ABHISHEK NARAYAN,HYDERABAD vs. ITO,WARD INTL. TAXATION 1(2), BANGALORE

PER SHRI WASEEM AHMED, ACCOUNTANT MEMBER: The present appeal filed by the assessee is directed against the order of the Learned Commissioner of Income Tax Appeals, Bengaluru-12 (hereafter- Ld. CIT(A)), passed u/s 250 of the Income Tax Act, 1961 (hereafter- the Act) dated 25.02.2026.

4.1 The assessee, in the delayed condonation application, explained that the intimation order u/s 143(1) of the Act was passed during the peak COVID period. Afterwards, he contacted a chartered accountant who advised that the intimation order u/s 143(1) of the Act is not an appealable order before the ld. CIT(A). Therefore, a rectification application was filed, but no response to the order was received from the department against the application. Upon receipt of a demand recovery notice dated 12.11.2025, he contacted another chartered accountant and upon whose advice the appeal was filed before the learned CIT(A). Accordingly, the assessee sought condonation of the delay and submitted that the delay was neither intentional nor deliberate. It was explained that the assessee had acted on professional advice and had bona fide perused the remedy of rectification u/s 154 of the Act instead of filing an appeal. The assessee contended that the delay arose because he believed that the disallowance of FTC would be rectified through proceedings u/s 154 of the Act.

4.2 On merits, the assessee's case was that the foreign salary had been offered to tax in India and tax had already been paid on the same income in Belgium. Therefore, Foreign Tax Credit of Rs. 3,00,783 was allowable u/s 90 of the Act. It was contended that filing Form No. 67 within the prescribed time was procedural in nature and a substantive claim of Foreign Tax Credit could not be denied merely because Form No. 67 was filed belatedly. However, the Ld. CIT(A) did not condone the delay of 1,687 days in filing the appeal. Consequently, the appeal was dismissed in limine on the ground of limitation without going into merit.

6.1 Further, the learned AR at the time of hearing before us prayed that in case the delay in filing of the appeal before the learned CIT(A) is not condoned, a suitable direction should be issued to the AO to adjudicate the rectification application u/s 154 of the Act filed by the assessee as on 17th December 2023. The bench also agreed to consider this specific prayer of the Ld. AR on behalf of the assessee.

6.2 Subsequently, the learned AR filed an affidavit of the assessee as on 16th July 2026. In the affidavit, it was explained that, on verification of the record on the income tax e-filing portal, it was noticed that the rectification application filed as on 17th December 2023 was disposed of and rejected by the CPC on the same day. However, this fact was not known to the assessee. Due to this inadvertent oversight, the Ld. AR at the time of hearing requested the bench to issue a direction for adjudication of the pending rectification application. The bench was also pleased to observe that since the rectification application is pending, the assessee could seek appropriate relief through proceeding u/s 154 of the Act. Therefore, due to a change in factual position and the fact that the assessee has no effective remedy available under section 154 of the Act, it is requested by the Ld. AR that the delay in filing of appeal before the learned CIT(A) should be condoned, which occurred due to bona fide belief; otherwise, the assessee will suffer irreparable loss and prejudice despite the fact that the assessee has a strong case on merit and is legally eligible for credit of FTC.

6.3 On merits, the ld. AR submitted that salary income of Rs. 14,42,703 earned in Belgium had already been offered to tax in India and tax of Rs. 4,53,596 had been paid in Belgium. Accordingly, Foreign Tax Credit of Rs. 3,00,783 was claimed u/s 90 of the Act. It was submitted that the claim was denied merely because Form No. 67 was not filed within the prescribed time. The assessee contended that filing Form No. 67 within the prescribed time is a procedural requirement and that a substantive claim of Foreign Tax Credit cannot be denied merely on account of delay in filing the said form. The assessee, therefore, prayed that the delay be condoned and the claim of Foreign Tax Credit be allowed on merits.

Accordingly, the Ld. DR supported the order of the Ld. CIT(A) and prayed that the appeal be dismissed.

8.1 First, we proceed to deal with the issue of delay in filing the appeal before the learned CIT(A). The provision of subsection 3 of section 249 of the Act empowers the learned CIT(A) to admit an appeal filed after the expiry of the prescribed period, where the assessee establishes sufficient cause for the delay. Such power is discretionary but must be exercised judicially and liberally to advance substantial justice. It is settled that the expression “sufficient cause” must be considered with reference to the facts and circumstances of each case. The length of the delay, though relevant, cannot be the sole basis for rejecting an application for condonation. What is material is whether the explanation is bona fide and whether the delay arose on account of deliberate inaction, gross negligence or lack of bona fides.

8.2 In the present case, the intimation order under section 143(1) of the Act was passed during the peak COVID period. Thereafter, the assessee consulted with the professional and, on the professional's advice, proceeded to file a rectification application under section 154 of the Act. This fact is supported by the affidavit of the Chartered Accountant Sri Sandeep Kumar at S. K. Dhar & Co., Chartered Accountant, which is placed on pages 16 to 17 of the paper book. Thus, the assessee did not remain completely inactive after the rectification order under section 143(1) of the Act disallowing the assessee’s claim of FTC credit. On receipt of the demand notice, the assessee consulted another Chartered Accountant and, on whose advice, preferred an appeal before the learned CIT(A).

8.3 In these circumstances, we are of the considered opinion that his belief that the grievance raised by the assessee through a rectification application u/s 154, instead of filing an appeal, cannot be regarded as wholly unreasonable or lacking in bona fides. The assessee had nothing to gain by delaying the appeal. On the contrary, the delay continued the outstanding demand against him. There is no material to suggest that the assessee deliberately allowed the limitation period to expire or that the explanation given by him is false. The delay arose from a bona fide procedural misunderstanding and not from wilful negligence.

8.4 We also take note of the settled principle that while considering condonation of delay, a justice-oriented and liberal approach is required where the explanation is bona fide and does not indicate deliberate delay. The Hon'ble Supreme Court in Collector, Land Acquisition v. Mst. Katiji reported in [1987] 1987 taxmann.com 1072 (SC) has held that substantial justice should ordinarily prevail over technical considerations. Similar principles have been reiterated in N. Balakrishnan v. M. Krishnamurthy in (1998) 7 SCC 123 and Vidya Shankar Jaiswal v. ITO reported in [2025] 174 taxmann.com 21 (SC). The case-law paper book filed by the assessee also contains decisions where delay arises on account of pursuing an alternative remedy or acting on professional advice has been considered while examining sufficient cause. Considering the totality of the facts, the affidavits filed, the fact that the assessee had perused rectification proceedings u/s 154 of the Act on professional advice, and the absence of any material suggesting that the delay was deliberate or mala fide, we are of the considered view that sufficient cause existed for the delay. Accordingly, the delay in filing the appeal before the Ld. CIT(A) is condoned.

8.5 Since the claim of the assessee was disallowed in summary assessment under section 143(1) in the absence of Form 67 and further the appeal of the assessee was dismissed by the ld. CIT(A) at the threshold without considering the issue on merit, we are inclined to take the note of certain facts that the assessee, being a resident of India, is entitled to claim foreign tax credit u/s 90 of the Act read with Article 23(2)(a) of the India-Belgium DTAA in respect of tax paid in Belgium on income which is also offered to tax in India. The credit shall be allowed to the extent of the Belgian tax actually paid, subject to the maximum amount of Indian tax attributable to such doubly taxed income.

8.6 It is a settled principle that denial of substantive benefit like Foreign Tax Credit, which is guaranteed under section 90/91 of the Act read with applicable DTAA, cannot be denied merely on technical or procedural lapses, particularly when the assessee has subsequently furnished all the relevant details and evidence. The purpose of Form-67 is procedural and intended to help verify the claim. It is not meant to deny legitimate relief. This view finds support from the decisions of coordinate benches of this Tribunal, including Ms. Brinda Ramkrishna v. ITO (135 taxmann.com 358), where it was held that filing of Form-67 is directory and not mandatory. The decision in Rakesh Singh v. ACIT (26 taxmann.com 240) also supports that an assessing officer should not take advantage of an assessee’s mistake or ignorance to deny rightful relief.

8.7 Now, the assessee, after the intimation passed under section 143(1) of the Act, has filed Form 67 and, before us, has filed supporting documents such as a copy of the tax return filed in Belgium. We consider it appropriate to set aside the impugned order and restore the matter to the file of the AO for fresh adjudication for the limited purpose of verifying the Form 67 and the tax return of Belgium and accordingly, provide appropriate relief of FTC as per the India-Belgium DTAA r.w.s. 90 of the Act. Hence, the ground of appeal of the assessee is allowed for statistical purposes.

Order pronounced in the open court on 17th August, 2026

Sd/- Sd/- KESHAV DUBEY WASEEM AHMED JUDICIAL MEMBER ACCOUNTANT MEMBER Bangalore Dated: 17th August, 2026 Vms Copy to: ABHISHEK NARAYAN, C - 202, HOUSE NO. 12-13-1274, ASPEN COMPLEX, TARNAKA, HYDERABAD, 1 SECUNDERABAD, TELANGANA, 500017, INDIA, HYDERABAD-500017, TELANGANA ITO,WARD INTL. TAXATION 1(2), WARD INTL. TAXATION 1(2), BMTC 2 BUILDING, KORAMANGALA, BANGALORE, BANGALORE-560095, KARNATAKA 3 THE PCIT / CIT, 4 THE D.R., ITAT, BANGALORE BENCH 5 GUARD FILE By Order

ASSISTANT REGISTRAR / I.T.A.T., BANGALORE