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Issues: Whether the cancellation of registration granted under section 12AA was valid under section 12AA(3) of the Income-tax Act, 1961.
Analysis: Section 12AA(3) permits cancellation only when the Commissioner is satisfied that the activities of the trust or institution are either not genuine or are not being carried out in accordance with its objects. The power cannot be exercised merely because registration was thought to have been granted erroneously. On the facts, no specific instance of violation of the objects of the institution was identified. The recovery of project cost through levy was held to be consistent with the statutory scheme under section 79 of the Gujarat Town Planning and Urban Development Act, 1976 and did not by itself establish that the institution was acting contrary to its objects.
Conclusion: The cancellation under section 12AA(3) was not justified and the registration was restored in favour of the assessee.
Final Conclusion: The appeal succeeded because the statutory conditions for cancellation of registration were not satisfied.
Ratio Decidendi: Registration under section 12AA can be cancelled only on the specific statutory grounds that the activities are not genuine or are not being carried out in accordance with the objects of the institution; absence of those conditions bars invocation of section 12AA(3).
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