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Facts
The assessee, an individual, filed original return for AY 2018-19 declaring income of Rs. 11,56,480/-. Based on information of foreign dividend received, a notice u/s 148 was issued. The assessee filed a revised return declaring lower income. Reassessment was completed assessing the original income.
Held
The Tribunal held that the original return clearly disclosed the foreign dividend income. Therefore, the notice u/s 148 was issued without any escapement of income. The reassessment order was quashed as there was no escapement of income.
Key Issues
Whether the reassessment proceedings initiated under Section 148 were valid when the income was already declared in the original return, and whether the foreign tax credit filing was mandatory.
Sections Cited
147, 148, 139(1), 151A, 250
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Income Tax Appellate Tribunal, ‘A’ (SMC
Before: SHRI GEORGE GEORGE K
आदेश/ O R D E R This appeal filed at the instance of the assessee is directed against the order of Commissioner of Income Tax (Appeals), Chennai-18 dated 22.10.2024 passed under section 250 of the Income Tax Act, 1961 (hereinafter called ‘the Act’). The relevant Assessment Year is 2018-19.
2 -: 2. The grounds raised by the assessee read as follows:-
1. The order of the CIT(A) is erroneous as the same is opposed to the facts of the case and provisions of law.
2. The AO having reopened the assessment in the absence of necessary jurisdiction, the CIT(A) grossly erred in failing to quash the reopening of the assessment.
3. The assessment having been reopened in violation of the provisions of section 151A of the Act, the CIT(A) erred in failing to hold the reopening illegal.
4. There being no escapement of income, the CIT(A) grossly erred in upholding the reopening of assessment by the AO.
5. The information forming the basis for reopening being incorrect and erroneous, the reopening is wholly illegal.
6. The appellant having duly declared his foreign income in the original ROI, the reopening and the addition are illegal and liable to be annulled and deleted.
7. The CIT(A) grossly erred in merely stating that credit to taxes paid must be given as per law without specifically directing the AO to allow the foreign tax credit which the AO had failed to do so.
8. Any other ground raised at the time of hearing.
Brief facts of the case are as follows: The assessee is an individual. For the assessment year 2018-19, return of income was filed u/s.139(1) of the Act on 17.07.2018 declaring total income of Rs.11,56,480/-. Based on the information with the Department that assessee had received foreign dividend of USD 9164.85 (Rs.6,45,114/-) and same having not been disclosed in the return of income, a notice u/s.148 of the Act was issued on 30.06.2021. The assessee pursuant to notice u/s.148 of the Act filed return on 01.11.2021 declaring lesser income of Rs.4,93,810/-. The reassessment was completed u/s.147 of the
Aggrieved by the reassessment completed vide order dated 27.03.2023, the assessee filed appeal before the CIT(A). It was contended before the CIT(A) that assessment was reopened for the reason that assessee had earned foreign dividend income but not offered in the return of income. However, reassessment was completed for a totally new reason that there is difference in the return of income filed u/s.139(1) of the Act and pursuant to notice issued u/s.148 of the Act. It was submitted that assessee had received dividend from Ford, USA of USD 12,218.80 (Rs.7,95,199/-) for which withholding tax of 25% of USD 3,054.95 was deducted. The assessee in the original return of income filed on 17.07.2018 has disclosed the dividend income of Rs.7,95,199/-. Therefore, it was submitted that the AO without considering the return of income filed by the assessee proceeded to reopen the assessment u/s.148 of the Act without any escapement of income. It was further submitted that pursuant to the notice issued u/s.148 of the Act, assessee had filed return of income and also Form No.67 for claiming Foreign Tax Credit (FTC). It was submitted that the reassessment was completed 4 -: subsequently and assessee was entitled to FTC. The CIT(A) however rejected the contentions of the assessee and dismissed the appeal. The CIT(A) held that assessee had underdeclared foreign income in the return filed in response to notice issued u/s.148 of the Act, hence the reassessment order dated 27.03.2023 is valid.
Aggrieved by the order of the CIT(A), the assessee has filed the present appeal before the Tribunal. The assessee has filed two sets of paper-book enclosing therein the notice issued during the course of reassessment proceedings, relevant portions of DTAA between India and USA, details filed during the course of appellate proceedings and the case laws relied on. The Ld.AR reiterated the submissions made before the CIT(A).
The Ld.DR on the other hand supported the order of the CIT(A) and submitted that assessee had underdeclared the foreign income in the return filed pursuant to the notice issued u/s.148 of the Act, hence reassessment order need to be upheld.
I have heard rival submissions and perused the material on record. The assessee is a retired employee of Ford India Pvt. Ltd., Chennai. He was granted stock option by allotment of 5 -: shares in Ford India Pvt. Ltd., as well as Ford, USA. The assessee had received dividend from Ford, USA during the relevant assessment year. In the return of income filed on 17.07.2018 u/s.139(1) of the Act, the assessee had declared foreign income of Rs.7,95,199/-. The foreign tax paid amounting to Rs.1,98,800/- was also claimed as deduction. The reason stated for issuance of notice u/s.148 of the Act reads as follows:- “2. The information available on record indicates that the assessee had earned foreign income of USD 9164.85 during the relevant assessment year. Further, it is noticed that the assessee did not disclose the said income in the return of income filed for this year.
3. In the circumstances, I have reason to believe that income to the extent of Rs.6,45,114/- chargeable to tax, has escaped assessment for the A.Y.2018-19 in the case of Shri Vanangamudi Vairamani Pandiyan within the meaning of explanation to section 147 of the Income Tax Act, 1961.”
On material on record and on perusal of the return filed u/s.139(1) of the Act on 17.07.2018 (original return), I find that assessee had disclosed the entire foreign dividend of Rs.7,95,199/-. Hence, notice u/s.148 of the Act was issued without any escapement of income. The only difference for the reassessment was assessee was not granted the benefit of FTC of Rs.1,98,800/-. However, I noticed that assessee had filed Form No.67 along with the return of income filed pursuant to the notice issued u/s.148 of the Act. The Hon’ble Madras High Court in the case of Duraisamy Kumarasamy vs. PCIT reported in [2023] 156 6 -: taxmann.com 445 (Madras) had held that filing of Form No.67 is only directory and not mandatory. Similar view has been taken by the Bangalore Bench of the Tribunal in the case of Vinodkumar Lakshmipathi vs. CIT(A) reported in [2022] 145 taxmann.com 235 (Bangalore-Trib.). In the instant case, as mentioned earlier, the assessee had filed Form No.67 along with the return filed and same was available prior to the reassessment being completed on 27.03.2023. The issue whether the assessee has underdeclared foreign income in the return filed in response to notice u/s.148 of the Act is not relevant since the escapement of income is to be examined in the original return filed on 17.07.2018 u/s.139(1) of the Act. Since there is no escapement of income, notice issued u/s.148 of the Act is uncalled for and I quash the reassessment order. It is ordered accordingly.
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 1st July, 2025 at Chennai.