Intimation under income tax return, foreign tax credit reporting and notice of demand: recovery barred where no notice served

Failure to report foreign tax credit in the specific ITR line item, though claimed elsewhere in the return, was treated as a disclosure format difference and not suppression; consequently an individual should not be denied legitimate foreign tax credit for such reporting approach, and a pending rectification seeking correction was noted. The intimation required to specify sums payable and, when treated as a notice of demand, must be mandatorily served; absence of any produced intimation or independent notice of demand precludes recovery of the alleged demand against the taxpayer, and rectification remained unacted upon by the revenue.

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Issues: (i) Whether a demand for Assessment Year 2010-11 raised without producing an intimation under Section 143(1) or any independent notice of demand is enforceable; (ii) Whether foreign tax credit reflected in employer's Form-16 but not separately disclosed in the specific ITR column should be allowed and rectified under Section 154.

Issue (i): Whether a demand can be enforced against the assessee in the absence of a produced intimation under Section 143(1) or any independent notice of demand.

Analysis: Applicable provisions include the requirement of an intimation under Section 143(1) to specify sums payable or refundable and the proviso making such intimation a deemed notice of demand for purposes of Section 156. Section 156(1) mandates service of a notice of demand; where demand arises from an intimation under Section 143(1), that intimation must have been served. Departmental records did not establish production of the intimation or proof of service; retrieval of legacy physical dispatch records was not shown. The demand was recorded as arising from a mismatch in TDS reporting but the office has not produced the foundational intimation or notice of demand.

Conclusion: The demand for Assessment Year 2010-11 cannot be enforced in the absence of a produced intimation under Section 143(1) or any independent notice of demand. This conclusion is against the Revenue.

Issue (ii): Whether the foreign tax credit disclosed in the employer's Form-16 but not separately entered in the specified ITR column must be allowed and corrected via rectification under Section 154.

Analysis: The assessee claimed total TDS in the return corresponding to the employer's Form-16 which expressly mentioned taxes withheld abroad. The mismatch arose from non-entry in the specific ITR column for relief under Sections 90/91, not from suppression or misrepresentation. The rectification application under Section 154 explaining the factual matrix remained pending and the department did not dispute entitlement to the foreign tax credit on merits. Given the objective of avoiding depriving an individual taxpayer of legitimate credit due to a technical reporting approach, rectification to give effect to the credit is appropriate.

Conclusion: The assessee is entitled to benefit of the foreign tax credit as reflected in the employer's Form-16 and rectification under Section 154 must be effected in favour of the assessee.

Final Conclusion: The petition is allowed; the demand for AY 2010-11 is deleted and the foreign tax credit reflected in Form-16 shall be given effect to by completing rectification and any necessary refund adjustments within the specified time.

Ratio Decidendi: Where a demand is alleged to arise from an intimation under Section 143(1), the intimation must be produced/served as required by law and, absent such produced intimation or any independent notice of demand, the demand is not enforceable; technical mis-reporting of foreign tax credit in the ITR that corresponds to employer's Form-16 may be rectified under Section 154 to give the assessee the legitimate credit.

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