Section 13 Violations Cannot Bar 12AB Renewal at Registration Stage: ITAT Delhi

Lala Sher Singh Vs PCIT (ITAT Delhi)

Summary: The Delhi Bench of the ITAT allowed the appeals of M/s Lala Sher Singh Memorial Jeevan Trust Society against rejection of its Form 10AB applications for renewal of registration under Section 12A(1)(ac)(ii)/12AB and approval under Section 80G(5) of the Income Tax Act, 1961. The society, engaged in imparting education through Prudence School, had originally obtained registration under Section 12AA on 29.12.2006 and Section 80G approval on 14.01.2011. It was subsequently granted registration for AY 2022-23 to 2026-27 and corresponding Section 80G approval. Following a search and seizure operation dated 24.08.2022 concerning Sudha Gupta, Devendra Gupta and others including the Prudence Group, the PCIT (Central) cancelled the assessee’s registration retrospectively from AY 2011-12 onwards by order dated 30.12.2024. That cancellation was quashed by the Tribunal on 16.06.2025 in ITA No. 10/Del/2025 on jurisdictional grounds, relying upon the decision in M/s Meenakshi Foundation Vs. PCIT, Central-3, Delhi. The Revenue’s appeal against that order was pending before the High Court. Meanwhile, the assessee filed Form 10AB on 25.09.2025 seeking renewal for AY 2027-28 onwards. The PCIT again relied upon material unearthed during the earlier search, including allegations of specified violations and diversion of funds, and rejected registration for AY 2027-28 to 2031-32; Section 80G approval was consequently rejected.

The assessee contended that the PCIT (Central) lacked jurisdiction, that rejection on the same material disregarded the Tribunal’s binding earlier order and violated judicial discipline, and that at the registration/renewal stage the authority was required to examine the charitable objects and genuineness of activities rather than matters relating to application of income or alleged Section 13 violations that properly arose during assessment. The assessee also relied upon Rule 17A(g), under which annual accounts for not more than three immediately preceding years accompany the registration application. The Revenue defended the PCIT’s jurisdiction and reliance on specified violations and diversion of income but, as recorded by the Tribunal, could not justify the action against the principle of judicial propriety when the earlier decision based on the same search material had already been quashed and was sub judice before the High Court.

The Tribunal accepted the assessee’s jurisdictional objection. It noted that the assessee’s principal object of providing education was charitable within Section 2(15), its educational activity had not been disputed, and the earlier registration remained operative until 31.03.2026. Referring to Rule 17A, the Tribunal held that the competent authority could not go beyond the immediately preceding three years while considering the renewal application. The search material relied upon by the PCIT related to an earlier period and had already formed the basis of the cancellation order quashed by the Tribunal. Relying, inter alia, upon Chandigarh Educational Society, Garden City Education Trust, CIT Vs. Red Rose School, Indian Institute of Model Education Society and Fateh Chand Trust Vs. CIT (Exemption), the Tribunal held that the registration authority must confine its examination to the charitable nature of the objects and genuineness of activities. Alleged violation of Section 13, even if assumed, was a matter falling within the Assessing Officer’s domain at the assessment stage and could not justify rejection of renewal in the circumstances.

Accordingly, the ITAT held that the PCIT had acted beyond jurisdiction, failed to follow judicial discipline and improperly reconsidered the same search material on which the earlier cancellation had already been quashed. The impugned order was held arbitrary, erroneous and devoid of jurisdiction. The Tribunal quashed it and directed the competent authority to grant registration/renewal forthwith upon allowing Form 10AB, together with consequential approval under Section 80G(5). The same order was applied mutatis mutandis to the connected appeals of M/s Florence Nightingale Educational Society in ITA Nos. 5042/Del/2026 and 5043/Del/2026, and all appeals were allowed.

Cases Discussed

• M/s Meenakshi Foundation Vs. PCIT, Central-3, Delhi — ITA No. 3952/Del/2024 dated 23.05.2025.
• M/s Lakhmi Chand Charitable Society Vs. PCIT (Central)-3.
• Glaxo Smith Kline Asia (P) Ltd. Vs. CIT — 290 ITR 35 (Del).
• Maruti Suzuki India Ltd. Vs. DCIT — 347 ITR 43 (Del).
• Pr. CIT Vs. Anand Kumar Jain (HUF) — 432 ITR 384 (Del).
• CIT (Exemption) Vs. IILM Foundation — 480 ITR 1 (Del).
• Indian School of Model Education Society Vs. CIT — 218 ITD 416 (Chd-Trib.).
• DIT Vs. Garden City Education Trust — 330 ITR 480 (Kar).
• Richmond Educational Society Vs. DCIT, Central — 184 taxman.com 281.
• CIT Vs. Red Rose School — 212 CTR (All).
• Advantage India Vs. PCIT — ITA No. 64/D/2019.
• Legal Initiative For Forest & Environment (Life Trust) Vs. PCIT, Central-2 — SA No. 129/D/2024 dated 07.02.2024.
• Chandigarh Educational Society Vs. DCIT/ACIT — ITA No. 225/CHD/2026 dated 21.04.2026.
• Fateh Chand Trust Vs. CIT (Exemption) — 67 ITR (Trib) 564 (Agra).

FULL TEXT OF THE ORDER OF ITAT DELHI

All the appeals filed by the Assessees are directed against the orders passed by the Ld. PCIT, Central-3 New Delhi whereby and whereunder the application dated 25.09.2025 filed by the Assessee Trust in Form No. 10AB for grant of registration under Section 12A(1)(ac)(ii) of the Income Tax Act, 1961 (‘Act’ for short) and applications under Section 80G(5)(ii) of the Act in Form No. 10AB wererejected.

2. Since, this bunch of appeals relate to common issues, these are heard analogously andare disposed of by a common order for the sake of convenience.

ITA No. 5040/Del/2026 and ITA No. 5041/Del/2026

3. The brief facts leading to this case is this that the appellant is a society formed under the Society Registration Act, 1860 lying and situated at Plot No. 18, Sector 22, Phase-1, Sector-6, Dwarka, South West Delhi 110075 relevant documents whereof are annexed to Page 1 of the Paper Book filed before us. Such certificate of registration was granted by and under registration No. S/34007 of 1998 from the office of the Registrar of Societies, Government of NCT of Delhi under the Society Registration Act XXI of 1860. The Assessee was subsequently granted registration under Section 12AA(1b) of the Act on 29.12.2006 appearing at Page 2 of the Paper Book filed by the Assessee. Similarly, certificate of registration of exemption/continuation of exemption under Section 80G of the Act was issued by the DIT(Exemption) by and under its order dated 14.01.2011 appearing at page No. 236 of the Paper Book. On 15.02.12, the Assessee amended the Memorandum and by laws of the society alongwith Rules and Regulations therein. On 12.08.2021 by way of Form No. 10A, an application for registration and/or provisional registration under Section 12A of the Act was made by the appellant appearing at Page Nos. 17 to 21 of the Paper Book. Similarly, on 17.08.2021 under Form No. 10A application for grant of registration/provisional registration under Section 80G of the Act was also made copy whereof are appearing at Page Nos. 237 to 241 of the Paper Book. Registration for a period from Assessment Year 2022-23 to 2026-27 under Section 12A(1)(ac)(i) was granted to the Assessee by and under the order of registration being Form No. 10AC issued under the signature of the PCIT, copy whereof is annexed to the Paper Book at Page Nos. 23 to 25. Similarly approval granted to the Assessee in terms of Section 11 in Clause (1) of the first proviso to Sub Section (5) of Section 80G on 24.09.2021 for a period commencing from A,Y2022-23 to 2026-27 by and under the signature of the Ld. PCIT is appearing at Page Nos. 242 to 243 of the Paper Book.

4. Subsequently, a search and seizure operation dated 24.08.2022 was conducted under Section 132(1) of the Act in the case of Sudha Gupta, Devendra Gupta and others including the ‘Prudence Group’ whereupon on 15.11.2022 by and under the order under Section 127 of the Act passed by the Ld. CIT(E) the case was transferred from Central Circle-(Exemption )-1(1), Delhi to Central Circle-29, New Delhi and thaton 30.12.2024 an order was issued only by the Ld. PCIT, Central under Section 12A r.w. Section 12AA and 12AB (4) of the Act whereby and where under, the Assessee’s registration earlier granted under Section 12AA of the Act was cancelled retrospectively for the period of AY2011-2012 and further years.

5. Being aggrieved by the said order passed by the Ld. PCIT, Central, dated 30.12.2024, inter alia challenging the jurisdiction of the Ld. PCIT-Central, an appeal was filed before the Tribunal being ITA No. 10/Del/2025, whereupon on 16.06.2025, the Co-ordinate Bench of the Tribunal has been pleased to restore the registration of the appellant society relying upon the judgment passed by the Co-ordinate Bench of the Tribunal in the case of M/s Meenakshi Foundation Vs. PCIT, Central-3, Delhi. The Revenue has preferred Appeal before the Hon’ble High Court against the said order dated 16.06.2025 passed by the Tribunal which is pending adjudication.

6. Subsequently, the Assessee filed a fresh application on 25.09.2025 in Form 10AB for grant of registration/ and/or approval and/or renewal of Registration under Section 12A(1)(ac)(ii) filed with the DIT, Exemption-Delhi. Copy of the application is annexed to the paper book at page Nos. 26 to 35.

7. Thereafter on receipt of the said application a notice was issued under Section 12A(1) (ac)(ii) by the PCIT (Central), Delhi-3, directing the assessee to furnish details copy whereof is reproduced as under:-

GOVERNMENT OF INDIA
MINISTRY OF FINANCE
INCOME TAX DEPARTMENT
PCIT (Central), Delhi-3

To,
LALA SHER SINGH MEMORIAL JEEVAN VIGYAN
TRUST SOCIETY
PLOT NO-18, SECTOR-22, DWARKA
NEW DELHI 110075, Delhi
India

PAN: AAAAL2241H
Application No: CIT(EXEMPTION), DELHI/2025-26/12AA/16895
DIN & Notice No: ITBA/EXM/F/EXM43/2025-26/1084420721(1)
Date: 26/12/2025

Sir/ Madam/ M/s,

Subject: Proceeding u/s 12A(1)(ac)(ii)

The hearing for the above noted application no. has been fixed on 09/01/2026 at 05:00 PM in my office.

Sub: Proceedings u/s 12A(1)(ac)(ii) of Income Tax Act, 1961 in the case of M/s Lala Sher Singh Memorial Jeevan Vigyan Trust Society (PAN: AAAAL2241H) – reg.

Kindly refer to your application in FORM-10AB filed on 25.09.2025 for registration u/s 12A(1)(ac)(ii) of Income Tax Act, 1961 in the case of M/s Lala Sher Singh Memorial Jeevan Vigyan Trust Society (PAN: AAAAL2241H).

2. With reference to your application in Form 10AB for registration u/s 12A(1)(ac)(ii) of the Income Tax Act, 1961. In this regard, you are hereby required to furnish the following documents/clarification/information:

(i) A copy of registration certificate granted to your society u/s 12A(ac)(vi)/80G(5)(iv) in Form No. 10AC and copy of initial registration certificate u/s 12A/80G.

(ii) Please specify the main area of your charitable/religious activities and a Projection/plan for the main charitable/religious activities to be undertaken in the next two years.

(iii) Please attach a ‘No Objection Certificate’ from the owner of the premises from which you are operating along with proof of his ownership.

(iv) Please provide the details of offices/branches of the Trust/Society/Non Profit Company.

Note: If digitally signed, the date of digital signature may be taken as date of document.

ROOM NO:325, 3rd floor, INCOME TAX BUILDING, E-2, ARA CENTRE, JHANDEWALAN EXTENSION, NEW DELHI, DELHI, Delhi, 110055
Email: [email protected]

Note: The website address of the e-filing portal has been changed from www.incometaxindiaefiling.gov.in to www.incometax.gov.in.
DIN- Document Identification No.

(v) Please file an undertaking that there will be no infringement to the 1st proviso to section 2(15) of the Income Tax Act, 1961.

(vi) A declaration that no part of the income of the Trust/ Society/ Non Profit Company enures, directly or indirectly for the benefit of any person specified in section 13(1)(c) of the Income Tax Act, 1961 and that no part of the income or property of the Trust/ Society/Company was ever used or applied for the benefit of any person specified in section 13(1)(c) of the Income Tax Act, 1961, duly signed by the Authorized Signatory.

(vii) Please submit a confirmation that none of the objects of the Trust deed/Memorandum of association/ Memorandum of article of the Trust/ Society/ Charitable Company or any other charitable institution is in the nature of trade business or commerce.

(viii) A certificate to the fact that all the requirements of law has been complied with which are essential for the purpose of achieving the objects of society/trust or company.

(ix) Please furnish telephone number and e-mail address of assessee society/trust/company.

(x) Please quote the order no. of the last rejection order alongwith copy of order, if any and explain the change in facts and circumstances of the case since the last rejection order. Also provide the current status of appellate proceedings against the rejection order, if any.

(xi) Please specify the category of charitable purposes provided in section 2(15) of the Income-Tax Act, 1961 in which your case falls, i.e. whether your objective is relief of the poor/ education/ yoga/ medical relief/ preservation of environment (including watersheds, forests and wildlife)/ preservation of monuments or places of artistic/ historic interest/ advancement of any other object of general public utility/ religious activities.

(xii) Please submit a note on activities conducted since inception / during last three years & till 31.03.2025.

(xii) Please provide a certified copy of the Trust Deed/ Memorandum of Association & Articles of Association/ certificate of incorporation/ section 8 licence (companies Act) in respect of your trust/society/company.

(xiv) Please provide a copy of registration under Foreign Contribution Regulation Act (FCRA) if registered under FCRA. Also provide the details of Bank Account maintained for receiving Foreign Contribution and the utilization certificate. Also provide the current status of…

(B). Please provide the details of all bank account/s maintained by the trust/society/company during last three years & till 31.03.2025/since inception & till 31.03.2025.

(C). Please provide the copy of bank statement in respect of all bank accounts maintained by the trust/society/company of last three years & till 31.03.2025/since inception. Also provide narrations of entries appearing in bank accounts.

(D). Please furnish the details of donations received and made for the last three years & till 31.03.2025/since inception & till 31.03.2025 in the following format (provide donation receipts as well):

(xviii). Please provide financial statements i.e. Balance Sheet, Income & Expenditure A/C and Receipt & Payment A/C, Audit Report of last three years & till 31.03.2025 /since inception & till 31.03.2025

(xix). Copy of ITRs filed for last three years and form 26AS.

(xx). Details of remuneration/ re-imbursement if any drawn by the Trustee/ Member/Director against the services provided by them to the Trust/Society/Company.

(xxi). Details of business/source of income of the Trustees/ Members/Directors and their ID proof and address proof.

(xxii). Whether the Trustee/ Member/Director are associated with any other Trust/Society/Non Profit Company? If yes, details thereof.

(xxiii). Details of vehicles owned by the Trust/Society/Company along with ownership proof.

(xxiv). Details of scrutiny assessment made u/s. 143(3) of the Income Tax Act, 1961 during the past 10 years and copy of assessment orders, appeals filed if any and present status of such appeals.

3. The present application has been filed u/s. 12A(1)(ac)(ii) of the I. T. Act which is applicable to the cases “where the trust or institution is registered u/s 12AB[or approved under sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10] and the period of the said registration [or approval, as the case may be,] is due to expire, at least six months prior to expiry of the said period”.

4. It may be noted that the complete point-wise reply in respect of this notice is required to be filed. In case the reply is not being submitted in respect of any of the points, the same should be mentioned in the covering letter.

8. The Assessee duly filed its reply initially on 09.01.2026 followed by several replies on 15.01.2026, 22.01.2026, 02.02.2026. 09.02.2026. Thereafter, on 17.02.2026 notice under Section 12A(1)(ac)(ii) and 80G (5) (ii) of the Act were issued/replies whereofwere duly filed by the Assessee on 27.02.2026.

9. On 30.03.2026, the Ld. PCIT declined to grant registration to the appellant Society for Assessment Years 2027-28 to 2031-32 by issuing order under Section 12AB(1)(b)(ii)(B)of the Act which is impugned before us.

10. Approval under Section 80G(5) which was applied in Form 10AB dated 28.09.2025 was also been rejected on the ground of registration/approval under Section 12A/12AB being the mandatory pre-condition for grant of approval under Section 80Gstoodrejected.

11. The Assessee society operates an educational institution, under the name of “Prudence School” in Ashok Vihar, New Delhi, in the earlier proceeding objected to the show cause notice issued by the Ld. PCIT on 30.06.2024 under Section 12AB (4) of the Act on the ground of lack of jurisdiction of the Ld. PCIT, Central and also contended that the Ld. CIT(E), Delhi would be the only prescribed authority in that case who was vested with the power to cancel such registration in terms of the binding CBDT Notification being No. 52/2014 dated 22.10.2014. It was further objected by the Assessee therein that the jurisdiction of the Ld. PCIT was limited to only to the matters of assessment and does not incumbent upon the authority to grant or to cancel registration under Section 12A/12AA of the Act. Apart from that the proposal for retrospective cancellation of the registration granted to the Assessee by the Ld. PCIT was further objected. It was contended that the allegation of “specified violation” as noted in the show cause notice stood applicable only on and from 01.04.2022 relevant to A.Y 2023-24 onwards and the same cannot at all be applied to the earlier years.

12. Considering the entire aspect of the matter, the statutory provisions and the CBDT Notification being No. 52/2014 dated 22.10.2014, the Co-ordinate Bench of the Tribunal relying upon the Judgment passed in another matter of Meenakshi Foundation in ITA No. 3952/Del/2024 dated 23.05.2025 held the power to cancel registration vest only with the Ld. CIT(E) and not Ld. PCIT, Central. It further appears that this particular aspect of the matter was duly recorded by the Ld. PCIT in the order impugned dated 31.03.2023 relevant observation whereof is as follows:

“A Search and Seizure operation u/s 132 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’), was conducted on Sudha Gupta, Devendra Gupta & Others including Prudence Group on 24.08.2022. During the search & seizure action, it was revealed that Mother’s Pride and Presidium Group of schools run by Smt. Sudha Gupta and Sh. Devendra Gupta and Prudence Group of schools run by Sh. G. S. Matharoo were involved in systemic tax evasion.

3.2 During the course of search/post search proceedings in the case of M/s Lala Sher Singh Memorial Jeevan Vigyan Trust Society, evidences have been found which reveal that the activities of the assessee society were contrary to the aims and objects and conditions subject to which registration was granted to the assessee.

3.3 During the assessment proceedings, the assessing officer of Central Circle-29, Delhi was satisfied that the trust has committed specified violation as defined in Explanation to sub-clause (4) of section 12AB and therefore, referred the case of the assessee to the Ofo the Pr. CIT (Central) 3, Delhi as per the provisions of second proviso to sub-section (3) of section 143 substituted by the Finance Act, 2022, proposing the cancellation of registration of the assessee trust.

3.4 In light of the above, the order u/s 12AB(4) was passed in the case of the society on 30.12.2024 cancelling the registration of the assessee society for the previous year relevant to AY 2011-12 and all subsequent assessment years on the ground as under:

a. The assessee society was engaged in collecting funds in cash as well as cheque from parents of students studying in their schools and also from public at large under Ponzi investment scheme (MPRS & PRS) run by the promoters of the assessee society. Actually, there is no entity in existence in the name of Mothers’ Pride Registration Scheme or Presidium Registration Scheme and the investment in Ponzi Scheme have been received keeping in view the property held under the assessee society and its reputation. The staff member and even the teachers of the assessee society were involved in promoting the Ponzi scheme and duping/luring the investors. Such activities are also clear violation of stated aims and objects of the society.

b. The funds of the society have been siphoned off by way of booking bogus expenses in the name of the companies owned and controlled directly/indirectly by Sh. Gurmeet Singh Matharoo (chairperson & trustee of the assessee society) and relatives of the specified person which have not provided any real services to them. Many of such companies to whom payments have been made are found to be non-existent at the addresses as per record and entities were non-complaint to the rule & regulation of GST. Financials of those entities also suggest that the entities were operating on paper only.

c. The employees/relatives of Sh. Gurmeet Singh Matharoo were made directors of the paper entities and bogus expenses were booked. Sh. Gurmeet Singh Matharoo was actually controlling the administrative as well as financial matters of the assessee trust. Further, the funds of the society are being further channelized through layers of bogus entities. Hence, the funds of trust were siphoned off and were actually used for personal benefit of Sh. Gurmeet Singh Matharoo.

d. M/s. Lala Sher Singh Memorial Jeevan Vigyan Trust Society has made bogus payments to Ms. Neha Singh who is daughter of Gurmeet Singh Matharoo who is chairperson of Prudence group and Principal Officer of the assessee M/s Lala Sher Singh Memorial Jeevan Vigyan Trust Society. Sh. Rajiv Narang Member of assessee Society M/s Lala Sher Singh Memorial Jeevan Vigyan Trust Society has also admitted that payments to Ms. Neha Singh were made without any services provided by her and on the instructions of Sh. Gurmeet Singh Matharoo. The Principal of Prudence School Sec-22, Dwarka from where payments were made to Ms. Neha Singh, has denied knowing about Ms. Neha Singh and has no knowledge about services rendered by her to the school.

e. Funds were routed from M/s Lala Sher Singh Memorial Jeevan Vigyan Trust Society to Sh. Akash Tomer, brother-in-law of Sh. Gurmeet Singh Matharoo without rendering any services. The funds of society were siphoned off and were actually used for personal benefit of relatives of Sh. Gurmeet Singh Matharoo.

3.5 Aggrieved with the order u/s 12AB(4) dated 30.12.2024, the assessee society filed an appeal before the Hon’ble ITAT. The Hon’ble ITAT vide order dated 16.06.2025 in the ITA no. 10/DEL/2025 restored the registration of the assessee society by relying upon the decision of Coordinate Bench in the case of M/sMeenakshi Foundation vs. PCIT(Central)-3 in ITA No. 3952/Del/2024 and Human Welfare Foundation vs DCIT(Exemptions) wherein the appeal was allowed on the following technical issues:

a. The order passed by the PCIT(Central) cancelling the registration is without jurisdiction.

b. Specified violation, if any, existed prior to 01.04.2022 cannot be the basis for invoking section 12AB(4) of the Act.

3.5.2 The Hon’ble ITAT in the above-mentioned order relied upon case of M/s Meenakshi Foundation vs. PCIT(Central)-3 allowed the appeal of the assessee thereby, restored the registration of the society by relying upon the decision of M/s Lakhmi Chand Charitable Society vs. PCIT(Central)-3 as well as in the case of the assessee society restored the registration only on technical issue as mentioned above in para 3.5, however did not adjudicate on the merits of the relied upon case as well as in the case of assessee society or the incriminating material/statements indicating specified violations.

3.6 Aggrieved by the ITAT’s order in the case of M/s Lakhmi Chand Charitable Society, M/s Meenakshi Foundation, the Revenue has filed further appeals before the Hon’ble Delhi High Court, which are presently pending adjudication. Further, the Revenue has also filed appeal before the Hon’ble Delhi High Court in the case of the assessee society which is presently pending adjudication.

3.7 As the Hon’ble ITAT has not adjudicated the case of the assessee society on merits or the incriminating material/statements indicating specified violations and the decision of Hon’ble ITAT in the case of the assessee society as well as the relied upon case has not attained finality, both the technical grounds based on which relief has been allowed to the assessee has been discussed in detail in later part of this order.

4. As discussed in para 1 above, the registration u/s 12AA(1)(b)(1) of the IT Act, 1961 was granted to the assessee society by DIT(Exemption) vide F. No. DIT(E)/12A/2006-07/L-606/1386 dated 29.12.2006. The assessee was granted fresh registration for period AY 2022-23 to 2026-27 vide URN: AAAAL2241HE200606 (DIN-AAAAL2241HE2006001) dated 23.09.2021.

4.2 It is pertinent to note that such renewal was granted prior to Search & Seizure action u/s 132 on 24.08.2022 and further completion of assessment proceedings u/s 148 in consequence of the search and seizure action, and therefore, the material evidencing the aforesaid violations was not before the competent authority at the time of grant of such renewal.

5. The substitution of the earlier registration framework with Section 12AB under the Act signifies a conscious legislative shift from a static, one-time approval system to a dynamic and periodically reviewed regime. Under the erstwhile provisions of Sections 12A/12AA, registration once granted was generally perpetual in nature, with limited scope for review except in cases warranting cancellation. This resulted in a regulatory gap, as entities were not subjected to continuous scrutiny to ensure that their activities remained genuine and in accordance with their stated charitable objects.

5.2 In contrast, Section 12AB provides for time-bound registration, requiring trusts and institutions to seek renewal at prescribed intervals based on verification of their activities, compliance with applicable laws, and adherence to their declared objects. The provision also contemplates provisional registration for newly established entities, thereby balancing ease of entry with subsequent verification of actual activities. This framework enables the prescribed authority to undertake periodic and evidence-based assessment of the continued eligibility of such entities for availing exemption.

5.3 Thus, the legislative intent underlying Section 12AB is to ensure transparency, accountability, and effective regulatory oversight by making the grant and continuance of registration contingent upon satisfaction regarding the genuineness of activities and compliance with statutory requirements. The scheme clearly envisages that exemption is not a perpetual entitlement but is subject to ongoing adherence to the conditions prescribed under the Act.

5.4 In the present case, it is observed that the assessee society has filed an application in Form 10AB seeking renewal of registration subsequent to the completion of assessment proceedings under Section 153A of Income-tax Act, 1961 in the above-mentioned cases. The findings recorded in the said assessment orders, pursuant to search and seizure action, have conclusively established various violations, including deviation from the stated objects of the society and non-compliance with the provisions of the Act. These material facts, which were not available at the time of earlier grant/renewal of registration, have a direct and substantial bearing on the satisfaction required to be recorded under Section 12AB regarding the genuineness of activities and compliance with statutory conditions.”

13. Thus, it appears that the cancellation of renewal of registration of the appellant before us is again inter-alia on the same ground of ‘specified violations’ and ‘diversion of income’ including deviation from the stated objects of the society and non compliance of the provisions of the Act by the appellant Trust.

14. Under these facts and circumstances of the matter, the Ld. Counsel Mr. Gautam Jain appearing for the Assessee at the very threshold raised serious objection against the order impugned aswithout jurisdiction and, therefore, liable to be quashed. It was argued by him that the order impugned is nothing but a product of blatant disregard and brazen disrespect to the order passed by the Co-ordinate Bench dated 16.06.2025 in ITA No. 10/Del/2025 in appellant’s society whereby and whereunder the order passed by the Ld. PCIT, Central 3-New Delhi withdrawing the registration of the society by invoking the provision of Section 12AB(4) of the Act was held to be without jurisdiction. The impugned order is nothing but utter disobedience to the order passed by the Tribunal and, therefore, contrary to the judicial discipline, propriety and further that the same is factually incorrect, legally misconceived and unsustainable as contended by the Ld. AR. The order passed by a higher appellate forum ought to have been followed by the Ld. PCIT, Central, New Delhi in view of the principal of judicial discipline and, therefore, he relied upon the following Judgments passed by different judicial forums on the said ratio:

“i) 290 ITR 35 (Del) Glaxo Smith Kline Asia (P) Ltd. vs. CIT

ii) 347 ITR 43 (Del) Maruti Suzuki India Ltd. vs. DCIT

iii) 432 ITR 384 (Del) Pr. CIT v. Anand Kumar Jain (HUF)”

15. Having regard to the order impugned quashed by the Ld. PCIT on the same ground as passed in the earlier order dated 30.12.2024 while cancelling the registration of the Appellant Trust with retrospective effect it was further contended by the Ld. AR that in that view of the matter the order passed by the Ld. PCIT is suffered from the doctrine of constructive res-judicata.

16. It was further argued by the Ld. AR that the Ld. PCIT has failed to appreciate that while examining the application under Section 12A of the Act, the scope was merely to examine the object of the society/trust/institution and the genuineness of its activities and whether the activity is being carried out with the objects of the society at this stage and therefore, the cancellation of registration on the same issues which could be the matter of assessment is bad in law and liable to be quashed. So far as the rejection of renewal of the registration of the trust alleging violation under Section 13(1)(c) r.w. Section 13(3) (cc) and 13(3)(d) of the Act by the Ld. PCIT is concerned, the same has been argued as legally misconceived and untenable, neither relevant at the time of registration/renewal under Section 12A of the Act. In this regard, Mr. Jain has relied upon the Judgment passed by the Delhi ITAT in the case of CIT (Exemption) Vs. IILM Foundation, reported in 480 ITR 1(Del), the Judgment passed by the Chandigarh Bench in the case of Indian School of Model Education Society Vs. CIT, reported in 218 ITD 416 (Chd-Trib.) the Judgment passed in Tribunal of DCIT Vs Garden City Education Trust, reported in 330 ITR 480 (Kar) and Richmond Educational Society vs. DCIT, Central, reported in 184 taxman.com 281.

17. It was further argued by him that the question of claim exemption under Sections 11 & 12 of the Act to be dealt with by the Assessing Officer at the time of assessment for each year. Profit earning or misuse of the income derived by the charitable institution from its charitableactivities may be a ground for refusing exemption with respect to that part of the income but cannot be taken to be a synonym to the genuineness of the activities of the trust or the institutions as further contended by him. In this regard, he has relied upon the Judgment passed by the Allahabad Bench in the case of CIT Vs. Red Rose School, reported in 212CTR(All).

18. The Ld. AR further submitted before us that this is an undisputed fact that the appellant society is engaged in the activity of imparting education by running school and secondly is a registered society under Section 12A of the Act up to 31.03.2026.

19. In this respect it was submitted that the Ld. PCIT needs to decide the application dated 25.09.2025 for registration/renewal filed by the appellant trust for A.Y 2027-28 onwards along with its enclosures being the audited Financial Statement for F.Ys 2022-23 , 2023-24, 2024-25 relevant to A.Ys 2023-24, 2024-25 and 2025-26 i.e. three years immediately preceding the year in which the said application is made for which the activity have been made. in accordance with Rules 17A sub Rule (g) of Income Tax Rules, 1962.

20. The Ld. DR relied upon the impugned order and submitted that the Ld. PCIT is empowered to reject the application for renewal of registration of the Trust and while rejecting the same the ground of ‘specified violation’ and ‘diversion of income’. has rightly been expressed. The Ld. PCIT has rightly exercised his jurisdiction in going into the merit of the matter while rejecting the application for renewal of registration of the trust and also denying the grant under Section 80G(5) of the Act. The Pr. CIT (Central) validly assumes jurisdiction in the present case, and the provisions of Section 12AB(4) are fully applicable to violations committed by the assessee society even for the period prior to 1.4.2022 as was the crux of the submissions made by the Ld. DR. However, he has not been able to justify the action of the Ld. PCIT against the principle of judicial propriety asthe earlier decision on the basis of the same material unearthed during the course of search stood quashed by the Co-ordinate Bench and the issue is subjudice before the Hon’ble High Court. The DRrelied upon the judgement passed in the matter of Advantage India vs PCIT, in ITA No. 64/D/2019. He further relied upon the judgement as already quoted in the impugned order passed by the Learned PCIT in the matter of Legal Initiative ForForest &Environment (Life Trust Vs PCIT, Central-2) in SA No. 129/D/2024 dated 07.02.20 24.

21. We have heard the rival submissions made by the respect parties and further perused the relevant material available on records.

22. It is a trite law that at the time of granting registration or renewal of registration of trust under Section12A or 80G of the Act, the competent authority is required to examine the object of the trust/institution and whether the activities are in consonance with the object of the Trust. We have further considered the submission made by the Learned Counsel appearing for the assessee that the Ld. PCIT – Central does not have the jurisdiction to decide the fate of the applications for renewal under Section 12A and 80G of the Act and the same has already been decided by the Co-ordinate Bench by its order dated 16.06.2025and therefore, the issue is not res intrega which is found to be acceptable and we note that no contrary submission has been made by the Learned representative of the Department .

23. Upon considering the object of the assessee society it appears the same is wholly charitable in as much as main object is to provide education which is further covered under Section 2(15) of the Act which provides an inclusive definition of the expression “charitable purpose” as under:

“ Charitable purpose’ includes relief of the poor, education (yoga), medical relief (preservation of environment (including water-sheds, forests and wildlife) and preservation of monuments or places or object of artistic or holistic interest,] and the advancement of any other object of object of general public utility.”

24. Admittedly the assessee is engaged in the activities of imparting education by running a reputed school (being registered under Section 12A of the Act till 31.03.2026) which has never been objected by the Revenue at any stage.

25. From the documents already submitted before the Ld. PCIT and before us including the Memorandum of Association and the Financial Statement for Financial Years 2022-23, 2023-24 and 2024-25 relevant to A.Y 2023-24, 2024-25 and 2025-26 of the appellantit appears that the total income being the surplus of the trust without giving effect to the provisions of Sections 11 & 12 does not exceed Rs. 5 crores extended to Rs. 10 Crore w.e.f. 01.04.2025 details whereof is as follows:

Sr. No.	A.Y	Receipts	Revenue expenses	Capital expenses	Total expenses	Surplus/Deficit
I	2023-24	24,63,25,001	22,02,36,139	1,84,61,028	23,86,97,167	76,27,834
ii	2024-25	27,64,64,441	2,29,181,638	1,43,84,750	24,35,66,388 26,26,83,822	3,28,98,053
iii	2025-25	28,46,36,196	24,84,92,485	14,191,337		2,19,52,374

26. Apart from that as per the provision of law the Ld. PCIT has to be satisfied himself about the object of the Trust or Institution and the genuineness of its activities and compliance of such requirements of any other law for the time being in force and to pass an order in writing registering the trust or institution for a period of five years or ten years as the case may be and in the event the Ld. PCIT is not satisfied, he can pass the order rejecting such application.

27. In this case, the Ld. PCIT, is supposed to decide the application for registration dated 25.09.2025 filed by the appellant Trust for A.Y 2027-28 onwards; the application was supported by the audited Financial Statement for F.Ys 2022-23 , 2023-24, 2024-25 relevant to A.Ys 2023-24, 2024-25 and 2025-26 i.e. three previous years immediately preceding the previous years in accordance with Rules 17A sub Rule (g) of Income Tax Rules, 1962 which specifically provides as follows:

‘‘(g) where the applicant has been in existence during any year or years prior to the financial year in which the application for registration is made, self- certified copies of the annual accounts of the applicant relating to such prior year or years (not being more than three years immediately preceding the year in which the said application is made) for which such accounts have been made up;’

28. Thus, the prescribed provision suggests while seeking renewal of registration the competent authority neither required to go beyond immediately preceding three years noreven call for information.

29. As is further appears that the Ld. PCIT Central issued the show cause notice dated 17.02.2026 and the impugned order was passed on 31.03.2026 relying upon the evidences allegedly unearthed during the course of search conducted on 24.08.2022, under Section 132(1) of the Act allegedly revealed the fact of ‘specified violation’ or ‘diversion of fund’ which was actually prior period to 01.04.2021 and therefore, cannot be the subject matter for consideration under Rule 17A Sub Rule (g) at this stage of considering of the application for registration/renewal of the trust for AY 2027-28 to 2031-32.

30. It appears that several allegations made by the Learned PCIT in regard to collection of funds through Ponzi scheme or that the diversion of funds from trust/society through bogus expenses or that the allegation of payment made by the trust for ultimate benefits of specified persons under Section 13(3) of the Act or that the payments made to various entities are not genuine business expenditure or that the payment made by the assessee trust to bogus companies for ultimate benefit of Shri Gurmeet Singh Matharoo were duly objected by the assessee by and under its reply dated 26.02.2026 before the Ld. PCIT itself appearing at pages 162 to235 and 198 to202 of the paper book filed before us. The assessee categorically denied collection of funds through Ponzi scheme both by the society or its member. However, no rebuttal is forthcoming from the impugned order. Relevant to mention that neither the allegation for the period under consideration nor it concerned with the appellant trust specifically or even its members. In fact all those Ponzi scheme as alleged were not during the period under consideration of the Ld. PCIT as it appears from the order impugned. It was contended that all the beneficiaries companies which were benefited through Ponzi schemes were related to the said Shri Devendra Gupta and Smt. Sudha Gupta as per the impugned order itself, categorical observation whereof is appearing from paid 77 to 78 of the said order.

31. So far as the judgement relied upon by the Ld DR in the matter of Advantage India –Vs- PCIT, in ITA No. 64/D/2019,it was objected by the Ld. AR that in that case the Ld. PCIT was entrusted to deal with the matter. However, in the case in hand no such power has been given in the hands of the Ld. PCIT under Section 127 of the Act and the transfer was made to the hands of the Ld. CIT(E) only. It was further contended by the Ld. AR that order of advantage India is per incuriam having regard to the decision of the Hon’ble Tribunal in assessee’s case in ITA No. 10/D/2025 dated 16.06.2025. In that view of the matter the judgment passed by the Coordinate Bench in the matter of Advantage India –Vs-PCIT (supra) is not applicable in the case in hand as argued by the Ld AR. Having regard to the factual and legal aspect of the matter particularly since the order impugned having been passed without been supported by anyorder issued under Section 127 of the Act with a direction to the ld. PCIT such submission made by the Ld. AR is found to be sustainable. The argument advanced by the Ld.AR in distinguishing the judgement relied upon by the Learned DR passed in the matter of legal Initiative For Forest & Environment (Life Trust)Vs PCIT, Central-2 in SA No. 129/D/2024 dated 07.02.2024.as not applicable in the case in hand as the same has only been passed in a stay application in the interim stage of the litigation and not at the final stage is also found to be acceptable.

32. It further appears from the fact that while issuing the order dated 30.12.2024 under Section 12AB(4) of the Act rejecting the application for registration under Section 12A of the Act of the Assessee’s society for the previous year and relevant to the Assessment Year 2011-12 and all subsequent Assessment Years, the Ld. PCIT, Central has already relied upon the alleged documents unearthed during the course of such dated 24.08.2022 but the said order has already been quashed by the Ld. Tribunal, Delhi Benches by and under its order dated 16.06.2025 in ITA No.10/Del/2025 albeit on jurisdiction and that provisions of specified violation under Section 12AB(4) of the Act are inapplicable retrospective which is also part of the said order under Section 12AB(4) of the Act stood quashed by the Tribunal. In this regard, we have considered the judgement relied upon by the Ld AR passed by the Chandigarh Bench in the matter of Chandigarh Educational Society Vs. DCIT/ACIT in ITA No. 225/CHD/2026 on 21.04.2026 wherein under the identical facts of the matter the initial order of cancellation of registration was quashed by the Tribunal in the first proceeding challenged by the assessee therein and further cancellation of renewal ordered by the Ld. PCIT on the same plea again stood quashed by the ITAT, Chandigarh Bench in the appeal preferred by the assessee. The scope of enquiry in regard to cancellation of registration vis-à-vis renewal of registration failed to have been appreciated by the Ld. PCIT as was the crux of the Judgment passed by the Chandigarh Bench as above. The following observation was made by the Bench while dealing with that particular aspect of the matter:

“At the cost of repetition, we would observe that ld. PCIT has mixed up two proceedings, namely, cancellation of registration vis-a-vis renewal of registration wherein scope of enquiry is separate in each proceeding. The Ld.Commissioner has taken up issues which were considered earlier while cancelling the registration but denied the renewal. Such issues did not meet the concurrence of ITAT in the earlier proceedings also and issue of cancellation is sub-judice before the Hon’ble High Court. The Department itself approved the registration for assessment year 2022-23 to 2026-27. Therefore, Id. PCIT is not justified in rejecting the renewal application while considering those very materials which were considered in the first round of litigation. The Id. PCIT has not made out that assessee has violated any laws. He has made some reference about user of land without getting approval. We have been apprised that CLU has been granted by the Competent Authority for its Campus in Village Gharuan. Those documents have been placed before us.”

33. Once the order cancelling registration stood quashed, the denial of renewal on the same ground by the Ld. PCIT is not permissible when the same issue is pending adjudication before the Hon’ble High Court and more particularly when the department itself approved the registration of the Assessee trust for a particular period of time. Further that relying on the same material on the basis of which the registration stood cancelled by the Ld. PCIT and which was further considered and decided against the Department in the first round of litigation by the ITAT, rejection of renewal application made by the Assessee trust on the same grounds/material is not permissible as held by the Bench.

34. Further reliance was made in the case of DIT Vs. Garden City Education Trust, reported in 330 ITR 480 (Kar), wherein it has been held that so long as the trust has education as one of its objects which is one of the enumerated heads which qualifies and comes within the scope of charitable purpose as enumerated in Clause 15 of Section 2 of the Act, it has to be accepted that the trust is having a charitable purpose as its object and may qualify for claiming exemption in terms of the provision of Sections 11 & 12 subject to fulfilling conditions enumerated therein and if so, grant of registration so long as the procedural requirements are complied with, is inevitable. It was further held that registration in accordance with the provisions of Section 12A of the Act is an additional condition for claiming the benefits under Sections 11 and 12 of the Act, and registration as per Section 12A by itself, will not automatically confer the benefits of Sections 11 & 12 of the Trust but the Trust will get the benefit only upon compliance of the requirements of Section 11 and 12 of the Act which compliance can be examined by the assessing authority while processing the return filed by the trust.

35. Thus, at the time of grant of registration the Ld. PCIT ought to confine himself on two aspects being the object of the society and the genuineness of the activities meaning thereby the activities whether in consonance with the object of the trust.

36. The Judgment passed in the case of CIT vs. Red Rose School as relied upon by the learned AR where the scope of Section 12AA has been explained as under:

“”34. Section 12AA, which lays down the procedure for registration, does not speak anywhere that the Commissioner, while considering the application for registration, shall also see that the income derived by the trust or the institution is either not being spent for charitable purpose or such institution is earning profit. The language used in the section only requires that activities of the trust or the institution must be genuine, which accordingly would mean, they are in consonance with the objects of the trust/institution, and are not mere camouflage but are real, pure and sincere, nor against the proposed objects. The profit earning or misuse of the income derived by charitable institution from its charitable activities, may be a ground for refusing exemption only with respect to that part of the income but cannot be taken to be a synonym to the genuineness of the activities of the trust or the institution.”

37. Consideration has also been made on the judgment relied upon by the Ld AR passed by the Chandigarh Tribunal in the case of Indian Institute of Model Education Society Vs. CIT, (Supra) wherein the following observations were made:

“29. We have carefully considered the rival submissions and perused the material available on record. In so far as the objection of the Ld. CIT(E) regarding the alleged violation of section 13 of the Act is concerned, we find that the said issue has weighed with the Ld. CIT(E) in denying registration to the assessee. In our considered view, such an approach is not in accordance with the settled legal position. At the stage of grant of registration under section 12A of the Act, the competent authority is required to examine the objects of the trust/institution and the genuineness of its activities. The question as to whether there is any violation of section 13 of the Act is a matter which falls within the domain of the Assessing Officer at the stage of assessment, and any disallowance, if warranted, is to be made in those proceedings. Therefore, the alleged violation of section 13, even if assumed, cannot be a valid ground to withhold registration.

In view of the above discussion, we direct the Ld. CIT(E) to grant registration to the assessee under section 12A of the Act. The appeal of the assessee is accordingly allowed….”

38. In the above judgement it has been held that while granting registration under Section 12A of the Act,the competent authority is required to examine the object of the trust/institution and the genuineness of its activities. The question as to whether there is any violation of Section 13 of the Act is a matter which falls within the domain of the Assessing Officer at the stage of assessment and any disallowance, if warranted is to be made in those proceedings, and therefore, the alleged violation of Section 13 even if assumed cannot be a valid ground for rejection of registration of the assessee trust. Suffice to say that we are inspired by the ratio laid down in the judgement as above and even in the case of rejection of renewal of registration of the assessee trust the alleged violation of provision of Section 13 of the Act cannot be a ground as because renewal of registration is nothing but asking for an approval for the continuous process, which is already been practiced, followed and that too on the basis of the order of sanction of registration given by the revenue authorities only.

39. Reliance were also placed in the case of Fateh Chand Trust Vs. CIT (Exemption), reported in 67 ITR (Trib) 564 (Agra) wherein following observation has been made:

“”19. We find that learned CIT, while passing impugned order seems to be under gross misconception that it is his satisfaction and definition of ‘charitable activities’ de hors requirement of law would only enable an institution to be granted registration under section 12AA of the Act as once registration is granted, the entire income of the institution would become exempt. The said view, in the light of precedents referred above is wholly opposed to law. Under section 12AA of the Act, the Commissioner is entitled to see that whether the objects are charitable in nature, which term has been well defined in the Act and also to see whether the activities are genuine or not. The genuineness of activities would mean to see that activities are not camouflage, bogus, artificial and whether these are in accordance with the objects of the institution. The scope of enquiry does not extend beyond that point…”

40. The issue decided by the Chandigarh bench in the case of Indian Institute of Model Education Society Vs. CIT (supra) has been reiterated here defining the scope of the competent authority to examine the object of the trust with the charitable in nature and activities whereof whether in accordance with such object of the trust at the stage of granting registration/renewal of the assessee trust.

41. Thus, considering the entire aspect of the matter, we find that the Ld. PCIT has exercised beyond his jurisdiction in issuing the order impugned, failed to obey the principle of judicial discipline in view of the fact that once the order of rejection of registration having been done on the basis of the documents unearthed during search stood quashed by the Co-ordinate Bench and the appeal whereof pending before the Hon’ble High Court, the situation as on date the order quashing the impugned order by the Ld. PCIT still holds the field and thus, further rejection of renewal of registration impugned before us on the same material unearthed during the earlier search and also on the ground of ‘specified violation’ and ‘diversion of fund’ as reiterated is not appreciated. Apart from that it has been decided in number of Judgments passed by different judicial forums that the competent authority is required to confine only to examine the object of the trust whether charitable and the activities whether in consonance with the object of the said Trust at the time of grant of registration and/or renewal of the trust. The provision of Rule 17A sub Rule (g) is basically the inspiration to those piece of Judgments which time and again reminded the authorities to act strictly in accordance with the four corners of the statute and not to divert to any other aspect of the matter which could lead to making adverse inference while granting registration. Nor the competent authority could go beyond three years to examine the activities of the Assessee trust prior to the date of application made before it. The impugned order of cancellation of registration and/or renewal alleges ‘specified violation’ and ‘diversion of funds’ at this stage which is neither supported by any provision of law nor by any judgment passed by any legal forum. The procedure sought to be adopted by the Ld. PCIT at this stage is not within the powers conferred upon him under the statute rather the same could only be followed by the Assessing Officer while processing assessment of the trust. The question whether the issue of violation of provision of Section 13 is coming under the purview of the jurisdiction of the Ld. PCIT at this stage is, therefore, found to be against Revenue in the case in hand. At the cost of repetition we note that it is within the domain of the Assessing Officer at the stage of assessment which has been found to have not been appreciated by the concerned authorities. It is the power of the Assessing Officer to disallow the exemption of the trust if such alleged violation under Section 13 of the Act could at all finds place during assessment and not at the stage of registration / renewal of registration by any authority under the provision of law. Thus, having regard to the entire aspect of the matter the order impugned is found to be in excess of jurisdiction. When the statute has conferred a particular right and/or power to be exercised by a particular authority, the statutory authority should confine themselves to act strictly within the boundaries framed under the provision herein Rule 17A r.w. Sub Rule (g) and the impugned order is therefore, found to be arbitrary, whimsical, erroneous and devoid of any jurisdiction and thus, liable to be quashed.

42. In that view of the matter, we quash the order impugned and, thus, allow the appeals on the grounds as contained therein preferred by the Assessee and further direct the Ld. Competent authority to grant requisition/renewal registration forthwith to the Assessee trust upon allowing the application made under Form 10AB and consequential grant of approval under Section 80G(5) of the Act.

43. In the result, Appeals filed by the Assessee are allowed.

44. The orders passed in these appeals apply mutatis mutandis in the appeals in ITA Nos. 5042/Del/2026, 5043/Del/2026 having regard to the identical facts involved therein.

45. In the result, all appeals filed by the Assesees are allowed.

Order pronounced in the open Court on 11. 08.2026