Section 351 — Specified Violations | ITA 2025

Section 351 — - SPECIFIED VIOLATIONS

Section 351 is the substantive equivalent of 1961 s. 12AB(4) -- the SPECIFIED VIOLATIONS framework introduced FA 2022 enumerating specific breaches that empower PCIT/CIT to CANCEL trust's registration under s. 332. Cancellation triggers s. 352 ACCRETED INCOME EXIT TAX (potentially 35%+ on accumulated wealth). The provision establishes which compliance failures are SERIOUS enough to warrant registration cancellation vs lesser violations addressed by s. 353. Key categories: (a) commercial / non-charitable activity (s. 345 violations); (b) specific abuse / mismanagement; (c) anonymous donation non-compliance; (d) corpus / accumulation rule violations; (e) audit / return / form non-filing. Practitioner-grade rule: monitor compliance against specified-violations list; remedy promptly; appellate route ITAT direct.

Statutory text — Income-tax Act, 2025

Marginal note -- Specified violation

(1) The following shall constitute specified violation by a registered non-profit organisation:—

(a) where any income of the registered non-profit organisation has been applied, other than for its objects; or

(b) it carries out any commercial activity in contravention of the provisions of section 345 66[***]; or

(c) where it has applied any part of its total income for private religious purposes, which does not 67[enure] for the benefit of the public; or

(d) where a registered non-profit organisation, 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 organ- isation 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 organisation has not complied with the require- ments of any other law as referred under section 332(7)(a) and the order, direction or decree, 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 any false or incorrect information.

(2) Where,—

(a) the Principal Commissioner or Commissioner has noticed occurrence of one or more specified violations during any tax year;

(b) the Principal Commissioner or Commissioner has received a reference from the Assessing Officer under section 270(13) for any tax year; or

(c) a registered non-profit organisation has been selected as per the risk management strategy formulated by the Board for any tax year, the Principal Commissioner or Commissioner shall—

(i) call for such documents or information from the registered non-profit organisation, or make such inquiry as he thinks necessary in order to satisfy himself about the occurrence of any specified violation;

66. Word and figures “or 346” omitted by the Finance Act, 2026, w.e.f. 1-4-2026.

67. Substituted for “ensure”, ibid.

(ii) pass an order in writing,—

(A) either cancelling the registration of such registered non-profit organisation, after affording a reasonable opportunity of being heard, for such tax year and all subsequent tax years, if he is satisfied that one or more specified violations have taken place; or

(B) not cancelling the registration of such registered non-profit organisation, if he is not satisfied about the occurrence of any specified violation; and

(iii) forward a copy of the order passed under clause (ii) to the Assessing Officer and such registered non-profit organisation.

(3) The order under sub-section (2)(ii), shall be passed before the expiry of six months, calculated from the end of the quarter in which the first notice is issued by the Principal Commissioner or Commissioner, calling for any document or information, or for making any inquiry, under clause (i) of the said sub-section. Tax on accreted income.

Corresponding provision — 1961 regime

INCOME-TAX ACT, 2025	INCOME-TAX ACT, 1961
INCOME-TAX ACT, 2025 -- s. 351	INCOME-TAX ACT, 1961 -- s. 12AB(4)
Specified violation enumerated list	1961 s. 12AB(4) Explanation [FA 2022]
Cancellation by PCIT/CIT	1961 s. 12AB(4)
Trigger for s. 352 accreted income tax	1961 s. 115TD interaction

STATUTORY ARCHITECTURE

SPECIFIED VIOLATIONS triggering registration cancellation: (I) APPLICATION FOR PURPOSE OTHER THAN REGISTERED OBJECTS: trust applying income for non-charitable / non-registered purpose; (II) BUSINESS / COMMERCIAL ACTIVITY violation under s. 345 (1961 s. 11(4A)) -- exceeding 20% gross-receipts limit OR not incidental to charitable object OR not business income utilised for objects; (III) NON-COMPLIANCE WITH SPECIFIED CONDITIONS at registration / approval stage; (IV) MISMANAGEMENT / DIVERSION OF FUNDS: persons specified in s. 13 (1961 s. 13) using trust funds for personal benefit; (V) NON-FILING OF RETURN / AUDIT REPORT for specified periods; (VI) VIOLATION OF S. 350 INVESTMENT RULES: trust funds in non-permitted instruments; (VII) ANONYMOUS DONATION non-compliance (s. 337 violation); (VIII) CORPUS / ACCUMULATION rule violations (ss. 339-343); (IX) FORM 10BD / 10BE FILING DEFAULTS (post FA 2020 framework). PROCEDURAL: PCIT issues show-cause; opportunity to be heard; cancellation order if violations established; appellate route ITAT direct (skip CIT(A)) within 60 days.

CONSEQUENCE -- s. 352 ACCRETED INCOME TAX

Cancellation under s. 351 triggers s. 352 (1961 s. 115TD) ACCRETED INCOME EXIT TAX: Accreted Income = FMV of net assets - corpus + specified additions / reductions; Tax: Maximum Marginal Rate (~35%+ effective). Substantial -- can wipe out lifetime accumulated wealth. STRATEGIC: prevent specified violation; if cancellation impending, strategic restructuring to qualifying transferee charity may preserve assets.

PRACTITIONER NOTES

(i) COMPLIANCE MONITORING -- annual review against specified-violation list; quarterly board oversight. (ii) S. 345 COMMERCIAL ACTIVITY -- 20% threshold; document business activity separately; ensure incidental / object-related. (iii) AUDIT REPORT (Form 10B / 10BB) -- mandatory; deadlines strict; compliance-first. (iv) RETURN-FILING DISCIPLINE (Form ITR-7) -- under s. 263(4A) / 1961 s. 139(4A). (v) FORM 10BD / 10BE -- post FA 2020; mandatory; non-filing = specified violation. (vi) PERSONAL-BENEFIT AVOIDANCE -- s. 13 / s. 353 -- trust persons cannot use trust assets personally; arms-length transactions. (vii) PCIT SHOW-CAUSE RESPONSE -- comprehensive submission; remedy if possible; preserve ITAT appeal.

CROSS-REFERENCES

Section 332 -- Trust registration.
Section 345 -- Commercial activities restriction.
Section 350 -- Permitted modes of investment.
Section 352 -- Accreted income tax (cancellation trigger).
Section 353 -- Other violations (lesser sanction).
Section 13 (of 1961 / equivalent) -- Trust personal-benefit prohibition.

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