Renewal of charitable registration cannot be denied on mere suspicion where educational land transactions were explained as genuine.

Renewal of registration under section 12A(1)(ac)(ii) depended on whether the trust's activities were genuine and whether it complied with other laws material to its objects. The Commissioner could refuse renewal under the new section 12AB framework only on a proper finding that these conditions were not met, and cancellation under section 12AB(4) required a specified violation. Land purchases, cancellations, or change in acquisition strategy for educational purposes did not by themselves show non-genuine activity, especially where one site was unsuitable, another was affected by litigation, and the institution had long been running. Mere suspicion was insufficient, and renewal was directed to be granted.

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Issues: Whether the assessee was entitled to renewal of registration under section 12A(1)(ac)(ii) of the Income-tax Act, 1961, and whether the Commissioner could refuse renewal on the ground that the land transactions indicated non-genuine activities or other specified violations.

Analysis: The new registration framework introduced with effect from 01.04.2021 requires the Commissioner, on an application under section 12A(1)(ac)(ii), to examine whether the trust or institution's activities are genuine and whether it complies with the requirements of any other law material to its objects. Under section 12AB(1), renewal can be refused only where the authority is not satisfied on those matters, and section 12AB(4) permits cancellation only on the basis of a specified violation. The assessee had explained that the land purchases and cancellations were made for educational purposes, that one site was unsuitable because of location and size, that another transaction was abandoned due to litigation and status quo orders, and that the amounts were re-deployed for acquisition of suitable school sites. The record also showed that the assessee had long been running an educational institution and that the scrutiny assessment had already examined the transactions. Mere suspicion arising from changes in acquisition strategy, without a finding of falsehood, unlawful activity, or non-compliance with another law, was insufficient to deny renewal.

Conclusion: The refusal to renew registration was unsustainable, and renewal under section 12A(1)(ac)(ii) was directed to be granted in favour of the assessee.

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