Balaji Educational & Welfare Trust Vs CIT (ITAT Chandigarh)
Section 12AB: Rejection Of Registration Application Cannot Automatically Cancel Existing Registration—ITAT
Registration Rejection And Cancellation Require Separate Examination
The Chandigarh ITAT has held that rejection of an application under Section 12AB cannot automatically supersede an existing registration. Cancellation requires compliance with the separate statutory procedure under Section 12AB(4), including identification of a specified violation, notice to the trust, an effective opportunity of hearing, and a reasoned order.
However, the Tribunal upheld the rejection of the trust’s registration application because it failed to establish genuine charitable activities or concrete steps to revive its educational operations. The decision thus distinguishes between the authority’s power to reject an application and its power to cancel an existing registration.
Background Of The Application
Shree Balaji Educational & Welfare Trust was constituted on September 11, 2011, with objects covering education, medical relief, relief to the poor, and other charitable purposes. It filed Form 10AB on September 29, 2025, under Section 12A(1)(ac)(ii), seeking registration under Section 12AB.
During examination, the CIT(E) sought an activity report and supporting evidence. The trust explained that it had operated a primary school before the COVID-19 pandemic, suspended operations during the pandemic, and intended to revive the school.
The school was admittedly not functioning when the application was examined. The CIT(E) found no satisfactory evidence of ongoing educational activities, such as recognition or affiliation records, student enrolment, fee receipts, staff salary payments, inspection reports, or other independent supporting material.
The trust also failed to substantiate concrete revival measures through renovation work, recruitment, regulatory correspondence, or allocation of funds. Its recent financial statements did not demonstrate substantial receipts or meaningful expenditure towards education or its other charitable objects.
Consequently, the CIT(E) rejected the application for failure to establish the genuineness of its activities.
Trust Relied On Charitable Objects And Pandemic Disruption
The trust argued that its objects were charitable within Section 2(15) and that temporary suspension of school operations during COVID-19 did not extinguish its charitable character.
It maintained that registration proceedings involve a limited inquiry and should not become an assessment of its income or expenditure. Relying on judicial decisions concerning charitable registration, it submitted that its past educational activities and intention to resume operations supported its application.
The Revenue contended that charitable objects alone were insufficient. Section 12AB requires examination of genuineness of activities and compliance with laws material to the trust’s objects, and the trust had not produced evidence of current operations or a documented revival programme.
Tribunal Upholds Rejection Of The Application
The Tribunal observed that Section 12AB(1)(b) expressly authorises the registration authority to examine the genuineness of activities and compliance with other laws relevant to achieving the trust’s objects.
Therefore, the inquiry could not be confined to reading the objects clause in the trust deed. The statutory requirements had to be supported by the facts and documents placed before the authority.
On the evidence available, the trust had neither demonstrated present charitable activities nor furnished contemporaneous material establishing concrete steps to restart its school. Its reliance on past operations and a stated intention to revive them did not adequately answer the CIT(E)’s concerns.
The Tribunal also held that principles developed under the earlier Sections 12A and 12AA could not be mechanically applied to dispense with the express requirements of Section 12AB.
Accordingly, it upheld rejection of the Form 10AB application.
Existing Registration Could Not Be Automatically Superseded
The CIT(E)’s order additionally stated that the rejection would supersede any registration previously granted under Section 12AB. The trust challenged this direction, pointing out that its existing registration was admittedly valid up to Assessment Year 2026-27.
The Tribunal held that cancellation is governed by Section 12AB(4) and requires a separate statutory exercise. The authority must identify a specified violation, confront the trust with that allegation, provide an effective hearing, and pass a speaking order.
Here, no specified violation had been identified and no separate notice proposing cancellation on that basis had been issued. Rejection of the subsequent application could therefore not operate as automatic cancellation of the existing registration.
The Tribunal set aside the cancellation or supersession direction and remanded that issue to the CIT(E). The authority must independently examine whether any specified violation exists and, if so, follow the prescribed procedure. The Tribunal expressed no opinion on the merits of any future cancellation decision.
Both appeals were partly allowed for statistical purposes.
Author’s Comments
This ruling highlights two practical requirements. An existing trust seeking registration must support its claim with reliable activity records or documented revival measures. A general explanation of pandemic disruption and an intention to resume operations may be insufficient where the evidence shows prolonged inactivity.
At the same time, an adverse decision on a subsequent application does not erase an existing registration automatically. Cancellation safeguards under Section 12AB(4) remain mandatory.
The ruling should be read in its factual context. It does not establish that every temporarily inactive trust must be denied registration, nor does it permanently protect this trust from cancellation. The application rejection stands, while the cancellation issue requires fresh examination through the statutory process.
Cases Discussed
- Sir CV Raman Educational & Charitable Trust v. CIT(E) (2026) 184 taxmann.com 197 — relied upon by the assessee for the proposition that principles governing registration under the erstwhile Sections 12A/12AA should apply, mutatis mutandis, under Section 12AB; the Tribunal held that such principles could not dispense with the express statutory requirements of Section 12AB.
- Mewari Tolly Charitable Trust v. CIT, ITA No. 4336/Mum/2026 — relied upon by the assessee on the scope of charitable registration proceedings; the Tribunal held that earlier-regime principles could not be mechanically imported so as to dispense with the express requirements of Section 12AB.
- Nazir Ahmad v. King Emperor, AIR 1936 PC 253 — relied upon for the principle that where a power is given to do a particular thing in a particular manner, it must be exercised in that manner or not at all; applied to the statutory cancellation procedure under Section 12AB(4).
FULL TEXT OF THE ORDER OF ITAT CHANDIGARH
These two connected appeals have been filed by the assessee-trust against the order passed by the learned Commissioner of Income-tax (Exemptions), Chandigarh [“CIT(E)”], whereby the application filed by the assessee in Form No.10AB seeking registration under section 12AB of the Income-tax Act, 1961 (“the Act”) was rejected. Since both the appeals arise from the same proceedings and involve interconnected issues, they are being disposed of by this consolidated order.
2. The assessee, Shree Balaji Educational & Welfare Trust, was created on 11.09.2011 and its stated objects include relief of the poor, education, medical relief and advancement of other objects of general public utility. The assessee filed an application in Form No.10AB on 29.09.2025 seeking registration under section 12A(1)(ac)(ii) of the Act.
3. The grounds raised by the assessee, inter alia, challenge the rejection of the application on the ground that the impugned order is contrary to law and facts, that adequate opportunity was not afforded to the assessee and that the CIT(E) failed to record cogent reasons for cancelling registration already granted.
4. While examining the application, the learned CIT(E) noted that the statutory provisions required examination not only of the objects of the trust but also of the genuineness of its activities and compliance with the applicable statutory requirements. Since the application was not accompanied by an activity report, notice was issued requiring the assessee to furnish an activity report and documentary evidence in support of its charitable activities.
5. In response, the assessee submitted that it had been actively engaged in running a primary school in furtherance of its charitable objects prior to the outbreak of COVID-19. It was stated that during the pandemic, operation of the school had to be temporarily suspended for reasons beyond the control of the assessee and that the assessee intended to revive and recommence its educational activities. The learned CIT(E), however, observed that the assessee had admittedly not been running the school at the relevant time and that no documentary evidence had been furnished to establish any ongoing educational activity. In particular, there was no recognition or affiliation document, staff salary record, student enrolment detail, fee receipt, inspection report, photograph or other independently verifiable evidence demonstrating that the assessee was presently engaged in educational activities.
6. The learned CIT(E) further observed that a mere assertion regarding temporary closure on account of COVID-19 could not, by itself, establish genuineness of activities, particularly when no evidence of concrete steps towards revival of the school had been furnished. The learned CIT(E) also examined the financial statements and observed that the recent financial years did not disclose substantial receipts or meaningful charitable expenditure relatable to education or any other charitable object. According to the learned CIT(E), the financial conduct of the assessee did not demonstrate structured, regular or systematic charitable activities and did not corroborate the claim regarding revival or continuation of charitable activity.
7. The application was, accordingly, rejected on the ground that the statutory requirement regarding genuineness of activities remained unfulfilled.
8. Before us, the learned Authorised Representative (“AR”) submitted that the assessee is a charitable trust whose objects indisputably fall within the ambit of section 2(15) of the Act and that the trust had, in fact, carried on educational activities by running a primary school. It was submitted that discontinuance of the school was attributable to the unprecedented circumstances created by the COVID-19 pandemic and could not be treated as cessation of the charitable character or objects of the assessee. The assessee continued to have the intention of reviving its educational activities and, therefore, temporary absence of actual activity ought not to have resulted in rejection of registration.
9. The learned AR further submitted that the scope of examination at the stage of registration is limited and that the competent authority is not required to undertake an assessment of the income or expenditure of the trust in the manner applicable in regular assessment proceedings. Reliance was placed upon the decisions of the Chennai Bench of the Tribunal in the case of Sir CV Raman Educational & Charitable Trust v. CIT(E) (2026) 184 taxmann.com 197 and the Bombay Bench of the Tribunal in Mewari Tolly Charitable Trust v. CIT (ITA No.4336/Mum/2026), for the proposition that the principles governing registration under the erstwhile sections 12A/12AA should, mutatis mutandis, apply even under the present regime of section 12AB. It was accordingly contended that the CIT(E) ought to have considered the objects of the assessee, its past charitable activities and its stated intention to recommence such activities, instead of rejecting the application merely because the school was not operational on the date of examination.
10. The learned AR also challenged the conclusion of the CIT(E) that there was no satisfactory evidence regarding the charitable character of the assessee. According to him, the impugned order proceeded essentially on the fact that the school was not functioning at that particular point of time and did not properly appreciate the explanation furnished by the assessee regarding the circumstances in which the educational activity had been suspended. It was, therefore, submitted that the impugned order deserved to be set aside and the registration application be considered afresh in accordance with law.
11. Per contra, the learned Departmental Representative (“DR”) strongly supported the order of the CIT(E). It was submitted that section 12AB contains a specific statutory requirement for the competent authority to satisfy itself regarding the genuineness of the activities of the trust or institution and compliance with the requirements of other applicable laws material for achievement of its objects. The learned DR submitted that this requirement cannot be rendered nugatory merely because the objects of the assessee are charitable or because the assessee had undertaken charitable activities in the past. The learned DR further submitted that the assessee itself admitted before the CIT(E) that the school was not presently functioning. Once there was no ongoing charitable activity, the CIT(E) had no material on the basis of which the genuineness of the present activities could be examined.
12. It was also submitted that the assessee had failed to furnish independent documentary evidence showing any concrete steps towards recommencement of the educational activity. The learned DR accordingly contended that the CIT(E) had rightly applied section 12AB and rejected the application.
13. We have carefully considered the rival submissions and perused the material available on record. The short controversy before us is whether, in the facts of the present case, the CIT(E) was justified in rejecting the application under section 12AB on the ground that the assessee was not carrying on any charitable activity at the relevant time and, consequently, the genuineness of its activities could not be verified. At this stage, it would be appropriate to refer to the relevant statutory provision. Section 12AB(1)(b) specifically provides that, in cases covered by the said provision, the Principal Commissioner or Commissioner shall call for such documents or information and make such inquiries as he thinks necessary in order to satisfy himself regarding:
“(A) the genuineness of activities of the trust or institution; and
(B) the compliance of such requirements of any other law for the time being in force by the trust or institution as are material for the purpose of achieving its objects.”
14. The provision further requires the Commissioner, after satisfying himself about the objects, genuineness of activities and compliance with the applicable requirements, either to grant registration or, if not so satisfied, to reject the application after affording reasonable opportunity of being heard. The language employed by the Legislature is significant. The function of the CIT(E) under section 12AB is not confined merely to examining whether the objects of the trust are charitable. The provision expressly requires satisfaction regarding the genuineness of the activities of the trust or institution. It also requires examination of compliance with the requirements of any other law which are material for achieving the objects of the trust. Thus, the statutory enquiry under section 12AB encompasses both the nature of the objects and the genuineness and legal compliance of the activities being carried on by the applicant.
15. In the present case, the assessee has not disputed the factual position that the primary school was not functioning at the time when the application was examined by the CIT(E). The explanation of the assessee is that the school had been suspended during the COVID-19 period and that the assessee proposed to revive the activity. However, as recorded by the CIT(E), no material such as recognition or affiliation, enrolment of students, staff details, fee receipts, inspection reports, photographs, renovation activity, recruitment process, regulatory correspondence or financial allocation towards recommencement was furnished to demonstrate that the charitable educational activity had in fact recommenced or was in the process of concrete revival. In these circumstances, we find force in the observation that, when no activity is being carried on, it becomes difficult, if not impossible, for the competent authority to examine the genuineness of the activity.
16. The requirement under section 12AB is not satisfied merely by demonstrating that the trust possesses charitable objects or that it had carried on some charitable activity in the past. The competent authority is required to arrive at a satisfaction regarding the genuineness of the activities on the basis of the material available before it.
17. We are also unable to accept the contention of the learned AR that the principles applicable under sections 12A/12AA can be mechanically imported into the present proceedings under section 12AB. The present statutory scheme under section 12AB specifically delineates the enquiry to be undertaken by the Commissioner. The Commissioner is empowered to call for documents and information and to make such inquiries as he considers necessary for satisfying himself regarding the genuineness of activities and compliance with the applicable legal requirements. Therefore, the decisions relied upon by the assessee for the proposition that the principles under the earlier registration regime should apply mutatis mutandis cannot, in the facts of the present case, dispense with the express statutory requirement contained in section 12AB.
18. It is equally important to appreciate that the CIT(E) is not required to grant registration merely because the objects of the trust are charitable. Where the statute requires satisfaction regarding genuineness of activities, the applicant must place sufficient material before the competent authority to enable such satisfaction to be reached.
19. In the present case, the assessee’s explanation regarding its past activity and its future intention to revive the school may explain the circumstances in which the activity came to be discontinued; however, such explanation by itself does not establish the present genuineness of charitable activities contemplated under section 12AB. We, therefore, find that the CIT(E) has examined the application in the light of the statutory requirement contained in section 12AB and has recorded specific reasons for reaching the conclusion that the requirement relating to genuineness of activities was not satisfied. The finding is supported by the assessee’s own admission that the school was not operational and by the absence of contemporaneous material demonstrating any ongoing or concrete charitable activity. Accordingly, the rejection of the application for registration under section 12AB is upheld.
20. Having examined the action of the learned CIT(E) in refusing to grant registration to the assessee within the four corners of section 12AB of the Act, the next issue requiring examination is the action of the CIT(E) in purporting to cancel or supersede the registration already granted to the assessee, which was admittedly valid for Assessment Year 2026-27.
21. The learned AR drew our attention to the concluding paragraph of the impugned order, wherein, after rejecting the application filed by the assessee for registration, the learned CIT(E) also observed that such rejection would supersede any registration granted under section 12AB of the Act by any authority at any earlier time. It was submitted that the registration of the assessee was otherwise valid for Assessment Year 2026-27 and that the learned CIT(E), while cancelling or superseding such registration, had not pointed out any “specified violation” as contemplated under section 12AB(4) of the Act.
22. The learned AR submitted that section 12AB(4) lays down a separate statutory mechanism for cancellation of registration already granted to a trust or institution. Where the Commissioner proposes to cancel an existing registration on the ground of a specified violation, the statutory procedure has to be followed. In particular, the assessee is required to be put to notice regarding the specified violation and an opportunity of hearing is required to be afforded before an order cancelling the registration is passed.
23. According to the learned AR, no such notice was issued to the assessee pointing out any specified violation and, consequently, cancellation of the registration without following the procedure prescribed under section 12AB(4) was without jurisdiction.
24. The learned DR, on the other hand, supported the action of the CIT(E) and submitted that once the application for registration was found not maintainable on account of non-satisfaction of the statutory conditions, the consequential observations made by the CIT(E) in the impugned order did not call for interference.
25. We have heard the rival contentions and perused the material available on record. The ld. counsel for the assessee has made an oral submission that the ground for wrongful cancellation of the registration may be accepted. Considering the illegality of the issue, we have accepted the ground and are deciding the same on the basis of the material available on record.
26. We find considerable force in the submission of the learned AR on this limited issue. The statutory scheme under section 12AB(4) operates in a field distinct from the initial examination of an application for registration. Once registration has been granted, its cancellation has to be tested with reference to the specific statutory conditions prescribed for cancellation, including the existence of a specified violation as contemplated under the Act and compliance with the prescribed procedural safeguards.
27. In our considered opinion, section 12AB(4) mandates that where the Commissioner proposes to cancel a registration on the ground of a specified violation, the assessee has to be confronted with the specified violation and the statutory procedure contemplated under the provision has to be followed. The assessee is required to be afforded an effective opportunity of being heard before an order cancelling the registration is passed. Thus, cancellation of an existing registration cannot be treated as an automatic or consequential consequence merely because an application for fresh registration has been rejected.
28. In the present case, the learned CIT(E), while rejecting the application of the assessee, proceeded further and, in the concluding portion of the order, stated that the rejection “would also supersede any registration granted u/s 12AB of the Act by any authority at any earlier time.” However, from the impugned order, we do not find any specific finding identifying a specified violation committed by the assessee so as to invoke the cancellation mechanism contemplated under section 12AB(4).
29. More importantly, there is nothing on record before us to demonstrate that a separate notice was issued to the assessee proposing cancellation of its existing registration by specifically identifying the alleged specified violation and calling upon the assessee to show cause against such cancellation.
30. The distinction between rejection of an application for registration and cancellation of an already existing registration is material. The former concerns the satisfaction to be reached on the application presently before the competent authority, whereas the latter has to satisfy the specific statutory requirements governing cancellation. Therefore, even though rejection of the assessee’s present application is upheld for the reasons discussed hereinabove, the existing registration cannot, in our considered view, be cancelled as an automatic consequence of such rejection without following the procedure prescribed under section 12AB(4).
31. We may also refer to the well-settled principle of statutory interpretation enunciated by the Privy Council in Nazir Ahmad v. King Emperor, AIR 1936 PC 253, wherein it was held that:
“where a power is given to do a certain thing in a certain way, the thing must be done in that way or not at all; other methods of performance are necessarily forbidden.”
32. The said principle has consistently been approved and followed by the Hon’ble Supreme Court. Applying the aforesaid principle to the facts of the present case, once the Legislature has prescribed a specific statutory mechanism under section 12AB(4) for cancellation of an existing registration on account of a specified violation, the competent authority is required to exercise the power strictly in the manner prescribed by the statute. The CIT(E) cannot bypass the statutory procedure prescribed for cancellation of registration and achieve the same consequence indirectly while disposing of an application for registration. In other words, when the Act requires cancellation of an existing registration to be preceded by identification of a specified violation, issuance of notice and grant of an opportunity of hearing, the cancellation has to be effected in that manner and in no other manner.
33. In the present case, the CIT(E) has neither identified any specified violation committed by the assessee for the purpose of section 12AB(4), nor issued a notice proposing cancellation of the existing registration on the basis of such specified violation. Instead, after rejecting the application filed by the assessee, the CIT(E) proceeded to observe that such rejection would also supersede the registration granted under section 12AB earlier. Such a course, in our considered view, does not conform to the procedure expressly prescribed by the statute for cancellation of an existing registration. The power to reject an application for registration and the power to cancel an existing registration operate in different fields and are subject to different statutory requirements. The former may be exercised upon the competent authority not being satisfied about the conditions applicable to the application before it; however, the latter can be exercised only in accordance with the specific conditions and procedure prescribed under section 12AB(4). The statutory procedure cannot be circumvented by describing cancellation as a consequence of rejection of the subsequent application.
34. In view of the foregoing discussion, we hold that the cancellation or supersession of the existing registration of the assessee, without following the procedure prescribed under section 12AB(4), cannot be sustained. Accordingly, while our findings regarding rejection of the application for registration remain as recorded hereinabove, the issue relating to cancellation of the existing registration is restored to the file of the learned CIT(E) for fresh adjudication in accordance with law. If the learned CIT(E) proposes to cancel the existing registration, he shall first examine whether any “specified violation”, as contemplated under section 12AB(4) of the Act, is made out. If so, the assessee shall be specifically confronted with such specified violation by issuing the requisite notice in accordance with section 12AB(4), and reasonable opportunity of being heard shall be afforded to the assessee. Thereafter, the issue shall be decided by passing a proper, reasoned and speaking order in accordance with law.
35. It is made clear that we have not expressed any opinion on the merits of the alleged cancellation or on whether any specified violation has, in fact, been committed by the assessee. The learned CIT(E) shall adjudicate the issue independently in accordance with the statutory provisions and after following due process of law.
36. Accordingly, the rejection of the application filed by the assessee for registration under section 12AB is upheld. However, the action of the learned CIT(E) in cancelling or superseding the existing registration, without following the statutory procedure prescribed under section 12AB(4), is set aside and the matter is restored to the file of the learned CIT(E) for fresh adjudication in accordance with law. To this limited extent, the ground raised by the assessee relating to cancellation of the existing registration is allowed for statistical purposes.
37. The appeals are accordingly partly allowed for statistical purposes.
Order pronounced on 30th September,2026.
