Section 12AB registration cannot be withdrawn without statutory grounds, and prior approval for object changes needs merit-based reconsideration.

Cancellation of section 12AB registration was held unjustified because no statutory ground, adverse material, or disqualifying use of income was recorded, and the withdrawal also lacked proper observance of natural justice. The assessee's Form 10AB seeking prior approval for change in objects was wrongly rejected because the application was made before any change was effected, the revised trust deed and Charity Commissioner's order were on record, and the matter required fresh consideration on its merits after a reasonable hearing. The cancellation was vacated and the approval application was remanded for reconsideration.

---

---

Issues: (i) whether the cancellation of the assessee's registration under section 12AB was justified; (ii) whether the rejection of the assessee's Form 10AB application seeking prior approval for change in objects was sustainable.

Issue (i): whether the cancellation of the assessee's registration under section 12AB was justified.

Analysis: The registration had been granted after the authority had accepted the genuineness of the assessee's religious activities and it remained valid for the relevant assessment period. Cancellation of registration requires specified violations, adverse material, or failure to satisfy the statutory conditions for withdrawal. No finding was recorded that the income was applied otherwise than for the objects, that any non-incidental business was carried on, that income was used for private benefit, or that any other disqualifying circumstance existed. The cancellation was also found to have been made without proper observance of natural justice.

Conclusion: The cancellation of registration was not justified and was vacated in favour of the assessee.

Issue (ii): whether the rejection of the assessee's Form 10AB application seeking prior approval for change in objects was sustainable.

Analysis: The application was filed pursuant to the condition in Form 10AC requiring prior approval before altering the objects, and it was stated that no change had yet been effected and no new activity had commenced pending approval. The revised trust deed and the order of the Charity Commissioner permitting modification were on record. The rejection order did not properly appreciate this factual and legal position and required reconsideration on the merits after giving a reasonable opportunity of hearing.

Conclusion: The rejection was set aside and the matter was remanded for fresh decision in favour of the assessee.

Final Conclusion: The assessee succeeded on both the cancellation issue and the reconsideration of its approval application, with the latter left to be decided afresh by the authority.

Ratio Decidendi: Registration under section 12AB cannot be withdrawn without statutory grounds and adverse material showing a specified violation, and an application for prior approval to alter objects must be considered on its own merits after due hearing.

---