RAHUL BHATNAGAR,DELHI vs. DCIT CC-6, NEW DELHI

ITA 3925/DEL/2026Status: DisposedITAT Delhi09 October 2026AY 2018-198 pages
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What did the Tribunal hold?

The Tribunal held in favour of the assessee. It was decided that Rule 128(9) of the Income-tax Rules, 1962, does not provide for the disallowance of FTC in case of delay in filing Form No. 67. The Tribunal found that filing of Form No. 67 is a directory, not a mandatory, requirement. Furthermore, it was held that the Double Taxation Avoidance Agreement (DTAA) overrides the provisions of the Income-tax Act, and the Rules cannot be contrary to the Act. The Tribunal agreed with the assessee that the DTAA provisions grant a vested right to claim FTC, which cannot be disallowed for mere delay in complying with a procedural provision. The Tribunal also ruled that the issue was not debatable and could be decided under Section 154 proceedings, as the rejection by revenue authorities was on merits, not on the ground of debatability. Consequently, the AO was directed to grant the FTC of Rs. 9,21,788/- and recompute the tax liability. Other grounds raised by the assessee were left undecided as the effective issue was decided in their favour.

What were the facts?

The assessee, Rahul Bhatnagar, filed his income tax return for AY 2018-19 on July 25, 2018, claiming foreign tax credit (FTC) of Rs. 9,21,788/-. The return was processed under Section 143(1) by the CPC, which disallowed the FTC on the grounds that Form No. 67, the prescribed proof for FTC, was not filed by the due date of the return under Section 139(1). The assessee had filed Form No. 67 belatedly on July 9, 2020. The Assessing Officer (AO) passed an order under Section 154, upholding the denial of FTC. The CIT(A) also upheld the AO's decision. The assessee's appeal is against the CIT(A)'s order.

What were the issues?

1. Whether the Learned CIT(A) was justified in upholding the action of the Learned AO in denying the foreign tax credit of Rs 9,21,788/- for the reason that Form No. 67 was filed beyond the due date of filing the return of income under section 139(1) of the Act? (Question of law and fact, turning on Section 90, Section 139(1) and Rule 128(9) of the Income-tax Rules, 1962). Assessee's contentions: The disallowance of FTC is bad in law. Section 90 of the Act read with Article 24(4)(a) of the India-Australia DTAA provides for FTC, which is a vested right and cannot be disallowed for non-compliance with procedural requirements. Filing of Form 67 is a procedural requirement and not mandatory, citing decisions like Brinda Ramakrishna vs. ITO, Sambhaji v. Gangabai, and various High Court decisions on directory vs. mandatory provisions. The DTAA provisions override the Act, and the DTAA does not prescribe disallowance for procedural non-compliance. The issue was not debatable and could be decided under Section 154 proceedings. Revenue's contentions: Rule 128(9) of the Rules is mandatory, and therefore, the revenue authorities were justified in refusing FTC. The issue was debatable and not a subject matter for Section 154 proceedings.

Which sections of the Income-tax Act were involved?

Section 90,Section 139(1),Section 154

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI

Before: SHRI M. BALAGANESH & SHRI SUDHIR KUMAR

For Respondent: Ms. Harpreet Kaur Hansra, Sr. DR

PER M. BALAGANESH, ACCOUNTANT MEMBER:

The appeal in ITA No.3925/Del/2026 for AY 2018-19, arises out of the 1. order of the ld. Commissioner of Income Tax (Appeals)-24, Delhi [hereinafter referred to as ‘ld. CIT(A)’, in short] dated 13.02.2026 against the order of assessment passed u/s 154 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 13.02.2025 by the Assessing Officer, DCIT, Central Circle-6, New Delhi (hereinafter referred to as ‘ld.

The order continues below.

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