Tax credit cannot be Denied merely because of non-fulfillment of Procedural Requirement: ITAT

The assessee, an individual, filed a return of income for Assessment Year 2018-19 declaring a total income of Rs.14,29,490. The assessee is a salaried employee. In the return of income, the assessee claimed credit for taxes paid in the USA on dividends received in the USA, under section 90 of the Income Tax Act, 1961, of a sum of Rs. 1,56,820. Apart from denying credit for tax paid in the USA, on dividend income earned in the USA, the AO also made 3 other adjustments to the total income returned by the assessee in the intimation under section 143(1) of the Act, resulting in an addition of Rs. 2,35,108 to the total income declared by the Assessee.

Appeal before CIT(A): In the appeal, the action of the AO was confirmed by the First Appellate Authority.

Appeal before ITAT: Aggrieved this appeal was filed by the assessee, before the Tribunal. The AO has considered schedule – SI and had found discrepancies in the figures. schedule if schedule BFLA is considered then there will not be any discrepancy. The assessee did not participate in the proceedings before CIT(A) and could not explain this. Thus, the tribunal is of the view that this aspect requires examination by the AO and therefore the issue was set aside to the AO for fresh consideration. The AO will look into the schedule BFLA also and thereafter decide the issue afresh after affording the assessee opportunity of being heard.

With regards to the credit for taxes paid in the US is concerned, one of the requirements was that the assessee has to file Form 67 as a procedural requirement which was filed before AO only after the date of intimation u/s. 143(1) of the Act. Therefore, this cannot be the basis to deny credit for taxes paid in US. The tribunal held that the AO shall consider the claim of the assessee for credit for taxes paid in the USA also in the set-aside proceedings. Hence, the appeal of the assessee was allowed for statistical purposes.