2023 (8) TMI 808 - AT - Income Tax

Tribunal overturns tax revision order, finding lack of jurisdiction. Appeal allowed, fresh assessment annulled.

The Tribunal set aside the revisionary order under Section 263 of the Income Tax Act, 1961, finding the assumption of jurisdiction by the Principal ... Revision u/s 263 - as per CIT assessee had belatedly filed requisite form for claiming foreign tax credit against foreign income returned i.e. form no.67, AO had wrongly allowed foreign tax credit to the assessee - mandatory requirement for claiming exemption - HELD THAT:- As 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 u/s 139(1) of the Act, since it was allowed by the AO following the decision in the case of M/s. Brinda Rama Krishna [2022 (2) TMI 752 - ITAT BANGALORE] and several other judgments have also affirmed the proposition of law laid down in the said decision. 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. Appeal of the assessee is allowed. Issues Involved:1. Validity of order under Section 263 of the Income Tax Act, 1961.2. Proper opportunity of being heard before passing the order.3. Instruction to the AO for fresh assessment for A.Y. 2017-18.Summary:1. Validity of order under Section 263 of the Income Tax Act, 1961:The assessee challenged the order of the ld. Pr. Commissioner of Income Tax (Pr.CIT) passed under section 263 of the Income Tax Act, 1961, for the assessment year 2017-18. The ld. Pr.CIT assumed revisionary jurisdiction under section 263 because the assessee had belatedly filed Form No.67 for claiming foreign tax credit, which was allowed by the AO despite the Income Tax Rules, 1962, requiring the form to be filed by the due date of filing the return under section 139(1) of the Act. The ld. Pr.CIT held that the decision of the ITAT Bangalore Bench, which the AO relied upon, was not a binding precedent as it was by the SMC Bench and not the jurisdictional High Court. The Tribunal found this reasoning grossly incorrect, stating that orders passed by the ITAT, whether 'SMC' or Division Bench, have equal binding precedent on the authorities below.2. Proper opportunity of being heard before passing the order:The assessee argued that the order under section 263 was passed without giving a proper opportunity of being heard. The Tribunal noted that the AO had conducted due inquiry on the issue of foreign tax credit and the assessee had filed a reply stating that the requirement of filing Form No.67 was directory and not mandatory, supported by various decisions including the ITAT Bangalore Bench in M/s. Brinda Rama Krishna. The ld. Pr.CIT dismissed these decisions in a casual manner, stating they were not applicable and not of the Apex Court, which the Tribunal found to be against the rules of judicial precedence.3. Instruction to the AO for fresh assessment for A.Y. 2017-18:The ld. Pr.CIT issued a show cause notice to the assessee for disallowing the foreign tax credit of Rs. 28,52,306/- due to the belated filing of Form No.67. The Tribunal found that the AO had rightly allowed the foreign tax credit following the decision of the ITAT in M/s. Brinda Rama Krishna, which held that filing Form No.67 is directory and not mandatory. The Tribunal also noted other decisions affirming this proposition. Therefore, the AO's order was not erroneous, and the revisionary order by the ld. Pr.CIT under section 263 was set aside.Conclusion:The Tribunal held that the ld. Pr.CIT's assumption of jurisdiction under section 263 was unjustified and set aside the revisionary order. The appeal of the assessee was allowed, and the instruction for fresh assessment was annulled. The order was pronounced on 29th March 2023 in Ahmedabad.