DCIT Vs Muralikrishna Vaddi (ITAT Visakhapatnam)
The Income Tax Appellate Tribunal (ITAT) Visakhapatnam addressed an appeal by the Revenue against the order of the CIT(A) concerning the disallowance of Foreign Tax Credit (FTC) claimed by Shri Muralikrishna Vaddi for Assessment Year 2018-19. Vaddi had claimed an FTC of Rs. 37,63,898 in his income tax return. However, the mandatory Form 67 for claiming FTC was filed belatedly, after the due date for filing the return. Consequently, the Assessing Officer (AO) disallowed the FTC under Rule 128(9) of the Income Tax Rules and added this amount to Vaddi’s total income. The AO also initiated penalty proceedings under Section 270A, considering the denial of FTC due to late filing as misreporting of income, and imposed a penalty of 200% of the tax on the disallowed FTC.
In the appeal before the CIT(A), Vaddi argued that the foreign taxes paid in the USA were genuine and undisputed, and the delay in filing Form 67 was a technical lapse that should not be equated with misreporting or under-reporting of income. The CIT(A) accepted this contention and deleted the penalty, reasoning that there was no concealment or misrepresentation of income, and the procedural delay in filing Form 67 did not constitute misreporting under Section 270A(9). The CIT(A) concluded that since the tax was indeed paid abroad and the only issue was a technical non-compliance, no penalty was justified.
