Deepakbhai Jerambhai Pansheriya, Ahmedabad V. The Pr. CIT-3 , Ahmedabad

ITA 101/AHD/2022

AI Insights

The case revolves around an appeal by Shri Deepakbhai Jerambhai Pansheriya against the order of the Principal Commissioner of Income Tax-3, Ahmedabad, which was passed under section 263 of the Income Tax Act, 1961. The Principal Commissioner had found an error in the assessment order concerning the allowance of foreign tax credit due to the belated filing of Form No.67. The Tribunal examined whether the belated filing of Form No.67, which was required for claiming foreign tax credit, should lead to the disallowance of the credit. The Tribunal referenced various decisions, including a significant ITAT Bangalore Bench decision, which supported the assessee's position that the requirement to file Form No.67 was directory and not mandatory.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 135551 (ITAT-AHMEDABAD)
• Duration Of Justice: 11 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 22-03-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 18-04-2022
• Other Referred Cases: M/s.Brinda Rama Krishna in ITA No.454/Bang/2021
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Double taxation relief; Opportunity of being heard; Corroborative evidences; Assessment record; Revised return
• Section: 263; 90; 143(3); 139(1)

Judgement Text

आयकर अपीलीय अिधकरणआयकर अपीलीय अिधकरणआयकर अपीलीय अिधकरणआयकर अपीलीय अिधकरण, अहमदाबाद 瀈यायपीठअहमदाबाद 瀈यायपीठअहमदाबाद 瀈यायपीठअहमदाबाद 瀈यायपीठ ‘A’ अहमदाबाद।अहमदाबाद।अहमदाबाद।अहमदाबाद। IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, AHMEDABAD BEFORE SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND SHRI T.R.SENTHIL KUMAR, JUDICIAL MEMBER ITA No.101/Ahd/2022 Assessment Year :2017-18 Shri Deepakbhai Jerambhai Pansheriya 13, Teenmurti Bungalows B/h. Jay Ambe Nagar Thaltej, Ahmedabad 380 054. PAN : AOFPP 0640 G Vs. Pr.Comm. of Income Tax-3 Ahmedabad. (Applicant) (Responent) Assesseeby : Shri Vipul Gohil, CA Revenue by : Shri Vijay Kumar Jaiswal, CIT सुनवाई क तार ख/D a t e o f H e a r i n g : 2 3 / 0 3 / 2 0 2 3 घोषणा क तार ख /D a t e o f P r o n o u n c e m e n t : 2 9 / 0 3 / 2 0 2 3 आदेश/O R D E R PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER This appeal has been filed by the assessee against order passed by the ld.Pr.Commissioner of Income Tax-3, Ahmedabad dated 8.2.2022passed under section 263 of the Income Tax Act, 1961 [hereinafter referred to as "the Act" for short]for the Asst.Year2017-18. 2. The assessee has challenged the order of the ld.Pr.CIT raising the following grounds: “1. Passing order under section 263 of Income tax Act without considering the provision of Income Tax Act which is against justice and equity. ITA No.101/Ahd/2022 2 2. Passing order under section 263 of Income tax Act without giving proper opportunity of being heard. The Ld. Pr. CIT-3 has wrongly applied provision of 263(1) of Income Tax Act. 3. Passing order under section 263 of Income tax Act with instruction to AO for fresh assessment for A.Y.2017-18. 4. The appellant reserves, craves leave all these to Hon'ble Commissioner to add, alter, amend, delete, modify, vary, and/or rescind any of the facts/grounds hereafter, if necessary, in the interest of justice.” 3. We have heard both the parties and have also gone through the order of the ld.Pr.CIT. 4. As transpires from the order of the Ld.PCIT, revisionary jurisdiction under section 263 of the Act was assumed by the ld.PCIT for the reason that he noted from the assessment record that though the assessee had belatedly filed requisite form for claiming foreign tax credit against foreign income returned i.e. form no.67, the AO had wrongly allowed foreign tax credit to the assessee, despite the Income Tax Rules, 1962 (hereinafter referred to as ‘Rules’) strictly requiring the furnishing of such form to be filed by due date of filing of return of income under section 139(1) of the Act. 5. The facts being that originally the assessee had disclosed total income of Rs.36,43,040/- in which neither foreign income was disclosed nor any tax credit under section 90 or 91 of the Act was claimed. Subsequently, the assessee has filed revised return in which foreign income was disclosed and foreign tax credit of Rs.28,52,306/- was claimed by the assessee as per provision of section 90 & 91 of the Act. As per the ld.Pr.CIT, Rule 128 of the IT Rules, 1962 which prescribed the manner of claiming foreign tax credit, required assessees to file a statement of foreign income earned and foreign tax deducted or paid thereon in form no.67 verified in the manner specified and this statement was to be furnished or filed before the due date specified for furnishing return ITA No.101/Ahd/2022 3 of income under section 139(1) of the Act. Rule 128 of the Rules is reproduced in the order of the ld.Pr.CIT is as under: 128.(1) An assesses, being a resident shall be allowed a credit for the amount of any foreign tax paid by him in a country or specified territory outside India, by way of deduction or otherwise, in the year in which the income corresponding to such tax has been offered to tax or assessed to tax in India, in the manner and to the extent as specified in this rule : Provided that in a case where income on which foreign tax has been paid or deducted, is offered to tax in more than one year, credit of foreign tax shall be allowed across those years in the same proportion in which the income is offered to tax or assessed to tax in India. One of the requirements of Rule 128 for claiming FTC is provided by Rule 128(8) & (9) of the Rules and the same reads thus: (8) Credit of any foreign tax shall be allowed on furnishing the following documents by the assessee, namely:— 6. Para 2.1 of the ld.Pr.CIT order reveals that he took note of the fact from the case records of the assessment in the present case that due inquiry wasconducted by the AO on the issue of foreign tax credit belatedly claimed and the assessee had filed a reply to him stating that requirement of filing requisite form no.67 was actually adirectory provision and not mandatory. In support, he relied upon various decisions including a direct decision on the issue by the ITAT Bangalore Bench in the case of M/s.Brinda Rama Krishna in ITA No.454/Bang/2021 order dated 17.11.2021. The ld.Pr.CIT after taking note of the same, went on to hold that this decision of the ITAT, Bangalore Bench was a decision by the SMC Bench and not binding precedent and the assessee had not cited any decision of the jurisdictional High Court and he further went to note and discuss in detail the requirement as per the Rule being mandatory and not directory, and accordingly noting this error in the assessment order, he issued show cause notice to the assessee. The contents of para 2 to 3 of the ld.Pr.CIT’s order reveals the above facts as under: ITA No.101/Ahd/2022 4 “2.1 On further examination of case records, it was noticed that the Assessing Officer had accepted the belated filing of Form No.67 as required to be filed under Rule 128 of the I.T. Rules inserted w.e.f. 01.04.2017. As per this Rule, the assessee was required to file the Form No.67 on or before the due date prescribed u/s. 139(1) of the Act. response to a query raised by the assessing officer, the assessee vide letter dated 22.11.2019 during the course of assessment proceedings submitted that filing of Form No.67 is a directory provision and not a mandatory provision and the breach of requirement of filing Form No.67 belatedly instead of filing the same by 30.09.2017 [due date u/s. 139(1)] was only a technical defect. The assessee has further submitted that therefore, the disallowance of the claim of relief of foreign tax should not be attracted. The assessee had also placed reliance on case laws viz. CIT v. Valibhai Khanbhai Mankand (Guj. HC) 28 Taxmann.com 119[2012] and CIT v. Sri Marikamba Transport Co. (Kar.HC) 57 Taxmann.com 273 [2015]. 2.2 On perusal of the decisions relied upon, it was noticed that said decision rendered by SMC bench of ITAT Bangalore is not a binding precedent and assessee has not cited any decision of jurisdictional ITAT or High Court. 2.3 Further, it is noticed that there are other conditions as mentioned in the Rule 128 are required to be satisfied while claiming such claim of Foreign Tax Credit (in short FTC). However, on perusal of case records, it is noticed that the nowhere it is found that the assessing officer has verified this issue in detail, particularly in view of the provisions of Clause (1) to (10) of the Rule 128 of the I.T. Rules. The assessee during the course of assessment proceedings has submitted the details of buying rate to be applied for the payment of tax or credit of tax and income earned and tax payable on such income in Indian rupees, however, the assessee has not submitted any supporting evidence so as to enable to verify the correctness of the claim. 2.4 As per Clause (9) of Rule 128, the statement in Form 67 should have been furnished before "due date" specified for filing of Return. The assessing officer in view of the above was required to disallow the tax credit of Rs.28,52,306/-. However, it is noticed that while finalizing the assessment proceedings, the assessing officer did not look into this aspect arid assessed the total income as returned by the assessee in the revised return of income and allowed FTC of Rs.28,52,306/- as claimed by the assessee. Thus, it was noticed that the A.O. had failed to pass the assessment order without making any enquiry on this aspect and failed to make disallowance of tax credit claimed on foreign income to the tune of Rs.28,52,306/-. It is thus, apparent that order passed by the then AO in this case for AY 2017-18 u/s. 143(3) of the Act dated 29.11.2019 is erroneous in so far as it is prejudicial to the interest of revenue to the above extent. 3. In view of above stated facts, a show cause notice was issued to the assessee on 07.01.2022 giving the assessee an opportunity of being heard and requesting to show cause as to why the impugned amount of Rs.28,52,306/- should not be disallowed on account of irregular tax credit claimed u/s.90/91 of the I.T. Act and demand is raised for A.Y.2017-18. The said notice was duly served upon the assessee online on e-Portal and requested to furnish its reply through e- filing portal.” ITA No.101/Ahd/2022 5 7. Though these contents do not reveal case law cited by the assessee to the AO during the assessment proceedings, the same finds mention in the written submission filed by the ld.counsel for the assessee before us as being M/s.Brinda Rama Krishna in ITA No.454/Bang/2021 order dated 17.11.2021. Clearly, the basis with the ld.Pr.CIT for forming prima facie view that there was an error in the order of the AO is grossly incorrect. As is evident from above primarily the reason with the Ld.PCIT for finding that the AO had wrongly allowed benefit of tax credit was that the decision of the ITAT cited by the assessee before the AO on identical issue and which found favour with the AO, was that by Single Member Bench ;‘SMC’ Bench, of ITAT and as per the Ld.PCIT the same therefore was not a binding precedent. 8. The Income Tax Appellate Tribunal is a quasi-judicial body constituted by the Central Government to deal with the appeal matters under Income Tax Act, 1962. Orders passed by the ITAT, whether ‘SMC’ or Division Bench have equal binding precedent on the authorities below. Therefore, in the absence of any other distinguishing facts noted by the ld.Pr.CIT regarding the applicability of said decision to the facts of the case; his finding that the said decision was wrongly applied by the AO for accepting the assessee’s plea that even belated filing of the Form No.67 would not hamper allowance of foreign tax credit, was totally incorrect and wrong. On this primary basis itself, we find that the ld.Pr.CIT’s assumption of jurisdiction to revise the order of the AO finding it to be erroneous, was totally unjustified. ITA No.101/Ahd/2022 6 9. Going forward, we find, even before the ld.Pr.CIT the assessee’s authorized representative had cited same decision of Bangalore Bench of ITAT along with other decisions. The same finds mention by the Ld.PCIT at page 8 of his order as under: “In support, the assessee has furnished the following documents: i) Copy of latest judgment Ms. Brinda Ramakrishna Vs. ITO, Ward-5(3)(1), Bangalore (ITA No.454/Bang/2021 assessment year 2018-19 in the Income Tax Appellate Tribunal, Bangalore benches, “smc-bench; Bangalore) ii) Relevant pages of India USA tax treaty (“DTAA”). But again it was dismissed by the ld.Pr.CIT in a very casual manner, simply stating that they are found to be not applicable in the instant case and all decisions relied upon are of High Courts and not of the Apex Court, and therefore, it can be safely stated that the issue has not attained finality. The relevant finding in of the ld.Pr.CIT at para 6.5 of his order as under: “6.5 The assessee has relied upon various case laws of High Courts in which it has taken a view that filing of audit report is directory and not mandatory. The assessee has contended that violation of procedural norm does not extinguish the substantive right of claiming the credit of foreign tax credit. The said case laws have been gone through. However, it is found that the same are not applicable to the instant case. All the decisions relied upon by the assessee are of High Court and not of the Apex Court and therefore, it can safely be said that the issue has not attained its finality. Besides this, these decisions are relating to claim of deduction u/s.80IA(7), 10A(5) etc. where Audit Report was not filed in time. Further, it is a matter of fact that the assessee has not filed Form No.67 on or before the due date of filing of return of income, as specified in Sub-Rule (9) of Rule 128 and therefore, as per sub-Rule (1) of Rule 128, he cannot be allowed the credit of foreign tax paid by him for the year under consideration.” 10. Again we find that the ld.Pr.CIT himself is in error stating that only the decision of the apex court has binding precedent and no other court. It appears that the Ld.PCIT is totally unaware of the Rule of judicial precedence . Even otherwise We have gone through ITA No.101/Ahd/2022 7 the order of the ITAT Bangalore Bench in the case of M/s.Brinda Rama Krishna and we find that decision rendered therein applies squarely to the facts of the present case. The finding of the ITAT in the said case at para 16 bring out the aforesaid facts clearly as under: “16. I have given a careful consideration to the rival submissions. I agree with the contentions put forth by the learned counsel for the Assessee and hold that (i) Rule 128(9) of the Rules does not provide for disallowance of FTC in case of delay in filing Form No.67; (ii) filing of Form No.67 is not mandatory but a directory requirement and (iii) DTAA overrides the provisions of the Act and the Rules cannot be contrary to the Act. I am of the view that the issue was not debatable and there was only one view possible on the issue which is the view set out above. I am also of the view that the issue in the proceedings u/s.154 of the Act, even if it involves long drawn process of reasoning, the answer to the question can be only one and in such circumstances, proceedings u/s.154 of the Act, can be resorted to. Even otherwise the ground on which the revenue authorities rejected the Assessee's application u/s.154 of the Act was not on the ground that the issue was debatable but on merits. I therefore do not agree with the submission of the learned DR in this regard.” 11. Therefore, the issue was directly covered in favour of assessee by the said decision, and the AO was bound to follow the same and had rightly done so while along the assessee’s benefits of foreign tax credit. The ld.Pr.CIT, dismissing all the decisions cited before him, stating that he would only rely on the decision of the Hon’ble Apex Court when the issue attained finality, is grossly against all rules of judicial precedence. Even before us, the ld.counsel for the assessee has cited numerous decisions on the issue holding that the filing of Form no.67 is only directory and not mandatory in nature as under; ITA No.101/Ahd/2022 8 12. It was specifically pointed to us that the ITAT Mumbai Bench in the case of Sonakshi Sinha (supra) had also taken note of the decision of Hon’ble Apex Court in the case of PCIT Vs. Wipro Ltd. in Civil Appeal No.1449 of 2022 dated 11.7.2022 which dealt with the aspect of mandatory nature of the requirement of filing of certain forms for claiming exemption. It was pointed out that ITAT, Mumbai had distinguished the said decision pointing out that firstly it dealt ITA No.101/Ahd/2022 9 with the exemption provision and requirement of filing of form was provided in the Statute itself which the Hon’ble Apex Court held, therefore, to be a mandatory requirement for claiming exemption. The ld.counsel for the assessee pointed out that ITAT distinguished present requirement of filing of form no.67 as being prescribed in the Rules and not in the Act itself, and not relating to exemption provision. 13. Considering the above, we hold that there was no error in the order of the AO accepting the assessee’s claim of foreign tax credit, even though form no.67 was filed belatedly beyond date prescribed under section 139(1) of the Act, since it was allowed by the AO following the decision of the ITAT in the case of M/s.Brinda Rama Krishna (supra) and several other judgments have also affirmed the proposition of law laid down in the said decision. The AO by doing so, had taken a possible view on the matter and therefore his order cannot under any circumstances be said to be in error. 14. In view of the above, revisionary order passed by the ld.Pr.CIT under section 263 of the Act is set aside and the appeal of the assessee is allowed. 15. In the result, the appeal of the assessee is allowed. Order pronounced in the Court on 29th March, 2023 at Ahmedabad. Sd/- Sd/- (T.R. SENTHIL KUMAR) JUDICIAL MEMBER (ANNAPURNA GUPTA) ACCOUNTANT MEMBER Ahmedabad, dated 29/03/2023