ITAT has Power to Stay Cancellation of Charitable Registration Even Without Income Tax Demand: J&K & Ladakh HC [Read Order]

In a recent decision, the Jammu & Kashmir and Ladakh High Court said that the Income Tax Appellate Tribunal ( ITAT ) has the power to pause the cancellation of a charity's registration, even if there is no pending income tax demand against the organisation.

The case was filed by J&K Yateem Foundation, a registered charitable society. The foundation got registration under Section 12A of the Income Tax Act on 12 October 2021, which let it claim tax exemptions.

Later, the Commissioner of Income Tax (Exemptions) in Chandigarh cancelled this registration on 19 January 2024 under Section 12AB(4)(ii) of the Income Tax Act. To challenge this, the foundation appealed to the ITAT in Amritsar.

Along with the appeal, it also asked for a stay to the cancellation from taking effect until the appeal was decided. But the ITAT rejected the stay request on 24 April 2025, saying since there was no outstanding tax amount against the foundation, it had no authority to pause the order.

Aggrieved by this decision, the Foundation approached the High Court. The petitioner’s counsel argued that the Tribunal had wrongly refused to exercise its jurisdiction. They argued that the power to grant stay comes from the Tribunal’s appellate powers under the Income Tax Act and is not limited only to cases involving tax recovery.

The petitioner’s counsel argued that if the cancellation order continues to operate, the appeal would lose its meaning. The Income Tax Department argued that the Tribunal can grant stay only in cases where tax demand or recovery is involved and that the Tribunal’s order was correct.

After hearing both sides, the Division Bench of Justice Sindhu Sharma and Justice Shahzad Azeem observed that the law on this issue is well settled. The court explained that the ITAT’s power to grant stay is incidental to its appellate powers. The purpose of this power is to ensure that an appeal, if successful, does not become useless.

The court pointed out that the Tribunal’s power to grant stay is not restricted only to cases involving tax demand. It also applies where continuation of an order may defeat the purpose of the appeal. The Bench observed that the Tribunal’s view that it lacked jurisdiction due to absence of tax demand was legally incorrect.

The court set aside the ITAT’s order and sent the matter back to the Tribunal to decide the stay application afresh according to law. The court clarified that it had not examined the merits of the appeal. The writ petition was disposed of.

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