ITAT Mumbai Sets Aside Cancellation of NPCI’s Section 12AB Registration; Remands for Fresh Decision on “Specified Violation”

Key Facts and Tribunal Findings

The Income Tax Appellate Tribunal (ITAT), Mumbai Bench, set aside the order of the Commissioner of Income Tax (Exemptions) cancelling registration of National Payments Corporation of India (NPCI) under Section 12AB and remanded the matter for fresh adjudication.

The assessee, a not-for-profit entity registered under Section 8 of the Companies Act, had been granted registration under Section 12A/12AB. The cancellation proceedings were initiated based on a reference made by the Faceless Assessing Officer during scrutiny, alleging “specified violations” under Section 12AB(4), including that the assessee’s activities were commercial in nature, benefitted specified persons (promoter banks), and involved application of income in violation of statutory provisions.

The CIT(E) cancelled the registration, holding that the assessee’s activities—such as providing payment infrastructure services including ATM networks, IMPS, RuPay, and other banking platforms—were not charitable and were carried out for the benefit of member banks generating commercial income.

Before the Tribunal, the assessee challenged the validity of the cancellation on procedural and jurisdictional grounds, contending that the exact “specified violation” under Section 12AB(4) was not identified, and that the reference made by the Assessing Officer was not furnished, thereby violating principles of natural justice.

The Tribunal accepted these contentions. It held that failure to provide the reference relied upon by the Assessing Officer and failure to specify the precise clause of “specified violation” deprived the assessee of a meaningful opportunity to respond.

Accordingly, the Tribunal set aside the cancellation order and remanded the matter to the CIT(E) for de novo adjudication, directing that the exact charge and relevant material be clearly communicated and adequate opportunity be provided. The appeal was allowed for statistical purposes.