard to cash received against staff salary, doctors salary, PG stipend through bearer cheque and also receiving capitation fee in cash during the period F.Yrs. 2019-20 to F.Y. 2021-22. The ‘specified violation’ as referred by ld. PCIT in the impugned order relates to three financial years. However, as observed above, the word ‘specified violation’ has been brought into Statute from 01.04.2022. Therefore, the same could not have been applied in the case of assessee as there is no ‘specified violation’ word in section 12AB(4) of the Act prior to 01.04.2022.

20. Now even though section 12AB(4) applies to the registration granted u/s.12AA of the Act as provided in section 12AB(4) but then we will have to look for the provisions of section 12AA(3) and 12AA(4) of the Act and for the sake of convenience they are reproduced below :

“(3) Where a trust or an institution has been granted registration under clause (b) of sub-section (1) or has obtained registration at any time under section 12A [as it stood before its amendment by the Finance (No. 2) Act, 1996 (33 of 1996)] and subsequently the Principal Commissioner or Commissioner is satisfied that the activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution:

Provided that no order under this sub-section shall be passed unless such trust or institution has been given a reasonable opportunity of being heard.

(4) Without prejudice to the provisions of sub-section (3), where a trust or an institution has been granted registration under clause (b) of subsection (1) or has obtained registration at any time under section 12A [as it stood before its amendment by the Finance (No. 2) Act, 1996 (33 of 1996)] and subsequently it is noticed that—

(a) the activities of the trust or the institution are being carried out in a manner that the provisions of sections 11 and 12 do not apply to exclude either whole or any part of the income of such trust or institution due to operation of sub-section (1) of section 13; or

(b) the trust or institution has not complied with the requirement of any other law, as referred to in sub-clause (ii) of clause (a) of sub-section (1), and the order, direction or decree, by whatever name called, holding thatsuch non-compliance has occurred, has either not been disputed or has attained finality,

then, the Principal Commissioner or the Commissioner may, by an order in writing, cancel the registration of such trust or institution: Provided that the registration shall not be cancelled under this subsection, if the trust or institution proves that there was a reasonable cause for the activities to be carried out in the said manner.”

21. Now in the above sub-section (3) and (4) of section 12AA, there is no mention to any ’specified violation’ but only refers to the genuineness of the activity carried out by a trust or institution, however, ld. PCIT has only referred to some ‘specified violations during F.Yrs. 2019-20 to 2021-22 which was going on under scrutiny by AO. There were only few statements which were recorded during the course of search which are the basis of the alleged allegation and that too have been retracted and apart from that no other evidence and no accounted assets, unaccounted income were found during search at assessee’s premises and therefore they are merely allegations and there is no concrete finding disproving the genuineness of activities of trust. Therefore, even sub-section (3) and sub-section (4) of section 12AA could not have been invoked in absence of any specified violation for the years under consideration.

22. To conclude we allow the legal ground raised by the assessee in Ground Nos. 2 and 3 and hold that since the show cause notices issued to the assessee on 21.07.2023 and 20.03.2024 are invalid and void ab-initio for want of express powers for cancellation of registration u/s.12A of the Act and also proceedings wrongly started u/s.12AA of the Act in view of the amendment brought in from 01.04.2021 and lastly the ‘specified violation word being inserted from 01.04.2022 cannot be applied for the alleged violation made from F.Yrs. 2019- 20 to 2021-22 and therefore hold that ld. PCIT (Central) grossly erred in cancellingthe registration granted to assessee u/s.12A of the Act on 16.02.2001 and also erred in cancelling the registration granted u/s.12A r.w.s.12AB of the Act granted on 28.05.2021. Thus registration u/s.12A and 12AB of the Act granted to the assessee trust are restored.”

22.13 As for the aforesaid principles the decision which ld. Counsel has relied in Open Door Welfare Society (supra); Hyderabad Science Society (supra); Little Pearl Charitable Society (supra); Hemkunt Foundations (supra); ShriShridevi Charitable Trust (supra); M/s Amala Jyothi Vidya Kendra Trust (supra); Ram Saran Das KishoriLal (supra), can also be relied.

22.14 Coming to the decisions which the learned departmental representative has relied on, we are of the considered view that, amongst all the decisions he has relied, with regard to the issues directly involved, the decision in the case of Advantage India(supra) does not help him, as that was not a case in which a notice, if at all, was issued under Section 12AB of the Act. Therein, the issue was whether there can be a retrospective cancellation of registration, under Section 12AA(3) of the Act after the coming into effect of Section 12AB of the Act. Therein, the assessing officer had forwarded a proposal for cancellation of registration under Section 12AA to PCIT(C), vide letter dated 27 November 2017, along with a copy of the inspection report by the FCRA wing of the Ministry of Home Affairs dated 4 August 2017, which observed a violation of FCRA. Thereupon, PCIT issued a notice leading to cancellation of registration granted under Section 12AA of the Act. There was no allegation by the assessing officer of any ‘specified violation’ being committed or enquired by the PCIT. In para 47 of the order, the co- ordinate bench has concluded that, for the reason of violation of the twin conditions of non-genuineness of activities of the trust, as well as its activities not being carried out in accordance with the objects of the trust, the cancellation of registration by invoking Section 12AA(3) was valid and permissible. None of the case laws which have been cited before us with regard to lack of power to cancel registration with retrospective effect in case of specified violations being committed have been discussed. Thus, this decision in the case of Advantage India (supra) does not benefit the department at all.

22.15 The decision in Legal Initiative for Forest and Environment, (Life Trust) (supra), cited by Learned DR is, in fact, only a decision of bench in a stay application, and certainly that does not have any persuasive value. Even in that assessee’s own case, it would not have any persuasive value, where appeal is heard finally.

22.16 Coming to the decisions of the Bangalore Tribunal in the case of Independent and Public Spirited Media Foundation (supra) and Rukmani Educational and Charitable Trust (supra), the decision in Rukmini Educational Charitable Trust (supra) was first in time and has been considered in the case of Independent and Public Spirited Media Foundation case (supra).

22.17 Now, if we take into consideration the decision in Rukmani Educational Trust (supra), we find that the said decision also does not help the department at all, rather to some extent benefits assessee, for our aforesaid discussion. In that case, in para 55, the coordinate bench has taken into account the illegality committed by the assessing officer in sending a proposal for cancellation of the registration without actually giving his findings and not after issuing notice u/s 143(2) of the Act. Thus on this ground, the order of PCIT was set aside with regard to some assessment years.

22.18 At the same time, we find that in para 57 onwards, the question of the powers granted for cancellation retrospectively was examined. In fact, relying on the decisions of the Coordinate Bench in Amala Jyoti Vidya Kendra (supra) and Shrinivas Education and Charitable Trust (supra) bench had held that the amendment will take effect from 1-4-2022 and would only apply from assessment years 2022-23 onwards. Accordingly, the retrospective cancellation was held to be unsustainable in law.

22.19 The Bench had then, in para 70 onwards, also considered the fact that the PCIT has to apply his own mind to the facts and cannot, merely by relying on the reference of the assessing officer, giving findings as such an order is based on mere borrowed satisfaction.

22.20 Coming to the decision of the Independent and Public Spirited Media Foundation case (supra), the first distinguishing fact is that, in that case, the survey under Section 133(A) of the Act was conducted at the office of said assesses on 7 September 2022. That is after the coming into effect of the Finance Act 2022. Then the bench had not given any observations as to how the various judicial decisions of various benches cited before it, and as discussed by us above in favour of assessee, are distinguishable for any fact or reason, or even that they lay incorrect law or the decision are rendered Per incuriam and primarily relying on the decision in the case of Advantage India (supra), alone it had sustained the retrospective cancellation.

22.21 We find that in para 55, the bench has referred to Circular No. 23 of 2022, dated 3rd November 2022, which has also been relied before us by the learned department representative and we find that, in fact, the circular categorically lays down that there shall be two regimes for registration, and that means there would be two regimes for cancellation as well. Then the circular specifies that the new provision of Section 12AB is by the way of substitution. Thus being of penal consequences, to our mind certainly it would be prospective in its application. The circular categorically lays down that the amendments brought by the way of the substitution come into effect from 1 April 2022. Thus leaving no doubt in our mind that the retrospective application to the ‘violations’ found to be committed for period prior to 1st April 2022, cannot be made culpable into the scope of ‘specified violations’ as defined, by bringing in an amendment by the way of substitution of Section 12AB. Thus these decision relied by ld. DR, do not help the department.

23. Furthermore, on the basis of aforesaid discussion we also find from the impugned notice dated 11.10.2022 and also from the impugned order dated 16.06.2023 that ld. PCIT has made very broad allegation of assesse committing ‘one or more specified violations’ as specified in Explanation to Section 12 AB(4) of the Act. However, there is nothing coming up to indicate as to which specific clause, (i) to (vi) mentioned in the Explanation were invoked.

23.1 We are of the considered view that when ld. Tax authorities invoke any provision of the Act with penal consequences, there should be categorical and crystal clear indication in the notice calling explanation or otherwise at least in the impugned order passed on the basis of such notice that which of the specified penal clauses of the Act has been violated. Each specified violation describes a distinct class of violation describing ingredients required to be considered and required to be established in the enquiry conducted by the tax authorities, to give a finding that a particular specified violation has been found to be committed, justifying the penal consequences, enshrined in the Act.

23.2 However, giving a very thorough examination to impugned notice and the impugned order we find that there is no such specific averments. Rather in very gross manner and broadly invoking the provision of Section 12AB(4) along with provision of Section 13 of the Act the notice was issued and impugned order is passed. While both these provisions are operating in different sphere and become applicable in different proceedings under the Act. The issues have been examined broadly and findings are given without indicating as which specific clause of Explanation to Section 12AB(4) of the Act has been invoked for justifying retrospective cancellation of registration and also provisional registration.

23.3 In this context, we take note of Delhi Bench decision in Ram Saran Das Kishori Lal (supra) wherein the Bench, in which one of us, the judicial member was also on the Bench, has examined this aspect and has observed as follows:

“19. Now, when the aforesaid aspects are taken into consideration, it leaves no doubt in the mind of this Bench that cancellation of registration by the impugned order was on the basis of certain alleged acts which occurred prior to 01.04.2022. The Revenue cannot dispute that the provisions for ‘specified violations’ are inserted in sub-section (4) of section 12AB w.e.f. 01.04.2022. Now, the ‘specified violations’ enumerated in section 12AB(4) recognise the specific nature and scope of violation giving rise to penal consequences of cancellation of registration. The first and foremost we would like to observe is that when the consequences are of the nature of withdrawing a recognition or cancellation of registration, the same can have a catastrophic effect on the existence of an institution and its activities. Thus, the provisions of the law have to be strictly interpreted and complied with.

19.1 As we take into consideration provisions and scope of 12AB(4) of the Act, we find that it refers to the powers granted for an action subsequent to grant of registration or provisional registration of a trust under section 12AA of the Act, and if, ‘subsequently’, specified violations are discovered, then, the competent authority is entitled to initiate an action by following a procedure enshrined in clauses (i) to (iv) of sub-section (4) of section 12AB of the Act.

19.2 It comes up that, clause (i) of sub-section (4) of section 12AB of the Act requires that the competent authority shall call for such documents or information from the trust or institution for making such inquiry as he think necessary in order to specify himself about the occurrence or otherwise of any‘specified violation’. This clause (i) when read with clause (ii) of sub-section (4) of section 12AB of the Act indicates that the competent authority shall, before cancelling the registration, call for documents or information or make an inquiry as is necessary and, thereupon, after affording a reasonable opportunity of hearing to the assessee, cancel the registration. Thus, of subsection (4) of section 12AB of the Act mandates that when the assessee is called upon to explain and justify the conclusions drawn for cancellation of the registration, the competent authority should have drawn a satisfaction as to what was the ‘specified violation’ which has taken place. Pertinent to mention again is that as observed while referring to sub-section (4) of section 12AB of the Act, the law vests jurisdiction in regard to only ‘specified violations’ found subsequently to the enactment of sub-section (4) of section 12AB of the Act. So it is also necessary that if competent authority intends to invoke cancellation powers with retrospective effects the same should be mentioned in the notice issued to show cause as per mandate of clause (i) when read with clause (ii) of sub-section (4) of section 12AB of the Act.

…………………………………………………………………

22. However, as the impugned order of cancellation of registration is considered, we find that in para 3.7 the competent authority makes specific reference to the class of ‘specified violation’ attracted and for which the assessee is being penalised by cancellation of registration and for convenience, we reproduce para 3.7 and 3.7.1, below:-

“3.7 Specified Violation:

3.7.1 Next it is argued that no specified violation as per section 12AB has occurred. This plea is not accepted, for the following reasons:

(i) It is amply clear from discussion in Para-3.3 to 3.4.1 supra the property of trust has been applied, other than for the objects of the trust. Thus assessee has made violation as per Explanation (a) to 12AB(4)

(ii) It is amply clear from discussion in Para-3.3 to 3.4.1 supra the trust has income from profits and gains of business which is not incidental to the attainment of its objective. Thus assesse has made violation as per Explanation (b) to 12AB(4).

(iii) It is amply clear from discussion in Para-3.3 to 3.4.1 supra the activity carried out by the trust is not genuine and not being carried out in accordance with all or any of the conditions subject to which it was registered. Thus assessee has made violation as per Explanation (e) to 12AB(4).

(iv) It is amply clear from discussion in Para-3.4.1 supra the trust has not complied with TOHO (Transplantation of Human Organs and Tissues) Act, 1994, because of which its license for kidney transplantation was cancelled and never renewed. Thus assessee has made violation as per Explanation (f) to 12AB(4).

(v) It is amply clear from discussion in Para-3.5.1 & 3.5.2 supra the application made by trust u/s 12A(1)(ac) contains false and incorrect information. Thus assessee has made violation as per Explanation (g) to 12AB(4).”

23. The aforesaid observations of the competent authority in paras 3.7 and 3.7.1 leaves no doubt in the mind of this bench that at the time of issuance of notice on 14.03.2024 calling upon the assessee to show cause for the purpose of clause (ii) of sub-section (4) of section 12AB of the Act the competent authority has not reached any conclusion on the basis of information called from the assessee or any independent inquiry as to which of the class of ‘specified violations’ defined in Explanation to sub-section (4) of section 12AB of the Act are being invoked. Neither there is proposal to cancel the registration retrospectively.

24. A co-ordinate bench on which one of us, the judicial member, was also in quorum, in ITA No. 1308 /DEL/2023 AggarwalVidyaPracharniSabha versus Principal Commissioner of Income Tax, Central Gurgaon videorder dated 08.01.2024 was considering similar issue of challenge of cancellation of registration by invoking powers of section 12AB(4) of the Act and with regard to the requirement to disclose in show cause notice as to which class of ‘specified violation’ is invoked, has in para 17.1 concluded as follows;

“17.1 Furthermore, here in this case, the exercise of power u/s 12AB(4) of the Act seems to also not have been done in accordance with law. As what comes up further is that, if at all, PCIT, Gurgaon was acting under clause (a) to Section 12AB(4), then, before issuing the notice dated 08.09.2022, itself the ld. PCIT, Gurgaon should have first formed his opinion that the assessee had committed one or more of a ‘specified violation’. However, as we go through the relevant part of the impugned order we find that the ld.PCIT has not mentioned as to which amongst the various specified violations mentioned in Explanation attached to subsection (4) of section 12AB were attracted so as to show cause the assessee under sub-section (4) of section 12AB of the Act and ask for information by notice dated notice dated 08.09.2022.”

24.1 This decision in AggarwalVidyaPracharniSabha (supra), has been challenged by the department before Hon’ble Punjab and Haryana High Court vide ITA-122-2024(O&M) and we find that the appeal is admitted vide order dated 12.12.2024, to examine three questions which are other than, aforesaid conclusion drawn by the co-ordinate bench. As for convenience the order dated 12.12.2024 of Hon’ble Punjab and Haryana High Court is reproduced below:-

“ Having heard learned counsel for the parties and considering the provisions of Section 127 of the Income Tax Act, 1961 and explanation appended thereto, the present appeal is admitted on following questions of law:

(i) Whether on facts and circumstances of the case and in law, Hon’ble HAT is right in quashing the order passed u/s 12AB cancelling the registration of assessee trust by holding that the PCIT (Central), Gurugram does not have jurisdiction to pass the aforesaid order ?

(ii) Whether on facts and circumstances of the case and in law, Hon’ble ITAT is right in only considering the CBDT Notification No.52/2014, S.O.2754(E) dated 22.10.2014 to hold that PCIT (Central), Gurugram does not have jurisdiction to pass order u/s 12AB(4) of the Act and not considering the CBDT Notification No.70/2014, S.O. 2915(E) dated 13.122014 according to which PCIT (Central), has very much jurisdiction to pass the aforesaid order ?

(iii) As to whether PCIT would have the powers to pass an order u/s 12AB, after the jurisdiction of the case of assessee has been transferred under Section 127, which would also include all proceedings including registration ?”

25. Lastly we take note of the decision of Hon’bleMudurai Bench of Madras High Court in M/s.S.R.Trust, Represented by its Trustee, B.Kannan versus PCIT, Chennai in W.P.(MD)No.14791 of 2021 and W.M.P.(MD)Nos.11697 and 11698 of 2021order dated 18.08.2021 is also relevant where Hon’ble High Court has examined the scope of word ‘subsequently’ used in Section 12AB of the Act and has held that the words ‘subsequently’ occurred in Sub-Section 4 of Section 12AB shall be construed as ‘subsequent to the registration under new regime. Para 33 is thus reproduced below;

“33. In this context, even though an attempt has been made by the learned counsel appearing for the respondent revenue that the word ‘subsequently’ occurred in Sub- Section 4 of Section 12AB shall be construed as ‘subsequent to the registration’, even under the old regime, that is 12A and 12AA of the Act, this Court is not impressed with said interpretation sought to be given by the revenue side, as projected by the learned Standing Counsel, because, the entire procedure as has been contemplated under 12AB is the new procedure introduced, where the word ‘subsequently’, since has been intentionally made in the Sub Section, it means, after the registration is undertaken within the meaning of Section 12AB, then only, if any punitive action by way of cancellation of registration is to be undertaken by the revenue.”

25.1 Thus it is only after the registration is undertaken within the meaning of Section 12AB, then only, if any punitive action by way of cancellation of registration is to be undertaken by the revenue same can be u/s 12AB of the Act, meaning there by that the ‘specified violations’ should be subsequent to the new regime coming into effect.”

23.4 Thus, on the basis of aforesaid discussion we are of the considered view that the notice and the impugned order passed by recourse to allegation of assesse committing specified violations creating a liability of cancellation of registration with retrospective effect cannot be sustained in law. 24. Further, if we examine the issue on the basis of procedure adopted by ld. PCIT, to issue notice and pass the impugned order, in the light of the provision of the Act, we find that the procedure provided under section 12AB(4) for cancellation of the registration has also not been followed. As for convenience we reproduce the relevant part of Section 12AB(4), which provides for procedure to be adopted for cancellation of a registration in case of alleged specified violations;

“(4) Where registration or provisional registration of a trust or an institution has been granted under clause (a) or clause (b) or clause (c) of sub-section (1) or clause (b) of sub-section (1) of section 12AA, as the case may be, and subsequently,—

(a) the Principal Commissioner or Commissioner has noticed occurrence of one or more specified violations during any previous year; or

(b) the Principal Commissioner or Commissioner has received a reference from the Assessing Officer under the second proviso to sub-section (3) of section 143 for any previous year; or

(c) such case has been selected in accordance with the risk management strategy, formulated by the Board from time to time, for any previous year, the Principal Commissioner or Commissioner shall,—

(i) call for such documents or information from the trust or institution, or make such inquiry as he thinks necessary in order to satisfy himself about the occurrence or otherwise of any specified violation;

(ii) pass an order in writing, cancelling the registration of such trust or institution, after affording a reasonable opportunity of being heard, for such previous year and all subsequent previous years, if he is satisfied that one or more specified violations have taken place;

(iii) pass an order in writing, refusing to cancel the registration of such trust or institution, if he is not satisfied about the occurrence of one or more specified violations;

(iv) forward a copy of the order under clause (ii) or clause (iii), as the case may be, to the Assessing Officer and such trust or institution.

Explanation.—For the purposes of this sub-section, the following shall mean “specified violation”,—

(a) where any income derived from property held under trust, wholly or in part for charitable or religious purposes, has been applied, other than for the objects of the trust or institution; or

(b) the trust or institution has income from profits and gains of business which is not incidental to the attainment of its objectives

or separate books of account are not maintained by such trust or institution in respect of the business which is incidental to the attainment of its objectives; or

(c) the trust or institution has applied any part of its income from the property held under a trust for private religious purposes, which does not enure for the benefit of the public; or

(d) the trust or institution established for charitable purpose created or established after the commencement of this Act, has applied any part of its income for the benefit of any particular religious community or caste; or

(e) any activity being carried out by the trust or institution,—

(i) is not genuine; or

(ii) is not being carried out in accordance with all or any of the conditions subject to which it was registered; or

(f) the trust or institution has not complied with the requirement of any other law, as referred to in item (B) of sub-clause (i) of clause

(b) of sub-section (1), and the order, direction or decree, by whatever name called, holding that such non-compliance has occurred, has either not been disputed or has attained finality; or

(g) the application referred to in clause (ac) of sub-section (1) of section 12A is not complete or it contains false or incorrect information.”

25. We find from the impugned order that there is absolutely no reference or indication of aforesaid procedure being adopted. The notice is issued under the heading as one issued under Section 12AA(3) of the Act. Even if it is assumed to have been issued u/s 12AB(4), on reasoning given to us by the ld. DR, then also it does not make reference as to which stage of proceedings the said notice specifically relates to. There is no reference as to if for purpose of invoking powers of cancellation u/s 12AB(4) of the Act, cognizance was being taken under which of the relevant clauses (a) to (c) of Section 12AB(4) of the Act. We are sure each clause would need a different sort of enquiry. Reliance for same is placed on decision in Rukmani Educational Trust (supra). Where the order of PCIT was quashed as same was found to be on borrowed satisfaction of AO.

25.1 Then, in case before us, there is no reference and without giving conclusive observation as to which one of the specified violation, i.e one or all of, clauses (i) to (f), described in Explanation to section 12AB(4) of the Act was found to have occurred, the notice is issued.

26. If we look at the provisions of section 12AB(4), it comes up that there is reference as for the purpose of invoking powers of cancellation u/s 12AB(4) of the Act, cognizance can be taken under three different mode, depending the source of information, referred in relevant clauses (a) to (c) of Section 12AB(4) of the Act.

26.1 Then clause (i) provides for inquiry and the notice issued by prescribed authority is to examine and record satisfaction, if there is occurrence of specified violations.

26.2 Once this finding and satisfaction is arrived at, then under clause (ii) notice has to be issued, calling assessee, to explain why registration should not be cancelled, and more particularly with retrospective effect.

26.3 We are of considered view that where law provides order has to be passed ‘after affording a reasonable opportunity of being heard’, then that certainly indicates legislative intention of exhibiting in the order the justification to cancel registration on specific charges. However, here ld. Prescribed authority has issued a general notice, covering scope of clause (a) as well as of clauses (i) and (ii) of Section 12AB(4) of the Act, without any reference of any particular specified violations.

26.4 In fact the alleged default covered by Sec 13(1) of the Act was re- characterized to a distinctly different default of Sec 12AB(4)of the Act. Reliance is placed on the decision in Ram Saran Das KishoriLal Charitable Trust vs CIT(Exemption) 180 taxmann.com 546 (Del-Trib), where a co-ordinate, in which one of us, the Judicial Member was the author, has expressed that such notices should be issued following due process prescribed in the Act, for cancellation of registration. Which is not the case here, thus on this account alone the impugned notice and consequent order deserved to be quashed.

27. Then, we find that when such an alleged action is specifically covered by Sec. 13 of the Act and there was no justification for Ld. PCIT(Central) to invoke Explanation to Sec. 12AB(4) to label the transaction as specified violation which is contrary to scheme of Act.

27.1 At the same time we are of considered view that the provision of sec 13 of the Act is self contained code by itself to deal with situations involving alleged benefit to specified persons and defaults specified under clause (c) & (d) of sec 13(1) have not been brought into Explanation 2 to sec 12AB of the Act which defines specified violation although in the above Explanation to sec 12AB(4), the clauses (a) & (b) of sec 13(1) has been brought in clauses (c) & (d) to sec 12AB(4). The exclusion of sec 13(1) (c) in specified violation shows legislative intent to spare such violation from ambit of Sec 12AB(4) of the Act.

27.2 Since, in the present case, there is alleged specified violation by family members of the Group, getting benefited by alleged siphoning of money, not accounting receipts or rotating their funds in group entity through the assessee, same fall with scope of under section 13(1)(c) of the Act, and the same goes out of the purview of Sec. 12AB of the Act. Reliance in this regard is placed on decision of co-ordinate bench in Richmond Educational Society Versus DCIT/ ACIT, Central Circle, GhaziabadITA No. 4779/Del/2025 order dated 11.03.2026.Which have been relied also by Pune bench inYashaswi Academy for Skills versus PCIT, (Central) Pune ITA No. 2814/PUN/2025 order dated 03.07.2026 and Santosh Trust Versus ACIT (Central-6), Delhi, ITA Nos. 3128& 3570/DEL/2026 order dated 31/08/2026, for the said proposition.

28. Thus mere allegations that certain transactions conferred benefit on persons referred to in section 13(3) of the Act, do not, by themselves, establish that the charitable activity is non-genuine or that the institution has abandoned its charitable object. The violations involving benefit to specified persons are dealt with by denial of exemption or taxation of the diverted income at the assessment stage and do not by themselves warrant cancellation of registration for which reliance is further placed on the decision of G.D. Education Society Versus DCIT/ACIT, Central Circle 2026(5) TMI 1776 – ITAT DELHI.

29. In the light of aforesaid discussion too we are of the considered view that the impugned order as passed is not passed in accordance with the provision of Section 12AB(4) of the Act and thus, liable to be quashed. Accordingly, we decide this issue No. 2 in favour of assesse and against the department.

30. Then, the third issue was actually raised on merits by the ld. Counsel asserting that the evidences which have been relied by ld. PCIT are in fact, no evidence in the eyes of law and thus, the conclusions drawn with regard to genuineness of activities or diversion of funds is unfounded. We find this factual aspect is also connected with aforesaid second issue which we have decided above in favour of the assessee.

31. In context to this issue it was submitted that assesse has been regularly making compliance. The assesse is imparting education to around 2800 students in 3 institutions and day to day operation of these educational institutions are regulated by competent authorities and no adverse findings/adverse observations from any of the regulatory authorities as to improper functioning of the educational activities or running of the institution has been cited.

32. As with regard to the issue of salary it was contended that certain loose sheets have been referred but they are merely computational transactions. It has been submitted that examination and cross-examination of employees indicate that there was no return of money as alleged. In this context, he submits that there were affidavits of various employees who retracted their statements which were obtained during the course of search. As with regard to reliance of documentary evidences in the form of excel sheet is concerned. It was contended that the same has been admitted in violation of provisions of law regulating admission of electronic evidences and particular reliance was made on decision dated 18.03.2026 in the case of M/s Ballar Marketing Pvt. Ltd. in ITA No. 3094/Del/2023. Then, it was submitted that statement of certain persons recorded behind the back assesse were relied and such statements cannot be made foundation for drawing inferences and reliance was placed in the decision in the case of Andaman Timber Industries of Hon’ble Supreme Court reported at 281 CTR 241 (SC). In the paper book copy of affidavit and other evidence have been filed which areas under:

“i. Copy of affidavit filed by Rajesh Waigaonkar.

ii. Copy of Bank account opening application, Bank passbook of Smt. SukeshaniPatil

iii. Copy of Statements of employees recorded on oath u/s 131 before the Income Tax Officer.

iv. Copy of affidavits of Shri Dhiraj Thakur and Shri AvinashThakre

v. Copy of affidavits of MangeshDharme and SachinLadekar

vi. Copy of statement of employees submitted before learned A.O. during 12AA(3) proceedings

vii. Copy of affidavit of JagdishBarange viii. Copy of affidavit of Nageshljamulwar.”

33. As with regard to brokerage in cash it was submitted that detailed explanation of same was given to the ld. PCIT which had not been rebuted by any independent evidence. So were the assertion in regard to other fees which allegedly were accounted in the books. As with regard to receipt of money from other entities it was submitted that that was integral part of the activity of the assesse and has been used for the educational activities of the assesse. In this context, Hon’ble Bombay High Court decision in Vanita Vishram Trust v. Chief Commissioner of Income-tax (2010)327 ITR 121 (Bom) was relied to submit that once expenditure is incurred on the object of trust and the same is not disputed, the source of revenue is not relevant factor. It was submitted that specially in case of loan received from M/s Zodiac Dealcom Pvt. Ltd. transactions were through banking channel and loan was in fact paid prior to the date of search through banking channel.

34. In this regard, we find that the department through ld. DR has countered the assertions by relying evidences in the copy of statement available at page No. 1-113 in Volume 3 of the paper book wherein statement of Rajesh Pandurang Waigaonkar recorded u/s 132(4) of the Act dated 19.09.2021 and copy of statements of Avinash Thakre dated 17.09.2021, of Mangesh dated 18.09.2021, of Sachin Ladekar dated 18.09.2021, of Dhiraj Thakur dated 18.09.2021, of Jagdish Ramkrishna Barange dated 17.09.2021, of Vinod Krushnarao Dafre dated 17.09.2021 of Ms Ridhee Salil Deshmukh dated 08.12.2021 of Sudhir Baheti dated 17.09.2021 of Surendra Kumar Jain dated 15.12.2021, of Sachinkumar M. Nimodia dated 11.11.2021 and copy of the Statement of Ms. Sukeshini Vijay Patil recorded u/s 132(4) of the Act dated 15.11.202, are filed. 35. Further, in the written submission filed by the ld. DR the facts have been reasserted countering the contentions of ld. Counsel of assesse. The submissions dated 18.06.2026 and 04.08.2026 have been duly considered these submissions and all the written submissions filed by ld. DR primarily rely the findings of ld. PCIT and various case laws have been also cited but it is not convenient to reproduce all of them.

36. Having considered all the aspects what strikes us from the impugned order is that ld. PCIT seems to have merely relied the search and seizure material and the statement recorded thereupon. Very apparently, during the present proceedings no independent inquiry has been made for collection of evidences or recording of statements. Assessee’s submission to the show cause notice have been reproduced in para 3 of the impugned order and as we examine the same we find that assesse during the present proceedings had asserted that there was no siphoning off any money of the trust and all salaries were paid by cheque. 37. It was specifically asserted that during the course of proceeding u/s 12AA(3) of the Act, Ld. AO was directed to examine various employees as regard to payment of salary made to such persons by the trust. In such proceedings when notices were issued u/s 131 of the Act, statement of such employees with regard to payment of salary was recorded on oath and the employees appearing before the ld. AO have stated on oath that they all received complete salary and nothing was refunded.

38. In regard to this assertion we find the assesse vide way of paper book volume 6 has filed a copy of letter dated 24.03.2023 written by Addl.CIT (Central Range-2) Nagpur, to the Commissioner of Income Tax (Central) Nagpur has been provided at page No. 1 which indicates that during the pendency of present proceedings before ld. PCIT, a report was called on examination/cross examination of employees/staff and vide letter dated 20.03.2023, DCIT, Central Circle 2(2) Nagpur had forwarded a report which was forwarded to ld. PCIT. Copy of this report is available at page No. 2-4 of the paper book and ld. AO conducting assessment proceedings u/s 143(3) had submitted that in the examination and cross examination of 15 employees of the trust, employees have denied return of any part of salary in cash to the trust and filed their bank accounts. The list of 15 such employees was given which includes the persons whose statement have been relied by ld. PCIT and filed by ld. DR in the paper book. Ld. AO in this letter dated 20.03.2023 has also mentioned of the affidavits of some employees wherein they have denied return of any money to the trust. A copy of the statement so recorded and the affidavits were sent along with report and form part of the paper book volume 6.

39. Assessee had further contended that brokerage were given for the reason carriers counselors are allocated in cities and distant place and to encourage the admissions some amount were paid after making collection with the staff itself. Assesse has also tried to give justification with regard to non-deposit of prospective fees. As with regard to receipt from some alleged shell companies it was submitted that with the amounts have been used for objects of the trust.

40. Now, what is relevant is that ld. PCIT has merely relied the evidences and statements collected during search proceedings. Certainly, statements recorded u/s 132(4) can be used for any proceedings under the Act, however, what is material is that when the persons who have made statements retract or file counter affidavits then that requires recording of the statements afresh or to give assesse opportunity to cross examine. Such statements recorded u/s 132(4) if retracted and are relied to give conclusive findings without any independent corroboration, same cannot be sustained under law.

41. The digital evidences allegedly found only indicated that some receipts are not accounted in the books of the trust. The same too have been relied without any further enquiry of own. Similarly, there is no finding whatsoever that the educational institutions run by assessee were otherwise not found to be carrying any actual activities and they were non justifiable or inflated expenses booked by assesse, to allege activities were non-genuine.

42. This all becomes relevant for the reason that we have observed the impugned notice and the impugned order are both silent with regard to which specific clause of alleged specified violation has been invoked. To be more precise about these various specified violations defined in the Explanation to Section 12AB(4) we find that clause (a) refers to use of income derived from property held under trust not applied for objects of trust or institution. However, here it is not the case of any income derived from property held by trust not applied for objects of trust or institution but allegation is of receipts which are not accounted in the books. As for that act of siphoning of cash receipts specified violation cannot be attributed against the trust as an independent entity. Clause (b) to the Explanation 12AB refers to specified violation where the income has been shown to be arising out of profit and gains of business which is not incidental to the opening of its objective and separate books are not kept. This too certainly is not the allegation in the case. Similarly, clause (c) refers to application of income for private religious purposes and clause (d) refers to application of income for benefit of any particular religious community. Clause (f) and (g) are certainly not applicable at as they are technical violations.

43. Thus, what is left is clause (e) wherein specified violation have been alleged to be of the nature if any activity of the trust or institution is found to be non-genuine or is not being carried out in accordance with or any of the conditions subject to which assesse was registered. As far as the genuineness of the activities is concerned, fact that assesse is running educational institutions fairly and as per applicable regulatory provision is not disputed. There is no allegation of any expenses accounted in books being inflated or not incurred for ends of attaining the objects of trust. Thus, the genuineness of the activity is not doubted in the terms of the running of the educational institutions.

44. At the same time, if the allegation was that activities of the trust are not being carrying out in accordance with the conditions subject to which it was registered then we find that nowhere in the impugned order there is allegation as to which specific condition was violated. In this context, we find it pertinent to observe that in Volume 1 at page 145 assessee has provided copy of registration granted u/s 12A w.e.f 21.09.2007 vide this letter dated 30.11.2007 and then at page No. 146-148 copy of provisional registration in Form 10AC for the period AY; 2022-23 to AY: 2026-27 effective from 31.05.2021 has been provided and we find that none of the alleged specified violation are mentioned to be conditions subject to which the registration u/s 12A or provisional registration has been granted. In column 10 of provisional registration, conditions subject to which provisional registration is being granted numbering (a) to (r) are mentioned and we find that it is only conditions (m), which is relevant for the issue before us and that condition provided that the registration so granted is liable to be cancelled at any point of time if the registering authority finds that activities of the trust /institution/non private company are not genuine or are not being carried out in accordance with the objects of the trust/institution/non private company. There is no reference whatsoever in any form with regard to other defaults defined as specified violations brought in statute w.e.f 01.04.2022 in the form of specified violations.

45. In the light of aforesaid discussion we are of the considered view that even otherwise the nature of allegations do not make out any of the alleged specified violations referred to any clause (a) to clause (g) of explanation to Section 12AB (4) and thus, on the basis of alleged specified violation the cancellation of registration retrospectively or cancellation of provisional registration cannot be sustained under the Act. The third issue needs to be decided in favour of the assessee.

46. As a sequel to aforesaid determination of issues no 2 and 3 in favour of assessee the corresponding grounds are sustained and the impugned order deserves to be quashed. Accordingly the appeal is allowed.

Order pronounced in the open court on 08.09.2026