Introduction
In order to ensure that the trust or institution do not deviate from their objects, the Income Tax Act, 2025 provides that at the time of granting registration under section 332 to a Non-profit organization, the Principal Commissioner of Income Tax or Commissioner of Income Tax shall call for such documents or information or make such inquiries as he thinks necessary in order to satisfy himself about the genuineness of activities, and the compliance of such requirements of any other law as are material for the purpose of achieving its objects.
Where a trust or an institution has been granted registration under section 332 and subsequently the Principal Commissioner or Commissioner is satisfied that the activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution. However, no such order will be passed without giving an opportunity of being heard to the non-profit organization.
Grounds for cancellation of registration are:
As per the provisions of section 351 of the Income Tax Act, 2025, the registration/provisional registration of a trust can be cancelled if the Principal Commissioner or Commissioner has noticed occurrence of one or more specified violations during any previous year or has received a reference from the Assessing Officer for any previous year or such case has been selected in accordance with the risk management strategy, formulated by the Board from time to time, for any previous year. However, no such order will be passed without proper inquiry & giving an opportunity of being heard.
Specific violations, as defined under section 351, includes:
a. where any income of the registered non-profit organization has been applied, other than for its objects; or
b. It carries out any commercial activity in contravention of the provisions relating to permissible commercial activities; or
c. where it has applied any part of its total income for private religious purposes, which does not enure for the benefit of the public; or
d. where a registered non-profit organization, created or established after the commencement of this Act for charitable purpose, has applied any part of its income for the benefit of any particular religious community or caste other than the Scheduled Castes or the Scheduled Tribes or backward classes or women and children; or
e. where any activity being carried out by the registered non-profit organization is not genuine or is not being carried out in accordance with all or any of the conditions subject to which it was registered; or
f. the registered non-profit organization has not complied with the requirement of any other law, and the order, holding that such non-compliance has occurred, has either not been disputed or has attained finality; or
g. the application referred to in section 332(1) contains false or incorrect information.
Registration can be refused (or renewal refused) for violation of other laws
(a) At the time of initial registration
(b) At any point of time after registration if such violation is noted
(c) Violation of the laws is undisputed or attained finality
(d) Reasonable opportunity of being heard is provided
The cancellation order or order refusing to cancel the registration, as the case may be, shall be passed before the expiry of 6 months, calculated from the end of the quarter in which the first notice is issued by the Principal Commissioner of Income Tax or Commissioner of Income Tax, calling for any document or information, or for making any inquiry.
