Genuineness of charitable activity must be tested narrowly at registration, and supersession needs statutory due process.

At the registration stage, the authority may examine financial material only to the extent needed to test the genuineness of the applicant's charitable activities and objects. Donations in particular denominations, routing of funds, temporary loans, dealings with related entities, purchases from related concerns, or maintenance of deposits do not, by themselves, establish that the trust is non-genuine or entitled to denial of registration. Supersession of an existing registration cannot be sustained unless the statutory procedure for specified violations is followed. On the stated reasoning, rejection based on lack of genuineness and the superseding part of the order were both unsustainable.

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Issues: (i) Whether, at the stage of processing an application for registration, the competent authority could reject the application by scrutinising the trust's financial dealings and treating them as indicative of non-genuine charitable activity; (ii) Whether the order superseding the registration could be sustained without following the statutory procedure under the provision governing specified violations.

Issue (i): Whether, at the stage of processing an application for registration, the competent authority could reject the application by scrutinising the trust's financial dealings and treating them as indicative of non-genuine charitable activity.

Analysis: The relevant inquiry at the registration stage is confined to the genuineness of the activities and the apparent charitable objects of the applicant, though financial material may be examined to the extent it helps in assessing genuineness. Donations made in particular denominations, routing of funds, temporary loans, receipt of funds from related entities, purchase of goods from a related concern, and maintenance of deposits were held not, by themselves, to establish that the activities were not charitable or that the trust lacked genuineness. Donations to other charitable bodies were not impermissible merely because some recipients were unregistered, and temporary financial arrangements did not justify denial of registration in the absence of evidence that the recipient entities were non-existent or that undue benefit was shown to related parties.

Conclusion: The rejection on the ground of lack of genuineness was unsustainable, and the assessee succeeded on this issue.

Issue (ii): Whether the order superseding the registration could be sustained without following the statutory procedure under the provision governing specified violations.

Analysis: The order also proceeded to supersede the earlier registration, but such action could not be taken merely on the basis of the impugned findings without following the due process prescribed for action on specified violations. Since the prerequisite statutory procedure was not followed, the supersession could not stand.

Conclusion: The superseding part of the order was invalid and the assessee succeeded on this issue as well.

Final Conclusion: The impugned order was set aside and the application was directed to be allowed with consequential effects, leaving no surviving adverse determination against the assessee's registration claim.

Ratio Decidendi: At the registration stage, the authority may examine only so much financial material as is necessary to assess the genuineness of the applicant's charitable activities, and denial or supersession of registration cannot rest on speculative inferences or alleged financial irregularities absent statutory procedure and a proper finding of specified violation.

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