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Judgment
PER RAMIT KOCHAR, AM:
This appeal in ITA No. 1393/Del/2026 filed by the assessee has arisen from the learned CIT(A)’s appellate order dated 16.01.2026 passed u/s 250 of the Income-tax Act, 1961(in short “Act”) in DIN & Order No: ITBA/NFAC/S/250/2025-26/1084848855(1), which appeal in turn has arisen from the rectification order u/s 154 of the Income Tax Act, 1961 dated 13.03.2025 passed by learned CPC, Bangalore (hereinafter referred to as the ‘AO’) , for Assessment Year 2018-19.
The assesse has raised following grounds of appeal in Memo of Appeal filed with Income Tax Appellate Tribunal, Delhi Benches, New Delhi:
“1.That the order of the Ld. Commissioner of Income Tax (Appeals) passed under section 250 of the Income Tax Act, 1961 ("the Act") dated 16.01.2026 is bad in law and on facts.
2.That no prior intimation was given to the Appellant of the adjustment, by way of denial of credit for foreign tax paid, as required under the first Proviso to Clause (a) of Sub-section (1) of Section 143 of the Act and, therefore, the order under Section 143(1)(a) dated 21.03.2020, passed by the Centralized Processing Centre, without requisite prior intimation of the adjustment, is bereft of jurisdiction, void ab-initio and liable to be quashed.
3.That no notice of defect in the income tax return filed under Sub-section (1) of Section 139 was given to the Appellant, as provided under Sub-section (9) of section 139 of the Act and, therefore, the order under Section 143(1)(a) dated 21.03.2020, passed by the Centralized Processing Centre is bereft of jurisdiction, void ab-initio and liable to be quashed.
4.That the Ld. Commissioner of Income Tax (Appeals) erred on facts and in law not to allow credit for the taxes paid by the Appellant on the income earned in United States of America (USA), although there is no specific provision for such adjustment under Clause (a) of Sub-section (1) of Section 143 of the Act.
5.That the Ld. Commissioner of Income Tax (Appeals) erred on facts and in law to hold that the requirement to submit Form No.67 under Rule 128 is mandatory to claim foreign tax credit, whereas it is merely a procedural requirement and therefore only directory in nature.
6.That the Ld. Commissioner of Income Tax (Appeals) erred on facts and in law not to allow credit for taxes paid by the Appellant in the USA, as provided under Article 25 of the Double Taxation Avoidance Agreement ("DTAA") signed between India and the USA, which is binding on authorities of both countries and in accordance with the provisions of section 90 of the Income Tax Act, 1961.
7.That the Ld. Commissioner of Income Tax (Appeals) erred on facts and in law not to consider Sub-section (2) of Section 90 of the Income Tax Act, 1961 which specifically provides that where the Central Government has entered into an agreement with the Government of any country outside India under Sub-section (1) for granting relief of tax or avoidance of double taxation then in relation to the assessee to whom such agreement applies the provisions of the Act shall apply to the extent they are more beneficial to that assessee.
8.That the Ld. Commissioner of Income Tax (Appeals) erred on facts and in law to dismiss the appeal without properly considering the replies of the Appellant and the facts, circumstances and legal submissions contained therein, thereby violating principles of natural justice.
9.That the Ld. Commissioner of Income Tax (Appeals) erred on facts and in law to hold that there was no mistake apparent from the record and thus credit for foreign tax, though admittedly paid by the Appellant, could not be allowed in a rectification under section 154.
10.That the Ld. Commissioner of Income Tax (Appeals) erred on facts and in law in failing to consider the rulings of the Income Tax Appellate Tribunals (ITATs), including the jurisdictional ITAT and, ignoring the principle of judicial discipline, held that the said rulings have only persuasive value and are not binding precedent.
11.That the Ld. Commissioner of Income Tax (Appeals) erred on facts and in law in holding that the rulings of the Income Tax Appellate Tribunals (ITATs), relied upon by the Appellant, are rendered in regular appellate proceedings and not in the context of rectification under section 154.
12.That the denial of credit for foreign tax, undisputedly paid by the Appellant, results in double taxation and causes hardship contrary to law and equity, which relief ought to be granted to the Appellant in whichever way the matter is looked at.
13.That the Ld. Commissioner of Income Tax (Appeals) erred on facts and in law not to allow credit for the taxes undisputedly paid by the Appellant in USA, allowable under Section 90 and the India-USA DTAA, and thus failed to delete the unjustified and illegal tax demand against the Appellant and deliver substantive justice.
That the Appellant craves leave to add, amend, alter, remove, rescind, forgo or withdraw any of the above grounds of appeal, which are without prejudice to one another, before or at the time of hearing of the appeal in the interest of natural justice.
That the above grounds of appeal are without prejudice to one another.”
The assessee has claimed that she is USA citizen , and during the year under consideration , she was resident in India. Short question which has arisen in this appeal is with respect to non-grant of foreign tax credit u/s 90/90A of the 1961 Act of Rs.23,48,278/- , which was although claimed by the assessee in the return of income filed by the assessee with Revenue vide acknowledgement No.191039620280818 dated 28.08.2018(copy of ITR placed on record by the assessee) , but the same stood disallowed by the Revenue on the grounds that the assessee has not filed Form No.67. The said return of income was transferred by CPC, Bangalore to the Jurisdictional AO ,vide order dated 9th May, 2019 (CPC reference No. CPC/1819/C15/1885896517) as credits for tax payments made outside India claimed in the return of income filed with the Department, cannot be verified by CPC. Thereafter, the intimation u/s 143(1) of the 1961 Act was issued by ld. CPC, Bangalore on 21st March, 2020 ( DIN:CPC/1819/A2/1978396834), wherein the credit for the foreign tax claimed by the assessee to the tune of Rs. 23,48,278/- was denied to the assessee, and consequently demand of Rs.30,63,510/-was raised against the assessee.
The assessee being aggrieved filed online rectification application u/s 154 of the 1961 Act , on 28th March, 2020 for the impugned assessment year 2018-19 (Rectification Reference number: 654066520280320) , which was processed by Revenue vide rectification order dated 24.06.2020 passed by ld. CPC u/s 154 of the 1961 Act (DIN: CPC/1819/U2/2002054517) , wherein aforesaid foreign tax credit was again denied to the assessee.
The assessee filed Form No.67 with the Revenue on 8th February. 2023 vide acknowledgement No.950314250080223 , wherein Foreign Tax Credit to the tune of Rs.23,48,278/- was claimed by the assessee. The assessee filed rectification application u/s 154 of the 1961 Act, on 20th February 2025 with jurisdictional AO , and submitted before the Department that the Form No.67 was filed on 8th February 2023. Vide order dated 13th March, 2025 passed by the Jurisdictional AO u/s 154 of the 1961 Act, the AO denied the credit of foreign tax credit to the tune of Rs. 23,48,278/- , by rejecting the application filed by the assessee u/s 154 of the 1961 Act, on the grounds that the assessee had failed to file Form No. 67 within prescribed time(placed on record in file).
Aggrieved , the assessee filed first appeal with Ld. CIT(A) which was also dismissed by Ld. CIT(A) as Form No.67 was not filed by the assessee within the prescribed time as per Rule 128(9) of the Income Tax Rule, 1962. Further, as per ld. CIT(A), the said mistake cannot be rectified u/s 154 of the 1961 Act as the same is not a mistake apparent from records.
Still aggrieved , the assessee filed second appeal with the Tribunal. The Ld. Counsel for the assessee submitted that non filing of Form No. 67 is a procedural defect , and filing of Form No. 67 is directory in nature and not mandatory. The ld. Counsel for the assessee relied upon the order of the Tribunal in the case of the assessee itself in ITA no. 6404/Del/2025 dated 27.03.2025 for assessment year 2019-20, wherein the Tribunal by relying on judgment and order in the case of Deepak Pragjibhai Gondaliya v. PCIT reported in (2025) 175 taxmann.com 985(Guj) held that filing of Form No. 67 is directory in nature and not mandatory, and allowed the relief to the assessee. It was submitted that in the instant case before us, Form No. 67 was not filed within stipulated time as prescribed , while the same was filed on 08.02.2023. It was submitted that no defect notice was issued by Revenue u/s 139(9) of the 1961 Act. It was submitted that no intimation was given to the assessee as is contemplated u/s 143(1)(a) of the 1961 Act, before disallowing the credit of foreign tax credit. It was submitted that an application u/s 154 was rightly filed as this is the mistake apparent from record by not granting of foreign tax credit. Prayers were made to condone the delay and allow the appeal of the assessee.
Ld. CIT-DR on the other hand submitted that this is not a mistake rectifiable under section 154 of the 1961 Act. Our attention was drawn to para 4.1 of ld. CIT(A) appellate order. Our attention was also drawn to para 4.3 of ld. CIT(A) order, wherein reference was made to CBDT Notification No. 100/2022 dated 18.08.2022, and it was submitted that even the amended time line for filing Form No. 67 before the end of the assessment year in which foreign income was offered to income-tax was not adhered to.
The ld. Counsel for the assessee in rejoinder submitted that the assessee claimed foreign tax credit in return of income filed by the assessee u/s 139(1) of the 1961 Act, and only Form No. 67 was not filed. The assessee was not aware of the obligation to file Form No. 67. Our attention was drawn to return of income filed by the assessee in which foreign tax credit was claimed, and the same is placed on record in file.It was submitted that Form No. 67 was filed on 08.02.2023.
We have considered rival submissions and perused the materials placed on record. We have observed that the assessee has filed her return of income on 28th August, 2018 for the impugned assessment year u/s 139(1) of the 1961 Act. The assessee has duly claimed foreign tax credit to the tune of Rs. 23,48,278/- in the aforesaid return of income filed with the Department. However, Form No.67 was not filed by the assessee along with return of income. Even Form No. 67 was not filed prior to the processing of return of income by Revenue u/s 143(1). The Form No. 67 was filed belatedly by the assessee ,on 8th February 2023. The ld. CPC has processed the return of income u/s 143(1) of the 1961 Act, on 21.03.2020 , wherein claim of aforesaid foreign tax credit was denied to the assessee. Incidentally , prior to aforesaid processing by ld. CPC, the CPC itself has transferred income-tax return of the assessee to jurisdictional AO , vide order dated 09.05.2019 on the ground that credits for tax payments made outside India claimed in the return, which cannot be verified by CPC. The jurisdictional AO ought to have commenced the proceedings for verification of the foreign tax credit, but it appears from documents on record that no such proceedings were initiated/commenced by the jurisdictional AO. It also emerges from records before us that no notice u/s 139(8) of the 1961 Act was issued by the AO/CPC, before disallowing credit of foreign tax credit. It also transpired that no notice as provided by proviso to Section 143(1) was issued by Revenue to the assessee, before disallowing credit of foreign tax credit. The assessee filed second rectification application u/s 154 after filing of Form No. 67 , which stood dismissed by the AO. The Ld. CIT(A) also dismissed appeal filed by the assessee. We have observed that the Jurisdictional High Court in the case of Real Time data Services (P.) Ltd. v. PCIT, reported in [2026]183 taxmann.com 701(Delhi) , has held as under:
“6.Heard learned counsel for the parties.
7.Admittedly, the petitioner has not furnished Form No. 67 up to the due date of filing return and it realised such fault only when its return was processed and when its Foreign Tax Credit of Rs.1,01,34,300/-being TDS on foreign receipts was not allowed by the AO. On inquiry, it found that the same had been rejected because Form No. 67 was not uploaded within the time prescribed.
8.We are of the view that may be the petitioner omitted or failed to upload Form No. 67 by the due date of return but simply because of this technical or venial breach, its substantial right of getting Foreign Tax Credit of Rs.1,01,34,300/-, deducted from its receipt cannot be denied. If that be so, it would amount to withholding of a substantial amount of an assessee without there being any authority of law which would amount to unjust enrichment in turn.
9.In the case of Vijay Gupta v. CIT (2016) 68 taxmann.com 131/238 Taxman 505/386 ITR 643 (Delhi)/2016 SCC OnLine Del 1961, wherein it had been held that the Principal Commissioner of Income Tax has enough powers to consider application under Section 264 of the Act of 1961, in the event of default by the assessee. In the instant case also, it is the default of the petitioner and the same could have been, rather should have been condoned by the Commissioner, while exercising powers under Section 264 of the Act of 1961. If Section 119 of the Act of 1961 confers a power upon the Commissioner, he could have invoked such powers. We could have simply quashed the order and remanded the matter back to the Commissioner for deciding the application under Section 264 of the Act of 1961 afresh, but the same would be an empty formality.
10.Concededly, the petitioner has subsequently furnished Form No. 67 on 14.09.2022. While exercising writ jurisdiction, we hereby direct the AO that in case the same has been furnished, he shall allow Foreign Tax Credit after verifying the facts in accordance with law. However, in case the AO is of the view that the Foreign Tax Credit cannot be allowed to the petitioner, he shall pass a speaking order, against which the petitioner's right to take remedies in accordance with law shall remain reserved.
11.The necessary exercise as directed above shall be done by the AO within a period of 2 (two) months from today.
12.The Writ Petition stands allowed. All the pending application(s) stand disposed of.”
Respectfully following the judgment and order of the Hon’ble Delhi High Court in case of Real Time Data Services (P.) Ltd.(supra) , We condone the aforesaid delay in filing Form No. 67 by the assessee, and direct AO to allow the foreign tax credit claimed by the assessee subject to verification by the AO of the facts in accordance with law and after due verification of documents. Proper and adequate opportunity of being heard shall be provided by the AO to the assessee. However, in case the AO is of the view that the Foreign Tax Credit cannot be allowed to the assessee, he shall pass a speaking order, against which the assessee’s s right to take remedies in accordance with law shall remain reserved. We have also noted that in assessee’s own case in ITA no. 6404/Del/2025 for assessment year 2019-20 vide orders dated 27.03.2026, the Delhi Tribunal has held that filing of Form No. 67 is directory in nature and directed AO to finalise its computation as per law after verification of all relevant facts. We order accordingly.
In the result,the appeal of the assesse is allowed in the manner as indicated above