AO can’t cancel trust registration until application for fresh registration filed u/s 12AB is disposed of
S.R. Trust v. PCIT –  133 taxmann.com 418 (Madras)
Short overview of the case:
The assessee was a public charitable trust registered under section 12A.
The Finance Act, 2021 has introduced a new regime by way of section 12AA(5) with effect from 1-4-2021.
According to such a regime, trust is required to make an application for fresh registration of trust by adopting the procedure under section 12AB.
The assessee had applied for fresh registration, and the same was pending.
The Assessing Officer (AO) noticed some violations in dealing with its finance by the assessee and accordingly issued a notice under section 12AA(3) for cancelling registration.
The assessee filed a writ petition against such notice before the Madras High Court.
The Madras High Court held that as per the newly inserted provisions of section 12AB, if an application is made for fresh registration by an already registered trust, such application shall be processed, and an order registering the trust for five years shall be passed.
Once such registration is granted for five years under the new regime, it is very open to the AO to invoke sub-sections (4) or (5) of section 12AB. He can very well verify whether any infringement or violation is noticed from the trust, and cancellation of registration can very well be taken as per the procedure established under section 12AB.
The word ‘subsequently’ occurred in sub-section 4 of section 12AB shall be construed as ‘subsequent to the registration.
Thus, unless and until the application pending for fresh registration of trust is decided, the AO has no jurisdiction to issue the notice for cancellation of registration.