The PCIT cancelled my registration under s.12AB(4) for a specified violation resting entirely on an addition made in assessment. The Tribunal has since deleted that addition. Does the cancellation survive?
No. Where the order under s.12AB(4) is founded entirely on the outcome of another proceeding, its fate depends on the sustainability of that foundational finding; once the Tribunal reversed the quantum findings on which the alleged specified violation rested, the cancellation could not survive independently. The Tribunal set aside the cancellation and directed restoration of the registration.
Decided by the ITAT (George George K, Vice President and Padmavathy S, Accountant Member — ITAT Chennai "C" Bench) on 2026-08-05, reported as ITA No.1962/CHNY/2026. It bears on section 12AB, section 12AB(1), section 12AB(4), section 12A(1)(ac)(ii), section 12AA, section 132, section 69A of the Income Tax Act 1961, in Charitable Trusts & Exemption, Capital Gains Exemptions and Search, Survey & Block Assessment matters.
The PCIT's answer to the pendency point is the one practitioners meet constantly: registration proceedings are independent of assessment proceedings, so he need not wait for the appeal to conclude. The Tribunal does not reject that proposition — it holds that where the cancellation order contains no independent inquiry into the objects or into genuineness, and rests solely on the assessment finding, the substratum disappears with the finding. That distinction is the whole of the case and it points both ways: a PCIT who makes his own inquiry and records his own findings of specified violation is not exposed in the same way. Note also what the PCIT did here procedurally — he rejected the Form 10AB application under s.12A(1)(ac)(ii) and, using s.12AB(1)(b)(ii)(B)(I), also cancelled the subsisting registration, backdating the cancellation to AY 2017-18, the year in which the alleged violations came to notice. That combination is what makes a renewal application dangerous where an assessment dispute is live.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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A search under s.132 was conducted on the trust and others on 27 December 2016. The Department's case was that fee receipts for 70,304 students amounting to Rs 32.35 crore were fabricated for the period 1 to 8 November 2016 to create a source for demonetised currency, and the amount was assessed as unexplained money under s.69A in the assessment order dated 29 December 2018 for AY 2017-18. The CIT(A) partly allowed the assessee's appeal but affirmed the findings on the genuineness of the fee receipts. Cross appeals by the assessee and the Revenue were pending before the Tribunal. On 29 September 2025 the trust applied in Form 10AB under s.12A(1)(ac)(ii) for registration. On show cause the trust replied that a specified violation could be found only where the violation had been confirmed by the appellate authorities and the order had not attained finality. By order dated 27 March 2026 the PCIT rejected that submission, holding that appeal proceedings are different from and independent of trust registration proceedings, and that what mattered was not the quantum of addition but the genuineness of the trust's activities; he found a specified violation within clauses (a) and (e)(ii) of the Explanation to s.12AB(4), rejected the Form 10AB application and cancelled the registration granted under s.12AA up to AY 2021-22 and under s.12AB from AY 2022-23, with effect from AY 2017-18. By the time the appeal was heard the Tribunal had disposed of the quantum cross appeals, allowing the assessee's appeal and dismissing the Revenue's.
Appeal allowed. The cancellation was founded solely on the alleged fabrication of fee receipts and manipulation of accounts, allegations which no longer survived after the Tribunal's decision in the quantum proceedings; the cancellation rested on no independent inquiry into the objects of the trust and on no other material showing that its activities were not genuine. The substratum of the order having disappeared, the conclusion that a specified violation within s.12AB(4) had occurred could not be sustained, and the cancellation of registration could not be upheld. The impugned order was set aside and restoration of the registration directed (paras 6, 7 and 8).
The Tribunal identified the foundation of the PCIT's order as the finding that the trust had fabricated fee receipts of Rs 32.35 crore and had thereby carried on activities which were not genuine, and recorded that the very same findings were the subject matter of the quantum proceedings for AY 2017-18 (para 6). It accepted that when the impugned order was passed the quantum appeals were pending, but treated as decisive the subsequent development that the Tribunal had allowed the assessee's appeal and dismissed the Revenue's, thereby reversing the findings which were the sole basis for invoking s.12AB (para 6). At paragraph 7 it applied the general principle that an order founded entirely on the outcome of another proceeding depends for its fate on the sustainability of the foundational finding, and stressed that the cancellation contained no independent inquiry into objects and no other material on genuineness. The Tribunal did not decide the wider question, argued by the assessee before the PCIT, whether a specified violation can be found at all before the underlying assessment attains finality.
It is well settled that where an order is founded entirely upon the outcome of another proceeding, the fate of such order necessarily depends upon the sustainability of the foundational finding.
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Handle my notice → Ask a CA on WhatsAppNo. Where the order under s.12AB(4) is founded entirely on the outcome of another proceeding, its fate depends on the sustainability of that foundational finding; once the Tribunal reversed the quantum findings on which the alleged specified violation rested, the cancellation could not survive independently. The Tribunal set aside the cancellation and directed restoration of the registration. This was decided by the ITAT (George George K, Vice President and Padmavathy S, Accountant Member — ITAT Chennai "C" Bench) and bears on section 12AB, section 12AB(1), section 12AB(4), section 12A(1)(ac)(ii), section 12AA, section 132, section 69A of the Income Tax Act 1961. It is reported as ITA No.1962/CHNY/2026. The PCIT's answer to the pendency point is the one practitioners meet constantly: registration proceedings are independent of assessment proceedings, so he need not wait for the appeal to conclude. The Tribunal does not reject that proposition — it holds that where the cancellation order contains no independent inquiry into the objects or into genuineness, and rests solely on the assessment finding, the substratum disappears with the finding. That distinction is the whole of the case and it points both ways: a PCIT who makes his own inquiry and records his own findings of specified violation is not exposed in the same way. Note also what the PCIT did here procedurally — he rejected the Form 10AB application under s.12A(1)(ac)(ii) and, using s.12AB(1)(b)(ii)(B)(I), also cancelled the subsisting registration, backdating the cancellation to AY 2017-18, the year in which the alleged violations came to notice. That combination is what makes a renewal application dangerous where an assessment dispute is live. If it applies to you, the first step is this: Check whether the s.12AB(4) order contains any independent inquiry or finding of its own, or whether it merely adopts the assessment or appellate findings; the second is the vulnerable case.
A search under s.132 was conducted on the trust and others on 27 December 2016. The Department's case was that fee receipts for 70,304 students amounting to Rs 32.35 crore were fabricated for the period 1 to 8 November 2016 to create a source for demonetised currency, and the amount was assessed as unexplained money under s.69A in the assessment order dated 29 December 2018 for AY 2017-18. The CIT(A) partly allowed the assessee's appeal but affirmed the findings on the genuineness of the fee receipts. Cross appeals by the assessee and the Revenue were pending before the Tribunal. On 29 September 2025 the trust applied in Form 10AB under s.12A(1)(ac)(ii) for registration. On show cause the trust replied that a specified violation could be found only where the violation had been confirmed by the appellate authorities and the order had not attained finality. By order dated 27 March 2026 the PCIT rejected that submission, holding that appeal proceedings are different from and independent of trust registration proceedings, and that what mattered was not the quantum of addition but the genuineness of the trust's activities; he found a specified violation within clauses (a) and (e)(ii) of the Explanation to s.12AB(4), rejected the Form 10AB application and cancelled the registration granted under s.12AA up to AY 2021-22 and under s.12AB from AY 2022-23, with effect from AY 2017-18. By the time the appeal was heard the Tribunal had disposed of the quantum cross appeals, allowing the assessee's appeal and dismissing the Revenue's. The matter was decided on 2026-08-05 by the ITAT (George George K, Vice President and Padmavathy S, Accountant Member — ITAT Chennai "C" Bench). On those facts the ITAT held as follows. Appeal allowed. The cancellation was founded solely on the alleged fabrication of fee receipts and manipulation of accounts, allegations which no longer survived after the Tribunal's decision in the quantum proceedings; the cancellation rested on no independent inquiry into the objects of the trust and on no other material showing that its activities were not genuine. The substratum of the order having disappeared, the conclusion that a specified violation within s.12AB(4) had occurred could not be sustained, and the cancellation of registration could not be upheld. The impugned order was set aside and restoration of the registration directed (paras 6, 7 and 8).
The Tribunal identified the foundation of the PCIT's order as the finding that the trust had fabricated fee receipts of Rs 32.35 crore and had thereby carried on activities which were not genuine, and recorded that the very same findings were the subject matter of the quantum proceedings for AY 2017-18 (para 6). It accepted that when the impugned order was passed the quantum appeals were pending, but treated as decisive the subsequent development that the Tribunal had allowed the assessee's appeal and dismissed the Revenue's, thereby reversing the findings which were the sole basis for invoking s.12AB (para 6). At paragraph 7 it applied the general principle that an order founded entirely on the outcome of another proceeding depends for its fate on the sustainability of the foundational finding, and stressed that the cancellation contained no independent inquiry into objects and no other material on genuineness. The Tribunal did not decide the wider question, argued by the assessee before the PCIT, whether a specified violation can be found at all before the underlying assessment attains finality. In the words reproduced by the source cited on this page: "It is well settled that where an order is founded entirely upon the outcome of another proceeding, the fate of such order necessarily depends upon the sustainability of the foundational finding."
It was decided by the ITAT on 2026-08-05 and is reported as ITA No.1962/CHNY/2026. Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere. A Tribunal decision binds the assessing officer and the Commissioner (Appeals) within that Tribunal's jurisdiction, and is persuasive before other benches. It is not binding on a High Court, and a contrary co-ordinate bench decision will be argued against you, so check whether the point has been taken the other way before you build a reply around it. On section 12AB, section 12AB(1), section 12AB(4), section 12A(1)(ac)(ii), section 12AA, section 132, section 69A, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. Appeal allowed. The cancellation was founded solely on the alleged fabrication of fee receipts and manipulation of accounts, allegations which no longer survived after the Tribunal's decision in the quantum proceedings; the cancellation rested on no independent inquiry into the objects of the trust and on no other material showing that its activities were not genuine. The substratum of the order having disappeared, the conclusion that a specified violation within s.12AB(4) had occurred could not be sustained, and the cancellation of registration could not be upheld. The impugned order was set aside and restoration of the registration directed (paras 6, 7 and 8). It arises in Charitable Trusts & Exemption, Capital Gains Exemptions and Search, Survey & Block Assessment matters, on section 12AB, section 12AB(1), section 12AB(4), section 12A(1)(ac)(ii), section 12AA, section 132, section 69A of the Income Tax Act 1961, and was decided by George George K, Vice President and Padmavathy S, Accountant Member — ITAT Chennai "C" Bench. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. If the quantum appeal is still pending, put the pendency on record but do not stop there — the PCIT is entitled to say registration proceedings are independent, so also meet the alleged violation on its own material. If the quantum appeal has since been decided in your favour, bring the order on record before the Tribunal at the hearing of the registration appeal; that is precisely what turned this case, the appeal having been decided after the PCIT's order. Identify which clause of the Explanation to s.12AB(4) is invoked — here clauses (a) and (e)(ii) — and test the order against that clause alone; the sub-section is confined to the listed specified violations and is not a general power. Where an existing registration is cancelled on rejection of a renewal application, take the point that the cancellation and its effective date must be separately justified; the order here backdated it by nine assessment years.
Validity check could not be completed. Validity check could not be completed — the order was pronounced on 5 August 2026 and I did not search for any later treatment or for any appeal by the Revenue under s.260A. I did not read the quantum order on which the result turns; it is described only as the Tribunal's own decision allowing the assessee's appeal and dismissing the Revenue's. The clauses of the Explanation to s.12AB(4) relied on were checked against the departmental text of s.12AB at /w/section-12ab-7, Year stamp 2026, heading "Procedure for fresh registration". No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The order runs to eight numbered paragraphs, which I established by transcribing the opening words of every paragraph in sequence and then the whole text. Paragraphs 2 and 3 reproduce the show-cause notice and the PCIT's order in full; the numbering that appears inside them — 4, 4.1, 4.2, 4.3, 5 and 6, and the CIT(A)'s 6.3.9, 6.3.11, 6.3.12 and 6.3.15 — belongs to those documents and not to the Tribunal, whose own reasoning is at paragraphs 6 and 7 only. The reproduced PCIT order contains obvious transcription corruption ("dated 25.00E TAX DEPART The relevant paragraphs are reproduced as ME under") and gives the fabricated receipts figure as both Rs 32.35 crore and Rs 32.53 crore. The quantum order of the Tribunal that reversed the findings is identified only by description and by a paper-book reference; neither its appeal number nor its date is given in this order, and I have not read it. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
Appeal allowed. The cancellation was founded solely on the alleged fabrication of fee receipts and manipulation of accounts, allegations which no longer survived after the Tribunal's decision in the quantum proceedings; the cancellation rested on no independent inquiry into the objects of the trust and on no other material showing that its activities were not genuine. The substratum of the order having disappeared, the conclusion that a specified violation within s.12AB(4) had occurred could not be sustained, and the cancellation of registration could not be upheld. The impugned order was set aside and restoration of the registration directed (paras 6, 7 and 8).
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