NATIONAL PAYMENTS CORPORATION OF INDIA,MUMBAI vs. CIT(EXEMPTIONS), MUMBAI

PER RATNA DASGPUTA, AM The captioned appeal is filed by the assessee against rejection by the Ld. Commissioner of Income-tax (Exemption) – in short, CIT(E) – of the assessee's application in Form 10AB under section

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12A(1)(ac)(ii) of the Income-tax Act, 1961 – in short, "the Act" – seeking renewal of registration under section 12AB of the Act. 2. The grounds of appeal are as follows;– The learned Commissioner of Income tax (Exemptions), Mumbai, erred in not renewing the registration of the Appellant under section 12A of the Income Tax Act, 1961(the Act) for A.Y. 2027 to A.Y. 2031-2032. He erred in rejecting the application filed by the Appellant in Form 10AB under section 12A(1)(ac)(ii) of the Act seeking renewal of registration u/s 12AB of the Act for A.Y. 2027- 2028 to A.Y. 2031-2032 by passing an order dated 30/03/2026, on the following grounds: i. That the application was incomplete and was not accompanied by all the documents prescribed under Rule 17A(2) of the Income Tax Rules, 1962 without appreciating the fact that the application was complete and all the mandatory details required at the time of the application were filled and supporting documents were annexed with the application. ii. That the notice dated 01/11/2025 was issued by the CIT(E) calling upon the appellant to furnish complete set of requisite documents without appreciating that details sought in the said notice were in respect of grant of approval under section 80G of the Act when in fact no application was made by the appellant for grant of approval under section 80G of the Act. The appellant had made application in Form 10AB for seeking renewal of registration u/s. 12AB of the Act and even after pointing out this fact vide letter dated 14/11/2025, no fresh notice was issued to the appellant. iii. That the earlier registration granted for A.Υ. 2022-23 to Α.Υ. 2026-27 under section 12A in Form No 10AC dated 23/09/2021 was cancelled by CIT(E) vide order dated 30/09/2025 overlooking that the cancellation order dated 30/09/2025 was challenged before Hon'ble Tribunal and

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Hon'ble Tribunal vide order dated 25/03/2026 had set aside the said cancellation order and, therefore, on the date of passing of the impugned order, the Appellant's registration under section 12A was in force. iv. That the appellant had not brought any material on record to demonstrate that the cancellation order dated 30/09/2025 has been set aside, without appreciating the fact that no opportunity was provided to the appellant to show cause as to make any such submissions. v. That the application filed by the appellant for renewal of registration is not allowable on the ground of "Specified violation" within the meaning of section 12AB(4) of the Act without pointing out what the specified violation was. He further erred in basing his rejection on the alleged ground that commercial activities undertaken by the appellant were in violation of clause (ii) of proviso to section 2(15) of the Act, overlooking that (i) there was no such violation of clause (ii) of the said proviso to section 2(15) of the Act and (ii) in any event, that cannot be the ground for rejection. vi. The Appellant craves leave to add to or amend or alter the aforesaid grounds before the disposal of appeal as they may think fit by themselves or by their representatives. 3. The facts of the case are that on verification of the assessee's application in Form 10AB seeking renewal of registration under section 12AB of the Act, the Ld. CIT(E) noted that the same was incomplete and not accompanied by all documents prescribed under Rule 17A(2) of the Income-tax Rules, 1962. He issued notice to the assessee for furnishing the requisite documents, following which relevant details were filed vide letter dated 14/11/2025. 3.1 The Ld. CIT(E) observed, from the material available before him, that the registration earlier granted to the assessee on

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23/09/2021 under section 12A in Form 10AC had since been cancelled vide order dated 30/09/2025 on account of "specified violation" within the meaning of section 12AB(4) of the Act. While cancelling the registration, the conclusion drawn was that the activities of the Trust are not genuine inasmuch as the services rendered by it to its member banks are utilized by them in their banking business, which helps them earn profits from their customers. In the process, the Trust earns a substantial amount of service charge and this, according to the Ld. CIT(E), tantamounts to "nothing but purely a commercial activity." The Ld. CIT(E) observed that there does not appear to be any element of charity in such activity being carried on by the assessee. The services rendered by the Trust ultimately help the member banks boost their business prospects in terms of profits earned from their ultimate customers. He had concluded that the assessee Trust is only providing commercial services to member banks in lieu of fees to help their banking business and that, therefore, their activities are non- genuine activities as per provisions of sections 12A and 12AB of the Act. 3.2 In view of the above, given the fact of earlier cancellation of registration of the Trust on account of non-genuine commercial activities, the Ld. CIT(E), vide his order dated 30/03/2026 in Form 10AB, held that the assessee’s application for registration in Form 10AB is not sustainable on grounds of "specified violation" within

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the meaning of section 12AB(4) of the Act and that commercial activities undertaken by the Trust are in violation of clause (ii) of proviso to section 2(15) of the Act. He observed that once the competent authority has recorded a finding of specified violation and has cancelled the registration, the substratum for claiming continuation or renewal of registration ceases to exist. In the absence of any material brought on record to demonstrate that the defects leading to such cancellation had been remedied or that the findings recorded in the cancellation order had been set aside or stayed by a competent appellate forum, the Ld. CIT(E) declined to entertain the impugned application. Aggrieved by this order, the assessee is in appeal before this Tribunal. 4. Before us, the Ld. AR for the assessee submitted a Paper Book containing copies of relevant documents, all of which were statedly filed before the lower authorities. It transpires from the order dated 30/09/2025, cancelling registration granted earlier on 23/09/2021 (from A.Y. 2022-23 to A.Y. 2026-27), that the Faceless Assessing Officer (FAO) had made a reference for cancellation of registration on the ground that the Trust has committed "specified violations" as defined in Explanation to section 12AB(4) of the Act. When this cancellation order was challenged before this Tribunal, the Co- ordinate Bench of ITAT, vide order dated 25/03/2026, set aside the matter to the file of the Ld. CIT(E) for fresh adjudication without expressing any opinion on the merits of the issues in hand. The Ld.

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CIT(E) was directed to give sufficient opportunity of hearing to the assessee by setting out the exact charge for the proposed cancellation of registration and to decide the issue on merits by a speaking order. 4.1 The Ld. AR argued that without giving effect to the order of the Hon’ble Tribunal as above, the Ld. CIT(E) could not have presumed that the registration of the Trust for A.Y. 2022-23 to A.Y. 2026-27 stood cancelled. On the contrary, the assessee’s registration u/s 12A of the Act was still in force and, therefore, the registration for A.Y. 2027-28 to A.Y. 2031-32 could not have been denied on the sole ground that the registration for the earlier years stood cancelled because of “specified violation” within the meaning of section 12AB(4) of the Act. 4.2 Without prejudice to the above, the Ld. AR pointed out that contrary to what was mentioned by the Ld. CIT(E) in his order dated 30/03/2026, the assessee had submitted complete set of documents as required under Rule 17A(2), that the Ld. CIT(E) had issued notice dated 01/11/2025 wrongly seeking details in respect of grant of approval u/s 80G of the Act when in fact no such approval had been sought by the assessee, that no commercial activities were undertaken by the Trust & there was no violation of clause (ii) of proviso to Section 2(15) and that, at any rate, this

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cannot be the ground for rejection of an application for renewal of registration. 5. The Ld. CIT DR, on the other hand, relied on the order dated 30/03/2026 of the Ld. CIT(E). 6. We have considered the aforesaid submissions in the light of the material placed on record. Admittedly, the Trust had been granted registration on 18/03/2010 w.e.f. 01/04/2009 u/s 12AA(1)(b)(1) of the Act, which was renewed on 23/09/2021 by the CPC for AYs. 2022-23 to 2026-27. Thereafter, the registration was cancelled by Ld. CIT(E)’s order dated 30/09/2025, but that order was set aside by the Tribunal on 25/03/2026 with a direction to the Ld. CIT(E) to give sufficient opportunity to the assessee to present its case by setting out the exact charge for the proposed cancellation of registration and to decide the issues afresh on merits. So, therefore, when the earlier cancellation order, on the basis of which the Ld. CIT(E) rejected the assessee’s application for renewal of registration, has itself been set aside, we are of the considered view that this matter should be remanded back to the Ld. CIT(E) for fresh consideration as per law after giving effect to the Tribunal’s direction contained in its order dated 25/03/2026. Needless to state, the assessee should be given sufficient opportunity of being heard before taking any particular stand in this matter.

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Order pronounced in the open Court on 03/09/2026

Sd/- Sd/- (BEENA PILLAI) (RATNA DASGPUTA) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 03/09/2026 Z.U., P.S. Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. BY ORDER,

//True Copy// (Assistant Registrar) ITAT, Mumbai

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