Prospective operation of section 12AB(4) limited cancellation of charitable registration; vague notice and mere irregularities were insufficient.

Section 12AB(4) applies prospectively from 1 April 2022, so cancellation of charitable registration could not be sustained for earlier assessment years. Alleged benefit to specified persons and other financial irregularities did not, by themselves, justify withdrawal where the trust's charitable activities remained genuine and the registration conditions were not shown to have been breached. The show-cause notices were also vulnerable because they did not specify the precise limb of the statutory explanation relied on, creating vagueness and jurisdictional infirmity. On these grounds, the cancellation was held unsustainable and the registration was restored for the relevant years.

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Issues: (i) Whether registration under section 12AB could be cancelled retrospectively for assessment years prior to the introduction of section 12AB(4); (ii) whether alleged benefit to specified persons and other financial irregularities, without a finding that the charitable activities were non-genuine or contrary to the registration conditions, could justify cancellation of registration; (iii) whether the show-cause notice and assumption of jurisdiction were valid.

Issue (i): Whether registration under section 12AB could be cancelled retrospectively for assessment years prior to the introduction of section 12AB(4).

Analysis: Section 12AB(4) and its explanation, which introduced the concept of specified violations and the machinery for cancellation on that basis, were held to be prospective and effective from 1 April 2022. The authorities relied upon by the Tribunal treated the law applicable in the relevant assessment year as determinative, and the amendment could not be applied to earlier years in the absence of express legislative mandate.

Conclusion: Retrospective cancellation for earlier assessment years was impermissible and the cancellation could not be sustained for years prior to the effective date of section 12AB(4).

Issue (ii): Whether alleged benefit to specified persons and other financial irregularities, without a finding that the charitable activities were non-genuine or contrary to the registration conditions, could justify cancellation of registration.

Analysis: The decisive test for cancellation was the genuineness of the activities of the trust or institution and compliance with the conditions of registration. The Tribunal held that isolated transactions, even if capable of assessment-stage consequences under sections 13 and 115BBI, do not by themselves establish that the activities are non-genuine. The assessee's core educational activities remained ongoing, and the alleged irregularities did not show abandonment of the charitable objects or violation of the registration conditions.

Conclusion: The alleged financial irregularities did not constitute a valid basis for cancellation of registration under section 12AB(4).

Issue (iii): Whether the show-cause notice and assumption of jurisdiction were valid.

Analysis: The notices were found to be vague because they did not specify the precise limb of the explanation to section 12AB(4) alleged to have been violated. The Tribunal also accepted the objection that the jurisdictional basis adopted for cancellation was not sustainable in law, as the statutory framework required a proper and specific invocation of the relevant provision before adverse action could be taken.

Conclusion: The proceedings were vitiated by vagueness and jurisdictional infirmity.

Final Conclusion: The cancellation of registration was held unsustainable and the assessee's registration was restored, leaving the trust's charitable status intact for the relevant years.

Ratio Decidendi: Cancellation of charitable registration can be upheld only when the statutory ground of specified violation is validly invoked for the relevant period and the activities themselves are found non-genuine or contrary to the registration conditions; alleged section 13 violations or transaction-level irregularities, by themselves, do not justify withdrawal of registration.

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