Delay in procedural compliance (filing Form 67) does not amount to misreporting under Section 270A(9)

 

ITAT Visakhapatnam decision in DCIT Circle 3(1), Visakhapatnam vs. Shri Muralikrishna Vaddi [ITA No. 494/Viz/2024, dated April 28, 2025] while dealing with penalty under Section 270A for denial of Foreign Tax Credit (FTC) due to late filing of Form 67 has held that the delay in procedural compliance does not amount to misreporting under Section 270A(9)

Let us have a Short Overview of the case:

Background:

• The assessee, Shri Muralikrishna Vaddi, claimed Foreign Tax Credit (FTC) of Rs. 37,63,898/- in his return of income.
• However, Form 67, which is mandatory for claiming FTC, was filed belatedly on 10/02/2021, i.e., after the due date prescribed under Section 139(1) of the Income Tax Act.
• Consequently, the Assessing Officer (AO) disallowed the FTC claim under Rule 128(9) of the Income Tax Rules, 1962 and added the same to the total income in the assessment order passed under Section 143(3) r.w.s. 143(3A)/(3B).
• The AO initiated penalty proceedings under Section 270A, treating the denial of FTC due to late filing as misreporting of income under Section 270A(9).
• A penalty at the rate of 200% of the tax on disallowed FTC was imposed.

CIT(A) Proceedings:
• The assessee contended that the payment of foreign taxes (in the USA) was genuine and undisputed, and the only default was the technical delay in filing Form 67, which should not be equated with misreporting or under-reporting.
• The CIT(A) accepted this argument and deleted the penalty, holding that:
• There was no concealment or misrepresentation of income.
• The delay in procedural compliance (filing Form 67) does not amount to misreporting under Section 270A(9).
• Since the tax was actually paid abroad and the only lapse was technical, no penalty was justifiable.

ITAT Findings:
• The ITAT upheld the CIT(A)’s decision and observed that:
• For misreporting under Section 270A(9) to apply, the addition must be due to misrepresentation, suppression of facts, or other deliberate infractions.
• In this case, there was no enhancement of income or concealment of facts-only a procedural default in filing Form 67.
• The denial of FTC was due to non-compliance with procedural requirement, not due to false claim or misreporting.
• Accordingly, the Tribunal concluded that:
• Penalty under Section 270A is not sustainable on such a procedural lapse.
• There was no error or illegality in the CIT(A)’s order.

Held:
• Appeal of the Revenue was dismissed.
• Penalty under Section 270A deleted.

 

The copy of the order is as under:

1745834505-hFe8Kp-1-TO