Genuineness of activities: cancellation under 12AB(4) requires recorded satisfaction of specified violations, not mere suspicion.

Cancellation of a trust's registration requires a recorded satisfaction that one or more statutory specified violations have occurred; mere suspicion about the source of a donation is insufficient. The Tribunal reasoned that section 12AB(4) focuses on genuineness of activities and application of income to objects, and that regulatory regimes like FCRA do not automatically create a ground for cancellation absent proof of a specified violation. The Commissioner failed to record any such violation or to employ available inquiry powers to obtain corroborative evidence, so the cancellation was set aside and registration restored.

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Issues: (i) Whether the Commissioner (Exemptions) was justified in cancelling the assessee-trust's registration under section 12AB(4) of the Income-tax Act, 1961 on the basis of suspicion regarding source of a donation.

Analysis: The issue required examination of the scope of section 12AB(4) (and related provisions) which permits cancellation of registration only upon satisfaction that one or more specified violations have occurred-examples include application of income other than for the objects of the trust, carrying on non-incidental business without separate books, activities not genuine or not in accordance with registration conditions, non-compliance with other material laws, or obtaining registration by false information. The statutory framework distinguishes between assessment inquiries into source of income and the limited inquiry for registration under sections 12A/12AB which focuses on genuineness of activities and application of income to objects. The regulatory provisions under the Foreign Contribution (Regulation) Act, 2010 (and its rules) define "foreign contribution" and prescribe separate compliance obligations but do not by themselves convert receipt of a donation into a statutory ground for cancellation under section 12AB(4) unless a specified violation is established. The facts show the assessee had longstanding charitable activities (running hospitals and dispensaries), maintained statutory registrations including FCRA registration, filed requisite donor returns under rule 17AA, and no finding was recorded by the Commissioner that any specified violation (as defined in section 12AB(4) Explanation) had in fact occurred or that income was applied otherwise than for the trust's objects. The cancellation rested on suspicion about the source of one donation and on the Commissioner's view that the donation may be foreign-sourced, whereas procedure and powers under section 12AB(4) require satisfaction of specified violations supported by evidence and afforded opportunity of hearing; mere suspicion without incriminating material does not meet that standard. The enquiry steps available to revenue (including summons under section 131) were not fully employed to secure corroborative evidence; reliance on assessment-type provisions (such as section 68) or on unproven donor-source concerns cannot substitute for a recorded finding of a specified violation under section 12AB(4).

Conclusion: The Tribunal held that the Commissioner (Exemptions) erred in cancelling the registration. There was no recorded finding of any specified violation under section 12AB(4), and cancellation based on suspicion about donor source was not sustainable. The impugned order cancelling registration under section 12AB(4) is set aside and the registration under section 12A is restored in favour of the assessee.

Ratio Decidendi: Cancellation of a trust's registration under section 12AB(4) of the Income-tax Act, 1961 requires a recorded satisfaction that one or more statutory "specified violations" have occurred; mere suspicion regarding the source of donations, absent evidence that income has been applied otherwise than for the trust's objects or other specified violations, does not justify cancellation.

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