Specified violation standard not satisfied, so registration restored and application remitted for fresh adjudication on the record.

The fifteenth proviso's 'specified violation' standard was applied to assess cancellation of charitable registration; the authority relied on isolated record discrepancies, unregistered land agreement and routine expenditure queries but failed to demonstrate income was applied otherwise than for objects or that activities were not genuine. The tribunal found the evidentiary record and explanations adequate as to receipts, payments and bona fides of the land transaction, concluding the threshold for cancellation was not met; registration under the charitable provision was restored and the dependent registration application remitted for fresh adjudication consistent with the tribunal's findings.

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Issues: Whether the assessee-society was entitled to continue to hold registration granted under section 10(23C)(vi) of the Income-tax Act, 1961 (and consequentially the application for registration under section 12A) or whether the Commissioner (Exemptions) was justified in cancelling that registration by invoking the fifteenth proviso to section 10(23C) on the ground of occurrence of one or more "specified violations" as defined in Explanation 2 to the said proviso.

Analysis: The fifteenth proviso to section 10(23C) read with Explanation 2 prescribes the circumstances and the definition of "specified violation" which may justify cancellation of approval/registration, including application of income for non objects, business income not incidental or without separate books, activities not genuine or not in accordance with conditions of approval, non compliance with other laws, or incomplete/false information in the application. The assessing record and show cause proceedings disclosed that the Department's risk management system flagged large cash/fee receipts, certain payments (including an advance for purchase of land), and other expenses. The assessee produced detailed bank and fee records, explanations for the advance to J.J. Construction Co. (a bona fide land purchase agreement leading to litigation and suit for specific performance), supporting documents for various small and routine expenditures, and evidence showing fee collection through banks and multiple wings. The findings relied on by the Commissioner (Exemptions) involved factual discrepancies, minor recording irregularities in bank entries, non registration of the land agreement, and questioned necessity of certain expenditures. Those matters either fell within issues the Assessing Officer should probe in scrutiny assessments or were not shown to amount to any of the "specified violations" in Explanation 2. The Commissioner did not establish that income was applied otherwise than for the objects, or that activities were not genuine, or that payments benefitted a specified person within section 13(3). The non registration of the agreement did not, by itself, demonstrate siphoning or that the transaction was with a related person; the assessee had initiated appropriate civil proceedings including conversion to specific performance and provided supporting material. Minor discrepancies in bills or bank record aggregation were explained and, given the scale of operations (multiple branches and thousands of students, and aggregate receipts exceeding Rs.20 crore), did not justify cancellation under the proviso. The Commissioner's conclusions were therefore based on suspicions and isolated inconsistencies rather than a satisfaction that a "specified violation" had occurred as required by the proviso and Explanation 2.

Conclusion: The cancellation of registration under section 10(23C)(vi) and the refusal to grant registration under section 12A were set aside. The registration under section 10(23C)(vi) is restored and the dependent application under section 12A is remitted to the Commissioner (Exemptions) for fresh adjudication in accordance with the findings recorded in the restored appeal.

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