ITAT Allows Assessee’s Appeal, Orders CIT(A) to Decide on Foreign Tax Credit Claim Along with Pending Appeal [Read Order]

Recently, the Ahmedabad Bench of  Income Tax Appellate Tribunal (ITAT), allowed the appeal of a senior citizen from Telangana, challenging the denial of Foreign Tax Credit (FTC) for the Assessment Year 2019-20. The Tribunal set aside the order passed by the Commissioner of Income Tax (Appeals) (CIT(A)), directing the CIT(A) to reconsider the matter along with a pending appeal related to the same assessment year.

Kamlesh D Patel,the appellant was denied of FTC due to the belated filing of Form No. 67, which is required for claiming the credit of taxes paid abroad under Section 90 of the Income Tax Act, 1961. Kamlesh Patel had filed his return declaring an income of Rs. 2.63 crore, which included agriculture income.

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The return was subjected to scrutiny, and notices were issued between May and September 2021. However, due to the closure of the Income Tax Portal in June 2021, Patel was unable to respond to the notices. Consequently, the Assessing Officer passed an ex parte order, treating the agricultural income as unexplained and denying the FTC claim.

Patel then filed an appeal before the CIT(A), contesting the disallowance of FTC and the treatment of agricultural income as unexplained. However, during the proceedings, the Assessing Officer issued a rectification order, demanding a payment of Rs. 30.90 lakh after adjusting a refund of Rs. 6.86 lakh. The reason cited was the belated filing of Form No. 67, which the Revenue considered as mandatory, leading to the rejection of the FTC claim.

In response, Patel filed another appeal, arguing that the filing of Form No. 67 was not a mandatory requirement but a directory one. He pointed to several judicial precedents supporting his case, asserting that the delay in filing the form should not result in the denial of the FTC. He also contended that the provisions of the Double Taxation Avoidance Agreement (DTAA) with the United States should take precedence over the procedural requirements of Form No. 67.

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The CIT(A), however, upheld the denial of the FTC claim, arguing that filing Form No. 67 within the prescribed time frame was mandatory. This decision prompted Patel to appeal before the ITAT, which agreed with the appellant’s submissions.

Two member Bench comprising of Annapurna Gupta(Accountant Member) and T R Senthil Kumar(Judicial Member) noted that the appeal against the ex parte assessment order was still pending with the CIT(A). Therefore, without commenting on the merits of the case, the ITAT set aside the CIT(A)’s order and instructed that the appeal be decided together with the pending appeal within four months.

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In Conclusion, the appeal was allowed for statistical purposes, and the matter is now remanded back to the CIT(A) for a fresh decision.

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