The power to cancel registration of a charitable trust under the Income-tax Act has often been a subject of jurisdictional debate, particularly when a case is transferred from one authority to another. In a significant ruling, the Bangalore Bench of the Income Tax Appellate Tribunal has clarified that once an assessee’s case is validly transferred under section 127 of the Income-tax Act, the Principal Commissioner of Income-tax (PCIT) acquires the jurisdiction to cancel registration granted under sections 12AA/12AB. The Tribunal held that in view of Notification No. 52/2014, the Commissioner (Exemptions) ceases to exercise authority over such transferred cases, thereby empowering the PCIT to invoke section 12AB(4) where the trust’s activities are found to be non-genuine or contrary to its stated objects.
Facts of the case
- The assessee was a charitable trust registered under section 12AA/12AB.
- A search operation was conducted, during which it was found that:
- The trust had diverted its funds,
- Bogus expenses were booked, and
- Activities were not genuine and not in accordance with its stated objects.
- Pursuant to the search, the assessee’s case was transferred under section 127 from the jurisdiction of the Commissioner (Exemptions) to the Assessing Officer under the charge of the Principal Commissioner (PCIT).
- The PCIT invoked section 12AB(4) and passed an order cancelling the trust’s registration.
- The assessee challenged the jurisdiction of the PCIT, contending that only the Commissioner (Exemptions) could cancel the registration.
Issue before the Tribunal
Whether the Principal Commissioner had jurisdiction to cancel registration under section 12AB(4) after the case was transferred under section 127, or whether such power continued to vest exclusively with the Commissioner (Exemptions).
Tribunal’s Observations
- The Tribunal relied upon Notification No. 52/2014, which clarifies that once a case is transferred under section 127:
- The Commissioner (Exemptions) ceases to exercise authority over such case.
- After transfer, the Principal Commissioner becomes the prescribed authority for all proceedings relating to the assessee, including matters concerning registration under section 12AA/12AB.
- Section 12AB(4) empowers the prescribed authority to cancel registration where:
- Activities are not genuine, or
- Are not carried out in accordance with the objects of the trust.
- Since serious violations were established during the search, invocation of section 12AB(4) was justified.
Decision
- The ITAT upheld the cancellation of registration.
- It was held that the PCIT had valid jurisdiction to cancel registration under section 12AB(4) once the case was transferred under section 127.
- The assessee’s objection on jurisdiction was rejected.
Key Takeaway
🔹 Once a trust’s case is validly transferred under section 127, the Principal Commissioner acquires full jurisdiction, including the power to cancel registration under section 12AA/12AB, and the Commissioner (Exemptions) no longer retains authority over such cases.
If you want, I can also:
- Prepare a short case digest,
- Draft a professional LinkedIn/website summary, or
- Analyse implications for charitable trusts facing search or jurisdictional transfer.
Citation:
[2025] 180 taxmann.com 257 (Bangalore – Trib.)
Date of order: 04 November 2025
Reported on: 18 December 2025
Provision involved: Sections 12AA / 12AB, 127 of the Income-tax Act, 1961
Authority: Income Tax Appellate Tribunal, Bangalore Bench