Valid registration granted under Section 12A(1)(ac)(i) cannot be invalidated during renewal without proper cancellation procedures.

ORDER

Sandeep Singh Karhail, Judicial Member.- The assessee has filed the present appeal against the impugned order dated 24/11/2025, passed by the learned Commissioner of Income Tax (Exemptions), Bangalore [“learned CIT(E)”], rejecting the application filed by the assessee seeking condonation of registration under section 12AB of the Income Tax Act, 1961 (“the Act”).

2. In this appeal, the assessee has raised the following grounds: –

3. The sole issue that arises for our consideration pertains to the denial of registration under section 12AB of the Act.

4. The brief facts of the case pertaining to this issue, as emanating from the record, are: The assessee is a statutory body established under the Bangalore Metropolitan Region Development Authority Act, 1985, for planned development and coordination among various civic bodies. The assessee functions under the control of the State Government and performs statutory duties for the orderly growth of urban and rural areas within its jurisdiction. The assessee originally applied for registration under section 12A of the Act, which was rejected by the learned CIT(E) vide order dated 31/03/2021 in the absence of relevant details being filed by the assessee to establish the genuineness of its objects and activities. Thereafter, the assessee applied for regular registration in the new regime under section 12A(1)(ac)(i) of the Act, which was granted vide Form 10AC dated 15/11/2021 for the period from assessment year 2022-23 to 2026-27. Since the said registration was due for renewal, the assessee filed an application under section 12A(1)(ac)(ii) of the Act in Form 10AB on 27/09/2025. However, the learned CIT(E), vide impugned order, rejected the said application on the basis that the assessee’s earlier registration under section 12A(1)(ac)(i) of the Act was not properly granted, as the registration under the said section is only available to entities that held a subsisting registration under section 12A or section 12AA of the Act immediately before the migration to the new regime. The learned CIT(E) held that since the assessee’s application for seeking registration under section 12A of the Act was rejected vide order dated 31/03/2021, the registration granted under section 12A(1)(ac)(i) of the Act was wrongly obtained and the assessee was never eligible to obtain the registration under the said section. Thus, it was held that since the earlier registration was not properly granted, all subsequent claims or applications based on that registration automatically lose legal sanctity. Accordingly, the learned CIT(E) held that the assessee’s application for extension of registration under section 12AB of the Act is void ab initio as it rests on an invalid foundational registration. Being aggrieved, the assessee is in appeal before us.

5. During the hearing, the learned Authorised Representative (“learned AR”) submitted that the learned CIT(E) did not consider any submission of the assessee. It was further submitted that the learned CIT(E) exceeded his jurisdiction by reviewing the validity of an earlier subsisting registration order passed under section 12A(1)(ac)(i) of the Act, which can only be revoked as per the provisions of section 12AB(4) of the Act. Thus, the learned AR submitted that without following the procedure laid down by the statute, the learned CIT(E) treated the earlier registration granted under section 12A(1)(ac)(i) of the Act to be an invalid registration.

6. On the other hand, the learned Departmental Representative (“learned DR”) vehemently relied upon the order passed by the learned CIT(E).

7. We have considered the submissions of both sides and perused the material available on record. In the present case, there is no dispute regarding the fact that the assessee’s application for seeking registration under section 12A of the Act, i.e. under the old regime, was rejected by the learned CIT(E), as the assessee failed to respond to the notices issued seeking documentary evidence. As per the assessee, soon after the rejection, it filed the application for seeking registration in the new regime, which was granted on 15/11/2021 under section 12A(1)(ac)(i) of the Act for a period from assessment year 2022-23 to 2026-27. As the said registration was due to expire, the assessee filed an application in Form 10AB for renewal of the registration under section 12A(1)(ac)(ii) of the Act. However, the learned CIT(E) rejected the assessee’s application on the basis that its earlier registration granted under section 12A(1)(ac)(i) of the Act was invalid, as the assessee was not holding any registration under section 12A, which is the primary requirement for seeking registration under section 12A(1)(ac)(i) of the Act. Thus, it was held that all subsequent applications seeking registration or its renewal also fail, as they rest on an invalid foundational registration.

8. On the other hand, as per the assessee, the registration granted on 15/11/2021 under section 12A(1)(ac)(i) of the Act was a subsisting registration which was never revoked as per the procedure laid down by the statute, and therefore, its application seeking renewal of registration was validly filed.

9. We find that the provisions of sub-section (4) to section 12AB of the Act provide a mechanism for cancellation of the registration once granted, and the same reads as follows: –

“(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 subsection (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

(g) the application referred to in clause (ac) of sub-section (1) of section 12A contains false or incorrect information.”

10. From the plain reading of the aforesaid provisions of section 12AB(4) of the Act, it is evident that only in a case where the occurrence of any one or more specified violations, as defined in the Explanation to section 12AB(4) of the Act, was noticed, or any reference was received from the Assessing Officer under 2^nd proviso to section 143(3) of the Act, or where the case was selected in accordance with the Risk Management Strategy formulated by the CBDT, the registration granted earlier can be cancelled. Thus, even if for an argument’s sake it is assumed that the case of the assessee falls in one of the clauses of the Explanation to section 12AB(4) of the Act, we are of the considered view that prior to cancelling the registration, the learned CIT(E) is required to follow the procedure laid down in clauses (i) to (iv) of section 12AB(4) of the Act. It is pertinent to note that in the present case, the learned CIT(E) merely treated the registration already granted to the assessee under section 12A(1)(ac)(i) of the Act as defective/invalid and no order cancelling the registration was passed under section 12AB(4)(ii) of the Act. Further, we do not find any provision in the Act which grants any statutory authority to the learned CIT(E) to treat the registration earlier granted as defective/invalid without passing an order cancelling the same. Therefore, we are of the considered view that the registration, once granted and not cancelled as per the procedure prescribed by the statute, remains a valid registration in the eyes of the law. Thus, if the learned CIT(E) notices the occurrence of any one or more specified violations, as defined in the Explanation to section 12AB(4) of the Act, then the learned CIT(E) can only cancel the registration earlier granted, provided the procedure prescribed is followed, and there is no option available with the learned CIT(E) to treat the said registration as defective/invalid without passing an order cancelling the same. Therefore, the impugned order passed by the learned CIT(E), in the present case, is quashed as not being in conformity with the provisions of the statute.

11. Accordingly, in light of our findings rendered in the foregoing paragraphs, we restore the application filed by the assessee for seeking renewal of registration to the file of the learned CIT(E) for de novo adjudication after providing reasonable and adequate opportunity of hearing to the assessee. With the above directions, the impugned order is set aside, and the grounds raised by the assessee are allowed for statistical purposes.

12. In the result, the appeal filed by the assessee is allowed for statistical purposes.