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2025 (4) TMI 1622 - AT - Income TaxPenalty levied u/s.270A - Foreign Tax credit denied for non filing Form 67 within the due date of filing of return - HELD THAT - Cojoint reading of sub-section (2) (9) of section 270A leads to the inference that if the income is assessed greater than the income reported in the return of income or determined in the return processed u/s 143(1)(a) and the addition in the total income of the assessee is due to the reason of misrepresenting or suppressing of facts failure to record the investment in the books of account unsubstantiated claim of expenditure disallowed recording false entries in the books of account failure to record any receipt in the books of account having bearing on the total income and failure to report any international transaction or specified domestic transactions. In the case in hand though the AO has not enhanced the total income of the assessee while passing the assessment order but the tax liability of the assessee was increased due to the reason that the claim of credit of foreign tax was denied by the AO due to the reason of delay in filing Form-67. Thus it is clear from the facts that the case of the assessee does not fall in the category of misreporting of income as envisaged in sub-section (2) and (9) of section 270A - Decided against revenue.
The primary legal issues considered in this appeal pertain to the levy of penalty under section 270A of the Income-tax Act, 1961, specifically:
1. Whether the assessee's claim of Foreign Tax Credit (FTC) without filing Form 67 within the due date amounts to misrepresentation of facts or misreporting of income under section 270A(9) of the Income-tax Act, warranting penalty. 2. Whether the delay in filing Form 67, which led to disallowance of FTC, constitutes under-reporting of income under section 270A(2) of the Act. 3. The correctness of the deletion of the penalty imposed by the Assessing Officer by the learned CIT (A) and the Tribunal's role in confirming or reversing that deletion. Issue-wise Detailed Analysis Issue 1: Whether the assessee's claim of Foreign Tax Credit without timely filing Form 67 amounts to misreporting/misrepresentation under section 270A(9) The relevant legal framework includes Rule 128(9) of the Income-tax Rules, 1962, which mandates that Form 67, containing details and documents for claiming FTC, must be furnished before the due date of filing the return under section 139(1). The Income-tax Act sections 90 and 90A provide for relief from double taxation through FTC. Section 270A(9) enumerates specific instances constituting misreporting of income, including misrepresentation or suppression of facts, failure to record investments or receipts, and failure to report international transactions. The Assessing Officer disallowed the FTC claim of Rs. 37,63,898/- because Form 67 was filed late (on 10/02/2021, after the due date of filing the return on 27/03/2019). Consequently, the Assessing Officer initiated penalty proceedings under section 270A(9), treating the late filing as misrepresentation. The learned Departmental Representative argued that the late filing violated Rule 128(9) and thus amounted to misreporting, justifying penalty imposition. Conversely, the assessee's representative contended that the claim of FTC was factually correct since taxes were indeed paid in the foreign jurisdiction (USA), and the only defect was a procedural delay in filing Form 67. Therefore, there was no misreporting or misrepresentation of facts, and the penalty was unwarranted. The Tribunal examined the statutory provisions and the facts. It observed that the case did not involve any misrepresentation or suppression of facts, false entries, or failure to report international transactions, but only a delay in filing a prescribed form. The Tribunal noted that the penalty provisions target deliberate misreporting or suppression, not mere procedural lapses. Thus, the Tribunal concluded that the delay in filing Form 67 did not amount to misreporting under section 270A(9). Issue 2: Whether the disallowance of FTC due to late filing of Form 67 constitutes under-reporting of income under section 270A(2) Section 270A(2) defines under-reporting of income in various scenarios where the assessed income exceeds the income declared in the return or previously assessed. In the present case, the Assessing Officer disallowed the FTC claim, which increased the tax liability of the assessee, but did not enhance the total income assessed. The addition was effectively a denial of tax relief rather than an addition to income. The Tribunal analyzed whether this denial of FTC and consequent increase in tax liability amounted to under-reporting of income. It found that since the total income assessed was not increased, and the only effect was disallowance of a tax credit due to procedural non-compliance, the situation did not fall within the ambit of under-reporting as envisaged in section 270A(2). Therefore, the Tribunal held that the penalty for under-reporting under section 270A(2) was not justified. Issue 3: Validity of the deletion of penalty by the learned CIT (A) and confirmation by the Tribunal The CIT (A) had deleted the penalty levied by the Assessing Officer, reasoning that the assessee had indeed paid foreign taxes amounting to Rs. 37,63,898/-. The only error was the late filing of Form 67, a technical non-compliance not amounting to misreporting or under-reporting. The CIT (A) emphasized that such a technical lapse should not be equated with misreporting or suppression of facts, and thus the penalty was not warranted. The Tribunal concurred with the CIT (A)'s reasoning, observing that the penalty provisions under section 270A are designed to penalize deliberate misreporting or suppression and not technical or procedural delays. The Tribunal found no error or illegality in the CIT (A)'s order deleting the penalty and accordingly dismissed the Revenue's appeal. Significant Holdings "The case of the assessee does not fall in the category of misreporting of income as envisaged in sub-section (2) and (9) of section 270A of the I.T. Act, 1961." "It is an undisputed fact that appellant has paid taxes amounting to Rs. 37,63,898/- in USA, only mistake on part of assessee that Form-67 was filed late. The said technical order cannot be concealed as 'misreporting or under reporting'. Accordingly question of levy of Penalty does not arise." "The penalty provisions under section 270A are intended to penalize misreporting or suppression of facts and not mere procedural lapses such as late filing of Form-67." Core principles established include:
Final determinations:
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